Fiscal Year ended October 31, 2005

Accounting Bulletin (Consolidated)
December 9, 2005
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.
Manager in Charge of Credit Analysis Section, Credit Management Division& Information Systems 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 9, 2005
SEC Accounting Standards The Company has not adopted SEC accounting standards
1. Consolidated Operating Results for the Fiscal Year ended October 31, 2005
(November 1, 2004 – October 31, 2005)(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, 2005
Fiscal year ended
October 31, 2004%

Ordinary Income

Millions of yen%

Millions of yen%

63,975

（

4.3 ）

1,404

（- 25.2 ）1,550（- 11.4 ）61,336（ - 3.7 ）1,878（- 18.6 ）1,749（- 23.2 ）Net Income

Millions of yen%

Net Income
per Share ofCommonStock

Net income per
Share on a Fully
Diluted Basis

Yen

Yen

Return on
Shareholders’Equity%Return on
Total
AssetsOrdinary
IncomeMargin%%Fiscal year ended（- 67.9）
−
352
11.57
1.1
1.8
2.4
October 31, 2005
Fiscal year ended（ 20.1）
−
1,097
36.50
3.4
2.0
2.9
October 31, 2004
(Note) 1. Investment profit or loss accounted for by the equity method
Fiscal Year ended October 31, 2005−
Fiscal Year ended October 31, 2004−
2. Average number of shares (consolidated) outstanding during the fiscal year
Fiscal Year ended October 31, 2005
29,856,334 sharesFiscal Year ended October 31, 2004
29,865,301 shares
3. Are there any changes in accounting method?
No
4. The percentages shown for revenues, operating income, ordinary income and net income are the percent increase or
decrease compared to the prior consolidated fiscal year

(2) Consolidated Financial Position
Total Assets
Millions of yen
Fiscal year ended
October 31, 2005
Fiscal year ended
October 31, 2004

Shareholders’ Equity

Shareholders’Shareholders’ Equity

Equity Ratio

Millions of yen

per Share％Yen

81,97733,46540.8

1,120.76

89,32332,74536.7

1,096.42(Note) Number of shares (consolidated) issued and outstanding at the end of the fiscal year:
Fiscal Year ended October 31, 2005
29,853,076 sharesFiscal Year ended October 31, 2004
29,859,442 shares

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 1

(3) Consolidated Cash Flows
Cash Flow from

Cash Flow from

Cash Flow fromOperating Activities

Investing Activities

Financing Activities

Millions of yen
Fiscal year ended
October 31, 2005
Fiscal year ended
October 31, 2004

Millions of yen

Balance of Cash andEquivalents at End of
PeriodMillions of yen

Millions of yen

10,219

-

11

-

7,833

14,1086,230- 1,535-

4,923

11,734(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, 2006
(November 1, 2005 - October 31, 2006)
Revenues
Millions of yen
Interim period
Full year

32,56063,210Operating Income

Ordinary Income

Millions of yen

Millions of yen

1,600
1,910

Reference: Projected net income per share of common stock (Full year)

1,470
1,680

Net Income
Millions of yen

540
610

¥20.43*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 Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 2

I

Current Conditions of the Company’s 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 development ofbusinesses involved in the rental and sale of a full line of construction-related materials.
An overview of each segment by business of the Kanamoto group, and the position of each company related
to that business, is provided below.
〔 Businesses related to the Construction Equipment Rental Division 〕
Daiichi Kikai Co., Ltd. (a consolidated subsidiary company) and Kanki Corporation (a consolidated
subsidiary company), are engaged in the rental and sale of construction equipment and machines used forconstruction. These two subsidiary companies operate in designated marketing areas and 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 modular housing units for temporary use. Kanki Maintenance Co., Ltd. (anon-consolidated subsidiary company), a subsidiary of Kanki Corporation, is engaged primarily in repair ofconstruction equipment.
〔 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.

〔 Businesses 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 and
Active Power Corporation, two affiliated companies involved in the Company’s Other Businesses, arecurrently restructuring their business operations and have temporarily halted business activities.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 3

〔 Relationship of the Operating Businesses 〕

Costomer

Construction-related businesses
Construction

Kanamoto Co., Ltd.

equipment rental
Construction
equipment rental
Rental of temporary
scaffolding

Construction
Equipment Rental
Division・
Steel Sales
Division・
Information
Products Division

Rental of safety
products
Manufacture and sale ofmodular housing units
Rental of safety
products
Repair of Construction
equipmentLines indicate：

Consolidated
subsidiaries

Supply of modular

Daiichi Kikai Co., Ltd.

housing units

Kanki Corporation
Repair of

SRG Kanamoto Co., Ltd.

construction
equipment

Assist Co., Ltd.

Kanatech Co., Ltd.
Comsupply Co., Ltd.
Kanki MaintenanceCo., Ltd.

Non-consolidated
subsidiaries

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 4

II

Management Policies

1. Basic policies concerning business management
The Kanamoto Company group believes that being able to truly contribute to society, and maximizing
earnings on a sustainable basis by providing services that fully satisfy the expectations and needs ofconstruction rental equipment users, is the best way to contribute to goals of its shareholders and groupstakeholders.
To achieve this goal, the Company has always made the concept “constantly seek innovation and strive toenergize the business” a key component of its action agenda, and has focused on comprehending changes
in the business environment, never being complacent about its present condition and consistently managing
its business to conform to current market conditions. By pursuing “maximization of income and minimizationof expenses” as the starting point of its raison d’etre as a firm, Kanamoto implements measures to create apowerful marketing organization, where customers are always Number One, and realize low-cost operations,to achieve the objectives based on “Metamorphose,” the long-range management plan the Company
currently is executing.

2. Basic policies concerning distribution of earnings
As the basis of its earnings distribution policy, Kanamoto takes into consideration its earnings level, payout
ratio, and financial position from a medium to long-term perspective. Among the factors it weighs, theCompany places its primary emphasis on expanding shareholders’ long-term total investment return andensuring a stable return of earnings. 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 serveas the source of future earnings.
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
From the standpoint of capital policy, one important issue for Kanamoto is broadening the range of investors
in order to improve the liquidity of the Company’s stock.
Kanamoto recognizes that reducing the size of its stock investment unit is one effective measure to stimulatemarket trading of the Company’s shares. Nevertheless, in light of the position of Kanamoto’s stock in thecurrent market, the Company has determined conditions do not warrant an urgent reduction in the size of its
investment unit.
In the future, Kanamoto will maintain a flexible outlook, while monitoring the introduction of the system fordematerialization of stock certificates and continuing to give due consideration to improving the liquidity ofits stock.
The Company currently also 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 create a substantial
capital investment burden. Moreover, the structure of this business requires a profit and loss outlook
extending over several years. Given these considerations, Kanamoto has always emphasized ROI (return on
investment) and cash flow, and seeks growth in its EBITDA+ (earnings before interest, taxes, depreciation
and amortization). Under its long-term management plan “Metamorphose,” the five-year plan throughOctober 2008 that Kanamoto currently is implementing, the Company is working to maximize asset
operations. One measure is to shift the equipment portfolio toward assets with higher profit margins, andlimit new rental equipment asset introductions while continuing to slash depreciation and other costs. Aftercompleting the first two years of the plan, Kanamoto believes the results of these asset operation measures
are becoming steadily apparent.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 5

Nevertheless, from the standpoint of earnings, the Company still is not achieving its plan. Although earning
are improving at a steady pace in the Honshu territory, which includes the Tokyo metropolitan area, theenvironment surrounding the construction industry in other regions is much more severe than initiallyprojected. In Hokkaido particularly, public works are in a slump and competition has intensified. Over the
next three years, Kanamoto projects the results from opening new branches in the Tokyo metropolitan area
will compensate to a certain extent for the decline in earnings in other local areas. Because it has slightly
revised downward its progress under the long-range management plan, however, Kanamoto has establishednew medium-term plan objectives for the three years beginning from the fiscal year ending October 2006.
These objectives are provided below. Although these targets are slightly lower than its initial plan, Kanamoto
still projects it will achieve the earnings level for the fiscal year ending October 2010 set in its initial plan.
(Millions of yen, except net income per share)

Consolidated operating
results
Non-consolidated
operating results(Kanamoto Company)

