Report of Business Operations for the53th Business Period(Business Period ended October 2017) (Attachment to the
Notification and Invitation to the 52th Regular General Meeting of
the Shareholders)
From November 1, 2016 to October 31, 2017
1. Analysis of Operating Results and Financial Position(1) Analysis of Operating Resultsa) Summary of consolidated fiscal year operating results (From November 1,
2016 to October 31, 2017)
In the fiscal year under review, Japan’s economy maintained a modest recovery trend,
supported by strong corporate earnings, the recovery of capital investment, reasons for
optimism in both the employment and income environments. However, a wariness mustremain in place about uncertainties, such as the economic impact of unstable politicalconditions in the US and Europe and geopolitical risks posed by the Middle East and Asia.

The construction industry, in which the Kanamoto Group is involved, was solid overall
due to robust public sector investment and a recovery in private-sector construction
investment attributable to improved corporate earnings.
In these conditions, the Group promoted various measures with the aim of achieving
its Medium-term Management Plan (fiscal 2014 to fiscal 2016), and worked to ensure
strong future revenue and build a stable management base. Those measures include thestrengthening of business structure by expanding the Group’s business in urban areas,
and the optimal reallocation of rental equipment and further improvement of such
equipment’s utilization rate.

Consequently, in the fiscal year ended October 31, 2017 net sales rose 9.4% from theprior consolidated fiscal year level to ¥158,428 million. On the earnings front, operating
profit increased 10.1% year on year to ¥16,665 million and ordinary profit rose 19.4% to¥17,193 million. Profit attributable to owners of parent increased 32.7% over the priorconsolidated fiscal year to ¥10,744 million.

Results for each of the Company’s business segments were as follows.

b) Summary of consolidated operating results by business segment

[Business related to the Construction Equipment Rental Division]Intheconstruction-related

business,

which

is

Kanamoto’s

corebusiness,reconstruction demand in the Tohoku Region was gradually decreasing, but in otherregions, demand was relatively brisk. Overall, rental demand for construction
equipment was solid. The Group focused its management resources on supporting
reconstruction and recovery efforts following last year’s Kumamoto earthquake andtyphoons in Kagoshima and Hokkaido, as well as this year’s torrential rain storms
throughout Japan, and carried out building a continual support system.
By region, sales in this business fluctuated as follows: up 16.7% in the Hokkaido
Region, down 7.7% in the Tohoku Region, up 7.5% in the Kanto & Koushinetsu Region,up 8.1% in the Nishi-nihon Region, and up 54.9% in the Kyushu & Okinawa Region. The
inclusion of Nishiken Co., Ltd. in the scope of consolidation from the third quarter of theprevious fiscal year and the signs of synergy effects in the Kyushu Region, including
Nishiken, led to a strong growth in net sales and operating profit in the Kyushu Region
during the fiscal year.

Moreover, in sales of used construction equipment, the Group continued tosystematically sell rental equipment that had been in service for a certain number ofyears to maintain a proper composition of assets. Sales of used construction equipment,
included in net sales, increased 9.1% versus the previous fiscal year.

Reflecting

thesefactors,theKanamotoGroup

posted

net

sales

in

the

construction-related businesses of ¥142,414 million, an increase of 8.5% year-on-year,
and operating profit of ¥15,415 million, an increase of 9.7%.

[Other Businesses]
In the Company’s other businesses, sales were steady at those related to both the
Steel Sales Division and the Information Products Division. This, coupled with theaddition of Nishiken’s welfare-related business, resulted in a 17.2% increase in net
sales from the same period of the prior consolidated fiscal year to ¥16,013 million anda 29.7% increase in operating profit to ¥856 million.

(Millions of yen)

52th Business Period 53th Business Period Change from
Segment

Business PeriodBusiness Periodprior year

ended October 2016 ended October 2017(%)

Business related to theConstruction Equipment
Rental Division

131,208

142,414

8.5

Other Businesses

13,662

16,013

17.2

Total

144,870

158,428

9.4(2) Financing activities(i) Funds Procurement
Funds procurement through capital increase or the issuance of corporate bonds has notbeen performed during the current consolidated fiscal year.

(ii) Capital investment
Capital investment implemented by the Kanamoto Group during the current
consolidated fiscal year totaled ¥26,584 million. This included purchases of rental
equipment of ¥24,094 million, and investments in assets used by the group, including theestablishment, relocation and expansion of branches, of ¥2,490 million.

< Change in number of branches >During the consolidated fiscal year under review, Kanamoto newly opened 8 branches
and closed 1 branch.
New branches:

Kuji Branch (Kuji City, Iwate Prefecture), Hidaka Equipment
Center (Saru-gun, Hokkaido), Kanto Aerial Work Vehicle
Maintenance Center (Chiba City, Chiba Prefecture), Iida Branch(Shimoina-gun, Nagano Prefecture), Fuji Branch (Fuji City,
Shizuoka Prefecture),
Niigata

Prefecture),

Murakami Branch

Komaki

Branch(Murakami City,(Komaki

City,

Aichi

Prefecture)

Closed branch:

Tsugaru Dam Branch (Nakatsugaru-gun, Aomori Prefecture)(iii) Transfer, absorption, division or new establishment of businesses
The Company had no material items to report.

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

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

(vi) Acquisition or disposal of shares, other equity or subscription
rights to shares of other companies
The Company had no material items to report.

