2007
Semiannual Report
For the six-month period ended September 30, 2006

TONAMI TRANSPORTATION CO., LTD.

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

A

M E S S A G E

F R O MT H E

P R E S I D E N T

Performancecustomer demands for greater distribution
efficiency and intensification of competition
among companies resulted in a continuation of
the downturn in unit freight charges. At thesame time, the cost burden on companies thatprovide distribution services increased due tothe revised Road Traffic Law and higher crude
oil prices.

I am pleased to report to our shareholders on
the operating environment and business results
for the six-month period ended September 30,
2006.
During the period under review, despite a sharp
increase in the price of crude oil and higher
interest rates the Japanese economy remainedon a recovery trajectory owing to an increase incapital investment fueled by improvement incorporate earnings, strong personal
consumption, and improvement in theemployment situation.

In these circumstances, the Tonami Group
continued to implement the 17th medium-termbusiness plan, a three-year plan launched theprevious term with the slogan “Committed to
Corporate Innovation.” Specifically, we worked
to expand highly profitable businesses byintegrating systematized distribution (third party
logistics) — the provision of comprehensive
physical distribution services that combine
business processes including existing transport,

In the distribution industry, the businessenvironment remained adverse. Amid acontinued decline in domestic freight volumes,

UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESSix months ended September 30, 2006 and 2005

Millions of yen
2006
2005

Thousands of
U.S. dollars
2006

For the period:
Operating revenues ................................................................... ¥ 64,257
Logistics ..................................................................................
58,426
Other .......................................................................................
5,831
Operating income ......................................................................
755
Net income (loss) ......................................................................
615¥ 63,131
57,794
5,337
794(5,780)$ 545,013
495,556
49,457
6,404
5,216

Per share (yen and U.S. dollars):
Net income (loss), basic ........................................................... ¥Net income, diluted ...................................................................
Cash dividends ...........................................................................

6.76
6.30
3.00

¥ (63.52)
—
3.00

$

At period-end:
Total assets ................................................................................ ¥119,986
Total shareholders’ equity .........................................................
47,388¥121,021
46,033$1,017,693
401,934

0.05730.05340.0254

Notes: 1. U.S. dollar amounts presented herein are included solely for convenience. The rate of ¥117.90 = U.S.$1, prevailing on
September 30, 2006, has been used for the translation into U.S. dollar amounts.
2. The computation of net income (loss) per share of common stock is based on the weighted average number of shares
outstanding (which represents the number of issued shares less treasury stock.) during each period.

1With regard to capital expenditures during theperiod, we plan to commence 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 ourtransport network and distribution facilities.

storage, distribution processing, inventory
management, delivery, and information
processing — with proposal capabilities andstrengthening sales power by deploying a
distribution solutions business characterized by
improved logistics.
In the period under review, the midway point of
the business plan, operating revenues were¥64,257 million, up 1.8% from the same periodof the previous term, as a result of higher
revenues from the mainstay less-than-atruckload freight transport operations andwarehousing operations.

Full-Year Outlook
Although the domestic economy is expected tocontinue to perform solidly, it will be necessary
to pay close attention to protracted high crude
oil prices, signs of rising interest rates, anddestabilizing factors in the internationalsituation, notably with regard to the UnitedStates and China. Also, as previously mentioned,
the distribution industry faces a number ofissues, and the operating environment is likely
to remain challenging. In this context, we are
stepping up our efforts to achieve the goals set
forth in the17th medium-term business plan,
which is in its second year.

With regard to internal business operations, weachieved increased operating efficiency due to
productivity enhancement and a group-wide
effort to cut operating costs through improved
fuel efficiency and other means. Nevertheless,operating income decreased by 5.0% year on
year to ¥755 million. Net income was ¥615
million.
In the results by business segment, operating
revenues from logistics-related businesses
increased by 1.1% from the same period of theprevious term to ¥58,426 million. In road
haulage operations, amid sluggish growth in thevolume of domestic freight transport andcontinued erosion of unit freight charges, theTonami Group strove to provide distribution
services that deliver customer satisfaction bypromoting a solutions business centered on
systematized distribution (third party logistics)
and increasing transportation quality. Operating
revenues from other businesses, which include
automobile repair and merchandising, increased
by 9.2% ¥5,831 million.

