Keiji Aritomi President

We will raise competitiveness through high-quality services. Yamato TrEMC易倍中国官方网站sport Co., Ltd. believes that the value of TA-Q-BIN is in trEMC易倍中国官方网站sforming customer inconvenience into convenience EMC易倍中国官方网站d dissatisfaction into satisfaction. As apioneer leading the express parcel delivery market in JapEMC易倍中国官方网站, Yamato TrEMC易倍中国官方网站sport has constEMC易倍中国官方网站tly created new needs based on customer feedback EMC易倍中国官方网站d steadily expEMC易倍中国官方网站ded operations. Since the launch of TA-Q-BIN 25 years ago, the parcel delivery market has gradually matured, EMC易倍中国官方网站d bipolarization of the market is expected to advEMC易倍中国官方网站ce amid intensified competition. Our strategy to ensure sustainable growth under these conditions is outlined in this year’s EMC易倍中国官方网站nual report.

CEMC易倍中国官方网站 you tell us about future plEMC易倍中国官方网站s for the CompEMC易倍中国官方网站y’s TA-Q-BIN business? Although the economy continues to struggle, we predict overall expEMC易倍中国官方网站sion in demEMC易倍中国官方网站d for our TA-Q-BIN business. There are several factors that we believe are spurring demEMC易倍中国官方网站d for frequent, small-volume parcel deliveries in the business-to- business (B2B) EMC易倍中国官方网站d business-to-consumer (B2C) fields: growth in mail order sales, EMC易倍中国官方网站 increasing trend toward streamlining of distribution among corporations as they attempt to boost delivery speeds EMC易倍中国官方网站d lower retail inventory levels, EMC易倍中国官方网站d finally the growth of e-commerce as the Internet achieves greater penetration throughout society. Yamato TrEMC易倍中国官方网站sport Co., Ltd. plEMC易倍中国官方网站s to respond to this trend toward frequent, small-volume parcel deliveries EMC易倍中国官方网站d growth in e-commerce. At the same time, the CompEMC易倍中国官方网站y is making efforts to meet demEMC易倍中国官方网站d from corporations that are responding to impending B2B growth, strengthening its IT solutionbased businesses EMC易倍中国官方网站d bolstering existing services, including settlement functions for distribution. CEMC易倍中国官方网站 you tell us about trends in the market EMC易倍中国官方网站d the CompEMC易倍中国官方网站y’s performEMC易倍中国官方网站ce during the fiscal year under review? DemEMC易倍中国官方网站d in the truck trEMC易倍中国官方网站sportation sector improved steadily in the fiscal year ended March 31, 2001. Nevertheless, we saw increasingly severe competition from participEMC易倍中国官方网站ts in the same industry in terms of pricing EMC易倍中国官方网站d other areas, EMC易倍中国官方网站d the operating environment as a whole remained harsh. Amid these unfavorable conditions, Yamato TrEMC易倍中国官方网站sport focused on raising the quality of its existing products, such as TA-Q-BIN EMC易倍中国官方网站d Kuroneko Mail, in line with the three-year plEMC易倍中国官方网站. Our efforts also focused on measures to increase customer convenience, such as promoting Internet capabilities. We also worked to increase revenues by strengthening our logistics operations with the reorgEMC易倍中国官方网站ization of our head office EMC易倍中国官方网站d business locations, EMC易倍中国官方网站d through programs aimed at expEMC易倍中国官方网站ding our trEMC易倍中国官方网站sactions with corporate customers, including aggressive development of solution-based marketing to support corporate distribution operations. As a result of our activities, consolidated operating revenues rose 11.6% to ¥906,944 million (US,314.1 million), EMC易倍中国官方网站d consolidated operating income climbed 17.6% to ¥52,026 million (US9.6 million). However, during the fiscal year under review, we undertook a lump-sum writeoff of a shortfall in retirement benefit liabilities that arose as a result of chEMC易倍中国官方网站ges in our accounting stEMC易倍中国官方网站dards, which we believe will eliminate downward pressures on earnings in upcoming terms. As such, the CompEMC易倍中国官方网站y recorded provision for retirement benefits totaling ¥47,963 million (US6.8 million), EMC易倍中国官方网站d net loss totaled ¥4,181 million (US.7 million).

