Fiscal Year ended October 31, 2006

Accounting Bulletin (Consolidated)
December 8, 2006
Listed Company Name

Kanamoto Company, Ltd.

Company Code Number

9678

Listing Exchanges

Tokyo Stock Exchange, Sapporo Stock Exchange

Head Office Address

1-19, Odori Higashi 3-chome, Chuo-ku, Sapporo, Hokkaido Japan 060-0041（URL http://www.kanamoto.co.jp）
Representative

Kanchu Kanamoto

Inquiries

Nobuhito Utatsu

President

Director & Corporate Officer, Division Manager, Accounting Division
TEL 81-11-209-1600
Please send inquiries in English to takayama@kanamoto.co.jp.
Date of Report to the Board of Directors December 8, 2006
SEC Accounting Standards The Company has not adopted SEC accounting standards

1. Consolidated Operating Results for the Fiscal Year ended October 31, 2006
(November 1, 2005 – October 31, 2006)(Numbers less than one million yen have been rounded down)(1) Consolidated Operating Results
Revenues

Operating Income

Millions of yen
Fiscal year ended
October 31, 2006
Fiscal year ended
October 31, 2005%

Millions of yen

Ordinary Income%

Millions of yen%

68,023

(6.3)

4,068

(189.7)3,788(144.4)

63,975

(4.3)

1,404

(△ 25.2)

1,550(△ 11.4)

Net Income per
Share ofCommon StockNet Income
Millions of yen%

Net income per
Return on
Share on a Fully Shareholders’
Diluted Basis
Equity

Yen

Yen

%

Return on
Total
AssetsOrdinary
IncomeMargin%%Fiscal year ended
57.41
－
1,742
(394.2)4.9
4.5
5.6
October 31, 2006
Fiscal year ended－352(△ 67.9)
11.57
1.1
1.8
2.4
October 31, 2005
(Note) 1. Investment profit or loss accounted for by the equity method
Fiscal Year ended October 31, 2006－
Fiscal Year ended October 31, 2005－
2. Average number of shares (consolidated) outstanding during the fiscal year
Fiscal Year ended October 31, 2006
30,357,093 sharesFiscal Year ended October 31, 2005
29,865,334 shares
3. Are there any changes in accounting method?
Yes
4. The percentages shown for revenues, operating income, ordinary income and net income are the percent increaseor decrease compared to the prior consolidated fiscal year

(2) Consolidated Financial Position
Total Assets
Fiscal year ended
October 31, 2006
Fiscal year ended
October 31, 2005

Shareholders’ Equity

Shareholders’Equity Ratio

Shareholders’Equity per Share

Millions of yen

Millions of yen%

Yen

86,81538,05143.7

1,155.22

81,97733,46540.8

1,120.76(Note) Number of shares (consolidated) issued and outstanding at the end of the fiscal year:
Fiscal Year ended October 31, 2006
32,859,118 sharesFiscal Year ended October 31, 2005
29,853,076 shares

Summary of Company Financial Statements, FY Ended October 31, 2006

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(3) Consolidated Cash Flows
Cash Flow fromOperating Activities
Fiscal year ended
October 31, 2006
Fiscal year ended
October 31, 2005

Cash Flow from
Investing Activities

Cash Flow from
Financing Activities

Balance of Cash andEquivalents at End of
PeriodMillions of yen

Millions of yen

Millions of yen

Millions of yen

8,414

△ 489

△ 3,635

18,398

10,219△ 11△ 7,833

14,108(4) Companies to which consolidation accounting and equity method accounting apply
Number of consolidated subsidiaries: 5
Number of non-consolidated subsidiaries accounted for by the equity method: 0
Number of affiliated companies accounted for by the equity method: 0(5) Changes in scope of consolidation and application of equity method accounting
Consolidation (new companies)

0(Excluded)0

Equity method accounting (new companies)

0(Excluded)0

2. Projected Consolidated Operating Results for the Fiscal Year Ending October 31, 2007
(November 1, 2006 - October 31, 2007)
Revenues

Operating Income

Ordinary Income

Net Income

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Interim period

35,530

2,940

2,870

1,830

Full year

68,570

4,230

4,020

2,360

Reference: Projected net income per share of common stock (Full year)¥71.82* The above projections were prepared based upon information available to the Company at the time the projections wereannounced as well as various assumptions concerning the future economic and business environment. Actual operating
results may differ from the projected figures depending upon various factors in the future

Summary of Company Financial Statements, FY Ended October 31, 2006

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I

Current Conditions of the Company GroupThe Kanamoto Company group is comprised of the parent company and seven subsidiaries. The businessactivities of the group are centered on the rental of construction equipment and the rental and sale of a full lineof construction-related materials. An overview of each segment by business of the Kanamoto group, and theposition of each company related to that business, is provided below.
〔 Businesses related to the Construction Equipment Rental Division 〕
The Company’s Construction Equipment Rental Division, Daiichi Kikai Co., Ltd. (a consolidated
subsidiary company) and Kanki Corporation (a consolidated subsidiary company) are engaged in therental and sale of construction equipment and machines used for construction. These two subsidiarycompanies borrow rental equipment assets from the Company as needed in order to meet customer demand.
SRG Kanamoto Co., Ltd. (a consolidated subsidiary company) operates a rental business that provides
temporary materials for construction use. Assist Co., Ltd. (a consolidated subsidiary company) andComsupply Co., Ltd. (a non-consolidated subsidiary company) are engaged in the rental and sale offurniture and fixtures and safety products for the construction industry. The Company borrows rental assets
from SRG Kanamoto Co., Ltd., Assist Co., Ltd. and Comsupply Co., Ltd. as needed to rent to its own customers.
In addition to the above companies, Kanatech Co., Ltd. (a consolidated subsidiary company) develops,
manufactures

and

sells

modularhousing

units

for

temporaryuse.

Flowtechno

Co.,

Ltd.

(a

non-consolidated subsidiary), which Kanamoto acquired in March 2006, is engaged in the technicaldevelopment, manufacture and sale of construction equipment for ground improvement works.
〔 Businesses related to the Steel Sales Division 〕
The Company’s Steel Sales Division sells steel products and other construction-related manufactured products.
The Company has no subsidiaries or affiliated companies related to this division.

〔 Business related to the Information Products Division and Other Businesses 〕
Kanamoto’s Information Products Division is engaged in the rental and sale of computers, including
workstations and PC servers, as well as computer peripheral equipment. Active Technology Corporation, anaffiliated company involved in the Company’s Other Businesses, has currently halted business activities.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.3

〔 Relationship of the Operating Businesses 〕

Customers

Construction-related businesses
Supply of modular

Construction

Kanamoto Co., Ltd.

housing units

equipment rental
Construction equipment
rentalKanki Corporation

Rental of temporary

SRG Kanamoto Co., Ltd.

scaffolding

Construction
Equipment Rental
Division・
Steel Sales
Division・
Information
Products DivisionLines
indicate：

Consolidated
subsidiaries

Rental of safety products

Manufacture and sale of modular
housing units
Rental of furniture, fixtures andsafety products

Assist Co., Ltd.

Kanatech Co., Ltd.

Comsupply Co., Ltd.

Technical development, manufacture and sale

Flowtechnoof ground improvement equipment

Corporation

Non-consolidated
subsidiaries

Summary of Company Financial Statements, FY Ended October 31, 2006

P.4

II

Management Policies

1. Basic management policy
The Kanamoto group has never been complacent about its present condition. Every group company has
positioned Kanamoto’s action agenda of promoting maximization of revenues and absolute reduction of costs,
while continually seeking innovation and striving to energize its businesses, as the common philosophy of theentire Kanamoto group. By managing the group’s businesses to conform to changes in market conditions, theCompany seeks to achieve continual growth in earnings by accurately providing the services truly demanded
by Kanamoto’s customers. Through this approach to its business, Kanamoto believes it will be evaluatedpositively as a corporate group that can fundamentally satisfy the expectations and trust of its stakeholders
and make a valuable and tangible contribution to society.

2. Basic policies concerning distribution of earnings
As the basis of its earnings distribution policy, Kanamoto seeks to ensure a stable return of earnings to theextent possible, while taking into consideration its earnings level, payout ratio, and financial position from a
medium to long-term perspective, and regards the payment of stable dividends as its primary obligation. At
the same time, the Company utilizes its internal reserves by allocating funds for capital investment, including
the introduction of rental equipment assets that will serve as the source of future earnings.
To enable the Company to flexibly implement its capital policy, Kanamoto has established a system for making
purchases of treasury stock.

3. Policy concerning reduction of the Company's investment unit
With regard to reducing the size of its investment unit, Kanamoto will maintain a flexible outlook while
carefully monitoring the position of the Company’s stock in the market, the affect on shareholders’ returns, theintroduction of the system for dematerialization of stock certificates and other factors, and continuing to givedue consideration to improving the liquidity of its stock.
Given current circumstances, the Company has no plans to execute a stock split.

4. Management indicators established as objectives
The Kanamoto Group’s core operations in the construction equipment rental business require a substantial
capital investment burden. Moreover, the structure of this business requires a profit and loss outlook extending
over several years. Given these considerations, the Kanamoto group has always positioned growth in EBITDA+(earnings before interest, taxes, depreciation and amortization) as its most important management indicator,
while also taking into consideration ROI (return on investment).

Based on its operating results for the consolidated fiscal year under review (12 months ended October
31, 2006), the Company has twice revised the numerical targets it established initially for the
long-term management plan (November 2003-October 2008) Kanamoto currently is implementing as
described below. Nevertheless, the Company will continue to establish its numerical objectives
prudently, given the uncertainty surrounding future construction demand.
(Millions of yen, except earnings per share)

Consolidated operating

Revenues

Fiscal Year ending

Fiscal Year ending

October 2007

October 2008

68,57070,980Ordinary income

4,020

4,560

Earnings per share¥71.82¥67.87

Non-consolidated

Revenues

61,54063,670operating results

Ordinary income

4,000

4,500

18,80019,960results(Kanamoto Company)

EBITDA＋

Summary of Company Financial Statements, FY Ended October 31, 2006

P.5

5. Medium to long-term corporate management strategies
The Company has now completed the third period of its long-range management plan “Metamorphose”(November 2003 - October 2008). During this past three-year period, the harsh management environment
centered on the regions where the Company conducts its businesses has continued. Nevertheless, theCompany is gradually realizing the results of measures it has promoted centered on reorganization of its
earnings profile and improvement of its financial position. Although progress is somewhat slower than in theoriginal operating plan, by continuing to practice earnings-focused management and further expand operating
results, the Company seeks to build a “strong Kanamoto” that will be evaluated positively by the market.
(1) Maintain an earnings-focused rental equipment asset portfolio
In addition to replacing its large rental assets with the latest emissions-controlled models, and extending
rental periods for such assets, the Company will seek to improve profit margins by also strengthening its
emphasis on equipment boasting high returns.
(2) Execute a bold scrap and build program
The Company has adopted a fundamental approach of giving priority to establishing new branches in the Tokyo
metropolitan area and regions surrounding other large metropolitan areas, while maintaining its existing
branch network in other regions. In areas where the Kanamoto group has not yet opened branches, theCompany’s policy is to investigate moving aggressively into a region after analyzing all pertinent information
and available opportunities. The Company also will carefully scrutinize the possibilities for expanding operating
results and improving the profitability of each branch, and continue to close and integrate branches.
(3) Build a powerful marketing organization and alliance group where customers are always
Number One
Kanamoto seeks to be a firm that enjoys a high level of customer trust and is firmly rooted in its local
communities. The Company pursues this objective by offering services that take maximum advantage of its
dominant size, such as Kanamoto’s comprehensive compensation system and agreements with local
governments to respond to urgent requests following a disaster, and offering products that are linked directly
to customers’ needs.
Moreover, the Kanamoto group forms a network reaching from Hokkaido to Okinawa. The Company willcontinue to strengthen cooperation among all Kanamoto group firms, and increase the synergistic effects fromthis approach.

