Report of Business Operations for the54th Business Period (Business Period
ended October 2018) (Attachment to the Notification and Invitation to the 53th
Regular General Meeting of the Shareholders)
From November 1, 2017 to October 31, 2018
1. Analysis of Operating Results and Financial Position(1) Analysis of Operating Resultsa) Summary of consolidated fiscal year operating results (From November 1, 2017 to October 31, 2018)
In the fiscal year under review, Japan’s economy maintained a moderate recovery trend, with continuous
improvements in employment and income environments supported by strong corporate earnings. However,circumstances requiring attention, such as uncertainty with regards to foreign economies and fluctuations infinancial capital markets accompanying international trade policies of the United States, have persisted.
In the construction industry where the Kanamoto Group belongs, public sector investments remained solid,
and favorable private capital investments were seen in the redevelopment projects in major metropolitan areas,
and the like.

In such circumstances, the Group has focused on expanding domestic bases for operations for achieving the“BULL55” long-term vision, while putting forth efforts to expand regional strategies in areas where we are yet
to open branches, to the Kanto Region and westward, as well as in Kyushu Region and to possess optimal
machines and enrich the machine line-up for rental equipment suitable to both construction demands andcustomer needs. The Group also has strived to strengthen its system, with the aims to increase work efficiency
and improve productivity by utilizing IT through the full-scale operation of new systems.

Furthermore, we transferred all of the equity interests in Shanghai Jinheyuan Engineering Construction Co.,
Ltd., which was our consolidated subsidiary.

Consequently, in the fiscal year ended October 31, 2018 net sales rose 6.2% from the prior consolidated
fiscal year level to ¥168,188 million. On the earnings front, operating profit increased 5.6% year on year to¥17,599 million, ordinary profit rose 4.3% to ¥17,925 million, and profit attributable to owners of parent rose
10.4% to ¥11,857 million.

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, which is Kanamoto’s core business, differences in construction
demand were seen in some regions, but rental demand for construction equipment was solid as a whole, withtransportation infrastructure refurbishment related to the Tokyo Olympics and Paralympics and large-scale
redevelopment construction. Further, the Group has worked to develop our response capabilities byreconfiguring our existing rental equipment and augmenting our assets in order to strengthen our support
system for restoration and recovery from the natural disasters that have been occurring one after anotherover recent years, such as the 2018 Osaka earthquake, 2018 West Japan floods, and 2018 Hokkaido Eastern
Iburi earthquake. As a result, sales by region in this business were up 8.9% in the Hokkaido Region, down
4.5% in the Tohoku Region, up 10.5% in the Kanto & Koushinetsu Region, up 11.0% in the Nishi-nihon Region,
and up 6.7% in the Kyushu & Okinawa Region.

Used construction equipment sales were steady against the backdrop of an excellent market environment
from the beginning of the period, as prices were pushed higher by growing demand in China and Southeast
Asia.

Reflecting these factors, the Kanamoto Group posted net sales in the construction-related businesses of¥150,542 million, an increase of 5.7% year-on-year, and operating profit of ¥16,358 million, an increase of
6.1%.

[Other Businesses]
In the Company’s other businesses, net sales were up 10.2% from the same period of the previous
consolidated fiscal year to ¥17,646 million because of steady demand in Kanamoto’s steel products-related,
information and telecommunications-related, and welfare-related businesses. Operating profit from these
operations slipped 1.2% to ¥846 million, however, reflecting a decline in net sales from steel-related works
and expenses in conjunction with the Company’s push into the Kanto area in its welfare-related operations.

(Millions of yen)

53th Business Period 54th Business Period Change from
Segment

Business PeriodBusiness Period

ended October 2017 ended October 2018prior year(%)

Business related to theConstruction Equipment
Rental Division

142,414150,542

5.7

Other Businesses

16,013

17,646

10.2

Total

158,428

168,188

6.2(2) Financing activities(i) Funds Procurement
Funds procurement through capital increase or the issuance of corporate bonds has not been performed
during the current consolidated fiscal year.

(ii) Capital investment
Capital investment implemented by the Kanamoto Group during the current consolidated fiscal year totaled¥35,136 million. This included purchases of rental equipment of ¥30,297 million, and investments in assets
used by the group, including the establishment, relocation and expansion of branches, of ¥4,839 million.

< Change in number of branches >During the consolidated fiscal year under review, Kanamoto newly opened 7 branches .
New branches: East Japan Works Keihin Premises Equipment Center (Kawasaki City, Kanagawa
Prefecture),Musashimurayama Branch (Musashimurayama City, Tokyo),Matsuyama Branch(Matsuyama City, Ehime Prefecture),Saijo Branch (Matsuyama City, Ehime Prefecture),Kyushu
General Equipment Center (Chikugo City, Fukuoka Prefecture),Fukuoka Branch (Fukuoka City,
Fukuoka Prefecture),Yokkaichi Branch (Yokkaichi City, Mie Prefecture)(iii) Transfer, absorption, division or new establishment of businesses
The Company had no material items to report.

(iv) Receipt of businesses from other companies
The Company had no material items to report.

(v) Succession to rights and obligations concerning the businesses of othercorporations etc. by absorption and merger or absorption and division
The Company had no material items to report.

(vi) Acquisition or disposal of shares, other equity or subscription rights to shares ofother companies
The Company transferred all of its equity interests in Shanghai Jinheyuan Engineering Construction Co., Ltd.
to Shanghai Miyuan Group Co, Ltd. on September 20, 2018.

(3) Financial position and profit and loss in the current business period and three
immediately prior business periods(Millions of yen except per share data, which are in yen)
54th Business Period

Category

51th Business Period

52th Business Period

53th Business Period(current consolidated(Business Period ended(Business Period ended(Business Period ended

fiscal year)

October 2015)

October 2016)

October 2017)(Business Period ended
October 2018)

Net sales

133,292

144,870

158,428

168,188

Ordinary income

16,164

14,405

17,193

17,925

9,557

8,098

10,744

11,857

Net income per share

266.27229.16304.05335.54

Total assets

202,919

220,836

227,545

241,578

Profit attributable toowners of parent

Net assets
Net assets per share

71,99881,434

91,788102,031

1,969.16

2,169.93

2,440.41

2,707.49(4) Issues to be Addressed by the Company
Currently, the core business of the Kanamoto Group is construction equipment rental. Accordingly, on theback of its asset portfolio structure and scale, the Company must establish a strong earnings structure
supported by detailed operation. In addition, the Company needs to explore and target business domains inwhich earnings are not substantially impacted by the domestic construction investment trend.

