2008

Annual Report
For the 12months ended October 31, 2007

CONTENTS
3
4
6
8
11
16
22
24
26
28
29
30
31
32
34
36
38
40
43
44
46
57
63
66
70

Financial Highlights (Consolidated)
Mission Statement
A Message from the President
Operating Division Guide
The Kanamoto Advantage
CSR Report
Branch Network
Alliance and Associates
Corporate History
Corporate Data
Organization Chart
Board of Directors

Financial Section
Report of Operating Results and Financial Position for the 43rd Business Period
Consolidated Financial Data
Non-Consolidated Financial Data
Report of the Audit Committee
At a Glance
Stock Information
Forward-Looking Statements
Statements included as part of the Kanamoto Co., Ltd. plans and strategies
described in this report, other than statements of actual past facts, aredescriptions of the Company’s outlook concerning future operating results
and are assumptions based on information currently available.
These descriptions of the future outlook contain known risks andunidentified risks, as well as other uncertainty factors, and the actual
management performance and operating results of Kanamoto Co., Ltd.
may vary substantially from the descriptions provided herein.

1kanamoto 2008

Financial Highlights (Consolidated)

Percent change

Millions of yen

Rental revenues and sales of goods
Operating income
Net income
Total shareholders’ equity
Total assets

2006

2007

2006-2007

2007¥ 68,023
4,068
1,742
35,540¥ 86,815¥ 68,626
4,236
3,035
37,971¥ 85,155

0.9
4.1
74.2
6.8
-0.2

$ 597,900
36,91026,446348,262$ 741,904

Percent change

U.S. dollars (Note)yen

Net income per share of common stock
Cash dividends per share of common stockThousands of U.S.
dollars (Note)

2006

2007

2006-2007

2007¥ 57.41
18.00¥ 92.40
20.00

60.9
11.1

$ 0.810.17

Note: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥114.78 =US $1, the approximate exchange rate on October 31, 2007.

当期純利益
Net Income

総資産
Total Assets

百万円/Millions of Yen

百万円/Millions of Yen

100,000

3,500
3,000

80,0002,500
60,000

2,000
1,500

40,0001,000
20,000
500
0

'03

'04

'05

'06

'07

0

'03

'04

株主資本
Total Shareholders’ Equity

キャッシュフロー
Cash Flow

百万円/Millions of Yen

百万円/Millions of Yen

40,0008,000

30,0006,000

20,0004,000

10,000

2,000

0

'03

'04

'05

'06

'07

0

'03

'04

'05

'06

'07

'05

'06

'07

kanamoto 20083

Mission Statement

Over forty years of continually challenging the potential of theconstruction equipment rental business.
Always striving to achieve the highest level of service.
Kanamoto's growth has been synonymous with the development of Japan's construction equipment rental business.
Whether the concern is products, quality assurance, supply channels, or a state-of-the-art business model developed tomeet changing times, helping customers rationalize their operations has always been our foremost goal.
With support from customer firms nationwide, Kanamoto will further expand the possibilities for construction
equipment rental solutions in the years ahead.

The final year of “Metamorphose,” Kanamoto’s long-term
management plan —— Maintaining positive revenue and earnings
trends, while evolving to meet tomorrow’s needs.
This year brings Kanamoto to the climax of “Metamorphose,” the long-term management plan the Company
introduced in its 40th Business Period ended October 2004. Throughout the plan, we have implemented measures suchas earnings-focused management, a bold scrap and build program and Kanamoto’s effective alliance strategy, andmaintained our focus on transforming Kanamoto into an enterprise with consistently strong margins. Following our
introduction of consolidated accounting, we have achieved quantitative results that surpassed our initial objectives,
reaching new heights of revenues and earnings with each passing year and shattering records set just 12 months earlier.
Today Kanamoto stands poised to throw off the last vestiges of the past and fully achieve the transformation evoked by
the term “Metamorphose.”
Kanamoto is currently also preparing its new long-term management plan and business strategies for the period from
November 2008 through October 2013. This plan will concentrate on further expansion of the Kanamoto group’s
operating results, based on the strong earnings structure created under “Metamorphose.” The next phase of Kanamoto’s
continuous evolution has already begun.

4

kanamoto 2008

Conceptual view of Kanamoto’s long-term management plan
“Metamorphose” and new long-term management plan

メタモルフォーゼ
Metamorphose

FY2004

FY2005

FY2006

FY2007

FY2008

利益重視の経営

資産のロングライフ化

スクラップ＆ビルドの続行

効果的なアライアンス戦略

Earnings-focusedmanagement

Longer asset lives

Continuation of the scrap
and build program

Effective alliance strategy

新長期経営計画
New long-term management plan

FY2009FY2013

Ｖ字回復路線の堅持

増収増益の記録更新

Steadily navigate
a V-shaped recovery

New record revenues
and earnings

kanamoto 2008

5

A Message From the President

Continuing to implement enhancements and Kanamoto’s
alliance strategy, and targeting further growth in Kanamotogroup operating results.
It is my great pleasure to report the results of Kanamoto’s activities forthe business period ended on October 31, 2007.
During this period, corporate earnings in Japan showed remarkable
improvement centered on export-oriented firms, and the economy
maintained its gradual expansion. As we entered the second half ofKanamoto’s fiscal year, however, rising crude oil prices andappreciation of the yen, together with the subprime loan problem in
the United States, began casting a shadow over the economy.
Construction demand related to the Kanamoto Group’s main businessremained brisk in major metropolitan areas, boosted by vigorous
private sector capital investment. In the majority of regions, however,conditions were greatly affected by cutbacks in public works spending,and subsequently lacked positive growth momentum. In addition, theconstruction industry suffered substantial adverse effects because of the6kanamoto 2008

time required to obtain construction certification application permits,and the subsequent delays in beginning new construction projects, as aresult of inadequate preparation of the administrative inspection
system in conjunction with revision of the Building Standards Law.
Despite this environment, Kanamoto improved both its operating
income and operating income margin, two indicators pertaining toour core business, from the prior business period. This positive
performance was the result of efforts to develop new demand, in both
metropolitan areas and regional areas, and steps to improve ourbusinesses based on the philosophy of Kanamoto’s five-year long-termplan “Metamorphose”* Together with one-time factors, including
unplanned profits on the sale of land and a gain on reversal of reservesin conjunction with revision of the Company’s retirement pension
system, Kanamoto achieved the highest ordinary income and net
income since the Company began consolidated reporting of its
operating results.

In the years ahead, we cannot look forward to large growth in overall
construction investment within Japan. Although we expect today’s
severe external environment to continue, we will work to expand theKanamoto Group’s market share, as we seek to generate earnings bycontinuing the Company’s improvement measures and develop newalliance partners. At the same time, we will concentrate on establishingan overseas base through Kanamoto’s joint venture in Shanghai.
We look forward to continuing to receive your support andencouragement over the coming year.

Kanchu Kanamoto President and Chief Executive Officer*“Metamorphose” is a German word meaning “transformation and evolution” Just
as insects become bigger and stronger as they pass through stages of growth, so
Kanamoto seeks to transform itself into a larger, stronger firm, by breaking out of its
traditional form through implementation of its long-term plan. The Company
selected “Metamorphose” as an apt title and metaphor for its long-term plan.

kanamoto 2008

7

Operating Division Guide

Construction Equipment Rental Business

Worksite talk is Kanamoto’s
driving force.
In Kanamoto’s core operations in the construction
equipment rental business, worksite talk is our driving
force. Whether it’s construction or civil engineering works,
we stand prepared - ready with all of the items required atany site, to meet the demands of each and every customer.
An ample equipment lineup, ready to meet an extensive
range of diverse needs
Of course Kanamoto is the undisputed one-stop source for construction
equipment such as dump trucks, hydraulic excavators and vehicles for highlevel work. But we go far beyond the competition, by providing temporary
housing materials and structures, generators and all of the hand tools
indispensable at a construction site. At Kanamoto we strive to satisfy every
demand, with a full line-up of approximately 460 different models and
400,000 rental items in a broad range of sizes.
We even stock optional apparatus, such as attachments for expanding basic
equipment use, in order to respond to the diverse needs at customers’ sites.

Kanamoto’s online system ensures prompt product searches“Provide only the right equipment, in the right quantity, at the right time.”
Our online network linking every branch and office, which we’ve utilized8

kanamoto 2008

事業部門別売上比率（連結）
Divisional sales ratio (Consolidated)

Fiscal 2007 operating results

Rental revenues

91.9%

Sales revenues

Division total

since 1985, is the key that enables Kanamoto to maintain this stance andcould be called the basis of our rental business. Kanamoto’s online system
ensures smooth equipment pickup and delivery, and has contributed
significantly to the formation of a product lineup and rental fleet that meets
our customers’ demands.

Maintenance of quality is indispensable to the rental business
Kanamoto operates a complete maintenance organization at
every branchWith more than 150 of our own branches throughout Japan, and over 240
bases from Hokkaido to Okinawa for the entire Kanamoto group, we
continue to expand our network as we partner with new firms, year after
year.
Cover every corner of Japan. That’s how we can meet the expectations of ourcustomers.
We’ve centralized operational control of our construction equipment in our
online system. But when it comes to maintenance and control overequipment quality, we rely on the maintenance staff assigned to each
Kanamoto branch. Our highly-trained and technically knowledgeable
maintenance staff follows an exacting maintenance schedule, day in, day out.
That’s the Kanamoto standard. At Kanamoto, we’ve always offered acomplete equipment maintenance program to our customers, in every regionof Japan, and we’ll continue to do so.

46,33916,732
63,072

Rentals to individuals help Kanamoto’s market growFrom BtoB to BtoC. In cooperation with Komeri Co., Ltd., Japan’s DIY
leader, Kanamoto is developing its rental business aimed at individual users.
We have set up tool rental corners in five Komeri Power Store branches, partof the do-it-yourself store network Komeri is developing, and stocked themwith an ample selection, ranging from tools for professional use to small
construction equipment, to meet the needs of individual customers, smallbuilding contractors and farmers.

Kanamoto’s new compensation system conforms todiversified needs
When renting construction equipment and vehicles, there’s always a risk ofan accident caused by construction equipment and vehicles or the theft ofrental equipment. That’s why, for over two decades, Kanamoto has offered acomprehensive compensation system to address these risks. In recent years,
the conditions under which incidents can occur and the types of accidents
encountered have become more complex. Customer needs have grown morediverse as well. To address these changes, and reflect customers’ comments
and opinions to the greatest extent possible, we’ve significantly revamped the
key components used for this program in the past and begun operation of
our “new Kanamoto compensation system.” Inspectors with training andexperience in compensation activities are assigned to each region, where they
provide customer-oriented service.
kanamoto 2008

9

Operating Division Guide
事業部門別売上比率（連結）
Divisional sales ratio (Consolidated)

Fiscal 2007 operating results

Steel Products Sales Business
Division total

5,120

7.5%

Supplying indispensable steel
products for engineering andconstruction works
The Steel Sales Division sells a variety of steel products, including formed
steel bars and steel H-beams, sheet piles and single tube pipes, mainly in
Hokkaido, the birthplace of Kanamoto. The division also handles various
specialized works, including construction of ALC (autoclave lightweight
concrete) exterior walls and insulation construction and the installation of“KT roof system” insulated waterproof roofing. By providing construction
together with the supply of materials, these activities help customers
eliminate complicated procedures and slash costs.
Although more than 20 years have passed since Kanamoto shifted the focus
of its operations to the construction equipment rental business, today
Kanamoto remains among the top group in Hokkaido’s steel products
wholesale industry. In the years ahead, the Steel Sales Division will continue
to supply the high-quality steel products so indispensable for engineeringand construction works.

事業部門別売上比率（連結）
Divisional sales ratio (Consolidated)

Fiscal 2007 operating results

Information Products Business
Rental revenues

0.6%

Sales revenues

Division total

399
34
434

Kanamoto always offers
leading-edge models
The Information Products Division, which Kanamoto established in 1982 as
the third pillar of the Company, initially focused on software development
and sales of semiconductor products. The division has achieved significant
milestones. It was the first to offer for rent in Japan the IBM PC-AT, themost advanced model of its time and the forerunner for today’s Windows
machine standard, as well as the second company in the world - and the firstin Japan – to be certified by Sun Microsystems as a rental firm for Sun
workstations.
Today Kanamoto continues to rent efficient hardware, as well as propose avariety of network solutions. In the computer industry, where products andtechnology evolve with remarkable speed, Kanamoto continues to actively
develop services that enable customers to use the most advanced services
from both a hardware and software perspective.

10

kanamoto 2008

The Kanamoto Advantage

日本の建設総投資と建機レンタル依存率の推移
Change in construction investment in Japan and reliance on construction equipment rentals
兆円/Trillions of Yen

80%
民間/Private investment
政府/Public works investment

ゼネコン/General contractors

70

80
70

60
50

60

建設会社平均/Construction
建設会社平均/Construction company average

40

50

30

40

協力会社
会社（サブコン）/Sub-contractors

20
30

10
0

'98

'99

'00

'01

'02

'03

'04

'05

'06

20

As construction companies pursue greater management rationalization, the use of construction equipment rentals
continues to climb. Today, when half of all construction equipment used at worksites is rented, the role played by theconstruction equipment rental business has become bigger than ever. That’s why at Kanamoto, we will continue to offer
the highest level of service as our customers’ best partner, while responding to the needs of this new era.
As companies rationalize management, rental is the rightchoiceConstruction equipment rental is an efficient, sensible approach that enables
customers to secure “the right equipment” at “the right time” and in “theright quantity.” With rentals, companies can keep fixed assets and liabilities
off their balance sheet by eliminating the financial burdens pertaining to thepurchase of equipment itself and the need to provide a storage location, andreduce running costs such as maintenance and inventory control. The
complex accounting treatment needed to book the costs incurred every
month can also be reduced.
Whether a construction company or other user, large or small, Kanamoto
helps customers by offering the most effective, optimum solutions for
management rationalization through construction equipment rentals.

Kanamoto’s dominance and future potential in the industry
According to a report from the Ministry of Economy, Trade and Industry,
Japan’s construction equipment rental industry market has grown toapproximately 1.2 trillion yen. Altogether the market is composed of roughly
2,000 companies, including four large multi-regional companies such as
Kanamoto and numerous small firms covering local markets. As the amountof capital investment required to remain competitive increases and the
management environment becomes more challenging with each passing year,
however, moves have accelerated to consolidate the business among
Kanamoto and other large companies, which serve markets in multiple
regions.
At the same time, rental has become the commonsense approach for
obtaining the construction equipment used at construction sites. According
to statistics from the Japan Civil Engineering Contractors’ Association, Inc.,
the construction equipment rental utilization rate has reached 49.8%, withrental equipment accounting for nearly half of all construction equipmentused at construction sites. And because many models with a high rental
utilization rate are excluded from this figure, the true construction
equipment rental utilization rate for all items is clearly at an even higher
level.
As future demand grows for equipment with a broad range of generalapplications, such as generators and hydraulic excavators, as well as forequipment that exhibits the potential for higher levels of rental use, therental utilization ratio is projected to rise. For Kanamoto, which boasts theindustry’s preeminent product lineup and a branch network covering all ofJapan, this means there are still plenty of opportunities to expand operating
results.
kanamoto 2008

11

The Kanamoto Advantage

Flowtechno Corporation ground improvement equipment

Asbestos real-time monitor“Bridge Dragon” new model bridge
inspection vehicle

At Kanamoto, responding to future needs that show promise for further growth in demand, while also meeting today’s
diverse customer needs, is one of our most critical missions. That’s why we are pushing into new sectors, and aggressively
developing and introducing new products.

12

Ground improvement sector technology broadens
Kanamoto’s potential

New product development stays one step ahead of today’s
needs

Possessing the equipment and technology for ground improvement works
gives Kanamoto a key advantage. The ground improvement MITS techniqueand the SDI technique for large-scale concrete structure maintenance, forexample, which are specialties of Flowtechno Corporation, a Kanamotosubsidiary engaged in technical development and equipment design, aretechnologies in sectors with substantial projected future growth in demand,
particularly in the Tokyo metropolitan area. These definitive technologies in
the ground improvement sector, which have been enhanced by Flowtechno
Corporation, will greatly broaden Kanamoto’s potential.

Kanamoto continuously reviews its asset portfolio with an eye on the future.
The new “Bridge Dragon,” a highly efficient bridge inspection vehicle
authorized by the Hokkaido Industrial Cluster Formation Promotion Projectand developed jointly with several companies including the manufacturer,
offers a labor-saving inspection system. And Kanamoto’s rental of asbestos
real time monitors, which are capable of immediately measuring the asbestos
concentration in the air at asbestos removal sites, also contributes to work
efficiency improvements and safety.
In the future as well, Kanamoto will work to develop new products suited to
the needs of the times, while pursuing technical tie-ups with researchorganizations and firms spanning diverse fields.

kanamoto 2008

EBITDA+（イービットディーエー・プラス）の推移
Change in EBITDA+
百万円/Millions of Yen

予想値/Projected

20,00015,00010,000

5,000

0

'01

'02

'03

'04

'05

'06

'07

'08

EBITDA+＝ 営業利益＋減価償却費＋支払ファイナンスリース料＋割賦手数料＋小額資産
EBITDA+= operating income + depreciation and amortization expense + finance leasefee payments + installment payment charges + purchase payments forsmall-scale construction equipment and inexpensive rental assets＊レンタル資産導入に際しては割賦購入だけではなく、ファイナンスリースも多用していることから当社では
EBITDA（減価償却前営業利益）に支払ファイナンスリース料や小額資産を加算したEBITDA+の拡大を重視しています。
Note: Because Kanamoto introduces rental assets by using finance leases as well as installment
payment purchases, the Company focuses on growth in the indicator EBITDA+, which adds financelease fee payments and purchase payments for small-scale construction equipment and inexpensive
rental assets to EBITDA (earnings before interest, taxes, depreciation and amortization).