6. Issues to be addressed by the Company
Based on Japan’s fiscal policies, the declining trend in public works construction is projected to continue. On
the other hand, the demand for construction equipment rentals is showing a positive trend, driven by theefforts of construction companies to control capital spending. The severity of the competition among
construction equipment rental firms, however, continues to increase. Given this environment, the issue facedby Kanamoto is to maintain its traditional earnings and ensure its profit base is sound, by responding
accurately to the demands of user firms as their needs become more advanced and complex.
(1) Enhance marketing capabilities and customer strategies
As the leading firm in the construction equipment rental industry, Kanamoto strives to foster employees who
possess appropriate knowledge and skills. The Company also is taking steps to cultivate a new range ofcustomers, including sectors such as facilities maintenance, landscaping and gardening and events, by
diversifying the types of products it handles.
(2) Emphasize group management and strengthen alliances
Kanamoto will strengthen cooperation among Kanamoto group companies from an operating, business andasset management standpoint. The Company also will increase alliances with firms in every region of Japan,
and seek mechanisms aimed at the creation of mutual earnings opportunities.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.6

(3) Reinforce Kanamoto’s financial strategy
Kanamoto is taking steps to enhance funds procurement flexibility, while giving consideration to equipment
plans including its purchases of rental equipment assets. At the same time, the Company is striving to improve
its financial position, by reducing interest-bearing debt as much as possible while improving capital efficiency
through measures such as the liquidation of assets and bill receivables.
(4) Cost reductions in every operation
Because of factors such as the sharp rise in crude oil and raw materials prices and increasing interest rates,
increasing asset introduction costs are a concern. Together with the thorough use of benchmarks whenintroducing assets, the Company also will strive to maintain asset value by optimizing asset maintenance costs
based on its rental assets operating policies. The Company also will continue measures aimed at achieving
low-cost operations and eliminating wasteful expenses.

7. Basic approach concerning corporate governance and status of corporate governancemeasures
For information on Kanamoto’s basic approach concerning corporate governance and the status of theCompany’s corporate governance measures, please refer to Report Concerning Corporate Governancesubmitted to the Tokyo Stock Exchange dated May 31, 2006.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.7

III

Operating Results and Financial Position(1) Operating resultsa) Summary of consolidated fiscal year operating results
During the consolidated fiscal year under review, Japan’s economy began slowing in early autumn, as crude oil
prices fluctuated at a high level. Even export-related industries such as machinery manufacturing, which had
continued to achieve solid growth, were affected by this environment. Nevertheless, the economy remained
steady, buoyed by a recovery in capital investment and the positive employment environment accompanying
the improvement in corporate profits, including record earnings centered on Japan’s largest enterprises.
Because of this recovery trend, the economy entered a gradual expansionary phase. In every aspect, however,this was an expansion characterized by sharp contrasts that progressed along bipolar lines. The economic
recovery did not always feel like a true recovery, because the effects of the economic recovery wereconcentrated in major metropolitan areas and specific high-income, high-wealth brackets, for example, while
the burden on most individuals, on the other hand, continued to grow as a result of government measures that
included the elimination of various income tax deductions and higher social insurance premiums. An identicalphenomenon affected the Kanamoto Group’s customers in the construction industry as well, as heavily
populated regions such as the Tokyo metropolitan area benefited from strong private sector demand, while
local regions continued to struggle under a tough environment.
As described above, revenues for the Kanamoto group overall remained steady. Despite a severe management
environment in many regions that reflected stringent local government financial circumstances, in Kanamoto’s
main business in the construction equipment rental industry, the Company responded accurately tocustomers’ needs as dictated by respective local conditions, including the growth in demand in both the public
and private sectors in major metropolitan areas. The Company also achieved revenues from equipment sales
that exceeded the Company’s initial plan.
From an earnings perspective, on the other hand, Kanamoto steadily achieved positive results. Despite somedelays in seeing the effects from measures the Company implemented as improvements based on its
long-term management plan, including greater operating efficiency for rental equipment assets, therestoration of unit prices and a reduction of the depreciation burden, operating income, ordinary income andnet income all substantially exceeded Kanamoto’s initial projections and the Company’s actual results for theprevious consolidated fiscal year.
As a result, revenues for the consolidated fiscal year ended October 31 increased 6.3% from the previous
consolidated fiscal year level to ¥68,023 million. Operating income jumped 189.7% year-on-year to ¥4,068
million, ordinary income rose 144.4% compared with the previous consolidated fiscal year to ¥3,788 million
and net income increased 394.2% year-on-year to ¥1,742 million. Furthermore, during the consolidated fiscal
year under review, the Company began to apply the Accounting Standard for Impairment of Fixed Assets, andas previously reported booked an impairment loss of ¥594 million for the consolidated fiscal year interim
period. A summary of operating results for each of the Company’s businesses, and business development
issues deserving special mention, are described below.
〔 Businesses related to the Construction Equipment Rental Division 〕
In the construction-related businesses of the entire Kanamoto Group, revenues and earnings both were higher.
For the consolidated fiscal year under review, consolidated revenues increased 5.6% from the previous
consolidated fiscal year to ¥61,102 million, and operating income rose 216.7% year-on-year to ¥3,812 million.
For Kanamoto’s Construction Equipment Rental Division on a stand-alone basis, rental revenues increased
5.7% year-on-year to ¥41,435 million, revenues from sales rose 4.6% year-on-year to ¥12,397 million, andtotal revenues increased 5.4% from the previous consolidated fiscal year to ¥53,832 million.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.8

< Kanamoto Co., Ltd. on a non-consolidated basis >Looking at the Company’s construction equipment rental revenues by region, total construction investment in
the Hokkaido Region has been declining each year. Nevertheless, for the fiscal year under review, construction
equipment rental net revenues were unchanged from the previous fiscal year. In addition, although the Tohoku
Region is confronting the same harsh environment as the Hokkaido Region, revenues in the Tohoku Region
were strong as well, because of firm orders received for redevelopment projects and other works forprefectural government office locations, and rose 13.7% compared with the previous fiscal year.
Moreover, the division’s nationwide sales efforts bore fruit and produced strong results. This included a 7.0%
year-on-year increase in revenues in the Kanto & Shinetsu Region as a result of meeting the demand fordisaster recovery special procurement in Niigata Prefecture and the private sector equipment demand in thenorthern Kanto Region and various other areas, as well as the brisk demand in the Tokyo metropolitan area,
and revenue growth of 6.8% over the previous fiscal year in the Kinki-Chubu Region as the result of recovering
demand in Osaka and the synergistic effects with Kanki Corporation. The percentage of revenues accounted
for by Hokkaido and by Honshu and other regions was 35.3% and 64.7%, respectively.
During the consolidated fiscal year under review, Kanamoto opened three new branches in Shimukappu(Shimukappu, Hokkaido), Sanjo (Sanjo City, Niigata Prefecture) and Omiya (Saitama City), and closed the
Kanazawa Branch (Kanazawa City, Ishikawa Prefecture). As a result, at the end of the period Kanamoto had
148 branches.
< Consolidated subsidiaries >Daiichi Kikai Co., Ltd. enjoyed steady growth of construction equipment rentals, including demand fordisaster restoration work. As a result, revenues grew 12.3% over the previous fiscal year, and operating
income increased ¥127.5 million year-on-year. Both revenues and earnings were new records.
SRG Kanamoto Co., Ltd. increased rentals of temporary scaffolding for condominium construction projects
in the Sapporo area and for bridge construction work in other areas, respectively. Revenues expanded 26.0%
from the previous consolidated fiscal year, and the company substantially reduced its operating loss by 80.5%
from the previous consolidated fiscal year level.
At Assist Co., Ltd., revenues were up 1.3% year-on-year, and operating income rose 135.2% from theprevious consolidated fiscal year, as the result of measures to specialize in rental products boasting high profit
margins. Both revenues and earnings were below the company’s initial objectives, however.
At Kanki Corporation, which is restructuring its management, revenues were 6.0% lower than in theprevious consolidated fiscal year, as the result of efforts to restructure its business. These efforts included
focusing management resources on the construction equipment rental business. The company also
substantially improved operating income by ¥47.9 million year-on-year, even though its cost burden forinvestment in rental equipment assets was substantially higher. The company posted a net loss, however,reflecting the cost burden from greatly enhancing its rental equipment assets and the cost to open a new
branch in Himeji.
Kanatech Co., Ltd. achieved a 31.2% increase in revenues compared with the previous consolidated fiscal
year, as a result of implementing improvements that included enhancements to its materials stock and finishedproduct inventory management system. Operating income improved by ¥146.0 million compared to theprevious consolidated fiscal year.
〔 Businesses related to the Steel Sales Division 〕
Orders handled by the Steel Sales Division remained strong as a result of urgent demand for private sector
construction, including condominiums in Sapporo, as well as private sector capital investment demand in the
Tomakomai East district (Tomakomai, Hokkaido). Despite also being affected by a sharp drop in sale prices forgeneral steel materials, revenues grew by 13.8% compared with the previous consolidated fiscal year to¥6,485 million, and operating income jumped 77.8% year-on-year to ¥44 million.
〔 Business related to the Information Products Division and Other Businesses 〕
Although rental demand for personal computers grew at a steady pace, revenues for the Information Products

Summary of Company Financial Statements, FY Ended October 31, 2006

P.9

Division edged down 2.9% compared with the previous consolidated fiscal year, as rental fees also fell. On theother hand, revenues from sales of used devices increased 39.6% year-on-year. Revenues for the entire
division rose 1.2% year-on-year to ¥219 million, and operating income climbed 54.6% compared with theprevious consolidated fiscal year to ¥31 million.
Fiscal Year ended October 31, 2006 Consolidated Operating Results(Million yen; % change from prior year)
Revenues
Consolidated Fiscal Year
Under Review
Prior Consolidated Fiscal
Year

Operating Income

Ordinary Income

Net Income

68,023

6.3

4,068

189.7

3,788

144.4

1,742

394.2

63,9754.3

1,404△ 25.2

1,550△ 11.4352△ 67.9(2) Financial position
Cash flows for the consolidated accounting fiscal year under review are reviewed below.
Cash flow from operating activities was ¥8,414 million, a decrease of ¥1,804 million from the priorconsolidated accounting fiscal year. Although income before taxes and adjustments increased, this mainlyreflected a substantial change in accounts receivable, trade because the current consolidated accounting fiscal
year was the first full year to reflect the reduction of bill receivables from use of the Company’s liquidation
facility.
Cash flow used in investing activities was ¥489 million, ¥477 million higher than in the prior consolidated
accounting fiscal year. This mainly reflected an increase in funds used for the purchase of tangible fixed assets.
Cash flow used in investing activities was ¥3,635 million, a decrease of ¥4,197 million from the priorconsolidated accounting fiscal year. This mainly reflected funds provided by issuance of stock.
As a result of the above factors, the balance of cash and cash equivalents at the end of the current consolidated
accounting fiscal year increased by ¥4,289 million compared with the prior consolidated fiscal year to ¥18,398
million.
〔 Cash flow indicator trends for the Kanamoto group 〕
The cash flow indicator trends for the Kanamoto group are provided below.
Fiscal Year Ended

Fiscal Year Ended

Fiscal Year Ended

October 2004

October 2005

October 2006

36.7

40.8

43.7

18.1

26.6

32.0

Years to repay debt

6.3

3.3

3.5

Interest coverage ratio (times)

13.4

24.5

21.0

Shareholders’ equity ratio (%)
Shareholders’ equity ratio on a market
capitalization basis (%)(Notes)Shareholders’ equity ratio: Shareholders’ equity / Total assets
Shareholders’ equity ratio on a market capitalization basis: Shareholders’ equity on a market capitalization basis / Total
assetsYears to repay debt: Interest-bearing liabilities / Operating cash flow
Interest coverage ratio: Operating cash flow / Interest payments*All indicators are calculated using financial values on a consolidated basis.
*Total market capitalization is calculated by multiplying the closing share price at the end of the term by the number ofshares outstanding (after deducting treasury stock) at the end of the term.
*Cash flow from operating activities shown on the Consolidated Statements of Cash Flows is used as operating cash flow.
Interest-bearing liabilities include all liabilities on which the Company pays interest that are accounted for on theSummary of Company Financial Statements, FY Ended October 31, 2006

P.10

Consolidated Balance Sheets. The amounts shown as interest expense on the Consolidated Statements of Cash Flows areused as interest payments.