Fiscal Year ending

Fiscal Year ending

October 2006

October 2008

63,21066,170Ordinary income

1,680

3,260

Net income per share

20yen

58yen

56,76059,480

1,730

3,270

16,80017,390

Revenues

Revenues
Ordinary income
EBITDA＋

5. Medium to long-term corporate management strategy
As explained above, Kanamoto already has completed the first two business periods of “Metamorphose,” itsfive-year long-term management plan extending through the fiscal year ending October 2008. During thistwo-year period, Kanamoto made business organization improvements to shift the management focus togross margins. This included building a powerful marketing organization where customers are always
Number One, and thorough reductions of costs such as equipment repair expense and transport expense.
Unfortunately, because deterioration of the local business environment has been worse than initiallyprojected, Kanamoto revised its numerical objectives for the remaining three fiscal years of“Metamorphose,” its long-term management plan. For the consolidated fiscal year ending October 2006 as
well, the third year of its long-term management plan, Kanamoto expects operating results to be affected by
the extremely tough business conditions. By pursuing the following strategies, however, Kanamoto will seek
to earn further recognition as Japan’s leading company in the construction equipment rental business. To
maintain its “strong Kanamoto” market reputation, the Company also will continue to improve andstrengthen its financial position.
a) Earnings-focused management
Kanamoto will shift its focus from a revenues-first approach, and pursue management emphasizing grossprofit. In terms of its asset portfolio, the Company has already completed replacement of its large rental
assets with the latest emissions-controlled models, designed to reduce pollution, and will continue
restricting introductions of new rental assets to the minimum quantity necessary in order to reduce
depreciation and amortization expense and other costs. In addition, the Company will maintain its priority on
introducing small-scale construction equipment and inexpensive rental assets, which have high profit
margins, and seek to improve profit margins by extending rental periods for such assets.
b) Execute a bold scrap and build program
Currently Hokkaido accounts for 37.3% of Kanamoto’s total rental revenues by region, which indicates theshift of revenues towards Honshu is occurring at a pace faster than initially planned. In the Hokkaido
territory, Kanamoto is maintaining its market share through reorganization of its branches. In Honshu,
Kanamoto is developing branches around the Tokyo metropolitan area, as the core market where demand

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 6

will remain strong in the future, by utilizing low-cost bases equipped with a smaller equipment line-up, tominimize capital investment requirements as much as possible. The Company also will continue to review
unprofitable branches and pursue a bold scrap and build program.
c) Build a powerful marketing organization where customers are always Number One
By taking maximum advantage of its information systems, Kanamoto will implement marketing programs tothoroughly fulfill user needs and create a position in which Kanamoto’s presence is indispensable for its
customers’ operations. Specifically, Kanamoto is further strengthening its relationships with customers andlocal communities by means such as Kanamoto’s comprehensive compensation system offering improved
systems and contents, and agreements with local governments to respond to urgent requests following
disasters.
d) Pursue Kanamoto’s alliance strategy
The Kanamoto group and its alliance firms currently are active in many regions, from Hokkaido to Okinawa.
The Company will seek to strengthen cooperation among these firms as the Kanamoto group and increase
the synergistic effects from this approach, by seeking additional high-quality alliance members.
Kanamoto also will further promote business growth at its subsidiaries through full cooperation with eachsubsidiary’s business.

6. Issues to be addressed by the Company
During the past several years, total construction investment in Japan has been fallen sharply. The cutback inpublic works in particular has been pronounced. Particularly in areas such as Hokkaido that traditionally had
relied heavily on public works construction, difficult conditions are continuing.
Nevertheless, despite some differences among regions, the trend in demand towards construction
equipment rentals is growing steadily as construction companies restrict their own capital investment inconjunction with the decline in total construction investment.
On the other hand, while the increasingly sharp competition among construction equipment rental
companies continues unabated, given the current environment the growth in construction equipment rental
demand will not necessarily be linked to improved operating earnings. The issues facing Kanamoto, and themeasures the Company will take to address this tough environment, are described below.

(1) Enhance marketing capabilities and customer strategies
As the leading firm in the construction equipment rental industry, Kanamoto strives to accurately understandusers’ needs and generate a profit as it develops its customer-first rental business with an emphasis on thehighest levels of quality satisfaction. Kanamoto also works to develop the construction equipment rental
market and promote a healthy industry.
By diversifying the types of products it handles, Kanamoto also will seek to cultivate a new range ofcustomers, in sectors such as facilities maintenance, landscaping and gardening, and events, in addition to
its traditional customers, who are mainly in civil engineering works and construction.
(2) Emphasize group management
Kanamoto’s consolidated subsidiaries are still in a growth phase. To increase operating results at thesecompanies, Kanamoto will strengthen its cooperation from a operating, business and asset management
standpoint, including seconding the necessary individuals from Kanamoto, and seek further growth inearnings as a group.
(3) Strengthen alliances
Kanamoto will build its alliance group in areas where the Company has not yet opened branches, andimplement efforts to create mini-alliances in areas where Kanamoto branches already exist.
Kanamoto fundamentally plans to strengthen this alliance-based approach, but also considers techniquessuch as business transfers and M&A to be effective alternatives.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 7

(4) Reinforce 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 capitalefficiency through the liquidation of bill receivables.
(5) Cost reductions in every operation
Kanamoto’s pursuit of low-cost operations has produced substantial positive results. While further large cost
reductions may not be possible in the future, Kanamoto will continue to seek greater operating efficiency infuture business periods aimed at eliminating wasteful expenses and boosting operating income. The
Company also will strive for the proper level of asset maintenance costs, based on a fundamental policy ofextending the life of its rental assets.

7. Basic approach concerning corporate governance and status of corporate
governance measuresa) Basic approach concerning corporate governance
The Kanamoto group recognizes that the creation of a relationship of trust with its stakeholders is a key
management issue for the Company’s stable development. In addition to strengthening its in-housecorporate governance system, to further increase trust the Company is working to maintain and improve
management transparency and fairness, and concentrating on activities that will ensure timely information
disclosure and provide an information feedback system.
b) Status of corporate governance measures
Kanamoto Company’s Board of Directors is composed of nine directors, including two outside directors. The
board fulfills its functions as the highest decision-making body concerning execution and supervision of theCompany’s business strategies and business plans, and acts to respond quickly to the Company’s continually
evolving business conditions.
Kanamoto also has adopted the auditor system. The Audit Committee is composed of four auditors(including two outside auditors), and forms an organization to exchange information and opinions withmanagement and the Board of Directors on a daily basis regarding important matters affecting theCompany’s management and operating results.
To clarify supervisory authority over operations and responsibility for execution of the Company’s businesses,
Kanamoto also has introduced a corporate officer system. The Company consolidated its organizationalframework, to provide a system for keeping employees well informed about Kanamoto’s policies, and ismaking every effort to formulate precise business strategies that conform to the market environment andexecute comprehensive management controls at each business division and each affiliated company.
With regard to compliance, Kanamoto has prepared ethics guidelines, established a Compliance Committeethat includes outside committee members, and taken steps to strengthen observance of laws and ethics
regulations throughout the Company. In addition to gathering information on important matters such as
violations of the law and improper conduct, by providing such information to management quickly theCompliance Committee fulfills the role of monitoring, guiding and advising the entire company, and ensures
Kanamoto’s system for compliance is functioning appropriately.
Kanamoto also has established a new internal management project team, which will further improvefinancial statement transparency by studying and adjusting the operation of internal controls.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 8

жKanamotot’s corporate governance organization

General Meeting of the shareholderes
Election andDismissal

Election andDismissal

Election and Dismissal
Board of directors(Decision making and supervision)

Auditors（Auditors andOutside auditors ）OperatingauditsConsultation
and reporting

Election andsupervision

Independent
Accounting
auditsCorporate Officer(auditcorporation)