The equipment rental business demands a substantial capital investment each fiscal year. Because this investment can bepartially recovered by selling used equipment in the future, however, it is, so to speak, a source of earnings. This is thereason Kanamoto has always practiced a management strategy that positions growth in EBITDA+ (earnings before
interest, taxes, depreciation and amortization in the broad sense) as its most important management indicator, while also
taking into consideration ROI (return on investment).
Maintaining an earnings-focused rental equipment asset
portfolio
Since 2004, when Kanamoto launched its long-term management plan
“Metamorphose,” Kanamoto has declared the creation of a highly profitablerental equipment portfolio to be a key Company policy and pursued
optimized utilization of its assets. The effects of this focus, including theimprovement of rental profit margins, have become steadily evident as aresult of reinforcing our emphasis on models offering high operating
efficiency, successfully implementing measures to adjust rental unit prices
and controlling depreciation burden by extending rental asset lives.
Kanamoto will continue pursuing this profit-focused strategy and establish
an even stronger management base in the years ahead.

Asset strategy demonstrates Kanamoto’s style
To promptly comply with anti-pollution measures and regulations
promoted by Japan’s Ministry of Land, Infrastructure and Transport,

Kanamoto has proactively introduced the latest models of anti-pollution
equipment. With most of our existing construction equipment alreadystate-of-the-art models that clear mandated requirements, we can help
achieve the environmentally-friendly management that customer firms
demand. Pursuit of convenience, plus attention to today’s needs – that’s justone aspect of the Kanamoto style.
In addition, Kanamoto makes capital investments in excess of 15 billion
annually, and nearly all of our construction equipment featurescharacteristics that enable us to sell used items after their useful rental lives
have expired. So the depreciation expense incurred each fiscal year becomes
the source of future earnings. This is the reason Kanamoto has always
focused on EBITDA+ growth as its most critical management indicator.
Ensuring not just strong operating results, but also higher EBITDA+ toprovide for future earnings, has always defined Kanamoto’s management
approach. As we move ahead, we’ll continue to focus on increasing our
EBITDA+.

kanamoto 2008

13

The Kanamoto Advantage

純資産、有利子負債、D/Eレシオの推移
Change in net assets, interest-bearing debt and D/E ratio
百万円/Millions of Yen

40,000

純資産/Net Assets
有利子負債/Interest-bearing debt

D/Eレシオ / D/E ratio

倍/Times

1.5

30,0001.0
20,0000.5
10,000

0

'03

'04

'05

'06

'07

0.0

Kanamoto has adopted a web-based open system built on a
UNIX platform for its mission-critical systems

Improving Kanamoto’s financial position by reducing
interest-bearing debt
Because Kanamoto introduces a large quantity of construction equipment
each year to satisfy customers’ needs, compared with other industries theCompany has a high interest-bearing debt ratio. Together with its
characteristics as a stock business, Kanamoto’s financial strategy is challenged
by the decisions taken to service this debt. Kanamoto therefore is working tostrengthen shareholders’ equity, reduce interest-bearing debt and slim down
its balance sheet, by limiting capital investment within the scope of annual
cash flow and adopting financial techniques to also use finance leases
effectively when introducing assets.
As a result, Kanamoto has moved steadily to improve and strengthen its
financial position. For example, the Company’s D/E ratio (debt equity
ratio), an indicator for measuring financial health that shows the ratio of

14

kanamoto 2008

interest-bearing debt to shareholders’ equity, has been well below 1.0 for the
past several years.

Enhancement of information systems has boosted operating
efficiency
Kanamoto was a pioneer in the industry when it created an online network
in 1985 linking every branch and the head office. In 2004, we completed themigration of all mission-critical systems from a mainframe to an open system
and realized greater efficiency in all of our internal operations, frommanagement of our rental asset inventory to execution of maintenance andregular inspections, accounting treatment and credit management, plus
selection of models for next-period introduction. And we’ll continue toaggressively tackle internal systems development in the future, in order tofurther improve the efficiency of our internal operations.

当社の建設関連事業（建機レンタル）におけるビジネスモデル

中古建機需要（国内・海外）

Business Model for Kanamoto’s Construction-related
Businesses (Construction Equipment Rentals)

台数/Pieces of equipment%

100,00080

資産導入

法定耐用年数売却（廃棄）

Asset introduction

Legal durable
years

Disposal (scrapping)

Used construction equipment demand (domestic and overseas)
海外/Other countries
国内/Japan
海外比率/Overseas percentage

80,00070

レンタル収入Rental revenues

売却収入60,00060

40,00050

20,00040

Gain on sale

中古市場状況で売却時期を変更
Timing of equipment sales
changes depending on conditionsin the used equipment market

生涯回収
Lifetime recovery

0'96Creation of a flexible business model
Kanamoto’s basic business model is straightforward - earn income andrecover our investment through rentals after introducing assets, thenultimately dispose of the equipment. The number of years from introduction
until final sale is determined from the standpoint of recovery over an asset’s
lifetime. One theme in Metamorphose, Kanamoto’s long-term management
plan, was improving profit margins by easing the depreciation burden andlengthening the useable life of assets, which had been subject to short
replacement cycles. For models such as hydraulic excavators that enjoy
robust used construction equipment demand, on the other hand,
Kanamoto’s response must conform to conditions in the global usedequipment market. In short, we believe maintaining the flexibility to decide
whether to own and rent assets over many years or replace the equipment
over relatively short life cycles, depending upon conditions, is the optimalbusiness model for the construction equipment rental business.

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

30

Kanamoto’s maintenance capabilities enjoy an unsurpassed
reputation, at home and abroad
The lifetime recovery on rental equipment is affected significantly by boththe stream of rental revenues earned over the rental period and the sale pricereceived at time of disposal. When purchasing used construction equipment,buyers will check the condition carefully. Savvy buyers know the trained
technicians assigned to each Kanamoto branch consistently implement arigorous maintenance program, to ensure customers can use Kanamoto’s
construction equipment safely and with peace of mind – a fact that produces
a secondary benefit by increasing the re-sale value of Kanamoto’s used
construction equipment assets.
Over 70% of the used construction equipment sold in Japan is exported toother countries. Almost all of Kanamoto’s used equipment is exported toforeign countries, and strong demand from countries around the world canbe expected to continue in the future. For all of its domestic customers, andfor global customers yet not served, Kanamoto will continue working in the
future to improve its maintenance technology.

kanamoto 2008

15

CSR Report

社会性報告
社会性報告
Corporate Social
Corporate Social
Responsibility
ReportResponsibility Report

環境報告
環境報告
Environmental Report
Environmental Report

The starting point of Kanamoto’s CSR ——Current approach and future efforts“Be a firm trusted by society, and entrusted with society’s future.” The starting point of CSR at Kanamoto lies in a simple
yet uncompromising philosophy – “contribute to society.” The essential foundation of a firm responsible for the future isnurtured through various activities that are grounded in compliance. At Kanamoto, we endeavor to build corporate value
through the creation of profits – the raison d’être of every firm – and the fulfillment of our social responsibilities, throughsystematic CSR activities at every company of the Kanamoto group.
The CSR report provided here outlines Kanamoto’s CSR efforts by classifying activities into a “Society Report” and“Environmental Report.”
Fostering a compliance outlook—Kanamoto’s Employee Conduct Standards Handbook and helpline
In today’s environment, where the social responsibility of each corporation is
being scrutinized as never before, the creation of a compliance system isabsolutely critical for any firm that seeks to achieve sustainable growth.
Compliance is all about observing the rules, including the letter and intent oflaws and regulations as well as social standards, in the course of pursuing thefirm’s business activities. In practice, each employee must perform his or her
activities with a strong awareness of the firm’s social responsibility. At
Kanamoto, we’ve taken steps to foster a thorough compliance outlook inevery employee. These include preparing a handbook detailing theCompany’s employee conduct standards, which we distribute to every
employee, and creating an environment where employees can accesscompliance information easily using Kanamoto’s Intranet. In 2003
Kanamoto also enacted ethics guidelines, and established a system for16

kanamoto 2008

compliance with laws and these ethics guidelines, centered on a Compliance
Committee that includes outside committee members, to disseminate thisinformation to every Kanamoto group company.
We’ve also set up a helpline within the Compliance Committee, as a window
for receiving internal reports and consultations concerning violations of thelaw or employee misconduct, and established a reporting window outside theCompany at an attorney’s office. In the future we will continue to actively
pursue employee education and compliance system enhancements based on a
positive compliance outlook.

Strengthening Kanamoto’s corporate governance system toimprove management transparency
Corporate governance refers to the mechanisms for supervising company
activities and ensuring management fairness and transparency, in order toincrease corporate value. Kanamoto has always proactively adopted measuresカナモトのコーポレ−トガバナンス体制
Kanamoto’s corporate governance organization
監査役会（監査役・社外監査役）
Auditors(Auditors and Outside
Auditors)

株主総会
General Meeting of the Shareholders

選任・解任Election anddismissal

選任・解任

選任・解任
Election anddismissal

Election anddismissal

会計監査人（監査法人）
Independent auditors(Audit corporation)

取締役会（意思決定・監督）
業務・会計監査Operating audits
and accounting
auditsBoard of Directors(Decision-making and supervision)

Consulation andreporting

付議・報告

選任・解任

会計監査
Accounting audits

Election anddismissal

取締役社長
President

選任・解任 Election and dismissal（業務執行）(Execution of activities)（内部統制）(Internal controls)

執行役員

監査室

Corporate officers

Auditing Office

顧問弁護士
Advising attorney

Internal controls staff are proceeding with
provisional operations

法務室
各事業部門

Legal Office

Operating divisions

コンプライアンス委員会
Compliance Committee

内部統制プロジェクトチーム
Internal Management Project Team Committee

to strengthen its corporate governance organization, based on the belief suchmeasures will earn the trust of every Kanamoto stakeholder and increase thevalue of Kanamoto’s operations to society.
To incorporate the broadest range of opinions and proposals into its
management decision making, Kanamoto has appointed outside directors. In
addition, the Company has sought to clarify supervisory authority andresponsibilities for the execution of Company activities through theintroduction of a corporate officer system in 2001. Kanamoto has also worked
to improve management transparency and accelerate decision-making. And in
January 2006, Kanamoto created a more flexible management organization by
shortening the term of office for directors to one year from two years.
To audit its management activities, the Company has adopted an Audit
Committee system. The Audit Committee fulfills an important role forstrengthening Kanamoto’s corporate governance organization, throughactivities such as audits concerning the legality and appropriateness of
directors’ duties throughout the entire Kanamoto group, and internal auditsof all businesses, as well as regular participation in Board of Directors
meetings and the collection of information in cooperation with theCompany’s Auditing Office and outside auditing firm.

Creating an internal controls system in accordance with the law
Under the Company Act enforced in May 2006, firms are obligated toestablish an internal controls system, and senior management is required tocheck for financial reporting irregularities and verify risk management practices

as part of its daily activities. Furthermore, under the Financial Instruments andExchange Law (Japanese version of the Sarbanes-Oxley Act), beginning fromthe business period ending in March 2009 all listed companies will be required
to evaluate and disclose their own internal controls system in each accounting
period and submit a report, together with the company’s financial statements,
after the report has been audited by a certified public accountant.
Internal controls serve to increase corporate value and shareholder value firstand foremost by achieving the four objectives of “operating effectiveness andefficiency,” “reliability of financial reports,” “observance of laws andregulations” and “preservation of assets.” In December 2005, Kanamoto
initiated an internal controls project intended to highlight opportunities tofurther strengthen the Company’s business capabilities. Taking advantage ofthe opportunities provided by the start of its Internal Controls Committee in
April 2006, which consists of the division managers of each division and the
Operations Control Headquarters and is chaired by Kanamoto’s president as
the internal controls administrator, and the formation of the Internal
Controls Project Team, today Kanamoto is proceeding with this activity
methodically and efficiently. In December 2007, the Internal Controls
Project Team and process owners cooperated to re-verify activity processes,
through steps that included training sessions on internal controls for officegeneral managers held at branches throughout Japan. Kanamoto currently is
operating its internal controls system provisionally, in preparation for startup of its financial reporting-related internal controls on November 1, 2008,
and focusing on organizational operations with full-fledged compliance.
kanamoto 2008

17

CSR Report

Kanamoto utilizes SSL encryption
technology to strengthen the information
security system for its IR website
http://www.kanamoto.ne.jp

Kanamoto actively holds
company briefings throughout
Japan for individual investors

Closer communications with all Company stakeholders
To enhance communications with its stakeholders, Kanamoto works hard to
disclose information and create opportunities for dialogue.
Kanamoto has devised its information disclosure practices to maintaintransparency, fairness and speed. We focus on publishing not just quarterly
financial reports, but press releases as well, by posting them promptly on the
Company’s homepage after formal release, and even provide theseinformation disclosure documents in English. And whether it’s videos of theCompany’s financial statement briefings and briefing materials distributed toparticipants, the Kanamoto Examiner quarterly issued to shareholders or our
Annual Report, interested individuals can also readily view all documents
and pamphlets communicating facts and figures on Kanamoto and theKanamoto Group by visiting the Company’s website.
Of course, it’s impossible to report all of Kanamoto’s thinking, or benefit
from hearing the opinions of all investors, just by disclosing information andreceiving inquiries through our website. Consequently Kanamoto actively
exhibits at IR events, including the Nikkei IR Fair for individual investors,
and has increased the number of venues and frequency of company briefings
held throughout Japan each year. Kanamoto also focuses on formation of theCompany’s stock price, by holding quarterly briefings and one-on-one

18

kanamoto 2008

meetings with the security analysts and domestic institutional investors who
serve as an information source and implementing IR activities overseas.

Information risk management—Kanamoto’s Personal Information Protection Policy
Because the majority of Kanamoto’s business is centered on transactions withother firms, one might be tempted to think the volume of personal data
handled by the Company is quite small. In fact, the quantity of personal
information managed by Kanamoto has expanded voluminously, andencompasses not only customers but other stakeholders such as shareholders
and investors as well. Consequently Kanamoto has adopted a Privacy Policy(Personal Information Protection Policy), and established a thoroughorganization to manage personal information appropriately and respond in
the event personal data is leaked outside the Company.
One example of this effort is Kanamoto’s use of measures such as SSL(Secure Socket Layer) encryption technology to strengthen its Internet
information security system for information sent when individuals use theCompany’s homepage to forward inquiries. This system has earned
Kanamoto a SureServer Certificate from Cybertrust Japan Co., Ltd., a thirdparty certification organization.

Corporate Social Responsibility Report

Number of Repair Qualified Technicians and Operation Qualified Technicians (As of January 2008)

Repair Qualified Technicians Operation Qualified Technicians

Construction Equipment Repair Technician (Expert)

12

Construction Equipment Repair Technician (First Class)

88

Construction Equipment Repair Technician (Second Class)

194

Portable Generator Repair Technician

228

Automobile Repair Technician

292

Gas Welding Technician

420

Organic Solvent Work Manager

55

Hazardous Materials Handling Manager

194

Vocational Training Instructor
Vehicle-type Construction Equipment Operator

28
1006

Mobile Crane Operator

45

Mobile Crane Special Training

872

Large-scale Equipment (Special) Operating License

292

Sling Crane Technician

460

Forklift Operator

179

Shovel Loader Operator

11

Note: Number of qualifications held is total man-qualifications

Approach to upgrading safety and health systems
Kanamoto’s construction equipment is used heavily in many locales. To
ensure equipment operates at peak efficiency, Kanamoto has establishedmaintenance facilities at all branches and strives to maintain a uniform levelof maintenance, wherever its equipment is being used. This system hasearned Kanamoto an unparalleled reputation. Yet even with our experienced
repair and maintenance staff assigned throughout our branch network,
unanticipated gaps in our technology and safety education and training cansometimes occur.
Kanamoto therefore established a Safety and Health Office in 2004 andcreated a complete organization to emphatically address the prevention ofworker accidents. This division helps increase employee awareness of safety
and health practices by regularly implementing in-house courses, including
audits and guidance, at each repair facility.
These activities to strengthen Kanamoto’s safety and health systems andeliminate accidents have proven successful, and as a result, the number ofbranches that have achieved a zero accident rate for a continuous period of atleast three years has increased to 110 branches. The best record is held by six
branches that have not suffered any accidents for a period of at least 20 years.
Kanamoto also seeks to maintain and improve employee motivation byrecognizing excellence, including the award of certificates to branches thathave achieved a superior record of accident prevention.

