Fiscal Year ended October 31, 2016

Financial Statements Bulletin (Japan GAAP)
December 9, 2016
Kanamoto Co., Ltd.
9678
Tokyo Stock Exchange, Sapporo Stock Exchange
http://www.kanamoto.co.jp
Tetsuo Kanamoto
President and CEO
Nobuhito Utatsu
Director and Senior Executive Corporate Officer,
Division Manager, Accounting Division
TEL 81-11-209-1600
Please send inquiries in English to takayama@kanamoto.co.jp
Scheduled date for Regular General Meeting of the Shareholders
January 26, 2017
Scheduled date for commencement of dividend payments
January 27, 2017
Scheduled date for submission of Annual Securities Report
January 26, 2017
Preparation of Supplementary Explanatory Materials:
Yes
Earnings Briefings (For institutional investors and analysts):
Yes
Listed Company Name
Company Code Number
Listing Exchanges
URL
Representative
Inquiries(Numbers less than one million yen have been rounded down)

1. Consolidated Operating Results for the Fiscal Year ended October 31, 2016
(November 1, 2015 – October 31, 2016)(1) Consolidated Operating Results(Percentages show the change from the prior year)

Net Sales

Operating Income

Millions of yen%

Millions of yen

Profit Attributable to
Owners of Parent

Ordinary Income%

Millions of yen%

Millions of yen%

Fiscal year ended
October 31, 2016

144,870

8.7

15,134-7.0

14,405

-10.9

8,098

-15.3

Fiscal year ended
October 31, 2015

133,292

6.2

16,270-1.1

16,164

0.5

9,557

2.8

(Note) Comprehensive income (millions of yen)
Fiscal year ended October 31, 2016
Fiscal year ended October 31, 2015

Earnings per
Share

8,818 (-10.4%)
9,845(-3.1%)

Earnings per
Share on a Fully
Diluted Basis

Ordinary Income
to Total Assets

ROE

OperatingMargin

Yen

Yen

%

%

%

Fiscal year ended
October 31, 2016

229.16

–

11.1

6.8

10.4

Fiscal year ended
October 31, 2015

266.27

–

14.4

8.3

12.2

(Reference) Investment profit or loss accounted for by the equity method (millions of yen)
Fiscal year ended October 31, 2016

Fiscal year ended October 31, 2015
(2) Consolidated Financial Position
Total Assets

Net Assets

Equity Ratio

Net Assets per Share

Millions of yen

Millions of yen%

Yen

As of October 31,
2016

220,836

81,43434.7

2,169.93

As of October 31,
2015

202,919

71,99834.3

1,969.16

Net cash provided by(used in) operating
activities

Net cash provided by(used in) investing
activities

Net cash provided by(used in) financing
activities

Cash and Cash
Equivalents at End of
Period(Reference) Equity (millions of yen)
As of October 31, 2016
As of October 31, 2015

76,68369,588(3) Consolidated Cash Flows

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Fiscal year ended
October 31, 2016

26,618-8,940-20,726

33,069Fiscal year ended
October 31, 201733,509-4,488-24,857

36,150 1

2. Dividends
Annual Dividends per Share
End offirstquarter

End ofsecondquarterYen

End ofthird
quarter

Yen

Year-end

Yen

Full-year

Yen

Dividends in
Dividend
Dividends on
Total
Payout Ratio
Net Assets(Full Year) (Consolidated) (Consolidated)

Yen Millions of yen%%

Fiscal year ended
October 31, 2015

–

15.00

–

20.00

35.00

1,247

13.1

1.9

Fiscal year ended
October 31, 2016

–

15.00

–

30.00

45.00

1,590

19.6

2.2

Fiscal year ending
October 31, 2017
(projected)

–

15.00

–

35.00

50.00

18.7

3. Projected Consolidated Operating Results for the Fiscal Year Ending October 31, 2017
(November 1, 2016 - October 31, 2017)(Percentages show the change from the prior year)
Net Sales
Millions of yen

Operating Income% Millions of yen

Profit Attributable to
Owners of Parent

Ordinary Income% Millions of yen% Millions of yen%

Earnings per
Share
Yen

Interim period

77,000

12.2

8,410

-2.3

8,190

-0.7

4,950

-0.4

140.07Full year

153,000

5.6

15,820

4.5

15,580

8.2

9,460

16.8

267.69 2Notes(1) Changes in material subsidiaries during the period under review (changes in specific subsidiaries in
conjunction with a change in the scope of consolidation): No
Company newly includedCompany newly excluded(2) Changes in accounting principles, changes in accounting estimates and retrospective restatements(a) Changes in accounting policy in conjunction with revision of accounting standards: Yes(b) Changes other than the above: No(c) Changes in accounting estimates: No(d) Retrospective restatements: No(3) Number of shares issued (common shares)(a) Number of shares outstanding at the end of the period (including treasury shares)
As of October 31, 2016
36,092,241 shares
As of October 31, 2015
36,092,241 shares(b) Number of treasury shares of at the end of the period
As of October 31, 2016
753,079 shares
As of October 31, 2015
752,941 shares(c) Average number of shares outstanding during the period
Fiscal year ended October 31, 2016
35,339,216 sharesFiscal year ended October 31, 2015
35,894,640 shares 3(Reference) Summary of Non-Consolidated Operating Results
1. Non-Consolidated Operating Results for the Fiscal Year Ended October 31, 2016
(November 1, 2015 – October 31, 2016)(1) Non-Consolidated Operating Results
Net Sales(Percentages show the change from the prior year)
Operating Income

Millions of yen%

Millions of yen

Ordinary Income%

Millions of yen

Profit%Millions of yen%

Fiscal year ended
October 31, 2016

103,777

1.7

11,864-15.9

12,132

-13.0

6,840

-18.0

Fiscal year ended
October 31, 2015

102,029

8.2

14,1085.0

13,948

2.9

8,344

2.0

Earnings per Share

Earnings per Shareon a Fully Diluted Basis

Yen

Yen

Fiscal year ended
October 31, 2016

193.56–

Fiscal year ended
October 31, 2015

232.47–(2) Non-Consolidated Financial Position
Total Assets

Net Assets

Equity Ratio

Net Assets per Share

Millions of yen

Millions of yen%

Yen

As of October 31,
2016

178,796

71,66540.1

2,027.93

As of October 31,
2015

170,894

65,94838.6

1,866.15(Reference) Equity (millions of yen)
As of October 31, 2016
As of October 31, 2015

71,66565,948

2. Projected Non-Consolidated Operating Results for the Fiscal Year Ending October 31, 2017
(November 1, 2016 - October 31, 2017)(Percentages show the change from prior year)
Net Sales
Millions ofyenInterim period
Full year

Ordinary Income%

Millions ofyen

52,100-0.7

104,300

0.5

ProfitEarnings per Share

%Millions of
yen

%

Yen

6,250

-18.4

3,990

-7.1

112.91

12,130

-0.0

7,740

13.2

219.02

Note: Disclosure concerning implementation of audit proceduresThis financial report is exempt from audit procedures based on the Financial Instruments andExchange Act. At the time of disclosure of this financial report, the Company is in the process of
implementing the audit procedures for its consolidated financial statements.
Note: Explanation concerning appropriate use of the projected operating results and other items to note
(Note concerning forward-looking statements)
The forward-looking statements, including business results forecasts, contained in these materials
are based on information currently available to the Company and on certain assumptions deemed tobe reasonable. The Company does not guarantee the achievement of the projections. Actual
operating results may differ substantially due to a number of factors. Please refer to “1. Analysis ofOperating Results and Financial Position (1) Analysis of Operating Results” on Page 6 of the
Attachments for the conditions used as assumptions for the projected operating results and mattersto note before using the projected operating results.
(Methods of obtaining the supplementary materials and the content of the earnings briefings)
The Company plans to hold a meeting for institutional investors and analysts on December 12,
2016. Presentation materials will be available on the Company’s website after the meeting.

 4Attachments Table of Contents
1. Analysis of Operating Results and Financial Position ...........................................................6(1) Analysis of Operating Results ······················································································6(2) Analysis of Financial Position ·······················································································8(3) Basic Policy Concerning Distribution of Earnings and Dividends for the Consolidated
Fiscal Year under Review and Next Consolidated Fiscal Year ············································9(4) Business Risks and Other Risks ················································································· 10
2. Current Conditions of the Company’s Group .................................................................... 11
3. Management Policies .................................................................................................... 13(1) Basic Management Policies ······················································································· 13(2) Management Indicators Established as Objectives ······················································· 13(3) Medium- to Long-term Corporate Management Strategy ·············································· 13(4) Issues to be Addressed by the Company ···································································· 13
4. Basic Policy Regarding Selection of Accounting Standards ................................................. 14
5. Consolidated Financial Statements ................................................................................. 15(1) Consolidated Balance Sheets ···················································································· 15(2) Consolidated
StatementsofIncomeandConsolidated
StatementsofComprehensive Income ···························································································· 17(Consolidated Statements of Income) ···································································· 17(Consolidated Statements of Comprehensive Income) ············································· 18(3) Consolidated Statements of Changes in Equity ···························································· 19(4) Consolidated Statements of Cash Flows······································································ 21(5) Notes to the Consolidated Financial Statements ·························································· 23(Notes Relating to the Going Concern Assumption) ······················································ 23(Important Matters Used as Basis for Preparation of the Consolidated Financial
Statements) ··········································································································· 23(Change in Accounting Policy) ··················································································· 27(New Accounting Standards Not Yet Applied) ······························································ 27(Changes in Presentation) ························································································ 29(Supplemental Information)······················································································ 29(Notes to the Consolidated Balance Sheets) ································································ 29(Notes to the Consolidated Statements of Income) ······················································ 31(Notes to the Consolidated Statements of Comprehensive Income) ······························· 33(Notes to the Consolidated Statements of Changes in Equity) ······································· 34(Notes to the Consolidated Statements of Cash Flows) ················································· 35(Notes to Leasing Transactions) ················································································· 36(Business Segment Information) ··············································································· 39(Business Combinations) ·························································································· 43(Material Events after the Close of the Consolidated Fiscal Year)···································· 45
6. Non-Consolidated Financial Statements .......................................................................... 46(1) Balance Sheets ········································································································· 46(2) Statements of Income ······························································································· 48(3) Statements of Changes in Equity ················································································ 50

 51. Analysis of Operating Results and Financial Position(1) Analysis of Operating Resultsa) Summary of consolidated fiscal year operating results (From November 1, 2015 to October
31, 2016)
In the fiscal year under review, Japan’s economy maintained a modest recovery trend, supportedby the continuation of the government’s economic and monetary policy measures. However, wemust remain wary about conditions, given the economic slowdown in emerging countries, as well as
the softness in the stock market and yen appreciation spurred by fears of a global economic
slowdown due to the UK’s vote to leave the EU.
In the construction industry related to the Kanamoto Group, private sector construction
investment was solid both for building and capital investment. Moreover, demand related to disasterrecovery and the Tokyo Olympics and Paralympics was strong, but the management environment
was challenging due to overall weakness in construction demand, as indicated by the decline inpublic sector investment in outlying areas.
Given such circumstances, the Kanamoto Group moved forward with key initiatives which werebased on various measures in its Medium-term Management Plan (fiscal 2014 to fiscal 2016). In
addition to expanding its base in the Tokyo metropolitan area and other locations in which public
and private sector demand is concentrated, the Company took steps to augment and expand its
domestic base of operations, including making NISHIKEN CO., LTD. (Kurume City, Fukuoka
Prefecture), the largest construction equipment rental firm in the Kyushu region, a subsidiary inMarch 2016.
Consequently, in the fiscal year ended October 31, 2016 net sales rose 8.7% from the priorconsolidated fiscal year level to ¥144,870 million. On the earnings front, operating income
decreased 7.0% year on year to ¥15,134 million and ordinary income fell 10.9% to ¥14,405 million,
reflecting the increased burden for depreciation and amortization resulting from increases in assets
such as rental assets. Profit attributable to owners of parent decreased 15.3% over the priorconsolidated fiscal year to ¥8,098 million.
[Operating Results for the Fiscal Year ended October 31, 2016](Percentages show the change from the prior year)
Net sales

Consolidated

Non-consolidated

Operating income

Profit attributable toowners of parent

Ordinary income

Millions of yen%

Millions ofyen%Millions ofyen%Millions ofyen%Year underreview

144,870

8.7

15,134-7.0

14,405

-10.9

8,098

-15.3

Prior year

133,292

6.2

16,270-1.1

16,164

0.5

9,557

2.8

Year underreview

103,777

1.7

11,864-15.9

12,132

-13.0

6,840

-18.0

Prior year

102,029

8.2

14,1085.0

13,948

2.9

8,344

2.0

Results for each of the Company’s business segments were as follows.
b) Summary of consolidated operating results by business segment[Business related to the Construction Equipment Rental Division]
In the construction-related business that is Kanamoto’s core business, construction demand was
brisk primarily for recovery and restoration in the Tohoku Region and infrastructure refurbishment
ahead of the Tokyo Olympics and Paralympics. In other regions, however, the operating
environment grew more severe as demand for construction equipment rentals was uneven in someregions during the fiscal year under review as public works projects were put off.