As a result of the above circumstances, we
forecast full-year operating revenues of ¥130,000
million (100.7% of the previous year), operating
income of ¥2,000 million (97.3%), and net
income of ¥1,800 million.

Issues to Be Addressed
Although the economic recovery trend in Japanis expected to continue, in the distribution
industry a decrease in the volume of domestic
freight transport for the seventh consecutive
year is forecast. In these circumstances, the2We plan to pay annual dividends of ¥6.00 per
share for the fiscal year ending March 31, 2007,
including the ¥3.00 per share interim dividend.

Tonami Transport Group has many issues toaddress, including the increase in fuel costs due
to a spike in crude oil prices, the strengtheningof government environmental and safety
regulations, the globalization of physicaldistribution, and the implementation of
information and communication technologies in
the industry. In this business environment,
inspired by the slogan “Aiming for a New ValueAdded Corporate Group — Committed to
Corporate Innovation,” we have been executing
the 17th medium-term business plan since theprevious fiscal year.

We will continue to strive to improve businessperformance so as to meet the expectations of
our shareholders. We request your continued
support for our endeavors.

December 2006

The business plan sets forth the following six
core objectives:
1) Develop the distribution solutions business;
2) Upgrade the quality of distribution services;
3) Strengthen international operations;4) Increase revenues from road haulage operations;5) Recruit, retain, and develop human resources;and6) Build an internal control structure.
By engaging in focused efforts within theframework of these objectives, we will manage
with the aim of expanding the Group’s businessby increasing our competitive advantage andenhancing value to society through the creationof additional value in our distribution operations
and the fulfillment of corporate social
responsibility. Specific numerical targets for the
final year of the plan (the year ending March
2008) are operating revenues of ¥142,000
million, operating income of ¥2,700 million, andan operating margin of 1.9%. We are committed
to achieving these targets.

Katsusuke Watanuki
President and Representative Director

3

UNAUDITED CONSOLIDATED BALANCE SHEETSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESAs of September 30, 2006 and 2005

Thousands of
U.S. dollars(Note 1)Millions of yen
2006

2005

2006

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

¥ 11,956¥ 13,672$ 101,408

Marketable securities (Note 2) ..........................................................

1,000

1,000

8,482

22,50721,510190,899

ASSETS
Current assets:

Trade receivables:
Notes and accounts ......................................................................
Less: allowance for doubtful accounts .......................................

(30)

(39)

(254)

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

673

796

5,708

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

667

709

5,657

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

2,509

2,568

21,281

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

39,282

40,216333,181Land ...................................................................................................

38,29338,260324,792

Buildings and structures ...................................................................

21,904

22,631

185,785

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

3,126

3,026

26,514

Property and equipment (Note 3):

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

711

973

6,030

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

64,03464,890543,121

Investments in securities (Note 2) ....................................................

9,275

8,943

78,668Deferred tax assets ............................................................................

2,055

2,301

17,430Goodwill ............................................................................................

95

—

806

Investments and other assets:

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

5,245

4,671

44,487

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

16,67015,915

141,391

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

¥119,986¥121,021$1,017,693

The accompanying Notes are an integral part of these statements.

4

Thousands of
U.S. dollars(Note 1)Millions of yen
2006

2005

2006

LIABILITIESCurrent liabilities:
Short-term bank loans (Note 3) ........................................................
Current portion of long-term debt (Note 3) ....................................
Trade notes and accounts payable ...................................................
Income taxes payable .......................................................................
Other current liabilities .....................................................................
Total current liabilities ........................................................