In-house maintenance andrepair course
Branches that achieve a recordof no accidents are recognized
at a Company-wide meeting
held in January of each year

Fostering the human resources to lead Kanamoto into the
future
The employees working for the Kanamoto group are also important
stakeholders. The human resources responsible for the Company are ourmost important asset, and the foundation supporting our corporate growth.
For Kanamoto, which seeks to achieve sustainable long-term growth,
creating an organization to encourage and nurture the capabilities of each
employee to the maximum extent possible is an absolute must. Kanamoto
therefore strives to improve skills and motivation, by implementing
organizationally suitable personnel training and development programs forindividuals with management duties and those responsible for maintenanceand repair.
Given the need for employees to have numerous qualifications formaintenance and repair work in particular, we work diligently to train
individuals engaged in equipment maintenance and repairs. In addition toproviding in-house training, we’ve supported the acquisition of maintenanceskills by expanding our training system to include participation in
manufacturer-sponsored maintenance and repair training, and byencouraging employees to obtain advanced qualifications. For Kanamoto’s
rental business, which thrives by enabling numerous customers to use theCompany’s construction equipment, maintenance of product quality is a key
management issue. Kanamoto will continue training its employees to ensure
they can always provide the highest quality of service.

kanamoto 2008

19

CSR Report

社会性報告
社会性報告
Corporate
Corporate Social
SocialResponsibility
Responsibility Report
Report

環境報告
環境報告
Environmental
Environmental Report
Report
公害対策機の導入率
Percentage of Company and rental assets meeting anti-pollution regulations
%

100

80

60

40

発電機/Generators
ミニショベル・油圧ショベル/Excavators
レンタカー/Rental cars

20

Moving ahead with the introduction ofsuper-low noise construction equipment
and models that comply with Tier III
emissions regulations

全社計/Total

0

'00

'01

'02

'03

'04

'05

'06

Practical and effective actions for environmental preservation
As the push for environmental preservation accelerates
worldwide, voices calling on firms to implement
environmentally-friendly management grow stronger day
by day. The goal of environmental preservation is therealization of sustainable social development, with theenvironmental load kept within the limits of the earth’s
regenerative capacity. At Kanamoto we’ve been engaged in
actual environmental preservation conduct since 1998, byselecting hybrid automobiles as the Company’s corporate
vehicles and being an early adapter of strict anti-pollution
measures for our rental equipment. We will continue todevote efforts to environmentally-aware management, as
we seek to be a firm that contributes to our largest
stakeholder the earth, while implementing systematicconservation activities across the entire Kanamoto Group.

20

kanamoto 2008

Always maintaining the most advanced equipment lineup
with the lightest environmental load
Among the many types of environmental preservation and anti-pollution
measures, exhaust emissions regulations are undoubtedly the focus of thegreatest attention. Mention exhaust emissions regulations, and chances aremost people will think only of automobiles. Yet in fact, these regulations
apply equally to construction equipment as well.
At Kanamoto, we view consideration of the global environment as animportant obligation for fulfilling our social responsibilities as a corporation,and for many years we have been implementing a planned shift of assets tomodels that clear anti-pollution statutes for exhaust gas, noise and otherenvironmentally harmful effects. As a result, as of 2007 fully 99% of theCompany’s rental construction equipment portfolio consisted of the latest
environmentally-friendly models that satisfy anti-pollution regulations. In
the years ahead, Kanamoto will actively upgrade its inventory to equipmentthat takes maximum advantage of “green technology,” and pursue
environmental preservation activities that can assist customers’ ecomanagement.

Also began the rental of hybrid trucks,
the first in Japan.

低燃費・低排出ガス車の導入率
Low-fuel consumption and low-exhaust automobiles as a percentage of
all Company vehicles
平成17年基準 75%低減レベル（★★★★）
2005 standard 75% reduction level（★★★★）

15.1%

平成17年基準 50%低減レベル（★★★）
2005 standard 50% reduction level（★★★）
平成12年基準 75%低減レベル（★★★）
2000 standard 75% reduction level（★★★）

84.9%

平成12年基準 50%低減レベル（★★）
2000 standard 50% reduction level（★★）
平成12年基準 25%低減レベル（★）
2000 standard 25% reduction level（★）
その他 計
Other vehicles Total＊2007年現在、サービスカーなどに採用している車両のディーゼルエンジンには規制基準に準じたものがありません
Note: As of 2007, diesel engines in vehicles adopted for Company service automobiles andother uses are not based on the new standards

Aggressive introduction of low-fuel consumption, lowexhaust vehicles, even for corporate automobiles
At Kanamoto, not only have we actively been introducing construction
equipment for rent to customers, we’ve also aggressively introduced
automobiles certified as low-fuel consumption, low-exhaust vehicles for theCompany’s own use.
Kanamoto first began using the Prius hybrid automobile as its corporate
vehicle in 1998. As of 2007, the Company had introduced approximately
400 such certified vehicles as a result of continual upgrades to low-fuelconsumption, low-exhaust vehicles. Currently about 85% of Kanamoto’s
automobiles for corporate use are environmentally-friendly models offering
reduced environmental loads.

The more customers use our equipment, the closer they link
Kanamoto’s construction equipment rental business toenvironmental preservation
When you think about it, the construction equipment rental business itself
can be called an environmentally-conscious business. The reason?

Kanamoto exhibits at environmental events such as “Environmental Plaza
Sapporo” (left, August 2007/Access Sapporo) and “ECO-Manufacture”(right, November of each year/Tokyo Big Sight), to introduce theCompany’s environmental programs

Equipment rentals enable customers to use equipment on a time-sharing
basis, and that means assets are utilized more efficiently as rental use
increases.
On the other hand, the fact is that people generally have an image of
construction work being equivalent to environmental destruction.
Nevertheless, construction work remains indispensable for maintaining andrepairing the social infrastructure that supports our lives. For this reason,
Kanamoto is helping to reduce the environmental burden on construction
sites and surrounding areas by maintaining an ample inventory of
construction equipment that satisfies environmental regulations.
Consequently, rental equipment is linked to energy savings and resource
conservation by society as a whole, and can be viewed as one solution toenvironmental problems.
To help more people better understand these efforts by the Kanamoto
Group, Kanamoto participates actively in various environmental events withenvironmental action and ecology themes. The Company also engages invarious public relations activities designed to increase recognition of
Kanamoto’s business as environment friendly.

kanamoto 200821

Branch Network

Kanamoto’s expanding domestic and international network.
Our increase in branches is linked to the growth of our services.
Further growth of Kanamoto’s base network
Kanamoto is pursuing branch development by emphasizing demand-based
needs, including disaster recovery works and large-scale projects in various
regions, while placing branch development in the Tokyo metropolitan area
and other major urban areas at the center of its branching strategy. We’realso practicing a “seeding” strategy, to advance into regions not yet served bya Kanamoto branch and expand the Company’s sphere of business, andworking to expand services.
During its 43rd Business Period (fiscal year ended October 2007) Kanamoto
opened six new branches, including the Chiba Shinminato Branch (Mihama
Ward, Chiba City), the Higashidori Branch (Higashidori, Shimokita-gun,
Aomori Prefecture), the Hiroshima Branch (Asaminami-ku, Hiroshima), theKanazawa Branch (Kanazawa City, Ishikawa Prefecture), the Itoigawa
Branch (Itoigawa City, Niigata Prefecture) and the Asahikawa Ichijo-doriHigashi Branch (Asahikawa City, Hokkaido). The Company has maintained
its brisk pace of branch development since the beginning of the 44th
Business Period (fiscal year ending October 2008) as well, by establishing the
Mikasa branch (Mikasa City, Hokkaido) in November 2007 and opening
the Tobetsu branch (Tobetsu-cho, Ishikari-gun, Hokkaido) in December.
Kanamoto will continue to open branches in regions with demand andregions with promise, building a nationwide network that can provide every
customer with the industry’s top services.

22

kanamoto 2008

Shanghai Jinheyuan Equipment Rental Co., Ltd. begins
operations in rapidly-growing China
In August 2006, Kanamoto established Shanghai Jinheyuan Equipment
Rental Co., Ltd., a joint venture with a Chinese firm. With large growthdifficult to anticipate in Japan’s rental market, the new company represents
the initial overseas expansion effort by the Kanamoto group, and will serve asa wedge in the Chinese market. The venture is expected to seize a major
business opportunity within just one year of the start of operations.
In July 2007, Shanghai Jinheyuan entered an alliance with Shanghai
Mechanized Construction Co., Ltd., a member of the Shanghai
Construction Group, one of the largest construction concerns in Shanghai,
China. This company is studying its response to the increase in equipment
demand expected as a result of large projects such as the Shanghai Expo, andShanghai Jinheyuan will develop its construction equipment rental businessin China. The details of the agreements exchanged match the needs of bothcompanies, and provide for Shanghai Jinheyuan to supply all of theequipment components Shanghai Mechanized Construction is expected toneed. This alliance therefore is likely to become the first step on the road to
Shanghai Jinheyuan’s rapid growth.
By digging deep to uncover customer needs, not only in China today but
also in other countries where demand will exist in the future, Kanamoto islaying a solid foundation for overseas development.

Kanamoto and the group companies’ operating branches (As of January 2008)

Hokkaido

60

19

4

83

Tohoku

43

2

5

50

Kanto

28

1

1

30

Chubu

16

–

–

16

Kinki

5

7

–

12

Chugoku

1

–

–

1

Shikoku

1

–

–

1

Kyushu

–

29

3

32

–

–

15

15

154

58

28

240

Okinawa
Total

レンタル事業部

Construction Equipment
Rental Division
鉄鋼事業部

Steel Sales Division
情報機器事業部

Information Products Division
アライアンス企業

Kanamoto Alliance Group Firms
連結子会社

非連結子会社

Kanamoto Alliance Group Firms

Kanamoto Alliance Group Firms（株）アシスト
Assist Co., Ltd.

（株）
コムサプライComsupply Co., Ltd.

（株）エスアールジー・カナモト
SRG Kanamoto Co., Ltd.

フローテクノ（株）
Flowtechno Corporation

（株）
カナテック
Kanatech Co., Ltd.

町田機工（株）
Machida Kikou Co., Ltd.

第一機械産業（株）
Daiichi Machine Industries Co., Ltd.

ツールレンタル事業＊1
Tool Rental Business（株）カンキ
Kanki Corporation
九州建産グループ＊2
Kyushu Kensan Group＊1 ホームセンター大手の（株）
コメリと提携し、小物機械のレンタル事業を展開しています。
＊2 九州建産グループは（株）九州建産、（株）建産福岡、（株）建産テクノ、（株）センター・コーポレーションの4社で構成されています。
Note 1: Kanamoto is developing the small equipment
and tools rental business in cooperation with Japan’s
DIY leader Komeri Co., Ltd.
Note 2: The Kyushu Kensan group is composed of four
companies: Kyushu Kensan Co., Ltd., Kensan Fukuoka
Co., Ltd., Kensan Techno Co., Ltd. and Center
Corporation Ltd.

kanamoto 200823

Alliance and Associates

24

kanamoto 2008

Delivering high-quality services to more customers, throughcollaboration with leading local firms in regions throughout JapanThe Kanamoto alliance group is comprised of Kanamoto, eight consolidated subsidiaries and four non-consolidated subsidiaries. By combining Kanamoto’s
overwhelming inventory of rental assets and branch network with the absolute management capabilities of each group firm, Kanamoto seeks to provide highquality services perfectly suited to regional characteristics and take customer satisfaction to an even higher level.

Assist Co., Ltd. ( 10 branches )SRG Kanamoto Co., Ltd. ( 3 branches )Kanatech Co., Ltd. ( 10 branches )Engaged in the rental of safety products such as
signals or signs for the construction industry.

A joint venture between Kanamoto and SRG
Takamiya Co., Ltd. that provides rentals of temporary
scaffolding.

Designs, manufactures and sells modular housing
units for construction use.

Daiichi Machine Industries Co., Ltd.
( 9 Branches )Kanki Corporation ( 7 branches )Construction equipment rental company
headquartered in Kagoshima Prefecture.

Construction equipment rental company
headquartered in Hyogo Prefecture.

Kyushu Kensan Group( 20 branches, 4 group companies )Construction equipment rental company
headquartered in Fukuoka Prefecture.

Comsupply Co., Ltd. ( 5 branches )Flowtechno Corporation ( 2 branches )Engaged in the rental of safety products for theconstruction industry.

Headquartered in Fukuoka Prefecture,developing a business engaged in the design,
manufacture and sale of ground improvement
equipment.

Shanghai Jinheyuan Equipment Rental Co., Ltd.
( 1 branch )Engaged in development of a construction
equipment rental business and construction
equipment and construction materials importand export business in Shanghai, People’s
Republic of China.

Alliance companies

Machida Kikou Co., Ltd. ( 15 branches )Construction equipment rental company
headquartered in Okinawa Prefecture.
kanamoto 200825

Corporate History

1964.101971.101972.12
1979. 91981. 91982. 3
10
11
1983. 7
9
1985. 2
7
11
1986. 6
1987. 7
1988.12
1989. 6
9
1991. 6

2002. 2
6
11
2003. 811
12
2004. 1
5
7
9
10

1992.10

2006. 3

1993. 810
12
1994. 14

8
92007. 2

10
1995. 4
8
10
1996. 35
6
10
12
1997. 4
10
11
1998. 1
4
6
9
10
1999. 810
11kanamoto 2008

11
12
2001. 1
6
11

7
10

7

26

2000. 1
3
10

5
6
7
10

1964.10

1971.101972.12
1979. 91981. 91982. 3
10
11
1983. 7
9

1985. 2
7
11
1986. 6
1987. 7
1988.12
1989. 6
9
1991. 6
7
10

1992.10
1993. 810
12
1994. 1
4
7

10
1995. 4
8
10

1996. 35
6
10

12
1997. 4
10
11
1998. 14
6
9

10

Kanamoto Shoten Co., Ltd. established (Reorganizationin Muroran, Hokkaido)
Zenchu Kanamoto appointed President and Representative
Director
Began development of sales branch network (Hokkaido)
Company name changed to Kanamoto Co., Ltd.
Advanced into Aomori Prefecture with the first officelocated outside of Hokkaido
Taichu Kanamoto (Currently honorary chairman)
appointed President and Representative Director
Advanced into Akita Prefecture
Third-party allocation of shares (400 thousand shares;
par value 50 yen)
Advanced into Iwate Prefecture
Advanced into Chiba Prefecture
Launched Computer and Peripheral Equipment Division
as the company’s third operating division (Tomakomai,
Hokkaido)
Advanced into Gunma Prefecture
Advanced into Miyagi Prefecture
Completed on-line computer system network linking all
branches
Advanced into Kanagawa Prefecture
Advanced into Fukushima Prefecture
Advanced into Tochigi Prefecture
Branches located in nearly all regions of Hokkaido
Advanced into Niigata Prefecture
Listed on the Sapporo Stock Exchange
Advanced into Yamagata Prefecture
Advanced into Saitama Prefecture
Completed 1:1.2 stock split Paid an annual dividend of¥12, including a dividend of ¥4.5 to commemorate theCompany’s stock listing
Completed Information Products Division Ofuna
Technocenter
Completed 1:1.1 stock split Increased dividend by ¥2.5
per share and paid annual dividend of ¥10
Issued Swiss franc-denominated warrants (SFr60 million)
Completed 1:1.5 stock split, paid annual dividend of ¥10
Advanced into Nagano Prefecture
Advanced into Aichi Prefecture
Increased capital through public offering (2 million shares)
Began conducting overseas IR briefings
Advanced into Osaka Prefecture
Issued Swiss franc-denominated convertible bonds(SFr100 million)
Completed 1:1.3 stock split Paid annual dividend of ¥10
Advanced into Toyama Prefecture
Designated as a loan transaction stock for the Sapporo
Stock Exchange
Advanced into Fukui Prefecture
Completed 1:1.1 stock split Increased annual dividendby ¥2 to ¥12
Increased capital through public offering (2 million shares)
Listed on the Second Section of the Tokyo Stock Exchange
Advanced into Ishikawa Prefecture
Relocated head office functions in Sapporo, Chuo Ward
Conversion of first unsecured convertible bonds (¥10 billion)
Advanced into Ibaraki Prefecture
Completed 1:1.1 stock split Increased annual dividendby ¥2 to ¥14
Advanced into Mie Prefecture
Designated as a stock for margin trading on the Tokyo
Stock Exchange
Increased annual dividend by ¥2 to ¥16
Issued Eurodollar-denominated straight corporate bonds(US$42 million)
Introduced stock option program
Stock elevated to the First Section of the Tokyo Stock Exchange
Kanchu Kanamoto appointed President andRepresentative Director
Honored by the Tokyo Stock Exchange with theCommendation Award for Listed Companies, for morethan five consecutive years of annual dividend increases
following listing on the Exchange
Increased ordinary annual dividend by ¥2 to ¥18

1999. 810

11

2000. 1
3
10

11
12
2001. 1
6
11

2002. 2
6
11
2003. 811

12

2004. 15
7
9
10

2006. 38

9
2007. 25
6
7

10

Established SRG Kanamoto Co., Ltd.
Paid a total annual dividend of ¥19, including acommemorative per-share dividend of ¥1 to commemorate
Kanamoto’s 35th-year anniversary
Construction completed on the Kanamoto Hamamatsucho
K Building (Tokyo)
Issued ¥5 billion denominated zero-coupon bond
(Switzerland)
Implemented second stock option program
Concluded an alliance with Machida Kikou Co., Ltd.
Transferred temporary housing production business to
Kanatech Co., Ltd.
Paid annual ordinary dividend of ¥18 per share
Established commitment facility (first in Hokkaido)
Concluded an alliance with Kyushu Kensan Co., Ltd.
Introduced corporate officer system
Established Kanamoto Shikoku Co., Ltd.
Opened Hassamu Megastation
Converted Daiichi Machine Industries Co., Ltd. into a
subsidiary
Established sales office in Tokyo
Concluded syndicated loan (7 billion yen)
Advanced to Hyogo Prefecture
Merged with Taniguchi Co., Ltd.
Converted Daiichi Machine Industries Co., Ltd. into awholly-owned subsidiary
Start of “Metamorphose” long-range management plan
Kanamoto honored with the IR Excellent Firm Award
from the Japan Association for Individual Investors(JAII) (fourth company to receive the award)
Converted Kanamoto Shikoku Co., Ltd. into a whollyowned subsidiary
Received the operating rights to the construction
equipment rental business of Kanaya Lease
Succeeded to the construction equipment rental businessof Nakano Motors
Converted Kanki Corporation into a subsidiary
Kanamoto concluded an alliance with Tsuruga Kenki
Lease Co., Ltd.
Executed ¥12.0 billion liquidation scheme for billreceivables
Paid a total annual dividend of ¥19, including acommemorative per-share dividend of ¥1 tocommemorate Kanamoto’s 40th-year anniversary
Converted Flowtechno Corporation, a ground
improvement engineering company, into a subsidiary
Established Shanghai Jinheyuan Equipment Rental Co.,
Ltd., a joint venture company to manage Kanamoto’s
first foray in a foreign market
Increased capital through a public stock offering (2.6
million shares)
Received construction equipment rental equipment assets
and goodwill from TO Ogasawara Co., Ltd.
Converted Kyushu Kensan Co., Ltd. into a subsidiary
Assist Co., Ltd. made a wholly-owned subsidiary
Advanced into Hiroshima Prefecture
Shanghai Jinheyuan Equipment Rental Co., Ltd. signed
an alliance agreement with Shanghai MechanizedConstruction Co., Ltd.
Paid a total annual dividend of ¥20, including a special
dividend of ¥2
Established special benefits plan for shareholders
Completed off-floor distribution of shares (one million
shares)
Items in black are business development
Items in blue are financial information

kanamoto 200827

Corporate Data
(As of February 1, 2008)

