Report of Business Operations for the57th Business Period(Business Period ended October 2021) (Attachment to the
Notification and Invitation to the 57th Regular General Meeting of
the Shareholders)
From November 1, 2020 to October 31, 2021
1. Analysis of Operating Results and Financial Position(1) Analysis of Operating Resultsa) Summary of consolidated fiscal year operating results (From November 1, 2020 to
October 31, 2021)
During the consolidated fiscal year under review, Japan’s economy continued to facedifficult conditions, partly due to the prolonged spread of COVID-19. Also, in the global
economy, while some countries and regions began to show signs of recovery, there werestill significant concerns about sluggish economic activity and stock market turmoil
caused by COVID-19 and the situation remained unpredictable.

In the construction industry in which the Group is involved, public sector investment
including activity being carried out for Japan’s National Resilience Plan remained strong
and private sector construction investment has shown signs of picking up although thesituation still requires monitoring as rising material prices and the shortage of skilledconstruction workers are apparent.

In such circumstances, based on the three key measures of the Medium-Term
Corporate Management Plan “Creative 60” (FY2020-2024), the Group is promoting thestrengthening of the Alliance Group’s foundations and the expansion of its businesses inJapan and overseas. In addition, the Group is committed to the sustainable developmentof the Group and the enhancement of corporate value through an asset strategy that
carefully assesses changes in the business environment as well as selection andconcentration to reinforce profitability.

Consequently, in the fiscal year ended October 31, 2021, the Group reported net salesof ￥189,416 million, up 5.8% compared with the prior year. Operating profit increased
2.6% from the prior year to ￥14,624 million, ordinary profit increased 7.9% from theprior year to ￥15,391 million, and profit attributable to owners of parent increased 5.2%
from the prior year to ￥8,907 million.

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

b) Summary of consolidated operating results by business segment[Business related to the Construction Equipment Rental Division]
In the construction-related business, which is Kanamoto’s core business, public sector
investments were firm, mainly in construction related to disaster recovery work andinfrastructure-related construction as well as disaster prevention-related construction,
while private sector construction investments varied by region although overall rental
demand for construction equipment remained steady.
In addition to promoting business alliances and M&As that can be expected to generatesignificant synergies, the Group aims to strengthen its profitability by further improving
operational efficiency and productivity through focusing on measures such as ensuring
the optimal ownership and model mix of assets according to market conditions. As aresult, sales by region in this business were up 6.7% in the Hokkaido Region, down 1.9%in the Tohoku Region, up 2.5% in the Kanto & Koushinetsu Region, up 10.6% in the
Nishi-nihon Region, and up 5.0% in the Kyushu & Okinawa Region.
Used construction equipment sales decreased 10.5% year on year, as Kanamoto has
carried out the extension of the rental equipment operation period as planned at the
beginning of the fiscal year.

Reflecting these factors, the Group posted net sales in the construction-related
businesses of ￥171,020 million, an increase of 6.3% year on year, and operating profit of￥13,043 million, an increase of 1.5%.

[Other Businesses]
In the Group’s other businesses, net sales increased by 0.9% year on year to ￥18,395
million and operating profit increased by 14.5% to ￥1,110 million, as the business related
to the Steel Sales Division as well as the business related to the Information Products
Division and welfare-related business performed well.

(Millions of yen)

56th Business Period 57th Business Period Change from
Segment

Business PeriodBusiness Period

ended October 2020 ended October 2021

prior year(%)

Business related to theConstruction Equipment

160,826

171,020

6.3

Other Businesses

18,226

18,3950.9

Total

179,053

189,416

5.8

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

2) Capital investment
Capital investment implemented by the Kanamoto Group during the current
consolidated fiscal year totaled ￥28,596 million. This included purchases of rental
equipment of ￥25,346 million, and investments in assets used by the group, including theestablishment, relocation and expansion of branches, of ￥3,249 million.

< Main branches newly established in the Corporate Group >During the consolidated fiscal year under review, Kanamoto newly opened 6
branches .
Kanamoto Co., Ltd.
New branches:

Obama Branch (Obama City, Fukui Prefecture)
Marumori Branch (Marumori Town, Igu County, Miyagi Prefecture)
Kitakyusyu Branch (Kitakyusyu City)
Tokyo Construction Branch, Special Small Equipment Center(Misato City,
Saitama Prefecture)
Futaba Branch (Futaba Town, Futaba County, Fukushima Prefecture)
Nakatonbetsu Equipment Center (Nakatonbetsu Town, Esashi County,
Hokkaido)

3) Transfer, absorption, division or new establishment of businesses
The Company had no material items to report.
4) Receipt of businesses from other companies
The Company had no material items to report5) Succession to rights and obligations concerning the businesses of othercorporations etc. by absorption and merger or absorption and division
The Company had no material items to report.
6) Acquisition or disposal of shares, other equity or subscription rights to shares ofother companies
The Company had no material items to report(3) Financial position and profit and loss in the current business period andthree immediately prior business periods(Millions of yen except per share data, which are in yen)

Category

54th Business Period(Business Period ended
October 2018)

55th Business Period(Business Period ended
October 2019)

56th Business Period(Business Period ended
October 2020)

57th Business Period(current consolidated
fiscal year)(Business Period ended
October 2021)

Net sales

168,188

180,694

179,053

189,416

Ordinary income

17,925

18,277

14,26815,391

11,857

11,430

8,466

8,907

Net income per share

335.54295.30221.45235.55

Total assets

241,374

268,182

301,533

303,754

Net assets

102,031

121,779

126,188

134,917

Net assets per share

2,707.49

2,981.68

3,150.30

3,357.10

Profit attributable toowners of parent

Note： During the 57th Business Period (the fiscal year under review), the Company finalized
the provisional accounting treatment for business combinations. As a result, figures forthe 56th Business Period reflect the finalization of the provisional accounting treatment.

(4) Issues to be Addressed by the Company
The outlook of the economy is unclear due to the impact of the spread of the novel
coronavirus disease (COVID-19).
In the construction equipment rental business, which is a core business of theKanamoto Group, it is important to select rental assets that match the characteristics ofsales areas and customers’ needs. Based on the collected data, the Company must build
an asset portfolio structure aimed at maximizing operational efficiency and establish astrong earnings structure with a detailed operation. In addition, the Company also needs
to aspire to be a “general rental company” that provides one-stop and comprehensive
customer service, not just rental of goods.

