Fiscal Year ending October 31, 2007

Financial Statements Bulletin
December 7, 2007
Listed Company Name

Kanamoto Company, Ltd.

Company Code Number 9678
Listing Exchanges

Tokyo Stock Exchange, Sapporo Stock Exchange

Head Office Address

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

http://www.kanamoto.co.jp)

Representative

Kanchu Kanamoto

Inquiries

Nobuhito Utatsu

President

Director & Corporate Officer, Division Manager, Accounting Division
TEL 81-11-209-1600
Please send inquiries in English to takayama@kanamoto.co.jp.
Date for Regular General Meeting of the Shareholders: January 29, 2008
Date for start of dividend payments:
January 30, 2008
Date for submission of Annual Report:
January 29, 2008

1. Consolidated Operating Results for the Fiscal year ended October 31, 2007

(Nov. 1, 2006 – Oct. 31, 2007)(Numbers less than one million yen have been rounded down)(Percentages show the change from the prior year)(1) Consolidated Operating Results
Revenues

Operating Income

Millions of yen%

Ordinary Income

Millions of yen%

Millions of yen%

Fiscal year ended
October 31, 2007

68,626

0.9

4,236

4.1

4,416

16.6

Fiscal year ended
October 31, 2006

68,023

6.3

4,068

189.7

3,788

144.4

Net Income
Millions of yen%

Net Income per Share ofCommon StockYen

Net Income per Share on a Fully
Diluted Basis
Yen

Fiscal year ended
October 31, 2007

3,035

74.2

92.40

－

Fiscal year ended
October 31, 2006

1,742

394.2

57.41

－

Notes 1. Investment profit or loss accounted for by the equity method－
Fiscal year ended October 31, 2007
Fiscal year ended October 31, 2006－

(2) Consolidated Financial Position
Total Assets

Shareholders’EquityShareholders’ Equity
per Share

Shareholders’Equity Ratio%

YenMillions of yen

Millions of yen

Fiscal year ended
October 31, 2007

85,15539,93746.9

1,216.98

Fiscal year ended
October 31, 2006

86,81538,05143.7

1,155.22

Notes 1. Owners’ equity and valuation and translation adjustments:
Fiscal year ended October 31, 2007
¥39,973,000,000
Fiscal year ended October 31, 2006
¥37,959,000,000

Summary of Company Financial Statements, FY Ended October 31, 2007

P.1

(3) Consolidated Cash Flows
Cash Flow fromOperating Activities

Fiscal year ended
October 31, 2007
Fiscal year ended
October 31, 2006

Balance of Cash andEquivalents at End of
PeriodCash Flow from
Financing Activities

Cash Flow from
Investing Activities

Millions of yen

Millions of yen

Millions of yen

Millions of yen

4,479- 1,427- 4,237

17,213

8,414

- 489

- 3,635

18,398

2. Dividends
Interim Dividendper Share ofCommon Stock

Year-end Dividend per
Share of Common
Stock

Full-year Dividend per
Share of Common
Stock

Yen

Yen

Yen
Fiscal year ended
October 31, 2006

9.00

9.00

18.00

Fiscal year ended
October 31, 2007

9.00

11.00

20.00

10.00

10.00

20.00

Fiscal year ended
October 31, 2008
(projected)
Fiscal year ended October 31, 2007 breakdown of dividend

special dividend 2.00Yen

3. Projected Consolidated Operating Results for the Fiscal Year Ending October 31, 2008
(November 1, 2007 - October 31, 2008)(Percentages show the change from the prior year)