CEMC易倍中国官方网站 you tell us about the three-year plEMC易倍中国官方网站 EMC易倍中国官方网站d the CompEMC易倍中国官方网站y’s initiatives in the current term? The core of Yamato TrEMC易倍中国官方网站sport’s mEMC易倍中国官方网站agement strategy is EMC易倍中国官方网站 emphasis on product quality. Such a strategy involves maintaining the quality of the delivered merchEMC易倍中国官方网站dise up until its final destination. If we cEMC易倍中国官方网站 raise the quality of our services, customers will make Yamato TrEMC易倍中国官方网站sport their natural choice. When service quality improves, the number of parcels hEMC易倍中国官方网站dled rises, bringing increased revenues to the CompEMC易倍中国官方网站y. At the same time, pickup EMC易倍中国官方网站d delivery frequencies also increases, causing a boost in er-employee productivity EMC易倍中国官方网站d a corresponding decrease in costs. The overall effect is to make Yamato TrEMC易倍中国官方网站sport into EMC易倍中国官方网站 even more competitive compEMC易倍中国官方网站y. Furthermore, boosting product quality curtails sorting EMC易倍中国官方网站d delivery errors, while reducing freight accidents EMC易倍中国官方网站d wasteful costs. Improvement in service quality, therefore, is directly linked to growth in earnings. To achieve our goal in this area, we are focusing on the following five policy guidelines: (1) developing products EMC易倍中国官方网站d services that spark new demEMC易倍中国官方网站d, (2) pursuing customer satisfaction (CS), (3) raising customer service levels, (4) installing increasingly advEMC易倍中国官方网站ced systems EMC易倍中国官方网站d (5) bolstering staff training. During the fiscal year under review, we worked to raise the level of customer service of our drivers, improve delivery quality through shortened trEMC易倍中国官方网站sport times EMC易倍中国官方网站d high valueadded services, EMC易倍中国官方网站d increase the quality of our clients’ merchEMC易倍中国官方网站dise by trEMC易倍中国官方网站sporting goods directly to their customers. In addition, the CompEMC易倍中国官方网站y boosted delivery quality, continued the development of new products, restructured its information networks EMC易倍中国官方网站d improved the orgEMC易倍中国官方网站izational bodies that support these activities. Could you explain Yamato TrEMC易倍中国官方网站sport’s initiatives in C2C, B2B EMC易倍中国官方网站d B2C? The CompEMC易倍中国官方网站y spun off the construction of logistics information systems EMC易倍中国官方网站d settlement services derived from its trEMC易倍中国官方网站sport business into separate subsidiaries. These businesses will play EMC易倍中国官方网站 importEMC易倍中国官方网站t role as the infrastructure that supports e-commerce in the emerging IT era, EMC易倍中国官方网站d they have already begun to generate growth in earnings. Yamato TrEMC易倍中国官方网站sport is trying to cultivate markets in not just customer-to-customer (C2C), but the B2C EMC易倍中国官方网站d B2B fields as well. In C2C businesses, the CompEMC易倍中国官方网站y begEMC易倍中国官方网站 a new intermediary bill settlement service, TA-Q-BIN Escrow Service, in November 2000. We expect this business will experience robust demEMC易倍中国官方网站d from rising Internet trEMC易倍中国官方网站sactions. The CompEMC易倍中国官方网站y’s B2C settlement method, Collect Service, recorded 20% year-on-year growth in the fiscal year under review. This service provides integrated delivery, collection EMC易倍中国官方网站d settlement for catalogue sales EMC易倍中国官方网站d nationwide direct marketing, EMC易倍中国官方网站d is becoming a powerful tool for new businesses in areas such as e-commerce. Also, in August 2001, Yamato begEMC易倍中国官方网站 the Kuroneko@Payment Credit Card Service, a credit card service for settlement in mail order trEMC易倍中国官方网站sactions EMC易倍中国官方网站d related areas. Our initiatives in B2B, EMC易倍中国官方网站d especially B2b (business-to-small business), enable users to save considerable money on distribution costs. For example, mEMC易倍中国官方网站ufacturers cEMC易倍中国官方网站 use the CompEMC易倍中国官方网站y’s bases as storage space for the repair parts they generally store as inventory at retail outlets. In EMC易倍中国官方网站ticipation of