(3) Outlook for the next consolidated fiscal year (Business Period ending October 2007)
Japan’s economy is poised to achieve a recovery that will produce strong operating results centered on major
companies, as exemplified by the remarkable business recovery at Japan’s mega-banks. On the other hand
there also remain matters of concern, such as the sharp jump in crude oil prices and higher interest rates.
Moreover, a review of the leading indicators pointing toward the economy’s future direction makes it
impossible to be completely optimistic regarding a robust business expansion. Overall, conditions can be said
to have fostered a sense of uncertainty.
Turning to the environment surrounding Kanamoto and the trend in construction demand, in dynamic regions
such as the Tokyo metropolitan area the recovery is being supported by the current strong levels of public andprivate sector demand, as well as the gradual commencement of work on large-scale projects such as
construction of a new runway at Haneda Airport. Demand also has recovered in metropolitan areas in otherregions, including the Chukyo and Kansai regions. In Japan’s less populated areas such as the Hokkaido
Region and Tohoku Region, however, tough economic conditions are expected to continue.
Although the Company has revised slightly upwards the plan reviewed in the previous period, based on thepossibility of slowing growth and the assumption of no significant improvement in the construction demand
trend, Kanamoto has made no major changes in its outlook for the next consolidated fiscal year.
Kanamoto will continue its urgent drive to establish new branches, mainly in the Tokyo, Nagoya and Osaka
metropolitan areas where the Company was somewhat late in expanding because of the challenges faced insecuring personnel and branch locations, and seek to strongly link the current positive surge in economic
momentum to earnings growth.

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

Revenues

Operating Income

Ordinary Income

Net Income

Interim period

35,53

2.9%

2,940

2.3%

2,870

2.5%

1,830

74.5%

Full year

68,57

0.8%

4,230

4.0%

4,020

6.1%

2,360

35.4%

< Reference > Projected net income per share (full year) ¥71.82(Non-consolidated)

Revenues

Operating Income

Ordinary Income

Net Income

Interim period

32,010

4.0%

2,610

4.6%

2,700

5.1%

1,770

85.3%

Full year

61,540

1.3%

3,900

5.0%

4,000

7.0%

2,410

40.1%

< Reference > Projected net income per share (full year) ¥73.34〔 Projected Financial Position for the Fiscal Year Ending October 31, 2007 〕
Cash flow from operating activities is projected to decrease compared with consolidated fiscal year underreview because of an increase in expenditures for acquisition of rental assets.
Cash flow used for investing activities is projected to be approximately identical to the amount in the
consolidated fiscal year under review because there are no factors that will result in material changes.
Cash flow used for financing activities is projected to increase compared with the consolidated fiscal year
under review because of a decrease in funds provided from the issuance of new stock and a decrease in funds
provided by long-term bank loans.
As a result of the above, the balance of cash and cash equivalents at the end of the next consolidated fiscal
year is projected to decrease compared to the balance at the end of the consolidated fiscal year under review.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.11

4. Business and other risks
The following risks are included among the business and accounting matters described in the Accounting
Bulletin (Consolidated) that might have an important influence on investors’ decisions.
Statements concerning future matters are judgments made by the Company based on information available atthe present time.
(1) Economic conditions
Because the construction-related businesses that are the main business of the Kanamoto group remain highly
dependent on public works, the stagnation of market growth and intensification of price competition resulting
from ongoing cutbacks in public works investment are continuing and the severity of the business environmentis expected to continue.
To minimize the affects from cutbacks in public works, the Kanamoto group is implementing various
management measures, such as shifting management resources to major metropolitan areas where private
sector demand is strong, and seeking to maintain and improve operating results. Nevertheless, there is apossibility future operating results including revenues will be negatively affected if further large reductions inpublic works or other changes affecting industry demand occur in the future.
(2) Seasonal changes in operating results
Because budget decisions for public works are made in April of each year, there is a time lag of roughly six
months before construction actually is begun. Therefore the construction-related businesses that are
Kanamoto’s main business experience a trend in which the busy season during each business period extends
from about October until the following March, and construction equipment rental demand reaches its
maximum peak during this period. As a result, the revenues and earnings of the Kanamoto group tend to beconcentrated in the Company’s interim accounting period (the six-month period from November through thefollowing April).
(3) Interest rate fluctuations
The Kanamoto group allocates internal capital and procures funding from outside sources to meet its need forfunds to purchase rental equipment and other assets, make branch-related capital investments and provide
working capital for business activities. Although the Company takes steps to mitigate the affect of interest rate
fluctuations on its externally borrowed funds, including transactions to fix the interest rates paid on borrowed
funds to the extent possible, there is a possibility the operating results and financial position of the Kanamotogroup will be affected by future changes in interest rates.
(4) Projected benefit obligation
The projected employee benefit obligation and costs of the Kanamoto group are calculated mainly based on
basic rates such as a discount rate and expected rate of return on pension assets. Because these basic rates
are determined in each annual review, they have a material affect on changes in the operating results andfinancial position of the Kanamoto group. Although the Kanamoto group is studying ways to minimize thisinfluence, including conversion of benefit plans to a defined contribution pension plan or a cash balance
pension system, there is a possibility the operating results and financial position of the Kanamoto group will be
negatively affected by a further reduction in the discount rate or a deterioration in returns on invested assets.
(5) Asset impairment accounting for fixed assets
Beginning from the business period ending in October 2006, the Kanamoto group will apply the AccountingStandard for Impairment of Fixed Assets. There is a possibility the operating results and financial position of
the Kanamoto group might be negatively affected if the profitability of fixed assets declines because of factors
such as a marked deterioration in the Company’s business environment in the future.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.12

IV

Consolidated Financial Statements

1. Consolidated Balance Sheets(Unit: Thousands of yen)
Prior Consolidated Accounting
Fiscal Year(As of October 31, 2005)
Classification

Notes

AmountPercent

Current Consolidated Accounting
Fiscal Year(As of October 31, 2006)
AmountChange fromprior year

Percent(Assets)
I

Current Assets
14,111,882

18,398,312

4,286,430

14,329,090

14,959,325

630,235

538,951

560,203

21,251

1,469,376

1,193,669△275,707

5. Deferred tax assets

318,999

391,80372,804

6. Other873,516752,572△120,944△923,256△523,650

399,605

1. Cash and deposits
2. Notes and accounts
receivable, trade*6

3. Inventory
4. Construction equipment

Allowance for doubtful
accounts
Total Current Assets
II

30,718,560

35,732,235

37.5

41.2

5,013,675

Fixed Assets

1. Tangible Fixed Assets(1) Rental equipment

37,784,220

38,229,358

Accumulated depreciation

28,418,054(2) Buildings and structures

15,911,967

Accumulated depreciation

9,410,054(3) Machinery, equipment,
vehicles and delivery
equipment

4,270,130

Accumulated depreciation

3,477,735(4) Land(5) Construction in progress(6) Other

28,426,025

9,811,304

9,358,195-453,109

6,631,891

129,978

720,775△71,619

26,140,976

25,906,130△234,845－

246,544

246,544259,900△32,426

16,561,916
9,930,025

6,501,912

4,322,961
3,602,186

792,395

1,093,684

Accumulated depreciation

801,358

Total Tangible Fixed Assets

1,126,604
292,326
43,538,915

866,704
53.1

43,123,437

49.7△415,477

2. Intangible Fixed Assets(1) Consolidated adjustment
account(2) Goodwill(3) Other
Total Intangible Fixed
Assets*7435,655－△435,655－

395,109395,109

252,765

141,585△111,180

688,4210.8

536,695

0.6△151,726

Summary of Company Financial Statements, FY Ended October 31, 2006

P.13

Prior Consolidated Accounting
Fiscal Year(As of October 31, 2005)
Classification

Notes

AmountPercent

Current Consolidated Accounting
Fiscal Year(As of October 31, 2006)
AmountChange fromprior year

Percent

3. Investments and Other
Assets5,753,056

6,224,097

471,040

302,238－△302,238

1,754,473

1,874,002

119,529

Allowance for doubtful
accounts-778,148-674,876

103,271

Total Investments andOther Assets

7,031,620

8.6

7,423,223

8.5

391,602

Total Fixed Assets

51,258,957

62.5

51,083,356

58.8△175,600

Total Assets

81,977,517

100.0

86,815,592

100.0

4,838,074(1) Investment securities(2) Deferred tax assets(3) Other*1(Liabilities)
I

Current Liabilities

1. Notes and accounts
payable, trade

10,837,618

12,419,337

1,581,719

577,364

497,704△79,660

10,718,496

10,077,496△641,000

4. Corporate taxes payable

555,570

1,365,479

809,909

5. Accrued bonuses to
employees

515,796

511,737△4,059

－

5,500

5,500

2,464,772

2,676,023

211,251

467,946

1,017,823

549,876

2. Short-term bank loans
3. Long-term bank loans due
within one year

6. Accrued bonuses todirectors and auditors
7. Accounts payable, other
8. Other
Total Current Liabilities
II

26,137,564

31.9

28,571,100

32.9

2,433,536

Long-term Liabilities

1. Long-term bank loans

18,643,607

16,031,111△2,612,496

2. Accrued employees
retirement benefits

1,525,993

1,681,719

155,725

110,473

129,214

18,741

1,968,265

2,107,836

139,570

55,003242,843

187,840

3. Retirement allowances todirectors and auditors
4. Long-term accrued
expenses
5. Other
Total Long-term Liabilities

22,303,342

27.2

20,192,724

23.3△2,110,617

Total Liabilities

48,440,907

59.1

48,763,825

56.2

322,918

Summary of Company Financial Statements, FY Ended October 31, 2006

P.14

Prior Consolidated Accounting
Fiscal Year(As of October 31, 2005)
Classification

Notes

AmountPercent

Current Consolidated Accounting
Fiscal Year(As of October 31, 2006)
AmountChange fromprior year

Percent(Minority Interests)
Minority Interests

71,135

0.1

－

－

－

8,596,737

10.5

－

－

－

(Shareholders’ Equity)*4

I

Common stockII

Additional paid-in capital

9,720,343

11.8

－

－

－

III

Consolidated retained
earnings

13,691,585

16.7

－

－

－

IV

Valuation difference onother investment
securities

1,643,403

2.0

－

－

－

Treasury stock△186,594

-0.2

－

－

－

Total Shareholders’ Equity

33,465,475

40.8

－

－

－

Total Liabilities, Minority
Interest and Shareholders’Equity81,977,517

100.0

－

－

－

V

(Net Assets)
I

II

Owners’ equity
1

Paid-in capital－－

9,696,717

11.2

－

2

Capital surplus－－

10,960,869

12.6

－

3

Earned surplus－－

14,889,638

17.2

－

4

Treasury stock－－△6,303△0.1－

Total Owners’ Equity－－

35,540,922

40.9

－

－

－

2,418,684

2.8－

Total Valuation andTranslation Adjustments－－

2,418,684

2.8－

Minority Interests－－

92,1590.1－

Total Net Assets－－

38,051,766

43.8

－

Total Liabilities and Net
Assets－－86,815,592

100.0

－

Valuation and translation
adjustments
1

III

Valuation difference onother investment
securities

Summary of Company Financial Statements, FY Ended October 31, 2006

P.15

2. Consolidated Statements of Income(Unit: Thousands of yen)
Prior Consolidated Accounting
Fiscal Year
(From November 1, 2004
To October 31, 2005)
Classification
I

Notes

AmountPercent

Current Consolidated Accounting
Fiscal Year
(From November 1, 2005
To October 31, 2006)
AmountChange fromprior year