President（Execution of activities）

Auditors

Intermal Controls

Auditing section
Advising attoney

Legal section
Operating divisions

Compliancecommittee

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 9

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 was affected by external environmental
factors such as the sharp rise in prices for oil and raw materials. Nevertheless, business conditions in major
metropolitan areas enjoyed a recovery. Private sector capital investment continued to grow centered on theTokyo metropolitan area, against the backdrop of strong operating results in export-related industries, suchas iron and steel and marine transportation. The benefits of this economic recovery, however, did not extend
as far as other regions. As a result, the gap between the Tokyo metropolitan area and other large urban
areas compared with other regions, in terms of both the local economy and personal consumption, became
even more marked.
A similar trend also was evident in the construction industry, the primary customer of the Kanamoto group.
The difference between the Tokyo metropolitan area, where ample public works and private capital
investment are closely linked and have produced a synergistic effect, and local regions where public works
projects have decreased remarkably, has emerged in stark relief. For the Kanamoto group, which has
numerous branches in local areas, the tough business environment continued.
〔 Construction-related business 〕
In Kanamoto’s main business in the construction equipment rental industry, demand grew at acomparatively steady pace in the major metropolitan areas where private sector capital investment is strong.
In local areas, on the other hand, where cutbacks in the volume of public works has been substantial andprivate capital investment also was limited, the management environment remained severe.
Confronted with this challenging business environment, for the consolidated fiscal year under review the
Kanamoto group achieved consolidated revenues of ¥57,844 million in its construction-related businesses,
an increase of 5.5% compared to the prior consolidated fiscal year, and operating income ¥1,203 million, a
28.4% decrease year-on-year.
For this division of the Company on a stand-alone basis, rental revenues rose 1.9% compared to the priorconsolidated fiscal year, to ¥39,217 million, and sales decreased 17.0% compared to the prior consolidated
fiscal year to ¥11,854 million as a result of strictly limiting sales of used equipment in accordance with theCompany’s original plan. As a result, total revenues for Kanamoto’s Construction Equipment Rental Divisionwere ¥51,072 million, 3.2% lower than in the prior consolidated fiscal year.
By region, rental revenues decreased 5.2% year-on-year in Hokkaido, where public works were sharply
lower and the first stage of disaster restoration work begun last year was completed. In the Tohoku territory,
rental revenues exceeded the prior year level by 4.6%, despite a marked decline in public works. This was
the result of a new branch opened to support large projects such as the Shinkansen and a gas pipeline,
prefectural government urban redevelopment projects, and growth in private demand such as apartmentbuilding construction. In the Kanto and Shinetsu territory, demand was strong because of numerous
large-scale private construction projects and maintenance and repair work in the Kanto region, as well as
extraordinary demand because of disaster recovery work in Shinetsu following the Niigata Prefecture
Chuetsu Earthquake, resulting in 11.7% higher rental revenues, while in the Kinki-Chubu territory rental
revenues rose 6.5% year-on-year, despite concerns of a slowdown in demand following the completion of
construction related to the Chubu International Airport and Aichi Expo, because of comparatively strong
large-scale building construction and maintenance and repair work as part of redevelopment in Tokai andOsaka and the impact of disaster relief work following last year’s typhoon and local torrential rains. As aresult, the percentage of total rental revenues accounted for by Hokkaido and Honshu were 37.3% and62.7%, respectively, as the shift of revenues towards Honshu progressed further.
During the consolidated fiscal year under review, Kanamoto opened one new branch and closed one branchin the Hokkaido territory, added four new branches in the Tohoku territory and opened two new branches in

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 10

the Kanto-Shinetsu territory. There were no new branches or branches closed in the Kinki-Chubu territory.
The total number of branches increased by six to 146 branches.
Turning to the operations of its consolidated subsidiaries, Daiichi Kikai Co., Ltd. enjoyed growth in rental
revenues and sales of temporary housing units as a result of opening a new branch, and increased revenues
7.9% from the prior consolidated fiscal year level. The company incurred an operating loss, however,
because of its increased cost burden for new branch start-up costs.
SRG Kanamoto Co., Ltd. was unable to increase demand as expected in local cities, even though private
construction works in the Sapporo area were steady, and revenues decreased 0.8% year-on-year. The
company reduced its operating loss by 22.8%.
At Assist Co., Ltd., both revenues and operating income fell. Revenues declined 5.5% from the priorconsolidated fiscal year because the company was unable to increase orders for safety equipment, whichwere affected by the decline in public works. Operating income was down 5.6% year-on-year.
Beginning from the consolidated fiscal year under review, Kanki Corporation was included within the scopeof consolidation for both the balance sheet and statement of income. This company currently is
implementing a management restructuring, and although revenues changed nearly according to plan thecompany booked an operating loss because of a large increase in rental equipment assets.
At Kanatech Co., Ltd., which is the only manufacturing firm in the Kanamoto group, revenues decreased
9.8% from the prior consolidated fiscal year level. The company incurred an operating loss as a result of
increased materials procurement expenses in conjunction with new product development, and because it
was unable to absorb the affect of higher manufacturing costs resulting from a sharp increase in raw
materials costs.
〔 Steel Sales-related business 〕
During the first half of the consolidated fiscal year under review, revenues were supported by inventory
levels from the prior year and strong exports, and steady growth in orders that included a new products(highly durable, insulated and waterproof roofing, and the KT roofing system). During the second half,
however, selling prices fell sharply with concerns about market inventory levels for steel materials. As aresult, revenues declined 5.9% year-on-year to ¥5,699 million, and operating income fell 45.2% comparedto the prior consolidated fiscal year to ¥24 million.
〔 Information Products-related business and Other Businesses 〕
As demand for personal computers expanded along with the economic recovery, the Information Products
Division increased the number of large volume accounts from the start of the fiscal year and increased rental
revenues by 8.6% compared to the prior consolidated fiscal year. On the other hand, revenue from productsales dropped 56.7% year-on-year, as the lack of new core products continued. As a result, revenues for thedivision as a whole fell 5.2% from the prior consolidated fiscal year to ¥430 million, and operating income
shrank to ¥20 million under pressure from cost of revenues and selling, general and administrative
expenses.
Fiscal Year ended October 31, 2005 Consolidated Operating Results(Million yen; % change from prior year)
Revenues

Operating Income

Ordinary Income

Net Income

Consolidated Fiscal
Year Under Review

63,975

4.3

1,404

-25.2

1,550

-11.4

352

-67.9

Prior Consolidated
Fiscal Year61,336

-3.7

1,878

-18.6

1,749

-23.2

1,097

20.1

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 11b) Outlook for the next consolidated fiscal year (Business Period ending October 2006)
As 2005 drew to a close, factors such as improved operating performance at leading financial institutions
and growing private sector capital investment against a backdrop of stronger corporate earnings gave
evidence that a sustainable recovery in Japan’s economy was underway. On the other hand, the affect of theexternal environment, including the sharp rise in crude oil and raw materials prices, remained a source ofconcern. In addition, increases in the general public’s financial burden that seem all but certain, such asincreases in the consumption tax and other taxes and changes in medical care costs, cast a shadow overpersonal consumption. As a result, Japan’s economic recovery is expected to experience repeated fits andstarts as long as it remains susceptible to these instability factors.
In the construction industry, the environment enveloping the industry in local regions presents conditions
much more severe than initially anticipated. In the years ahead as well, there is little hope of substantial
public works because of stringent local fiscal conditions, and in regions such as Hokkaido, Kanamoto projects
the severe management environment to continue.
In the prior fiscal year, demand in the Honshu territory including the Tokyo metropolitan area remained
steady, and as a result covered the decline in demand in the Hokkaido territory. Even if the slump in
Hokkaido continues, Kanamoto projects it will be able to maintain the corresponding level of demand, during
the current fiscal year and beyond, because it expects to establish new branches in the Tokyo metropolitan
area and because of the recovery in the Tohoku territory. Nevertheless, because future demand in regions
boosted by disaster recovery work is unpredictable, Kanamoto revised the numerical objectives for the next
three periods, beginning from the fiscal year ending October 2006 of its long-range management plan. The
outlook of next consolidated fiscal year is given below.
Because the results of measures under its long-term management plan “Metamorphose,” including
adjustments in rental rates for selected territories and equipment, are being demonstrated steadily, theentire Kanamoto group will seek to maintain earnings by pursuing further optimization of asset operations,continuing to create the corporate structure and business capabilities to respond fully to the challenging
business environment, taking full advantage of Kanamoto’s broad line-up of state-of-the-art equipment, andavoiding competition through alliances with other leading rental companies in selected regions.
Finally, although Kanamoto will be required to apply asset impairment accounting for fixed assets beginningfrom the next business period, at the present time the Company plans to apply asset impairment write-offs
for certain idle assets and lease assets.

Fiscal Year ending October 31, 2005 Projected Consolidated Operating Results(Million yen; % change from prior year)
Revenues

Operating Income

Ordinary Income

Net Income

Interim period

32,560

-1.7％

1,600

23.9％

1,470

24.1％

540

16.6％

Full year

63,210

-1.2％

1,910

36.0％

1,680

8.4％

610

73.3％

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 12

(2) Financial position
Cash flows for the consolidated accounting fiscal year under review are reviewed below.
Cash flow from operating activities increased ¥3,989 million from the prior consolidated fiscal year to¥10,219 million. This mainly was the result of a decrease in accounts receivable, trade as a result of
liquidation of bill receivables.
Cash flow used for investing activities decreased ¥1,524 million from the prior consolidated fiscal yearto ¥11 million, primarily reflecting a decrease in funds used for the purchase of tangible fixed assets.
Cash flow used for financing activities increased ¥2,910 million compared with the prior consolidated
fiscal year to ¥7,833 million. This mainly reflected a decrease in funds provided by long-term bank loans.
As a result of the above, the balance of cash and the cash equivalents at the end of the consolidated fiscal
year under review was ¥14,108 million, ¥2,374 million more than at the end of the prior consolidated fiscal
year.
〔 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 2003

October 2004

October 2005

Shareholders’ equity ratio (%)

35.8

36.7

40.8

Shareholders’ equity ratio on a market
capitalization basis (%)

17.7

18.1

26.6

Years to repay debt

4.0

6.3

3.3

Interest coverage ratio (times)

17.2

13.4

24.5

(Note)
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 theConsolidated Balance Sheets.
The amounts shown as interest expense on the Consolidated Statements of Cash Flows are used as interest payments.