a) Strengthen human resources training, and also Kanamoto Group alliances
Human resources are an important driver of corporate growth. During the next several years, intensifiedcompetition among companies, especially in the construction equipment rental industry, is likely to reveal aclear distinction among companies and result in poor performers falling to the wayside. Kanamoto plans to train
its employees so that they will possess the knowledge and skills fitting for people working at a leading company
in the construction equipment rental industry. The Company will also train human resources that can
immediately respond to business expansion in Japan and abroad.
Moreover, to expand business domains and areas, it is essential that Kanamoto fortify Group company
alliances and the relationships with alliance companies, based on which Kanamoto will fully exert its
comprehensive corporate vitality, leading to enhanced synergy effects for the Group.

b) Deepen asset strategies
Customers’ needs and operational track records are certainly factors when selecting which assets tointroduce. However, after considering how the particulars of domestic construction demand are changing, suchas with respect to recent ICT techniques, for example, we ultimately determine the composition of the assets
to be introduced by thoroughly examining the market and earnings characteristics of both the present and thefuture.

c) Continuous cost reductions
When introducing assets the Company utilizes a thorough benchmark system, and further aims to maintainand improve asset value by optimizing asset maintenance costs based on its rental assets operating policies.

d) Promotion of overseas business
Aiming to actively invest assets that match the onsite circumstances in the countries whose markets we havecurrently entered, we continue to promote sales activities that are carried out in coordination with asset
management and earnings management.

e) Improve financial position
Kanamoto is taking steps to ensure timely and optimal funds procurement, while giving consideration toequipment plans including purchases of rental equipment assets and corporate facilities. At the same time, theCompany is focusing on further enhancing shareholders’ equity, and reducing interest-bearing debt andimproving capital efficiency as much as possible, by incorporating measures such as the liquidation of assets.

(5) Main businesses (As of October 31, 2018)
Activities

Main products and services

Business related to the

Rental and sale of equipment and instruments for use in construction,

Construction Equipment

temporary materials for construction use, safety products for theRental Division

construction industry and modular housing units for temporary use
Sale of steel products such as steel bar, steel plate and round bar, contract

Other Businesses

construction, rental and sale of computers and computer peripheral
equipment、 Rental and sales of social-welfare-service and nursing-careequipment(6) Main offices of the Kanamoto Group (As of October 31, 2018)(i) Main offices and facilities
Kanamoto’s Head Office and Operations Control Headquarters are located in Chuo-ku in Sapporo, Hokkaido,
and the Company’s Business Coordination Headquarters is located in Minato-ku in Tokyo.
The number of branches in each of the Company’s operating regions is shown below.

■Number of offices by region (excluding non-operating divisions)
Business related to theConstruction Equipment
RegionOther Businesses

Rental Division
Consolidated

Kanamoto

subsidiaries

Consolidated

Kanamoto

subsidiaries

Hokkaido

64

22

3

0

Tohoku

55

12

0

0

Kanto

35

24

1

2

Chubu

22

8

0

0

Kinki

7

15

0

9

Chugoku

2

2

0

10

Shikoku

4

1

0

0

Kyushu

2

74

0

21

Total

349

46

(ii) Number of Kanamoto Group employees
Number of
employees
Business related to the Construction Equipment Rental Division
Other Businesses

2,682
275

All companies (shared)

178
Total

3,135

(Notes)1. Figures are the number of full-time employees and do not include directors, temporary or part-time
employees.
2. The number of employees increased by 97 compared to the end of the previous fiscal year.
3. Employees designated as “All companies (shared)” are individuals affiliated with management
departments who cannot be classified in a specific segment.

(iii) Number of Kanamoto employees
Number of

Change comparedemployees
1,865with end of prior

Average age

Average length ofservicefiscal year
63

37.9

10.7 years(Note) Figures are the number of full-time employees and do not include temporary or part-time employees.

(7) Important parent company affiliates and subsidiary companies(i) Parent company affiliates
The Company had no items to report.

(ii) Subsidiaries(Unit: Millions of yen; Thousands of yuan)Company name

Kanamoto’s

CapitalMain activities

ownership (%)

Rental and sale of furniture, fixtures and safety
Assist Co., Ltd.

136

100.0

products
Design and sale of modular housing units for

Kanatech Co., Ltd.

100

100.0

temporary use

Kanki Corporation

99

92.7

Rental and sale of construction equipment
Rental and sale of construction equipment

Kyushu Kensan Co., Ltd.

70

61.5

centered on foundation equipment

Daiichi Kikaisangyo Co., Ltd.

20

100.0

Rental and sale of construction equipment
Shield tunneling method-related peripheral

Toyo Industry Co., Ltd.

31

100.0

equipment rentals and sales
Rental and sales of construction machinery,
temporary materials for construction use,social-welfare-service and nursing-care

NISHIKEN CO., LTD.

1,049

76.7

equipment
Rental and sale of road construction equipment,

Unite Co., Ltd.

1,144

66.9

road construction works(Note)1. There are no specified wholly-owned subsidiaries as of the end of this fiscal year.

2. The holding ratio in NISHIKEN CO., LTD. is calculated excluding 68,126 shares of treasury shares.

(8) Primary lenders and amount of borrowing (As of October 31, 2018)
Loan balance

Financial institution(Millions of yen)

MUFG Bank, Ltd.

6,911

Mizuho Bank, Ltd.

3,960

North Pacific Bank, Ltd.

2,930

The Hokkaido Bank, Ltd.

2,525

The 77 Bank, Ltd.

2,300

JA - Hokkaido Shinren

1,845

The Norinchukin Bank

1,795

The Aomori Bank, Ltd.

1,435

The Akita Bank, Ltd.

1,215

The Bank of Fukuoka, Ltd.

1,215

(9) Basic Policy Concerning Distribution of Earnings and Dividends for theConsolidated 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 toprovide shareholders with a consistent and stable dividend
regardless of the business environment. Furthermore, the Company aims to implement profit distribution in linewith earnings performance. Moreover, it is the basic policy of Kanamoto to sufficiently build up its retained
earnings, which is essential for strengthening financial position and to implement aggressive businessexpansion.
For the fiscal year ended October 2018, the Board of Directors has decided to pay a
year-end dividend of ¥40 and an annual dividend of ¥60 per share (which includes aninterim dividend of ¥20).
Furthermore, the Company aims to allocate retained earnings to capital investments, including facilities
investment for rental equipment and other assets. Note that thecompany is putting a share buyback program

into place to facilitate the flexible implementation of capital policies.