(3) Financial position and profit and loss in the current businessperiod and three immediately prior business periods(Millions of yen except per share data, which are in yen)
53th Business Period

Category

50th Business Period

51th Business Period

52th Business Period(current consolidated(Business Period ended(Business Period ended(Business Period ended

fiscal year)

October 2014)

October 2015)

October 2016)(Business Period ended
October 2017)

Net sales

125,555

133,292

144,870

158,428

Ordinary income

16,07816,164

14,405

17,193

9,299

9,557

8,098

10,744

Net income per share

258.02266.27229.16304.05

Total assets

188,491

202,919

220,836

227,545

Net assets

65,513

71,99881,434

91,788

1,758.24

1,969.16

2,169.93

2440.41

Profit attributable toowners of parent

Net assets per share(4) Issues to be Addressed by the Company
The core business of the Kanamoto Group is construction equipment rental.
Accordingly, the Company must build a strong earnings structure and a detailed
operating structure by targeting business domains, asset-ownership scale, and an asset
portfolio structure, in which earnings are not substantially impacted by the level ofdomestic construction investment.

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

b)Reinforce Kanamoto’s financial strategy
Kanamoto is taking steps to ensure timely and optimal funds procurement, while giving
consideration to equipment plans including purchases of rental equipment assets andcorporate facilities. At the same time, the Company is focusing on improving its financial
position, and reducing interest-bearing debt and improving capital efficiency as much as
possible, by incorporating measures such as the liquidation of assets.
c)Continuous cost reductions
When introducing assets the Company utilizes a thorough benchmark system, andfurther strives to maintain asset value by optimizing asset maintenance costs based on
its rental assets operating policies.

d)Strengthen overseas branch management
The Company will enhance marketing and sales aspects, and strengthen management
systems in areas such as asset management and operations management, to match its
overseas development. It also will urgently prepare a system for the assignment of
human resources and personnel training for this purpose.

(5) Main businesses (As of October 31, 2017)
Activities

Main products and services

Business related to the

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

Construction Equipment

temporary materials for construction use, safety products for theRental Division

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

Other Businesses

construction, rental and sale of computers and computer peripheral
equipment、 Rental and sales of social-welfare-service and nursing-careequipment(6) Main offices of the Kanamoto Group (As of October 31, 2017)(i) Main offices and facilities
Kanamoto’s Head Office and Operations Control Headquarters are located in Chuo-ku
in Sapporo, Hokkaido, and the Company’s Business Coordination Headquarters is locatedin Minato-ku in Tokyo.
The number of branches in each of the Company’s operating regions is shown below.

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

RegionConsolidated

KanamotoJapan

Overseas

Other Businesses

subsidiaries

Consolidated

Kanamoto

subsidiaries

Hokkaido

64

21

3

0

Tohoku

55

11

0

0

Kanto

33

24

1

0

Chubu

22

8

0

0

Kinki

6

15

0

9

Chugoku

2

2

0

9

Shikoku

2

1

0

0

Kyushu

0

75

0

21

China

0

2

0

0

Total

344

44

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

2,614

Other Businesses263

All companies (shared)

161
Total

3,038

(Notes)1. Figures are the number of full-time employees and do not include directors, temporary or
part-time employees.
2. The number of employees increased by 94 compared to the end of the previous fiscal year.
3. Employees designated as “All companies (shared)” are individuals affiliated withmanagement departments who cannot be classified in a specific segment.

(iii) Number of Kanamoto employees
Number of
employees

Change comparedwith end of prior

Average age

Average length ofservicefiscal year

1,802

13

37.7

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

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

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

Kanamoto’s

CapitalMain activities

ownership (%)

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

136

100.0

products
Design and sale of modular housing units for

Kanatech Co., Ltd.

100

100.0

temporary use

Kanki Corporation

99

92.7

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

Kyushu Kensan Co., Ltd.

70

61.5

centered on foundation equipment

Daiichi Kikaisangyo Co., Ltd.

20

100.0

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

Toyo Industry Co., Ltd.

31

100.0

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

NISHIKEN CO., LTD.

1,049

76.7

equipment
Rental and sale of road construction equipment,

Unite Co., Ltd.

1,144

66.9

Shanghai Jinheyuan Engineering
Construction Co., Ltd.

road construction works
Rental and sale of construction equipment,

CNY193,271

85.3

import and export of construction materials(Note)1. There are no specified wholly-owned subsidiaries as of the end of this fiscal year.
2. The holding ratio in NISHIKEN CO., LTD. is calculated excluding 68,126 shares oftreasury shares.

(8) Primary lenders and amount of borrowing (As of October 31,
2017)
Financial institution

Loan balance(Millions of yen)

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

4,516

Mizuho Bank, Ltd.

3,975

Mitsubishi UFJ Trust and Banking Corporation

3,631

North Pacific Bank, Ltd.

2,540

The Hokkaido Bank, Ltd.

2,310

The 77 Bank, Ltd.

2,070

JA - Hokkaido Shinren

1,675

The Norinchukin Bank

1,610

The Daishi Bank, Ltd.

1,605

The Aomori Bank, Ltd.