〔 Fiscal Year ending October 31, 2006 Projected Cash Flows 〕
Cash flow from operating activities is projected to same amount as in the consolidated fiscal year underreview because there are no factors that will result in large changes.
Cash flow from investing activities is projected to same amount as in the consolidated fiscal year underreview because there are no factors that will result in large changes.
Cash flow used for financing activities is projected to decrease compared with the consolidated fiscal
year under review because the Company will decrease the amount of funds provided by long-term bankloans.
As a result, the balance of cash and cash equivalents at the term 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 Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 13

IV

Consolidated Financial Statements

1. Consolidated Balance Sheets
PeriodCategory(Unit: Thousands of yen)

Prior Consolidated
Accounting Fiscal Year（As of October 31, 2004）
AmountPercent

Current Consolidated
Accounting Fiscal Year(As of October 31, 2005)
AmountChange fromprior year

Percent(Assets)
Current Assets
Cash and deposits

11,742,173

14,111,882

2,369,708

Notes and accounts receivable,
trade

23,480,548

14,329,090- 9,151,458

703,059

538,951- 164,108

1,905,762

1,469,376- 436,385

252,069

318,999

66,929429,435

873,516444,081- 730,669- 923,256- 192,586

Inventory
Construction equipment
Deferred tax assets
Other current assets
Allowanceaccounts

fordoubtful

Total Current Assets

37,782,380

42.3

30,718,560

37.5- 7,063,819

Fixed Assets
Tangible Fixed Assets
Rental equipment
Buildings and structures
Machinery, equipment,
vehicles and delivery
itLandConstruction in progress
Other assets
Total Tangible Fixed Assets

10,309,578

9,811,304- 498,274

7,011,800

6,501,912- 509,887

907,542792,395- 115,146

26,112,181

26,140,976

28,794

2,793−- 2,793361,109292,326- 68,782

44,705,006

50.1

43,538,915

53.1- 1,166,090

Intangible Fixed Assets

559,067

435,655- 123,411

Total Intangible Fixed Assets

262,569

252,765- 9,803

Fixed Assets

821,637

Other assets

0.9

688,4210.8- 133,215

Investment and Other Assets
Investment securities

3,938,162

5,753,056

1,814,894

Deferred tax assets

911,019

302,238- 608,781

2,826,514

1,754,473- 1,072,041- 1,660,994- 778,148

882,846

Other
Allowance for doubtful
accounts
Total Investments and Other
Assets6,014,701

6.7

7,031,620

8.6

1,016,918

Total Fixed Assets

51,541,344

57.7

51,258,957

62.5- 282,387

Total Assets

89,323,725

100.0

81,977,517

100.0- 7,346,207

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 14

(Unit: Thousands of yen)
PeriodCategory

Prior Consolidated
Accounting Fiscal Year（As of October 31, 2004）
AmountPercent

Current Consolidated
Accounting Fiscal Year(As of October 31, 2005)
AmountChange fromprior year

Percent(Liabilities)
Current Liabilities
Notes and accounts payable,
trade

13,405,603

10,837,618- 2,567,984

676,639

577,364- 99,275

10,935,496

10,718,496- 217,000

Corporate taxes payable

368,813555,570

186,756

Accrued bonuses to employees

480,597515,796

35,198

Accounts payable, other

4,129,127

2,464,772- 1,664,354

Other current liabilities

623,001

467,946- 155,054

Short-term bank loans
Long-term bank loans due
within one year

30,619,278

Total Current Liabilities

34.3

26,137,564

31.9- 4,481,714

Long-term Liabilities
Long-term bank loans
Accrued employees retirement
benefits
Retirement allowances todirectors and auditors
Long-term accrued expenses
Other

21,952,103

18,643,607- 3,308,496

1,228,829

1,525,993

297,163

96,281

110,473

14,1912,496,910

1,968,265- 528,645

125,226

55,003- 70,223

Total Long-term Liabilities

25,899,351

29.0

22,303,342

27.2- 3,596,008

Total Liabilities

56,518,630

63.3

48,440,907

59.1- 8,077,722

59,2450.0

71,1350.1

11,889Common stock

8,596,737

9.6

8,596,737

10.5−

Additional paid-in capital

9,720,343

10.9

9,720,343

11.8−

13,913,568

15.6

13,691,585

16.7- 221,982

697,675

0.8

1,643,403

2.0945,727- 182,475- 0.2- 186,594- 0.2- 4,118

Total Shareholders’ Equity

32,745,849

36.7

33,465,475

40.8

719,625

Total Liabilities, Minority Interestand Shareholders’ Equity

89,323,725

100.0

81,977,517

100.0- 7,346,207(Minority Interests)
Minority Interests(Shareholders’ Equity)

Consolidated retained earnings
Valuation difference on otherinvestment securities
Treasury stock

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 15

2. Consolidated Statements of Income
PeriodCategory(Unit: Thousands of yen)

Prior Consolidated
Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)
AmountPercent

Current Consolidated
Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)
AmountChange fromprior year

Percent

Revenues from operations
Rental revenues

39,759,242

42,985,807

3,226,564

Sales

21,577,015

20,989,405- 587,609

Total revenues from operations

61,336,258

100.0

63,975,212

100.0

2,638,954

Cost of revenues from operations
Cost of rental revenues

29,998,533

31,949,570

1,951,037

Cost of goods sold17,018,896

16,785,504- 233,391

Total cost of revenues

47,017,429

76.6

48,735,074

76.2

1,717,645

14,318,828

23.4

15,240,137

23.8

921,309

12,440,160

20.3

13,835,766

21.6

1,395,605

1,878,668

3.1

1,404,371

2.2- 474,296

Gross profit
Selling,
generaladministrative expenses

andOperating income
Non-operating revenues
Interest revenue

2,781

3,756

974

Dividend income

68,30857,149- 11,159

47,261

363,963316,701

5,845−- 5,845

28,85047,70918,859113,474

94,173- 19,301

1,283−- 1,283

Other

170,632

149,796- 20,836

Total non-operating revenues

438,438

Gain on sale of investment
securities
Amortizationof
consolidation
adjustment accountInsurance benefits
Rents received
Cash bonus received

0.7

716,5481.1

278,109

Non-operating expenses
Interest expense

347,660

353,256

5,595

Other

219,738

217,449- 2,288

Total non-operating expenses

567,3990.9

570,705

0.9

3,306

1,749,707

2.9

1,550,213

2.4- 199,493

Ordinary income
Extraordinary profits
Gain on sale or retirement of fixed
assetsValuation gain on investment
enterprise partnership
Gain on return of entrusted portionof corporate Employee Welfare
Pension Fund
Gain on reversal of allowance for
doubtful accounts
Gain on sale of investment
securities
Other
Total extraordinary profits

8,334

57,93049,5955,130

10,8495,719

606,420−- 606,420−

24,174

24,174−

26,906

26,906

342

1,164

822

620,2261.0

121,025

0.2- 499,201

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 16

PeriodCategory

Prior Consolidated
Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)
AmountPercent

Extraordinary losses(Unit: Thousands of yen)
Current Consolidated
Accounting Fiscal Year
(From November 1, 2004
Change fromTo October 31, 2005)prior year
AmountPercent%

Loss on sale or retirement of
fixed assets
Valuation loss on investment
securities
Loss on valuation of affiliatedcompany stock
Transfer to allowance for
doubtful accounts for affiliatedcompany stock
Other

%

97,824

147,388

49,56342,54429,961- 12,583−

55,00055,000−255,724

255,724

17,41557,31039,894

157,7850.3

545,3830.8

387,598

Incomebeforetaxes
andadjustments
Corporate, local and business
taxes
Adjustment for corporate andother taxes

2,212,149

3.6

1,125,855

1.8- 1,086,293

839,0831.4

858,422

1.3

19,338

256,687

0.4- 97,079- 0.1- 353,767

Minority interest in income

18,939- 0.0

11,889- 0.0- 7,049

1,097,439

1.8

352,623

0.6- 744,816

Total extraordinary losses

Net income

3. Statements of Consolidated Retained Earnings
PeriodCategory

Prior Consolidated
Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)
Amount(Unit: Thousands of yen)
Current Consolidated
Accounting Fiscal Year
(From November 1, 2004
Change fromTo October 31, 2005)prior year
Amount(Capital Surplus)
Balance of capital surplus at the
beginning of the period
Balance of capital surplus at theend of the period

9,720,343

9,720,343−

9,720,343

9,720,343−(Earned Surplus)
Balance of earned surplus at the
beginning of the period
Increase in earned surplus

13,400,060

13,913,568

513,508352,623- 744,816

574,605- 9,325

13,691,585- 221,982

Net income for the period

1,097,439

1,097,439

352,623

Decrease in earned surplus
Dividends
Directors and auditors’ bonuses
Decrease in earned surplus frommerger of non-consolidated
subsidiary
Balance of earned surplus at theend of the period