Percent

Revenues from operations
42,985,807

2. Sales

20,989,405 63,975,212

II

100.0

975,793

2. Cost of goods sold16,785,504 48,735,074

Gross profit
Selling, general andadministrative expenses*1

Operating income

747,629

32,697,199

31,949,570

IV

100.0 21,965,199 68,023,782

Cost of revenues fromoperations

1. Cost of rental revenuesIII

3,072,775

46,058,582

1. Rental revenues

76.2 17,048,094 49,745,294

73.1

262,590

15,240,137

23.8

18,278,487

26.9

3,038,349

13,835,766

21.6

14,210,350

20.9

374,584

1,404,371

2.2

4,068,136

6.0

2,663,765

Non-operating revenues

1. Interest revenue

3,756

2,467

△1,2892. Dividend income

57,14940,396△16,752

3. Gain on sale of investment
securities

363,963

24,883△339,080

4. Insurance benefits

47,70940,910△6,799

5. Rents received

94,17390,902△3,2706. Other149,796V

1.1

116,103

315,6620.5△33,692

Non-operating expenses

1. Interest expense
2. New share issuance costs
3. Other353,256

357,750

4,494－

14,762

14,762

217,449

Ordinary income
VI716,548570,7050.9

1,550,213

2.4

222,828595,340

0.9

5,378

3,788,458

5.6

2,238,244

Extraordinary profits

1. Gain on sale or retirementof fixed assets

57,93050,018△7,911

2. Valuation gain on
investment enterprisepartnership

10,8498,515△2,334

3. Gain on reversal of
allowance for doubtful
accounts

24,17433,2709,096

4. Gain on sale of investment
securities

26,906－△26,906－

275,500

275,500

5. Compensation received
6. Other

*2

1,164

121,025

0.2

27,421

394,726

0.6

26,257

Summary of Company Financial Statements, FY Ended October 31, 2006

P.16

Prior Consolidated Accounting
Fiscal Year
(From November 1, 2004
To October 31, 2005)
Classification
VII

Notes

AmountPercent

Current Consolidated Accounting
Fiscal Year
(From November 1, 2005
To October 31, 2006)
AmountChange fromprior year

Percent

Extraordinary losses

1. Loss on sale or retirementof fixed assets*3

147,388

52,366△95,021

2. Impairment loss

*4－594,568

594,568

3. Valuation loss on
investment securities

29,961－△29,961

4. Loss on valuation ofaffiliated company stock

55,000－△55,000

5. Transfer to allowance for
doubtful accounts toaffiliated companies

255,724－△255,724

6. Other

57,310

Income before taxes andadjustments
Corporate, local andbusiness taxes

858,422

Adjustment for corporate
and other taxes△97,079

545,383

0.8

1,125,855

1.8

82,666729,600

1.1

25,3553,453,583

5.1

2,327,728

1,767,872
761,342

1.2

Minority interest in income

11,889Net income

352,623

909,450
1,689,906

2.5

19,1130.0

21,024

0.0

9,134

0.6

1,742,652

2.6

1,390,029△77,965

Summary of Company Financial Statements, FY Ended October 31, 2006

P.17

3. Statement of Consolidated Retained Earnings(Unit: Thousands of yen)
Prior Consolidated Accounting
Fiscal Year
(From November 1, 2004
To October 31, 2005)
Classification

Notes

Amount(Additional paid-in capital)
I

Balance of additional paid-in capital at
the beginning of the period

9,720,343

II

Balance of additional paid-in capital at
the end of the period

9,720,343(Consolidated retained earnings)
I

Balance of consolidated retained
earning at the beginning of the period

II

Increase in consolidated retained
earnings
1. Net income

III352,623352,623

Decrease in consolidated retained
earnings

1. Dividends
2. Directors and auditors’ bonusesIV

13,913,568

Balance of consolidated retained
earnings at the end of the period

567,305
7,300

574,605
13,691,585

Summary of Company Financial Statements, FY Ended October 31, 2006

P.18

4. Consolidated Statement of Changes in Net Assets
Current Consolidated Accounting Fiscal Year (From November 1, 2005 to October 31, 2006)(Unit: Thousands of yen)
Owners’ equity
Paid-in capital
Balance at the end of theprevious consolidated fiscal
year (October 31, 2005)

Capital surplus

Earned surplus

Treasury stock

8,596,737

9,720,343

13,691,585△186,594

1,099,980

1,097,046

Total owners’
equity31,822,071

Change of items during theconsolidated fiscal year
Issuance of new shares

2,197,026

Dividends from surplus△268,677△268,677

Dividends from surplus(interim dividend)△268,622△268,622△7,300△7,3001,742,652

1,742,652

Directors and auditors’
bonuses from appropriationof earnings
Net income
Purchase of treasury stock
Disposal of treasury stock

143,480-11,781-11,781

192,072

335,552

Change of items other thanshareholders’ equity during
the consolidated fiscal year
(net amount)－

Total changes of items during
the consolidated accounting
fiscal year under review

1,099,980

1,240,526

1,198,052

180,290

3,718,850

Balance at the end of theconsolidated accounting fiscal
year under review (October
31, 2006)

9,696,717

10,960,869

14,889,638△6,30335,540,922

Valuation and translation adjustments
Valuation difference
Total valuation andon othertranslation
investment
adjustments
securities
Balance at the end of theprevious consolidated fiscal
year (October 31, 2005)

1,643,403

1,643,403

Minority interests

71,135

Total net assets

33,536,610

Change of items during theconsolidated fiscal year
Issuance of new shares

2,197,026

Dividends from surplus△268,677

Dividends from surplus(interim dividend)△268,622

Directors and auditors’
bonuses from appropriationof earnings△7,300Net income

1,742,652

Purchase of treasury stock△11,781

Disposal of treasury stock

335,552

Change of items other thanshareholders’ equity during
the consolidated fiscal year
(net amount)775,281775,281

21,024

796,305

Total changes of items during
the consolidated accounting
fiscal year under review

775,281775,281

21,0244,515,155

Summary of Company Financial Statements, FY Ended October 31, 2006

P.19

Balance at the end of theconsolidated accounting fiscal
year under review (October
31, 2006)

2,418,684

2,418,684

92,15938,051,766

5. Consolidated Statements of Cash Flows
Current Consolidated Accounting Fiscal Year (From November 1, 2005 to October 31, 2006)(Unit: Thousands of yen)
Current Consolidated
Prior Consolidated
Accounting Fiscal Year
Accounting Fiscal Year
(From November 1, 2004 (From November 1, 2005
To October 31, 2005)
To October 31, 2006)
Classification
I

Change fromprior year

Notes

Cash flow from operating activities

Income before taxes and adjustments

1,125,855

3,453,583

2,327,728

Depreciation and amortization
expense5,211,105

4,792,624△418,480－

594,568

594,568

106,781－△106,781－

136,546

136,546

Gain on sale or retirement of fixed
assets△57,930△50,018

7,911

Loss on sale or retirement of fixed
assets147,388

52,366△95,021

Installment purchases of assets forsmall-value rentals

69,455125,132

55,676

Reclassification of cost of sales
associated with disposal of
construction equipment

7,442

6,866

△576

Reclassification of cost of sales
associated with disposal of rental
assets564,032

569,2735,240△2,465,393△1,811,898

653,495－

14,762

14,762

84,961－△84,961

Gain on sale of investment securities△363,963△24,883

339,080

Decrease in allowance for doubtful
accounts△690,259△502,887

187,382

Increase (decrease) in accrued
bonuses to employees

35,198△4,059△39,257

Increase in accrued bonuses todirectors and auditors

－

5,500

5,500

Increase in accrued employees
retirement benefits

297,163

155,725△141,438

Increase in retirement allowances todirectors and auditors

14,191

18,741

4,549

Interest revenue and dividend income△60,905△42,863

18,041

Interest expense on installment
purchases of rental assets

68,12042,906△25,214

Interest expense

353,256

357,7504,494

Impairment loss
Amortization of consolidation
adjustment account
Amortization of goodwill

Expenditures for acquisition of rental
assets
New share issuance costs
Valuation loss on investment
securities

Summary of Company Financial Statements, FY Ended October 31, 2006

P.20

(Increase) decrease in accounts
receivable, trade9,151,458△630,235△9,781,693(Increase) decrease in inventory
assets164,108△21,251△185,360

Increase (decrease) in accounts
payable, trade△2,567,984

1,581,719

4,149,703

Increase (decrease) in accounts
payable, other△195,552

428,072

623,624

Directors and auditors’ bonuses paid

△7,300△7,300－

Other

256,190

489,036

232,845

11,247,422

9,729,787△1,517,634

60,90542,863△18,041

Interest expense△417,194△400,061

17,133

Payment of corporate and other taxes△671,665△957,962△286,296

Cash flow from operating activities

10,219,467

8,414,626△1,804,840

SubtotalInterest and dividends received

Summary of Company Financial Statements, FY Ended October 31, 2006

P.21

Current Consolidated
Prior Consolidated
Accounting Fiscal Year
Accounting Fiscal Year
(From November 1, 2004 (From November 1, 2005
To October 31, 2005)
To October 31, 2006)
Classification
II

Change fromprior year

Notes

Cash flow from investing activities

Revenue from redemption of term
deposits

5,000

3,018

△1,981

Funds used for the purchase of
tangible fixed assets△484,985△2,248,477△1,763,492

Funds provided from the sale oftangible fixed assets

314,122931,262

617,139

Funds used for the purchase ofintangible fixed assets△50,730-14,729

36,000Funds used for the purchase ofinvestment securities△1,188,707-465,832

722,875

1,386,291

1,353,015△33,276

2,902－△2,902－-50,025△50,025

4,741

2,556

△2,184△11,364△489,212△477,847

Decrease in short-term bank loans△99,275△79,660

19,614

Funds provided by long-term bankloans

7,900,000

8,200,000

300,000

Funds used to repay long-term bankloans

△11,425,496△11,453,496△28,000

Funds used for repayment of
installment obligations△3,637,197△2,271,544

1,365,652

Funds provided by issuance of stock－

2,182,264

2,182,264

Funds provided from disposal oftreasury stock－

335,552

335,552

Funds used for the purchase oftreasury stock△4,118△11,781△7,662

Payment of dividends to parent
company△567,305△537,300

30,005△7,833,393△3,635,966

4,197,427

Funds provided from sale ofinvestment securities
Funds provided from sale of subsidiarycompany stock
Funds used for the purchase ofnon-consolidated subsidiary stock
Other
Cash flow from investing activities
III

Cash flow from financing activities

Cash flow from financing activities
IV

Increase in cash and equivalents

2,374,708

4,289,448

1,914,739

V

Balance of cash and equivalents at
beginning of period

11,734,154

14,108,863

2,374,708

VI

Balance of cash and equivalents at
end of the period

14,108,863

18,398,312

4,289,448*1

Summary of Company Financial Statements, FY Ended October 31, 2006

P.22

Significant Accounting Policies for the Consolidated Financial Statements
Prior Consolidated Accounting Fiscal Year Current Consolidated Accounting Fiscal Year
(From November 1, 2004
1. Companies included in the
consolidation(From November 1, 2005

To October 31, 2005)

To October 31, 2006)(1) Number of consolidated companies: 5(1) Number of consolidated companies: 5

The names of the main consolidated

The names of the main consolidated

subsidiaries are omitted here because

subsidiaries are omitted here because

they are provided in “Consolidated

they are provided in “Consolidated

Subsidiaries”

Subsidiaries”

under

“III

OperatingResults and Financial Position”.

under

“III

OperatingResults and Financial Position”.

(2) Main non-consolidated subsidiaries: 2(2) Main non-consolidated subsidiaries: 3

Non-consolidated subsidiary company

Non-consolidated subsidiary company

name

name

Comsupply Co., Ltd.

Comsupply Co., Ltd.

Kanki Maintenance Co., Ltd.

Kanki Maintenance Co., Ltd.

(Reason for exclusion from

(Reason for exclusion fromconsolidation)

consolidation)

Flowtechno Co., Ltd.