 6In these conditions, the Group focused all of its resources on supporting reconstruction efforts
by strengthening affiliations with Group companies and efficiently allocating management
resources between companies to participate in disaster recovery efforts following the earthquake
in the Kumamoto region and reconstruction after torrential rain storms in Hokkaido.
By region, sales in this business fluctuated as follows: down 0.5% in the Hokkaido Region, up
2.6% in the Tohoku Region, up 6.1% in the Kanto & Koushinetsu Region, down 1.1% in the Kansai& Chubu Region, and up 89.9% in the Kyushu & Okinawa Region. The inclusion of NISHIKEN CO.,LTD. in the scope of consolidation led to a significant increase in net sales in the Kyushu Region,
where there had been little previous expansion of bases.
Sales of used construction equipment slipped 4.1% versus the previous fiscal year, reflecting thesystematic sale of equipment that had been in service for a certain number of years to maintain aproper composition of assets.
Reflecting these factors, the Kanamoto Group posted net sales in the construction-related
businesses of ¥131,208 million, an increase of 6.2% year-on-year, and operating income of¥14,057 million, a decrease of 9.8%.
[Other businesses]
In the Company’s other businesses, sales were steady at those related to both the Steel Sales
Division and the Information Products Division. This, coupled with the addition of NISHIKEN’s
businesses such as welfare-related business, resulted in a 40.6% increase in net sales from thesame period of the prior consolidated fiscal year to ¥13,662 million and a 118.8% increase inoperating income to ¥660 million.
< Change in number of branches >The Company opened eight new branches and closed one branch.
New branches:
Kumagaya Branch (Kumagaya City, Saitama Prefecture), Fukushima
Machinery Maintenance Center (Koriyama City, Fukushima Prefecture),
Okegawa-Kitamoto Branch (Kitamoto City, Saitama Prefecture), Chusan
Branch (Zentsuji City, Kagawa Prefecture), Shinjo Branch (Shinjo City,
Yamagata Prefecture), Yamanashi-Minami Branch (Minamikoma-gun,
Yamanashi Prefecture), Ishikari Branch (Ishikari City, Hokkaido),
Kashiwazaki Branch (Kashiwazaki City, Niigata Prefecture)
Closed branch:
Yubari Machinery Maintenance Center (Yubari City, Hokkaido)c) Outlook for the Next Fiscal Year (Fiscal year ending October 2017)
In the next fiscal year, we expect demand for construction equipment rentals to be solid due tothe shinkansen extension project and reconstruction and recovery work following torrential rains in
Hokkaido, earthquake disaster reconstruction work in the Tohoku region, infrastructure-related
construction ahead of the Tokyo Olympics and Paralympics, other private-sector redevelopment
projects in the Tokyo metropolitan area and reconstruction and recovery work following
earthquakes in Kumamoto and other regions. However, we expect the overall management
environment to remain harsh in light of delays in starting construction projects as a result of labor
shortages and skyrocketing material and equipment costs.
Looking forward, while continuing to support the disaster restoration and revitalization projects
in the specific regions, we aim to enhance and grow our domestic sales base with a focus on interregional cooperation by promoting further expansion of branches, particularly in areas where weare yet to open branches, including the Tokyo metropolitan area and the greater Kanto region, in
accordance with key measures of the medium-term corporate management plan BULL 53.
Regarding overseas business expansion, the Group will continue actively expanding andstrengthening its existing branches in cooperation with local partner companies in China (Shanghaiand Hong Kong), Singapore, Thailand, Indonesia, Vietnam, and the Philippines.
In addition, to continuing to build corporate value, the Company plans to concentrate
management resources in fields in which it can leverage the Group’s comprehensive capabilities.
 7

The Company aims to build a structure to facilitate the fortification of its financial position andearnings strength.
In light of the aforementioned measures, the Kanamoto Group aims for net sales of ¥153,000
million, a growth of 5.6% year-on-year, operating income of ¥15,820 million, an increase of 4.5%,
ordinary income of ¥15,580 million, a rise of 8.2%, and profit attributable to owners of parent of¥9,460 million, an improvement of 16.8%.
(2) Analysis of Financial Positiona) Financial position
Total assets at the end of the consolidated fiscal year under review stood at ¥220,836 million, an
increase of ¥17,916 million compared with the end of the prior consolidated fiscal year. This wasprimarily due to the inclusion of NISHIKEN CO., LTD. to the scope of consolidation, as well a¥7,611 million increase in rental equipment in conjunction with operating activities, a ¥2,051
million increase in construction machine parts, a ¥3,276 million increase in land and a ¥2,581
million increase in buildings and structures.
Total liabilities were ¥139,402 million, an increase of ¥8,480 million compared with the end of
the prior consolidated fiscal year. This was primarily due to the inclusion of NISHIKEN CO., LTD. tothe scope of consolidation, as well as a ¥7,029 million increase in long-term loans payable and a¥1,846 million increase in accounts payable - other, tempered by a ¥1,659 million decrease inincome taxes payable.
Total net assets totaled ¥81,434 million, ¥9,435 million higher than at the end of the priorconsolidated fiscal year. This chiefly reflects profit attributable to owners of parent of ¥8,098
million and non-controlling interests of ¥2,341 million. Meanwhile, the Company posted ¥1,236
million in cash dividends.
b) Consolidated cash flows(Unit: Millions of yen)
FY Ended October 2015
(Prior consolidated fiscal
year)

FY Ended October 2016
(Consolidated fiscal year
under review)

Change from prior year

Net cash provided by (used in)operating activities

33,50926,618-6,890Net cash provided by (used in) investing
activities-4,488-8,940-4,452

Net cash provided by (used in) financing
activities-24,857-20,726

4,131

Net increase (decrease) in cash andcash equivalents

4,169-3,080-7,250Cash and cash equivalents at beginningof period

31,98036,1504,169

Cash and cash equivalents at end of
period36,15033,069-3,080The balance of cash and cash equivalents (“cash”) on a consolidated basis at the end of theconsolidated fiscal year under review was ¥33,069 million, a decrease of ¥3,080 million comparedwith the end of the prior consolidated fiscal year. Cash flows for the consolidated fiscal year underreview are discussed below.
(Net cash provided by (used in) operating activities)
Cash generated from operating activities stood at ¥26,618 million, a decrease of 20.6% from theprior consolidated fiscal year.
This was primarily attributable to the following: income before income taxes and minority
interests of ¥13,844 million and depreciation of ¥22,097 million, as well as income taxes paid of¥6,970 million, expenditure by the assets acquisition for rentals of ¥3,034 million and increase(decrease) in notes and accounts payable - trade of ¥1,654 million.

 8(Net cash provided by (used in) investing activities)
Cash flow utilized in investing activities was ¥8,940 million, compared with ¥4,488 million in theprior consolidated fiscal year.
This mainly reflected the purchase of shares of subsidiaries resulting in change in scope of
consolidation of ¥5,806 million and the purchase of property, plant and equipment of ¥2,729
million.
(Net cash provided by (used in) financing activities)
Cash flow used for financing activities was ¥20,726 million, compared with cash flow used infinancing activities in the prior consolidated fiscal year of ¥24,857 million.
This mainly reflected ¥21,304 million for repayments of installment payables, ¥14,637 million for
repayments of long-term loans payable, ¥1,967 million for repayments of lease obligations, and¥1,235 million in cash dividends paid.
The following are cash flow indicator trends for the Kanamoto Group.
FY ended
October 2013

FY ended
October 2014

FY ended
October 2015

FY ended
October 2016

Equity ratio (%)

32.2

33.6

34.3

34.7

Equity ratio on a market capitalizationbasis (%)

56.4

76.3

42.7

40.4

Ratio of interest-bearing liabilities tooperating cash flow (year)

3.9

3.5

2.7

3.8

Interest coverage ratio (times)

19.1

25.6

40.4

40.8

(Notes) Equity ratio:
Equity / Total assets
Equity ratio on a market capitalization basis:
Shareholders’ equity on a market capitalization basis / Total assets
Ratio of interest-bearing liabilities to operating cash flow:
Interest-bearing liabilities / Cash flows from operating activities
Interest coverage ratio: Cash flows from operating activities / Interest payments* All indicators are calculated using financial values on a consolidated basis.
* Total market capitalization is calculated by multiplying the closing share price at the end of
the fiscal year by the number of shares outstanding (after deducting treasury shares) at theend of the fiscal year.
* Cash flows from operating activities in the consolidated statements of cash flows are used for
operating cash flow in the table above. Interest-bearing liabilities include all liabilities posted
to the consolidated balance sheets that incur interest. Interest expenses in the consolidated
statements of cash flows are used for interest payments in the table above.
(3) Basic Policy Concerning Distribution of Earnings and Dividends for the Consolidated Fiscal
Year under Review and Next Consolidated Fiscal Year
Distribution of earnings to shareholders is a key management issue. The dividend policy of Kanamoto
is to provide shareholders with a consistent and stable dividend regardless of the business environment.
Furthermore, the Company aims to implement profit distribution in line with earnings performance.
Moreover, it is the basic policy of Kanamoto to sufficiently build up its retained earnings, which isessential for strengthening financial position and to implement aggressive business expansion.
For the fiscal year ended October 2016, the Company plans a year-end dividend of ¥30 and anannual dividend of ¥45 per share (including an interim dividend of ¥15 per share). Meanwhile, theCompany plans an annual dividend payout for the fiscal year ending October 2017 of ¥50 per share(which includes an interim dividend of ¥15).
Furthermore, the Company aims to allocate retained earnings to capital investments, including
facilities investment for rental equipment and other assets. Note that the company is putting a sharebuyback program into place to facilitate the flexible implementation of capital policies.