1,275

(9) Basic Policy Concerning Distribution of Earnings and Dividends for
the Consolidated Fiscal Year under Review and Next Consolidated
Fiscal Year
Distribution of earnings to shareholders is a key management issue. The dividend policyof Kanamoto is to provide shareholders with a consistent and stable dividend
regardless of the business environment. Furthermore, the Company aims to implement
profit distribution in line with earnings performance. Moreover, it is the basic policy ofKanamoto to sufficiently build up its retained earnings, which is essential forstrengthening financial position and to implement aggressive business expansion.
For the fiscal year ended October 2017, the Board of Directors has decided to pay a
year-end dividend of ¥35 and an annual dividend of ¥50 per share (which includes aninterim dividend of ¥15).
Furthermore, the Company aims to allocate retained earnings to capital investments,
including facilities investment for rental equipment and other assets. Note that thecompany is putting a share buyback program into place to facilitate the flexible
implementation of capital policies.

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

2. Matters Concerning the Company’s Stock
Summary of Common Stock (As of October 31, 2017)(i) Total number of shares authorized

130,000,000 shares(ii) Shares issued and outstanding

36,092,241 shares(including 753,253 shares of treasury stock)(iii) Number of shareholders

6,742(iv) Principal shareholders (ten largest)

Shareholder name

Number ofPercentage

shares heldof total(‘000 shares)(%)

Japan Trustee Services Bank, Ltd. (Trust account)

2,482

7.03

ORIX Corporation

1,628

4.61

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

1,279

3.62

Komatsu Construction Equipment Sales and Service Japan Ltd.

954

2.70

Kanamoto Capital Company

915

2.59

The Hokkaido Bank, Ltd.

888

2.52

Tokio Marine & Nichido Fire Insurance Co., Ltd.

802

2.27

North Pacific Bank, LTD.

763

2.16

Denyo Co., Ltd.

625

1.77

HOKUETSU INDUSTRIES CO., LTD.

619

1.75

(Note) Percentage of total is calculated excluding treasury shares (753,253 shares).

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

4. Matters Concerning Company Directors (As of October 31, 2017)(1) Summary of directors and auditors
Name

KanchuChairman

Kanamoto

Representative Director

TetsuoKanamoto

Main concurrent positions at other

Position and duties

of

the

entities

Board

and

Chairmanofthe

Board,

Shanghai

Jinheyuan Engineering Construction Co.,Ltd.

President and CEO, Corporate Officer;

President and Representative Director,

andToyo Industry Co., Ltd.

GeneralManager,BusinessCoordination Headquarters

Chairman

of

the

Board

and

Representative Director, Unite Co., Ltd.
Chairman

of

the

Board

and

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

SeniorExecutive

Corporate

Officer; Division Manager, Accounting
Nobuhito
UtatsuDivision; Manager in charge of Credit
Management
Systems

Division

Division;&

Information

Manager,

Bill

Collection Center; and General Manager,
Public Relations Office
Hitoshi

Director, Corporate Officer; and Division

President and Representative Director,

NaritaManager, Management Planning Division

Kanatech Co., Ltd.

Director,

Corporate

Officer;

DivisionManager, Construction Equipment Rental
TatsuoKanamoto

Division; Regional Manager, Construction
Equipment

RentalDivision

Hokkaido

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

Corporate

Officer;Manager,

DeputyConstruction

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

Hiroyuki
Isono
ManabuNagasakiDirector,

Corporate

Officer;

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

Yuichi

Director, Corporate Officer; and Division

Asano

Manager, Credit Management Division

Naoki
Mukunashi

Director, Corporate Officer; Assistant toGeneral Manager, Business Coordination
Headquarters; and Division Manager,

Representative Director and President,
NISHIKEN CO., LTD.

Overseas Business OfficeDirector, Corporate Officer; Assistant toGeneral Manager, Business Coordination
Kazunori
Hashiguchi

Headquarters; General Manager, Market
Development Office; General Manager,
Information Products Division; General
Manager, Event Marketing Division; andManager, New Products Office

Susumu
Naito
Masayuki
OikawaMotoki
Yonekawa
Eichu
Kanamoto
NaoyukiYokotaAkio

Director (Outside Director)

President and Representative Director,
ORIX Food Supply Corporation

Director (Outside Director)

Director (Outside Director)

Chairperson, Social Medical Corporation
HokuyukaiStanding Corporate Auditor

Standing Corporate Auditor

Auditor (Outside Auditor)

LawyerAuditor (Outside Auditor)

Certified public tax accountant

Akira Naoi

Auditor (Outside Auditor)

Certified public accountant

Kouji Soga

Auditor (Outside Auditor)

Hashimoto
Kiyohiro
Tsuji(Notes)1.

Directors Susumu Naito, Masayuki Oikawa and Motoki Yonekawa are Outside
Directors.

2.

Corporate Auditors Akio Hashimoto, Kiyohiro Tsuji, Akira Naoi and Koji Soga are
Outside Corporate Auditors.

3.

Corporate Auditor Kiyohiro Tsuji is a certified public tax accountant with considerable
knowledge of finance and accounting.

4.

Corporate Auditor Akira Naoi is a certified public accountant with considerable
knowledge of finance and accounting.

5.

The Company has notified the Tokyo Stock Exchange and Sapporo Securities
Exchange, the exchanges on which Kanamoto’s shares are listed, of the positions of
directors Susumu Naito, Masayuki Oikawa and Motoki Yonekawa as “independent
officers” as provided by the rules, etc., of both exchanges.

6.

The Company has notified the Tokyo Stock Exchange and Sapporo Securities
Exchange, the exchanges on which Kanamoto’s shares are listed, of the positions ofCorporate Auditors Akio Hashimoto, Kiyohiro Tsuji and Akira Naoi as “independent
officers” as provided by the rules, etc., of both exchanges.