The size of the non-consolidated

Same as at left

subsidiaries is small and their total
assets, sales and fiscal year profit orloss (amount corresponding to equity)andretainedearnings(amount

corresponding to equity) are small insize and do not have a material effectontheconsolidated

financialstatements.
Kanki Maintenance Co., Ltd. was
liquidated on October 3, 2006.
2. Matters pertaining to

Two non-consolidated subsidiaries

Two non-consolidated subsidiaries

application of equity

and two affiliated companies (Active

and two affiliated companies (Active

method accounting

Technology Corporation and Active

Technology Corporation and Active

Power Corporation) have been omitted

Power Corporation) have been omitted

from items to which equity methodfrom items to which equity method

accounting is applied because theiraccounting is applied because theirrespective effect on consolidated net

respective effect on consolidated net

income or loss (amount corresponding

income or loss (amount corresponding

to minority interest) and consolidated

to minority interest) and consolidated

capital surplus (amount corresponding

capital surplus (amount corresponding

to minority interest) is immaterial andto minority interest) is immaterial andnone of the companies is important tonone of the companies is important to

the Company’s overall operations.

the Company’s overall operations.
ActivePower

Corporation

was

liquidated on January 18, 2006, andKanki

Maintenance

Co.,

Ltd.

was

liquidated on October 3, 2006.
3. Matters pertaining to the

The fiscal year closing date for all offiscal year closing date forthe consolidated subsidiaries except

consolidated subsidiaries

Kanki Corporation is August 31.

Same as at left

When preparing the consolidated
financialusedstatements

the

the

Company

subsidiaries’

financialstatements as of August 31, adjusted
forsignificant

transactions

thatoccurred between the subsidiaries’
fiscal year-end and the consolidation
date that have a material effect on the
consolidated financial results.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.23

Prior Consolidated Accounting Fiscal Year Current Consolidated Accounting Fiscal Year
(From November 1, 2004

(From November 1, 2005

To October 31, 2005)

To October 31, 2006)

4. Accounting principles andstandards used for normal
accounting treatment(1) Appraisal standards andappraisal methods forprincipal assets

a. Negotiable securities

a. Negotiable securities

Other negotiable securities

Other negotiable securities

Securities with a market price
The

Company

has

Securities with a market priceadoptedtheThe

Companyhasadoptedthemarket value method (the full amountmarket value method (the full amountof the valuation difference is chargedof the valuation difference is charged

to equity using the direct transfer toto net assets using the direct transfer

capital method, with the disposal costto capital method, with the disposal

determined by the moving averagecostmethod) based on the market price on

average method) based on the market

the consolidated accounting fiscal year

price on the consolidated accounting

closing date or similar prices

fiscal year closing date or similar

determined

by

the

movingpricesSecurities without market prices

Securities without market prices

The Company has adopted the cost

Same as at left

method, cost being determined by themoving average method
b. Construction equipment
Amountafter

depreciation

expenseaccordingthetob. Construction equipment

deductionofSame as at left

calculated

declining-balancemethod from the original prices, byseparate fiscal year of purchasec. Merchandise inventories and suppliesc. Merchandise inventories and supplies(i) Merchandise inventories(i) Merchandise inventories

Lower of cost or market based on theSame as at left

Last-in, First-out method(ii) Supplies(ii) Supplies

The Latest Purchase Cost method(2) Depreciation methods forprincipal depreciable
assetsSame as at left

a. Tangible fixed assets
The

Companya. Tangible fixed assets

has

adoptedtheSame as at left

declining-balance method. Buildings
on

land

that

fixed-term

is

land

leased
lease

under

a

agreement,

however, are depreciated using thestraight-line

methodusing

theremaining period of the fixed-termlease as the depreciable life and zero
residualconsolidated
Company

value.

For

certainsubsidiaries,
has

adoptedthethestraight-line method for buildings andstructures acquired on or after April 1,
2000

but

excluding

fixturesandequipment.
The depreciable lives mainly used by
the Company are as follows.
Rental assets
5-10 years
Buildings
31-34 years

Summary of Company Financial Statements, FY Ended October 31, 2006

P.24

b. Intangible fixed assets
The Company has adopted

b. Intangible fixed assets
thestraight-line method.
Software for use within the Company isdepreciated using thestraight-line method based on theSame as at left

assumed useful life for internal use (5years)(3) Accounting standards fordeferred assets

a. New share issuance costs──────

The Company expenses the fullamount of new share issuance costs
when the costs are incurred(4) Accounting standards forprincipal allowances andreserves

a. Reserve for doubtful accounts

a. Reserve for doubtful accounts

To provide for losses on doubtfulSame as at left

accounts such as accounts receivable,
the Company charges to income anamountbasedonactualloss

experience for normal accounts, plusanamountunrecoverableforamounts

projected
based

on

assessments of individual accounts.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.25

Prior Consolidated Accounting Fiscal Year Current Consolidated Accounting Fiscal Year
(From November 1, 2004

(From November 1, 2005

To October 31, 2005)

To October 31, 2006)

b. Accrued bonuses to employeesb. Accrued bonuses to employees

To fully provide for expenditures ofSame as at left

bonuses the Company will pay toemployees, an amount is appropriatedto the reserve during the year based
upon a salary estimate amount.
c.

c. Accrued bonuses to directors and──────

auditors
To fully provide for expenditures ofbonuses the Company will pay to
directors and auditors, an amount isappropriated to the reserve during theaccounting fiscal year to provide forthe liability recognized during theperiod.
(Supplemental information)
In the past, the Company accounted
for directors and auditors’ bonuses asa decrease in unappropriated retained
earnings, based on the Proposal for
Appropriation of Retained Earnings
approved at the General Meeting of
the Shareholders. Beginning from thisconsolidated accounting fiscal year,
however, the Company will account for
directors and auditors’ bonuses as an
expense of the accounting period in
which

such

bonusesareaccrued,based on the Accounting Standard for
Directors’

Bonuses(AccountingStandards Board of Japan, Accounting
Statement No. 4 dated November 29,2005). As a result, operating income,ordinary income and income before
taxes

and

adjustments

were¥5,500,000 less than they otherwise
would have been had the accounting
standards used in past periods been
applied.
The affect of this change on the
Company’s information by segment is
not material.
d. Accrued employees retirement benefitd. Accrued employees retirement benefit
Same as at left

e. Retirement allowances to directors ande. Retirement allowances to directors andauditors

auditors

The

Company

providesfor

Same as at left

retirement allowances to directors andauditors based upon pertinent rules
andappropriated

to

the

account

proportionately at the end of theconsolidated accounting fiscal year
based upon length of service.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.26

(5) Lease transactions

Forfinance

exceptfor

leaseleasestransactions
that

Same as at lefttransferownership of the property to thelessee, rent expenses are charged toincome as payments are made.
(6) Hedge accounting forprincipal hedging
methodsa. Hedge transactions

a. Hedge transactions

The Company accounts for hedge

Same as at lefttransactions using allocations basedon accounting standards for foreign
currency-denominatedtransactions,and special rule accounting based on
accounting

standards

forfinancial

products.
b. Hedge methods and hedgedb. Hedge methods and hedgedtransactionstransactions

The Company uses currency swaps

Same as at left

and forward transactions in order toavoid the currency fluctuation risk
relatedtotheCompany’s

foreigncurrency-denominated straight bonds
and liabilities for import payments.
The Company also uses interest swaps
to avoid interest rate fluctuation risk
related to interest on bank borrowing.
c. Hedging policies

c. Hedging policies

The Company’s use of derivative

Same as at lefttransactions is limited to hedging risk
within the scope of the Company’s
assets and liabilities subject to market
fluctuation risk.
d. Method for evaluating the effectivenessd. Method for evaluating the effectivenessof hedgesof hedges

The Company does not evaluate theSame as at left

effectiveness of its hedge transactions
becauseitcurrency

swap

can

assumethattransactions

its
and

forward transactions will completely
offset market fluctuations or changes
in cash flow from the time hedge
begins

until

it

is

terminated.

In

addition, the Company’s interest swap
transactions fulfill the requirements
for special rule accounting, and theCompany has elected to use this inplace of an evaluation of effectiveness.
(7) Accounting standards for
consumption tax

Consumption tax is taken out of all
StatementofIncomeitems

Same as at left

andBalance Sheet items, except mainly
for receivables and payables.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.27

Prior Consolidated Accounting Fiscal Year Current Consolidated Accounting Fiscal Year
(From November 1, 2004

(From November 1, 2005

To October 31, 2005)
5. Valuation of consolidated

The

Companyhas

To October 31, 2006)

adoptedthesubsidiary assets andmarket value appraisal method for theliabilities

evaluation of assets and liabilities ofSame as at left

consolidated subsidiaries.
6. Amortization of the

The remainder is transferred to theconsolidation adjustment

consolidation account and amortizedaccount

over

five

years

using

──────

level

amortization, except for extremely
small amounts that are written off
completely in the year in which theyoccur.
7. Amortization of goodwill

The remainder is amortized over five──────

and goodwill liability

years using level amortization, except
for extremely small amounts that are
written off completely in the year inwhich they occur.

8. Appropriation of retained
earnings

The

StatementofConsolidated──────

Retained Earnings is created based
upon the appropriation of consolidated
net income decided upon by theCompany

duringtheconsolidated

accounting fiscal year.
9. Items included in cash andFunds included in cash (cash andequivalents on the

cash equivalents) on the Consolidated

Consolidated Statement ofStatement of Cash Flows include cash

Cash Flows

on

hand,

deposits

that

can

Same as at leftbewithdrawn on demand and highly
liquid short-term investments thatmature within three months of thedate of acquisition and which can beeasily converted into cash and thathave minimal risk of a change in price.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.28

Changes in Important Matters Used as the Basis for Preparation of the Consolidated
Financial Statements
Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)──────

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)(Accounting Standard for Impairment of Fixed Assets)
Beginning from this consolidated accounting fiscal
year, the Company has adopted the AccountingStandard for Impairment of Fixed Assets (“Opinion
Concerning Establishment of Accounting Standard for
Impairment of Fixed Assets” (Business Accounting
Council,August

9,

2002)

and

“Implementation

Guidance for the Accounting Standard for Impairmentof Fixed Assets” (Accounting Standards Board of Japan,
October 31, 2003, Financial Accounting Standard
Implementation Guidance No. 6).
As a result, income before taxes and adjustments
decreased by ¥594,568,000.
The total amount of the impairment loss is deducted
directly from the balance for each asset based on therevisedstandards

forpreparationofinterimconsolidated financial statements and other rules.
──────

(Accounting Standard for Presentation of Net Assets in the
Balance Sheet)
Beginning from this consolidated accounting fiscal
year, the Company has adopted the “AccountingStandard for Presentation of Net Assets in the Balance
Sheet”(AccountingStandards

Board

of

Japan

Statement No. 5 dated December 9, 2005) and the“Guidance on Accounting Standard for Presentation ofNet

AssetsintheBalance

Sheet”(AccountingStandards Board of Japan Guidance No. 8 dated
December 9, 2005).
The

amountcorresponding

to

the

total

of

shareholders’ equity based on the past accounting
standard is ¥37,959,606,000.
The net asset section of the consolidated balance
sheet for the consolidated accounting fiscal year underreview was prepared based on the revised consolidated
financial statements rules.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.29

Change in Presentation Method
Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)(Consolidated Balance Sheets)(Consolidated Balance Sheets)

1. Following promulgation of the Law to Partially Amend1.

──────

the Securities and Exchange Law Etc. (Law No. 97 of
2004) on June 9, 2004 and its application on December
1, 2004, and the revision of the Practical Guidelines for
AccountingforFinancial

Instruments(Accounting

Committee Report No. 14) on February 15, 2005, theCompany changed its reporting method to disclose
investments in venture capital investment limited
partnerships and similar associations (investments
regarded as negotiable securities under Article 2paragraph 2 of the Securities and Exchange Law) as“investment securities” beginning from the consolidated
accounting fiscal year under review.
The amount of a such investments included ininvestment securities for the consolidated accounting
fiscal year under review is ¥106,935,000, and theamount of such investments included in “Other” under
Investments and Other Assets in the prior consolidated
accounting fiscal year was ¥108,080,000.

2.