(10) Summary of other important matters concerning the corporate group
There are no material events that should be reported.

2. Matters Concerning the Company’s Stock
Summary of Common Stock (As of October 31, 2018)(i) Total number of shares authorized

130,000,000 shares

(ii) Shares issued and outstanding

36,092,241 shares(including 753,183 shares of treasury stock)(iii) Number of shareholders

5,670(iv) Principal shareholders (ten largest)

Shareholder name

Number ofPercentage ofshares held

total(‘000 shares)(%)

Japan Trustee Services Bank, Ltd. (Trust account)

3,705

10.49

The Master Trust Bank of Japan, Ltd. (Trust account)

1,514

4.28

ORIX Corporation

960

2.72

Kanamoto Capital Company

915

2.59

The Hokkaido Bank, Ltd.

888

2.52

Tokio Marine & Nichido Fire Insurance Co., Ltd.

802

2.27

North Pacific Bank, Ltd.

763

2.16

Mizuho Securities Co., Ltd.

707

2.00

GOLDMAN, SACHS & CO. REG

676

1.91

Denyo Co.,Ltd.

625

1.77

(Note) Percentage of total is calculated excluding treasury shares (753,183 shares).

3. Matters Concerning Stock Acquisition Rights etc.
The Company had no material items to report.

4. Matters Concerning Company Directors (As of October 31, 2018)(1) Summary of directors and auditors
Name

Main concurrent positions at other

Position and duties

KanchuChairmanoftheKanamoto

Representative Director

entities

Board

and

Chairmanofthe

Board,

Kanamoto(China) Investment Co., Ltd.
President and Representative Director,
Toyo Industry Co., Ltd.

TetsuoKanamoto

President and CEO, Corporate Officer;

Chairman

andRepresentative Director, Unite Co., Ltd.

GeneralManager,

Coordination Headquarters

Business

Chairman

of

of

the

the

Board

Board

and

and

Representative Director, KG FlowtechnoCo., Ltd.

Chairman of the Board, KANAMOTO (HK)CO., LTD.
Representative Director, Kanamoto & JP
Nelson Equipment (S) PTE. Ltd.
Director,

SeniorExecutive

Corporate

Officer; Division Manager, Accounting
Nobuhito
UtatsuDivision; Manager in charge of Credit
Management Division; General Manager,
Public Relations Office & Information
Systems

Division;Manager,

Bill

Collection Center
Hitoshi

Director, Corporate Officer; and Division

President and Representative Director,

NaritaManager, Management Planning Division

Kanatech Co., Ltd.

Director,

Corporate

Officer;

DivisionManager, Construction Equipment Rental
TatsuoKanamoto

Division; Regional Manager, Construction
Equipment

RentalDivision

Hokkaido

Region; and Manager in charge of SteelSales Division
Director,
Masakazu
HirataDivision

Corporate

Officer;Manager,

DeputyConstruction

Equipment Rental Division; and Division
Manager, Used Equipment Sales Division

Hiroyuki
Isono
ManabuNagasakiDirector,

Corporate

Officer;

DivisionManager, Administration Division; andGeneral Manager, Secretary OfficeDirector, Corporate Officer

Yuichi

Director, Corporate Officer; and Division

Asano

Manager, Credit Management Division
Director, Corporate Officer; Assistant to

Naoki

General Manager, Business Coordination

Mukunashi

Headquarters; and Division Manager,
Overseas Business OfficeDirector, Corporate Officer; Assistant to

Kazunori
Hashiguchi

General Manager, Business Coordination
Headquarters; General Manager, Market
Development Office; General Manager,
Information Products Division; General

Representative Director and President,
NISHIKEN CO., LTD.

Manager, Event Marketing Division; andManager, New Products Office
Susumu
Naito
Masayuki
OikawaMotoki
Yonekawa
Eichu
Kanamoto
NaoyukiYokotaAkio

Director (Outside Director)

Director (Outside Director)

Director (Outside Director)

Chairperson, Social Medical Corporation
HokuyukaiStanding Corporate Auditor

Standing Corporate Auditor

Auditor (Outside Auditor)

LawyerAuditor (Outside Auditor)

Certified public tax accountant

Akira Naoi

Auditor (Outside Auditor)

Certified public accountant

Kouji Soga

Auditor (Outside Auditor)

Hashimoto
Kiyohiro
Tsuji(Notes)1.Directors Susumu Naito, Masayuki Oikawa and Motoki Yonekawa are Outside Directors.
2.Corporate Auditors Akio Hashimoto, Kiyohiro Tsuji, Akira Naoi and Koji Soga are Outside Corporate
Auditors.
3.Corporate Auditor Kiyohiro Tsuji is a certified public tax accountant with considerable knowledge of financeand accounting.
4.Corporate Auditor Akira Naoi is a certified public accountant with considerable knowledge of finance andaccounting.
5.The Company has notified the Tokyo Stock Exchange and Sapporo Securities Exchange, the exchanges on
which Kanamoto’s shares are listed, of the positions of directors Susumu Naito, Masayuki Oikawa and
Motoki Yonekawa as “independent officers” as provided by the rules, etc., of both exchanges.
6.The Company has notified the Tokyo Stock Exchange and Sapporo Securities Exchange, the exchanges on
which Kanamoto’s shares are listed, of the positions of Corporate Auditors Akio Hashimoto, Kiyohiro Tsuji
and Akira Naoi as “independent officers” as provided by the rules, etc., of both exchanges.
7.Based on the provision of Article 427 paragraph 1 of the Companies Act, the Company has enteredagreements with its outside directors and outside auditors that limits their liability for compensation fordamages under Article 423 paragraph 1 of the same law. The amount of the limit on the liability forcompensation for damages based on said agreement is the amount provided by the law.

(2) Total remuneration and other amounts paid to Directors and Auditors
Classification

Number ofCompensationcompensatedamountindividuals(Millions of yen)

Director

12(1)114(1)

Auditor (Outside Auditor)

6 (4)

28 (4)

Total

18(5)

142 (5)(Notes) 1. Two Directors (Outside Directors) who received no remuneration are not included in the compensatedindividuals indicated above.
2. Total compensation paid to Directors does not include ¥117 million equivalent to the employee salary
portion (including bonuses) paid to Directors serving concurrently as employees.
3. The maximum compensation for Directors was established at a maximum annual
amount of ¥240 million (however, not including the employee salary portions) by a resolution of the 26th
Regular General Meeting of the Shareholders convened on
January 24, 1991.
4. The maximum compensation for Auditors was established at a maximum annual amount of ¥50 million by
a resolution of the 42nd Regular General Meeting of the Shareholders convened on January 26, 2007.