Company Name

Head Office
1-19, Odori Higashi 3-chome Chuo-ku,
Sapporo, Hokkaido 060-0041 Japan
Established
October 28, 1964
Capitalization¥ 9,696 million (Paid-in capital)
Listing Exchanges
Tokyo Stock Exchange, First Section
Sapporo Stock Exchange
Stock Code9678
Common Shares Issued and Outstanding
32,872 thousands
Fiscal Year-end
October 31
Revenues¥ 61,576 million(Fiscal year ended October 2007)
Number of Employees
1,242 (As of October 31, 2007)(Excluding directors and temporary or parttime workers)

28

kanamoto 2008

Principal Businesses
Rental of construction equipment
Sale of steel products
Rental of engineering workstations andcomputer peripherals.
Primary Lenders
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation
Mizuho Corporate Bank, Ltd.
Sumitomo Mitsui Banking Corporation
North Pacific Bank, Ltd.
The Hokkaido Bank, Ltd.
Hokkaido Shinren
The Norinchukin BankThe Daishi Bank, Ltd.
The Sumitomo Trust & Banking Co., Ltd.
OthersPrincipal Shareholders
Japan Trustee Services Bank, Ltd.
The Master Trust Bank of Japan, Ltd.
ORIX Corporation
Taichu Kanamoto
Saburo Kanamoto
Trust & Custody Services Bank, Ltd.
Komatsu Ltd.
Kanamoto Capital Company
Tokio Marine & Nichido Fire Insurance Co., Ltd.
NOMURA SECURITIES CO., LTD.
OthersPrimary Customers
Aichi Corporation
Isuzu Motors Limited
ITOCHU CONSTRUCTION MACHINERY CO., LTD.
ITOCHU Corporation
OBAYASHI CORPORATION
Kajima Corporation
Komatsu Ltd.
PENTA-OCEAN CONSTRUCTION CO., LTD.
SAKAI HEAVY INDUSTRIES, LTD.
SHIMIZU CORPORATIONSHIN CATERPILLAR MITSUBISHI LTD.
Taisei Corporation
Takenaka Corporation
TADANO Ltd.
TSURUMI MANUFACTURING Co., Ltd.
Denyo Co., Ltd
TOA CORPORATIONTODA CORPORATION
Nishimatsu Construction Co., Ltd.
HANWA CO., LTD.
Hino Motors, Ltd.
HOKUETSU INDUSTRIES CO., LTD.
MAEDA CORPORATIONMITSUI & CO., LTD
Mitsubishi Fuso Track and Bus Corporation
Yanmer Construction Equipment Sales Co., Ltd.
OthersOrganization Chart(As of February 1, 2008)

株主総会
General Meeting of the Shareholders

監査役会
Auditors

取締役会

社長室

Board of Directors

業務部
Business Management Planning Division
業務課
Business Management Planning Section

Office of the President
秘書担当･広報担当
Secretary, Investor & Public Relations

社長

監査室

President

Auditing Office

安全衛生室
Safety and Health Office

法務室

総務部
Administration Division
総務課･人事課･工務課
Administration Section, Personnel Section, Facilities
Management Section

経理部
Accounting Division
経理1課･経理2課･資金課
Accounting Section 1, Accounting Section 2,
Finance Section

Legal Office

債権管理部
関連企業室
Affiliated Business Office

Credit Management Division
債権管理課･審査課
Credit Management Section, Credit Analysis Section

管理本部

事業開発部

Operations Control Headquarters

Market Development Division

営業統括本部
Business Coordination Headquarters

情報システム部
Information System Division
システムサポート課･システムソリューション課
System Support Section, System Solutions Section

営業推進室
Business Promotion Office

品質保証室
Quality Assurance Office

海外事業室Overseas Business Office

レンタル事業部

ニュープロダクツ室Construction Equipment Rental Division

New Products Office

鉄鋼事業部

特販事業部

Steel Sales Division

Used Products Sales Division

情報機器事業部

広域特需営業部

Information Products Division

Regional Special Procurement Sales Division
地盤改良課・広域営業課・基礎機械課
Ground Improvement Section, Regional Sales Section,
Foundation Equipment Section

北海道地区
Hokkaido Region
道北ブロック･北網ブロック･道東ブロック・空知ブロック・
道央ブロック･日胆ブロック･道南ブロック
Dohoku Block, Hokumou Block, Dotou Block,
Sorachi Block, Doou Block, Nittan Block, Donan Block

東北地区
Tohoku Region
青森ブロック･岩手ブロック･福島ブロック･宮城山形ブロック･
秋田庄内ブロック・新潟富山ブロック
Aomori Block, Iwate Block, Fukushima Block, Miyagi &Yamagata Block, Akita & Shonai Block, Niigata & Toyama Block

関東地区
Kanto Region
北関東ブロック･東関東ブロック･首都圏ブロック･
西関東ブロック
Kitakanto Block, Higashikanto Block, Shutoken Block,Nishikanto Block

近畿中部地区
Kinki & Chubu Region
東海ブロック･近畿ブロック
Tokai Block, Kinki Block

事務センターBill Collection Center

Headquarters Buillding(Sapporo, Hokkaido)

Tokyo Operating Division（札幌・東京）(Sapporo and Tokyo)

kanamoto 200829

Board of Directors(As of February 1, 2008)

Directors

Kanchu Kanamoto *President
CEO

Hitoshi Narita *Division Manager,
Business Management Planning
Division
President of Kanatech Co., Ltd.

Nobuhito Utatsu *Division Manager,
Accounting Division

Masakazu Hirata *Division Manager,
Used Products Sales Division

Tetsuo Kanamoto *Manager,Business Coordination
Headquarters Division Manager,
Construction Equipment Rental
Division

Keiichi Kitakata *Division Manager,
Information Products Division
Division Manager,
Market Development Division

Manabu Nagasaki *Hiroyuki Isono *Tatsuo Kanamoto *Division Manager,
Administration Division

Regional Manager,
Hokkaido Region
Construction Equipment Rental
Division

Yukio Sato

Masayuki Okamoto

Michiya Hakamata

Director

Director

Toshizo Okumura

Shinroku Sawada

Eichu Kanamoto

Standing Corporate
AuditorStanding Corporate
AuditorStanding Corporate
AuditorAkio Hashimoto

Kiyohiro Tsuji

Nobutomo Kuwata

Outside Corporate
AuditorOutside Corporate
AuditorOutside Corporate
AuditorRegional Manager,
Tohoku Region
Construction Equipment Rental
Division

President of Kanki Corporation

Auditors

Corporate Officers

30

kanamoto 2008

Hiroshi Kumagai

Yuichi Asano

Division Manager,
Information System Division

Division Manager,
Credit Management Division

Satoru Toiya

Naoki Mukunashi

Regional Manager,
Kanto Region
Construction Equipment Rental
DivisionManager,
Overseas Business Office

1.Asterisk indicates directors who hold the additional postof corporate officer.
2.Masayuki Okamoto and Michiya Hakamata fulfill therequirements for Outside Directors as stipulated by Article
2-15 of the Company Law.
3.Outside Auditors Akio Hashimoto, Kiyohiro Tsuji and
Nobutomo Kuwata are outside auditors as stipulated by
Article 2-16 of the Company Law.

kanamoto 2008

31

32

kanamoto 2008

61,102

63,072

3.2

68,023(6.3)

68,626

(0.9)

6,485

5,120

21.0

4,068

(189.7)

4,236

(4.1)

435

434

0.4

3,788

(144.4)4,416(16.6)

68,023

68,6260.9

1,742(394.2)

3,035(74.2)

予想値

売上高
（百万円）

2008 10

利益
（百万円）

8,000

80,00071,900

売上高

4,400

6,000

60,000
営業利益

70.02
40,000

経常利益

4,000

20,000

当期純利益

2,000

61,7004,100
19,435

0

'04

'05

'06
メタモルフォーゼ

'07'08

68,626

71,90061,576

61,700

4,236

4,600

4,012

4,300

4,416

4,400

4,372

4,100

3,035

2,300

3,431

2,200

92.40

70.02

104.440

66.98

kanamoto 200833

35,732
18,398
14,959
–
560
1,193
292
391
459
523
51,083
43,123
9,358
5,672
959
712
8
259
25,906
246
536
395
141
7,423
6,224
8
50
64
1,750
674
86,81534

kanamoto 2008

41.2

58.8
49.7

0.6

8.5

100.0

33,326
11,913
14,239
5,300
533
1,010
271
360
185
488
51,82943,498
9,523
5,693
977
745
5
238
26,268
46
413
275
137
7,917
6,610
8
58
38
1,964
762
85,155

39.1

60.9
51.1

0.5

9.3

100.0

28,571
12,41910,575
2,676
1,365
237
295
511
5
484
20,192
16,031
2,107
1,681
129
221
21
48,76332.9

35,5409,696
10,96014,889
6
2,418
2,418
92
38,05186,815

40.9
11.2
12.6
17.2
0.1
2.8

23.3

56.2

0.1
43.8
100.0

25,586
11,292
9,302
2,346
1,449
169
293
552
–
178
19,595
15,718
2,486
935
132
317
3
45,18230.1

37,971
9,696
10,96017,333
19
2,002
2,002
–
39,97385,155

44.6
11.4
12.9
20.4
0.1
2.3

23.0

53.1

–
46.9
100.0

68,023
49,745
18,278
14,210
4,068
315
42
24
90
40
–
116
595
357
–
237
3,788
394
50
275
–
69
729
52
594
–
82
3,453
1,767
77
21
1,742

100.0
73.1
26.9
20.9
6.0
0.5

0.9

5.6
0.6

1.1

5.1
2.6
0.1
0.0
2.6

9,696

68,62649,49019,136
14,899
4,236
712
96
287
81
38
105
102
532
338
75
119
4,416
1,800
921
–
845
34
449
68
0
331
48
5,767
2,286
410
35
3,035

100.0
72.1
27.9
21.7
6.2
1.0

8,414
489
3,635
4,289
14,10818,398

4,479
1,427
4,237
1,184
18,39817,213

6

35,540

13

591
3,035
13

2,430
37,971

0.8

6.4
2.6

0.6

8.4
3.3
0.6
0.1
4.4

10,96014,889
591
3,035

9,696

10,9602,444
17,333

13
19

2,418

2,418

92

38,051
591
3,035
13

416

416

92

508

416
2,002

416
2,002

92

1,921
39,973kanamoto 2008

35

36

kanamoto 2008

kanamoto 200837

32,984
17,461
2,876
10,734
–
259
968
61
243
384
100
350
456
50,53042,308
9,087
5,462
933
696
1
246
25,634
246
147
64
83
8,074
6,115
1,029
8
500
197
47
50
59
1,017
385
565
83,51438

kanamoto 2008

39.5

60.5
50.6

0.2

9.7

100.0

30,891
11,1152,255
10,825
5,300
227
770
67
229
355
–
178
435
52,01142,754
9,297
5,502
952
729
2
227
25,996
46
148
60
87
9,108
5,249
2,649
8
900
252
52
–
30
960
430
565
82,902

37.3

62.7
51.5

0.2

11.0

100.0

26,234
8,246
2,522
9,935
2,562
1,291
193
236
437
5
340
462
18,903
15,120
2,030
1,663
90
–
45,13831.4

35,962
9,696
10,96010,817143
15,310
1,375
13,935
19
11,831
2,084
6
2,414
2,414
38,376
83,514

43.1
11.6
13.1

22.6

54.0

18.4

0.0
2.9
46.0
100.0

23,758
7,660
2,456
8,818
2,211
1,406
137
246
499
–
175
146
18,356
14,926
2,353
928
89
58
42,11428.7

38,788
9,696
10,96010,817143
18,1501,375
16,77519
12,931
3,823
19
1,999
1,999
40,78782,902

46.8
11.7
13.2

22.1

50.8

21.9

0.0
2.4
49.2
100.0

60,753
44,904
15,84912,133
3,715
561
47
–
24
250
–
237
537
326
14
–
196

9,696

100.0
73.9
26.1
20.0
6.1
0.9

0.9

61,57644,713
16,863
12,850
4,012
852
87
15
287
195
104
162
492
312
–
68
111

10,817

100.0
72.6
27.4
20.9
6.5
1.4

3,739
360
50
255
–
54
809
49
594
84
17
–
–
62
3,289
1,684
114
1,720

0.8

143

10,960

1,375

19

9,696

10,817143

10,9601,375

19

15,310635,962

2,414

2,414

38,376

13

591
3,431
13

591
3,431

2,839
18,150

13
19

2,826
38,788

6.1
0.6

4,372
1,796
920
–
845
30
115
63
0
–
8
11
11
19
6,053
2,203
419
3,431

1.3

5.4
2.8
0.2
2.8

7.1
2.9

0.2

9.8
3.5
0.7
5.6

11,831

2,084

1,100

1,100
591
3,431

1,100
12,931

1,739
3,823

591
3,431
13
414

414

414

414
1,999

414
1,999

2,411
40,787kanamoto 2008

39

40

kanamoto 2008

kanamoto 200841

役員及びその近親者が議決権の過半数を自己の計算において所有している会社

役員及びその近親者が議決権の過半数を自己の計算において所有している会社

氏 名

カナモトキャピタル
株式会社

株式会社カナスチール

株式会社カナックス

有限会社
カナレンテム住 所

札幌市中央区

北海道室蘭市

北海道室蘭市

北海道室蘭市

資本金
又は
出資金
(千円)

52,00630,00010,000

5,000

事業の内容
又は職業

不動産賃貸業

鋼材の売買、修理、輸出入

鉄板敷板等の販売、修理、賃貸

鉄板敷板等の販売、
修理、
賃貸

議決権等の
所有
(被所有)
割合(%)

当社代表取締役社長
及びその近親者が85.25%を直接所有、
また2.79%が直接被所有

当社役員及びその近親者が100.00%を直接所有

当社役員及び
その近親者が100.00%を直接所有

当社役員及び
その近親者が100.00%を直接所有

2

1

1

1

役員の
関 兼任等(人)係
内容 事業上の
関係

土地の賃借

商品売買

土地の
賃借

副産物の
販売

商品売買

商品売買

取引の内容

営業所用地の
賃借

鋼材の売買

営業所用地
の賃借

鉄屑の
販売

鉄板敷板等の販売、修理、賃貸

鉄板敷板等の販売、
修理、
賃貸

取引金額
(千円)

1,200

2,686

2,126

69,608

17,106

科 目

販売費及び
一般管理費

支払手形及び
買掛金

支払手形及び
買掛金

期末残高
(千円)

−

36,177

6,018

属 性

子会社

氏 名

株式会社カンキ

住 所

神戸市須磨区

資本金
又は
出資金
(千円)

99,000

事業の内容
又は職業

建設機械の
レンタル・販売

議決権等の
所有
(被所有)
割合(%)

当社が87.74%を
直接所有

役員の
関 兼任等(人)係
内容 事業上の関係

42

役員及びその近親者が 役員及びその近親者が議決権の過半数を議決権の過半数を自己の計算において自己の計算において所有している会社
所有している会社

属 性

5

土地の賃借

取引の内容

営業所用地の
賃借

取引金額
(千円)

56,600

科 目

受取賃貸料

期末残高
(千円)

−

kanamoto 2008

415,042

60,594

受取手形 支払手形 販売費及び 営業外収益及び売掛金 及び買掛金 一般管理費 その他
2,643

31,549−−Financial Section
November 1, 2006 - October 31,2007

Report of Operating Results andFinancial Position for the 43rd
Business Period
Consolidated Financial PositionNon-consolidated Financial Position

Note 1
For purposes of this report, the Balance Sheets and Statements of Income
were created using financial data prepared according to Japan’s Securities
Report Guidelines.
Note 2
Kanamoto uses a variety of techniques when introducing rental assets. In
addition to purchasing assets by installments, the Company also uses financeleases (including operating leases), which are an off-balance sheet item (details
are provided in the notes to the accounting statements).
Accordingly, please refer to the balance sheets (description page 46, 57-58)
and the Supplemental Information (details of tangible fixed assets publishedon page 54-55, 61) concerning the amount of rental assets introduced in thefiscal year under review, and to the balance sheets (description page 46, 5758) and the note on finance leases (including operating leases) in the notes tothe balance sheets (description page 54-55, 61) concerning depreciation andamortization expense.

Comparison of straight-line methodand declining balance method
Scrap value(%)
100

Straight-line method
Declining balance method

80

60

40

20

0
1

2

3

4

5

6

7

Life

Kanamoto has adopted the declining balance method for depreciation andamortization expense. As shown, this results in a situation where paper gains
are easily produced if assets can be used over long periods of time because thedepreciation and amortization expense is large for the first year, then grows
smaller in later years. The difference in depreciation according to thedeclining balance method and the straight-line method is shown in the
diagram below.
Under Japan’s current accounting system, large variances between actual asset
values and book values can occur in asset value assessments. One reason is thefact durable lives are stipulated by the Tax Code. For assets handled by
Kanamoto in particular, implementing planned rental assets introductions
suitable to the size of its business and keeping balance sheet depreciation andamortization expense uniform are extremely difficult because the durable lives
established by law are different for each equipment model.
Accordingly, to achieve results more closely approximating the market-value
accounting concept, Kanamoto also introduces assets by utilizing both
operating leases and finance leases in an effort to equalize depreciation andamortization expense.