7.

Based on the provision of Article 427 paragraph 1 of the Companies Act, the Company
has entered agreements with its outside directors and outside auditors that limits their
liability for compensation for damages under Article 423 paragraph 1 of the same law.
The amount of the limit on the liability for compensation for damages based on said
agreement is the amount provided by the law.

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

Number ofCompensationcompensatedamountindividuals(Millions of yen)

Director

13(1)101(0)

Auditor (Outside Auditor)

6 (4)

26 (3)Total

19 (5)

127 (4)(Notes) 1. The persons to be paid, stated above, includes one Director who retired upon the
conclusion of the 52nd Regular General Meeting of Shareholders convened on
January 26, 2017.
2. Two Directors (Outside Directors) who received no remuneration are not included in
the compensated individuals indicated above.
3. Total compensation paid to Directors does not include ¥128 million equivalent to theemployee salary portion (including bonuses) paid to Directors serving concurrently
as employees.
4. The maximum compensation for Directors was established at a maximum annual
amount of ¥240 million (however, not including the employee salary portions) by aresolution of the 26th Regular General Meeting of the Shareholders convened on
January 24, 1991.
5. The maximum compensation for Auditors was established at a maximum annual
amount of ¥50 million by a resolution of the 42nd Regular General Meeting of the
Shareholders convened on January 26, 2007.
6. The amounts to be paid, stated above, do not include ¥7 million, which was paid in
the form of a retirement allowance to one Director who retired this period.

(3) Matters concerning Outside Directors(i) Concurrent posts held by Company executives including positionsat other companies

Director Susumu Naito is President and Representative Director of ORIX Food Supply
Corporation. There is no special relationship between ORIX Food Supply Corporationand the Company.
Director Motoki Yonekawa is the Chairperson of Social Medical Corporation Hokuyukai.
There is no special relationship between Social Medical Corporation Hokuyukai and theCompany.

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

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

(iv) Activities during the current fiscal year
Classification

Name

Activities
After inauguration attended all of the four Board of Directors meetings held during

Director

Susumu Naito

the fiscal year and appropriately contributed the necessary advice and proposals
concerning resolutions and discussions.

Director

Director

Masayuki
OikawaMotoki
Yonekawa

After inauguration attended all of the four Board of Directors meetings held during
the fiscal year and appropriately contributed the necessary advice and proposals
concerning resolutions and discussions.
Attended all of the five Board of Directors meetings held during the fiscal year andappropriately

contributed

thenecessaryadviceandproposalsconcerning

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

Akio

Corporate Auditors meetings held during the fiscal year and appropriately

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

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

Corporate Auditors meetings held during the fiscal year and appropriately
contributed the necessary advice and proposals based mainly on his expert
perspective as a certified public accountant.

AuditorKouji Soga

Attended all of the five Board of Directors meetings and all of the eight Board of
Corporate Auditors meetings held during the fiscal year, and appropriately

contributed the necessary advice and proposals based on his many years of
employment and experience at financial institutions and his experience as astanding auditor at other companies.
(Note) In addition to the above, to achieve more rapid decision-making the Company
implemented resolutions in writing 14 times based on the provision of Article 370 of theCompanies Act.

5. Matters Concerning Independent Auditors(1) Name
Ernst & Young ShinNihon LLC(2) Amount of compensation and other benefits
Amount paid
(Millions of yen)Amount paid for compensation etc. as independent auditors
pertaining to the current fiscal year

39

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

54(Note) 1. The amount of compensation and other benefits pertaining to the current fiscal year
is reported in these total amounts because the amounts of the audit fees etc. foraudits based on the Companies Act and audits based on the Financial Instruments
and Exchange Act are not classified separately and cannot be substantively classified
in the audit agreement between the Company and its independent auditors.
2. The Board of Corporate Auditors comprehensively examined the details of audit plansby the accounting auditor, the status of its execution of duties in accounting andothers audit, as well as referring to past remuneration of the accounting auditor
before agreeing on the remuneration amount, etc. for the accounting auditor.

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

(4) Policy for deciding on dismissal or refusal of reappointment
If the Board of Corporate Auditors judges that the accounting auditor falls under any of
the items in Article 340, paragraph (1) of the Companies Act, and that there is noprospect of improvement, the Audit Committee shall dismiss the accounting auditor byunanimous decision.
Furthermore, the Board of Corporate Auditors shall decide whether to dismiss or refuse
to reappoint the accounting auditor in cases that the Board of Corporate Auditors judgesthat the above action is needed, such as when it is recognized that audits cannot be
conducted appropriately due to the occurrence of events that harm the competence andindependence of the accounting auditor.