Millions of yen

Net Income per

Operating

Revenues

Ordinary Income

IncomeNet Income

Share of Common
Stock% Millions of yen% Millions of yen% Millions of yen%

Yen

Interim period

37,500

3.5

3,400

- 1.1

3,300

- 3.6

1,800

- 24.454.80

Full year

71,900

4.8

4,600

8.6

4,400

- 0.4

2,300

- 24.270.02

4. Other(1) Changes to material subsidiaries during the period (transfer of specified subsidiaries in conjunction withrevision to scope of consolidation)? No(2) Changes to accounting principles, procedures and reporting method pertaining to preparation of theconsolidated financial statements (matters described in the Changes in Important Matters Used as theBasis for Preparation of the Consolidated Financial Statements)(a) Changes accompanying revisions to accounting standards etc.? No(b) Changes other than those in (a)? No(3) Number of shares issued (common stock)(a) Number of shares issued and outstanding at end of period (including treasury stock)
Fiscal year ended October 31, 2007 32,872,241 sharesFiscal year ended October 31, 2006 32,872,241 shares(b) Number of shares of treasury stock at end of period
Fiscal year ended October 31, 2007
25,725 sharesFiscal year ended October 31, 2006
13,123 shares

Summary of Company Financial Statements, FY Ended October 31, 2007

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(Reference) Summary of Company Interim Operating Results

1. Operating Results for the Fiscal year ended Octber 31, 2007
(November 1, 2006–October 31, 2007)(1) Operating Results(Numbers less than one million yen have been rounded down)
Revenues

Operating Income

Millions of yen%

Ordinary Income

Millions of yen%

Millions of yen%

Fiscal year ended
October 31, 2007

61,576

1.4

4,012

8.0

4,372

16.9

Fiscal year ended
October 31, 2006

60,753

6.2

3,715

143.4

3,739

90.7

Net Income
Millions of yen%

Net Income per Share ofCommon StockYen

Net Income per Share ofCommon Stock Fully Diluted
Yen

Fiscal year ended
October 31, 2007

3,431

99.5

104.44－

Fiscal year ended
October 31, 2006

1,720

182.4

56.67

－

(2) Financial Position
Total Assets

Shareholders’Shareholders’Shareholders’ Equity

EquityEquity Ratio

per Share

Millions of yen

Millions of yen

Fiscal year ended
October 31, 2007%

Yen

82,90240,78749.2

1,241.77

Fiscal year ended
October 31, 2006

83,51438,37646.0

1,167.90

Notes 1. Owners’ equity and valuation and translation adjustments:
Fiscal year ended October 31, 2007
¥40,787,000,000
Fiscal year ended October 31, 2006
¥38,376,000,000

2. Projected Operating Results for the Fiscal Year Ending October 31, 2008
(November 1, 2007 - October 31, 2008)(Percentages show the change from prior year)
Operating

Revenues
Millions of yen

Ordinary Income

Income% Millions of yen

Net Income per

Net Income

Share of common
stock% Millions of yen% Millions of yen%

Yen

Interim period

32,100

- 1.1

3,100

1.0

3,000

- 6.1

1,600

- 31.048.71

Full year

61,700

0.2

4,300

7.2

4,100

- 6.2

2,200

- 35.966.98

Note: Explanation concerning appropriate use of the projected operating results and other items to note
The projected operating results were prepared based upon information available to the Company at the time
the projections were announced as well as various assumptions concerning the future economic andbusiness environment. Actual operating results may differ from the projected figures depending uponvarious factors in the future.