Report of Operating Results and Financial Position for the 43rd Business Period (November 1. 2006 - October 31, 2007)

Summary of consolidated fiscal year operating results
During the consolidated fiscal year under review, corporate earnings turnedin a remarkable recovery centered on major corporations and export-oriented
firms. Although Japan’s economy appeared to maintain its gradual expansion
when viewed based solely on macroeconomic indicators such as the increasein land values in major metropolitan areas, this growth did not extend to
most other regions. In addition to the subprime loan problem in the UnitedStates, which gradually worsened after June, other factors such as the sharp
jump in the price of crude oil, the appreciation of the yen and the weak
dollar put pressure on corporate earnings, casting a pall over economic
conditions as a whole. Personal consumption generally remained sluggish as
well, as firms held the line on wage levels and the cost of living rose under
the influence of the sudden rise in oil prices.
On the other hand construction demand, which is related to the main
business of the Kanamoto group, continued to suffer from difficult
conditions. Although demand was vigorous in and around major
metropolitan areas because of private sector capital investment, whichreflected the recovery in corporate operating results and rising land prices,conditions in the majority of Japan’s prefectures remained severe, because
the public and private sector demand that drives local economies remained
elusive. In particular, rental demand lacked its typical upsurge after August, achange that originated in factors such as the ongoing reduction in public
works in regional areas and the postponement of work ordering periods.
Even the number of new private residences being built, which had been the
one segment to maintain a steady pace, fell because of a real decline inpersonal income and higher raw material prices. New housing starts also
experienced substantial delays as more time was required for approvals of
applications for building confirmation in conjunction with implementationof the revised Building Standard Law.
Given the above, the Company continued to confront a management
environment that was less than ideal. Nevertheless, by concentrating on
uncovering new demand, the Kanamoto group achieved steady growth inrental revenues, Furthermore, equipment sales in the construction
equipment business exceeded the Company’s initial plan, as the quantity ofused construction equipment sold soared because of a worldwide
construction equipment shortage. As a result, operating results on the whole
improved compared with results of the previous consolidated fiscal year.
From an earnings perspective, operating income, ordinary income and net
income all exceeded Kanamoto’s initial projection and the actual results forthe previous consolidated fiscal year, as the Company steadily realized theeffects of measures to improve the operating efficiency of rental equipment
assets and lessen the depreciation burden, as outlined in the Company’s
long-term management plan, and successfully managed the collaboration
among the entire Kanamoto group.
As a result, revenues for the consolidated fiscal year ended October 31, 2007
edged upward 0.9% from the previous consolidated fiscal year level to¥68,626 million, operating income rose 4.1% year-on-year to ¥4,236
million and ordinary income increased 16.6% compared with the previous
consolidated fiscal year to ¥4,416 million. Because the Company accounted
for the gain from reversal of accrued employees retirement benefits of ¥845
million in conjunction with a revision to Kanamoto’s pension system as
extraordinary profits on the non-consolidated and consolidated statements ofincome, net income increased 74.2% from the previous consolidated fiscal
year to ¥3,035 million.
A summary of operating results for each of the Company’s businesses, andbusiness development issues deserving special mention, are described below.

Businesses related to the Construction Equipment Rental
DivisionIn the construction-related businesses of the entire Kanamoto group,
revenues and earnings were both higher. For the consolidated fiscal year
under review, consolidated revenues increased 3.2% from the previous
consolidated fiscal year to ¥63,072 million, and operating income rose 6.4%
year-on-year to ¥4,054 million.

––Kanamoto Co., Ltd. on a non-consolidated basis
In addition to devoting maximum efforts to ensuring it did not lose any
opportunities to support construction projects in the engineering works
sector where it excels, Kanamoto sought to offset the decline in public works
through efforts to develop new customers. This included aggressive sales
efforts to secure private sector construction demand. As a result, during thesecond half of the fiscal year the Company ensured growth compared withthe same period of the previous fiscal year, despite the presence of negative
factors such as the sudden rise in the price of crude oil and delays forapprovals of applications for building confirmation in conjunction with
implementation of the revised Building Standard Law.
By region, non-consolidated construction equipment rental net revenues
increased 3.8% compared with the previous fiscal year in the Hokkaido
Region, where the Company was successful in marketing to private sector
demand, and rose 1.2% year-on-year in the Tohoku Region, an area where
the Company achieved large increases in market share until the previous
fiscal year. In the Kanto & Shinetsu Region, net revenues fell 1.1% from the44

kanamoto 2008

level of the previous fiscal year because construction work scheduled to begin
on a large project was significantly delayed. In the Kinki & Chubu Region,
net revenues grew 6.2% year-on-year as sales in both the Tokai district andKansai exceeded the prior year levels during the latter half of the fiscal year.
As a result, non-consolidated rental revenues for Kanamoto’s Construction
Equipment Rental Division rose 1.9% from the previous fiscal year to¥42,234 million. The percentage of revenues accounted for by Hokkaido
and by Honshu and other regions was 35.7% and 64.3%, respectively.
In addition, non-consolidated revenues from sales were including the resultsfrom the Company’s “Customer Thanks Fair” equipment exhibition andsale, while used construction equipment sales jumped 22.3% year-on-year asa result of vigorous overseas demand. Total non-consolidated net sales for
the Construction Equipment Rental Division increased 11.2% from theprevious fiscal year, to ¥13,788 million. As a result, total operating revenues
for the Construction Equipment Rental Division were ¥56,022 million,
4.1% higher than in the previous fiscal year.
During the consolidated fiscal year under review, Kanamoto established six
new branches and closed one branch. As a result, at the end of the businessperiod Kanamoto had 152 branches.
Newly opened branches: Chiba Shinminato Branch (Chiba City, Mihama
Ward), Higashidori Branch (Higashidori, Shimokita-gun, Aomori
Prefecture), Hiroshima Branch (Hiroshima, Asaminami Ward), Kanazawa
Branch (Kanazawa City, Ishikawa Prefecture), Itoigawa Branch (Itoigawa
City, Niigata Prefecture), Asahikawa Ichijo-dori Higashi Branch (Asahikawa
City, Hokkaido)
Branch closed: Ojiya Branch (Ojiya City, Niigata Prefecture)––Consolidated subsidiaries
Daiichi Machine Industries Co., Ltd. increased revenues 5.4% comparedwith the previous consolidated fiscal year. Although the company’s
construction equipment rentals were sluggish following completion of thefirst phase of disaster relief work, sales of items such as used modular housing
units remained strong. Operating income fell 53.7% from the previous
consolidated fiscal year because of the capital investment burden related tothe opening of a new branch.
SRG Kanamoto Co., Ltd. enjoyed robust demand for temporary scaffolding
for construction of condominiums in the Sapporo area and for maintenancework. Revenues expanded 17.5% from the previous consolidated fiscal year.
Although this company projected positive operating income for the year,
higher operating expenses resulted in a loss of ¥12 million. Nevertheless, thiswas an improvement of ¥4 million compared with the previous consolidated
fiscal year.
With the success of new business activities it initiated during theconsolidated fiscal year under review, Assist Co., Ltd. absorbed the increased
burden caused by rental asset purchases and boosted revenues 4.2% over theprevious consolidated fiscal year. Operating income increased 13.0% yearon-year.
At Kanki Corporation, which is restructuring its management, revenues were7.0% lower than in the previous consolidated fiscal year. Although thecompany zealously focused management resources on securing construction
equipment rental demand in Hyogo Prefecture, where sales have been slow,
this failed to compensate for the decline in the subcontracting division,
where the volume of work has been shrinking. The company posted an
operating loss, reflecting the cost burden from greatly enhancing its rental
equipment assets and establishing a new branch.
Kanatech Co., Ltd. posted a 3.0% drop in revenues compared with theprevious consolidated fiscal year and 30.0% decline year-on-year inoperating income, as a result of changing its accounting method during theconsolidated fiscal year under review for the stocking of raw materials forcooperating manufacturing firms.

Businesses related to the Steel Sales Division
Despite strong demand in Hokkaido for steel frame materials for private
sector construction as well as steel for telecommunications towers, demand
softened after April. Factors included the implementation of new height
limits on buildings in Sapporo (height restricted districts), a slowdown incondominium construction and lower revenues from work to heatproof,
weatherproof and waterproof roofing. As a result, revenues slipped 21.0%
compared with the previous consolidated fiscal year to ¥5,120 million, andthe division posted an operating loss of ¥10 million.

Business related to the Information Products Division andOther Businesses
Rental revenues for the Information Products Division grew 5.7% comparedwith the previous consolidated fiscal year, reflecting aggressive efforts todevelop new products and meet short-term spot demand and the absorptionof price declines on hardware. On the other hand, despite steady sales ofused devices, sales of new products declined 40.5% from the level of theprevious consolidated fiscal year because the division could not respond toremarkable price cutting for new products. Revenues for the entire divisionslipped 0.4% year-on-year to ¥434 million, and operating income increased
1.7% from the previous consolidated fiscal year to ¥31 million.

Fiscal Year ended October 31, 2007 Consolidated Operating Results(Million yen; % change from prior year)

Consolidated Fiscal Year Under Review
Prior Consolidated Fiscal Year

Revenues
68,62663,024

0.9
6.3

Operating Income
4,236
4.1
4,069 189.7

Medium to long-term corporate management strategies
Kanamoto’s long-range management plan “Metamorphose”(November 2003
through October 2008) enabled the Company to achieve appropriate
operating results, and at the same time clarified the issues confronting
Kanamoto, including the fact the Company did not progress as far asplanned in its branch development and hiring of human resources in theTokyo metropolitan area.
With regard to its new long-term management plan beginning in November
2008, the Company is now finalizing the measures it will pursue. Kanamoto
will continue addressing the various problems it has identified as quickly as
possible, and seek to promote a group management strategy that enables eachcompany in the Kanamoto group to practice earnings-focused management
and creates a corporate group capable of further improving operating
performance and earning a positive evaluation from the market.

Enhance the earnings-focused rental equipment asset
portfolio (asset optimization strategy)

Ordinary Income
4,416
3,788

16.6
144.4

Net Income
3,035
1,743

Net Income per Shareof Common Stock

74.2
394.2

¥ 92.40¥ 57.41smooth start centered on the construction equipment rental business. In the
future this firm will focus on meeting local needs, developing proactive sales
and building a solid foundation for its business. On the other hand, as usedequipment is exported through buyers to countries around the world,
Kanamoto’s used construction equipment sales are gradually increasing the
reputation of Kanamoto in various countries, and Kanamoto will continue
its efforts to increase such used equipment sales.

Develop new rental products and new businesses
The New Products Office, which has the objective of uncovering new rental
products that meet customers’ needs, has achieved steady results withproducts such as equipment for the event rental business. Kanamoto willcontinue its efforts to provide side support to the sales departments in the
future.

Outlook for the next consolidated fiscal year

Together with continuing to optimize asset management periods by
replacing rental assets with the latest emissions-controlled models andlengthening rental periods, the Company will seek to increase the accuracy of
its optimal asset portfolio and increase profit margins through measures suchas strengthening its emphasis on equipment boasting high returns.

Expand base network in the Tokyo metropolitan area andadvance into regions where the Company does not yet havebranches
The Company has put its priority on establishing new branches in the Tokyo
metropolitan area and regions surrounding other large cities. Furthermore, in
its approach to areas where it does not have branches, the Kanamoto group isaggressively promoting more rapid expansion of its business area throughM&A and alliances, while taking into consideration local conditions inmarkets where it will expand, rather than simply establishing new branches.
The Kanamoto group has positioned M&A as one growth engine for the
future.

Strengthen activities in the Regional Special Procurement
Sales Division
The Regional Special Procurement Sales Division, which is responsible foropportunities such as large-scale projects, pursues business cooperation that
extends across regions and individual firms, and this approach has graduallytaken root and generated positive results. In many cases this is linked tolong-term, large-scale rentals for work such as the ground improvement
MITS technique, the SDI technique for large-scale concrete structure
maintenance, and repair works in cooperation with Flowtechno
Corporation, a member of the Kanamoto group, and to unusual equipment
utilized for major projects. Because these activities make a considerable
contribution to revenues and earnings, the Company will strengthen theactivities of this division in the future.

Build a powerful marketing organization and alliance groupwhere customers are always Number One
While Kanamoto has continued to gradually increase the number ofagreements with various local governments for responding to urgent requests
following a disaster, the Company seeks to be a firm that is strongly rooted
in its local communities from many aspects, not merely throughcountermeasures against natural disasters. The Company is building acommunity-based sales and marketing organization that can increase
synergistic effects and take maximum advantage of corporate scale, not only
for Kanamoto but for customer firms and local governments as well, throughcooperation with Kanamoto group companies and alliance firms that cover
Japan from Hokkaido to Okinawa.

Pursue overseas development
Shanghai Jinheyuan Equipment Rental Co., Ltd., an affiliated company
established in February 2007 through a joint venture with a Chinese firm
and the first overseas expansion of the Kanamoto group, has achieved aAs tremors from the subprime loan problem in the United States spread, andthe global flow of money functioned less efficiently, a shadow continued tofall across the real economy, as evidenced by reactions such as the drop in
stock prices in Japan. In addition, higher raw material prices, led by the
sharp climb in crude oil prices and supported by the strong yen-weak dollar
trend, have begun putting pressure on manufacturing earnings, and the costof goods connected directly with people's daily lives, including fuel and foodproducts, are gradually pushing upward and putting a damper on personal
consumption. In Japan, issues of particular concern are the growing
economic disparity between major metropolitan areas and other regions, andthe deteriorating management environment surrounding small and mediumsized firms.
Turning to the main businesses of the Kanamoto group, as long as thecurrent central and local government policies are continued, the downward
trend in local public works discussed earlier can be expected to continue into
the next fiscal year in response to the weakness of local economies. In
addition, delays in construction starts of properties can be noted in many
instances because of strict application of the revised Building Standard Law,
which encompasses revised anti-earthquake regulations. Although morenormal conditions appear set to return in the near future because the
Ministry of Land, Infrastructure and Transport has eased regulations
somewhat, this situation is expected to have a significant impact on
construction equipment rental businesses, which has one foot firmly placedin the construction sector. For Kanamoto, the affect is expected to be limited
because a large proportion of the Company’s business is related to civilengineering works.
With regard to used construction equipment sales, on the other hand, used
construction equipment demand is vigorous worldwide despite concerns
about a slump in construction equipment demand in the U.S. because of thesubprime loan problem. The affect of the U.S. demand trend on used
construction equipment that Kanamoto in particular sells is believed to beminimal under current conditions, because Kanamoto mainly ships usedequipment to China, Southeast Asia and the Middle East.
While the decrease in the amount of domestic construction investment is anegative factor for the construction equipment rental business that is
Kanamoto's main business, to some extent this is offset by the accelerating
dependence on rentals for equipment used at construction sites as theconstruction industry continues its efforts to rationalize. Furthermore, for
Kanamoto there still are regions within Japan where the Company has yet toopen branches and develop its business. There remains substantial room toadvance into the Tokyo metropolitan area in particular, the market where
the greatest domestic demand is anticipated. In addition there is room tosubstantially increase earnings, including new support for large-scale projects
that involve ground improvement works, for example, which enable
Kanamoto to take maximum advantage of its size, as well as the event rental
sector that Kanamoto is gradually expanding. The Company will strive todevelop these businesses in close cooperation with each affiliated company.
In addition, Shanghai Jinheyuan Equipment Rental Co., Ltd., which opened
for business in Shanghai, China, is off to a good start. In conjunction withKanamoto’s strong used construction equipment sales, the Company willseek to achieve robust expansion of its overseas operations.

Projected Consolidated Oprating Result for the Fiscal Year ending October 31, 2008
(Million yen)Interim period
Full year

Revenues

Operating Income

Ordinary Income

Net Income

Net Income per Shareof Common Stock

37,50071,900

3,400
4,600

3,300
4,400

1,800
2,300

¥ 54.80¥ 70.02

kanamoto 200845

Consolidated Balance Sheets

ASSETS
Thousands of U.S.
dollars (Note 1)

Millions of yen
As of October 31, 2007 and 2006

Current assets :Cash and cash equivalents
Notes and accounts receivable, trade
Inventories
Deferred income taxes (Note 9)
Other current assets
Less : Allowance for doubtful accounts
Total current assets
Property and equipment :Rental equipment
Building and structures
Machinery and equipment
Less : Accumulated depreciation
Land
Construction in progress
Total property and equipment
Investments and other assets :Investment securities-Unconsolidated subsidiaries and affiliates (Note 3)-Others (Note 3)
Deferred income taxes (Note 9)
Other assets
Less : Allowance for doubtful accounts
Total investments and other assets
Total assets(Note)* For details of Current assets : Deferred income taxes, please refer to page 55 (Note 9).
* For details of Unconsolidated subsidiaries and affiliates, please refer to page 51 (Note 3).
* For details of Others, please refer to page 51 (Note 3).
* For details of Investments and other assets : Deferred income taxes, please refer to page 55 (Note 9).