537,604

567,305

14,1007,300

32,226583,931
13,913,568−

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 17

4. Consolidated Statements of Cash Flows
PeriodCategory

Prior Consolidated
Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)
Amount(Unit: Thousands of yen)
Current Consolidated
Accounting Fiscal Year
(From November 1, 2004
Change fromTo October 31, 2005)prior y e ar
AmountCash flow from operating activities
Income before taxes andadjustments
Depreciation and amortization
expenseAmortization of consolidation
adjustment accountGain on sale or retirement of fixed
assetsLoss on sale or retirement of fixed
assetsInstallment purchases of assets forsmall-value rentals
Reclassification of cost of sales
associated with disposal of
construction equipment
Reclassification of cost of sales
associated with disposal of rental
assetsExpenditures for acquisition of rental
assetsValuation loss on investment
securities

2,212,149

1,125,855- 1,086,293

5,294,745

5,211,105- 83,640- 5,845

106,781

112,626- 8,334- 57,930- 49,595

97,824

147,388

49,563

12,47569,45556,98022,224

7,442- 14,782

1,482,068

564,032- 918,036- 1,278,248- 2,465,393- 1,187,144

42,54484,96142,416- 47,261- 363,963- 316,701

152,945- 690,259- 843,205

6,692

35,19828,506- 548,485

297,163

845,648- 101,749

14,191

115,941- 71,090- 60,905

10,184

111,954

68,120- 43,833

347,660

353,256

5,595- 944,131

9,151,458

10,095,589

204,823

164,108- 40,714

1,071,687- 2,567,984- 3,639,672

239,627- 195,552- 435,179- 14,100- 7,300

6,800

Other, net- 538,148

256,190794,339

Subtotal

7,742,029

11,247,422

3,505,392

71,09060,905- 10,184- 463,881- 417,194

46,686- 1,119,008- 671,665

447,342

6,230,229

10,219,467

3,989,237

Gain on sale of investment securities
Increase (decrease) in allowance for
doubtful accounts
Increase (decrease) in accrued
bonuses to employees
Increase (decrease) in accrued
employees retirement benefits
Increase (decrease) in retirement
allowances to directors and auditors
Interest revenue and dividend
incomeInterest expense on installment
purchases of rental assets
Interest expense
Increase (decrease) in accounts
receivable, trade
Decrease in inventory assets
Increase (decrease) in accounts
payable, trade
Increase (decrease) in accounts
payable, other
Directors and auditors’ bonuses paid

Interest and dividends received
Interest expense
Payment of corporate and other taxes
Cash flow from operating activities

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 18

PeriodCategory

Prior Consolidated
Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)
Amount(Unit: Thousands of yen)
Current Consolidated
Accounting Fiscal Year
(From November 1, 2004
Change fromTo October 31, 2005)prior year
AmountCash flow from investing activities
Disbursements for investments interm deposits
Revenue from redemption of term
deposits
Funds used for the purchase of
tangible fixed assets
Funds provided from the sale oftangible fixed assets
Funds used for the purchase ofintangible fixed assets
Funds used for the purchase ofinvestment securities
Funds provided from sale ofinvestment securities
Funds used for purchase ofinvestments
Funds used for purchase of
subsidiary company stock
Funds provided from sale ofsubsidiary company stock
Funds provided from purchase of
subsidiary company stock
following change in scope of
consolidation
Other
Cash flow from investing activities

-1

−

1

−

5,000

5,000

- 1,899,402- 484,985

1,414,416

15,555314,122

298,566- 182,859- 50,730

132,128- 1,044,472- 1,188,707- 144,235

1,332,729

1,386,291

53,561

- 10

−

10

- 27,875−

27,875

−

2,902

2,902

319,306−- 319,306- 48,581

4,741

53,323- 1,535,610- 11,364

1,524,245- 36,718- 99,275- 62,556

11,930,000

7,900,000- 4,030,000- 10,709,516- 11,425,496- 715,980- 5,564,061- 3,637,197

1,926,864- 5,157- 4,118

1,038- 537,604- 567,305- 29,700

- 150

−

150

- 4,923,208- 7,833,393- 2,910,184- 228,589

2,374,708

2,603,298

11,920,620

11,734,154- 186,465

42,124−- 42,124

11,734,154

14,108,863

2,374,708

Cash flow from financing activities
Decrease in short-term bank loans
Funds provided by long-term bankloans
Funds used to repay long-termbank loans
Funds used for repayment of
installment obligations
Funds used for the purchase oftreasury stock
Payment of dividends to parent
company
Other
Cash flow from financing activities
Increase (decrease) in cash andequivalents
Balance of cash and equivalents at
beginning of period
Increase in cash and equivalents
accompanying merger with
non-consolidated subsidiary
Balance of cash and equivalents at
end of the period

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 19

5. Significant Accounting Policies for the Consolidated Financial Statements
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)
1. Companies included in
the consolidation(1) Number of consolidated companies: 5
Consolidated company name:
Assist Co., Ltd.
SRG Kanamoto Co., Ltd.
Kanatech Co., Ltd.
Daiichi Kikai Co., Ltd.
Kanki Corporation

Current Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)(1) Number of consolidated companies: 5
Consolidated company name:
Assist Co., Ltd.
SRG Kanamoto Co., Ltd.
Kanatech Co., Ltd.
Daiichi Kikai Co., Ltd.
Kanki Corporation

Kanki Corporation is included in thescope of consolidation beginning in the
consolidated fiscal year under review
following the acquisition of its stock byKanamoto in October 2004. Only thecompany’s balance sheet has been
consolidated, however, because theacquisition was considered to occur at
Kanamoto’s

consolidated

fiscalyear-end.
(2) Main non-consolidated subsidiaries
Non-consolidated subsidiary company
nameComsupply Co., Ltd.

(2) Main non-consolidated subsidiaries
Non-consolidated subsidiary company
nameSame as at left

Kanki Maintenance Co., Ltd.
(Reason for exclusion from consolidation)
The

size

of

the

non-consolidated

subsidiaries is small and their net assets,
sales and fiscal year profit or loss
(amount corresponding to equity) andretainedearnings(amount

corresponding to equity) are small in sizeand do not have a material effect on the
consolidated financial statements.
2. Matters pertaining toTwounconsolidated
Co.,

subsidiaries

application of equity(ComsupplyLtd.

method accounting

Maintenance Co., Ltd.) and two affiliatedcompanies(Active

Corporation

and

and

Kanki

Same as at left

Technology
ActivePower

Corporation) have been omitted fromitems to which equity method accounting
is applied because their respective effecton consolidated net income or loss
(amount

corresponding

tominority

interest) and consolidated capital surplus(amount

corresponding

tominority

interest) is immaterial and none of thecompanies

isimportanttotheCompany’s overall operations.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 20

3. Matters pertaining totheclosingfiscal

year

date

for

consolidated
subsidiaries

The fiscal year closing date for all oftheconsolidated

subsidiaries

exceptSame as at left

Kanki Corporation is August 31.
When

preparingtheconsolidated

financial statements the Company used
the subsidiaries’ financial statements asof August 31, adjusted for significant
transactions that occurred between thesubsidiaries’ fiscal year-end and theconsolidation date that have a material
effectontheconsolidated

financialresults.
4. Accounting principles
and standards used
for normal accounting
treatment(1) Appraisal standards
and appraisal
methods forprincipal assets

a. Negotiable securities
Other negotiable securities
Securities with a market pricea. Negotiable securities
Other negotiable securities
Securities with a market price

The Company has adopted the market

Same as at left

value method (the full amount of thevaluation difference is charged to equity
using

the

method,directtransfer

with

the

by

the

determinedtocapitaldisposalmovingcost

averagemethod) based on the market price on the
consolidated

accounting

fiscalyear

closing date or similar prices
Securities without market prices
The Company has adopted the cost

Securities without market prices
Same as at left

method, cost being determined by the(2) Depreciation
methods for principal
depreciable assets

moving average method
b. Construction equipment
Amount after deduction of depreciation
expense calculated according to thedeclining-balance method from the original
prices, by separate fiscal year of purchasec. Merchandise inventories and supplies(i) Merchandise inventories
Lower of cost or market based on the
Last-in, First-out method(ii) Supplies
The Latest Purchase Cost method
a. Tangible fixed assets
The
Companyhasadoptedthedeclining-balance method. Buildings onland that is leased under a fixed-term landlease agreement, however, are depreciatedusing the straight-line method using theremaining period of the fixed-term lease as
the depreciable life and zero residual value.
For certain consolidated subsidiaries, theCompany has adopted the straight-line
method for buildings and structuresacquired on or after April 1, 2000 but
excluding fixtures and equipment.
The depreciable lives mainly used by theCompany are as follows.
Rental assets
5-10 years
Buildings
31-34 years

b. Construction equipment
Same as at left

c. Merchandise inventories and supplies(i) Merchandise inventories
Same as at left(ii) Supplies
Same as at left
a. Tangible fixed assets
Same as at left