 9

(4) Business Risks and Other Risks
This section has been omitted as there were no significant changes from the Business Risks andOther Risks section of the annual securities report filed with the MOF on January 28, 2016.
The annual securities report can be viewed by visiting the following URL.
https://www.kanamoto.ne.jp/report/index.html

 10



2. Current Conditions of the Company’s GroupThe Kanamoto Group is comprised of a total of 20 companies—Kanamoto, 9 consolidated subsidiaries,
7 non-consolidated subsidiaries, and 3 affiliates.
Explanation of main business activities and positioning of each group company is as follows.
< Business related to the Construction Equipment Rental Division >Kanamoto, Daiichi Kikaisangyo Co., Ltd., Kanki Corporation, and NISHIKEN CO., LTD. are engaged in
the rental and sales of construction equipment. Assist Co., Ltd. and its affiliate Asahi Rentax Co., Ltd.
deal in the rental and sales of furniture, fixtures and safety products. Kanatech Co., Ltd. engages in thedesign and sales of modular housing units for temporary use. Kyushu Kensan Co., Ltd. deals in rental
and sales of construction equipment centered on foundation equipment. Toyo Industry Co., Ltd. handles
the rental and sales of equipment related to shield tunneling. Unite Co., Ltd. handles the rental and salesof road construction equipment and the carries out road construction. KG Flowtechno Co., Ltd. engages
in the rental, design, manufacturing, and sales of specialty equipment that is used mainly for ground
improvement and the construction of underground structures.
Outside Japan, construction equipment rental and sales are carried out by Shanghai Jinheyuan
Engineering Construction Co., Ltd. and Shanghai KG Machinery Co., Ltd., a subsidiary of KG FlowtechnoCo., Ltd., in Shanghai, China, by KANAMOTO (HK) CO., LTD. in Hong Kong, China, by Kanamoto & JP
Nelson Equipment (S) PTE. Ltd. in Singapore, by PT Kanamoto Indonesia in Indonesia, by SIAM
KANAMOTO LTD. in Thailand, by KANAMOTO FECON HASSYU CONSTRUCTION EQUIPMENT RENTAL JSC in
Vietnam and by KNK MACHINERY & EQUIPMENT CORPORATION in the Philippines.
These group companies also lease rental equipment from Kanamoto when necessary. In the same
fashion, Kanamoto leases rental equipment from these group companies, which it in turns leases to othercompanies. Kanamoto purchases modular housing units for temporary use from Kanatech Co., Ltd.
< Other businesses >This segment mainly consists of the business related to the Steel Sales Division, the business related
to the Information Products Division, the welfare-related business and Other businesses.
In the business related to the Steel Sales Division, Kanamoto sells construction materials, including
steel products. In addition, in the business related to the Information Products Division and Other
businesses, the Company handles the rental and sales of computers and peripherals, including
workstations and servers. In the welfare-related business, NISHIKEN CO., LTD. rents and sells nursing
care products.

 11



The following diagram outlines our operating companies and relationships.
Domestic, Overseas Customers◎Assist Co., Ltd.

○KG Flowtechno Co., Ltd.

◎Kanatech Co., Ltd.

○Shanghai KG Machinery Co., Ltd.

◎Kanki Corporation○KANAMOTO (HK) CO., LTD.

◎Kyushu Kensan Co., Ltd.

○KNE

◎Daiichi Kikaisangyo Co., Ltd.

●KNK MACHINERY&EQUIPMENT CORPORATION◎Toyo Industry Co., Ltd.

○PT Kanamoto Indonesia◎Unite Co., Ltd.

○KANAMOTO FECON HASSYU CONSTRUCTION◎NISHIKEN CO., LTD.

EQUIPMENT RENTAL JSC◎Shanghai Jinheyuan○Eiwashoukai Co., Ltd.

Engineering Construction●Asahi Rentax Co., Ltd.

Co., Ltd.

●SIAM KANAMOTO CO., LTD.

Suppliers

Notes:(1)

The equity method is not applied to non-consolidated subsidiaries and affiliates.

(2)→ indicates the flow of rental services and products provided(3)◎ indicates consolidated subsidiaries, ○ indicates non-consolidated subsidiaries, ● indicates affiliates.
Please refer to the aforementioned text for details.

 12



3. Management Policies(1) Basic Management Policies
The Kanamoto Group believes that seeking innovation, maintaining a dynamic corporate culture andcontinually pushing businesses forward, by regarding “customers’ interests as Kanamoto’s interests,” isthe best way to meet the expectations of shareholders and group stakeholders and ensure earnings
growth. Through this philosophy, Kanamoto practices group management with the objective of being a
corporate group that can make a valuable and tangible contribution to society.
(2) Management Indicators Established as Objectives
To improve the value of its shares in the medium and long term, the Group targets an ROE (return on
equity) of more than 10% by improving earnings in each business segment, and by enhancing its
capital efficiency. Moreover, in the mainstay construction equipment rental business, given the highweighting of fixed assets, the Company aims to further improve its shareholders’ equity ratio by setting
its target at 45% and above.
The Company is also employing ROI (return on investment) and EBITDA+ (earnings before interest,
taxes, depreciation and administration) which is a key indicator Kanamoto has been employing forsome time to measure asset efficiency, as a key indicator to determine whether to make new capital
investments, including those for rental equipment.
Meanwhile, heavy emphasis is being placed on consolidated net sales and operating income, whichyardsticks for corporate size and earnings strength, as the smooth growth of net sales and operating
income is an indicator of corporate growth potential.
(3) Medium- to Long-term Corporate Management Strategy
The Company’s medium- to long-term corporate management strategy is included in BULL 55, thelong-term vision, and BULL 53, the medium-term corporate management plan. In accordance with thisplan, Kanamoto plans to aggressively expand its operations base in the Kanto & Koshinetsu region, thehome to major projects such as the maglev bullet train and infrastructure development andredevelopment projects related to the Tokyo 2020 Summer Olympic/Paralympic Games, and also aims
to build a structure that will enable the Company to bolster earnings in the Tokyo metropolitan area, inline with medium- to long-term demand forecasts. In addition, as a long-term growth engine,
Kanamoto aims to strategically move forward with the development of an overseas base for operations,mainly in the ASEAN nations, where strong underlying demand is potential long-term growth engine.
The Company will also proactively participate in innovation fields, such as METI’s i-Construction projectto raise productivity on construction sites.
Meanwhile, to enhance risk resilience to adapt to changes in the business environment, Kanamoto
aims to build a management system that will facilitate sustainable growth in the long term by further
improving its earnings management and strengthening its corporate governance system.
(4) Issues to be Addressed by the Company
The core business of the Kanamoto Group is construction equipment rental. Accordingly, theCompany must build a strong earnings structure and a detailed operating structure by pursuingbusiness domains, asset-ownership scale, and an asset portfolio structure, in which earnings are notsubstantially impacted by the size of domestic construction investments.
a) Strengthen human resources training, the group, and its alliances
In the construction equipment rental industry, during the next few years, intensified competition
among companies in the industry is likely to reveal a clear distinction among companies and resultin poor performers falling to the wayside. Kanamoto plans to train its employees so that they will
possess the knowledge and skills suitable for people working at a leading company in theconstruction equipment rental industry. The Company also plans to train human resources that can
immediately respond to business expansion in Japan and abroad. Moreover, to expand businessdomains and areas, it is essential that Kanamoto fortify Group company alliances and therelationships with alliance companies, based on which Kanamoto will fully exert its comprehensive
corporate vitality.
 13b) Reinforce Kanamoto’s financial strategy
Kanamoto is taking steps to ensure timely and optimal funds procurement, while giving
consideration to equipment plans including purchases of rental equipment assets and corporate
facilities. At the same time, the Company aims to focus on improving its financial position, andreducing interest-bearing debt and improving capital efficiency as much as possible, byincorporating measures, including the liquidation of assets.
c) Continuous cost reductions
When introducing assets the Company utilizes a full-fledged benchmark system, and further
strives to maintain asset value by optimizing asset maintenance costs based on its rental assets
operating policies.
d) Strengthen overseas branch management
In line with the promotion of its overseas development, Kanamoto aims to enhance its marketingand sales strategies and also plans to strengthen its management systems in areas such as asset
management and operations management. The Company also plans to quickly prepare a system forthe positioning and training of human resources.

4. Basic Policy Regarding Selection of Accounting Standards
The Kanamoto Group plans to prepare its consolidated financial statements in accordance withgenerally accepted accounting practices in Japan, taking into account comparability of consolidated
financial statements between different accounting periods and against different companies.
Note that it is the policy of the Kanamoto Group to adopt IFRS standards depending on conditions andtrends in Japan and aboard.

 14



5. Consolidated Financial Statements(1) Consolidated Balance Sheets(Unit: Millions of yen)
Prior consolidated
fiscal year
(As of October 31, 2015)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Electronically recorded monetary claims- operating
Securities
Merchandise and finished goods
Raw materials and supplies
Construction machine parts
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Rental equipment
Accumulated depreciation
Rental equipment, net
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment andvehicles, net
Land
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Other
Allowance for doubtful accounts
Allowance for investment loss
Total investments and other assets
Total non-current assets
Total assets

*4

*1

 15



35,90034,961

Current consolidated
fiscal year
(As of October 31, 2016)*4

33,20936,502

2,290

3,718

350
672
272
8,214
610
623
-701
83,195200
693
379
10,265
604
1,059
-689
85,945

164,914-97,573
67,341
25,840-16,275
9,564
5,714-4,965

189,549-114,596
74,95331,029-18,883
12,145
6,999-5,963749

1,036

32,354
2,539-1,112
1,426
111,436

35,6302,343-1,332
1,011
124,776

–
316
316

628
664
1,292

6,317
285
2,008
-528
-110
7,972
119,724
202,919

*1

6,911
419
2,216
-406
-320
8,821
134,891
220,836

(Unit: Millions of yen)
Prior consolidated
fiscal year
(As of October 31, 2015)
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Current portion of bonds
Current portion of long-term loans
payableLease obligations
Income taxes payable
Provision for bonuses
Accounts payable - other
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Long-term accounts payable - other
Provision for directors’ retirement
benefits
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-forsale securities
Deferred gains or losses on hedges
Foreign currency translation
adjustment
Remeasurements of defined benefit
plans
Total accumulated other comprehensive
incomeNon-controlling interests
Total net assets
Total liabilities and net assets

 16



Current consolidated
fiscal year
(As of October 31, 2016)

27,775727–

26,986
1,194
40

12,55013,951

1,585
3,711
856
19,233
3,093
69,534

1,357
2,052
1,091
21,0792,399
70,152

19,614
1,831
39,254

26,6442,700
38,870

–

94

–
317
368
61,387130,921

234
384
321
69,249139,40213,652
14,916
41,156-2,12867,597

13,652
14,91648,017-2,12974,458

1,948

2,051

-0

–

43

164

–

8

1,991

2,225

2,409
71,998202,919

4,750
81,434
220,836(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive
Income(Consolidated Statements of Income)(Unit: Millions of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Insurance income
Rent income
Bonus income
Foreign exchange gains
Reversal of allowance for doubtful
accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on sales of notes receivable - trade
Foreign exchange losses
Provision of allowance for investment loss
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Subsidy income
Gain on sales of investment securities
Gain on sales of shares of subsidiaries
and associates
Compensation income for damage
Gain on step acquisitions
Total extraordinary income
Extraordinary losses
Loss on sales and retirement of noncurrent assets
Impairment loss
Loss on valuation of investment securities
Loss on sales of investment securities
Loss on valuation of shares of subsidiaries
and associates
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to non-controllinginterests
Profit attributable to owners of parent

Prior consolidated
fiscal year
(From November 1, 2014
to October 31, 2015)
133,292
91,886
41,405*1
25,134
16,270

6
140
29
71
10
–

4

47

225
581

222
528

461
18
–
–
208
688
16,164

267
11
493
278
206
1,257
14,405



35
6
2
–

118
–
519

–
14
59

171
87
–

*4

*2

68

157

*3

 17

8
111
42
65
26
96

12
12
307

*2

Current consolidated
fiscal year
(From November 1, 2015
to October 31, 2016)
144,870
101,31343,556*1
28,422
15,134

*3
*4

164
254
54
4

–

141

416
16,266
6,318
98
6,416
9,850

620
13,844
5,215
36
5,252
8,591

292

493

9,557

8,098

(Consolidated Statements of Comprehensive Income)(Unit: Millions of yen)

ProfitOther comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans,
net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable toowners of parent
Comprehensive income attributable tonon-controlling interests

Prior consolidated
fiscal year
(From November 1, 2014
to October 31, 2015)
9,850

 18



Current consolidated
fiscal year
(From November 1, 2015
to October 31, 2016)
8,591