¥ 14,094
729
10,895376
7,906
34,000¥ 15,827
417
10,788437
7,426
34,895$ 119,542
6,183
92,4093,189
67,057288,380

Long-term liabilities:
Long-term debt, less current portion (Note 3) .................................
Deferred tax liabilities from revaluation reserve for land ................
Employees’ severance and retirement benefits ...............................
Consolidation difference ...................................................................
Negative goodwill .............................................................................
Other long-term liabilities .................................................................
Total long-term liabilities ....................................................
Total liabilities .....................................................................

12,291
5,801
18,278—260
1,968
38,59872,598

11,2005,801
19,137327—
2,981
39,44674,341

104,249
49,203155,030—
2,205
16,692
327,379
615,759

14,183
12,775
13,60014,183
14,687
10,936120,297108,354
115,352(1,972)
38,586(1,957)
37,849(16,726)
327,277

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

2,006
6,245
8,251

1,939
6,245
8,184

17,01452,96969,983

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

551
47,388¥119,986

647
46,680¥121,021

4,674
401,934$1,017,693

NET ASSETS
Shareholders’ equity:
Common stock:
Authorised: 299,200,000 shares in 2005
299,200,000 shares in 2006
Issued:97,610,118 shares in 2005
97,610,118 shares in 2006 .......................................
Capital surplus ...................................................................................
Retained earnings ..............................................................................
Treasury stock, at cost: 6,613,886 shares in 2005 and
6,656,403 shares in 2006 ............................
Total shareholders’ equity ..................................................

5

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the six months ended September 30, 2006 and 2005

Thousands of
U.S. dollars(Note 1)Millions of yen
2006

2005

2006

¥64,257¥63,131$545,013

64,257

63,131545,013

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

60,564

59,248513,690

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

2,938

3,089

24,91963,50262,337

538,609

755

794

6,404

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

154

142

1,306

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

69

98

585

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

(72)

(51)

(610)

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

(114)

(159)

(967)

Impairment losses .............................................................................

—(7,678)—Other, net ...........................................................................................

287

214

2,434

324

(7,434)

2,748

1,079

(6,640)9,152

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

312

350

2,646

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

140(1,176)

1,188

452

(826)

3,834

12

(34)

102

615

¥ (5,780)

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

Operating costs and selling, general and administrative expenses:

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

Other income and expenses:

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

Minority interests ................................................................................
Net income (loss) ................................................................................

The accompanying Notes are an integral part of these statements.

6

¥

$

5,216

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the six months ended September 30, 2006 and 2005

Thousands of
U.S. dollars(Note 1)Millions of yen
2006

2005

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

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

¥ (6,640)
1,178
7,678
23
35
0
8
(75)
—
(98)
(50)
(240)
74
(142)
159
1,224
(250)
(525)
(48)
(823)
1,488
142
(158)
(601)
871

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

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

(78)
130
(0)
65
(2,105)
92
(36)
70
(1)
16
15
(1,832)

(992)
840
—
—
(10,373)
738
(568)
8
(25)
127
42
(10,203)

Cash flows from financing activities:
Net decrease in short-term loans ......................................................
Proceeds from long-term debt ..........................................................
Repayment of long-term debt ...........................................................
Purchase of treasury stock ................................................................
Dividends paid ..................................................................................
Dividends paid to minority interests ................................................
Net cash used in by financing activities .................................

(1,846)
1,790
(439)
(8)
(273)
(6)
(782)

(136)
280
(449)
(8)
(273)
(8)
(594)

(15,657)
15,182(3,723)(68)(2,316)(51)(6,633)Net decrease in cash and cash equivalents .....................................
Cash and cash equivalents at beginning of year ...........................
Cash and cash equivalents at end of year ......................................

(1,306)
14,034¥12,728(1,555)
16,040¥14,485(11,077)
119,033$107,956

The accompanying Notes are an integral part of these statements.

7

2006

$

9,152
10,602
—
619
—
—
—
—
(602)
(585)
212
(3,715)1,026(1,306)967
5,148(1,450)(7,600)1,348(8,388)
5,428
1,315
(967)
(17)
5,759

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

1.