(5) Matters pertaining to administrative dispositions in theevent

that the Accounting Auditor was subjected to a businesssuspension order during the past two years
Overview of the disciplinary measures announced by the Financial Services Agency on
December 22, 2015(i) Subject of disposition
Ernst & Young ShinNihon LLC(ii) Contents of disposition
Business improvement administrative order (improvements to operation control
system) Partial business suspension order for three months (suspension of accepting
new engagements) (from January 1, 2016 to March 31, 2016)

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

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

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

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

(iv) System for ensuring efficient execution of directors’ duties

In addition to its regular Board of Directors meetings, Kanamoto and its subsidiaries
hold extraordinary Board of Directors meetings from time to time as necessary to decide
important matters and to make flexible decisions concerning the execution andsupervision of management strategies and the Company’s business plans. The
Company's Board of Directors receives reports on important matters including thefinancial condition and other matters of the Company's subsidiaries. For its management
plan, the Company establishes budgets for the next business fiscal year andmedium-term future, which gives the managers of each division the Company’s overall
objectives based on specific numerical targets. Each division sets division-wide
objectives, and executes progress management and specific measures aimed atachieving its goals. Kanamoto has also introduced the corporate officer system toacceleratemanagement

decision-making

and clarify

supervisory

authorityandresponsibility for plan execution, and each corporate officer is responsible for achieving
the management plan approved by the Board of Directors. To respond quickly to thesevere pace of change in its management environment, the Company has also shortened
the directors’ term of office to one year.

(v) System to ensure appropriate activities at Kanamoto and withinthecorporategroupcomprisedoftheparentcompany

andsubsidiaries
To apply Kanamoto’s Ethics Guidelines correspondingly to each company in the
Kanamoto Group, the Company has decided to enlarge the scope of the Compliance
Committee and the consultation and reporting system to every group firm, to ensure theeffectiveness of business activities is as extensive as possible.
In addition, in accordance with the provisions of the Financial Instruments andExchange Act, the Company and its affiliates maintain an excellent management
environment, and work to strengthen company-wide internal controls, internal controls
pertaining to settlement of accounts financial reports and operating process control
activities, create internal control systems that enable the Company to make proper andeffective assessments and conduct appropriate operations. Furthermore, underKanamoto’s

internal

management

systemconcerning

financialreporting,eachorganization (individual) has affirmed the following roles.
[1] Managers have the final responsibility for all of the organization’s activities, and prepare andimplement internal controls based on this basic policy.
[2] The Board of Directors has supervisory responsibility for the preparation and operation of
the managers’ internal controls, and monitors and supervises managers to ensure the financial
reporting and internal controls are executed properly.
[3] The auditors monitor and verify the financial reporting and preparation and operation of theinternal controls from an independent standpoint.

[4] The Internal Control and Auditing Office objectively evaluates from an independent
standpoint, the effectiveness of the internal controls related to financial reporting at Kanamotoand its affiliated companies on behalf of the Company’s managers in accordance with the audit
rules, and when necessary makes proposals concerning improvements and corrections andreports to the managers and Board of Directors.

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

(vii) Matters related to the independence of employees in thepreceding paragraph from directors
Personnel matters for employees assigned to audit activities (appointments, transfersand evaluations) will have the consent of the auditors.

(viii) System for directors and employees to report to the auditors,
other systems concerning reports to auditors, and other systems toensure audits are performed effectively
To perform audits of the directors, the Company’s auditors attend the meetings of theBoard of Directors, and also attend important meetings and committees, in order tounderstand other important decisions and the circumstances of execution of theCompany’s business activities. If the directors and employees of Kanamoto and its
subsidiaries discover facts that might cause the Company considerable harm, they are toreport immediately to the auditors. The standing auditors will circulate a report andrequest for managerial decision, and if necessary can request explanations from thedirectors and employees. Those who reported to the auditors shall not be treatedunfavorably on the grounds of giving such report.
The auditors also meet regularly with the president and representative director, toexchange opinions concerning issues the Company should address and important audit
matters. After audits are completed, the Internal Control and Auditing Office promptly
submits an Auditors’ Report concerning the audit results to the president andrepresentative director and the auditors.
The auditors and the Internal Control and Auditing Office also exchange informationand cooperate in other ways with outside specialists, including the accounting auditorsand the Company’s attorneys.

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

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

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

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

Consolidated Financial Statements

53th Business Period
From November 1, 2016
to October 31, 2017

Kanamoto Co., Ltd.

Consolidated Balance Sheet(As of October 31, 2017)( Millions of Yen)
Classification

AmountClassification(Assets)
Current assets

Amount(Liabilities)
90,772Current liabilities

71,521

Cash and deposits

35,220Notes and accounts payable-trade

Notes and accounts receivable -37,057

Short-term loans payable

13,0234,069

Lease obligations

1,048

Electronically recordedmonetary claims - operating

28,773

Securities

200

Income taxes payable

21,269Merchandise and finished goods

583

Provision for bonuses

3,247

Costs on uncompleted
construction contracts

27

Accounts payable-other1,099

Raw materials and supplies

288

Other

3,060

construction machine parts

12,193

Deferred tax assets

706

Noncurrent liabilities

64,234

Other

1,210

Long-term loans payable

Allowance for doubtful accounts-784

Lease obligations

2,017

Long-term accounts payable-other37,127

Total non-current assets

Property, plant and equipment

136,772

124,286

Rental equipment

73,668

Buildings and structures

13,108

Machinery, equipment and vehicles

1,136

Tools, furniture and fixtures
Land

Provision for directors’ retirement
benefits

106

Net defined benefit liability

259

Asset retirement obligations

431

Other

444

Total Liabilities

Intangible assets

135,756

436(Net Assets)

35,623

Construction in progress

23,846

312

Shareholders’ equity

83,612

1,596

Capital stock

13,652

Goodwill

486

Capital surplus

14,916

Software in progress

681

Retained earnings

57,172

Other

428

Treasury stock–2,129Investments and other assets

10,889Investment securities

8,417

Deferred tax assets

436

Other

2,308

Allowance for doubtful accounts-272

Allowance for investment loss

-0

Total Assets

227,545

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation
adjustment
Minority interests