-29

93

-0
25

0
121

–

11

-4
9,845

226
8,818

9,556

8,323

289

495

(3) Consolidated Statements of Changes in Equity
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)(Unit: Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginningof current period
Changes of items
during period
Dividends ofsurplusRetainedearnings

Capital surplus

13,652

14,91632,860

Profit attributableto owners of parent
Purchase oftreasury shares
Net changes of
items other thanshareholders’equityTotal changes of items
during period
Balance at end ofcurrent period

Totalshareholders’equityTreasury shares-56

61,373-1,261-1,261

9,557

9,557
-2,072-2,072

–

–

8,296

-2,072

6,223

13,652

14,916

41,156-2,12867,597

Accumulated other comprehensive income

Balance at beginningof current period
Changes of items
during period
Dividends ofsurplus

Valuationdifferenceonavailablefor-salesecurities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasure-ments ofdefinedbenefit
plans

Total
accumulated
othercomprehensive income

Noncontrollinginterests

1,977

–

14

–

1,992

2,147

Profit attributableto owners of parent
Purchase oftreasury shares
Net changes of
items other thanshareholders’equityTotal changes of items
during period
Balance at end ofcurrent period

Total net
assets65,513–-1,261

–

9,557

–

-2,072

-29

-0

28

–

-0

261

260

-29

-0

28

–

-0

261

6,484

1,948

-0

43

–

1,991

2,409

71,998 19Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)(Unit: Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginningof current period
Changes of items
during period
Dividends ofsurplusRetainedearnings

Capital surplus

13,652

14,916

41,156

Profit attributableto owners of parent
Purchase oftreasury shares
Net changes of
items other thanshareholders’equityTotal changes of items
during period
Balance at end ofcurrent period

Totalshareholders’equityTreasury shares-2,12867,597-1,236-1,236

8,098

8,098
-0

-0

–

–

6,861

-0

6,861

13,652

14,91648,017-2,12974,458

Accumulated other comprehensive income

Balance at beginningof current period
Changes of items
during period
Dividends ofsurplus

Valuationdifferenceonavailablefor-salesecurities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasure-ments ofdefinedbenefit
plans

Total
accumulated
othercomprehensive income

Noncontrollinginterests

1,948

-0

43

–

1,991

2,409

Profit attributableto owners of parent
Purchase oftreasury shares
Net changes of
items other thanshareholders’equityTotal changes of items
during period
Balance at end ofcurrent period

Total net
assets

71,998–-1,236

–

8,098

–

-0

103

0

121

8

233

2,341

2,574

103

0

121

8

233

2,341

9,435

2,051

–

164

8

2,225

4,750

81,434 20

(4) Consolidated Statements of Cash Flows(Unit: Millions of yen)
Prior consolidated
fiscal year
(From November 1, 2014
to October 31, 2015)
Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Loss (gain) on sales and retirement of
non-current assets
The amount of cost price transfer withasset sell-off for rentals
Expenditure by the construction
equipment and supplies
Expenditure by the assets acquisition forrentals
Loss (gain) on valuation of investment
securities
Loss (gain) on sales of investment
securities
Loss on valuation of shares of subsidiaries
and associates
Loss (gain) on sales of shares ofsubsidiaries and associates
Increase (decrease) in allowance for
doubtful accounts
Increase (decrease) in allowance forinvestment loss
Increase (decrease) in provision forbonuses
Increase (decrease) in net defined benefit
liability
Interest and dividend income
Assets buy on the installment planpurchase payment interest for rentals
Interest expenses
Foreign exchange losses (gains)
Compensation income for damage
Decrease (increase) in notes andaccounts receivable - trade
Decrease (increase) in inventories
Increase (decrease) in notes andaccounts payable - trade
Increase (decrease) in accounts payable other
Other, net
SubtotalInterest and dividend income received
Compensation for damage income
received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating
activities

 21



Current consolidated
fiscal year
(From November 1, 2015
to October 31, 2016)

16,266
20,273171
1013,84422,097
254
83

145

128

944

840

-132

-492

-1,198-3,034

87

54

-307

2

–

141

-68

–

498

-61

–

278

17

141

6

-14

-120

-146

380

371

461
-64
-118

267
292
–

-3,613

390

-109

-107

4,486

-1,654

2,101

1,298

302
40,420120-877
34,096
146

118

–

-828
-6,320-653-6,97033,50926,618

(Unit: Millions of yen)
Prior consolidated
fiscal year
(From November 1, 2014
to October 31, 2015)
Cash flows from investing activities
Payments into time deposits
Purchase of property, plant andequipment
Proceeds from sales of property, plantand equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment
securities
Purchase of shares of subsidiaries
Proceeds from sales of shares ofsubsidiaries resulting in change in scopeof consolidation
Purchase of shares of subsidiaries
resulting in change in scope of
consolidation
Purchase of shares of subsidiaries andassociates
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing
activities
Cash flows from financing activities
Net increase (decrease) in short-termloans payable
Redemption of bonds
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of installment payables
Repayments of lease obligations
Purchase of treasury shares
Purchase of treasury shares ofsubsidiaries
Cash dividends paid
Dividends paid to non-controllinginterests
Payments from changes in ownershipinterests in subsidiaries that do not resultin change in scope of consolidation
Net cash provided by (used in) financing
activities
Effect of exchange rate change on cash andcash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
periodCash and cash equivalents at end of period

-80

-0

-4,113-2,729

34

38

-160
-72

-366
-22

330

48

-213

–

51

–

–

 22



-5,806

*2

-54

–

-98
4
-115

-37
25
-90

-4,488-8,940

102

-894

–
11,462-12,984-18,913-1,188-2,072-50
19,960-14,637-21,304-1,967-0-0-0-1,259-1,235

-3

-1

–

-594

-24,857-20,726

5

-33

4,169

-3,08031,98036,15036,150*1

Current consolidated
fiscal year
(From November 1, 2015
to October 31, 2016)*1

33,069(5) Notes to the Consolidated Financial Statements(Notes Relating to the Going Concern Assumption)
The Company had no material items to report.
(Important Matters Used as Basis for Preparation of the Consolidated Financial Statements)
1. Companies included in the consolidation(1) Number of consolidated subsidiaries: 9 companies
Name of consolidated subsidiaries
Assist Co., Ltd.
Kanatech Co., Ltd.
Kanki Corporation
Kyushu Kensan Co., Ltd.
Shanghai Jinheyuan Engineering Construction Co., Ltd.
Daiichi Kikaisangyo Co., Ltd.
Toyo Industry Co., Ltd.
Unite Co., Ltd.
NISHIKEN CO., LTD.
Note: Among the companies listed above, NISHIKEN CO., LTD. became a subsidiary in thecurrent consolidated fiscal year and is therefore included in the scope of consolidation.
(2) Names of non-consolidated subsidiaries
KG Flowtechno Co., Ltd.
KANAMOTO (HK) CO., LTD.
Kanamoto & JP Nelson Equipment (S) PTE. Ltd.
Shanghai KG Machinery Co., Ltd.
PT Kanamoto Indonesia
KANAMOTO FECON HASSYU CONSTRUCTION EQUIPMENT RENTAL JSC
Eiwashoukai Co., Ltd.
(Reason for exclusion from consolidation)
The size of each of the non-consolidated subsidiaries is small, and each company’s total assets,
net sales and profit or loss (amount corresponding to equity) and retained earnings (amountcorresponding to equity) do not have a material effect on the consolidated financial statements.
2. Matters pertaining to application of equity method accounting(1) Equity-method affiliates
There are no equity-method affiliates(2) Non-consolidated subsidiaries and affiliates not accounted for under the equity method
Number of affiliates: 3 companies
Names of affiliates
Asahi Rentax Co., Ltd.
SIAM KANAMOTO CO., LTD.
KNK MACHINERY & EQUIPMENT CORPORATION(Reasons for not accounting for the companies under the equity method)
Given the level of profit or loss (commensurate with equity) and retained earnings(commensurate with equity), the equity method was not applied to these 7 non-consolidated
subsidiaries and 3 affiliates given the minimal degree of impact to consolidated financial
statements. In addition, these companies were excluded from the scope of equity-method
accounting given their lack of overall significance.

 23



3. Matters pertaining to the fiscal years for consolidated subsidiaries
The closing date for Shanghai Jinheyuan Engineering Construction Co., Ltd. is December 31, and theclosing date for all other consolidated subsidiaries matches the closing date for consolidated accounts
settlement.
When preparing the consolidated financial statements, the Company uses financial statements for
Shanghai Jinheyuan Engineering Construction Co., Ltd. that is based on a provisional accounts
settlement as of September 30. The data is adjusted to reflect significant transactions that occurred
between the subsidiary’s fiscal year-end and the consolidated accounts settlement date that are
believed to have a significant effect on consolidated financial results.
Furthermore, following the Company’s purchase of shares of NISHIKEN CO., LTD. in the current
consolidated fiscal year, the closing date for NISHIKEN CO., LTD. has changed from December 31 to
October 31 so that it has the same closing date as the Company. In the current consolidated fiscal year,
accounting period of NISHIKEN CO., LTD. is ten months and seven of those months are included inconsolidation.
4. Accounting principles(1) Appraisal standards and appraisal methods for principal assets
a. Securities
Other securities
Securities with a market price
The Company adopted the market value method (the full amount of the valuationdifference is charged to net assets using the direct transfer to capital method, with thedisposal cost determined by the moving average method) based on the market price on
the consolidated fiscal year closing date or similar prices.
Securities without market prices
The Company adopted the cost method, cost being determined by the moving averagemethod.
b. Construction machine parts
The Company calculates the amount after deduction of depreciation expense according to
the straight-line method from the original prices starting from year of purchase.
c. Inventories(i) Merchandise and finished goods
The Company adopted the cost method, cost being determined based on the periodic averagemethod (amounts shown on the balance sheet are calculated by determining write-downs ofbook value based on the decline in profitability)(ii) Costs on uncompleted construction contracts
The Company adopted the cost method, cost being determined by the specific identification
method(iii) Raw materials and supplies
The Last Purchase Cost method (amounts shown on the balance sheet are calculated bydetermining write-downs of book value based on the decline in profitability)(2) Depreciation methods for principal depreciable assets
a. Property, plant and equipment (excluding leased assets)
The Company adopted the straight-line method for rental equipment (for certain
consolidated subsidiaries, the declining-balance method) and the declining-balance method
for other assets. Buildings on land that is leased under a fixed-term land lease agreement,
however, are depreciated using the straight-line method using the remaining period of the
fixed-term lease as the depreciable life and zero residual value. For certain consolidated
subsidiaries the Company adopted the straight-line method for buildings and structuresacquired on or after April 1, 1998, but excluding fixtures and equipment.
The depreciable lives mainly used by the Company are as follows.
Rental equipment:
2-15 years
Buildings and structures:
2-60 years