46

kanamoto 2008

2006

2007

2007

¥ 18,398)
14,959)560)
392)
1,946)(523)
35,732)¥ 17,214)
14,239)534)
360)
1,468)(489)
33,326)$ 149,973)
124,056)
4,649)
3,141)
12,789)(4,259)290,349)

37,784)
16,562)5,450)(42,825)
16,971)
25,906)247)
43,124)37,567)
17,152)5,531)(43,066)
17,184)26,268)46)
43,498)327,297)
149,433)
48,187)(375,206)
149,711)
228,858)402)
378,971)55)
6,169)–)
2,411)(675)
7,960)¥ 86,816)

1,308)
5,302)–)
2,483)(762)
8,331)¥ 85,155)

11,394)
46,196)–)
21,637)(6,643)72,584)$ 741,904)

LIABILITIES AND SHAREHOLDERS’ EQUITY
Thousands of U.S.
dollars (Note 1)

Millions of yen
As of October 31, 2007 and 2006

2006

2007

2007

Current liabilities :Short-term bank loans (Note 4)
Current portion of long-term debt (Note 4)
Notes and accounts payable, trade
Accrued income taxes
Accrued bonuses
Other current liabilities
Total current liabilities¥ 498)
11,574)
12,419)1,365)
512)
2,203)
28,571)¥ 330)
10,464)
11,292)
1,449)
553)
1,498)
25,586)$ 2,875)
91,165)98,385)
12,628)4,817)
13,050)222,920)

Non-current liabilities :Long-term debt (Note 4)
Accrued pension and severance costs (Note 5)
Other liabilities (Note 9)
Total non-current liabilities

17,618)
1,682)
893)
20,193)

17,950)936)
709)
19,595)

156,385)
8,155)
6,182)
170,722)

9,697)
10,960)14,890)(6)
2,419)
92)
38,052)¥ 86,816)

9,697)
10,960)17,334)(19)
2,002)–)
39,974)¥ 85,155)

84,481)
95,495)151,016)(172)
17,442)–)
348,262)$ 741,904)

Contingent liabilities (Note 6)
Shareholders’ equity :Common stock :Authorized – 66,000,000 shares
Issued – 32,872,241 shares (2007/2006)
Capital surplus
Retained earnings
Treasury stock
Unrealized holding gain on securities (Note 3)
Minority interests
Total shareholders’ equity
Total liabilities and shareholders’ equity(Note)* For details of Short-term bank loans, please refer to page 53 (Note 4).
* For details of Current portion of long term debt, please refer to page 53 (Note 4).
* For details of Long-term debt, please refer to page 53 (Note 4).
* For details of Accrued pension and severance costs, please refer to page 53 (Note 5).
* For details of Other liabilities, please refer to page 55 (Note 9).
* For details of Contingent liabilities, please refer to page 54 (Note 6).
* For details of Unrealized holding gain on securities, please refer to page 51 (Note 3).

kanamoto 200847

Consolidated Statements of Income

Thousands of U.S.
dollars (Note 1)

Millions of yen
Years Ended October 31, 2007 and 2006

Revenue
Rentals
Sales
Cost of sales
Rentals
Sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses) :Interest and dividend income
Interest expenses
Impairment loss (Note 7)
Others, net
Income before income taxes and minority interests
Income taxes (Note 9) :Current
Deferred
Minority interests in subsidiaries
Net income

2006

2007

2007

¥ 46,059)
21,965)68,024)¥ 46,739)
21,888)68,627)$ 407,206)
190,694)
597,900)

32,697)
17,048)49,745)
18,279)14,210)4,069)

33,260)
16,230)49,490)19,137)
14,900)4,237)

289,774)
141,403)431,177)
166,723)
129,813)36,910)

43)
(358)
(595)
295)
3,454)

96)
(338)
(1)
1,774)
5,768)

841)(2,945)(8)
15,454)50,252)

1,768)(78)
1,690)
21)¥ 1,743)2,287)
410)
2,697)
36)¥ 3,035)

19,923)3,574)
23,497)309)$ 26,446)

Yen
Years Ended October 31, 2007 and 2006

Per share of common stock :Net income
Basic
DilutedCash dividends applicable to the year

(Note)* For details of Impairment loss, please refer to page 54 (Note 7).
* For details of Income taxes, please refer to page 55 (Note 9).

48

kanamoto 2008

U.S. dollars (Note 1)

2006

2007

2007

¥ 57.41–
18.00¥ 92.40–
20.00$ 0.81–
0.17

Consolidated Statements of Cash Flows

Thousands of U.S.
dollars (Note 1)

Millions of yen
2006

2007

2007

¥ 3,454)¥ 5,768)$ 50,252)

4,793)
595)
52)
–)
(25)
(503)
156)
(43)
400)
(630)
(21)
1,581)(80)
9,729)
43)
(400)
(958)
8,414)

4,649)
1)
68)
11)
(288)
53)
100)
(96)
381)
720)
(28)
(1,127)(3,242)
6,970)
90)(377)(2,203)
4,480)

40,501)8)594)
96)(2,505)
460)
868)
(841)
3,322)
6,275)(242)(9,816)(28,249)
60,723)788)(3,288)(19,192)
39,031)

Cash flows from investing activities :Payments for purchase of investment securities
Proceeds from sales of investment securities
Payments for purchase of property and equipment
Other
Net used in investing activities(466)
1,353)(2,248)
872)
(489)

(124)
528)
(2,059)228)(1,427)(1,078)4,597)(17,942)
1,990)(12,433)

Cash flows from financing activities :Increase (decrease) in short-term bank loans, net
Proceeds from long-term debt
Repayments of long-term debt
Repayments of lease obligations
Proceeds from issuance of new stock
Cash dividends paid
Other
Net cash used in financing activities(80)
8,200)(11,453)(2,272)
2,182)(537)
324)(3,636)(168)
9,550)(10,968)(2,047)
–)
(591)
(13)
(4,237)(1,461)
83,203)(95,553)(17,836)–)(5,153)(117)(36,917)

Net increase (decrease) in cash and cash equivalents

4,289)(1,184)(10,319)

Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

14,109)¥ 18,398)

18,398)¥ 17,214)

160,292)$ 149,973)

Years Ended October 31, 2007 and 2006

Cash flows from operating activities :Net income before income taxes and minority interests
Adjustments for :Depreciation expenses
Impairment loss
Loss on disposal or sales of property and equipment
Write-down of investments in securities
Gain on sales of investments in securities
Provision (reversal of provision) for allowance for doubtful accounts
Provision (reversal of provision) for accrued pension and severance costs
Interest and dividend income
Interest expenses
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Other
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

kanamoto 200849

Consolidated Statements of Shareholders’ Equity

Millions of yen

Years Ended October 31, 2007 and 2006

Balance at October 31, 2005
Issuance of new stock
Net income
Cash dividends
Bonuses to directors and auditors
Other
Balance at October 31, 2006
Net income
Cash dividends
Other
Balance at October 31, 2007

Thousands ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Unrealized
holding gain
on securities

30,253
2,619¥ 8,597
1,100¥ 9,720
1,097¥ 13,691)¥ 1,643)

1,743)(537)(7)
32,872

9,697

143
10,96032,872¥ 9,697¥ 10,960

14,890)3,035)(591)¥ 17,334)

776)
2,419)(417)¥ 2,002)

Thousands of U.S. dollars (Note 1)

Year Ended October 31, 2007

Balance at October 31, 2006
Net income
Cash dividends
Other
Balance at October 31, 200750

kanamoto 2008

Commonstock

CapitalsurplusRetainedearnings$ 84,481$ 95,495$ 129,723)
26,446)(5,153)$ 84,481$ 95,495$ 151,016)

Unrealized
holding gain
on securities$ 21,072)(3,630)$ 17,442)

Notes To Consolidated Financial Statements

1. Basis of presenting of consolidated financial statements
The consolidated financial statements have been prepared from the accounts maintained by Kanamoto Co., Ltd. (the “Company”) and its consolidated
subsidiaries in accordance with the provisions set forth in the Company Law of Japan and the Financial Products Exchange Law of Japan and in conformity
with accounting principles and practices generally accepted in Japan, which may differ in some material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.
The notes to the consolidated financial statements include information which is not required under accounting principles generally accepted in Japan but ispresented herein as additional information.
In order to facilitate the understanding of readers outside Japan, certain reclassifications are given to the consolidated financial statements prepared for domestic
purposes.
Translations of Japanese yen amounts into U.S. dollars are included solely for the convenience of the reader, using the approximate exchange rate on October
31, 2007, which was ¥114.78 to US$1.00. These translations should not be construed as representations that the Japanese yen amounts have been, or could
have been, or could in the future be converted into U.S. dollars at this or any other rate of exchange.

2. Summary of significant accounting policies(a) Consolidation principles
The consolidated financial statements include the accounts of the Company and significant companies which the Company controls through majority
voting right or existence of certain conditions. All significant inter-company transactions and accounts are eliminated.
Investments in unconsolidated subsidiaries and affiliates of which the Company has the ability to excise significant influence over operating and financial
policies are stated at cost and equity method is not applied for the valuation of such investments since they are considered immaterial in the aggregate.
(b) Cash and cash equivalents
For the purpose of statements of cash flows, cash and cash equivalents comprise cash in hand, deposits held at call with banks and all highly liquid
investments with maturities of three months or less.
(c) Securities
Securities except for investments in unconsolidated subsidiaries and affiliates are classified as trading securities, held-to-maturity securities or other securities.
Trading securities are carried at fair value. Held-to-maturity securities are carried at amortized cost. Marketable securities classified as other securities arecarried at fair value with unrealized gains and losses reported in a separate component of shareholders’ equity, net of taxes. Non-marketable securities
classified as other securities are carried at cost. Cost of securities sold is determined by the moving average method.
(d) Inventories
Inventories are stated principally at the lower of cost or market, cost being determined principally by the last-in, first-out method.
(e) Property and equipment
Property and equipment are stated at cost. Depreciation is mainly computed at rates based on the estimated useful lives of assets on the declining-balancemethod.
The principal estimated useful lives range from 5 to 10 years for rental equipment and from 10 to 34 years for building and structures.
(f) Accrued pension and severance costs
To provide for employees’ severance indemnities and pension payments, net periodic pension and severance costs are computed based on the projected
benefit obligation and the pension plan assets.
The actuarial assumption adjustment is to be amortized by the straight-line method beginning the following fiscal year over a period of 10 years, which isless than the average remaining years of service of the active participations in the plans.
See Note 5 for the method of the accounting for the separation of the substitutional portion of the benefit obligation from the corporate portion of thebenefit obligation under Welfare Pension Fund Plan.
(g) Leases
All leases are accounted for as operating leases. Under Japanese accounting standards for leases, finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, while other finance leases are permitted to be accounted for as operating lease transactions if certain “as if
capitalized” information is disclosed in the notes to the lessee’s financial statements.
(h) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred taxes and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in incomein the period that includes the enactment date.
(i) Earnings per share
Basic Earnings per Share (“EPS”) is computed based on the average number of shares of common stock outstanding for the period. Diluted EPS assumes
that outstanding convertible bonds were converted into common stock at the beginning of the period at the current conversion price.
(j) Appropriation of retained earnings
Under the Company Law of Japan, the appropriation of retained earnings with respect to a financial period is made by resolution of the shareholders at a
general meeting held subsequent to the close of the financial period and the accounts for that period do not, therefore, reflect such appropriations.
(k)Reclassification of accounts
Certain of the 2006 accounts have been reclassified to confirm with the 2007 financial statement presentation.

3. Short-term investments and investments securities
At October 31, 2007, the Company and its consolidated subsidiaries did not possess any securities classified as trading securities or held-to-maturity securities.
Securities classified as other securities are included in “short-term investments” and “investments securities-others” in the consolidated balance sheets.
a) The components of unrealized gain or loss on marketable securities classified as other securities at October 31, 2007 were as follows:
Millions of yen
October 31, 2007

Unrealized gain:
Stock
Other
Unrealized loss:
Stock
Other
Total

Acquisition
costs

Carrying value

Unrealized gain
(loss)¥ 1,527–
1,527¥ 4,909–4,909¥ 3,382)–)
3,382)

39
103
142¥ 1,66935
87
122¥ 5,031

(4)
(16)
(20)
¥ 3,362)

kanamoto 200851

Notes To Consolidated Financial Statements

Thousands of U.S. dollars
October 31, 2007

Unrealized gain:
Stock
Other
Unrealized loss:
Stock
Other
Total

Acquisition
costs

Carrying value

Unrealized gain
(loss)$ 13,304–
13,304$ 42,767–
42,767$ 29,463)–)
29,463)

342
897
1,239
$ 14,543

306
760
1,066
$ 43,833

(36)
(137)
(173)
$ 29,290)

The components of unrealized gain or loss on marketable securities classified as other securities at October 31, 2006 were as follows:
Millions of yen
October 31, 2006

Unrealized gain:
Stock
Other
Unrealized loss:
Stock
Other
Total

Acquisition
costs

Carrying value

Unrealized gain
(loss)¥ 1,55115
1,566¥ 5,64115
5,656¥ 4,090)–)
4,090)

81
146
227¥ 1,79374
123
197¥ 5,853

(7)
(23)
(30)
¥ 4,060)

Non-marketable securities classified as other securities at October 31, 2007 and 2006 amounted to ¥271 million ($2,363 thousand) and ¥315 million
respectively.
b) Sales of securities classified as other securities with aggregate gain and loss are summarized as follows:
Millions of yen

Sales proceeds
Aggregate gain
Aggregate loss

Thousands of
U.S. dollars

October 31,
2007

October 31,
2006

October 31,
2007

¥ 524
288
–

¥ 1,325
25–$ 4,5632,505–c) The redemption schedule for bonds with maturity dates at October 31, 2007 was summarized as follows:
Millions of yen

October 31, 2007

Corporate bonds
Other
Total

Due in one year
or less

Due after one
year throughfive years

Due after five
years throughten years

Due after ten
years

¥–
–
¥–

¥–
–
¥–

¥–
–
¥–

¥–
87
¥ 87

Due in one year
or less

Due after one
year throughfive years

Due after five
years throughten years

Due after ten
years

$–
–
$–

$–
–
$–

$–
–
$–

$–
760
$ 760

Thousands of U.S. dollars

October 31, 2007

Corporate bonds
Other
Total

The redemption schedule for bonds with maturity dates at October 31, 2006 was summarized as follows:
Millions of yen

October 31, 2006

Corporate bonds
Other
Total

52

kanamoto 2008

Due in one year
or less

Due after one
year throughfive years

Due after five
years throughten years

Due after ten
years

¥–
–
¥–

¥–
–
¥–

¥ 15
–
¥ 15

¥–
83
¥ 83

4. Short-term bank loans and long-term debt
The annual average interest rates applicable to short-term bank loans outstanding at October 31, 2007 and 2006 were 1.85% and 1.34%, respectively.
Thousands of
U.S. dollars

Millions of yen
Long-term debt at October 31, 2007 and 2006 consisted of the following:

2006

2007

2007

Loans from banks and insurance companies, maturing
through 2014:
SecuredUnsecured
Obligations under installment purchases, maturing
through 2012 :¥–
26,109¥–24,691$–
215,117

3,083
29,192
11,574¥ 17,618

3,723
28,414
10,464¥ 17,950

32,433
247,550
91,165$156,385

Millions of yen

Thousands of
U.S. dollars¥ 10,464
7,839
5,576
3,158
1,377
¥ 28,414$ 91,165
68,297
48,57827,511
11,999$ 247,550

Less current portion

Aggregate annual maturities of long-term debt subsequent to October 31, 2007 are as follows:Year ending October 31

2008
2009
2010
2011
2012 and thereafter

5. Accrued pension and severance costs
The Company and certain consolidated subsidiaries have established a defined-benefit pension system (cash balance system) and defined contribution pension
system. Other consolidated subsidiaries have adopted termination allowance plans. In addition, when an employee retires or leaves the Company, in some cases
the Company pays an additional retirement amount that is not covered by the reserve for accrued employees retirement benefit when using actuarial accounting
based on retirement benefit accounting.
In addition, during the consolidated accounting fiscal year under review two consolidated subsidiaries transferred their termination allowance plans to a defined
contribution corporate pension plan. There was no monetary affect (projected benefit obligation) from this change.
The projected benefit obligation and funded status including a portion of the governmental welfare program at October 31, 2007 and 2006 were as follows:
Millions of yen

Projected benefit obligation
Plan assets
Unrecognized actuarial assumption adjustment
Accrued pension and severance costs

Thousands of
U.S. dollars

2006

2007

2007

¥ (4,702)
3,136)(116)¥ (1,682)¥ (4,206)
3,278)(8)¥ (936)$ (36,642)
28,557)(70)$ (8,155)

In computing projected benefit obligation, several simplified methods are permitted to small companies, and certain subsidiaries have adopted such methods.
The components of net periodic pension and severance costs for the years ended October 31, 2007 and 2006 were as follows:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial losses
Sub total
Net periodic pension and severance costs

Thousands of
U.S. dollars

2006

2007

2007

¥ 320
84)
(114)
–)
15)
305)
¥ 305)¥ 306)
83)
(122)
(845)
17)
(561)
¥ (561)$ 2,668)727)(1,067)(7,365)145)(4,892)$ (4,892)

The assumptions used were as follows:
Discount rate
Expected rate of return on plan assets
Method of attributing benefit to periods of service
Amortization period for actuarial assumption adjustment

2.0%
4.0%
Straight-line basis
10 years

kanamoto 200853

Notes To Consolidated Financial Statements

6. Contingent liabilities
At October 31, 2007, the Company and its consolidated subsidiaries were contingently liable as follows:

Guarantees of loans
Trade notes discounted
Factoring of trade notes with recourse

Millions of yen/Thousands of
RMB

Thousands of
U.S. dollars
/RMB

2007

2007

¥ 123
RMB15,620
307
1,017

$ 1,073
RMB15,620
2,675
8,864

7. Impairment loss
During this fiscal year the Kanamoto Group incurred an impairment loss on the following asset groups.
Location
Tomakomai City, Hokkaido

Use
Dormant assets

Asset
Land

Asset groupings used by the Kanamoto Group to apply asset impairment accounting are based on the block classified as the smallest segment for which
profitability can be determined regularly by business.
Specifically, dormant assets are grouped as units that generate independent cash flow.
For certain dormant assets for which the asset value was less than book value, the Company reduced book value to the recoverable value, and accounted for the
reduction as an impairment loss (¥1 million, $8 thousand) under other income (expenses). This amount was all for land.
The recoverable value for this asset group is measured according to net sales price, and the land is evaluated using the inheritance tax assessment value based on
the land tax assessment value or other amount as a base.