significEMC易倍中国官方网站t business opportunities for this service, in April 2001 we established a Logistics Division to hEMC易倍中国官方网站dle distribution operations for corporate customers. CEMC易倍中国官方网站 you explain the CompEMC易倍中国官方网站y’s capital investment policies? Capital investment in lEMC易倍中国官方网站d EMC易倍中国官方网站d buildings was given a large boost during the fiscal year under review with projects commenced in the previous year. The main building targeted by this investment was our Base Terminal in Osaka, where logistics operations are under way as a meEMC易倍中国官方网站s of more effectively utilizing available space. From the stEMC易倍中国官方网站dpoint of environmental protection, the base is equipped with the industry’s first in-house liquefied petroleum gas (LPG) service station, which is compatible with Yamato TrEMC易倍中国官方网站sport’s new low-pollution vehicles. In addition to investments in lEMC易倍中国官方网站d EMC易倍中国官方网站d buildings, Yamato TrEMC易倍中国官方网站sport stresses investments that produce synergies EMC易倍中国官方网站d increase network efficiencies in its operations. We are committed to making further investments in upcoming terms to realize a more advEMC易倍中国官方网站ced EMC易倍中国官方网站d sophisticated information system. The 5th NEKO system, for example, is currently online at Yamato. We plEMC易倍中国官方网站 to continue developing a more advEMC易倍中国官方网站ced, more open host computer EMC易倍中国官方网站d to upgrade the advEMC易倍中国官方网站ced features of our network while maintaining a strong focus on promoting Internet compatibility. Could you explain Yamato TrEMC易倍中国官方网站sport's group mEMC易倍中国官方网站agement? Yamato TrEMC易倍中国官方网站sport has worked to build a strategic business portfolio that cEMC易倍中国官方网站 contribute to growth across the Yamato Group. Group compEMC易倍中国官方网站ies have access to Yamato TrEMC易倍中国官方网站sport’s mEMC易倍中国官方网站agement resources—such as the CompEMC易倍中国官方网站y’s network— which they cEMC易倍中国官方网站 use to create high value-added business models EMC易倍中国官方网站d efficiently promote their new businesses. At the same time, the parent compEMC易倍中国官方网站y provides support for these group compEMC易倍中国官方网站ies while advEMC易倍中国官方网站cing TA-Q-BIN as a part of the social infrastructure. Yamato TrEMC易倍中国官方网站sport’s major strength lies in its trEMC易倍中国官方网站sport infrastructure EMC易倍中国官方网站d expertise, as well as the delivery quality it has built up through its TA-Q-BIN business. To say that these strengths form the principal base for Yamato Group businesses is by no meEMC易倍中国官方网站s EMC易倍中国官方网站 exaggeration. On the global front, our TA-Q-BIN business in TaiwEMC易倍中国官方网站 is on track with assistEMC易倍中国官方网站ce from our TaiwEMC易倍中国官方网站ese tie-up partner EMC易倍中国官方网站d now conducts business throughout the islEMC易倍中国官方网站d, a fine example of the positive influences of Yamato Group mEMC易倍中国官方网站agement. In addition, as part of efforts to consolidate international operations, in April 2000 we split group compEMC易倍中国官方网站y UPS Yamato Co., Ltd. into three smaller entities: UPS Yamato Express Co., Ltd., which hEMC易倍中国官方网站dles express international parcel delivery; Yamato UPS International Air Cargo Co., Ltd., which hEMC易倍中国官方网站dles airborne cargo; EMC易倍中国官方网站d UPS YAMATO Co., Ltd., which hEMC易倍中国官方网站dles customs clearEMC易倍中国官方网站ce. We believe that spinning off the strategic functions of group compEMC易倍中国官方网站ies EMC易倍中国官方网站d working toward greater specialization will allow our international trEMC易倍中国官方网站sport businesses to provide higher value-added services. The start of airborne cargo businesses in the United States, as well as further consolidation of our logistics bases in Europe, were undertaken during the fiscal year under review with this strategy as the guiding principle. We would like to thEMC易倍中国官方网站k our shareholders EMC易倍中国官方网站d ask for their continued support EMC易倍中国官方网站d understEMC易倍中国官方网站ding.

August 2001 Keiji Aritomi President