 24



b. Intangible assets (excluding leased assets)
The Company adopted the straight-line method.
Software for use within the Company is depreciated using the straight-line method based on
the assumed useful life for internal use (5 years).
c. Leased assets
The Company adopted straight-line depreciation using the lease term as the depreciable lifeand zero residual value.
The Company accounts for finance lease transactions except for leases that transfer
ownership of the property for which the lease start date is before October 31, 2008 by
applying accounting treatment based on the method applied for ordinary rental transactions.
(3) Accounting standards for principal allowances and reserves
a. Allowance for doubtful accounts
To provide for losses on doubtful accounts such as accounts receivable, the Company
charges to income an amount based on actual loss experience for normal accounts, plus anamount for projected unrecoverable amounts based on separate assessments of theprobability of collection from specific credits such as credits at risk of bankruptcy.
b. Provision for bonuses
To fully provide for expenditures of bonuses the Company will pay to employees, an amountis appropriated to the reserve during the fiscal year based upon a salary estimate amount.
c. Allowance for investment loss
The Company builds up provisions to cover losses from declines in real prices of assets suchas the stock of subsidiary companies that are not subject to asset impairment accounting byapplying internally established standards that take into consideration subsidiary operating
results and asset quality.
d. Provision for directors' retirement benefits
At certain consolidated subsidiaries, to prepare for the payment of retirement benefits todirectors, the amount to be paid at the end of the fiscal year, based on an internal rule, isprovided.
(4) Method of accounting for retirement benefits
a. Method of attributing expected retirement benefit to periods
In calculating the retirement benefit obligations, the straight-line basis is used indetermining the amount of the expected retirement benefit obligation attributed to service
performed up to the end of the current fiscal year.
b. Method of recognizing actuarial differences
Actuarial differences are recognized in profit or loss in the year following the year in which a
respective gain or loss arises, and are amortized proportionally on a straight-line basis over a
period of 7.7 years, which is within the average remaining years of service of the eligible
employees.
c. Method of accounting for unrecognized actuarial difference
Unrecognized actuarial difference is accounted for in remeasurements of defined benefit
plans, after adjusting for tax effects, under accumulated other comprehensive income of net
assets.
(5) Accounting standards for principal income and expenses
Accounting standards for amount of completed works and cost of completed construction works
a. Construction works for which the portion of the works completed by the end of the year canbe reliably determined (cost-to-cost method is used to estimate the rate of progress forconstruction)
Percentage-of-completion method (progress in construction work is estimated using thecost-to-cost method)b. Other construction works
Completed-contract method

 25



(6) Standard for conversion of main foreign currency-denominated assets or liabilities into Japaneseyen
The Company converts monetary claims and liabilities that are denominated in foreign
currencies into Japanese yen based on the spot rate for the consolidated fiscal year settlement
date, and posts the translation difference to income as a gain or loss. The assets and liabilities ofcontrolled foreign corporations are converted into Japanese yen based on the spot rate for theforeign corporation’s fiscal year closing date, and the earnings and costs are converted into
Japanese yen using to the average market price during the period, and the translation adjustments
are accounted for by including the amounts in the foreign currency translation adjustment andnon-controlling interests in net assets.
(7) Hedge accounting for principal hedging methods
a. Hedge accounting method
The Company employs the deferral accounting method of hedges. Also, allocation treatment
is applied when foreign exchange rate risk hedging meets necessary requirements. Also,
special accounting treatment is employed for interest rate swap transactions that meet special
rule accounting.
b. Hedge methods and hedged transactions
Hedge accounting is applied to the following hedge methods and hedged transactions.
(i) Hedge method:
foreign exchange forward contracts
Hedged transactions: foreign currency denominated financial obligations and scheduledtransactions owing to the import of raw materials(ii) Hedge method:
Interest rate swaps
Hedged transactions: Debt
c. Hedging policies
The Company’s use of derivative transactions is limited to hedging risk within the scope of
the Company’s assets and liabilities subject to market fluctuation risk.
d. Method for evaluating the effectiveness of hedging
The effectiveness of hedging is measured from the time a transaction is first hedged to thepoint effectiveness can be determined. Effectiveness is determined based on a comparison of
the cumulative market fluctuations for hedged transaction based on a single hedge method.
In addition, the Company’s interest swap transactions fulfill the requirements for special ruleaccounting. The results of this are used to evaluate the effectiveness of interest swap hedges.
(8) Amortization method and amortization period for goodwill
Goodwill amortization is done using the straight-line method over a five-year period. However,extremely small amounts are written off completely in the year in which they occur.
(9) Scope of capital in the consolidated statements of cash flows
Capital includes cash on hand, deposits that can be withdrawn on demand and highly liquidable
short-term investments that mature within three months from the date of acquisition and have a
low risk of a fluctuation in value.
(10) Other important matters for preparing consolidated financial statements
Accounting standards for consumption taxes
The tax-exclusion method is employed as the accounting standard for national and local
consumption taxes. Non-deductible national and local consumption taxes are treated as an
expense in the fiscal year under review.

 26



(Change in Accounting Policy)(Application of Accounting Standards for Business Combinations and related standards)
Beginning from the current consolidated fiscal year, the Company is applying the AccountingStandard for Business Combinations (ASBJ Statement No. 21, September 13, 2013; “the Business
Combinations Accounting Standard”), Accounting Standard for Consolidated Financial Statements(ASBJ Statement No. 22, September 13, 2013; “the Consolidated Accounting Standard”), AccountingStandard for Business Divestitures (ASBJ Statement No. 7, September 13, 2013; “the Business
Divestitures Accounting Standard”), and related statements. As a result, the method of recording thedifference resulting from changes in the Company’s ownership interests in subsidiaries that are underongoing control of the Company was changed to one in which it is recorded as capital surplus, and themethod of recording acquisition-related costs was changed to one in which they are recognized as
expenses for the fiscal year in which they are incurred. Furthermore, for business combinations
executed on or after the beginning of the current consolidated fiscal year, the accounting method waschanged to one in which the reviewed acquisition cost allocation resulting from the finalization of thetentative accounting treatment is reflected in the consolidated financial statements for the fiscal year
in which the business combination occurs. In addition, the Company has revised its presentation of net
income etc., and revised its presentation from minority interests to non-controlling interests. To reflect
these changes in presentation, the consolidated financial statements of the previous fiscal year havebeen restated to reflect a consistent presentation format.
Application of the Business Combinations Accounting Standard and related standards is in line withthe transitional measures provided for in paragraph 58-2 (4) of the Business Combinations AccountingStandard, paragraph 44-5 (4) of the Consolidated Financial Statements Accounting Standard andparagraph 57-4 (4) of the Business Divestitures Accounting Standard. The Company is applying thesaid standards prospectively from the beginning of the current fiscal year.
As a result, the effect of this change on the consolidated financial statements and the per-share data
for the current consolidated fiscal year is immaterial.
In the consolidated statements of cash flows for the current consolidated fiscal year, the cash flow
for costs related to the purchase or sales of subsidiary shares not related to changes of scope of
consolidation are reported in net cash provided by (used in) operating activities. Moreover, the cash
flow for costs arising from the purchase of subsidiary shares related to changes in scope of
consolidation and costs arising from the purchase or sales of subsidiary shares not related to changes
in scope of consolidation are reported in net cash provided by (used in) operating activities.
(Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016)
Following the revision to the Corporation Tax Act, certain consolidated subsidiaries have applied thePractical Solution on a Change in Depreciation Method Due to Tax Reform 2016 (ASBJ PITF No. 32,
June 17, 2016) from the fiscal year ended October 31, 2016, and changed the depreciation method forfacilities attached to buildings and structures acquired on or after April 1, 2016 from the decliningbalance method to the straight line method.
The effects on the consolidated financial statements for the current fiscal year are minimal.
(New Accounting Standards Not Yet Applied)
Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Statement No. 26, December
28, 2015)(1) Outline
When transferring authority on the Japanese Institute of Certified Public Accountants’ practicalguidelines on accounting related to tax-effect accounting and practical guidelines for auditing(sections related to accounting treatment) to the Accounting Standards Board of Japan, theImplementation Guidance on Recoverability of Deferred Tax Assets groups companies into fivecategories with respect to guidelines related to the recoverability of deferred tax assets, principallythose provided in the Japanese Institute of Certified Public Accountants Auditing Committee Report
No. 66, Audit Treatment for Judgment of Recoverability of Deferred Assets. The guidance basicallyapplies the framework for handling estimates of the amount of deferred tax assets recorded
according to these categories, making some necessary revisions to category conditions and thehandling of the amount of deferred tax assets recorded, thereby providing guidelines for theapplication of the Accounting Standards for Tax-Effect Accounting (Business Accounting Council)
for the recoverability of deferred tax assets.
 27

(Revisions to category conditions and the handling of the amount of deferred tax assets
recorded)・Accounting treatments of entities not satisfying any of the category criteria from “Category 1”
to “Category 5.”・Category criteria of “Category 2” and “Category 3.”
・ Accounting treatments of unscheduled deductible temporary differences for entities in“Category 2.”・Accounting treatments for reasonably estimable period for taxable income before temporary
differences for entities in “Category 3.”
・Accounting treatments for entities satisfying the category criteria of “Category 4” and also
falling in “Category 2” or “Category 3.”(2) Scheduled date of application
The Company is applying the guidance beginning the fiscal year starting on or after November 1,
2016.
(3) Effects of application of accounting standards, etc.
The amount of the effect on the consolidated financial statements from the revisions of the
Implementation Guidance on Recoverability of Deferred Tax Assets is currently under assessment.

 28



(Changes in Presentation)(Consolidated balance sheets)“Electronically recorded monetary claims - operating,” which was included in “Notes and accounts
receivable - trade” under “Current assets” in the previous fiscal year, is presented as a separate line
item from the current consolidated fiscal year because of an increase in the significance of the amount.
The consolidated financial statements of the prior consolidated fiscal year were reclassified to reflect thischange in presentation.
As a result of the change, in the consolidated balance sheets of the prior consolidated fiscal year,¥37,251 million that was presented in “Notes and accounts receivable - trade” under “Current Assets”
was reclassified into ¥34,961 million of “Notes and accounts receivable - trade” and ¥2,290 million of“Electronically recorded monetary claims - operating.”(Consolidated statements of cash flows)“The amount of cost price transfer with the construction machine parts sale,” which was presented
separately under “Cash flows from operating activities” in the previous fiscal year, is included in "Other,net" under “Cash flows from operating activities” for the fiscal year under review because the amountbecame immaterial. The consolidated financial statements of the previous fiscal year have been
reclassified to reflect this change in presentation.
As a result of the change, in the consolidated statement of cash flows for the prior fiscal year, ¥7
million that was presented in “Amount of cost price transfer with the construction machine parts sale”
under “Cash flows from operating activities” was reclassified into ¥7 million of “Other, net”.
(Supplemental Information)(Impact from change to corporate tax rate)
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and the “Act for
Partial Revision of Local Tax Act, etc.” (Act No. 13 of 2016) were enacted on March 31, 2016.
Accordingly, the income tax rate was reduced for consolidated fiscal years in and after April 1, 2016.
Henceforth the effective income tax rate applied to the calculation of deferred tax assets and liabilities
will be lowered from 32.0% to 30.6%. Meanwhile, an income tax rate of 30.6% is to be applied to oneoff items expected to be written off in the consolidated fiscal year beginning November 1, 2016 andNovember 1, 2017. Ultimately both income tax rates will be lowered from 32.0% to 30.4% for one-off
and other items expected to be written off in the fiscal years in and after the consolidated fiscal year
beginning November 1, 2018.
In light of this revision, deferred tax assets at the end of the fiscal year under review declined ¥19
million while income taxes - deferred rose ¥66 million and the valuation difference on available-for-salesecurities increased ¥46 million.
(Notes to the Consolidated Balance Sheets)*1 Matters related to non-consolidated subsidiaries and affiliated companies are as follows.
(Unit: Millions of yen)
Prior consolidated fiscal year
(As of October 31, 2015)
Investment securities (shares)

617

 29



Current consolidated fiscal year
(As of October 31, 2016)
1,002

2 Guarantees(Unit: Millions of yen)
Prior consolidated fiscal year
(As of October 31, 2015)

Current consolidated fiscal year
(As of October 31, 2016)

Joint and several guarantees of
employee bank loans (North PacificBank, Ltd.)