Basis of presenting financial statements

The accompanying unaudited consolidated financial
statements of Tonami Transportation Co., Ltd. (the“Company”) and consolidated subsidiaries are prepared on
the basis of accounting principles generally accepted inJapan, which are different in certain respects as to theapplication and disclosure requirements of International
Financial Reporting Standards, and are compiled from theconsolidated financial statements prepared by the Company
as required by the Securities and Exchange Law of Japan.
U.S. dollar amounts presented in the unaudited
financial statements are included solely for convenience andshould not be construed as representations that Japanese yenamounts have been or could in the future be converted into
U.S. dollars. The rate of ¥117.90 = U.S.$1, prevailing on
September 30, 2006, has been used for the translation into
U.S. dollar amounts in the unaudited financial statements.

Change of Accounting Category for Selling, General, andAdministrative Expenses and Cost of Sales
In view of the increased importance of the Company’s
information processing operations, beginning with the interim
fiscal period under review the Company has changed theinformation 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 theinterim fiscal period under review, in order to more
appropriately present gross operating income the Company
has included information processing business expenses inoperating 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 ¥266 million(US$2,256 thousand), and gross operating income decreasedby the same amount. As selling, general, and administrative
expenses decreased by the same amount, the change has had
no effect on operating income, income before taxes andminority interests, or net income.

Change in Important Items that Form the Basis for
Preparation of Interim Consolidated Financial
Statements
Accounting Standards for Presentation of Net Assets in the
Balance Sheet
Effective from the interim fiscal period under review, theCompany has adopted Accounting Standards for Presentationof Net Assets in the Balance Sheet (Accounting Standards
Board of Japan Corporate Accounting Standard No. 5,
December 9, 2005) and Guidance on Accounting Standards
for Presentation of Net Assets in the Balance Sheet(Accounting Standards Board of Japan, Corporate AccountingStandard Implementation Guidance No. 8, December 9,2005).
The change had no impact on profit and loss.
The amount corresponding to the previous “Total
shareholders’ equity” is ¥46,836 million (US$397,252
thousand).
Owing to the revision of the regulations for interim
consolidated financial statements, the interim consolidated
financial statements for the period under review wereprepared in accordance with the revised regulations forinterim consolidated financial statements.

2.

Change in Method of Presentation
Interim Consolidated Balance Sheets
Effective from the interim fiscal period under review, items
recorded in the consolidation difference account in previous
interim consolidated accounting periods are expressed as
goodwill or negative goodwill.
Interim Consolidated Statements of Operations
Effective from the interim fiscal period under review, items
recorded as amortization of consolidation difference accountin previous interim consolidated accounting periods are
expressed as amortization of negative goodwill.
Interim Consolidated Statements of Cash Flows
Effective from the interim fiscal period under review, items
recorded as amortization of consolidation difference accountin previous interim consolidated accounting periods are
expressed as amortization of goodwill.

Fair Value of Securities

No trading securities or held-to-maturity securities were heldat September 30, 2006 or 2005. Securities classified as othersecurities are included in “marketable securities” and“investments in securities” in the accompanying unaudited
consolidated balance sheets.

The components of unrealized gain or loss onmarketable securities classified as other securities at
September 30, 2006 and 2005 are summarized as follows:—

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

8

Acquisition
costs

Millions of yen
2006
Carrying
value

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

20
—
—

21
—
—

1
—
—

78

62

(16)

101
—
100
¥2,811

94—
98¥6,187(7)—(2)¥3,376

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

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

Acquisition
costs

Millions of yen
2005
Carrying
value

Unrealizedgain(loss)¥2,555¥5,821¥3,266

20
—
—

20
—
—

0
—
—

8

7

(1)

—
—
100
¥2,683——99¥5,947——(1)¥3,264

Acquisition
costs

Thousands of U.S. dollars
2006
Carrying
value

Unrealizedgain(loss)$21,306$50,144$28,838

170
—
—

178
—
—

8
—
—

662

526

(136)

856
—
848
$23,842798—
831$52,477

(58)
—
(17)
$28,635

Millions of yen
2006
2005
¥ 3,255¥ 3,635
10,83912,193Thousands of
U.S. dollars
2006$ 27,608
91,934

Millions of yen
2006
2005
¥ 6,400¥ 6,400
600
600

Thousands of
U.S. dollars
2006$ 54,283
5,089

3. Short-term bank loans and long-term debt(a) Short-term bank loans
Short-term bank loans as at September 30, 2006 and 2005 were as follows:—

Secured ....................................................................................................................
Unsecured ................................................................................................................