2. Beginning from this consolidated fiscal year, the──────

Company will report “goodwill” and “consolidation
adjustment account” as “goodwill,” based on based on
the revised consolidated financial statements rules.
At the end of this consolidated accounting fiscal year,theamounts“consolidationaccounting

corresponding
adjustment

standards

toaccount”

previously“goodwill”
based
applied

on

and
the
were

¥64,000,000 and ¥331,109,000, respectively.
(Consolidated Statements of Income)(Consolidated Statements of Income)1. The Company has reported cash bonus received1.

──────

2.

──────

(¥2,905,000 for the consolidated accounting fiscal year
under review), which was reported as a separate
category until the prior consolidated accounting fiscal
year, in “Other” under non-operating revenues becausetheamountremains

less

than

10%

of

total

non-operating revenues.
2. In prior consolidated accounting fiscal years, theCompany reported the loss on valuation of affiliatedcompany stock in “Other” under extraordinary losses,
but for the consolidated accounting fiscal year underreview this item is reported separately because theamountexceeded

10%

of

the

total

amountofextraordinary losses.
The amount of the loss on valuation of affiliatedcompany stock at the end of the prior consolidated
accounting fiscal year was ¥646,000.

3.

──────

3. Beginning from this consolidated fiscal year, theCompany will report “Amortization of consolidation
adjustment account” as “Amortization of goodwill,”
based on the revised consolidated financial statements
rules.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.30

(Consolidated Statements of Cash Flows)(Consolidated Statements of Cash Flows)1.

1. Beginning from this consolidated accounting fiscal──────

year, the amount for goodwill amortization expense(¥32,000,000 in the previous consolidated accounting
fiscal year) that had been reported in “Depreciation andamortization expense” will be reported as “Amortizationof goodwill,” and the amount reported in the past as“Amortization of consolidation adjustment account” will
be included in “Amortization of goodwill”, based on therevised consolidated financial statements rules.

Supplemental Information
Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)

Following promulgation of the Law to Partially Amend──────

the Local Tax Law (Law No. 9 of 2003) on March 31,
2003 and the introduction of a corporate size-based tax
system in the corporate fiscal year beginning after April
1, 2004, the Company will report the added value
portion and capital portion of corporate taxes in selling,
generalandadministrative

expenses

from

the

consolidated accounting fiscal year under review inaccordance with the Practical Solution on Presentation
for Corporate Size-Based Portion of Corporate BusinessTax on the Income Statement (Accounting Standards
Board

of

Japan,

Corporate

AccountingStandards

Committee Report No. 12 dated February 13, 2004).
As a result, selling, general and administrative
expenses increased by ¥77,297,000, and operating
income, ordinary income and income before taxes andadjustments decreased by ¥77,297,000.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.31

Notes to the Financial Statements(Notes to the Consolidated Balance Sheets)
Prior Consolidated Accounting Fiscal Year（As of October 31, 2005）

Current Consolidated Accounting Fiscal Year(As of October 31, 2006)

1. Matters related to non-consolidated subsidiaries and

1. Matters related to non-consolidated subsidiaries andaffiliated companies are as follows.

affiliated companies are as follows.

Investment securities (stocks)

5,000,000

2. Guarantees

55,025,000

2. Guarantees

Joint and several guarantees of
employee bank loans (Bank ofTokyo-Mitsubishi, others)
Total

Joint and several guarantees of
employee bank loans (Bank ofTokyo-Mitsubishi, others)

30,779,000
30,779,000

3. Discount on notes receivable, trade373,580,000

4. Total number of shares issued(common stock)

27,162,000

Total

27,162,000

3. Discount on notes receivable, trade4.

──────

5.

──────

347,861,000

30,253,241 shares

5. Number of shares of treasury stock held by
the Company (common stock)

400,165 shares

6. Liquidation of receivables based on receivables transfer
facility

6. Liquidation of receivables based on receivables transfer
facility

Notes receivable, trade

7.

Investment securities (stocks)

5,348,993,000

Notes receivable, trade

5,734,296,000

Liquidated claims bearing a right of recourse to the

Liquidated claims bearing a right of recourse to theCompany and included in the balance of notes

Company and included in the balance of notes

receivable, trade transferred total ¥1,152,352,000.

receivable, trade transferred total ¥1,244,278,000.

──────

7. Intangible fixed assets and goodwill includes liabilities
for goodwill of ¥1,188,000 and goodwill of¥64,000,000.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.32

(Notes to the Consolidated Statements of Income)Prior Consolidated Fiscal Year
(From November 1, 2004
to October 31, 2005)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)

1. Major expense categories and amounts included in

1. Major expense categories and amounts included inselling, general and administrative expenses

selling, general and administrative expenses

Employee salaries and wages
Depreciation expense
Rents
Transfer to allowance for
doubtful accounts
Transfer to accrued bonuses
to employees
Employees retirement benefit
expenseTransfer
toretirement
allowances to directors andauditors
Amortization of consolidation
adjustment accountEmployee salaries and wages

5,529,726,000

Depreciation expense
Rents
Transfer to allowance for
doubtful accounts
Transfer to accrued bonuses to
employees
Transfer to accrued bonuses todirectors and auditors
Employees retirement benefit
expenseTransfer to retirement
allowances to directors andauditors
Amortization of goodwill

746,963,000
1,587,085,000
45,529,000

5,220,900,000
861,893,000
1,529,712,000
203,769,000
509,379,000
515,384,000
14,191,000

106,781,000

2. Gain on sale or retirement of fixed assets
Land
Buildings and structures
Machinery, equipment anddelivery equipment
Other
Total

Machinery, equipment anddelivery equipment
Land
Other

51,273,000
3,122,000
3,528,000

304,966,000
18,741,000

136,546,000

Land
Buildings and structures
Other
Total

49,905,000
110,000
3,000
50,018,000

6,000
57,930,000
3. Loss on sale or retirement of fixed assets（Loss on sale of fixed assets）
58,116,000
605,000
1,915,000
53,000（Loss on retirement of fixed assets）
Rental equipment

38,767,000

Buildings and structures

5,623,000

Machinery, equipment anddelivery equipment

8,855,000

Other

33,449,000

Total

5,500,000

2. Gain on sale or retirement of fixed assets

3. Loss on sale or retirement of fixed assets（Loss on sale of fixed assets）
Buildings and structures

510,328,000

Buildings and structures

108,000

Land

2,428,000

Other

284,000（Loss on retirement of fixed assets）
Rental equipment

24,055,000

Buildings and structures
Machinery, equipment anddelivery equipment
Other

21,261,000

Total

2,464,000
1,763,000
52,366,000

147,388,000

Summary of Company Financial Statements, FY Ended October 31, 2006

P.33

Prior Consolidated Fiscal Year
(From November 1, 2004
to October 31, 2005)4.

──────

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)
4. Impairment loss
During this consolidated accounting fiscal year the
Kanamoto Group incurred an impairment loss on thefollowing asset groups.
Location
Kamakura City,
Kanagawa Prefecture
Kanazawa City,
Ishikawa Prefecture
Muroran City,
Hokkaido
Five other locations

Use

Asset

Dormant
assetsLand

Asset groupings used by the Kanamoto Group to
apply asset impairment accounting are based on theblock classified as the smallest segment for which
profitability can be determined regularly by business.
Specifically, dormant assets are grouped as units thatgenerate 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

reductionasanimpairment

loss(¥594,568,000) under extraordinary losses. This
¥594,568,000 was for land.
The recoverable value for this asset group ismeasured according to net sales price, and the land isevaluated using the inheritance tax assessment value
based on the land tax assessment value or otheramount as a base.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.34

(Notes to the Consolidated Statement of Changes of Changes in Net Assets)
Current consolidated accounting fiscal year (From November 1, 2005 to October 31, 2006)
1. Class of shares issued and number of shares, treasury stock and number of shares(Thousands of shares)
Number of sharesat end of the priorconsolidated
accounting fiscal
year

Increase in
number of shares
during the current
consolidated
accounting fiscal
year

Decrease in
number of shares
during the current
consolidated
accounting fiscal
year

Number of sharesat end of thecurrent
consolidated
accounting fiscal
year30,2532,619－

32,87230,2532,619－

32,872

Common stock (Note 2, 3)

400

12

400

13

Total

400

12

400

13

Number of shares issued
Common stock (Note 1)
Total
Treasury stock(Notes) 1. The number of shares of common stock issued increased by 2,619,000 shares. This included anincrease of 2.6 million shares of new stock issued through a public offering and an increase of
19,000 shares of new stock issued by a third party allocation.
2. The number of treasury stock shares of common stock increased by 12,000 shares throughpurchases of shares comprising less than one investment unit.
3. The number of treasury stock shares of common stock decreased by 400,000 shares throughdisposals of treasury stock.
2. Matters pertaining to subscription rights and treasury stock subscription rights
The Company had no material items to report.
3. Dividends(1) Dividends paid
Resolution

Class of stock

Total dividend(‘000 yen)

Dividend pershare (yen)Common stock

268,677

Common stock

268,622

Date of record

Payment date

9.00

October 31, 2005

January 30, 2006

9.00

April 30, 2006

July 18, 2006

January 27, 2006
Regular General
Meeting of the
Shareholders
June 9, 2006
Board of Directors(2) Dividends for which the date of record falls in the current consolidated accounting fiscal year andthe dividend payment date is in the following fiscal year
Resolution

Class of stocks

Total dividend Source of funds Dividend per(‘000 yen)for dividend
share (yen)January 26, 2007
Regular General

CommonMeeting of thestock

Shareholders

Date of record

Payment date

Consolidated
295,732

retained

9.00

October 31, 2006 January 29, 2007

earnings

Summary of Company Financial Statements, FY Ended October 31, 2006

P.35

(Notes to the Consolidated Statements of Cash Flows)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)

1. Relationships between fiscal year-end balance for cash

1. Relationships between fiscal year-end balance for cash

and equivalents and amounts for items shown on theand equivalents and amounts for items shown on the

consolidated accounting fiscal year balance sheet

consolidated accounting fiscal year balance sheet

Cash and equivalents
14,111,882,000
Term deposits with a maturity longer- 3,018,000
than 3 months
Items considered to be cash and
14,108,863,000
equivalents
2. Details of major non-cash transactions

Cash and equivalents
18,398,312,000
Term deposits with a maturity longer
than 3 months
Items considered to be cash and18,398,312,000
equivalents
2. Details of major non-cash transactions

The

amountofassetsandliabilities

relatedto

The amount ofassets andliabilities related

toinstallment transactions that are newly accounted for

installment transactions that are newly accounted for

during this consolidated accounting fiscal year isduring this consolidated accounting fiscal year is¥1,538,987,000 respectively.

¥2,004,757,000 respectively.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.36

(Notes for Leasing Transactions)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)

1. Finance lease transactions except for leases that

1. Finance lease transactions except for leases thattransfer ownership of the property to the lessee.

transfer ownership of the property to the lessee.