1) Strengthen human resources training, and also Kanamoto Group alliances
In the construction equipment rental industry, intensifying competition between
companies could lead to a trend of mergers and acquisitions due to a further increase indistinction and selection. The Company will make efforts to develop employees with theknowledge and skills appropriate for a leader in the construction equipment rental
industry, and we will work to develop human resources that can adapt to businessexpansion in Japan and overseas.
Also, in order to expand the business domains that are essential for the Company tobecome a general rental company, we will strengthen cooperation with the Groupcompanies and relationships with alliance companies to increase synergy effects between
the Group.

2) Deepen asset strategies
In introducing rental assets, we give top priority to market needs, but in recent years
the particulars of domestic construction demand, such as ICT techniques, are changing,and therefore we ultimately determine the composition of the assets to be introduced andappropriate amount thereof by thoroughly examining the market and earnings
characteristics not only at present, but also looking forward.
3) Optimizing Maintenance Costs
Maintaining and improving rental asset value is the very lifeline of the construction
equipment rental business, and maintenance costs are essential to that end, but we aim
to reduce the cost ratio by consolidating and optimizing the expertise of the Group interms of expenditures.

4) Promotion of overseas businessIn addition to strengthening sales activities in the countries whose markets we havecurrently entered, we also seek to increase profitability through thorough asset andrevenue management.

(5) Main businesses (As of October 31, 2021)
Activities
Business related to theConstruction Equipment
Rental Division

Main products and services
Rental and sale of equipment and instruments for use in construction,
temporary materials for construction use, safety products for theconstruction industry, measuring instrument and modular housing units
for temporary use
Sale of steel products such as steel bar, steel plate and round bar, contract

Other Businesses

construction, rental and sale of computers and computer peripheral
equipment、 Rental and sales of social-welfare-service and nursing-careequipment(6) Main offices of the Kanamoto Group (As of October 31, 2021)
1) Main offices and facilities
Kanamoto’s Head Office and Operations Control Headquarters are located in Chuo-ku
in Sapporo, Hokkaido, and the Company’s Business Coordination Headquarters is locatedin Minato-ku in Tokyo.
The number of branches in each of the Company’s operating regions is shown below.

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

RegionConsolidated

KanamotoJapan

Overseas

Other Businesses

subsidiaries

Consolidated

Kanamoto

subsidiaries

Hokkaido

67

27

3

0

Tohoku

58

15

0

0

Kanto

40

28

1

3

Chubu

24

9

0

0

Kinki

8

17

0

9

Chugoku

3

3

0

11

Shikoku

4

1

0

0

Kyushu

4

82

0

23

China

0

2

0

0

Australia

0

9

0

0

Total

401

50

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

3,269

Other Businesses319

All companies (shared)

205
Total

3,793

Notes：1. Figures are the number of full-time employees and do not include directors, temporary
or part-time employees.
2. The number of employees increased by 117 compared to the end of the previous fiscal
year.
3. Employees designated as “All companies (shared)” are individuals affiliated withmanagement departments who cannot be classified in a specific segment.

3) Number of Kanamoto employees
Number of
employees
2,016

Change comparedwith end of prior

Average age

fiscal year
＋17

38.5

Average length ofservice11.3 years

Note：Figures are the number of full-time employees and do not include temporary or part-time
employees.

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

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

CapitalKanamoto’s

Main activities

ownership (%)

Rental and sale of furniture, fixtures and safety

Assist Co., Ltd.

136

100.0

Kanatech Co., Ltd.

100

100.0

Kanki Co., Ltd.

99

93.6

Kyushu Kensan Co., Ltd.

70

90.1

SOOKI HOLDINGS Co., Ltd.

1

100.0

Holding Company

Daiichi Kikaisangyo Co., Ltd.

20

100.0

Rental and sale of construction equipment

Toyo Industry Co., Ltd.

31

100.0

products
Design and sale of modular housing units for
temporary use
Rental and sale of construction equipment
Rental and sale of construction equipment
centered on foundation equipment

Shield tunneling method-related peripheral
equipment rentals and sales
Rental and sales of construction machinery,

NISHIKEN CO., LTD.

1,049

77.6

temporary materials for construction use,social-welfare-service and nursing-careequipment

Unite Co., Ltd.

1,144

66.9

Rental and sale of road construction equipment,road construction works
Developing a business in the rental and design,
manufacture and sale of specialized equipment

KG Flowtechno Co., Ltd.

20

100.0

used for projects such as ground improvement
work and the construction of undergroundstructures

Kanamoto (China)
Investment Co., Ltd.
Kanamoto Australia Holdings
Pty Ltd

2,376

100.0

Rental and sale of construction equipment

5,687

100.0

Holding Company

Notes：1. There are no specified wholly-owned subsidiaries as of the end of this fiscal year.

2. The holding ratio in Kanki Co., Ltd. and NISHIKEN CO., LTD. is calculated excluding
treasury shares.

(8) Primary lenders and amount of borrowing (As of October 31, 2021)
Financial institution

Loan balance(Millions of yen)

MUFG Bank, Ltd.

5,905

North Pacific Bank, Ltd.

4,960

The Hokkaido Bank, Ltd.

4,085

The 77 Bank, Ltd.

4,005

Mizuho Bank, Ltd.

3,750

JA - Hokkaido Shinren

3,325

The Norinchukin Bank

2,955

The Aomori Bank, Ltd.

1,300

The Bank of Fukuoka, Ltd.

1,155

THE NISHI-NIPPON CITY BANK, LTD.

1,155

(9) Basic Policy Concerning Distribution of Earnings and Dividends for theConsolidated Fiscal Year under Review and Next Consolidated Fiscal Year
Distribution of earnings to shareholders is a key management issue. The dividend policyof Kanamoto is to provide shareholders with a consistent and stable dividend
regardless of the business environment. Furthermore, the Company aims to implement
profit distribution in line with earnings performance. Moreover, it is the basic policy ofKanamoto to sufficiently build up its retained earnings, which is essential forstrengthening financial position and to implement aggressive business expansion.
For the fiscal year ended October 2021, the Board of Directors has decided to pay a
year-end dividend of ￥45 and an annual dividend of ￥70 per share (which includes aninterim dividend of ￥25).
Furthermore, the Company aims to allocate retained earnings to capital investments,
including facilities investment for rental equipment and other assets. Note that thecompany is putting a share buyback program into place to facilitate the flexible
implementation of capital policies.