Interest rates range from 0.6% to 2.6%.

(b) Long-term debt
Long-term debt as at September 30, 2006 and 2005 was as follows:—

0.89% ¥6.4 billion unsecured straight bonds due 2008 ........................................
0.52% ¥0.6 billion unsecured straight bonds due 2008 ........................................
0.00% ¥2.5 billion unsecured convertible bond type–bonds
with stock acquisition rights due 2009 ................................................................
0.7%–3.7% loans from financial institutions due 2006 to 2010 and thereafter
Secured ..............................................................................................................
Unsecured .........................................................................................................
Total .............................................................................................................
Less: amount due within one year .........................................................................

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.

2,500

2,500

21,2041,140
2,380
13,020729¥12,291

1,369
748
11,617417¥11,200

9,669
20,187
110,432
6,183$104,249

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

(c) Pledged assets
Property and equipment having a net value of ¥15,674 million ($132,943 thousand) was pledged as collateral for short-term bankloans and long-term debt.

9

4.

Cash flow statements

Reconciliation of cash and time deposits shown in the unaudited consolidated balance sheets and cash and cash equivalents
shown in the unaudited consolidated statements of cash flows as at September 30, 2006 and 2005 is as follows:—

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

5.

Millions of yen
2006
2005
¥11,956¥13,672
(228)
(187)
1,000
1,000
—
—
¥12,728¥14,485

Thousands of
U.S. dollars
2006$101,408(1,934)
8,482—$107,956

Amounts per share

Net income (loss) per share has been computed using theweighted-average number of shares of common stock
outstanding during each period.
Although dilutive securities were outstanding, diluted
net income per share for the six months ended September 30,
2005 was not disclosed because of the net loss in this period.

Net assets per share has been computed using thenumber of shares of common stock outstanding at eachbalance sheet date.
Amounts per share of common stock for the six months
ended September 30, 2006 and 2005 were as follows:—
2006

Yen
2005

U.S. dollars
2006

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

¥

6.76
6.30

(¥ 63.52)—$0.0573
0.0534

Net assets per share ................................................................................................

¥515.05¥505.97$4.3685

Basis for the calculation of net income (loss) per share and diluted net income per share for the six months ended September 30,
2006 and 2005 was as follows:—
2005

Thousands of
U.S. dollars
2006

¥615
—
(—)
615
90,952,300(¥5,780)—(—)(¥5,780)
90,991,074$5,216—(—)$5,216—¥ —(—)
6,738,544(6,738,544)¥

Millions of yen
2006
Net income (loss) available to shareholders of common stock:
Net income (loss) .................................................................................................
Net income (loss) not available to shareholders of common stock: ...............
of which appropriation of bonuses to directors and statutory auditors ........
Net income (loss) 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 computation of diluted net income
per share due to their anti-dilutive effect .........................................................

6.

Stock options (The grant of
1,340 options wasapproved at the Company’s
Annual General Meeting of
Shareholders held on June29, 2005.)

$

—
(—)
—
(—)

—
(—)
—
(—)

(a) Stock acquisition rights(The ¥2.5 billion convertible
bond type-bonds with stockacquisition rights to mature on
September 30, 2009)(b) Stock options (The grant of
1,340 options was approved at
the Company’s Annual General
Meeting of Shareholders heldon June 29, 2005.)

Subsequent event

At a meeting held on November 13, 2006, the board of directors of the Company resolved the following interim cash dividends:—
Dividends (¥3.00 per share) .....................................................................................

10

Millions of yen¥273

Thousands of
U.S. dollars$2,316

7.