Summary of Company Financial Statements, FY Ended October 31, 2007

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I

Operating Results(1) Analysis of operating resultsa) Summary of consolidated fiscal year operating results
During the consolidated fiscal year under review, corporate earnings turned in a remarkable recovery centeredon major corporations and export-oriented firms. Although Japan’s economy appeared to maintain its gradualexpansion when viewed based solely on macroeconomic indicators such as the increase in land values in major
metropolitan areas, this growth did not extend to most other regions. In addition to the subprime loan problem
in the United States, which gradually worsened after June, other factors such as the sharp jump in the price of
crude oil, the appreciation of the yen and the weak dollar put pressure on corporate earnings, casting a pallover economic conditions as a whole. Personal consumption generally remained sluggish as well, as firms held
the line on wage levels and the cost of living rose under the influence of the sudden rise in oil prices.
On the other hand construction demand, which is related to the main business of the Kanamoto group,
continued to suffer from difficult conditions. Although demand was vigorous in and around major metropolitan
areas because of private sector capital investment, which reflected the recovery in corporate operating results
and rising land prices, conditions in the majority of Japan’s prefectures remained severe, because the public
and private sector demand that drives local economies remained elusive. In particular, rental demand lacked
its typical upsurge after August, a change that originated in factors such as the ongoing reduction in public
works in regional areas and the postponement of work ordering periods. Even the number of new private
residences being built, which had been the one segment to maintain a steady pace, fell because of a realdecline in personal income and higher raw material prices. New housing starts also experienced substantial
delays as more time was required for approvals of applications for building confirmation in conjunction
with implementation of the revised Building Standard Law.
Given the above, the Company continued to confront a management environment that was less than ideal.
Nevertheless, by concentrating on uncovering new demand, the Kanamoto group achieved steady growth inrental revenues, Furthermore, equipment sales in the construction equipment business exceeded theCompany’s initial plan, as the quantity of used construction equipment sold soared because of a worldwide
construction equipment shortage. As a result, operating results on the whole improved compared with resultsof the previous consolidated fiscal year.
From an earnings perspective, operating income, ordinary income and net income all exceeded Kanamoto’s
initial projection and the actual results for the previous consolidated fiscal year, as the Company steadily
realized the effects of measures to improve the operating efficiency of rental equipment assets and lessen the
depreciation burden, as outlined in the Company’s long-term management plan, and successfully managed
the collaboration among the entire Kanamoto group.
As a result, revenues for the consolidated fiscal year ended October 31, 2007 edged upward 0.9% from theprevious consolidated fiscal year level to ¥68,626 million, operating income rose 4.1% year-on-year to ¥4,236
million and ordinary income increased 16.6% compared with the previous consolidated fiscal year to ¥4,416
million. Because the Company accounted for the gain from reversal of accrued employees retirement benefitsof ¥845 million in conjunction with a revision to Kanamoto’s pension system as extraordinary profits on the
non-consolidated and consolidated statements of income, net income increased 74.2% from the previous
consolidated fiscal year to ¥3,035 million.
A summary of operating results for each of the Company’s businesses, and business development issues
deserving special mention, are described below.

Summary of Company Financial Statements, FY Ended October 31, 2007

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[ Fiscal Year ended October 31, 2007 Operating Results ](Million yen; % change from prior year)
Revenues
Year underConsolidated

reviewPrior year
Year under

Non-consolidated

reviewPrior year

Operating income

Ordinary income

Net income

68,626

0.9

4,236

4.1

4,416

16.6

3,035

74.2

68,023

6.3

4,068

189.7

3,788

144.4

1,742

394.2

61,576

1.4

4,012

8.0

4,372

16.9

3,431

99.5

60,753

6.2

3,715

143.4

3,739

90.7

1,720

182.4

b) Summary of consolidated fiscal year operating results by business segment[Business related to the Construction Equipment Rental Division]
In the construction-related businesses of the entire Kanamoto group, revenues and earnings were both higher.
For the consolidated fiscal year under review, consolidated revenues increased 3.2% from the previous
consolidated fiscal year to ¥63,072 million, and operating income rose 6.4% year-on-year to ¥4,054 million.
< Kanamoto Co., Ltd. on an non-consolidated basis >In addition to devoting maximum efforts to ensuring it did not lose any opportunities to support construction
projects in the engineering works sector where it excels, Kanamoto sought to offset the decline in public works
through efforts to develop new customers. This included aggressive sales efforts to secure private sector
construction demand. As a result, during the second half of the fiscal year the Company ensured growthcompared with the same period of the previous fiscal year, despite the presence of negative factors such as thesudden rise in the price of crude oil and delays for approvals of applications for building confirmation in
conjunction with implementation of the revised Building Standard Law.
By region, non-consolidated construction equipment rental net revenues increased 3.8% compared with theprevious fiscal year in the Hokkaido Region, where the Company was successful in marketing to private sector
demand, and rose 1.2% year-on-year in the Tohoku Region, an area where the Company achieved large
increases in market share until the previous fiscal year. In the Kanto & Shinetsu Region, net revenues fell 1.1%
from the level of the previous fiscal year because construction work scheduled to begin on a large project wassignificantly delayed. In the Kinki & Chubu Region, net revenues grew 6.2% year-on-year as sales in both theTokai district and Kansai exceeded the prior year levels during the latter half of the fiscal year. As a result,non-consolidated rental revenues for Kanamoto’s Construction Equipment Rental Division rose 1.9% from theprevious fiscal year to ¥42,234 million. The percentage of revenues accounted for by Hokkaido and by Honshu
and other regions was 35.7% and 64.3%, respectively.
In addition, non-consolidated revenues from sales were including the results from the Company’s “Customer
Thanks Fair” equipment exhibition and sale, while used construction equipment sales jumped 22.3%
year-on-year as a result of vigorous overseas demand. Total non-consolidated net sales for the Construction
Equipment Rental Division increased 11.2% from the previous fiscal year, to ¥13,788 million. As a result, total
operating revenues for the Construction Equipment Rental Division were ¥56,022 million, 4.1% higher than in
the previous fiscal year.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.5