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

2. Matters Concerning the Company’s Stock
Summary of Common Stock (As of October 31, 2021)
1) Total number of shares authorized

130,000,000 shares

2) Shares issued and outstanding

38,742,241 shares(including 924,846 shares of treasury stock)3) Number of shareholders

9,7684) Principal shareholders (ten largest)
Number ofPercentage ofshares held

total(‘000 shares)(%)

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

3,368

8.91

Custody Bank of Japan, Ltd. (Trust account)

2,695

7.13

ORIX Corporation

960

2.54

Kanamoto Capital Company

915

2.42

The Hokkaido Bank, Ltd.

888

2.35

Tokio Marine & Nichido Fire Insurance Co., Ltd.

802

2.12

North Pacific Bank, Ltd.

763

2.02

SSBTC CLIENT OMNIBUS ACCOUNT

756

2.00

CEP LUX-ORBIS SICAV

731

1.93

Denyo CO.,Ltd,

625

1.65

Shareholder nameNotes：1. Percentage of total is calculated excluding treasury shares (924,846 shares).
2. The Company holds treasury share numbering 924,846 hundred shares. However,
the Company is excluded from the above list of Principal shareholders.

5) Status of shares granted to officers of the Company as compensation for
their execution of duties during the fiscal year under review
Classification

Number of shares

Eligible for issuanceDirectors

9,200 shares

8 directors

Note： Details of the Company’s share-based remuneration are presented in “2) Mattersconcerning non-monetary remuneration, etc.

6) Other important matters concerning stocks
Pursuant to a resolution made at the Board of Directors meeting held on December 10,
2021, the Company will acquire up to 1,200,000 shares of treasury stock at a total costof no more than ￥2.0 billion between December 13, 2021 and April 21, 2022 throughbuying on the market in order to increase shareholders’ value.

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

4. Matters Concerning Company Directors (As of October 31, 2020)(1) Summary of directors and auditors
Name

Main concurrent positions at other

Position and duties

entities

KanchuChairman of the Board andChairman of the Board, Kanamoto

Kanamoto

Representative Director(China) Investment Co., Ltd.
President and Representative Director,
Toyo Industry Co., Ltd.
Chairman of the Board andRepresentative Director, Unite Co., Ltd.

TetsuoKanamoto

President and CEO, Corporate Officer;

Chairman of the Board andand General Manager, Business

Representative Director, KG Flowtechno

Coordination Headquarters

Co., Ltd.
President and Representative Director,
Soki Holdings Co., Ltd.
Chairman of the Board andRepresentative Director, Kanki Co., Ltd.

Director, Corporate Officer; and Division
HitoshiManager, Management Planning Division;

Naritaand Division Manager, Used Equipment
Sales Division
Director,

Corporate

Officer;

DivisionManager, Construction Equipment Rental
TatsuoKanamoto

Division; Regional Manager, Construction
Equipment

RentalDivision

Hokkaido

Region; and Manager in charge of SteelSales Division
Hiroyuki
Isono

Director, Corporate Officer; Division
Manager, Accounting Division; Manager,
Bill Collection Center
Director, Corporate Officer; Division

Kazunori

Manager Human Resources Division;

Hashiguchi

General Manager, Business Development
OfficeDirector,

Corporate

Officer;

Regional

Manager, Construction Equipment Rental

Akira
Sannomiya

Division west japan Region; and Regional
Manager, Construction Equipment Rental
Division Kyusyu Region
Director,

Corporate

Officer;

DivisionManager, Construction Equipment Rental

Jun
Watanabe

Division National Special Demand Sales
Division; and Manager in charge of New

President and Representative Director,
KG Flowtechno Co., Ltd.

Products Office

Shun

Director,

Corporate

Manager,

Accounting

Officer;

Division

Division;andGeneral Manager, Public Relations Office;Hiroseserving concurrently as Manager, Bill
Collection Center

HideakiDirector,

Yamashita
Susumu

Eiji

DivisionManager, Overseas Business Division

Director (Outside Director)

Arita
Motoki
Yonekawa
Ayako
TabataTetsuya
Okawa
Eichu
Kanamoto
NaoyukiDirector (Outside Director)

Director (Outside Director)

LawyerDirector (Outside Director)

LawyerStanding Corporate Auditor

Standing Corporate Auditor

YokotaNoriakiAuditor (Outside Auditor)

Ikushima
KatsunoriMatsushita

Ishiwaka

Officer;

Director (Outside Director)

Naito

YasushiCorporate

Auditor (Outside Auditor)

Auditor (Outside Auditor)

Certified public accountant

Notes: 1. Directors Susumu Naito, Eiji Arita, Motoki Yonekawa Ayako Tabata and Tetsuya Okawa
are Outside Directors.

2. Corporate Auditors Noriaki Ikushima, Katsunori Matsushita and Yasushi Ishiwaka are
Outside Corporate Auditors.
3. Corporate Auditor Naoyuki Yokota and Corporate Auditor Katsunori Matsushita has
many years of experience in the banking business, and has considerable knowledgeof finance and accounting.
4. Corporate Auditor Yasushi Ishiwaka is a certified public accountant with considerable
knowledge of finance and accounting.
5. The Company has notified the Tokyo Stock Exchange and Sapporo Securities
Exchange, the exchanges on which Kanamoto’s shares are listed, of the positions of
directors Susumu Naito, Eiji Arita, Motoki Yonekawa Ayako Tabata and Tetsuya
Okawa as “independent officers” as provided by the rules, etc., of both exchanges.
6. The Company has notified the Tokyo Stock Exchange and Sapporo Securities
Exchange, the exchanges on which Kanamoto’s shares are listed, of the positions ofCorporate Auditors Noriaki Ikushima, Katsunori Matsushita and Yasushi Ishiwaka as“independent officers” as provided by the rules, etc., of both exchanges.
7. Based on the provision of Article 427 paragraph 1 of the Companies Act, theCompany has entered agreements with its outside directors and outside auditorsthat limits their liability for compensation for damages under Article 423 paragraph
1 of the same law. The amount of the limit on the liability for compensation fordamages based on said agreement is the amount provided by the law.