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 21

b. Intangible fixed assets
Software for use within the Company
is depreciated using the straight-line
method based on the assumed useful life
for internal use (5 years)(3) Accounting
standards forprincipal allowancesand reserves

a. Reserve for doubtful accounts
To provide for losses on doubtful
accounts such as accounts receivable,
the Company charges to income anamount based on actual loss experience
for normal accounts, plus an amount for
projected unrecoverable amounts basedon assessments of individual accounts.
b. Accrued bonuses to employees
To fully provide for expenditures ofbonuses the Company will pay toemployees, an amount is appropriated to
the reserve during the year based upon asalary estimate amountc. Accrued employees retirement benefit
The Company provides for employees’
accrued retirement benefits based upon
the projected amounts of the liability for
accrued employees retirement benefits
and the value of pension assets at theend of the consolidated accounting fiscal
year. At the end of each consolidated
accounting fiscal year, the Company
appropriates an amount to the reserve toprovide for the liability recognized during
the period. Past years’ service liabilities
are fully amortized in the year incurred.
The difference based on an actuarial
calculation is charged to income
beginning in the consolidated accounting
fiscal year following the year in which
incurred, with the amounts allocatedproportionately using the straight-line
method, based on a specified number ofyears (10 years) that is less than the
averageremaining
periodofemployment for employees at the timethe difference arises.

b. Intangible fixed assets
The
Companyhasadoptedthestraight-line method.
Software for use within the Company isdepreciated using the straight-line method
based on the assumed useful life forinternal use (5 years)
a. Reserve for doubtful accounts
Same as at leftb. Accrued bonuses to employees
Same as at leftc. Accrued employees retirement benefit
Same as at left

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 22

(4) Lease transactions(5) Hedge accounting
for principal hedging
methods(Supplemental information)
On January 1, 2004 the Company
received approval from the Minister of
Health,LabourandWelfarefor
exemption from the obligation to makefuture payments for the entrusted
portion of the Employee Welfare Pension
Fund, accompanying enforcement of theDefined Benefit Corporate Pension Law.
The Company has adopted the interim
measures prescribed in Paragraph 47-2of the Business Guidelines Concerning
Retirement Benefit Accounting (Interim
Report) concerning return of theentrusted portion of the corporate
Employee
WelfarePensionFund(Japanese Institute of Certified Public
Accountants,
Accounting
SystemCommittee Report No. 13), and on the
day authorization was received theCompany accounted for the retirement
benefit liability related to the entrusted
portionandthepensionassetsequivalent to the return amount as being
extinguished.
The Company accounted for theaffects on earnings accompanying thistreatment at the end of the consolidated
fiscal accounting year under review bybooking
extraordinary
incomeof¥606,420,000.
The
returnedequivalentamount(minimum actuarial liability) measured
as of the end of the consolidated
accounting fiscal year under review was¥1,296,434,000.
d. Retirement allowances to directors andauditors
The Company provides for retirement
allowances to directors and auditors
based
upon
pertinent
rules
andappropriatedtotheaccount
proportionately at the end of theconsolidated fiscal year based upon
length of service.
For finance lease transactions except
for leases that transfer ownership of theproperty to the lessee, rent expenses arecharged to income as payments are
made.
a. Hedge transactions
The Company accounts for hedgetransactions using allocations based on
accounting
standards
forforeigncurrency-denominated transactions, andspecial rule accounting based on
accounting
standards
forfinancial
products.

──────

d. Retirement allowances to directors andauditors
Same as at left

Same as at left

a. Hedge transactions
Same as at left

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 23

(6) Other material
matters pertaining topreparation of theconsolidated financial
statements

5. Valuation of
consolidated
subsidiary assets andliabilities
6. Amortization of theconsolidation
adjustment account

7. Appropriation ofretained earnings

8. Items included in cash
and equivalents on
the Consolidated
Statement of CashFlowsb. Hedge methods and hedged transactionsb.
Hedge
methods
andhedgedSame as at lefttransactions
The Company uses currency swaps andforward transactions in order to avoid thecurrency fluctuation risk related to theCompany’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
andliabilities
subject
tomarketfluctuation risk.
d. Method for evaluating the effectiveness of d. Method for evaluating the effectiveness ofhedgeshedgesThe Company does not evaluate theSame as at left
effectiveness of its hedge transactions
because it can assume that its currency
swap
transactions
andforwardtransactions will completely offset market
fluctuations or changes in cash flow fromthe time the hedge begins until it isterminated. In addition, the Company’s
interest swap transactions fulfill therequirements for special rule accounting,and the Company has elected to use thisin place of an evaluation of effectiveness.
a. Accounting treatment of consumption tax a. Accounting treatment of consumption tax
Same as at left
Accounting treatment of consumption
tax
Consumption tax is taken out of all
Statement of Income items and Balance
Sheet
items,
exceptmainlyforreceivables and payables.
The Company has adopted the market
Same as at left
value
appraisal
methodfortheevaluation of assets and liabilities of
consolidated subsidiaries.
The remainder is transferred to theSame as at left
consolidation account and amortizedover five years using level amortization,
expect for extremely small amounts thatare written off completely in the year inwhich they occur.
The
StatementofConsolidated
Same as at left
Retained Earnings is created based upon
the appropriation of net income decided
upon by the Company during theconsolidated accounting fiscal year.
Funds included in cash (cash and cash
Same as at left
equivalents)ontheConsolidated
Statement of Cash Flows include cash on
hand, deposits that can be withdrawn on
demand and highly liquid short-term
investments that mature within threemonths of the date of acquisition andwhich can be easily converted into cash
and that have minimal risk of a change inprice.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 24

Change in Presentation Method
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

(Consolidated Balance Sheets)
Following promulgation of the Law to Partially Amend the
Securities and Exchange Law Etc. (Law No. 97 of 2004) on
June 9, 2004 and its application on December 1, 2004, andthe revision of the Practical Guidelines for Accounting for
Financial Instruments (Accounting Committee Report No.
14) on February 15, 2005, the Company changed its
reporting method to disclose investments in venture capital
investment limited partnerships and similar associations(investments regarded as negotiable securities under
Article 2 paragraph 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 in investment
securities for the consolidated accounting fiscal year underreview is ¥106,935,000, and the amount of suchinvestments included in “Other” under Investments andOther Assets in the prior consolidated accounting fiscal year
was ¥108,080,000.
(Consolidated Statements of Income)1. The Company has reported cash bonus received(¥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 because the amount remains
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 under review thisitem is reported separately because the amount exceeded
10% of the total amount of extraordinary losses.
The amount of the loss on valuation of affiliated company
stock at the end of the prior consolidated accounting fiscal
year was ¥646,000.

Supplemental Information
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)─────Current Consolidated Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)
Following promulgation of the Law to Partially Amend the
Local Tax Law (Law No. 9 of 2003) on March 31, 2003 andthe introduction of a corporate size-based tax system in thecorporate fiscal year beginning after April 1, 2004, theCompany will report the added value portion and capital
portionof

corporate

taxes

in

selling,

generalandadministrative expenses from the consolidated accounting
fiscal year under review in accordance with the Practical
Solution on Presentation for Corporate Size-Based Portionof Corporate Business Tax on the Income Statement(AccountingStandards

Board

of

Japan,

Corporate

Accounting Standards 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 and adjustments decreasedby ¥77,297,000.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 25

6. Notes to the Financial Statements(Notes to the Consolidated Balance Sheets)
Prior Consolidated Accounting Fiscal Year（As of October 31, 2004）
1. Total accumulated depreciation
for tangible fixed assets¥41,979,902,000

Current Consolidated Accounting Fiscal Year(As of October 31, 2005)
1. Total accumulated depreciation
for tangible fixed assets

2. Discount on notes receivable,
trade¥456,467,000

2. Discount on notes receivable,trade

3. Balance of notes
receivable-trade endorsed¥45,618,000

3. Balance of notes
receivable-trade endorsed

4. Notes and bills maturing at the end of the consolidated¥42,107,202,000¥373,580,000−──────

fiscal year
Notes and bills maturing on the last day of theconsolidated fiscal year are settled and processed on
the note and bill clearing date. Because the last day of
the Company’s consolidated accounting fiscal year wasa financial institution holiday, notes and bills maturingon the final day of the following accounting fiscal year
are included in the consolidated accounting fiscal
year-end balance.
Notes receivable¥766,154,000

Bills receivable¥1,059,945,000
5. Common stock

5. Common stock
Total number of shares issued

30,253,241 shares

30,253,241 shares(common stock)(common stock)
6. Treasury stock

6. Treasury stock

Number of shares of treasury

Number of shares of treasury
393,799 sharesstock held by the Company(common stock)stock held by the Company

400,165 shares(common stock)

7. Items pertaining to non-consolidated subsidiaries andaffiliated companies are as follows.
Investment securities (stocks)