(1) Amounts corresponding to lease property(1) Amounts corresponding to lease property

acquisition price, accumulated depreciation andacquisition price, accumulated depreciation andoutstanding balances at the end of the consolidated

outstanding balances at the end of the consolidated

fiscal year accounting period

fiscal year accounting period

Acquisition
price（¥’000）

Accumulated Outstanding
depreciation
balance（¥’000）（¥’000）Rental assets

37,626,285

14,078,793 23,547,492

Other assets

350,675

Total

37,976,961

196,156

154,519

14,274,949 23,702,011

Acquisition
price（¥’000）

Accumulated Outstanding
depreciation
balance（¥’000）（¥’000）Rental assets

39,777,357

17,228,654 22,548,702

Other assets

313,056

Total

40,090,413

194,312

118,744

17,422,966 22,667,447(2) Outstanding balance of future lease payments at(2) Outstanding balance of future lease payments at

the end of the consolidated accounting fiscal year

the end of the consolidated accounting fiscal year

Within one year

5,777,918,000

Within one year

6,355,705,000

After one year

17,311,719,000

After one year

15,869,153,000

Total

23,089,637,000(3) Amount of lease payments, depreciation expense
and interest expense

Total

22,224,858,000(3) Amount of lease payments, depreciation expense
and interest expense

Lease payments

6,569,358,000

Lease payments

6,471,623,000

Depreciation expense

5,959,692,000

Depreciation expense

5,912,597,000Interest expense

772,799,000(4) Accounting method for amount equivalent toInterest expense

677,257,000(4) Accounting method for amount equivalent todepreciation expensedepreciation expense

Straight-line depreciation using the lease term as

Same as at left

the depreciable life and zero residual value.
(5) Accounting method for amount equivalent to(5) Accounting method for amount equivalent tointerest expenseinterest expense
Same as at left

Interest method using the difference between
total lease payments and the acquisition price of thelease property, allocated to each year.
2. Operating leases

2. Operating leases

Future lease payments

Future lease payments

Within one year

1,664,503,000

Within one year

2,150,840,000

After one year

3,837,936,000

After one year

5,381,216,000

Total

5,502,439,000

Total

7,532,057,000

Summary of Company Financial Statements, FY Ended October 31, 2006

P.37

(Notes Related to Negotiable Securities)
Negotiable securities
1. Other negotiable securities with market prices(Unit: Thousands of yen)
Current consolidated accounting
fiscal year
(As of October 31, 2006)

Prior consolidated accounting
fiscal year
(As of October 31, 2005)
Acquisition
price

Amountreported ontheconsolidatedbalance sheet

Valuation
profit or loss

Acquisition
price

Amountreported ontheconsolidatedbalance sheet

Valuation
profit or loss

1,544,363

4,347,665

2,803,302

1,550,751

5,640,940

4,090,189

－

－

－

－

－

－

－

－

－

15,375

15,420

45

－

－

－

－

－

－

10,20010,624

424

－

－

－

1,554,563

4,358,289

2,803,726

1,566,126

5,656,360

4,090,234

99,17584,322△14,853

81,23074,019△7,211

－

－

－

－

－

－

－

－

－

－

－

－

Type

Negotiablesecurities
whosebalance ontheconsolidatedbalancesheet
exceeds theacquisition
price(1) Stocks(2) Bonds
a. Government
bonds
b. Corporate
bondsc. Other(3) Othernegotiablesecurities
Subtotal(1) Stocks

Negotiablesecurities
whosebalance ontheconsolidatedbalancesheet is lessthan theacquisition
price(2) Bonds
a. Government
bonds
b. Corporate
bondsc. Other

－

－

－

－

－

－

(3) Othernegotiablesecurities

988,278

959,460△28,818

145,500

123,340△22,160

Subtotal

1,087,453

1,043,782△43,671

226,730

197,359△29,3712,642,016

5,402,071

2,760,055

1,792,856

5,853,719

4,060,862

Total

2. Other negotiable securities sold during the prior consolidated accounting fiscal year and thecurrent consolidated accounting fiscal year

Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)
Selling amount
Total gain on sale Total loss on sale958,250

363,963－(Unit: Thousands of yen)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)
Selling amount
Total gain on sale Total loss on sale
1,324,642

24,883－

3. Details of other negotiable securities that do not have a market value(Unit: Thousands of yen)Type

Prior consolidated accounting
fiscal year
(As of October 31, 2005)
Amount shown on the consolidatedbalance sheet

Current consolidated accounting
fiscal year
(As of October 31, 2006)
Amount shown on the consolidatedbalance sheet

Other negotiable securities
Unlisted stocks (excluding
over-the-counter stocks)

239,050

229,400

Unlisted foreign bonds－－

Corporate bonds with warrants
for new stock－－

106,935

85,953

Other

Summary of Company Financial Statements, FY Ended October 31, 2006

P.38

4. Planned future redemption amounts of other securities that have a maturity date
(Unit: Thousands of yen)Type(1) Bonds
a. Government
bonds

Prior consolidated accounting
fiscal year
(As of October 31, 2005)
After one
After five
year andWithinAfter tenyears within
years
one year within fiveten years
years

Current consolidated accounting
fiscal year
(As of October 31, 2006)
After five
After one
After ten
years
year andWithinyears
one year within five within ten
years
years

－

－

－

－

－

－

－

－

b. Corporate bonds

－

－

－

－

－

－

15,420－c. Other

－

－

－

－

－

－

－

－

(2) Other negotiablesecurities－－

950,364

－

－

－

－

82,620

Total

－

－

950,364－－－

15,42082,620

Summary of Company Financial Statements, FY Ended October 31, 2006

P.39

（Notes related to Derivative Transactions）
1. Notes related to transaction conditions
Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)

a. Contents and purpose of derivative transactions

a. Contents and purpose of derivative transactions

The Kanamoto Group uses forward exchange
agreements

andcurrency

swap

transactions

Same as at leftfor

specified foreign currency-denominated assets andliabilities to avoid the risk of future exchange rate
fluctuations in currency markets related to its foreign
currency-denominated assets and liabilities.
The Company also uses interest swaps to limit withina specific range the affect any future increase inmarket interest rates will have on payments of intereston the Company’s floating rate loans. The Company
accounts for derivative transactions using hedge
accounting principles.
Hedge accounting methods
The Company accounts for hedge transactions
using allocations based on accounting standards
for foreign currency-denominated transactions,and special rule accounting based on accounting
standards for financial products.
Hedge methods and hedged transactions
Hedge methods
Currency

swaps,

forwardexchangeagreements and interest swaps
Hedged transactions
Foreign currency-denominated straight bonds,
import payment liabilities and loans
Hedging policy
The Company’s use of derivative transactions islimited to hedging risk within the scope of theCompany’s assets and liabilities subject to market
fluctuation risk.
Method for evaluating the effectiveness of hedges
The

Companydoes

notevaluatetheeffectiveness of its hedge transactions because it
can assume its currency swap transactions andforward transactions will completely offset market
fluctuations or changes in cash flow from the time
the hedge begins until it is terminated. In addition,
the Company’s interest swap transactions fulfill
the requirements for special rule accounting, andthe Company has elected to use this in place of anevaluation of effectiveness.
b. Transaction matching policyb. Transaction matching policy

The Kanamoto Group has adopted a policy of using

Same as at leftderivative transactions only to avoid the risks to its
assets and liabilities exposed to market fluctuation
risk. The Company’s policy is to not use derivativetransactions to earn short-term trading gains or for
speculative purposes.

Summary of Company Financial Statements, FY Ended October 31, 2006

P.40

Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)

c. Transaction-related risksc. Transaction-related risksSame as at left

Derivative transactions present market risk related
to fluctuations in the market prices of the commodity
subject to the transactions and credit risk related to
non-performances of the agreements by customers.
The foreign currency-related forward agreements
used by the Kanamoto Group present risk fromcurrency market fluctuations, and the interest swaps
used by the Kanamoto Group present risk fromchanges in market interest rates.
The Company believes it faces minimal credit risk
because the counterparties to the Kanamoto Group’s
derivative transactions are always domestic banks or
securities firms with excellent creditworthiness.
d. Transaction risk management system

d. Transaction risk management system
Same as at left

The Company’s basic policy concerning derivativetransactions is determined by the Board of Directors,
and the manager responsible for the finance section in
the Accounting Division executes and manages thetransactions based on internal management guidelines.
The chief financial officer reports on the Company’s
financial affairs, including all derivative transactions, at
the regular meetings of the Board of Directors.
e. Supplemental explanation of matters related toe. Supplemental explanation of matters related totransaction market prices

transaction market prices

Forward agreements and currency swap transactions

Same as at left

accounted for on the Company’s financial statements
throughconversion

currency-denominatedliabilities

by

being

of

the

money

relevant

foreignclaimsandmoneyappropriatedtoforeigncurrency-denominated claims or liabilities or otheraccounts at the end of the consolidated fiscal year are
excluded from transactions for which market prices aredisclosed.

2. Notes related to transaction market prices etc.
Prior consolidated accounting fiscal year (As of October 31, 2005)
The Company had no material items to report.
Current consolidated accounting fiscal year (As of October 31, 2006)
The Company had no material items to report.

Summary of Company Financial Statements, FY Ended October 31, 2006
P.41

（Notes related to accrued employees retirement benefit）
1. Summary of the employees retirement benefit system adopted by the Company
The Company and its consolidated subsidiaries have established a pension fund system and a retirement lump-sum
benefit system as a defined benefit plan. In addition, when an employee retires or leaves the Company, in some cases theCompany 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.
On January 1, 2004 the Company received approval from the Minister of Health, Labour and Welfare for exemption fromthe obligation to make future payments for the entrusted portion of the Employee Welfare Pension Fund.

2. Details of the Company’s liability for accrued employees retirement benefit(Unit: Thousands of yen)
Prior consolidated accounting
fiscal year
(As of October 31, 2005)(1) Liability for accrued employees retirement benefit(2) Pension assets(3) Liability for unreserved accrued employees
retirement benefit (1) ＋(2)△4,382,486△4,702,213

2,979,738

3,136,068△1,402,748△1,566,144－－△123,245－－△115,575△1,525,993△1,681,719－－△1,525,993△1,681,719(4) Unamortized amount of the one-time valuationdifference for change in accounting standards(5) Unrecognized actuarial differences(6) Unrecognized past years’ service obligation(reduction in liability)(7) Net liability shown on the consolidated balance
sheet (3)＋(4)＋(5)＋(6)(8) Prepaid pension expense(9) Accrued employees retirement benefit(7)－(8)(Note)

Current consolidated accounting
fiscal year
(As of October 31, 2006)

1. The Company’s consolidated companies have adopted the simple method for calculating the accrued employees’
retirement benefit.

3. Details of accrued employees retirement benefit expense
Prior Consolidated Accounting
Fiscal Year
(From November 1, 2004
To October 31, 2005)(Unit: Yen thousands)
Current Consolidated Accounting
Fiscal Year
(From November 1, 2005
To October 31, 2006)(1) Service costs

407,274

320,452(2) Interest costs

91,621

84,390(3) Expected return on plan investments（reduction）

95,571

114,322－－112,060

14,446－－515,384

304,966－－

515,384

304,966(4) Write-off of past years’ service liability expense(5) Write-off of expense for actuarial based difference(6) Amount of one-time valuation difference forchange in accounting standards charged as an
expense(7) Employees retirement benefit expense(8) Gain on return of entrusted portion of corporate
Employee Welfare Pension Fund
TOTAL

Note: The employees retirement benefit expenses at consolidated subsidiary companies that have adopted the simple method
are included in service costs.

Summary of Company Financial Statements, FY Ended October 31, 2006
P.42

4. Matters related to the basis for accounting for the accrued employees retirement benefit andother items
Prior consolidated accounting Current consolidated accounting
fiscal year
fiscal year
(As of October 31, 2005)(As of October 31, 2006)(1) Discount rate

2.00

2.00

(2) Expected rate of return on plan investments

4.00

4.00

(3) Method of allocating projected benefits to periodsof service

Service period fixed
benefit basis

Service period fixed
benefit basis(4) Amortization period of past years’ service liability－－

10 years beginning from thenext consolidated accounting
fiscal year

10 years beginning from thenext consolidated accounting
fiscal year－－

(5) Amortization period for actuarial differences(6) Number of years for amortization of one-timevaluation difference for change in accounting
standards

Summary of Company Financial Statements, FY Ended October 31, 2006
P.43

（Notes Related to Tax Effect Accounting）
Prior Consolidated Accounting Fiscal Year(As of October 31, 2005)

Current Consolidated Accounting Fiscal Year(As of October 31, 2006)

1. Principal items accounted for as deferred tax assets and1. Principal items accounted for as deferred tax assets anddeferred tax liabilities

deferred tax liabilities

Deferred tax assets
Amount in excess of limit forinclusion
Disallowance of deferred business
taxes
Excess accrued employees
retirement benefit
Amount in excess of limit for
retirement benefit
Amount in excess of limit for
accrued bonuses to employees
Disallowance of excess
depreciation
Amount of loss carried forward

321,983,000
54,003,000
606,705,000
44,631,000
208,381,000
319,278,000
1,340,357,000

Other

396,028,000

Deferred tax asset subtotal
Valuation reserve

3,291,368,000△1,558,279,000

Total deferred tax assets
Deferred tax liability
Valuation difference on othernegotiable securities
Net amount of deferred tax assets

1,733,089,000

1,115,062,000
618,027,000

Deferred tax assets
Amount in excess of limit forinclusion
Disallowance of deferredbusiness taxes
Excess accrued employees
retirement benefit
Amount in excess of limit for
retirement benefit
Amount in excess of limit for
accrued bonuses to employees
Disallowance of excess
depreciation
Impairment loss

135,080,000
102,760,000
670,548,000
52,202,000
208,963,000
280,174,000
240,205,000

Amount of loss carried forward

1,347,600,000

Other

453,341,000

Deferred tax asset subtotal
Valuation reserve

3,351,731,000△1,401,531,000

Total deferred tax assets
Deferred tax liability
Valuation difference on othernegotiable securities
Net amount of deferred tax assets

1,811,055,000

1,640,588,000
170,467,000

Disclosure item:

Disclosure item:
Current assets - Deferred tax assets

318,999,000

Current assets - Deferred tax assets

Fixed assets - Deferred tax assets

302,238,000

Fixed assets - Deferred tax assets－

Long-term liabilities-3,209,000

Long-term liabilities△221,336,000

2. Causes of principal differences between the statutory

391,803,000

2. Causes of principal differences between the statutory

tax rate and burden ratio for corporate and other taxes

tax rate and burden ratio for corporate and other taxes

following application of tax effect accounting by major

following application of tax effect accounting by major

category.

category.