(2) Summary of the directors and officers liability insurance policy
The Company and certain subsidiaries has entered into a directors and officers liability
insurance policy as provided for in Article 430-3 paragraph (1) of the Companies Act withan insurance company.
1) Scope of insureds
The Company’s and certain subsidiarie’s directors, auditors and corporate officers2) Summary of insurance policy terms
The insurance policy covers losses that may arise when the insured assumes liability
incurred in the course of the performance of duties or receives claims related to the
pursuit of such liability. However, certain reasons, such as claims for damages pertaining
to intentional violations of laws, will not be covered so as not to impair theappropriateness of the performance of duties by the insured. The full amount of theinsurance premiums is borne by the Company.

(3) Total remuneration and other amounts paid to Directors and Auditors
1) Total amount of remuneration for the fiscal year under review
Remuneration by typeClassification

Number ofCompensationcompensatedamountindividuals(Millions of yen)

(Millions of yen)Non-monetary
Basic reward

remuneration,etc.

Director
Auditor(Outside Auditor)
Total

15(3)

110(4)

99(4)

11(－)

5 (3)

30 (5)

30(5)

－(－)

20(6)

141 (10)130(10)－(－)

Notes：1. Two Directors (Outside Directors) who received no remuneration are not included in
the compensated individuals indicated above.
2. Total compensation paid to Directors does not include ￥102 million equivalent to theemployee salary portion (including bonuses) paid to Directors serving concurrently
as employees.

2) Matters concerning non-monetary remuneration, etc.
The Company has introduced a restricted share-based remuneration plan for directors(excluding outside directors; hereinafter, the “Eligible Directors”) with the aim ofproviding an incentive to sustainably increase the corporate value, and further promoteshared value with shareholders. Eligible Directors shall, pursuant to a resolution of theBoard of Directors of the Company, make contributions in-kind of all of the monetary
remuneration claims received to have common shares of the Company issued or
disposed of. The total amount of these monetary remuneration claims shall be no morethan ￥100 million per year, and the total number of common shares of the Company tobe issued or disposed of through this plan shall be no more than 50,000 shares per year.
In addition, the specific timing and allocation of payment to individual Eligible Directors
shall be determined by the Board of Directors.

3) Matters concerning the resolution of the General Meeting of the Shareholders
on remuneration, etc. for directors and auditors
At the 26th Regular General Meeting of the Shareholders held on January 24, 1991, it
was resolved that remuneration paid to directors shall be no more than ￥240 million peryear (excluding salaries and bonuses received as an employee). The number of directors
at the conclusion of the said Regular General Meeting of the Shareholders was nine.
Furthermore, at the 56th Regular General Meeting of the Shareholders held on January
28, 2021, it was resolved that, separately from the above-mentioned annualremuneration, restricted share-based remuneration for directors (excluding outside
directors) shall be no more than ￥100 million per year.
At the 42nd Regular General Meeting of the Shareholders held on January 26, 2007, it
was resolved that remuneration paid to auditors shall be no more than ￥50 million per
year. The number of auditors at the conclusion of the said Regular General Meeting of the
Shareholders was two.

4) Matters concerning the policy for determining details of remuneration, etc. forindividual directors
Many directors of the Company concurrently serve as corporate officers. Directors’
remuneration is a fixed amount paid in respect of management decision-making and theperformance of supervisory functions, while corporate officers’ remuneration is paid
based on an assessment of business performance. Since a certain portion of the
remuneration is linked to business performance and therefore functions as an incentive,
directors’ remuneration and corporate officers’ remuneration are considered on a clearly
separate basis.
Remuneration for outside directors shall be a fixed amount in light of their roles andindependent position.
Remuneration for directors is entrusted solely to the President and CEO according to a
resolution of the Board of Directors and is determined based on an evaluation of eachdirector within the remuneration limits decided at the General Meeting of the
Shareholders.

5) Matters concerning delegation of the determination of the details of
remuneration, etc. for individual directors
Based on a resolution of the Board of Directors, the individual remuneration amount isdelegated to the President and CEO Tetsuo Kanamoto. The reason for this delegation isthat the Company has judged the President and CEO as appropriate to conduct
evaluations of the departments that each director is in charge of while considering theCompany’s overall performance.
The Board of Directors has judged that individual remuneration, etc. are in accordancewith the determination policy.

(3) Matters concerning Outside Directors
1) Concurrent posts held by Company executives including positions at othercompanies
The Company had no material items to report.

2) Concurrent service as an outside director at other companies

The Company had no material items to report.

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

4) Activities during the current fiscal year
Classification

Name

Activities
Attended all of the five Board of Directors meetings held during the

Director

Susumu Naito

fiscal year and appropriately contributed the necessary advice andproposals concerning resolutions and discussions.
Attended all of the five Board of Directors meetings held during the

Director

Eiji Arita

fiscal year and appropriately contributed the necessary advice andproposals concerning resolutions and discussions.
Attended all of the five Board of Directors meetings held during the

Director

Motoki Yonekawa

fiscal year and appropriately contributed the necessary advice andproposals concerning resolutions and discussions.
Attended all of the five Board of Directors meetings held during the

Director

Ayako Tabatafiscal year and appropriately contributed the necessary advice andproposals concerning resolutions and discussions.
After inauguration attended all of the four Board of Directors

Director

Tetsuya Okawa

meetings held during the fiscal year and appropriately contributed thenecessaryadviceandproposalsconcerning

resolutions

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

Noriaki Ikushima

appropriately contributed the necessary advice and proposals basedon his experience involvement in administration and management
through his participation in municipal government.
Attended all of the five Board of Directors meetings and all of theeight Board of Corporate Auditors meetings held during the fiscal

Auditor

Katsunori Matsushita

year, and appropriately contributed the necessary advice andproposals based on his many years of employment and experience atfinancial institutions and his experience as a standing auditor at othercompanies.
Attended all of the five Board of Directors meetings and all of the eight

AuditorYasushi Ishiwaka

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

Note： In addition to the above, to achieve more rapid decision-making the Company

implemented resolutions in writing 4 times based on the provision of Article 370 of theCompanies Act.