2,629
2,538

85
5
5,547

Total Net Assets

91,788

Total liabilities and net assets

227,545

Consolidated Statement of Income(From November 1, 2015 to October 31, 2017)(Millions of Yen)
Classification

AmountNet sales

158,428

Cost of sales

109,863

Gross profit

48,565

Selling, general and administrative expenses

31,899Operating income

16,665Non-operating income

936Interest income and dividends

153

Rent income

73

Reversal of allowance for doubtful accounts

31

Foreign exchange gains

253

Other

424

Non-operating expenses

409

Interest expenses

199

Other

209

Ordinary income

17,193Extraordinary income

265

Gain on sales of noncurrent assets

21

Gain on donation of non-current assets

13

Subsidy income

9Gain on sales of investment securities
Gain on step acquisitions

220-

Extraordinary loss

518

Impairment loss

157

Loss on sales and retirement of noncurrent assets

140

Loss on sales of shares of subsidiaries andassociates
Loss on valuation of shares of subsidiaries andassociates

79

140

Income before income taxes and minority interests

16,940

Income taxes-current

5,594

Income taxes-deferred-204

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

5,389
11,551806
10,744

Consolidated statements of income and consolidated statements ofcomprehensive income
Consolidated statements of income

Fiscal year ended October 31, 2017
(Millions of yen)
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period

Capital surplus

13,652Retained earnings

14,916

Total shareholders'equityTreasury shares

48,017-2,12974,458Changes of items during
periodDividends of surplus-1,590-1,590

Profit attributable toowners of parent

10,744

10,744Purchase of treasury
shares-0-0

Net changes of items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
period

–

–

9,154

-0

9,154

13,652

14,91657,172-2,12983,612

Accumulated other comprehensive income
Valuationdifference on

available-for-s
ale securities
Balance at beginning ofcurrent period

2,051

Deferred
gains or losses
on hedges–

Foreigncurrency

Remeasuremen
ts of defined

Total
accumulated Non-controllin
g interests
othertranslation
adjustment

benefit planscomprehensiv
e income

164

8

2,225

4,750

Total net
assets81,434

Changes of items during
periodDividends of surplus–-1,590

Profit attributable toowners of parent–

10,744–-0Purchase of treasury
sharesNet changes of items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
period

486

0

-79

-3

404

796

1,200

486

0

-79

-3

404

796

10,354

2,538

0

85

5

2,629

5,547

91,788

The Accounting Auditor’s Report of Consolidated Financial Statements
Independent Auditor’s Report

December 18, 2017

Kanamoto Co., Ltd.
To the Board of Directors,

Ernst & Young ShinNihon LLC
Shigenobu Omori
Designated limited liability partner
Managing Partner
Certified public accountant
Kiyohiro Saito
Designated limited liability partner
Managing Partner
Certified public accountant
Pursuant to Article 444, Section 4 of the Companies Act, we have audited theaccompanying consolidated financial statements, which comprise theconsolidated balance sheet, the consolidated statement of income, theconsolidated statement of changes in equity and the notes to the consolidated
financial statements, of Kanamoto Co., Ltd. (“the Company”) applicable to thefiscal year from November 1, 2016 to October 31, 2017.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of theconsolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparationand fair presentation of the consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the consolidated financial
statements based on our audit from an independent perspective. We
conducted our audit in accordance with auditing standards generally acceptedin Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance as to whether the consolidated financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence on theamounts and disclosures in the consolidated financial statements. The
procedures selected and applied depend on our judgment, including theassessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. The purpose of an audit of theconsolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk
assessments, we consider internal controls relevant to the entity’s preparationand fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit
also includes evaluating the appropriateness of accounting policies used, themethod of their application, and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of theconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position and results ofoperations of the Kanamoto Group, which consisted of the Company and its
consolidated subsidiaries, in the fiscal year under review in accordance withaccounting principles generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company that should be disclosed in compliancewith the Certified Public Accountants Act.

Financial Statements

53th Business Period
From November 1, 2016
to October 31, 2017

Kanamoto Co., Ltd.

Balance Sheet(As of October 31, 2017)Classification

AmountClassification(Assets)
Current assets( Million of Yen)
Amount(Liabilities)
67,085

54,101

Current liabilities

Cash and deposits

27,335

Notes payable-trade

17,028Notes receivable-trade

6,073

Accounts payable-trade

5,010

Electronically recorded monetaryclaims - operating

3,605

Short-term loans payable

10,116

Accounts receivable, trade18,139Accounts payable-other

16,978

Securities

200

Accrued expenses

Merchandise and finished goods

244

Income taxes payable

25

Accrued expenses

718

Provision for bonuses

631

Costs on uncompleted
construction contracts

473
2,215

Construction machine parts

10,081

Raw materials and supplies

149

Notes payable-facilities

617

Prepaid expenses

313

Other

311

Deferred tax assets

361

Short-term loans receivable

398

Other

210

Allowance for doubtful accounts
Noncurrent assets–54
117,255

Noncurrent liabilities

51,190Long-term loans ayable

20,546

95,101Long-term accounts payable-other

29,953

Rental equipment

51,644

Deferred tax liabilities

416

Buildings

8,202

Asset retirement obligations

274

Structures

2,004

Property, plant and equipment

Machinery and equipment
Vehicles and delivery equipment
Tools, furniture and fixtures
Land