During the consolidated fiscal year under review, Kanamoto established six new branches and closed one
branch. As a result, at the end of the business period Kanamoto had 152 branches.
Newly opened branches:

Chiba Shinminato Branch (Chiba City, Mihama Ward), Higashidori Branch(Higashidori,Shimokita-gun,

AomoriPrefecture),

Hiroshima

Branch(Hiroshima, Asaminami Ward), Kanazawa Branch (Kanazawa City, Ishikawa
Prefecture), Itoigawa Branch (Itoigawa City, Niigata Prefecture), Asahikawa
Ichijo-dori Higashi Branch (Asahikawa City, Hokkaido)
Branch closed:

Ojiya Branch (Ojiya City, Niigata Prefecture)< Consolidated subsidiaries >Daiichi Kikai Co., Ltd. increased revenues 5.4% compared with the previous consolidated fiscal year.
Although the company’s construction equipment rentals were sluggish following completion of the first phaseof disaster relief work, sales of items such as used modular housing units remained strong. Operating income
fell 53.7% from the previous consolidated fiscal year because of the capital investment burden related to the
opening of a new branch.
SRG Kanamoto Co., Ltd. enjoyed robust demand for temporary scaffolding for construction of condominiums
in the Sapporo area and for maintenance work. Revenues expanded 17.5% from the previous consolidated
fiscal year. Although this company projected positive operating income for the year, higher operating expenses
resulted in a loss of ¥12 million. Nevertheless, this was an improvement of ¥4 million compared with theprevious consolidated fiscal year.
With the success of new business activities it initiated during the consolidated fiscal year under review, Assist
Co., Ltd. absorbed the increased burden caused by rental asset purchases and boosted revenues 4.2% overthe previous consolidated fiscal year. Operating income increased 13.0% year-on-year.
At Kanki Corporation, which is restructuring its management, revenues were 7.0% lower than in theprevious consolidated fiscal year. Although the company zealously focused management resources on
securing construction equipment rental demand in Hyogo Prefecture, were sales have been slow, this failed tocompensate for the decline in the subcontracting division, where the volume of work has been shrinking. The
company posted an operating loss, reflecting the cost burden from greatly enhancing its rental equipment
assets and establishing a new branch.
Kanatech Co., Ltd. posted a 3.0% drop in revenues compared with the previous consolidated fiscal year and30.0% decline year-on-year in operating income, as a result of changing its accounting method during theconsolidated fiscal year under review for the stocking of raw materials for cooperating manufacturing firms.
[ Business related to the Steel Sales Division ]Despite strong demand in Hokkaido for steel frame materials for private sector construction as well as steel fortelecommunications towers, demand softened after April. Factors included the implementation of new height
limits on buildings in Sapporo (height restricted districts), a slowdown in condominium construction and lower
revenues from work to heatproof, weatherproof and waterproof roofing. As a result, revenues slipped 21.0%
compared with the previous consolidated fiscal year to ¥5,120 million, and the division posted an operating
loss of ¥10 million.
[ Business related to the Information Products Division and Other Businesses ]Rental revenues for the Information Products Division grew 5.7% compared with the previous consolidated
fiscal year, reflecting aggressive efforts to develop new products and meet short-term spot demand and theabsorption of price declines on hardware. On the other hand, despite steady sales of used devices, sales of new
products declined 40.5% from the level of the previous consolidated fiscal year because the division could not
respond to remarkable price cutting for new products. Revenues for the entire division slipped 0.4%
year-on-year to ¥434 million, and operating income increased 1.7% from the previous consolidated fiscal yearto ¥31 million.