5. Matters Concerning Independent Auditors(1) Name
Ernst & Young ShinNihon LLC(2) Amount of compensation and other benefits
Amount paid
(Millions of yen)Amount paid for compensation etc. as independent auditors pertaining to
the current fiscal year
Total amount of cash and other financial interests Kanamoto and its
subsidiary companies will pay to the Company’s independent auditors

50

69

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

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

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

6. System and Operating Status for Ensuring Appropriate Business
Operations(1) System for Ensuring Appropriate Business Operations
Pursuant to the Board of Directors meeting held on January 28, 2021, the Company
has resolved to partially revise its "Basic Policy on Establishment of an Internal Control
System." In conjunction with this, the Company has revised its matters concerning
individuals requested by the auditors to assist with auditors’ activities. A summary of theCompany’s decisions concerning the above revisions is provided below.

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

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

3) Rules and other systems concerning management of loss risk

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

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

decision-making

and clarify

supervisory

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

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

internal

management

systemconcerning

financialreporting,eachorganization (individual) has affirmed the following roles.
[1] Managers have the final responsibility for all of the organization’s activities, and prepare
and implement internal controls based on this basic policy.
[2] The Board of Directors has supervisory responsibility for the preparation and operation of
the managers’ internal controls, and monitors and supervises managers to ensure thefinancial reporting and internal controls are executed properly.
[3] The auditors monitor and verify the financial reporting and preparation and operation of
the internal controls from an independent standpoint.
[4] The Internal Control and Auditing Office objectively evaluates from an independent
standpoint, the effectiveness of the internal controls related to financial reporting at
Kanamoto and its affiliated companies on behalf of the Company’s managers inaccordance with the audit rules, and when necessary makes proposals concerning
improvements and corrections and reports to the managers and Board of Directors.

6) Matters concerning individuals requested by the auditors to assist withauditors’ activities
With regard to employees to assist auditors in their activities, the Company will appoint
audit staff to provide operational assistance upon request of auditors. With regard to thematters designated by auditors to be provided assistance for, the management authority
for the nominated employees will be transferred to the auditors, and the employees will
not receive instructions or orders from the Company’s directors, thereby ensuring theeffectiveness of instructions from auditors.

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

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

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

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

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

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

Consolidated Financial Statements

57th Business Period
From November 1, 2020
to October 31, 2021

Kanamoto Co., Ltd.

Consolidated Balance Sheet(As of October 31, 2021)( Millions of Yen)
Classification

AmountClassification(Assets)
Current assets
Cash and deposits

Amount(Liabilities)
120,751

Current liabilities

87,23056,093

Notes and accounts payable-trade

37,082

Notes and accounts receivable trade39,305

Short-term loans payable

14,015

Electronically recorded monetaryclaims - operating

7,319

Current portion of bonds payable

Merchandise and finished goods

1,666

Lease obligations

1,269

24

Uncompleted construction
expenditure

82

Income taxes payable

2,681

Raw materials and supplies

1,375

Provision for bonuses

1,548

construction machine parts

18,055

Accounts payable-other

24,545

Other

3,123

Other

6,063

Allowance for doubtful accounts－269

Noncurrent liabilities

81,607Long-term loans payable

31,460Total non-current assets

177,003

Lease obligations

2,888

Property, plant and equipment

156,135

Long-term accounts payable-other

44,486

Rental equipment

98,046

Net defined benefit liability

566

Buildings and structures

18,024

Asset retirement obligations

588

Machinery, equipment and vehicles

1,623

Deferred tax liabilities

Tools, furniture and fixtures
Land

530
37,684

Lease assets

Other

1,501
115

Total Liabilities

68

168,837(Net Assets)

Construction in progress

157

Shareholders’ equity

124,226

Intangible assets

6,904

Capital stock

17,829Goodwill

4,111

Capital surplus

19,326

Customer-related assets

1,276

Retained earnings

89,048

Other

1,516

Treasury stock－1,978

13,963

Accumulated othercomprehensive income

2,729

Investment securities

9,249

Valuation difference on
available-for-sale securities

2,249

Deferred tax assets

2,175

Deferred gains or losses on hedges

Other

3,046

Foreign currency translation
adjustment

541

Allowance for doubtful accounts－507

Remeasurements of defined benefit
plans

－60

Investments and other assets

Minority interests

Total Assets

300,3620

7,960

Total Net Assets

134,917

Total liabilities and net assets

303,754

Consolidated Statement of Income(From November 1, 2020 to October 31, 2021)(Millions of Yen)
Classification

AmountNet sales

189,416

Cost of sales

133,812Gross profit

55,604

Selling, general and administrative expenses

40,979Operating income

14,624Non-operating income

1,140Interest income and dividends

206

Insurance income

357

Rent income

83

Temporary transfer charges income

69

Foreign exchange gain

97

Reversal of allowance for doubtful accounts

25

Other

300

Non-operating expenses

372

Interest expenses

102

Loss on lease cancellation

27

Waste disposal costs

41

Other

201

Ordinary income

15,391

Extraordinary income

59

Gain on sales of non-current assets

21

Subsidy income

18

Gain on valuation of shares of subsidiaries andassociates

20

Extraordinary loss

703

Loss on sales and retirement of noncurrent assets

275

Loss on valuation of investment securities

172

Loss on valuation of shares of subsidiaries andassociates

Loss on extinguishment of tie-in shares

174

81

Income before income taxes and minority interests

14,747

Income taxes-current

5,145

Income taxes-deferred－190

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

4,954
9,793
885
8,907

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

Fiscal year ended October 31, 2021

(Millions of yen)
Shareholders' equity
Capital stock
Balance at beginning ofcurrent period

Capital surplus

17,829Retained earnings

19,324

Total shareholders'

Treasury shares

82,599equity－2,009117,744

Changes of items during
periodDividends of surplus
Profit attributable toowners of parent－2,457－2,457