29

23

Guarantee of borrowing liabilities of KG
Flowtechno Co., Ltd., a nonconsolidated subsidiary company

150–

Guarantee of borrowing liabilities of
KANAMOTO (HK) CO., LTD., a nonconsolidated subsidiary company

HK$ 16,695 thousand(260)

HK$ 13,125 thousand(177)

Guarantee of borrowing liabilities of
KANAMOTO (HK) CO., LTD., a nonconsolidated subsidiary company

US$ 18 thousand
(2)

–
(–)

Guarantee of financing and leasing
liabilities of KANAMOTO (HK) CO., LTD.,a non-consolidated subsidiary company

HK$ 6,067 thousand(94)

HK$ 7,971 thousand(107)

Guarantee of installment payment
liabilities of Kanamoto & JP Nelson,anon-consolidated subsidiary company

SG$ 1,887 thousand(163)

SG$ 1,339 thousand(100)

Guarantee of financing and leasing
liabilities of Kanamoto & JP Nelson, a
non-consolidated subsidiary company

SG$ 38 thousand(3)

SG$ 32 thousand(2)

Guarantee of borrowing liabilities of
SIAM KANAMOTO CO., LTD., an affiliate

THB 70,000 thousand(238)

THB 65,625 thousand(196)

Guarantee of financing and leasing
liabilities of SIAM KANAMOTO CO., LTD.,an affiliate–(–)

THB 108,715 thousand(325)

Guarantee of borrowing liabilities of PT
KANAMOTO INDONESIA, a nonconsolidated subsidiary company

IDR 7,000,000 thousand(62)

IDR 20,500,000 thousand(164)

Guarantee of borrowing liabilities of PT
KANAMOTO INDONESIA, a nonconsolidated subsidiary company

US$ 250 thousand(30)

US$ 250 thousand(26)

Guarantee of financing and leasing
liabilities of PT KANAMOTO INDONESIA,a non-consolidated subsidiary company–(–)

IDR 943,586 thousand(7)

US$ 1,650 thousand(199)

US$ 1,455 thousand
(152)

1,233

1,283

Guarantee of borrowing liabilities of
KANAMOTO FECON HASSYU JSC, a
non-consolidated subsidiary company
Total(HKD: Hong Kong dollars, USD: US dollars, SGD: Singapore dollars, THB: Thai baths, and IDR: Indonesia
rupiah)3 Discount on notes receivable – trade and notes receivable – trade transferred by endorsement(Unit: Millions of yen)
Prior consolidated fiscal year
(As of October 31, 2015)
Discount on notes receivable – trade

149

 30



Current consolidated fiscal year
(As of October 31, 2016)132

*4 Liquidation of receivables based on receivables transfer facility(Unit: Millions of yen)
Prior consolidated fiscal year
(As of October 31, 2015)
Notes receivable – trade

3,628

Current consolidated fiscal year
(As of October 31, 2016)
2,927

Liquidated claims bearing a right of recourse to the Company and included in the balance of notes
receivable – trade transferred are as follows.
(Unit: Millions of yen)
Prior consolidated fiscal year
(As of October 31, 2015)
Notes receivable – trade927

Current consolidated fiscal year
(As of October 31, 2016)
597(Notes to the Consolidated Statements of Income)*1 The main expense items included in selling, general and administrative expenses and the amounts
thereof are as follows.
(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)

Current consolidated fiscal year
(From November 1, 2015
to October 31, 2016)

Employees’ salaries and allowances

10,17911,911

Depreciation

1,046

1,465

Rent expenses

2,744

3,105

Provision of allowance for doubtful
accounts

537

90

Provision for bonuses

854

1,030

–

6

Retirement benefit expenses

393

443

Amortization of goodwill

1083

Provision for directors' retirement
benefits*2 The breakdown of gain on sales of non–current assets is as follows.
(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)

Current consolidated fiscal year
(From November 1, 2015
to October 31, 2016)

Buildings and structures

30

Machinery, equipment and vehicles

9

21

Land

0

–

Other

–

14

12

35

Total

 31



*3 The breakdown of loss on sales and retirement of non–current assets is as follows.
(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)

Current consolidated fiscal year
(From November 1, 2015
to October 31, 2016)(Loss on sales of non–current assets)
Machinery, equipment and vehicles

00Rental equipment

40

45

Buildings and structures

107

77

Machinery, equipment and vehicles

3

3

Land

0

0

Other (property, plant and equipment)

2

38

Other (software)

2–

Other (intangible assets)

0

–

157

164

(Loss on retirement of non–current
assets)Total*4 Impairment loss
During the consolidated fiscal year the Kanamoto Group recorded impairment losses on the following
asset groups.
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)
Location

Use

Asset

Business assets

Rentalequipment

Goodwill

Shanghai, China

Groupings used by the Kanamoto Group to apply asset impairment accounting are based on theblock classified by the segment and operating area for which profitability can be determined regularly.
Dormant assets are grouped as units that generate independent cash flow.
In the consolidated fiscal year under review, the asset value of assets pledged for business undershot
their book value. In light of this, the book value was lowered to the recoverable amount of the assets
and the decrease in value was posted as an impairment loss (¥129 million) under extraordinary losses.
Rental equipment accounts for the total ¥129 million.
The recoverable value for rental equipment is measured according to net sales price, and calculated
based on the estimated appraised value.
The Kanamoto Group judges whether to recognize impairment losses by grouping assets for eachcompany or business. The goodwill, total book value of ¥42 million, incurred owing to the investment in
the consolidated subsidiary Shanghai Jinheyuan Engineering Construction Co., Ltd. was recorded as an
impairment loss, given that the Company does not expect to see the earnings it forecast at the time ofinvestment.
Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)
Location
Shanghai, China

Use

Asset

Business assets

RentalequipmentGroupings used by the Kanamoto Group to apply asset impairment accounting are based on theblock classified by the segment and operating area for which profitability can be determined regularly.
Dormant assets are grouped as units that generate independent cash flow.
In the consolidated fiscal year under review, the asset value of assets pledged for business undershot
their book value. In light of this, the book value was lowered to the recoverable amount of the assets

 32



and the decrease in value was posted as an impairment loss (¥254 million) under extraordinary losses.
Rental equipment accounts for the total ¥254 million.
The recoverable value for rental equipment is measured according to net sales price, and calculated
based on the estimated appraised value.
(Notes to the Consolidated Statements of Comprehensive Income)* Reclassification adjustments and the related tax effects concerning other comprehensive income(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)

Current consolidated fiscal year
(From November 1, 2015
to October 31, 2016)

59

27

-248

39

Before adjustment for tax effects

-188

67

Tax effects

158

26

Valuation difference on available–
for–sale securities

-29

93

Amount occurring during the current
period-00Reclassification adjustments––

Before adjustment for tax effects-00

Tax effects––

Deferred gains/losses on hedges

-0

0

25

121

Amount occurring during the current
period–16

Reclassification adjustments––

Before adjustment for tax effects–

16

Tax effects–-4

Remeasurements of defined benefit
plans

–

11

Total other comprehensive income

-4

226

Valuation difference on available–for–sale securities:
Amount occurring during the current
periodReclassification adjustments

Deferred gains/losses on hedges:

Foreign currency translation
adjustment:
Amount occurring during the current
periodRemeasurements of defined benefit
plans: 33(Notes to the Consolidated Statements of Changes in Equity)
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)
1. Class of shares issued and number of shares, treasury shares and number of shares
Number of shares at Increase in number Decrease in number
Number of shares at
beginning ofof shares duringof shares during
end of consolidated
consolidated
consolidated
consolidated
fiscal year
fiscal year
fiscal year
fiscal year
(thousands of shares)(thousands of shares) (thousands of shares) (thousands of shares)
Outstanding shares
Common shares

36,092––36,092

Total

36,092––36,092

Common shares(Note)

52

700

–

752

Total

52

700

–

752

Treasury shares(Note) The increase in treasury stock (common shares) of 700,000 reflects the buyback of shares inaccordance with a resolution passed by the Board of Directors. Repurchase of shares less than theset trading unit is indicated an increase of 0 shares.
2. Matters pertaining to subscription rights to shares and treasury subscription rights to shares
The Company had no material items to report.
3. Dividends(1) Dividends paid
Class of shares

Total dividend(Millions of yen)

Dividend pershare (yen)December 26, 2014
Board of Directors
Common shares(Note)

720

20.00

June 5, 2015
Board of Directors

540

15.00

Resolution

Common shares

Date of record

Payment date

October 31, 2014 January 30, 2015
April 30, 2015

July 7, 2015

(Note) The dividend per share includes a commemorative dividend of ¥10.00 to celebrate the 50th
anniversary of the company’s founding.
(2) Dividends for which the date of record falls in the current consolidated fiscal year and thedividend payment date is in the following consolidated fiscal year
Resolution

Class of shares

Total dividend(Millions of yen)

Source offunds fordividend

Dividend pershare (yen)December 25, 2015
Board of Directors

Common shares

706

Retainedearnings

20.00

 34



Date ofrecordPayment date

October 31,
2015

January 29,2016Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)
1. Class of shares issued and number of shares, treasury shares and number of shares
Number of shares at Increase in number Decrease in number
Number of shares at
beginning ofof shares duringof shares during
end of consolidated
consolidated
consolidated
consolidated
fiscal year
fiscal year
fiscal year
fiscal year
(thousands of shares)(thousands of shares) (thousands of shares) (thousands of shares)
Outstanding shares
Common shares

36,092––36,092

Total

36,092––36,092

Common shares(Note)

752

0

–

753

Total

752

0

–

753

Treasury shares(Note) The increase in treasury stock (common shares) of 0 shares reflects repurchase of shares lessthan the set trading unit.
2. Matters pertaining to subscription rights to shares and treasury subscription rights to shares
The Company had no material items to report.
3. Dividends(1) Dividends paid
Class of shares

Total dividend(Millions of yen)

Dividend pershare (yen)December 25, 2015
Common shares
Board of Directors

706

20.00

June 10, 2016
Board of Directors

530

15.00

Resolution

Common shares

Date of record

Payment date

October 31, 2015 January 29, 2016
April 30, 2016

July 5, 2016

(2) Dividends for which the date of record falls in the current consolidated fiscal year and thedividend payment date is in the following consolidated fiscal year
Resolution

Class of shares

Total dividend(Millions of yen)

Source offunds fordividend

Dividend pershare (yen)December 27, 2016
Board of Directors(Planned)

Common shares

1,060

Retainedearnings

30.00

Date ofrecordPayment date

October 31,
2016

January 27,
2017(Notes to the Consolidated Statements of Cash Flows)*1. Relationship between cash and equivalents at end of period and amounts for items shown on the
consolidated balance sheets(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)
Cash and deposits accountCurrent consolidated fiscal year
(From November 1, 2015
to October 31, 2016)

35,90033,209Time deposits with a maturity longer
than 3 months

-100

-340

Securities

350

200

36,15033,069Cash and cash equivalents

 35



*2. Breakdown of assets and liabilities belonging to a new consolidated subsidiary
The breakdown of assets and liabilities when the consolidation of NISHIKEN CO., LTD. throughacquisition of shares started and the relationship between acquisition value of shares of NISHIKEN CO.,LTD. and expenditure for the acquisition (net value) of NISHIKEN CO., LTD. are as follows.
(Unit: Millions of yen)
Current assets
Non–current assets

5,897
10,350Goodwill
Current liabilities

711-4,710Non–current liabilities-3,622

Non-controlling interests-1,844

Acquisition price of NISHIKEN CO., LTD. shares

6,782

Gain on step acquisitions
Acquisition price until control was obtained-14-4

Expenditures to acquire NISHIKEN CO., LTD. shares
Cash and cash equivalents belonging to NISHIKEN CO., LTD.
Deduction: purchase of shares of subsidiaries resulting in change in scope of
consolidation

6,763
-956
5,806

3. Details of major non–cash transactions(1) Amount of assets and liabilities related to installment transactions and amount of assets andliabilities related to lease transactions that are newly accounted for(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)

Current consolidated fiscal year
(From November 1, 2015
to October 31, 2016)

Amount of assets and liabilities related
to installment transactions

21,146

20,981

Amount of assets and liabilities related
to lease transactions

1,408

1,248

(2) Amount related to asset retirement obligations that are newly accounted for(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)
Amount related to asset retirement
obligations

Current consolidated fiscal year
(From November 1, 2015
to October 31, 2016)

86

54(Notes to Leasing Transactions)(Lessee)
1. Finance lease transactions
Finance lease transactions except for leases that transfer ownership of the property(1) Leased assets
Property, plant and equipment
Mainly, construction-related and other businesses rental equipment and other property, plantand equipment.
(2) Method of depreciation for leased assets
Leased assets are depreciated according to the method described in “4. Accounting principles(2) Depreciation methods for principal depreciable assets” in important matters used as basis for
preparation of the consolidated financial statements.