(3) Matters concerning Outside Directors(i) Concurrent posts held by Company executives including positions at othercompanies
Director Motoki Yonekawa is the Chairperson of Social Medical Corporation Hokuyukai. There is no special
relationship between Social Medical Corporation Hokuyukai and the Company.

(ii) Concurrent service as an outside director at other companies
The Company had no material items to report.

(iii) Relationships with specified related parties including main customers
The Company had no material items to report.

(iv) Activities during the current fiscal year
Classification

Name

Activities
Attended all of the five Board of Directors meetings held during the fiscal year andDirector

Susumu Naito

appropriately

contributed

thenecessaryadviceandproposalsconcerning

resolutions and discussions.

Director

Director

Masayuki
OikawaMotoki
Yonekawa

Attended all of the five Board of Directors meetings held during the fiscal year andappropriately

contributed

thenecessaryadviceandproposalsconcerning

resolutions and discussions.
Attended four of the five Board of Directors meetings held during the fiscal year andappropriately

contributed

thenecessaryadviceandproposalsconcerningresolutions and discussions.
Attended all of the five Board of Directors meetings and all of the eight Board ofAuditor

Akio

Corporate Auditors meetings held during the fiscal year and appropriately

Hashimotocontributed the necessary advice and proposals based mainly on his expert
perspective as an attorney-at-law.
Attended all of the five Board of Directors meetings and all of the eight Board ofAuditorKiyohiro Tsuji

Corporate Auditors meetings held during the fiscal year and appropriately
contributed the necessary advice and proposals based mainly on his expert
perspective as a licensed tax accountant.
Attended all of the five Board of Directors meetings and all of the eight Board ofAuditorAkira Naoi

Corporate Auditors meetings held during the fiscal year and appropriately
contributed the necessary advice and proposals based mainly on his expert
perspective as a certified public accountant.
Attended four of the five Board of Directors meetings and seven of the eight Boardof Corporate Auditors meetings held during the fiscal year, and appropriately

AuditorKouji Soga

contributed the necessary advice and proposals based on his many years of
employment and experience at financial institutions and his experience as astanding auditor at other companies.

(Note) In addition to the above, to achieve more rapid decision-making the Company implemented resolutions inwriting 9 times based on the provision of Article 370 of the Companies Act.

5. Matters Concerning Independent Auditors(1) Name
Ernst & Young ShinNihon LLC(Note) On July 1, 2018, Ernst & Young ShinNihon LLC changed its Japanese corporate name from ShinNihon
Yugen Sekinin Kansa Hojin to EY ShinNihon Yugen Sekinin Kansa Hojin but left its English nameunchanged.

(2) Amount of compensation and other benefits
Amount paid
(Millions of yen)Amount paid for compensation etc. as independent auditors
pertaining to the current fiscal year

37

Total amount of cash and other financial interests Kanamoto and its
subsidiary companies will pay to the Company’s independent
auditors

52(Note) 1. The amount of compensation and other benefits pertaining to the current fiscal year is reported in these
total amounts because the amounts of the audit fees etc. for audits based on the Companies Act and audits

based on the Financial Instruments and Exchange Act are not classified separately and cannot be
substantively classified in the audit agreement between the Company and its independent auditors.
2. The Board of Corporate Auditors comprehensively examined the details of audit plans by the accounting
auditor, the status of its execution of duties in accounting and others audit, as well as referring to past
remuneration of the accounting auditor before agreeing on the remuneration amount, etc. for theaccounting auditor.

(3) Details of Non-audit Duties
The Company, as business outside of the business set forth in Article 2 paragraph 1 of the Certified Public
Accountants Act, has commissioned the agreed procedural business to the accounting auditor, and is paying
a fee for this.

(4) Policy for deciding on dismissal or refusal of reappointment
If the Board of Corporate Auditors judges that the accounting auditor falls under any of the items in Article
340, paragraph (1) of the Companies Act, and that there is no prospect of improvement, the Audit Committee
shall dismiss the accounting auditor by unanimous decision.
Furthermore, the Board of Corporate Auditors shall decide whether to dismiss or refuse to reappoint theaccounting auditor in cases that the Board of Corporate Auditors judges that the above action is needed, suchas when it is recognized that audits cannot be conducted appropriately due to the occurrence of events that
harm the competence and independence of the accounting auditor.

6. System and Operating Status for Ensuring Appropriate Business Operations(1) System for Ensuring Appropriate Business Operations
Pursuant to the Board of Directors meeting held on April 23, 2015, the Company has resolved to partiallyrevise its "Basic Policy on Establishment of an Internal Control System." In conjunction with this, the Company
has also revised its system to ensure that Company directors comply with laws and the Company’s Articles ofIncorporation in the execution of their duties and its systems to ensure that other Company operations areappropriate. A summary of the Company’s decisions concerning the above revisions is provided below.

(i) System to ensure directors and employees comply with laws and the Articles ofIncorporation in the execution of their duties
Kanamoto Company, Ltd. and its subsidiaries have prepared Ethics Guidelines as part of the corporate
philosophy, and use these as the Company standard for compliance. Under the Compliance Committee chairedby Kanamoto’s president, the Company has disseminated these Guidelines throughout the Company andestablished a system for compliance with laws and the Ethics Guidelines, and has prepared a handbook
summarizing Kanamoto’s corporate philosophy and employee conduct standards, which it distributes to all
executives and regular employees to increase compliance awareness. As a consultation and reporting system,
Kanamoto also has set up in-house and external compliance hotlines, and created a system to resolve problems
quickly when consultations or reports are received directly from employees and other individuals, while strictlyobserving confidentiality and ensuring that individuals who report problems do not suffer any disadvantages.
Furthermore, the Company has established a Legal Section reporting directly to the president, to act as anadvisory panel for important legal issues, and a system to enable the Company to give proper legal
consideration to all decision making.

(ii) System for preserving and managing information concerning the execution of
directors’ duties
Kanamoto retains documents and various information in accordance with laws and ordinances and its
internally established document administration regulations and document retention rules. Information iscontrolled in accordance with internal information management regulations and general data management
rules, and personal data are administered in accordance with the Kanamoto Rules on Personal Data Protection
and the Company’s personal data protection manual.