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 six months ended September 30, 2006 and 2005 is asfollows:—
Logistics
Net Sales:
Outside customers .............................................................
Inter segment sales ............................................................
Total ..............................................................................
Costs and expenses ..................................................................
Operating income ....................................................................

¥58,426
12
58,43857,826¥ 612

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

¥ 57,794
146
57,94057,499¥441

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

$495,556
101
495,657
490,466$ 5,191

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

¥64,257
3,816
68,07367,287¥ 786¥—(3,816)(3,816)(3,785)¥ (31)For the six months ended September 30, 2005
Millions of yen
OthersTotal
Eliminations(Note)¥ 5,337
3,675
9,012
8,592
¥ 420

¥ 63,131
3,821
66,952
66,091¥861¥—(3,821)(3,821)(3,754)¥(67)

For the six months ended September 30, 2006
Thousands of U.S. dollars
OthersTotal
Eliminations(Note)$49,457
32,26581,72280,246$ 1,476$545,013
32,366577,379
570,712$ 6,667$—(32,366)(32,366)(32,103)$ (263)

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

Consolidated¥ 63,131—
63,131
62,337¥794

Consolidated$545,013—
545,013538,609$ 6,404

Note: 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 ¥64 million ($543 thousand) and ¥95 million ($806 thousand) for thesix months ended September 30, 2006 and 2005, respectively.
The two business segments mainly consist of the following services:
Logistics ...... Road haulage, freight forwarding, warehousing, and harbor transport and customs services
Others ......... Vehicle maintenance, casualty insurance, leasing, merchandising and commissioned sales and purchases,
travel services, mail order services, travel inn, information processing, and other businesses
Change in the Business Segmentation Method
In view of the increased importance of the Company’s information processing operations, the Company has changed theinformation processing operations to a divisional structure, as is the case with its other business operations. In order toclassify its businesses in more appropriate business segments that reflect the actual state of the business, beginning with theinterim fiscal period under review the Company has transferred information processing operations from the Logistics-Related
Businesses segment to the Other Businesses segment.
As a result of this change, as compared to the previous accounting treatment, for the interim fiscal period under review
operating revenues from logistics-related businesses decreased ¥439 million (US$3,723 thousand), operating revenues fromother businesses increased ¥385 million (US$3,265 thousand), and eliminations increased ¥54 million (US$458 thousand).
Operating cost and expenses of logistics-related businesses decreased ¥313 million (US$2,655 thousand), operating cost andexpenses of other businesses increased ¥259 million (US$2,197 thousand), and eliminations increased ¥54 million (US$458
thousand). Operating income from logistics-related businesses decreased ¥126 million (US$1,069 thousand), and operating
income from other businesses increased ¥126 million (US$1,069 thousand).
Neither geographical segment information nor overseas sales have been presented because none of the Company’s
consolidated subsidiaries are domiciled outside Japan, and the Company and its consolidated subsidiaries had no overseas
sales for the six months ended September 30, 2006 and 2005.

11

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

12

BOARD OF DIRECTORS AND STATUTORYAUDITORSCORPORATE DATA

Chairman and Representative Director

Head Office

Yoshihiro Minami

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

President and Representative Director
Katsusuke Watanuki

Tokyo Headquarters
Senior Managing Director

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

Akiyoshi Kunisada

Managing Director
Kohichi Kishida
Shigeki Sakamoto

Date of Establishment

Director and Adviser

Common StockYohsuke Konishi¥14,183 million

Directors

Issued and Outstanding Shares

Noriaki Murata
Kiyomi Asamizu
Yasuo Terabayashi
Yoshinobu Watanabe
Toshiyuki Koroku
Shigeyuki Okada

97,610,118 sharesStanding Statutory Auditors

Terminals

Makoto Nagai
Nariyuki Aoki

Warehouses

June 1943

Shareholders
7,994

Employees
5,236

84

47

Statutory Auditors
Motor Vehicles

Shinichiro Inushima
Toshio Yaeda
Yohji Ishiguro

5,548(As of September 30, 2006)(As of September 30, 2006)

13

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