 36



It should be noted for those finance lease transactions except for leases that transfer
ownership of the property that have a start date prior to October 31, 2008 the Company uses
accounting methods that conform to methods used for ordinary rental transactions.
The details are outlined below.
a) Amounts corresponding to lease property acquisition price, accumulated depreciation andoutstanding balances at the end of the fiscal year
(Unit: Millions of yen)
Prior consolidated fiscal year (As of October 31, 2015)
Acquisition price
Rental equipment
Total

Accumulated
depreciation

Outstanding balance

18

14

3

18

14

3

(Unit: Millions of yen)
Current consolidated fiscal year (As of October 31, 2016)
Acquisition price
Rental equipment
Total

Accumulated
depreciation

Outstanding balance

4

4

0

4

4

0

b) Outstanding balance of future lease payments at the end of the consolidated fiscal year
(Unit: Millions of yen)
Current consolidated
Prior consolidated
fiscal year
fiscal year
(As of October 31, 2016)(As of October 31, 2015)
Outstanding balance of future lease
payments at the end of theconsolidated fiscal year
Within one year

10

After one year

0

–

Total

1

0

c) Amount of lease payments, depreciation expense, interest expense and impairment loss
(Unit: Millions of yen)
Current consolidated
Prior consolidated
fiscal year
fiscal year
(From November 1, 2014 (From November 1, 2015
to October 31, 2016)
to October 31, 2015)
Lease payments

144

Depreciation expense

38

1

Interest expense

10

Impairment loss

60–d) Accounting method for amount equivalent to depreciation expense
Straight-line depreciation using the lease term as the depreciable life and zero residual
value.
e) Accounting method for amount equivalent to interest expense
Interest method using the difference between total lease payments and the acquisition
price of the lease property, allocated to each year.

 37



1

2. Operating lease transactions
Prepaid lease payments pertaining to non-cancellable operating lease transactions(Unit: Millions of yen)
Prior consolidated fiscal year
(As of October 31, 2015)

Current consolidated fiscal year
(As of October 31, 2016)

Within one year

2,686

3,048

After one year

6,895

6,574

9,581

9,623

Total

 38



(Business Segment Information)[Segment information]
1. Summary of reporting segments
The Company’s reporting segments are those units of the Company’s for which discrete financial
information is available and for which the Board of Directors regularly conducts a review for the
purpose of making decisions about resources to be allocated to the segments and assess thesegments’ performance.
The Company conducts business operations by product and service. The “business related to theConstruction Equipment Rental Division” is the reporting segment.
The Company’s “business related to the Construction Equipment Rental Division” rents and sells
construction equipment and temporary materials for construction use.
2. Method of calculating the amount of net sales, income or loss, assets, liabilities and other items ofeach reporting segment
Except for the Standard for Measurement of Inventories, the accounting standards and methods
for the reported business segment are generally identical to the description in “Important Matters
Used as Basis for Preparation of the Consolidated Financial Statements.”
The Company values inventory assets using prices before write-downs of book value based on
decline in profitability.
Reporting segment earnings are the values on an operating income basis.
3. Information concerning the amount of net sales, income or loss, assets, liabilities and other items ofeach reporting segment
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)(Unit: Millions of yen)
Reporting segment
Business related to
the Construction
Equipment Rental
Division

Other businesses(Note)Total

Net sales
Net sales to outside customers

123,572

9,719

133,292–––

Net sales or transfers between related
segments

123,572

9,719

133,292

Segment income

Total

15,592301

15,894

Segment assets

153,908

3,034

156,943

20,044

4

20,04810–

1025,9973

26,001Other items
Depreciation
Amortization of goodwill
Amount of increase of property, plantand equipment and intangible assets(Note) The “Other businesses” classification encompasses business segments not included in thereporting segment, and includes business related to the Steel Sales Division and business related
to the Information Products Division and other businesses.

 39



Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)(Unit: Millions of yen)
Reporting segment
Business related to
the Construction
Equipment Rental
Division

Other businesses(Note)Total

Net sales
Net sales to outside customers

131,208

13,662

144,870–––

Net sales or transfers between related
segments

131,208

13,662

144,870

Segment income

Total

14,057660

14,718Segment assets

170,233

7,873

178,10721,440494

21,9354438

83

25,307994

26,302Other items
Depreciation
Amortization of goodwill
Amount of increase of property, plantand equipment and intangible assets(Note) The “Other businesses” classification encompasses business segments not included in thereporting segment, and includes business related to the Steel Sales Division and business related
to the Information Products Division, welfare-related business and other businesses.
4. Difference between total reporting segment amount and the amount reported on the consolidated
financial statements, and the main reasons for the difference (Matters Pertaining to Reconciliation ofDifference)(Unit: Millions of yen)
Prior consolidated
fiscal year

Net sales
Reporting segment total
Net sales for “Other businesses” classification

123,572

131,208

9,719

13,662––

133,292

144,870

Intersegment eliminations
Net sales reported in the consolidated financial statements

Current consolidated
fiscal year

(Unit: Millions of yen)
Prior consolidated
fiscal year

IncomeReporting segment total

Current consolidated
fiscal year

15,592

14,057

Income for “Other businesses” classification

301

660

Other adjustments

375

415

16,27015,134

Operating income reported in the consolidated financial
statements(Unit: Millions of yen)
Prior consolidated
fiscal year

AssetsReporting segment total

Current consolidated
fiscal year

153,908

170,233

Assets of “Other businesses” classification

3,034

7,873

Company assets (Note)

45,97642,728

Total assets reported in the consolidated financial
statements

202,919

220,836 40(Note) Company assets are mainly assets used in administrative divisions at the parent company that are
not attributable to the reporting segment.
(Unit: Millions of yen)
Other items

Reporting segment total

Other businesses

Amount of adjustment

Amount reported in the
consolidated financial
statements

Prior
Current
Prior
Current
Prior
Current
Prior
Current
consolidated consolidated consolidated consolidated consolidated consolidated consolidated consolidated
fiscal year
fiscal year
fiscal year
fiscal year
fiscal year
fiscal year
fiscal year
fiscal year
Depreciation

20,044

21,440

4

494

225

162

20,27322,097

Amount of increase ofproperty, plant andequipment andintangible assets

25,99725,307

3

994

202

425

26,203

26,727(Note) The adjustments to the increases in property, plant and equipment and intangible assets arecapital investments related to administrative divisions.
[Related information]
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)
1. Information by product and service
The Company has omitted a description of information by product and service because this same
information is disclosed in segment information.
2. Information by region(1) Net sales
The Company has omitted a description of information by region because net sales to outside
customers in Japan account for more than 90% of total net sales reported in the consolidated
statements of income.
(2) Property, plant and equipment
The Company has omitted a description of property, plant and equipment because the amountof property, plant and equipment located in Japan account for more than 90% of the total for
property, plant and equipment reported in the consolidated balance sheet
3. Main customers
The Company has omitted a description of net sales to outside customers because there are no
specific customers to which net sales account for more than 10% of the net sales reported in the
consolidated statements of income.
Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)
1. Information by product and service
The Company has omitted a description of information by product and service because this same
information is disclosed in segment information.
2. Information by region(1) Net sales
The Company has omitted a description of information by region because net sales to outside
customers in Japan account for more than 90% of total net sales reported in the consolidated
statements of income.
(2) Property, plant and equipment
The Company has omitted a description of property, plant and equipment because the amountof property, plant and equipment located in Japan account for more than 90% of the total for
property, plant and equipment reported in the consolidated balance sheet

 41



3. Main customers
The Company has omitted a description of net sales to outside customers because there are no
specific customers to which net sales account for more than 10% of the net sales reported in the
consolidated statements of income.
[Information concerning impairment loss on property, plant and equipment by reporting
segment]
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)(Unit: Millions of yen)

Impairment loss

Business related
to theConstruction
Equipment
Rental Division

Other businesses

Corporate andeliminations

171

–

–

Total

171

Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)(Unit: Millions of yen)

Impairment loss

Business related
to theConstruction
Equipment
Rental Division

Other businesses

Corporate andeliminations

254

–

–

Total

254

[Information concerning amortization of goodwill and unamortized balances by reporting
segment]
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)(Unit: Millions of yen)
Business related
to theConstruction
Equipment
Rental Division

Other businesses

Corporate andeliminations

Amortization in thecurrent period (Goodwill)

10

–

–

10

Balance at the end of theperiod

–

–

–

–

Total

(Note) In the fiscal year under review, the Company posted a loss on goodwill impairment of ¥42
million.
Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)(Unit: Millions of yen)
Business related
to theConstruction
Equipment
Rental Division

Other businesses

Corporate andeliminations

Amortization in thecurrent period (Goodwill)

44

38

–

83

Balance at the end of theperiod

335

292

–

628

 42



Total

[Information regarding gain on negative goodwill by reporting segment]
Prior consolidated fiscal year (From November 1, 2014 to October 31, 2015)
In the other businesses segment, gain on bargain purchase of ¥0 million was posted (other undernon–operating income). This reflects the additional purchase of shares in former consolidated
subsidiary Kanamoto Engineering Co., Ltd. However, all shares in this consolidated subsidiary were soldduring the fiscal year under review.
Current consolidated fiscal year (From November 1, 2015 to October 31, 2016)
The Company had no material items to report.
(Business Combinations)
Current fiscal year (From November 1, 2015 to October 31, 2016)
Business combination through acquisition
1. Outline of the business combination(1) Name and business of the acquired company
Name of the acquired company: NISHIKEN CO., LTD.
Description of business: Construction machinery rental business, social-welfare-service andnursing-care equipment rental business(2) Primary reasons for business combination
Intending to strengthen the business foundation in the Kyushu region and expand into theequipment rental business for social welfare services and nursing care, the Company acquired
shares of NISHIKEN CO., LTD. following a resolution at the Board of Directors meeting held on
January 21, 2016.
(3) Date of business combination
March 14, 2016(4) Legal form of business combination
Acquisition of shares paid for in cash(5) Name of resulting entity
There is no change in the company name.
(6) Ownership ratios after acquisition of voting rights
Voting right ratio possessed immediately before the business combination: 0.2%
Voting right ratio additionally acquired on the date of business combination: 76.5%
Voting right ratio after the acquisition: 76.7%(7) Main grounds for determining the acquirer
As the Company has acquired a voting right ratio of 76.7% following an acquisition of shares
paid for in cash, the Company is considered to be the acquirer.
2. Period of operating results of acquired entity included in consolidated financial statements
From April 1, 2016 to October 31, 2016
3. Acquisition price of the acquired company and acquisition cost breakdown(Unit: Millions of yen)
Fair value, as of the date of business combination, of the sharesof NISHIKEN CO., LTD. owned by the Company immediately
before the business combination

19

Cash and deposits delivered on date of business combination

6,763

Acquisition cost

6,782

4. Difference between acquisition cost of the acquired entity and total acquisition cost of individualtransactions leading to acquisition
Gain on step acquisitions ¥14 million
5. Details and amounts of main acquisition-related costs
Advisory fees and others¥9 million
 43

6. Amount of goodwill recognized, reason for recognition of goodwill, and method and period foramortization of goodwill(1) Amount of goodwill recognized¥711 million(2) Basis for recognition
As the net assets at fair value at the time of combination were below the acquisition price, thedifference was recorded as goodwill.
(3) Amortization method and period
Goodwill is amortized by the straight-line method over five years.
7. Amount and main breakdown of assets acquired and liabilities assumed as of date of businesscombination
Current assets(Unit: Millions of yen)
5,897

Non-current assets

10,350Total assets

16,248Current liabilities

4,710

Non-current liabilities

3,622

Total liabilities

8,332

8. Estimated amount of influence that would be exerted on consolidated statement of income for thecurrent fiscal year if the business combination is assumed to have been completed on the day ofcommencement of the fiscal year, and calculation method thereof

Net sales(Unit: Millions of yen)
7,037

Operating income
Ordinary income

848
1,025

Income before income taxes
and minority interests

992

Profit attributable to owners ofparent522(Calculation method of estimated amount)
The estimated amount of influence indicates the difference between net sales and the profit and loss
information calculated by assuming that the business combination has been completed on the day ofcommencement of the fiscal year and net sales and the profit and loss information on the consolidated
statement of income of the acquiring entity.
Audit attestation has not been received for this note.