792

Total Liabilities

9240(Net Assets)

31,919Construction in progress
Intangible assets

105,291

288

Shareholders’ equity

76,616

817

Capital stock

13,652

Capital surplus

14,916

Software91

Telephone subscription right52

Software in progress

655

Other

19

Legal capital surplus

14,773

21,335

Other capital surplus

143

Investments and other assets

Retained earnings

50,175Investment securities

6,543

Stocks of subsidiaries andaffiliates

11,753

Legal retained earnings

1,375

10

Other retained earnings

48,800Investments in capital
Long-term loans receivable fromsubsidiaries and affiliates

3,803

Claims provable in bankruptcy, claims
provable in rehabilitation and other66

Long-term prepaid
expenses47

Insurance funds

45

Guarantee deposits

905

Other

57

Allowance for doubtful accounts
Allowance for investment loss
Total Assets–1,896–0
184,340

Reserve for advanced depreciation of
noncurrent assets

22

General reserve
Retained earnings brought
forward39,731

Treasury stock
Valuation andtranslation adjustments
Valuation difference on
available-for-sale securities

9,046–2,129

2,432
2,432

Total Net Assets

79,048

Liabilities and Total Net Assets

184,340

Statement of Income(From November 1, 2016 to October 31, 2017)(Million of Yen)
Classification

Amount107,277

Net sales
Cost of sales

75,778Gross profit

31,498Selling, general and administrative expenses

19,535

Operating income

11,963Non-operating income

1,228Interest income and dividends

217

Rent income

285

Temporary transfer charges income

220

Reversal of allowance for doubtful accounts

84

Reversal of provision for investment loss

239

Other

179

Non-operating expenses
Interest expenses

670
84

Provision of allowance for doubtful accounts

454

Other

131

Ordinary income

12,521

Extraordinary income
Gain on sales of noncurrent assets
Subsidy income
Gain on sales of investment securities

236
10
5
220

Extraordinary loss

315

Loss on sales and retirement of noncurrent assets

95

Loss on sales of shares of subsidiaries and associates

79

Loss on valuation of shares of subsidiaries and associates

140

Income before income taxes

12,442

Income taxes-current

3,979

Income taxes-deferred-90

Total income taxes
Net income

3,888
8,553

Statement of Changes in Net Assets(From November 1, 2016 to October 31, 2017)(Million of Yen)

Shareholders’ equity
Retained earnings

Capital surplus
Capital stock

Other retained earnings

Legal capital

Other capital

Total capitalsurplussurplussurplus

Legal retained
earnings

Reserve for

Retained

advanced

Generalearnings

depreciation ofreservebrought

noncurrent assets

Balance at beginning of current period

13,652

14,773143

14,916

1,375

22

Total retained
earnings

forward33,731

8,082

43,212

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

Dividends of surplus－-1,590-1,590

Profit

－

8,553

8,553

Purchase of treasury shares－－

Net changes of items other thanshareholders’ equity－－

Total changes of items during period
Balance at end of current period

－

－

－

－

－

－

6,000

963

6,963

13,652

14,773143

14,9161,375

22

39,371

9,046

50,175

Valuation and translation

Shareholders' equity
Treasurystock

adjustments

Totalshareholders’equityValuationdifference on
available-for-salesecurities

Balance at beginning of current period–2,12969,653

2,012

Total valuationand translation

Total net
assetsadjustments
2,012

71,665

Changes of items during period
Provision of general reserve
Dividends of surplus
ProfitPurchase of treasury shares–0

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

–

－

–

-1,590－-1,590

8,553

－

8,553

–0

－

–0

420

420

－

420

–0

6,962

420

420

7,383

–2,12976,616

2,432

2,432

79,048

The Accounting Auditor’s Report of Financial Statements

Independent Auditor’s Report
December 18, 2017

Kanamoto Co., Ltd.
To the Board of Directors,

Ernst & Young ShinNihon LLC
Shigenobu Omori
Designated limited liability partner
Managing Partner
Certified public accountant
Kiyohiro Saito
Designated limited liability partner
Managing Partner
Certified public accountant

Pursuant to Article 436, Section 2, Paragraph 1 of the Companies Act, we have audited theaccompanying financial statements, which comprise the balance sheet, the statement ofincome, the statement of changes in equity, the notes to financial statements, and the
supplementary schedules, of Kanamoto Co., Ltd. (“the Company”) applicable to the 53rd
Business Period from November 1, 2016 to October 31, 2017.

Management’s Responsibility for the Financial Statements and the Supplementary Schedules
Management is responsible for the preparation and fair presentation of the financial statements
and the supplementary schedules in accordance with accounting principles generally acceptedin Japan, and for designing and operating such internal control as management determines isnecessary to enable the preparation and fair presentation of the financial statements and the
supplementary schedules that are free from material misstatement, whether due to fraud or
error.

Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements and the supplementaryschedules based on our audit from an independent perspective. We conducted our audit inaccordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance as to whether the financial
statements and the supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence on the amounts anddisclosures in the financial statements and the supplementary schedules. The procedures
selected and applied depend on our judgment, including the assessment of the risks of material
misstatement of the financial statements and the supplementary schedules, whether due tofraud or error. The purpose of an audit of the financial statements and the supplementaryschedules is not to express an opinion on the effectiveness of the entity’s internal control, but
in making these risk assessments, we consider internal controls relevant to the entity’s
preparation and fair presentation of the financial statements and the supplementary schedules
in order to design audit procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness, the method of their application, and thereasonableness accounting policies used by management and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements and the supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

OpinionIn our opinion, the financial statements and the supplementary schedules referred to above
present fairly, in all material respects, the financial position and results of operations ofKanamoto Co., Ltd. in the fiscal year under review in accordance with accounting principles
generally accepted in Japan.

Conflicts of Interest
We have no interest in the Company that should be disclosed in compliance with the Certified
Public Accountants Act.

Audit Report
The Board of Corporate Auditors has received the audit reports prepared by each of the
Corporate Auditors concerning the business performance of the Directors during the 53rd
Business Period from November 1, 2016 through October 31, 2017. After discussing the audit
results based on the reports, we have prepared this Audit Report and report as follows as theconsensus of opinion of the Board of Corporate Auditors.

1. Procedures and details of the audits by the Corporate Auditors and the Board of Corporate
Auditors(1) The Board of Corporate Auditors establishes the audit policies, audit plans and othermatters, and receives reports concerning the implementation of audits and the audit result fromeach of the Corporate Auditors as well as reports from the Directors and the Accounting Auditor
concerning the execution of their duties, and requests explanations as necessary.
(2) In addition to communicating with the Directors, the internal audit division, employees
and other individuals in accordance with the standards for Corporate Auditors and audits
provided by the Board of Corporate Auditors and in compliance with the audit policy and audit
plan, and gathering information and striving to improve the audit environment, each Corporate
Auditor performed audits according to the following procedures:(i)Each Corporate Auditor attended the Board of Directors meetings and other important

meetings, received reports from Directors, employees and other individuals on their
execution of duties and requested explanations from the Directors, other employees andother individuals when necessary as well as reviewed documents concerning matters suchas important decisions and conducted inspections of the business and financial condition at
the Company’s Head Office and main branches. With respect to subsidiaries, each Corporate
Auditor communicated and exchanged information with the Directors and Corporate
Auditors of such subsidiaries and received business reports therefrom as necessary.
(ii) Each Corporate Auditor regularly received reports from the Company’s Directors andemployees, and requested explanations and clarified opinions when necessary, regarding
the contents of Board of Director resolutions concerning the establishment of theorganization provided in Article 100 paragraph (1) and paragraph (3) of the Ordinance for
Enforcement of the Companies Act, and the status of operation of the organization (internal
controls system) that has been established based on said resolutions, as the organizationnecessary to ensure that the Directors comply with laws and the Company’s Articles ofIncorporation in the execution of their duties as described in the Report of Business
Operations and to ensure the appropriateness of other operations of the corporate group,
which consists of a stock company and the subsidiaries thereof.

(iii) Each Corporate Auditor monitored and verified whether or not the Accounting Auditor
performed audits properly while maintaining an independent position as well as received
reports from the Accounting Auditor on the execution of duties thereby and requested
explanations when necessary. Each Corporate Auditor was also notified by the Accounting
Auditor that the System for Securing the Proper Performance of Duties (matters listed in theitems of Article 131 of the Ordinance on Company Accounting) was developed in accordancewith the Standards for Quality Control of Audits (Business Accounting Council, October 28,2005), and requested explanations as necessary.
Based on the above procedures, the Board of Corporate Auditors reviewed the Report ofBusiness Operations and the supporting schedules, the Financial Statements (Balance Sheet,
Statement of Income, Statement of Changes in Net Assets and Notes to the Financial
Statements) and the supporting schedules and the Consolidated Financial Statements(Consolidated Balance Sheet, Consolidated Statement of Income, Consolidated Statement of
Changes in Net Assets and Notes to the Consolidated Financial Statements) for the businessperiod.

2. Result of audit(1) Audit result of the Report of Business Operations, etc.
(i)

The Report of Business Operations and its supporting schedules fairly represent thecondition of the Company in accordance with the laws of Japan and the Articles ofIncorporation of the Company.
(ii) We have determined that there was no serious occurrence of improper activity or
violation of laws or the Company’s Articles of Incorporation by any of the Directors incarrying out the duties and responsibilities of their office.
(iii) In our opinion, the details of the Board of Directors resolutions concerning the internal
controls system are appropriate. We also have determined that there are no matters thatshould be highlighted as a concern with regard to the information contained in the Report ofBusiness Operations and the Directors in carrying out their duties concerning the internal
controls system.
(2) Financial statement and audit result of the supporting schedules
In our opinion, the audit procedures and audit results received from the Accounting Auditor
Ernst & Young ShinNihon LLC are appropriate.
(3) Audit result of consolidated financial statements
In our opinion, the audit procedures and audit results received from the Accounting Auditor
Ernst & Young ShinNihon LLC are appropriate.

December 26, 2017

Kanamoto Co., Ltd.
The Board of Corporate Auditors

Standing Corporate Auditor

Eichu Kanamoto Seal

Standing Corporate Auditor

Naoyuki Yokota

Seal

Outside Corporate Auditor

Akio Hashimoto

Seal

Outside Corporate Auditor

Kiyohiro Tsuji

Seal

Outside Corporate Auditor

Akira Naoi

Seal

Outside Corporate Auditor

Koji Soga

Seal