7. Items pertaining to non-consolidated subsidiaries andaffiliated companies are as follows.

¥60,000,000

8. Guarantees

Investment securities (stocks)¥5,000,000

8. Guarantees

Joint
and
severalguarantees of employee
bank
loans
(Bank
of
Tokyo-Mitsubishi, others)¥25,669,000

Guarantee of debt for
long-term bank loan toaffiliated company(Active Power Co., Ltd.)(Mizuho Bank, Ltd.)¥269,500,000

Total

株 of shares issued
Total number

Joint
and
severalguarantees of employee
bank
loans
(Bank
of
Tokyo-Mitsubishi, others)
Total¥30,779,000¥30,779,000¥295,169,000
9. Liquidation of receivables based on receivablestransfer facility
The Company liquidates receivables based on areceivables transfer facility.
Notes receivable, trade¥5,348,993,000

Liquidated claims bearing a right of recourse to theCompany and included in the balance of notes
receivable, trade transferred total ¥1,152,352,000.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 26

株

（Notes to the Consolidated Statements of Income）
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

1. Major expense categories and amounts included in

1. Major expense categories and amounts included inselling, 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 account¥4,703,521,000¥888,113,000¥1,453,865,000¥331,332,000¥442,825,000¥427,675,000¥10,396,000−

2. Gain on sale or retirement of fixed assets
Land

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 account¥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¥8,310,000

Buildings and structures¥24,000

Total

selling, general and administrative expenses¥8,334,000Land¥51,273,000

Buildings and structures¥3,122,000

Machinery, equipment and¥3,528,000

delivery equipment
Other¥6,000Total
3. Loss on sale or retirement of fixed assets.

3. Loss on sale or retirement of fixed assets.

(Loss on sale of fixed assets)
Machinery,equipment（Loss on sale of fixed assets）
anddelivery equipment
Land¥83,000¥309,000(Loss on retirement of fixed assets)
Rental equipment¥20,915,000

Buildings and structures¥69,482,000

Machinery,equipmentdelivery equipment
Other
Total

¥57,930,000

and¥5,895,000¥1,138,000¥97,824,000

Buildings and structures
Machinery,¥58,116,000

equipment¥605,000

and delivery equipment
Land¥1,915,000

Other¥53,000（Loss on retirement of fixed assets）
Rental equipment¥38,767,000

Buildings and structures¥5,623,000

Machinery,¥8,855,000

equipment

and delivery equipment
Other
Total

¥33,449,000¥147,388,000

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 27

（Notes to the Consolidated Statements of Cash Flows）
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

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
Term deposits with a maturity
longer than 3 months
Items considered to be cash
and equivalents¥11,742,173,000¥−8,019,000¥11,734,154,000

2. Assets and liabilities of companies that became newly

Cash and equivalents¥14,111,882,000
Term deposits with a maturity¥- 3,018,000
longer than 3 months
Items considered to be cash and ¥14,108,863,000
equivalents──────

consolidated companies as the result of purchases of
their stock.
The details of assets and liabilities and their relationshipto the stock purchase amount and expenditures (netamount) for stock purchases at the start of consolidation
for newly consolidated companies as the result ofpurchase of stock are as follows.
Kanki Corporation
Current assets
Fixed assets¥1,591,473,000¥760,065,000

Current liabilities¥−1,602,439,000

Long-term liabilities¥−1,232,023,000

Consolidation adjustment¥570,824,000

Kanki Corporation
purchase price¥87,900,000

Kanki Corporation¥−407,206,000

cash and cash equivalents
Net: Amount expended toacquireKanki Corporation¥−319,306,000

3. Details of major non-cash transactions

3. Details of major non-cash transactions

Theand liabilities related to

The amount of assets and liabilities related to

installment 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¥763,664,000 respectively.

¥1,538,987,000 respectively.

amountofassetsSummary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 28

(Business Segment Information)
1. Segment Information by Type of BusinessPrior consolidated accounting fiscal year (From November 1, 2003 to October 31, 2004)(Unit: Thousands of yen)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

54,823,199

6,058,708

454,349−−

Eliminations
or entirecompany

Consolidated

61,336,258−

61,336,258

−

−

−

−

Total

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

54,823,199

6,058,708

454,349

61,336,258−

61,336,258

Operating expenses

53,142,297

6,013,546

454,178

59,610,022- 152,432

59,457,590

Operating income

1,680,902

45,161171

1,726,235

152,432

1,878,668

Assets

63,774,468

3,323,411

1,024,692

68,122,572

21,201,152

89,323,725

Depreciation expense

5,060,057

4,899

9,106

5,074,064

220,681

5,294,745

Capital disbursements

2,609,293

2,219

269

2,611,782

1,798,989

4,410,771

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

Principal products

Construction equipment
rentals
Steel sales
Information products
and other businesses

Construction equipment such as hydraulic shovels, generators, temporary
construction materials, construction safety equipment, temporary modular
housing units, special rustproof and waterproof shields
Steel bar, sheet steel, steel products such as round bar, steel scrap
Computers and peripheral devices, telecommunications-related equipment,
microturbine generators, microbrewery

3. The total amount for assets that were eliminated or included in the categories for all companies was¥21,201,152,000 and represents primarily idle working capital (cash, deposits and negotiable securities)
long-term investment funds (investment securities) and assets used in administrative departments at theparent company.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 29

Consolidated fiscal year under review (From November 1, 2004 to October 31, 2005)(Unit: Thousands of yen)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

Revenues(1) Sales to outside
customers(2) Sales or transfers
between related segments

57,844,580

5,699,737

430,894

−

−

Total

57,844,580

5,699,737

Operating expenses

56,640,650

5,675,002

Operating income

1,203,930

AssetsEliminations
or entirecompany

Consolidated

63,975,212−

63,975,212

−

−

−

−

430,894

63,975,212−

63,975,212

410,775

62,726,427- 155,586

62,570,841

24,734

20,1191,248,784

155,586

1,404,371

53,991,608

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

4,264,396

57,479423

4,322,299

345,4314,667,731

Total

I. Revenues and operating
incomeII. Assets, depreciation
expense and capital
disbursements(Notes) 1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, thenature of the business and the business markets.
2. Principal products, by businessBusiness

Principal products

Construction equipment
rentals
Steel sales
Information products
and other businesses

Construction equipment such as hydraulic shovels, generators, temporary
construction materials, construction safety equipment, temporary modular
housing units
Steel bar, sheet steel, steel products such as round bar, steel scrap
Computers and peripheral devices, telecommunications-related equipment,
microturbine generators

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 theparent 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 priorconsolidated 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 Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 30

(Notes for Leasing Transactions)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

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)

(1)

Amounts

corresponding

to

lease

property

Amounts

corresponding

to

lease

propertyacquisition 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
depreciation（¥’000）

Outstandingbalance（¥’000）Acquisition Accumulated Outstanding
price
depreciation
balance（¥’000）（¥’000）（¥’000）Rental assets

32,088,419

10,492,130

21,596,289

Rental assets

37,626,285

14,078,793

23,547,492

Other assets

435,397

228,409

206,988

Other assets

350,675

196,156

154,519

32,523,817

10,720,539

21,803,278

37,976,961

14,274,949

23,702,011

Total

Total

(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

¥5,450,340,000

Within one year

¥5,777,918,000

After one year

¥15,748,713,000

After one year

¥17,311,719,000

Total¥21,199,054,000(3) Amount of lease payments, depreciation expense¥23,089,637,000

Total(3) Amount of lease payments, depreciation expense

and interest expense

and interest expense

Lease payments¥6,015,002,000

Lease payments¥6,569,358,000

Depreciation expense¥5,633,557,000

Depreciation expense¥5,959,692,000Interest expense

Interest expense¥777,925,000(4) Accounting method for amount equivalent to¥772,799,000(4) Accounting method for amount equivalent todepreciation expensedepreciation expense
Same as at left

Straight-line depreciation using the lease termas 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

¥1,869,826,000

Within one year

¥1,664,503,000

After one year

¥3,603,704,000

After one year

¥3,837,936,000

Total¥5,473,531,000

Total¥5,502,439,000(Transactions with Affiliated Companies)
Prior consolidated accounting fiscal year (From November 1, 2003 to October 31, 2004)
The Company had no material items to report.