8. Leases
Lease payments under finance leases for the years ended October 31, 2007 and 2006 were ¥7,881 million ($68,660 thousand) and ¥6,472 million, respectively.
Pro forma information on leased property such as acquisition costs, accumulated depreciation, obligations under finance leases, depreciations expenses, interest
expenses on finance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended October 31, 2007
and 2006, was as follows:
Millions of yen
For the year ended October 31, 2007

Rentalequipment

Machinery andequipment

Acquisition costs
Accumulated depreciation
Net book value¥ 45,501
19,203¥ 26,298

¥ 255
192
¥ 63

Thousands of U.S. dollars
Total

Rentalequipment

Machinery andequipment

Total¥ 45,756
19,395¥ 26,361$ 396,420
167,300$ 229,120$ 2,226
1,674
$ 552

$ 398,646
168,974$ 229,672

Millions of yen

Thousands of
U.S. dollars¥ 7,485
18,551¥ 26,036$ 65,215
161,619$ 226,834

Obligations under finance leases:
Due within one year
Due after one year
Total

Millions of yen
For the year ended October 31, 2006

Rentalequipment

Machinery andequipment

Total

Acquisition costs
Accumulated depreciation
Net book value¥ 39,777
17,229¥ 22,548

¥ 313
194
¥ 119

¥ 40,090
17,423¥ 22,667

Millions of yen

Obligations under finance leases:
Due within one year
Due after one year
Total

54

kanamoto 2008

¥ 6,356
15,869¥ 22,225

Depreciation expenses and interest expenses, which are not reflected in the consolidated statements of income, computed by the straight-line method and theinterest method were ¥6,823 million ($59,442 thousand) and ¥745 million ($6,489 thousand), respectively, for the year ended October 31, 2007 and ¥5,913
million and ¥677 million, respectively, for the year ended October 31, 2006.
The minimum rental commitments under non-cancelable operating leases for the years ended October 31, 2007 and 2006 were as follows:

For the year ended October 31, 2007

Due within one year
Due after one year
Total

Millions of yen

Thousands of
U.S. dollars¥ 1,858
4,153¥ 6,011$ 16,185
36,189$ 52,374

Millions of yen

For the year ended October 31, 2006

¥ 2,151
5,381¥ 7,532

Due within one year
Due after one year
Total

9. Income taxes
The difference between the statutory tax rate and the effective tax rate for the years ended October 31, 2007 and 2006 was as follows:

Statutory tax rate
Effect of:
Net operating losses of subsidiaries
Expenses not deductible for tax purposes
Inhabitants tax per capital
Impairment loss
Goodwill amortization amount excluded from expenses
Other
Effective tax rate

2006

2007

40.4)%

40.4%

0.9)%
1.2)%
2.7)%
4.0)%
–)%
(0.3)%
48.9)%

1.1%
0.6%
1.6%
0.0%
2.3%
0.8%
46.8%

The significant components of deferred tax assets and liabilities at October 31, 2007 and 2006 were as follows:
Millions of yen

Thousands of
U.S. dollars

2006

2007

2007

Deferred tax assets:
Depreciation expenses
Impairment loss
Accrued bonuses for employees
Provisions for doubtful accounts
Accrued pension and severance costs
Net operating loss carry forwards
Others
Sub total
Less valuation allowance
Total deferred tax assets¥ 280)
240)
209)
207)
671)
1,348)
578)
3,533)(1,722)
1,811)¥ 268)
241)
223)
150)
377)
1,410)
555)
3,224)(1,823)1,401)$ 2,332)
2,096)
1,946)
1,308)
3,292)
12,283)
4,835)
28,092)(15,887)
12,205)

Deferred tax liabilities:
Net unrealized gain on securities
Net deferred tax assets

1,641)¥ 170)

1,358)¥ 43)

11,833)$ 372)¥ 392)(222)¥ 170)¥ 360)(317)¥ 43)$ 3,141)(2,769)$ 372)Net deferred tax assets were disclosed as follows:
Current assets
Non-current liabilities

kanamoto 200855

Notes To Consolidated Financial Statements

10. Supplemental cash flow information
Non-cash investing and financing activities for the years ended October 31, 2007 and 2006 were as follows:
Millions of yen

Non-cash investing and financing activities:
Additions to obligations under installment purchases

Thousands of
U.S. dollars

2006

2007

2007

¥ 2,005¥ 2,120$ 18,467

11. Segment information
Business segment information for the years ended October 31, 2007 and 2006 was as follows:
Millions of yen
Construction
relatedbusiness

Steel related
business

Information andcommunication
related andother business

Total

Eliminations
and corporate
items

Consolidated¥ 63,072–
63,07259,017¥ 4,055¥ 52,363
4,616
1
4,689

¥ 5,121)–)
5,121)
5,131)¥ (10)¥ 1,403)
3)
–)
22)

¥ 434
–
434
402
¥ 32
¥ 750
10
–
–

¥ 68,627–
68,62764,550¥ 4,077¥ 54,516
4,629
1
4,711

¥ –)
–)
–)
(160)
¥ 160)¥ 30,639)
20)–)
1,481)¥ 68,627–
68,62764,390¥ 4,237¥ 85,155
4,649
1
6,192

Construction
relatedbusiness

Steel related
business

Information andcommunication
related andother business

Total

Eliminations
and corporate
items

Consolidated$ 549,505–
549,505
514,179$ 35,326$ 456,199
40,2138
40,855$ 44,614)–)
44,614)44,700)$ (86)$ 12,227)
27)
–)
192)

$ 3,781
–
3,781
3,506
$ 275
$ 6,53888––$ 597,900–
597,900
562,385$ 35,515$ 474,964
40,328841,047$ –)–)–)(1,395)$ 1,395)$ 266,940)
173)–)
12,903)$ 597,900–
597,900
560,990$ 36,910$ 741,904
40,501
8
53,950For the year ended October 31, 2007

Sales
Outside customers
Intersegment
Total
Operating expenses
Operating profit
Identifiable assets
Depreciation
Impairment loss
Capital expenditures

Thousands of U.S. dollars

For the year ended October 31, 2007

Sales
Outside customers
Intersegment
Total
Operating expenses
Operating profit
Identifiable assets
Depreciation
Impairment loss
Capital expenditures

Millions of yen
Construction
relatedbusiness

Steel related
business

Information andcommunication
related andother business

Total

Eliminations
and corporate
items

Consolidated¥ 61,103–
61,10357,290¥ 3,813¥ 53,583
4,758
251
4,664

¥ 6,485
–
6,485
6,441
¥ 44
¥ 2,065
2
–
1

¥ 436
–
436
404
¥ 32
¥ 764
11
–
–

¥ 68,024–
68,02464,135¥ 3,889¥ 56,413
4,771
251
4,665

¥ –)
–)
–)
(180)
¥ 180)¥ 30,403)
22)
343)
735)

¥ 68,024–
68,024
63,955¥ 4,069¥ 86,816
4,793
595
5,400

For the year ended October 31, 2006

Sales
Outside customers
Intersegment
Total
Operating expenses
Operating profit
Identifiable assets
Depreciation
Impairment loss
Capital expenditures

12. Subsequent events
On January 29, 2008, the company’s shareholders approved the payment of a cash dividend of ¥11.00 ($0.10) per share to shareholders of record at October
31, 2007, or a total payment of ¥361 million ($3,148 thousand).

56

kanamoto 2008

Non-consolidated balance sheets

ASSETS
Thousands of U.S.
dollars (Note 1)

Millions of yen
As of October 31, 2007 and 2006

Current assets :Cash and time deposits
Notes receivable, trade
Accounts receivable, trade
Negotiable securities
Inventories
Deferred income taxes (Note 6)
Other current assets
Less : Allowance for doubtful accounts
Total current assets
Property and equipment :Rental equipment
Buildings
Structures
Machinery and equipment
Less : Accumulated depreciation
Land
Construction in progress
Total property and equipment
Investments and other assets :Investment securities-Subsidiaries and affiliates-Others
Deferred income taxes (Note 6)
Other assets
Less : Allowance for doubtful accounts and reserve for investments
Total investments and other assets
Total assets

2006

2007

2007

¥ 17,461)
2,877)
10,734)
–)
259)
385)
1,724)(456)
32,984)¥ 11,115)
2,256)
10,826)5,300)
227)
356)
1,246)(435)
30,891)$ 96,840)
19,653)
94,318)46,175)
1,984)
3,101)
10,856)(3,791)
269,136)

35,734)
11,763)
3,988)
5,210)(40,267)
16,428)25,634)247)
42,309)35,613)
12,166)4,167)
5,307)(40,541)
16,712)25,996)46)
42,754)

310,274)
105,993)
36,303)
46,238)(353,209)
145,599)
226,489)402)
372,490)1,029)
6,115)
51)
1,978)(951)
8,222)¥ 83,515)

2,650)
5,250)–)
2,354)(996)
9,258)¥ 82,903)

23,084)45,736)–)
20,506)(8,677)80,649)$ 722,275)(Note)* For details of Current assets : Deferred income taxes, please refer to page 62 (Note 6).
* For details of Investments and other assets : Deferred income taxes, please refer to page 62 (Note 6).

kanamoto 200857

Non-consolidated balance sheets

LIABILITIES AND SHAREHOLDERS’ EQUITY
Thousands of U.S.
dollars (Note 1)

Millions of yen
2006

2007

2007

Current liabilities :Current portion of long-term bank loans
Notes payable, trade
Accounts payable, trade
Notes payable, otherAccounts payable, otherAccrued income taxes
Accrued bonuses
Other current liabilities
Total current liabilities¥ 9,935)
8,247)
2,522)
340)
2,563)
1,292)
438)
898)
26,235)¥ 8,818)
7,660)
2,457)
175)
2,212)
1,406)
500)
531)
23,759)$ 76,825)
66,737)
21,402)
1,528)
19,267)
12,253)
4,351)
4,629)
206,992)

Non-current liabilities :Long-term bank loans
Long-term accounts payable, otherAccrued pension and severance costs
Other liabilities
Total non-current liabilities

15,120)2,030)
1,664)
90)
18,904)

14,926)2,353)
929)
148)
18,356)130,040)
20,502)
8,093)
1,291)
159,926)

9,697)
10,960)15,311)(6)
2,414)
38,376)¥ 83,515)

9,697)
10,960)18,150)(19)2,000)
40,788)¥ 82,903)

84,481)
95,494)
158,132)(172)
17,422)355,357)$ 722,275)

As of October 31, 2007 and 2006

Contingent liabilities (Note 3)
Shareholders’ equity :Common stock :Authorized – 66,000,000 shares
Issued – 32,872,241 shares (2007/2006)
Capital surplus
Retained earnings
Treasury stock
Unrealized holding gain on securities
Total shareholders’ equity
Total liabilities and shareholders’ equity(Note)* For details of Contingent liabilities, please refer to page 61 (Note 3)

58

kanamoto 2008

Non-consolidated statements of income

Thousands of U.S.
dollars (Note 1)

Millions of yen
Years ended October 31, 2007 and 2006

Revenue
Rentals
Sales
Cost of sales
Rentals
Sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses) :Interest and dividend income
Interest expenses
Impairment loss (Note 4)
Others, net
Income before income taxes
Income taxes (Note 6)
Current
Deferred
Net income

2006

2007

2007

¥ 41,813)
18,941)60,754)¥ 42,634)
18,943)
61,577)$ 371,439)
165,038)
536,477)

30,483)
14,422)
44,905)
15,849)12,133)
3,716)

30,953)
13,761)
44,714)
16,863)
12,850)4,013)

269,675)
119,886)
389,561)
146,916)
111,954)
34,962)

48)
(327)
(595)
448)
3,290)

103)
(313)
(1)
2,252)
6,054)

893)(2,723)(8)
19,619)52,743)

1,684)(114)
1,570)¥ 1,720)

2,204)
419)
2,623)¥ 3,431)

19,200)3,651)
22,851)$ 29,892)

Yen

Per share of common stock :Net income
Basic
DilutedCash dividends applicable to the year

U.S. dollars (Note 1)

2006

2007

2007

¥ 56.67–
18.00¥ 104.44–
20.00$ 0.91–
0.17(Note)* For details of Impairment loss, please refer to page 61 (Note 4).
* For details of Income taxes, please refer to page 62 (Note 6).

kanamoto 200859

Non-consolidated statements of shareholders’ equity

Millions of yen

Years ended October 31, 2007 and 2006

Balance at October 31, 2005
Issuance of new stock
Net income
Cash dividends
Bonuses to directors and auditors
Other
Balance at October 31, 2006
Net income
Cash dividends
Other
Balance at October 31, 2007

Thousands ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Unrealized
holding gain
on securities

30,253
2,619¥ 8,597
1,100¥ 9,720
1,097¥ 14,136)¥ 1,637)

1,720)(537)(7)
32,872

9,697

143
10,96032,872¥ 9,697¥ 10,960

15,311)
3,431)(592)¥ 18,150)

777)
2,414)(414)¥ 2,000)

Thousands of U.S. dollars (Note 1)

Year ended October 31, 2007

Balance at October 31, 2006
Net income
Cash dividends
Other
Balance at October 31, 200760

kanamoto 2008

Commonstock

CapitalsurplusRetainedearnings$ 84,481$ 95,494$ 133,392)
29,892)(5,152)$ 84,481$ 95,494$ 158,132)

Unrealized
holding gain
on securities$ 21,032)(3,610)$ 17,422)

Notes To Non-consolidated Financial Statements

1. Basis of presenting of non-consolidated financial statements
The non-consolidated financial statements have been prepared from the accounts maintained by Kanamoto Co., Ltd. (the “Company”) in accordance with theprovisions set forth in the Company Law of Japan and the Financial Products Exchange Law of Japan and in conformity with accounting principles andpractices generally accepted in Japan, which may differ in some material respects from accounting principles and practices generally accepted in countries andjurisdictions other than Japan.
The notes to the non-consolidated financial statements include information which is not required under accounting principles generally accepted in Japan but
is presented herein as additional information.
In order to facilitate the understanding of readers outside Japan, certain reclassifications are given to the non-consolidated financial statements prepared fordomestic purposes.
Translations of Japanese yen amounts into U.S. dollars are included solely for the convenience of the reader, using the approximate exchange rate on October
31, 2007, which was ¥114.78 to US$1.00. These translations should not be construed as representations that the Japanese yen amounts have been, or could
have been, or could in the future be converted into U.S. dollars at this or any other rate of exchange.

2. Summary of significant accounting policies
Basis of presentation
The non-consolidated financial statements are prepared on the basis of the same accounting policies as those discussed in Note 2 to the consolidated financial
statements except that investments in subsidiaries and affiliates are stated at cost.

3. Contingent liabilities

At October 31, 2007

Guarantees of loans
Factoring of trade notes with recourse

Millions of yen/Thousands of
RMB

Thousands of
U.S.dollars
/RMB

2007

2007

¥ 1,155
RMB15,620
1,017$ 10,064
RMB15,620
8,864

4. Impairment loss
During this fiscal year the Company incurred an impairment loss on the following asset groups.
Location
Tomakomai City, Hokkaido

Use
Dormant assets

Asset
Land

Asset groupings used by the Company to apply asset impairment accounting are based on the block classified as the smallest segment for which profitability canbe determined regularly by business.
Specifically, dormant assets are grouped as units that generate independent cash flow.
For certain dormant assets for which the asset value was less than book value, the Company reduced book value to the recoverable value, and accounted for the
reduction as an impairment loss (¥1 million, $8 thousand) under other income (expenses). This amount was all for land.
The recoverable value for this asset group is measured according to net sales price, and the land is evaluated using the inheritance tax assessment value based on
the land tax assessment value or other amount as a base.