(iii) Rules and other systems concerning management of loss risk
Kanamoto and its subsidiaries have established mechanisms to recognize and evaluate risks related to thebusiness activities of each division, and prepared systems to avoid such risks. This has created a systemcapable of clarifying the authority and responsibilities of each division, supervising risk management conditions
throughout the organization under the Board of Directors and discovering new risks. If unforeseen
circumstances have occurred that will have a serious effect on the Company operations, or if there is concern
such circumstances might occur, the Company and its subsidiaries will respond appropriately, and takemeasures to prevent a recurrence, based on its Emergency Response Manual (Contingency Plan).

(iv) System for ensuring efficient execution of directors’ duties
In addition to its regular Board of Directors meetings, Kanamoto and its subsidiaries hold extraordinary
Board of Directors meetings from time to time as necessary to decide important matters and to make flexible
decisions concerning the execution and supervision of management strategies and the Company’s businessplans. The Company's Board of Directors receives reports on important matters including the financial conditionand other matters of the Company's subsidiaries. For its management plan, the Company establishes budgets
for the next business fiscal year and medium-term future, which gives the managers of each division the
Company’s overall objectives based on specific numerical targets. Each division sets division-wide objectives,and executes progress management and specific measures aimed at achieving its goals. Kanamoto has also
introduced the corporate officer system to accelerate management decision-making and clarify supervisory
authority and responsibility for plan execution, and each corporate officer is responsible for achieving themanagement plan approved by the Board of Directors. To respond quickly to the severe pace of change in its
management environment, the Company has also shortened the directors’ term of office to one year.

(v) System to ensure appropriate activities at Kanamoto and within the corporategroup comprised of the parent company and subsidiaries

To apply Kanamoto’s Ethics Guidelines correspondingly to each company in the Kanamoto Group, theCompany has decided to enlarge the scope of the Compliance Committee and the consultation and reporting
system to every group firm, to ensure the effectiveness of business activities is as extensive as possible.
In addition, in accordance with the provisions of the Financial Instruments and Exchange Act, the Company
and its affiliates maintain an excellent management environment, and work to strengthen company-wide
internal controls, internal controls pertaining to settlement of accounts financial reports and operating processcontrol activities, create internal control systems that enable the Company to make proper and effective
assessments and conduct appropriate operations. Furthermore, under Kanamoto’s internal management
system concerning financial reporting, each organization (individual) has affirmed the following roles.
[1] Managers have the final responsibility for all of the organization’s activities, and prepare and implement internal
controls based on this basic policy.
[2] The Board of Directors has supervisory responsibility for the preparation and operation of the managers’ internal
controls, and monitors and supervises managers to ensure the financial reporting and internal controls are executed
properly.
[3] The auditors monitor and verify the financial reporting and preparation and operation of the internal controls froman independent standpoint.
[4] The Internal Control and Auditing Office objectively evaluates from an independent standpoint, the effectivenessof the internal controls related to financial reporting at Kanamoto and its affiliated companies on behalf of theCompany’s managers in accordance with the audit rules, and when necessary makes proposals concerning
improvements and corrections and reports to the managers and Board of Directors.

(vi) Matters concerning individuals requested by the auditors to assist with auditors’
activities
Kanamoto currently does not employ any individuals to assist the auditors in their activities, but should it
become necessary, the Company will hire audit staff. During a period the auditors specify, the management
authority for the nominated employees will be transferred to the auditors, and the employees will not receive
instructions or orders from the Company’s directors, thereby ensuring the effectiveness of instructions fromauditors.

(vii) Matters related to the independence of employees in the preceding paragraphfrom directors
Personnel matters for employees assigned to audit activities (appointments, transfers and evaluations) will
have the consent of the auditors.

(viii) System for directors and employees to report to the auditors, other systems
concerning reports to auditors, and other systems to ensure audits are performed
effectively
To perform audits of the directors, the Company’s auditors attend the meetings of the Board of Directors, andalso attend important meetings and committees, in order to understand other important decisions and thecircumstances of execution of the Company’s business activities. If the directors and employees of Kanamoto

and its subsidiaries discover facts that might cause the Company considerable harm, they are to report
immediately to the auditors. The standing auditors will circulate a report and request for managerial decision,and if necessary can request explanations from the directors and employees. Those who reported to theauditors shall not be treated unfavorably on the grounds of giving such report.
The auditors also meet regularly with the president and representative director, to exchange opinions
concerning issues the Company should address and important audit matters. After audits are completed, theInternal Control and Auditing Office promptly submits an Auditors’ Report concerning the audit results to thepresident and representative director and the auditors.
The auditors and the Internal Control and Auditing Office also exchange information and cooperate in otherways with outside specialists, including the accounting auditors and the Company’s attorneys.

(ix) Matters regarding policies related to processing of expenses or liabilities arisingfrom the execution of auditors' duties
In regards to procedures for prepayment or reimbursement of expenses arising from execution of auditors'
duties and processing of expenses or liabilities arising from execution of auditors' duties, such expenses or
liabilities are accounted for upon requests made by the auditors, except where the requests cannot be
considered necessary for the execution of auditors' duties.

(x) System for eliminating antisocial forces
In its Ethics Guidelines, Kanamoto has adopted a resolute stance and set forth provisions to block alltransactions and relationships with antisocial forces, individuals and groups that threaten the order and safetyof society and the stable operation of firms. In addition to gathering information from specialized external
agencies and other sources at an internal division, the Company works to educate employees throughprograms such as internal training. Moreover, in an emergency the Company will cooperate with the police
authorities having jurisdiction, its advising attorney and other institutions and individuals, to organizationally
block and eliminate unwarranted demands from antisocial elements.

(2) Operating Effectiveness of Internal Controls
In accordance with the provisions of the Financial Instruments and Exchange Act, Kanamoto and its
subsidiaries evaluate the design and operating effectiveness of internal controls for each period and have theaccounting auditor conduct audits on the appropriateness.
In addition, for the purpose of maintaining and enhancing the level of control, the Internal Control and
Auditing Office conducts audits of Kanamoto and its affiliated companies for each period, and when necessary,
reports to the managers, Board of Directors, Board of Auditors and Internal Control Committee.

7. Kanamoto’s Basic Policy Concerning Dividends
The Company had no applicable items to report.

Consolidated Financial Statements

54th Business Period
From November 1, 2017
to October 31, 2018

Kanamoto Co., Ltd.

