Years ended March 31

Strengthening Our Internal Structure

Strengthening our Internal Structure Our traditional backbone information system was plagued by a host of problems that included poor compatibility with the Internet, slow information processing speeds, and high costs of storage capacity. Determined to eliminate these problems, in April 2002 Yamato Transport rebuilt its information network into an open system that operates 24 hours a day, has a large-volume database, and eliminates restrictions on product and service-related information. This new system is expected to play a key role in allowing us to better respond to customer needs. Buyback of Company Stock As one effective use of cash, Yamato Transport announced a buyback of 4.5 million Company shares at a cost of ¥10 billion. This buyback resulted in a decrease in the total number of shares issued by the Company as well as an accompanying decline in shareholders’ equity. As a result, income per share and ROE rose, contributing to an increase in shareholder value.

Fortifying Our Sales Network Within a ten-year period, we are planning to open a large number of small-sized sales outlets, thus expanding our network of outlets from 2,800 at present, to 5,000. By increasing the size of our network in this manner, we will be better able to propose more convenient and pleasant lifestyles to consumers. Although there is a possibility this will lead to higher overall rental costs, we are making our best efforts to maintain capital efficiency through measures such as switching away from the use of high-rent buildings leased during the era of Japan's bubble economy to lower rent facilities, as well as improving efficiency by taking such steps as consolidating business affairs and striving to minimize costs.

Fortifying Our Service for Customers and Shippers

Fortifying the Quality of Our Deliveries As both a pioneer in the parcel delivery industry as well as a market leader, Yamato Transport boasts an approximately 35% share of the entire parcel delivery market. The approximately 40,000 drivers who deliver parcels cover 46,000 million households, or 1,150 households per driver. Drivers are assigned specific areas, allowing them to establish bonds of trust with customers, a feature of our operations that distinguishes us from our competitors. The enhanced quality of this parcel delivery service is the wellspring of Yamato Transport’s competitiveness as well as an ongoing theme of the Company’s operations. Developing Products and Enhancing Services to Respond to the Age of IT Yamato Transport has developed new products and enhanced its services in tandem with advances in IT. While basing its operations on the consumer-to-consumer (C2C) market, Yamato Transport is upgrading its services that utilize IT in all business-to-consumer (B2C) fields. During the fiscal year under review, we launched a TA-Q-BIN e-mail notification service that notifies customers of delivery dates and times as well as allows customers to change delivery dates and times.

TA-Q-BIN Escrow Service A fund collection service for Internet auctions for transactions between individuals Kuroneko Tankentai A service that enables searches for various stores and products in an electronic mall containing numerous virtual stores on home pages TA-Q-BIN Package-Tracking Service on the Internet An Internet-based reservation service for TA-Q-BIN parcel consolidations and reshipping Kuroneko@Payment Credit Card Service An Internet-based settlement service for credit card payments for mail-order goods and gifts TA-Q-BIN e-mail notification service An e-mail notification service that notifies customers of delivery dates and times as well as allows customers to change delivery conditions

Millions of Yen Thousands of U.S. Dollars   2002 2001 2000 2002 Operating revenues ¥932,120 ¥906,944 ¥812,355 $7,008,421 Operating costs 861,775 838,219 753,674 6,479,511 Selling, general and administrative expenses 17,156 16,699 14,431 128,993 Income (Loss) before income taxes and minority interest 49,905 (3,554) 37,339 375,226 Income taxes 22,217 484 16,876 167,045 Net income (loss) 27,512 (4,181) 20,418 206,857     Yen U.S. Dollars Per share of common stock:           Net income (loss) ¥59.64 ¥(9.25) ¥46.11 $0.45   Diluted net income 57.65 - 43.63 0.43   Cash dividends 14.00 14.00 14.00 0.11     Millions of Yen Thousands of U.S. Dollars Working capital ¥84,630 ¥93,534 ¥75,199 $636,315 Total shareholders’ equity 364,806 334,209 338,295 2,742,902 Total assets 678,939 670,246 642,477 5,104,805 Capital expenditures 40,379 37,144 32,761 303,602 Depreciation and amortization 31,764 29,900 28,917 238,827

	Note: U.S. dollar amounts have been translated, for convenience only, at the rate of ¥133 to US$1.