8,907

8,907

Acquisition of treasury
stock
Transfer-restricted

2

stock-based compensation

－0

－0

31

33

Net changes of items otherthan shareholders' equity–

Total changes of items during

–

2

6,449

30

6,482

17,82919,32689,048－1,978124,226

periodBalance at end of current
periodAccumulated other comprehensive income

Balance at beginning ofcurrent period

Valuation

DeferredForeigndifference on
available-for-gains orlosses on

currencytranslation

sale securities

hedgesadjustment

1,522

–

－126

Total
Remeasureme accumulated Non-controlli

Total net

ng interests

assetsnts of defined
benefit plansothercomprehensi
ve income

－49

1,346

7,097

126,188

Changes of items during
periodDividends of surplus
Profit attributable toowners of parent
Acquisition of treasury
stock
Transfer-restricted
stock-based compensation
Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at end of current
period–－2,457

–

8,907

–

－0

–

33

726

0

667

－10

1,383

863

2,246

726

0

667

－10

1,383

863

8,728

2,249

0

541

－60

2,729

7,960

134,917

The Accounting Auditor’s Report of Consolidated Financial Statements
Independent Auditor’s Report
December 17, 2021
Kanamoto Co., Ltd.
To the Board of Directors,
Ernst & Young ShinNihon LLC
Sapporo Office, Japan
Tatsuro Hayashi
Designated limited liability partner
Managing Partner
Certified public accountant
Mitsuhiro Fujimori
Designated limited liability partner
Managing Partner
Certified public accountant
Audit Opinion
Pursuant to Article 444, Section 4 of the Companies Act, we have audited theaccompanying consolidated financial statements, which comprise the consolidatedbalance sheet, the consolidated statement of income, the consolidated statement ofchanges in equity and the notes to the consolidated financial statements, of KanamotoCo., Ltd. (“the Company”) applicable to the fiscal year from November 1, 2020 to
October 31, 2021.
In our opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position and results of operations of theKanamoto Group, which consisted of the Company and its consolidated subsidiaries,
in the fiscal year under review in accordance with accounting principles generally
accepted in Japan.
Basis for Audit Opinion
We conducted our audit in accordance with auditing standards generally accepted inJapan. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Company and its consolidated
subsidiaries in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Japan, and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Responsibilities of Management, Corporate Auditors and the Board of Corporate
Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of theconsolidated financial statements in accordance with accounting principles generally
accepted in Japan; this includes the maintenance and operation of such internal
control as management determines is necessary to enable the preparation and fairpresentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible forassessing whether it is appropriate to prepare the consolidated financial statementswith the assumption of the Group’s ability to continue as a going concern anddisclosing, as required by accounting principles generally accepted in Japan, mattersrelated to going concern.
Corporate Auditors and the Board of Corporate Auditors are responsible foroverseeing the Directors’ performance of duties within the maintenance andoperation of the financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our responsibilities are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes ouropinion on the consolidated financial statements based on our audit from an
independent point of view. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate they could reasonably be
expected to influence the decisions of users taken on the basis of the consolidated
financial statements.
In accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit.
We also:• Identify and assess the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, and design and perform audit
procedures responsive to those risks. Selecting audit procedures to be applied is at
the discretion of the auditor. Obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion.
• Consider, in making those risk assessments, internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances,while the purpose of the audit of the consolidated financial statements is not
expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used by management andtheir method of application, as well as the reasonableness of accounting estimatesby management and related notes thereto.
• Conclude on the appropriateness of management’s use of the going concern
basis for preparing the consolidated financial statements and, based on the audit
evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related notes to the consolidated
financial statements or, if the notes to the consolidated financial statements onmaterial uncertainty are inadequate, to express a qualified opinion with exceptions
on the consolidated financial statements. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events orconditions may cause the Group to cease to continue as a going concern.
• Evaluate whether the presentation of the consolidated financial statements andthe notes thereto are in accordance with accounting standards generally acceptedin Japan, as well as evaluate the overall presentation, structure and content of theconsolidated financial statements, including the related notes thereto, andwhether the consolidated financial statements fairly represent the underlying
transactions and accounting events.
•
Obtain sufficient and appropriate audit evidence regarding the financial
information of the Company and its consolidated subsidiaries to express an opinion
on the consolidated financial statements. We are responsible for the direction,supervision and performance of the audit of the consolidated financial statements.
We remain solely responsible for our audit opinion. We communicate with
Corporate Auditors and the Board of Corporate Auditors regarding the planned
scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit, andother matters required by auditing standards.
We also provide Corporate Auditors and the Board of Corporate Auditors with astatement that we have complied with the ethical requirements in Japan regarding
independence that are relevant to our audit of the financial statements, andcommunicate with them all relationships and other matters that may reasonably bethought to bear on our independence, and where applicable, related safeguards inorder to eliminate or reduce obstruction factors.
Conflicts of Interest
Our firm and the designated engagement partners have no interest in the Company
and its consolidated subsidiaries which should be disclosed in accordance with theCertified Public Accountants Act.

Financial Statements

57th Business Period
From November 1, 2020
to October 31, 2021

Kanamoto Co., Ltd.

Balance Sheet(As of October 31, 2021)
Classification

AmountClassification(Assets)
Current assets( Million of Yen)
Amount(Liabilities)
82,28860,071