Current consolidated accounting fiscal year (From November 1, 2004 to October 31, 2005)
The Company had no material items to report.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 31

（Notes Related to Tax Effect Accounting）
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

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 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
Amount of loss carried forward
Other¥556,404,000¥24,011,000¥495,646,000¥38,804,000¥191,844,000¥368,263,000¥1,240,912,000¥329,388,000

Deferred tax asset subtotal¥3,245,275,000

Valuation reserve¥- 1,608,037,000

Total deferred tax assets¥1,637,238,000

Deferred tax liability
Valuation difference on othernegotiable securities
Total deferred tax liability¥474,149,000¥474,149,000

Net amount of deferred tax assets
Disclosure item: Current assets
Fixed assets¥1,163,088,000¥252,069,000¥911,019,000

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
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¥1,733,089,000

Deferred tax liability
Valuation difference on othernegotiable securities
Total deferred tax liability¥1,115,062,000¥1,115,062,000

Net amount of deferred tax assets¥618,027,000

Disclosure item:
Current assets - Deferred tax assets¥318,999,000

Fixed assets - Deferred tax assets¥302,238,000

Fixed assets – Other¥- 3,209,000

2. Causes of principal differences between the statutory

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

41.7%

（Adjustment）

Statutory corporate tax rate

40.4%

（Adjustment）

Local tax equalization
Items not included permanently in losses
such as expense accountConsolidated subsidiary losses
Valuation loss on investment inconsolidated companies
Other
Burden ratio for corporate and other taxes
after application of tax effect accounting

4.1%
1.4%
3.3%
0.2%
-1.2%

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

8.1%
3.0%
11.9%
4.2%
67.6%

49.5%

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 32

(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, 2005)

Prior consolidated accounting
fiscal year
(As of October 31, 2004)
Type
Acquisition
price

Amountreported ontheconsolidatedbalance sheet

Valuation
profit orloss

Acquisition
price

Amountreported ontheconsolidatedbalance sheet

Valuation
profit orloss

1,148,497

2,373,190

1,224,692

1,544,363

4,347,665

2,803,302

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

29,97044,013

14,043

10,20010,624424

Subtotal

1,178,467

2,417,203

1,238,735

1,554,563

4,358,289

2,803,726(1) Stocks

156,408

134,864- 21,543

99,17584,322- 14,853

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

−

(1) Stocks(2) Bonds
Negotiablesecurities
a. Government
bonds
whose balanceon theb. Corporate
bonds
consolidatedbalance sheet
c. Otherexceeds the(3) Otheracquisition
negotiable
price
securities(2) Bonds
Negotiablesecurities
whose balance a. Government
bonds
on theconsolidatedb. Corporatebondsbalance sheet
is less than the c. Other
acquisition(3) Otherpricenegotiable
Subtotal

968,278

924,350- 43,928

988,278

959,460- 28,818

1,124,686

1,059,214- 65,471

1,087,453

1,043,782- 43,671

Total

2,303,153

3,476,418

1,173,264

2,642,016

5,402,071

2,760,055

2. Other negotiable securities sold during the prior consolidated accounting fiscal year and thecurrent consolidated accounting fiscal year
(Unit: Thousands of yen)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

Selling amount

Total gain on sale

Total loss on sale

Selling amount

Total gain on sale

Total loss on sale

1,186,260

66,04918,787958,250

363,963−

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

Other negotiable securities
Unlisted stocks (excluding
over-the-counter stocks)
Unlisted foreign bonds
Corporate bonds with warrants
for new stock
Other

Prior consolidated accounting
fiscal year
(As of October 31, 2004)

Current consolidated accounting
fiscal year
(As of October 31, 2005)

Amount shown on the consolidatedbalance sheet

Amount shown on the consolidatedbalance sheet

401,743

239,050

−

−

−

−

−

106,935

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 33

4. Planned future redemption amounts of other securities that have a maturity date

(Unit: Thousands of yen)Type

Current consolidated accounting
fiscal year
(As of October 31, 2005)

Prior consolidated accounting
fiscal year
(As of October 31, 2004)
Withinone year

After one After five
years
year andwithin five within ten
years
years

After tenyears

Withinone year

After one After five
years
year andwithin five within ten
years
years

After tenyears

(１) Bonds
a. Government bonds

−

−

−

−

−

−

−

−

b. Corporate bonds

−

−

−

−

−

−

−

−

c. Other(２) Other negotiablesecurities

−

−

−

−

−

−

−

−

−

−

924,350

44,013−−

950,364−−−

924,350

44,013−−

950,364−

Total

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 34

（Notes related to Derivative Transactions）
1. Notes related to transaction conditions
Prior Consolidated Accounting Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

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, forward exchange agreements
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 Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 35

c. Transaction-related risksc. Transaction-related risks

Derivative transactions present market risk relatedSame as at left

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
The Company’s basic policy concerning derivatived. Transaction risk management system
Same as at lefttransactions 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 derivativetransactions, at the regular meetings of the Board of
Directors.
e. Supplemental explanation of matters related toe. Supplemental explanation of matters related totransaction market prices
Forward agreements and currency swap transactionstransaction market prices
Same as at left

accounted for on the Company’s financial statements
throughconversion

currency-denominatedliabilities

by

being

of

the

money

relevant
claimsappropriatedforeign

and

money

to

foreigncurrency-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, 2004)
The Company had no material items to report.
Current consolidated accounting fiscal year (As of October 31, 2005)
The Company had no material items to report.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 36

（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 somecases the Company pays an additional retirement amount that is not covered by the reserve for accrued employees
retirement benefit when using actuarial accounting based on retirement benefit accounting.
On January 1, 2004 the Company received approval from the Minister of Health, Labour and Welfare for exemption
from the 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, 2004)(1) Liability for accrued employees retirement
benefitCurrent consolidated accounting
fiscal year
(As of October 31, 2005)- 4,698,071- 4,382,486

2,504,295

2,979,738- 2,193,776- 1,402,748−−

964,947- 123,245

service−−(7) Net liability shown on the consolidatedbalance sheet (3)＋(4)＋(5)＋(6)- 1,228,829- 1,525,993−−- 1,228,829- 1,525,993(2) Pension assets(3) Liability for unreserved accrued employees
retirement benefit (1) ＋(2)(4) Unamortized amount of the one-timevaluation difference for change inaccounting standards(5) Unrecognized actuarial differences(6)

Unrecognized
pastyears’
obligation (reduction in liability)(8) Prepaid pension expense(9) Accrued employees retirement benefit(7)−(8)(Note)

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(Unit: Yen thousands)
Prior Consolidated Accounting
Fiscal Year
(From November 1, 2003
To October 31, 2004)

Current Consolidated
Accounting Fiscal Year
(From November 1, 2004
To October 31, 2005)(1) Service costs

328,382

407,274(2) Interest costs

107,677

91,621

89,914

95,571−−

81,473112,060−−

427,618

515,384(3) Expected return on plan investments（reduction）(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
for change in accounting standards charged
as an expense(7) Employees retirement benefit expense(8) Gain on return of entrusted portion of corporate
Employee Welfare Pension FundTOTAL−
178,802515,384

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

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 37

4. Matters related to the basis for accounting for the accrued employees retirement benefit andother items(1) Discount rate(2) Expected
investments

rate

of

returnonplan(3) Method of allocating projected benefits
to periods of service(4) Amortization
service liability

period(5) Amortizationdifferences

period

of

past
for

years’

actuarial(6) Number of years for amortization of
one-time valuation difference for change inaccounting standards

Prior consolidated accounting
fiscal year
(As of October 31, 2004)

Current consolidated
accounting
fiscal year
(As of October 31, 2005)

2.00%

2.00%

4.00%

4.00%

Service period fixed
benefit basis

Service period fixed
benefit basis−−

10 years beginning from the 10 years beginning from thenext consolidated accounting next consolidated accounting
fiscal year
fiscal year−−

(Per Share Information)
PeriodCategory
Net assets per share
Net income per share of common stock
Net income per share of common stock after
adjustment for potential ordinary shares

Prior consolidated accounting
fiscal year
(As of October 31, 2004)

Current consolidated accounting
fiscal year
(As of October 31, 2005)¥1,096.42¥1,120.76¥36.50¥11.57−−The Company has not reported
net income per share ofcommon stock after adjustment
for potential ordinary sharesbecause it does not have any
potential shares that would
have a dilution effect.

The Company has not reported
net income per share ofcommon stock after adjustment
for potential ordinary sharesbecause it does not have any
potential shares that would
have a dilution effect.

(Note) The basis for calculating consolidated fiscal year earnings per share is as follows.
(Unit: Yen thousands)
PeriodCategory

Prior Consolidated Accounting
Fiscal Year
(From November 1, 2003
To October 31, 2004)

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

Net income per share of common stock
Net income
Amount not attributed to common stock
shareholders
Net income related to common stock
Average number ofduring the fiscal year

outstanding

shares

1,097,439

352,623

7,300

7,300

1,090,139

345,323

29,865,301

29,856,334

−

−

−

−

−

−

−

−

Net income per share of common stock after
adjustment for potential ordinary sharesFiscal year net income adjustment(Interest expense [Tax equivalentdeduction amount])
Change in number of shares of common
stock (shares)(Convertible bonds)
Summary of latent stock not included in thecalculation of interim period (fiscal year)
earnings per share on a fully diluted basis
because it does not have a dilution effectWarrants based on the provisionsof Article 280-19 of the old
Commercial Code (incentive stock
options)──────

(Material Events After the Close of the Consolidated Fiscal Year)
The Company had no material items to report.
Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2005

P. 38