Consolidated Balance Sheet(As of October 31, 2018)( Millions of Yen)
Classification

AmountClassification(Assets)
Current assets

Amount(Liabilities)
97,112Current liabilities

74,267

Cash and deposits

36,793

Notes and accounts payable-trade30,695

Notes and accounts receivable trade

36,736

Short-term loans payable

13,971

Electronically recorded monetaryclaims - operating

5,091

Lease obligations

945

Securities

200

Income taxes payable

1,929

Merchandise and finished goods

765

Provision for bonuses

1,136

Uncompleted construction
expenditure

55

Accounts payable-other

22,839Raw materials and supplies

651

Other

2,749

construction machine parts

14,652

Deferred tax assets

664

Noncurrent liabilities

65,279

Other

1,710

Long-term loans payable

23,087

Allowance for doubtful accounts-208

Lease obligations

1,684

Long-term accounts payable-other

39,591

Total non-current assets

Property, plant and equipment

144,466

129,508

Rental equipment

76,277

Buildings and structures

14,671

Machinery, equipment and vehicles

1,309

Tools, furniture and fixturesLand

Net defined benefit liability

261

Asset retirement obligations

449

Deferred tax liability

204

Total Liabilities

509
36,566

Construction in progress
Intangible assets
Goodwill
Other

173

Shareholders’ equity

93,526

Capital stock

13,652

343

Capital surplus

14,916

13,377

Investment securities

9,989

Deferred tax assets

396

Other

3,367

Allowance for doubtful accounts-375

Total Assets(Net Assets)

1,580

1,236

Investments and other assets

139,547

241,578

Retained earnings

67,086

Treasury stock–2,129

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities

2,153
2,148

Deferred gains or losses on hedges

0

Foreign currency translation
adjustment

5

Minority interests

6,351

Total Net Assets

102,031

Total liabilities and net assets

241,578

Consolidated Statement of Income(From November 1, 2017 to October 31, 2018)(Millions of Yen)
Classification

AmountNet sales

168,188

Cost of sales

117,220Gross profit

50,968Selling, general and administrative expenses

33,368Operating income

17,599Non-operating income

746Interest income and dividends

178

Insurance income

74

Rent income

81

Temporary transfer charges income

105

Reversal of allowance for doubtful accounts

20

Other

284

Non-operating expenses

420

Interest expenses

108

Foreign exchange losses

78

Other

232

Ordinary income

17,925Extraordinary income

51

Gain on sales of non-current assets

8

Subsidy income

12

Gain on sales of investment securities

1

Compensation income for damage

29

Extraordinary loss

760

Impairment loss

30

Loss on sales and retirement of noncurrent assets

205

Loss on sales of shares of subsidiaries andassociates

322

Loss on sales of investment securities

157

Loss on valuation of investment securities

44

Income before income taxes and minority interests

17,216

Income taxes-current

4,509

Income taxes-deferred

16

Income before minority interests
Minority interests in income
Profit attributable to owners of parent

12,691834
11,857

Consolidated statements of income and consolidated statements of comprehensive
incomeConsolidated statements of income

Fiscal year ended October 31, 2018
(Millions of yen)
Shareholders' equity
Capital stock
Balance at beginning ofCapital surplus

13,652current period

Retained earnings

14,916

Total shareholders'equityTreasury shares

57,172-2,12983,612

Changes of items during
periodDividends of surplus-1,943-1,943

Profit attributable toowners of parent

11,857

11,857

Change in ownershipinterest of parent due
to transactions with

-0-0

non-controllinginterests
Disposal of treasury

0

shares00

Net changes of items
other than–shareholders' equity
Total changes of items
during period
Balance at end of current
period

–

-0

9,913

0

9,913

13,652

14,91667,086-2,12993,526

Accumulated other comprehensive income
Valuationdifference on
available-forsale
securities
Balance at beginning ofcurrent period

2,538

Deferred
gains or

Foreigncurrency

losses onhedgestranslation
adjustment
0

85

Total
Remeasureme accumulated Non-controlli

ng interests

nts of definedotherbenefit planscomprehensi
ve income

5

2,629

5,547

Total net
assets91,788Changes of items during
periodDividends of surplus–-1,943

Profit attributable toowners of parent–

11,857

–

-0

–

0

Change in ownershipinterest of parent due
to transactions with
non-controllinginterests
Disposal of treasury
sharesNet changes of items
other than

-389

-0

-85

0

-475

803

328

-389

-0

-85

0

-475

803

10,242

2,148

0

－

5

2,153

6,351

102,031

shareholders' equity
Total changes of items
during period
Balance at end of current
periodThe Accounting Auditor’s Report of Consolidated Financial Statements
Independent Auditor’s Report
December 18, 2018
Kanamoto Co., Ltd.
To the Board of Directors,
Ernst & Young ShinNihon LLC
Kiyohiro Saito
Designated limited liability partner
Managing Partner
Certified public accountant
Mitsuhiro Fujimori
Designated limited liability partner
Managing Partner
Certified public accountant
Pursuant to Article 444, Section 4 of the Companies Act, we have audited the accompanying
consolidated financial statements, which comprise the consolidated balance sheet, theconsolidated statement of income, the consolidated statement of changes in equity and thenotes to the consolidated financial statements, of Kanamoto Co., Ltd. (“the Company”)
applicable to the fiscal year from November 1, 2017 to October 31, 2018.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated
financial statements in accordance with accounting principles generally accepted in Japan, andfor designing and operating such internal control as management determines is necessary toenable the preparation and fair presentation of the consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our
audit from an independent perspective. We conducted our audit in accordance with auditing
standards generally accepted in Japan. Those standards require that we plan and perform theaudit to obtain reasonable assurance as to whether the consolidated financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence on the amounts anddisclosures in the consolidated financial statements. The procedures selected and applied
depend on our judgment, including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. The purpose of an audit of theconsolidated financial statements is not to express an opinion on the effectiveness of the entity’sinternal control, but in making these risk assessments, we consider internal controls relevant to
the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes
evaluating the appropriateness of accounting policies used, the method of their application, andthe reasonableness of accounting estimates made by management, as well as evaluating theoverall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position and results of operations of the Kanamoto Group, which
consisted of the Company and its consolidated subsidiaries, in the fiscal year under review inaccordance with accounting principles generally accepted in Japan.
Matters to be emphasized
As stated in the notes relating to Material Events after the Close of the Consolidated Fiscal Year,at the Board of Directors meeting held on November 12, 2018, the Company made resolutions
concerning the issuance of new shares by public offering and allocation to a third party, disposalof treasury shares by public offering, and sale of shares of the Company. With regards to theissuance of new shares by public offering and disposal of treasury shares by public offering, its
payment has been completed on November 28, 2018. With regards to the sale of shares of theCompany, the transfer has been completed on November 29, 2018.
This matter does not have any impact on our opinion.
Conflicts of Interest
We have no interest in the Company that should be disclosed in compliance with the Certified
Public Accountants Act.