Statutory corporate tax rate

40.4%

（Adjustment）
Local tax equalization
Items not included permanently in losses
such as expense accountConsolidated subsidiary losses
Other
Burden ratio for corporate and other taxes
after application of tax effect accounting

Statutory corporate tax rate

40.4%

（Adjustment）
8.1%
3.0%
11.9%
4.2%
67.6%

Local tax equalization
Items not included permanently in losses
such as expense accountAffect from application of asset
impairment accounting for fixed assets
Consolidated subsidiary losses
Other
Burden ratio for corporate and other taxes
after application of tax effect accounting

2.7%
1.2%
4.0%
0.9%
△0.3%
48.9%

Summary of Company Financial Statements, FY Ended October 31, 2006
P.44

(Business Segment Information)
1. Segment Information by Type of BusinessPrior consolidated accounting fiscal year (From November 1, 2004 to October 31, 2005)(Unit: Thousands of yen)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

57,844,580

5,699,737

430,894

63,975,212－

63,975,212

－

－

－

－

－

－

Eliminations
or entire
Consolidated
company

Total

I. Revenues and operating income
Revenues(1) Sales to outside customers(2) Sales or transfers between
related segments
Total

57,844,580

5,699,737

430,894

63,975,212－

63,975,212

Operating expenses

56,640,650

5,675,002

410,775

62,726,427△155,586

62,570,841

Operating income

1,203,930

24,734

20,1191,248,784

155,586

1,404,371

II. Assets, depreciation expenseand capital disbursements
Assets53,991,608

1,660,973

845,254

56,497,836

25,479,681

81,977,517

Depreciation expense

4,975,301

1,797

8,342

4,985,441

225,663

5,211,105

Capital disbursements

251,464－－

251,464

343,103594,568

Operating expenses

4,264,396

57,479423

4,322,299

345,4314,667,731(Notes) 1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, the nature of
the business and the business markets.
2. Principal products, by businessBusiness

Principal products

Construction equipment
rentals

Construction equipment such as hydraulic shovels, generators,
temporary construction materials, construction safety equipment,
temporary modular housing units

Steel sales

Steel bar, sheet steel, steel products such as round bar, steel scrap

Information products andother businesses

Computers and peripheral devices, telecommunications-related
equipment

3. The total amount for assets that were eliminated or included in the categories for all companies was¥25,479,681,000 and represents primarily idle working capital (cash, deposits and negotiable securities) long-term
investment funds (investment securities) and assets used in administrative departments at the parent company.

Summary of Company Financial Statements, FY Ended October 31, 2006
P.45

Consolidated fiscal year under review (From November 1, 2005 to October 31, 2006)(Unit: Thousands of yen)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

61,102,406

6,485,485

435,890

68,023,782－

68,023,782

－

－

－

－

－

－

61,102,406

6,485,485

435,890

68,023,782－

68,023,782

Operating expenses

57,289,724

6,441,515

404,783

64,136,023△180,377

63,955,645

Operating income

3,812,682

43,97031,106

3,887,758

180,377

4,068,136

Assets53,583,485

2,064,832

764,240

56,412,558

30,403,033

86,815,592

Depreciation expense

4,758,291

1,942

10,3024,770,536

22,0884,792,624

Capital disbursements

4,664,401

939,500－

4,665,341

734,632

5,399,973

Eliminations
or entire
Consolidated
company

Total

I. Revenues and operating income
Revenues(1) Sales to outside customers(2) Sales or transfers between
related segments
Total

II. Assets, depreciation expenseand capital disbursements(Notes) 1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, the nature of
the business and the business markets.
2. Principal products, by businessBusiness

Principal products

Construction equipment
rentals

Construction equipment such as hydraulic shovels, generators,
temporary construction materials, construction safety equipment,
temporary modular housing units

Steel sales

Steel bar, sheet steel, steel products such as round bar, steel scrap

Information products andother businesses

Computers and peripheral devices, telecommunications-related
equipment

3. The total amount for assets that were eliminated or included in the categories for all companies was¥30,403,033,000 and represents primarily idle working capital (cash, deposits and negotiable securities) long-term
investment funds (investment securities) and assets used in administrative departments at the parent company.

2. Segment information by location
The Company does not report segment information by location because the Company did not have any consolidated
subsidiaries or important offices located in countries or regions outside of Japan during the prior consolidated fiscal year
and the current consolidated fiscal year.

3. Foreign sales
The Company did not have any foreign sales during the prior consolidated fiscal year and the current consolidated fiscal
year.

Summary of Company Financial Statements, FY Ended October 31, 2006
P.46

Related party disclosures
Prior consolidated accounting fiscal year (From November 1, 2004 to October 31, 2005)
funding
Attribute

Name

Address(Thousandyen)Line ofbusiness or
positionvoting rights
owned (Indirect)(%)

Balance at end

Relationship

Percentage of

Capital or

Concurrently
serving as

Business

director etc.

relationship－－TransactionofDetails ofamountconsolidated

transaction(ThousandAccountyen)fiscal year
(Thousandyen)

OutsideCorporate
Auditor,Licensed tax
accountant,
Director

Kiyoshi Onishi

－

－

－

－

－

－

－

－

－

Eiko
Certified
AdvisorPublic Tax
compensation
Accountant's
based on an
Corporationagreement with
Outside2,400

certified public

Corporate

tax accountant

Auditor,

corporation

Licensed tax
accountant,
Director

Kiyohiro Tsuji

－

－

－

－

－

－

－

－

Eiko
CertifiedPublic Tax
Accountant's
Corporation
OutsideCorporate
Auditor,Attorney at
Advisorlaw andDirector

Akio Hashimoto－－

compensation,

3,443

President,
otherHashimotoand Okawa
Godo Law
Offices(Notes) 1. The transaction amounts shown above do not include consumption tax.
2. Kiyoshi Onishi serviced as the Company’s auditor from November 1, 2004 until January 27, 2005, and Kiyohiro Tsuji
served as the Company’s auditor from January 27, 2005 to October 31, 2005.
3. Terms of the transactions and the Company’s policy for deciding terms of the translations
The Company sets the amount for advisor compensation to its tax accountants after reviewing the Company’s terms
and conditions for general transactions. The Company sets the amount for advisor compensation to its attorneys
based on a monthly retainer of ¥100,000 plus additional amounts for other legal services that are determined byreferring to the compensation provisions of the Sapporo Bar Association.

Summary of Company Financial Statements, FY Ended October 31, 2006
P.47

Current consolidated accounting fiscal year (From November 1, 2005 to October 31, 2006)(1) Directors and individual large shareholders etc.
funding
Attribute

Name

Address(Thousandyen)Line ofbusiness or
positionvoting rights
owned (Indirect)(%)

Balance at end

Relationship

Percentage of

Capital or

Concurrently

Concurrently

serving asserving as

director etc.

director etc.

TransactionofDetails ofamountconsolidated

transaction(ThousandAccountyen)fiscal year
(Thousandyen)

OutsideCorporate
Advisor
Auditor,compensation
Licensed tax
based on an
accountant,
Director

Kiyohiro Tsuji

－

－

－

－

－

agreement with

2,400

－

－

5,068

－

－

Eiko
certified publicCertified
tax accountant
Public Tax
corporation
Accountant's
Corporation
OutsideCorporate
Auditor,Attorney at
Advisorlaw andDirector

Akio Hashimoto

－

－

－

－

－

compensation,

President,
otherHashimotoand Okawa
Godo Law
Offices
Kanamoto’s
Company for
President andwhich directors
close relatives
Selling,and relatives
Real estate
Kanamoto

own the

Capital Co., Ltd.

general andLease of land
52,006

majority of

directly own

Chuo-ku,leasing85.25% andagreement

indirectly own

2

Sapporo, Japan

1,200

Ground leasefor branch－administrati
ve expenses

voting rights in
2.83% of total
equityoutstanding
calculation
shares(Notes) 1. The transaction amounts shown in (1) above do not include consumption tax; consumption tax is included in the fiscal
year-end balance.
2. Terms of the transactions and the Company’s policy for deciding terms of the translations(1) The price for the sales transaction to the Company indicated above was determined by referring to market prices,and the payment terms are identical to the terms for other normal transactions.
(2) The Company makes its decisions on land leases and land sales based on the assessed value of a real estateappraiser and the price level of nearby similar properties.
(3) The Company sets the amount for advisor compensation to its tax accountants after reviewing the Company’s
terms and conditions for general transactions. The Company sets the amount for advisor compensation to its
attorneys based on a monthly retainer of ¥100,000 plus additional amounts for other legal services that are
determined by referring to the compensation provisions of the Sapporo Bar Association.

Summary of Company Financial Statements, FY Ended October 31, 2006
P.48

(Per Share Information)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)
Net assets per share

Current Consolidated Accounting Fiscal Year
(From November 1, 2005
To October 31, 2006)¥1,120.76

Net income per share of common stock
Net income per share of common
stock after adjustment for potential
ordinary shares

Net assets per share¥1,155.22¥11.57

Net income per share of common stock¥57.41－

Net income per share of common
stock after adjustment for potential
ordinary shares－

The Company has not reported net income per share of

The Company has not reported net income per share ofcommon stock after adjustment for potential ordinarycommon stock after adjustment for potential ordinary

shares because it does not have any potential shares thatshares because it does not have any potential shares thatwould have a dilution effect.

would have a dilution effect.
(Supplemental Information)
Beginning from this consolidated accounting fiscal year,
the Company has adopted the revised AccountingStandard for Earnings Per Share (Accounting Standards
Board of Japan Statement No. 2 dated January 31, 2006
(revised 2006) and the Guidance on Accounting Standard
for Earnings Per Share (ASBJ Guidance No. 4 dated
January 31, 2006 (revised 2006). There are no material
items to report as a result of this change.

(Note) The basis for calculating consolidated fiscal year earnings per share and earnings per share after adjustment forpotential ordinary shares is as follows.
Prior Consolidated Accounting
Fiscal Year
(From November 1, 2004
To October 31, 2005)(Unit: Thousands of yen)
Current Consolidated Accounting
Fiscal Year
(From November 1, 2005
To October 31, 2006)

Net income per share of common stock
Net income

352,623

1,742,652

7,300

－

345,323

1,742,652

29,856,334

30,357,093

Amount not attributed to common stock
shareholders
Net income related to common stock
Average number of outstanding shares
during the fiscal year──────

Summary of latent stock not included in thecalculationof

consolidated

fiscal──────

year

earnings per share on a fully diluted basis
because it does not have a dilution effect(Material Events after the Close of the Consolidated Fiscal Year)
The Company had no material items to report.

Summary of Company Financial Statements, FY Ended October 31, 2006
P.49