5. Leases
Lease payments under finance leases for the years ended October 31, 2007 and 2006 were ¥7,058 million ($61,494 thousand) and ¥5,812 million, respectively.
Pro forma information on leased property such as acquisition costs, accumulated depreciation, obligations under finance leases, depreciations expenses, interest
expenses on finance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended October 31, 2007
and 2006, was as follows:
Millions of yen
For the year ended October 31, 2007

Rentalequipment

Machinery andequipment

Acquisition costs
Accumulated depreciation
Net book value¥ 40,639
17,674¥ 22,965

¥ 256
192
¥ 64

Thousands of U.S. dollars
Total

Rentalequipment

Machinery andequipment

Total¥ 40,895
17,866¥ 23,029$ 354,063
153,981$ 200,082$ 2,227
1,675
$ 552

$ 356,290
155,656$ 200,634

Millions of yen

Thousands of
U.S. dollars¥ 6,773
15,876¥ 22,649$ 59,010
138,318$ 197,328

Obligations under finance leases:
Due within one year
Due after one year
Total
Millions of yen
For the year ended October 31, 2006

Rentalequipment

Machinery andequipment

Total

Acquisition costs
Accumulated depreciation
Net book value¥ 36,236
16,178¥ 20,058

¥ 275
184
¥ 91

¥ 36,511
16,362¥ 20,149
Millions of yen

Obligations under finance leases:
Due within one year
Due after one year
Total

¥ 5,816
13,839¥ 19,655
kanamoto 200861

Notes To Non-consolidated Financial Statements

Depreciation expenses and interest expenses, which are not reflected in the non-consolidated statements of income, computed by the straight-line method andthe interest method were ¥6,087 million ($53,033 thousand) and ¥640 million ($5,581 thousand), respectively, for the year ended October 31, 2007 and¥5,344 million and ¥596 million, respectively, for the year ended October 31, 2006.
The minimum rental commitments under non-cancelable operating leases for the years ended October 31, 2007 and 2006 were as follows:

For the year ended October 31, 2007

Due within one year
Due after one year
Total

Millions of yen

Thousands of
U.S. dollars¥ 1,660
3,767¥ 5,427$ 14,467
32,816$ 47,283

Millions of yen

For the year ended October 31, 2006

Due within one year
Due after one year
Total

¥ 1,938
4,809¥ 6,747

6. Income taxes
The difference between the statutory tax rate and the effective tax rate for the years ended October 31, 2007 and 2006 was as follows:

Statutory tax rate
Inhabitants tax per capital
Expenses not deductible for tax purposes
Impairment loss
Other
Effective tax rate

2006

2007

40.4)%
2.7)%
1.0)%
4.2)%
(0.6)%
47.7)%

40.4%
1.4%
0.6%
0.0%
0.9%
43.3%

The significant components of deferred income tax assets and liabilities at October 31, 2007 and 2006 were as follows:
Millions of yen

Thousands of
U.S. dollars

2006

2007

2007

Deferred tax assets:
Depreciation expenses
Accrued bonuses for employees
Provisions for doubtful accounts
Accrued pension and severance costs
Impairment loss
OthersSubtotal-deferred tax assets
Valuation reserve
Total deferred tax assets¥ 275)
179)
186)
663)
240)
710)
2,253)(181)
2,072)¥ 261)
202)
125)
375)
240)
690)
1,893)(240)
1,653)$ 2,278)
1,758)
1,087)
3,270)
2,096)
6,006)
16,495)(2,096)
14,399)Deferred tax liabilities
Unrealized holding gain on securities
Net deferred tax assets

1,636)¥ 436)

1,356)¥ 297)

11,810)$ 2,589)

7. Subsequent events
On January 29, 2008, the company’s shareholders approved the payment of a cash dividend of ¥11.00 ($0.10) per share to shareholders of record at October
31, 2007, or a total payment of ¥361 million ($3,148 thousand).

62

kanamoto 2008

Audit Report

Report of the Independent Public Accountants

December 21, 2007

Kanamoto Co., Ltd.
Board of Directors
Shin Nihon & Co.
Representative and Partner Certified Public Accountant Junichi Morikawa
Representative and Partner Certified Public Accountant Mikio Shibaguchi
Representative and Partner Certified Public Accountant Kiyohiro Saito

We have audited the Consolidated Balance Sheet, Consolidated Statement of Income, Consolidated Statement of Changes in Net Assets and therelated consolidated schedules of Kanamoto Company, Ltd. for the consolidated accounting fiscal year, from November 1, 2006 through October
31, 2007, for the purpose of reporting under the provisions of Article 444 paragraph 4 of the Company Law. With respect to the aforementioned
Consolidated Statements and the supporting consolidated schedules, our audit was limited to the documented matters based on the accounting
records of the Company. Preparation of the consolidated financial statements and related consolidated schedules was the responsibility of the
management of Kanamoto Company, Ltd. Our responsibility as a Third-party Auditor was limited solely to independently issuing a statement of
opinion concerning the consolidated financial statements and related consolidated schedules based on our audits.
We conducted our audits in accordance with the auditing standards, procedures and practices generally applied in Japan. Those standards,
procedures and practices require that we plan and perform the audit to obtain reasonable assurance the Consolidated Financial Statements are freeof material misrepresentations of the Company’s financial position and operating results. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Consolidated Financial Statements. An audit also includes assessing the representations in theConsolidated Financial Statements as a whole, including the accounting principles and procedures adopted by management and significant
estimates made by management.
In our opinion the Consolidated Financial Statements referred to above present fairly, in all material respects, the consolidated financial positionand operating results of the corporate group composed of Kanamoto Company, Ltd. and its consolidated subsidiary companies during the period
reported in the consolidated financial statements in accordance with the corporate accounting principles generally applied in Japan.
There are no interests between the Company and Shin Nihon & Co. or its Partners that should be disclosed pursuant to the provisions of theCertified Public Accountant Law.

The audit reports concerning the Company’s financial position (financial statements in Japanese for the 12 months ended October 31, 2007) areprepared by Shin Nihon & Co.
kanamoto 2008

63

Report of the Audit Committee

64

kanamoto 2008

Report of the Audit Committee
The Audit Committee has received the audit reports prepared by each of the auditors concerning the business performance of the directors during
the 43rd Business Period from November 1, 2006 through October 31, 2007. After discussing the audit results based on the reports, we have
prepared this Audit Report and report as follows.

1. Procedures and details of the audits by the Auditors and the Audit Committee
The Audit Committee establishes the audit policies, allocation of duties and other matters, and receives reports concerning the implementationof audits and the audit results from each of the auditors as well as reports from the directors and the independent auditors concerning theexecution of their duties, and requests explanations as necessary.
Each of the auditors investigated business and financial conditions at the head office and main branches of the Company through discussions
with directors, the internal audit sections and other employees, and worked to gather information and establish an audit environment. They
also attended the meetings of the Board of Directors and other important meetings, received reports from the directors, other managers andemployees concerning the execution of their duties, requested explanations when necessary and reviewed documents concerning matters such asimportant decisions, in accordance with the auditor and audit standards prescribed by the Audit Committee and the audit policies and theduties of their office.
The auditors also reviewed and verified the details of the Board of Directors resolutions concerning systems to ensure the execution of thedirectors’ duties complies with the law and the Company’s Articles of Incorporation and the establishment of other systems prescribed by
Article 100 paragraph 1 and paragraph 3 of the Company Law Enforcement Regulations as the systems necessary to ensure appropriate
activities by joint-stock corporations, and the conditions of the system (internal controls system) created based on said resolutions.
The auditors also hold discussions and exchange information with the directors of the subsidiary companies, and received business reports fromthe subsidiaries as necessary.
Based on the above procedures, the Audit Committee investigated the Report of Business Operations and the supporting schedules pertaining
to the business period. In addition, the independent auditors investigated and verified whether the auditors maintained an independent
standpoint and implemented proper audits, and the Audit Committee received reports concerning the auditors’ execution of their duties fromthe independent auditors and requested explanations as necessary. In addition, the Audit Committee received notification from theindependent auditors that the “systems to ensure duties are performed appropriately” (as described in each of the items under Article 159 of the
Corporate Accounting Regulations) have been established in accordance with the “Standards for Quality Control of Audits” (BusinessAccounting Council, October 28, 2005), and requested explanations as necessary.
Based on the above procedure, we have reviewed the Accounting Statements for the fiscal year (Balance Sheet, Statement of Income, Statementof Changes in Net Assets and notes) and the supporting schedules and the Consolidated Accounting Statements (Consolidated Balance Sheet,
Consolidated Statement of Income, Consolidated Statement of Changes in Net Assets, and consolidated notes).
2. Result of audit(1) Result of audit Report of Business Operations etc.
(i) The Business Report and its supporting schedules fairly represent the condition of the Company in accordance with the laws of Japanand the Articles of Incorporation of the Company.
(ii) We have determined that there were no serious occurrences of dishonest or false activity or violations of any laws or the Company’s
Articles of Incorporation by any of the directors in carrying out the duties and responsibilities of their offices.
(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 a concern with regard to the directors in carrying out their duties
concerning the internal controls system.
(2) Result of audit of the Accounting Statements and the supporting schedules. In our opinion, the audit procedures and audit results received
from the independent public accounting firm Shin Nihon & Co. are appropriate.
(3) Result of audit of the Consolidated Accounting Statements. In our opinion, the audit procedures and audit results received from theindependent public accounting firm Shin Nihon & Co. are appropriate.

December 26, 2007
Audit Committee, Kanamoto Company, Ltd.
Standing Corporate Auditor Toshizo Okumura
Standing Corporate Auditor Shinroku Sawada
Standing Corporate Auditor Eichu Kanamoto
AuditorAkio Hashimoto
AuditorKiyohiro Tsuji
AuditorNobutomo Kuwata(Note) Auditor Akio Hashimoto, Auditor Kiyohiro Tsuji and Auditor Nobutomo Kuwata are Outside Auditors as provided by Article 2 paragraph 16 and Article 335
paragraph 3 of the Company Law.
The audit reports concerning the Company’s financial position (financial statements in Japanese for the 12 months ended October 31, 2007) areprepared by Audit Committee of Kanamoto Co., Ltd.

kanamoto 200865

At a Glance (Consolidated)

売上高
Revenues

営業利益
Operating Income

経常利益
Ordinary Income

百万円/Millions of Yen

百万円/Millions of Yen

百万円/Millions of Yen

80,000

5,000

5,000

4,000

4,000

3,000

3,000

2,000

2,000

1,000

1,000

70,00060,00050,00040,00030,00020,00010,000
0

'03

'04

'05

'06

0

'07

キャッシュフロー
Cash Flow
株価キャッシュフロー倍率
PCFR
百万円/Millions of Yen

'03

'04

'05

'06

0

'07

減価償却前営業利益
EBITDAEBITDA倍率
EBITDA Ratio
倍/Times

8,000

6,000

10,000

4

8,000

'04

'05

'06

'07

'04

'05

'06

'07

株価収益率
PER

百万円/Millions of Yen

5'03

倍/Times

倍/Times

6

80

5
60
4

3

6,000

2

4,000

3

4,000

40

2
2,000

0

'03

'04

'05

'06

'07

1

2,000

0

0

20
1

'03

'04

'05

'06

'07

'05

'06

'07

総資産利益率
ROA
%

4

3

2

1

0

66

kanamoto 2008

'03

'04

0

0

'03

当期利益
Net Income

総資産
Total Assets

1株当り当期利益（EPS）
Net Income per Share of Common Stock

百万円/Millions of Yen

百万円/Millions of Yen

円/Yen

3,500

100,000

100

80,00080

60,00060

40,00040

20,000

20

3,000
2,500
2,000
1,500
1,000
500
0

'03

'04

'05

'06

'07

株価純資産倍率
PBR

0

'03

'04

'05

'06

0

'07

純資産
Net Assets
自己資本比率Capital Adequacy Ratio

'04

'05

'06

'07

'05

'06

'07

自己資本利益率
ROE

倍/Times

百万円/Millions of Yen

%

%

1.0

40,000

50

10

40

8

30

6

20

4

10

2

0

0

0.8

'03

30,0000.6
20,0000.4
10,000

0.2

0.0

'03

'04

'05

'06

'07

0

'03

'04

'05

'06

'07

'03

'04

Cash Flow
PCFR
CF = Net income + Depreciation expense - (Cash dividends + Bonuses to directors andauditors)
PCFR = Total market capitalization ÷ CF = Stock Price ÷ Cash flow per share of common
stock
EBITDAEBITDA Ratio
EBITDA = Operating income + depreciation and amortization expense
EBITDA ratio = (Total market capitalization at end of business period + interest-bearing
debt - market value of non-trade assets at end of business period) ÷
EBITDAPERPER = Total market capitalization at end of period ÷ Net Income
PBR
PBR = ROEPERNet Assets
Capital Adequacy Ratio
Capital Adequacy Ratio = Shareholders’ equity ÷ Total assets
ROE
ROE = Net income ÷ Shareholders’ equity = EPS ÷ BPSROAROA = Net income ÷ Total assets

kanamoto 200867

At a Glance (Non-consolidated)

売上高
Revenues

営業利益
Operating Income

経常利益
Ordinary Income

百万円/Millions of Yen

百万円/Millions of Yen

百万円/Millions of Yen

80,000

5,000

5,000

4,000

4,000

3,000

3,000

2,000

2,000

1,000

1,000

70,00060,00050,00040,00030,00020,00010,000
0

'03

'04

'05

'06

0

'07

キャッシュフロー
Cash Flow
株価キャッシュフロー倍率
PCFR
百万円/Millions of Yen

'03

'04

'05

'06

0

'07

倍/Times

6,000

10,000

4

8,000

'05

'06

'07

EBITDA+倍率
EBITDA+ Ratio

百万円/Millions of Yen

5'04

EBITDA+EBITDA+

減価償却前営業利益
EBITDAEBITDA倍率
EBITDA Ratio

8,000

'03

倍/Times

6

百万円/Millions of Yen

倍/Times

20,0004

15,0003

10,000

2

5,000

1

5
4

3

6,000

2

4,000

3

4,000

2
2,000

0

'03

'04

'05

'06

'07

自己資本利益率
ROE

1

2,000

0

0

1

'03

'04

'05

'06

'07

0

0

'03

'04

'05

'06

'07

1株当たり配当Dividend per Share of Common Stock

総資産利益率ROA= 中間/Interim period= 通期/Full year
%

%

円/Yen

10

5

20

8

4

6

3

4

2

2

1

= 記念配当/Commemorative dividend= 特別配当/Special dividend

15

10

0

68

kanamoto 2008

'03

'04

'05

'06

'07

0

5

'03

'04

0

'05

'06

'07

0

'03

'04

'05

'06

'07

当期利益
Net Income

総資産
Total Assets

1株当り当期利益（EPS）
Net Income per Share of Common Stock

百万円/Millions of Yen

百万円/Millions of Yen

円/Yen

3,500

100,000

120

3,000

100

80,0002,500

8060,000

2,000

60
1,500

40,00040

1,000
20,000

20

500
0

'03

'04

'05

'06

'07

株価収益率
PER

0

'03

'04

'05

'06

'07

株価純資産倍率
PBR

0

'03

'04

'05

'06

'07

純資産
Net Assets
自己資本比率Capital Adequacy Ratio

倍/Times

倍/Times

百万円/Millions of Yen

40

1.0

50,00050

0.8

40,00040

0.6

30,00030

0.4

20,00020

0.2

10,000

10

30

%

20

10

0

'03

'04

'05

'06

'07

0.0

'03

'04

'05

'06

'07

0

'03

'04

'05

'06

0

'07

Cash Flow
PCFR
CF = Net income + Depreciation expense - (Cash dividends + Bonuses to directors andauditors)
PCFR = Total market capitalization ÷ CF = Stock Price ÷ Cash flow per share of common
stock
EBITDAEBITDA Ratio
EBITDA = Operating income + depreciation and amortization expense
EBITDA ratio = (Total market capitalization at end of business period + interest-bearing
debt - market value of non-trade assets at end of business period) ÷
EBITDAEBITDA+EBITDA+ Ratio
EBITDA+ = Operating income + Depreciation expense + Other depreciation andamortization expense+ Low-price rental assets, and others
EBITDA+ is an indicator used only for the construction equipment rental business andexcludes steel products and information products
PER
PER = Total market capitalization at end of period ÷ Net Income
PBR
PBR = ROEPERNet Assets
Capital Adequacy Ratio
Capital Adequacy Ratio = Shareholders’ equity ÷ Total assets
ROE
ROE = Net income ÷ Shareholders’ equity = EPS ÷ BPSROAROA = Net income ÷ Total assets
Dividend per Share of Common Stock
The 2004 cash dividend of ¥19 included a one-time commemorative dividend of ¥1 tocelebrate the 40th anniversary of the Company’s founding.
The 2007 cash dividend of ¥20 included special dividend of ¥2.
kanamoto 2008

69

Stock Information (As of January 31, 2008)
Shareholders’ equity
9,696 million yen (paid-in capital)
Number of shares issued
32,872 thousands
Fiscal year-end
October 31
Regular General Meeting of the Shareholders
During January of each year
Date of record with respect to voting rights at a Regular General
Meeting
October 31
Date of record for distribution of year-end dividends
October 31
Date of record for distribution of interim dividends
April 30
Method of public notice
Kanamoto’s website, Nihon Keizai Shinbun**Public notices of Kanamoto Co., Ltd. will be released on Kanamoto’s website(http://www.kanamoto.co.jp and http://www.kanamoto.ne.jp).
When the Company cannot make electronic notification because of unavoidable reasons,the public notices of the Company will be published in the Nihon Keizai Shinbun.

Transfer agent
Mitsubishi UFJ Trust and Banking Corporation
Administrative Office
Mitsubishi UFJ Trust and Banking Corporation Transfer Agent Division
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo
Mailing address and telephone number
Mitsubishi UFJ Trust and Banking Corporation Transfer Agent Division
137-8081 10-11, Higashisuna 7-chome, Koto-ku, Tokyo
TEL: 0120-232-711 (free dial)
Commission offices
Mitsubishi UFJ Trust and Banking Corporation All branches
Nomura Securities Co., Ltd. All branches

カナモトの株価指数と売買高
Kanamoto stock index and trading volume
300
250

千株/Thousands of shares

4,000

売買高/Trading volume
カナモト*1/Kanamoto *1
日経平均*2/Nikkei Stock Average *2

3,000
200
150

2,000

100
1,000
50
0

’03
’04
11 12 1 2

3

4

5

6

7

8

’05
9 10 11 12 1 2

3

4

5

6

7

8

’06
9 10 11 12 1 2*1： 2003年11月のカナモトの株価（¥496）
を100とする
Kanamoto's share price as of November 2003 (¥496) assumed as 100.
*2： 2003年11月の日経平均株価（¥10,100.57）を100とする
Nikkei Stock Average as of November 2003 (¥10,100.57) assumed as 100.

70

kanamoto 2008

3

4

5

6

7

8

’07
9 10 11 12 1 2

3

4

5

6

7

8

’08
9 10 11 12 10

kanamoto 200871

www.kanamoto.co.jp〒060-0041 北海道札幌市中央区大通東3丁目1番地19

1-19, Odori Higashi 3-chome Chuo-ku, Sapporo, Hokkaido 060-0041 Japan

このアニュアルレポートは、古紙配合率100％再生紙と大豆油インキを用いています。
This annual report is printed on 100% recycled paper with soy ink.