Current liabilities

Cash and deposits

35,310Notes payable-trade20,516

Notes receivable-trade

4,920

Accounts payable-trade

5,597Electronically recorded monetaryclaims – operating

5,334

Short-term loans payable

9,550

Accounts receivable, trade

18,999

Income taxes payable

1,456

Merchandise and finished goods

368

Provision for bonuses

759

Costs on uncompleted
construction contracts

47

Accounts payable-otherRaw materials and supplies

866

Accrued expenses

474

Construction machine parts

14,378Notes payable-facilities

399

Prepaid expenses
Short-term loans receivable
Other

346

Noncurrent assets
Property, plant and equipment–72

147,255

61,897

Buildings

10,390

Structures

2,644

Machinery and equipment

1,091

Vehicles and delivery equipment

37

Tools, furniture and fixtures

256
33,539Construction in progress

Noncurrent liabilities

61,992Long-term loans payable

25,240Long-term accounts payable-other

36,378Asset retirement obligations

373

109,914

Rental equipment

Land

2,200

752
1,037

Allowance for doubtful accounts

Other

19,117

Total Liabilities

122,063(Net Assets)
Shareholders’ equity
Capital stock

105,257
17,829

Capital surplus

19,340Legal capital surplus

18,95055

Other capital surplus

389

757

Retained earnings

70,065

Software574

Legal retained earnings

1,375

Telephone subscription right20

Intangible assets

Other

162

Other retained earnings
Reserve for advanced depreciation of
noncurrent assets

General reserve

68,69022

Investments and other assets

36,58362,731

Investment securities
Stocks of subsidiaries andaffiliates

5,550

Retained earnings brought

28,428Treasury stock–1,978

5,936

Deferred tax asset

820

Valuation and translation
adjustments

2,223

Investments in capital

10

Valuation difference on
available-for-sale securities

2,223

Long-term loans receivable

1,567

Other

1,101

Allowance for doubtful
accounts–896

Total Assets

229,544

Total Net Assets

Liabilities and Total Net Assets

107,480

229,544

Statement of Income(From November 1, 2020 to October 31, 2021)(Million of Yen)
Classification

AmountNet sales

117,687

Cost of sales

87,508Gross profit

30,179Selling, general and administrative expenses

22,676

Operating income

7,503

Non-operating income

1,220Interest income and dividends

267

Rent income

340

Temporary transfer charges income

206

Foreign exchange gain

98

Reversal of allowance for doubtful accounts

69

Other

237

Non-operating expenses

253

Interest expenses

53

Other

200
8,471

Ordinary income
Extraordinary income

29

Gain on sales of noncurrent assets

10

Subsidy income

18

Gain on valuation of shares of subsidiaries and0

Extraordinary loss

525

Loss on sales and retirement of noncurrent assets

178

Loss on valuation of investment securities

172

Loss on valuation of shares of subsidiaries and associates

174

Income before income taxes

7,975

Income taxes-current

2,562

Income taxes-deferred

20

Net income

2,582
5,392

Statement of Changes in Net Assets(From November 1, 2020 to October 31, 2021)(Million of Yen)

Shareholders’ equity
Retained earnings

Capital surplus

Other retained earnings

Capital stock

Balance at beginning of current period

17,829Legal capital

Other capital

Total capitalsurplussurplussurplus18,950387

19,337

Legal retained
earnings

Reserve foradvanceddepreciation of
noncurrent assets

1,375

22

Retainedearnings
brought
forwardGeneralreserve

Total retained
earnings

57,731

8,001

67,1305,000–5,000–Changes of items during period
Provision of general reserve－

Dividends of surplus－–2,457-2,457

Profit

－

5,392

5,392

Acquisition of treasury stock

－

－

2

－

－

－

Transfer-restricted stock-based
compensation

2

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

－

－

2

2

－

－

5,000

–2,0652,934

17,82918,950389

19,3401,375

2262,731

5,936

70,065

Shareholders' equity

Balance at beginning of current period

Valuation and translation adjustments

Treasury stock

Total
shareholders’equity

Valuation difference on
available-for-sale securities

Total valuation and translation
adjustments–2,009102,289

1,512

1,512

Total net assets

103,802

Changes of items during period
Provision of general reserve

–

－

–

Dividends of surplus-2,457－-2,457

Profit

5,392

－

5,392

Acquisition of treasury stock

–0

–0

－

–0

Transfer-restricted stock-based
compensation

31

33

－

33

711

711

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

－

711

30

2,967

711

711

3,678

–1,978105,257

2,223

2,223

107,480

The Accounting Auditor’s Report of Financial Statements
Independent Auditor’s Report
December 17, 2021
Kanamoto Co., Ltd.
To the Board of Directors,

Ernst & Young ShinNihon LLC
Sapporo Office, Japan
Takuro Hayashi
Designated limited liability partner
Managing Partner
Certified public accountant
Mitsuhiro Fujimori
Designated limited liability partner
Managing Partner
Certified public accountant
Audit Opinion
Pursuant to Article 436, paragraph (2), item (i) of the Companies Act, we have audited the accompanying
financial statements, which comprise the balance sheet, the statement of income, the statement ofchanges in equity, the notes to financial statements, and the supplementary schedules (collectively,“financial statements, etc.”) of Kanamoto Co., Ltd. (the “Company”), applicable to the 57th Business
Period from November 1, 2020 to October 31, 2021.
In our opinion, financial statements, etc. referred to above present fairly, in all material respects, thefinancial position and results of operations of Kanamoto Co., Ltd. in the fiscal year under review inaccordance with accounting principles generally accepted in Japan.
Basis for Audit Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Company and its
consolidated subsidiaries in accordance with the ethical requirements that are relevant to our audit of thefinancial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance withthese requirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Responsibilities of Management, Corporate Auditors and the Board of Corporate Auditors for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements inaccordance with accounting principles generally accepted in Japan; this includes the maintenance andoperation of such internal control as management determines is necessary to enable the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, management is responsible for assessing whether it is appropriate
to prepare the financial statements with the assumption of the Group’s ability to continue as a going
concern and disclosing, as required by accounting principles generally accepted in Japan, matters related
to going concern.
Corporate Auditors and the Board of Corporate Auditors are responsible for overseeing the Directors’
performance of duties within the maintenance and operation of the financial reporting process.
Responsibilities of Management, Corporate Auditors and the Board of Corporate Auditors for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements inaccordance with accounting principles generally accepted in Japan; this includes the maintenance andoperation of such internal control as management determines is necessary to enable the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, management is responsible for assessing whether it is appropriate
to prepare the financial statements with the assumption of the Group’s ability to continue as a going
concern and disclosing, as required by accounting principles generally accepted in Japan, matters related
to going concern.
Corporate Auditors and the Board of Corporate Auditors are responsible for overseeing the Directors’
performance of duties within the maintenance and operation of the financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our responsibilities are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion on the financial statements based on our audit from an independent
point of view. Misstatements can arise from fraud or error and are considered material if, individually orin the aggregate they could reasonably be expected to influence the decisions of users taken on the basisof the financial statements.
In accordance with auditing standards generally accepted in Japan, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, and design and perform audit procedures responsive to those risks. Selecting audit
procedures to be applied is at the discretion of the auditor. Obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion.
• Consider, in making those risk assessments, internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, while the purpose of the audit of thefinancial statements is not expressing an opinion on the effectiveness of the Group’s internal control.
•