Financial Statements

54th Business Period
From November 1, 2017
to October 31, 2018

Kanamoto Co., Ltd.

Balance Sheet(As of October 31, 2018)
Classification

Amount(Assets)
Current assets( Million of Yen)

Classification

Amount(Liabilities)
70,63355,679Current liabilities

Cash and deposits

27,107

Notes payable-trade17,872

Notes receivable-trade

5,702

Accounts payable-trade

5,804Electronically recorded monetaryclaims – operating

4,337

Short-term loans payable

10,940Accounts receivable, trade18,856

Income taxes payable

Securities

200

Provision for bonuses

Merchandise and finished goods

284

Accounts payable-other

Costs on uncompleted
construction contracts

35

Accrued expenses

487

Raw materials and supplies

545

Notes payable-facilities

869

Construction machine parts

11,924

Other

403

Prepaid expenses

329

Deferred tax assets

325

Short-term loans receivable

582

Other

982
655
17,663

471

Allowance for doubtful
accounts
Noncurrent assets
Property, plant andequipment
Rental equipment–69

Noncurrent liabilities

51,670123,004

Long-term loans payable

19,116

100,049

Long-term accounts payable-other

32,07854,116

Asset retirement obligations

297

Buildings

9,031

Deferred tax liabilities

178

Structures

2,423

Machinery and equipment

1,003

Vehicles and delivery equipment
Tools, furniture andfixtures
Land
Construction in progress
Intangible assets

Total Liabilities

332(Net Assets)

32,952172

Shareholders’ equity

84,202

862

Capital stock

13,652

Capital surplus

14,917

Software805

Telephone subscription
right
Other

22
34

Legal capital surplus
Investments and other assets

22,092

Investment securities
Stocks of subsidiaries andaffiliates

5,793

Investments in capital

107,349

15

Other capital surplus
Retained earnings

14,773
143
57,761

14,040Legal retained earnings

1,375

10

Other retained earnings

56,386Long-term loans receivable

1,428

Reserve for advanced depreciation of
noncurrent assets

Other

1,731

General reserve

45,731

Allowance for doubtful
accounts–911

Retained earnings brought
forward10,631

Treasury stock

Total Assets

193,63822–2,129Valuation andtranslation adjustments

2,086

Valuation difference on
available-for-sale securities

2,086

Total Net Assets

86,288

Liabilities and Total Net Assets

193,638

Statement of Income(From November 1, 2017 to October 31, 2018)(Million of Yen)
Classification

AmountNet sales

113,990

Cost of sales

81,233Gross profit

32,756

Selling, general and administrative expenses

20,523Operating income

12,233Non-operating income

1,020Interest income and dividends

248

Rent income299

Temporary transfer charges income

240

Reversal of allowance for doubtful accounts

35

Other

196

Non-operating expenses

282

Interest expenses

59

Provision of allowance for doubtful accounts

21

Foreign exchange losses

29

Other

172

Ordinary income

12,971

Extraordinary income

36

Gain on sales of noncurrent assets

3

Subsidy income

2

Gain on sales of investment securities

1

Compensation income for damage

29

Extraordinary loss
Impairment loss

705
29

Loss on sales and retirement of noncurrent assets

102

Loss on sales of shares of subsidiaries and associates

370

Loss on sales of investment securities

157

Loss on valuation of investment securities
Other

44
0

Income before income taxes

12,302

Income taxes-current

2,824

Income taxes-deferred-51

Net income

9,529

Statement of Changes in Net Assets(From November 1, 2017 to October 31, 2018)(Million of Yen)

Shareholders’ equity
Retained earnings

Capital surplus

Other retained earnings

Capital stock
Legal capital

Other capital

Total capitalsurplussurplussurplus

Legal retained
earnings

Reserve for

Retained

advanced

Generalearnings

depreciation ofreservebrought

noncurrent assets

Balance at beginning of current period

13,652

14,773143

14,916

1,375

22

Total retained
earnings

forward39,731

9,046

50,1756,000–6,000–Changes of items during period
Provision of general reserve－

Dividends of surplus－-1,943-1,943

Profit

－

9,529

9,529

Purchase of treasury shares0

Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at end of current period

－

－

－

－

－

0

0

－

－

6,000

1,585

7,585

13,652

14,773143

14,9171,375

2245,731

10,631

57,761

Valuation and translation

Shareholders' equity
Treasurystock

adjustments

Totalshareholders’equityValuationdifference on
available-for-salesecurities

Balance at beginning of current period

0–2,12976,6162,432

Total valuationand translation

Total net
assetsadjustments
2,432

79,048Changes of items during period
Provision of general reserve
Dividends of surplus
ProfitPurchase of treasury shares

0

–

－

–

-1,943－-1,943

9,529

－

9,529

0

－

0

-346

-346

-346

Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at end of current period

0

7,586

-346

-346

7,240

–2,12984,202

2,086

2,086

86,288

The Accounting Auditor’s Report of Financial Statements
Independent Auditor’s Report
December 18, 2018
Kanamoto Co., Ltd.
To the Board of Directors,

Ernst & Young ShinNihon LLC
Kiyohiro Saito
Designated limited liability partner
Managing Partner
Certified public accountant
Mitsuhiro Fujimori
Designated limited liability partner
Managing Partner
Certified public accountant
Pursuant to Article 436, Section 2, Paragraph 1 of the Companies Act, we haveaudited the accompanying financial statements, which comprise the balance
sheet, the statement of income, the statement of changes in equity, the notes
to financial statements, and the supplementary schedules, of Kanamoto Co.,
Ltd. (“the Company”) applicable to the 54rd Business Period from November 1,
2017 to October 31, 2018.
Management’s