 44



(Per Share Information)
Prior consolidated fiscal year
(From November 1, 2014 to October 31, 2015)

Current consolidated fiscal year
(From November 1, 2015 to October 31, 2016)

Net assets per share¥1,969.16 Net assets per share¥2,169.93

Earnings per share¥266.27 Earnings per share¥229.16

Earnings per share on a fully diluted
basis

–

Earnings per share on a fully diluted
basis

The Company has not reported earnings per
share on a fully diluted basis because it does nothave any potential shares that would have a dilution
effect.

–Same as at left

(Note) The basis for calculating earnings per share is as follows.
(Unit: Millions of yen)
Prior consolidated fiscal year
(From November 1, 2014
to October 31, 2015)
Profit attributable to owners of parent
Amount not attributed to commonshare shareholders
Profit attributable to owners of parent
related to common shares
Average number of shares
outstanding during the fiscal year

9,557

8,098

–

–

9,557

8,098

35,894,640

35,339,216(Material Events after the Close of the Consolidated Fiscal Year)
The Company had no material items to report.

 45



Current consolidated fiscal year
(From November 1, 2015
to October 31, 2016)

6. Non-Consolidated Financial Statements(1) Balance Sheets(Unit: Millions of yen)
Prior fiscal year
(As of October 31, 2015)
AssetsCurrent assets
Cash and deposits
Notes receivable - trade
Electronically recorded monetary claims- operating
Accounts receivable - trade
Securities
Merchandise and finished goods
Costs on uncompleted construction
contracts
Construction machine parts
Raw materials and supplies
Prepaid expenses
Deferred tax assets
Short-term loans receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Rental equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plant and equipment
Intangible assets
SoftwareTelephone subscription right
Software in progress
Other
Total intangible assets
Investments and other assets
Investment securities
Shares of subsidiaries and associates
Investments in capital
Long-term loans receivable fromsubsidiaries and associates
Claims provable in bankruptcy,
claims provable in rehabilitation andotherLong-term prepaid expenses
Insurance funds
Guarantee deposits
Other
Allowance for doubtful accounts
Allowance for investment loss
Total investments and other assets
Total non-current assets
Total assets
 46



Current fiscal year
(As of October 31, 2016)29,250
5,983

25,489
5,630

2,290

3,658

19,522350
279

18,238
200
259

39

61

8,214
139
301
472
242
98
-101
67,084

9,058
267
303
334
50
403
-69
63,885

51,165
6,504
1,577
666
10
246
31,423
1,081
92,67653,451
7,603
1,926
736
12
254
31,925438
96,348

63
52
108
–
224

88
52
302
0
444

5,507
4,221
12

5,557
11,309
12

2,267

2,249

44

20

26
32
865
60
-1,691-438
10,908103,809170,894

29
38
908
44
-1,491-560
18,118114,911
178,796

(Unit: Millions of yen)
Prior fiscal year
(As of October 31, 2015)
Liabilities
Current liabilities
Notes payable - trade
Accounts payable - trade
Short-term loans payable
Accounts payable - otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Provision for bonuses
Notes payable - facilities
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Long-term accounts payable - other
Deferred tax liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surpluses
Retained earnings
Legal retained earnings
Other retained earnings
Reserve for advanced depreciationof non-current assets
General reserve
Retained earnings brought forward
Total retained earnings
Treasury shares
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-forsale securities
Total valuation and translation
adjustments
Total net assets
Total liabilities and net assets

 47



Current fiscal year
(As of October 31, 2016)

17,522
4,866
10,814
15,643
467
3,347
1,026
576
605
344
55,213

16,1904,750
11,07916,932
388
1,442
137
614
480
303
52,32016,551
32,637341
202–
49,732
104,946

21,452
32,797296
259
454,810107,130

13,652

13,652

14,773143
14,916

14,773143
14,916

1,375

1,375

22

22

26,731
9,479
37,609-2,12864,05033,731
8,082
43,212-2,12969,653

1,897

2,012

1,897

2,012

65,948170,894

71,665
178,796(2) Statements of Income

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividend income
Rent income
Temporary transfer charges income
Reversal of allowance for doubtful
accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on sales of notes receivable - trade
Provision of allowance for doubtful
accounts
Provision of allowance for investment loss
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Subsidy income
Gain on sales of investment securities
Gain on sales of shares of subsidiaries
and associates
Compensation income for damage
Total extraordinary income
Extraordinary losses
Loss on sales and retirement of noncurrent assets
Loss on valuation of investment securities
Loss on valuation of shares of subsidiaries
and associates
Bad debts written off of subsidiaries andassociates
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitPrior consolidated
fiscal year
(From November 1, 2014
to October 31, 2015)
102,02970,51031,51817,41014,108 48

(Unit: Millions of yen)
Current consolidated
fiscal year
(From November 1, 2015
to October 31, 2016)
103,777
73,57530,201
18,337
11,864

139
292
170

148
293
202

103

205

214
919

137
986

191
15

127
9

706

23

–
–
166
1,079
13,948

278
139
140
718
12,132

8
–
307

10
2
2

99

–

118
532

–
15

144

64

87

54

228

1,014

104

–

565
13,915
5,482
88
5,571
8,344

1,133
11,014
4,065
108
4,174
6,840

[Cost of sales statement](Statement of cost of rental revenues)
Prior consolidated fiscal year
(From November 1, 2014 to
October 31, 2015)
Category

Notes

Amount(Millions of yen)

Current consolidated fiscal year
(From November 1, 2015 to
October 31, 2016)

Ratio
(%)

Amount(Millions of yen)

Ratio
(%)

Rent expenses

20,51641.2

21,267

41.1

Repair expenses

4,693

9.4

4,813

9.3

Freightage expenses
Depreciation

7,378

14.8

7,784

15.0

*2

13,52927.2

14,369

27.8

872

1.7

899

1.7

*3

2,836

5.7

2,643

5.1

49,827100.0

51,777100.0

Supplies expenses
Other
Total

(Notes) 1

Cost of rental revenues is the direct
cost incurred to receive revenues
from the rental of construction
equipment and other goods.

Same as at left

*2

The Company posted rental
equipment depreciation expense of¥12,717 million andconstruction machine parts
depreciation expense of ¥811
million.

The Company posted rental
equipment depreciation expense of¥13,380 million andconstruction machine parts
depreciation expense of ¥989
million.

*3“Other” consisted mainly of taxes
and dues of ¥845 million, insurance
expenses of ¥808 million, andinterest of¥263 million related to installment
payment purchases of rental
equipment.

“Other” consisted mainly of taxes
and dues of ¥736 million, insurance
expenses of ¥775 million, andinterest of¥239 million related to installment
payment purchases of rental
equipment.

(Statement of cost of goods sold)Prior consolidated fiscal year
(From November 1, 2014 to
October 31, 2015)
Category

Notes

Amount(Millions of yen)

Beginning goods
Cost of purchased goods
Transfer from other account

Ratio
(%)

Amount(Millions of yen)279

19,954

21,280673
20,954Ending goods

498
265

7

6

20,682

21,798Transfer from other account is thecost amount for sales of rental
equipment and construction
machine parts that have beentransferred. The breakdown is asfollows.
Rental equipment

665

Construction machine
parts

 49

22,058100.0

279

Valuation loss on goods
Cost of goods sold

Ratio
(%)

327
*

Total

*

Current consolidated fiscal year
(From November 1, 2015 to
October 31, 2016)

7



100.0

Same as at left

Rental equipment

481

Construction machine
parts

17

(3) Statements of Changes in Equity
Prior fiscal year (From November 1, 2014 to October 31, 2015)(Unit: Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capitalstock

Balance at
beginning ofcurrent period
Changes of items
during period
Provision ofgeneral reserve
Dividends ofsurplus13,652

Generalreserve

Retainedearnings
brought
forward19

19,731

9,399

30,5267,000-7,000––-1,261-1,261

–

8,344

8,344

Other
capitalsurplusTotal
capitalsurplusLegalretainedearnings

14,773143

14,916

1,375–

ProfitPurchase oftreasury shares
Adjustment toreserve due tochange in tax
rate
Net changes of
items other thanshareholders’equityTotal changes of
items during period
Balance at end ofcurrent period

Reserve foradvanceddepreciationof noncurrent
assetsLegalcapitalsurplus

–

–

–

2

-2

–

–

–

–

–

–

2

7,000

80

7,082

13,652

14,773143

14,9161,375

22

26,731

9,479

37,609

Shareholders' equity
Treasury shares
Balance at
beginning ofcurrent period
Changes of items
during period
Provision ofgeneral reserve
Dividends ofsurplus-56

ProfitPurchase oftreasury shares
Adjustment toreserve due tochange in tax
rate
Net changes of
items other thanshareholders’equityTotal changes of
items during period
Balance at end ofcurrent period

Total
retainedearnings-2,072-2,072-2,128Valuation and translation adjustments

Total shareholders’equityValuationdifference on
available-for-salesecurities

59,0391,928

Total valuationand translation
adjustments

Total net assets

1,928

60,968–––-1,261–-1,261

8,344

–

8,344

-2,072–-2,072

–

–

–

-30

-30

-30

-30

-30

4,980

5,010
64,050

1,897

 50



1,897

65,948Current fiscal year (From November 1, 2015 to October 31, 2016)(Unit: Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capitalstock

Balance at
beginning ofcurrent period
Changes of items
during period
Provision ofgeneral reserve
Dividends ofsurplus13,652

Generalreserve

Retainedearnings
brought
forward22

26,731

9,479

37,6097,000-7,000––-1,236-1,236

–

6,840

6,840

Legal
capitalsurplus

OthercapitalsurplusTotal
capitalsurplusLegalretainedearnings

14,773143

14,916

1,375–

ProfitPurchase oftreasury shares
Adjustment toreserve due tochange in tax
rate
Net changes of
items other thanshareholders’equityTotal changes of
items during period
Balance at end ofcurrent period

Reserve foradvanceddepreciationof noncurrent
assets

–

0

-0

–

–

–

–

–

–

0

7,000

-1,397

5,603

13,652

14,773143

14,9161,375

22

33,731

8,082

43,212

Treasury shares-2,128

ProfitPurchase oftreasury shares
Adjustment toreserve due tochange in tax
rate
Net changes of
items other thanshareholders’equityTotal changes of
items during period
Balance at end ofcurrent period––

Shareholders' equity

Balance at
beginning ofcurrent period
Changes of items
during period
Provision ofgeneral reserve
Dividends ofsurplusTotal
retainedearnings-0

Valuation and translation adjustments

Total shareholders’equityValuationdifference on
available-for-salesecurities

64,0501,897

Total valuationand translation
adjustments

Total net assets

1,897

65,948–––-1,236–-1,236

6,840

–

6,840

-0

–

-0

–

–

–

114

114

114

-0

5,602

114

114

5,716

-2,12969,653

2,012

2,012

71,665

 51