Evaluate the appropriateness of accounting policies used by management and their method ofapplication, as well as the reasonableness of accounting estimates by management and related notes
thereto.
• Conclude on the appropriateness of management’s use of the going concern basis for preparing thefinancial statements and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related notes to the financial statements or, if the notes to the financial
statements on material uncertainty are inadequate, to express a qualified opinion with exceptions on
the financial statements. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
• Evaluate whether the presentation of the financial statements and the notes thereto are in accordancewith accounting standards generally accepted in Japan, as well as evaluate the overall presentation,
structure and content of the financial statements, including the related notes thereto, and whether thefinancial statements fairly represent the underlying transactions and accounting events.
We communicate with Corporate Auditors and the Board of Corporate Auditors regarding the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit, and other matters required by auditing standards.
We also provide Corporate Auditors and the Board of Corporate Auditors with a statement that we havecomplied with the ethical requirements in Japan regarding independence that are relevant to our audit of
the financial statements, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards in order
to eliminate or reduce obstruction factors.
Conflicts of Interest
Our firm and the designated engagement partners have no interest in the Company and its consolidated
subsidiaries which should be disclosed in accordance with the Certified Public Accountants Act.

Audit Report
The Board of Corporate Auditors has received the audit reports prepared by each of the Corporate
Auditors concerning the business performance of the Directors during the 57rd Business Period from
November 1, 2020 through October 31, 2021. After discussing the audit results based on the reports, wehave prepared this Audit Report and report as follows as the consensus of opinion of the Board of
Corporate Auditors.
1. Procedures and details of the audits by the Corporate Auditors and the Board of Corporate Auditors(1) The Board of Corporate Auditors establishes the audit policies, audit plans and other matters, andreceives reports concerning the implementation of audits and the audit result from each of the Corporate
Auditors as well as reports from the Directors and the Accounting Auditor concerning the execution of theirduties, and requests explanations as necessary.
(2) In addition to communicating with the Directors, the internal audit division, employees and otherindividuals in accordance with the standards for Corporate Auditors and audits provided by the Board of
Corporate Auditors and in compliance with the audit policy and audit plan, and gathering information andstriving to improve the audit environment, each Corporate Auditor performed audits according to thefollowing procedures:(i) Each Corporate Auditor attended the Board of Directors meetings and other important meetings,
received reports from Directors, employees and other individuals on their execution of duties andrequested explanations from the Directors, other employees and other individuals when necessary as
well as reviewed documents concerning matters such as important decisions and conducted
inspections of the business and financial condition at the Company’s Head Office and main branches.
With respect to subsidiaries, each Corporate Auditor communicated and exchanged information with
the Directors and Corporate Auditors of such subsidiaries and received business reports therefrom asnecessary.
(ii) Each Corporate Auditor regularly received reports from the Company’s Directors and employees,
and requested explanations and clarified opinions when necessary, regarding the contents of Board of
Director resolutions concerning the establishment of the organization provided in Article 100 paragraph(1) and paragraph (3) of the Ordinance for Enforcement of the Companies Act, and the status ofoperation of the organization (internal controls system) that has been established based on said
resolutions, as the organization necessary to ensure that the Directors comply with laws and theCompany’s Articles of Incorporation in the execution of their duties as described in the Report ofBusiness Operations and to ensure the appropriateness of other operations of the corporate group,
which consists of a stock company and the subsidiaries thereof.
(iii) Each Corporate Auditor monitored and verified whether or not the Accounting Auditor performed
audits properly while maintaining an independent position as well as received reports from the
Accounting Auditor on the execution of duties thereby and requested explanations when necessary.
Each Corporate Auditor was also notified by the Accounting Auditor that the System for Securing theProper Performance of Duties (matters listed in the items of Article 131 of the Ordinance on Company
Accounting) was developed in accordance with the Standards for Quality Control of Audits (BusinessAccounting Council, October 28, 2005), and requested explanations as necessary.
Based on the above procedures, the Board of Corporate Auditors reviewed the Report of BusinessOperations and the supporting schedules, the Financial Statements (Balance Sheet, Statement of Income,Statement of Changes in Net Assets and Notes to the Financial Statements) and the supporting schedules
and the Consolidated Financial Statements (Consolidated Balance Sheet, Consolidated Statement of
Income, Consolidated Statement of Changes in Net Assets and Notes to the Consolidated Financial
Statements) for the business period.
2. Result of audit(1) Audit result of the Report of Business Operations, etc.
(i) The Report of Business Operations and its supporting schedules fairly represent the condition of theCompany in accordance with the laws of Japan and the Articles of Incorporation of the Company.
(ii) We have determined that there was no serious occurrence of improper activity or violation of laws
or the Company’s Articles of Incorporation by any of the Directors in carrying out the duties andresponsibilities of their office.
(iii) In our opinion, the details of the Board of Directors resolutions concerning the internal controls
system are appropriate. We also have determined that there are no matters that should be highlighted
as a concern with regard to the information contained in the Report of Business Operations and the
Directors in carrying out their duties concerning the internal controls system.
(2) Financial statement and audit result of the supporting schedules
In our opinion, the audit procedures and audit results received from the Accounting Auditor Ernst & Young
ShinNihon LLC are appropriate.
(3) Audit result of consolidated financial statements
In our opinion, the audit procedures and audit results received from the Accounting Auditor Ernst & Young
ShinNihon LLC are appropriate.
December 24, 2021
Kanamoto Co., Ltd.
The Board of Corporate Auditors
Standing Corporate Auditor

Eichu Kanamoto

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Standing Corporate Auditor

Naoyuki Yokota

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Outside Corporate Auditor

Noriaki Ikushima

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Outside Corporate Auditor

Katsunori Matsushita

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Outside Corporate Auditor

Yasushi Ishiwaka

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