Responsibility

for

the

Financial

Statements

and

the

Supplementary Schedules
Management is responsible for the preparation and fair presentation of thefinancial statements and the supplementary schedules in accordance withaccounting principles generally accepted in Japan, and for designing andoperating such internal control as management determines is necessary toenable the preparation and fair presentation of the financial statements andthe supplementary schedules that are free from material misstatement,
whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements and the
supplementary schedules based on our audit from an independent perspective.
We conducted our audit in accordance with auditing standards generally
accepted in Japan. Those standards require that we plan and perform theaudit to obtain reasonable assurance as to whether the financial statements
and the supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence on theamounts and disclosures in the financial statements and the supplementaryschedules. The procedures selected and applied depend on our judgment,
including the assessment of the risks of material misstatement of the financial
statements and the supplementary schedules, whether due to fraud or error.
The purpose of an audit of the financial statements and the supplementaryschedules is not to express an opinion on the effectiveness of the entity’s
internal control, but in making these risk assessments, we consider internal
controls relevant to the entity’s preparation and fair presentation of thefinancial statements and the supplementary schedules in order to design audit
procedures that are appropriate in the circumstances. An audit also includes
evaluating the appropriateness, the method of their application, and thereasonablenessaccounting

policiesusedbymanagement

and

the

reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements and the
supplementary schedules.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements and the supplementary schedules
referred to above present fairly, in all material respects, the financial position
and results of operations of Kanamoto Co., Ltd. in the fiscal year under review
in accordance with accounting principles generally accepted in Japan.
Matters to be emphasized
As stated in the notes relating to Material Events after the Close of theConsolidated Fiscal Year, at the Board of Directors meeting held on November

12, 2018, the Company made resolutions concerning the issuance of newshares by public offering and allocation to a third party, disposal of treasury
shares by public offering, and sale of shares of the Company. With regards tothe issuance of new shares by public offering and disposal of treasury sharesby public offering, its payment has been completed on November 28, 2018.
With regards to the sale of shares of the Company, the transfer has been
completed on November 29, 2018.
This matter does not have any impact on our opinion.
Conflicts of Interest
We have no interest in the Company that should be disclosed in compliancewith the Certified Public Accountants Act.

Audit Report
The Board of Corporate Auditors has received the audit reports prepared byeach of the Corporate Auditors concerning the business performance of the
Directors during the 53rd Business Period from November 1, 2017 throughOctober 31, 2018. After discussing the audit results based on the reports, wehave prepared this Audit Report and report as follows as the consensus ofopinion of the Board of Corporate Auditors.
1. Procedures and details of the audits by the Corporate Auditors and theBoard of Corporate Auditors(1) The Board of Corporate Auditors establishes the audit policies, audit plansand other matters, and receives reports concerning the implementation ofaudits and the audit result from each of the Corporate Auditors as well asreports from the Directors and the Accounting Auditor concerning theexecution of their duties, and requests explanations as necessary.
(2) In addition to communicating with the Directors, the internal audit
division, employees and other individuals in accordance with the standards for
Corporate Auditors and audits provided by the Board of Corporate Auditors
and in compliance with the audit policy and audit plan, and gathering
information and striving to improve the audit environment, each Corporate
Auditor performed audits according to the following procedures:(i) Each Corporate Auditor attended the Board of Directors meetings andother important meetings, received reports from Directors, employees andother individuals on their execution of duties and requested explanations
from the Directors, other employees and other individuals when necessary
as well as reviewed documents concerning matters such as important
decisions and conducted inspections of the business and financial conditionat the Company’s Head Office and main branches. With respect tosubsidiaries, each Corporate Auditor communicated and exchanged
information with the Directors and Corporate Auditors of such subsidiaries
and received business reports therefrom as necessary.
(ii) Each Corporate Auditor regularly received reports from the Company’s
Directors and employees, and requested explanations and clarified opinions
when necessary, regarding the contents of Board of Director resolutions
concerning the establishment of the organization provided in Article 100
paragraph (1) and paragraph (3) of the Ordinance for Enforcement of theCompanies Act, and the status of operation of the organization (internal
controls system) that has been established based on said resolutions, as
the organization necessary to ensure that the Directors comply with laws
and the Company’s Articles of Incorporation in the execution of their duties
as described in the Report of Business Operations and to ensure theappropriateness of other operations of the corporate group, which consistsof a stock company and the subsidiaries thereof.
(iii) Each Corporate Auditor monitored and verified whether or not the
Accounting Auditor performed audits properly while maintaining an
independent position as well as received reports from the Accounting
Auditor on the execution of duties thereby and requested explanations
when necessary. Each Corporate Auditor was also notified by the
Accounting Auditor that the System for Securing the Proper Performance ofDuties (matters listed in the items of Article 131 of the Ordinance on
Company Accounting) was developed in accordance with the Standards for
Quality Control of Audits (Business Accounting Council, October 28, 2005),
and requested explanations as necessary.
Based on the above procedures, the Board of Corporate Auditors reviewed theReport of Business Operations and the supporting schedules, the Financial
Statements (Balance Sheet, Statement of Income, Statement of Changes in
Net Assets and Notes to the Financial Statements) and the supporting
schedules and the Consolidated Financial Statements (Consolidated Balance
Sheet, Consolidated Statement of Income, Consolidated Statement of
Changes in Net Assets and Notes to the Consolidated Financial Statements)
for the business period.
2. Result of audit(1) Audit result of the Report of Business Operations, etc.
(i) The Report of Business Operations and its supporting schedules fairly
represent the condition of the Company in accordance with the laws ofJapan and the Articles of Incorporation of the Company.
(ii) We have determined that there was no serious occurrence of improper
activity or violation of laws or the Company’s Articles of Incorporation by
any of the Directors in carrying out the duties and responsibilities of theiroffice.
(iii) In our opinion, the details of the Board of Directors resolutions

concerning the internal controls system are appropriate. We also havedetermined that there are no matters that should be highlighted as aconcern with regard to the information contained in the Report of Business
Operations and the Directors in carrying out their duties concerning theinternal controls system.
(2) Financial statement and audit result of the supporting schedules
In our opinion, the audit procedures and audit results received from the
Accounting Auditor Ernst & Young ShinNihon LLC are appropriate.
(3) Audit result of consolidated financial statements
In our opinion, the audit procedures and audit results received from the
Accounting Auditor Ernst & Young ShinNihon LLC are appropriate.
December 26, 2018
Kanamoto Co., Ltd.
The Board of Corporate Auditors
Standing Corporate Auditor Eichu Kanamoto

Seal

Standing Corporate Auditor Naoyuki Yokota

Seal

Outside Corporate Auditor

Akio Hashimoto

Seal

Outside Corporate Auditor

Kiyohiro Tsuji

Seal

Outside Corporate Auditor

Akira Naoi

Seal

Outside Corporate Auditor

Koji Soga

Seal