Summary of Company Financial Statements, FY Ended October 31, 2007

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(2) Analysis concerning financial positiona) Summary of consolidated fiscal year operating results(Millions of yen)
FY Ended October 2006

FY Ended October 2007

(Previous Consolidated(Consolidated Fiscal

Fiscal Year)

Year Under Review)% Change

Cash flow from operating activities

8,414

4,479

- 3,934

Cash flow from investing activities- 489- 1,427- 937

Cash flow from financing activities- 3,635- 4,237

- 601

4,289

- 1,184- 5,473

14,10818,3984,289

18,39817,213- 1,184

Increase (decrease) in cash andequivalents
Balance of cash and equivalents at
beginning of period
Balance of cash and equivalents at
end of the period

Cash and cash equivalents on a consolidated basis (referred to below as “cash”) at the end of the consolidated
fiscal year under review were ¥17,213 million. This was ¥1,184 million lower than at the end of previous
consolidated fiscal year. Cash flows for the consolidated fiscal year under review are discussed below.
(Cash flow from operating activities)
Cash generated as a result of operating activities was ¥4,479 million yen, a decrease of ¥3,934 million fromthe previous consolidated fiscal year.
Despite factors that served to increase cash flow from operating activities, such as the substantial increase inincome before taxes and adjustments, this result mainly reflected the large increase in funds used to decreaseof accounts payable, trade, substantially higher payments of corporate and other taxes, and the gain on
reversal of accrued employees retirement benefits.
(Cash flow from investing activities)
Cash flow utilized as a result of investing activities decreased ¥937 million from the same period of theprevious consolidated fiscal year to (¥1,427) million.
Although funds provided from the sale of tangible fixed assets doubled, this result mainly reflected factors thatserved to reduce cash flow provided by investing activities, including a large increase in funds used for thepurchase of non-consolidated subsidiary stock and a much smaller amount of funds provided from sale ofinvestment securities.
(Cash flow from financing activities)
Cash flow used as a result of financing activities decreased ¥601 million from the previous consolidated fiscal
year to (¥4,237) million.
This mainly reflected an increase in funds provided by long-term bank loans, and the fact that in contrast to
the previous consolidated fiscal year, during the consolidated fiscal year under review the Company did nothave any funds provided by issuance of stock.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.7

The cash flow indicator trends for the Kanamoto group are provided below.

Shareholders’ equity ratio (%)
Shareholders' equity ratio on a market
capitalization basis (%)
Years to repay debt
Interest coverage ratio (times)

FY Ended October

FY Ended October

FY Ended October

FY Ended October

2004

2005

2006

2007

36.7

40.8

43.7

46.9

18.1

26.6

32.0

41.3

6.3

3.3

3.5

6.4

13.4

24.5

21.0

11.9

(Notes) Shareholders’ equity ratio: Shareholders’ equity / Total assets
Shareholders’ equity ratio on a market capitalization basis: Shareholders’ equity on a market capital 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 of shares 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 the Consolidated Balance Sheets. The amounts shown as interest expense on the Consolidated
Statements of Cash Flows are used as interest payments.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.8

(3) Outlook for the next consolidated fiscal year
As tremors from the subprime loan problem in the United States spread, and the global flow of money
functioned less efficiently, a shadow continues to fall across the real economy, as evidenced by reactions suchas the drop in stock prices in Japan. In addition, higher raw material prices, led by the sharp climb in crude oil
prices and supported by the strong yen-weak dollar trend, have begun putting pressure on manufacturing
earnings, and the cost of goods connected directly with people’s daily lives, including fuel and food products,
are gradually pushing upward and putting a damper on personal consumption. In Japan, issues of particularconcern are the growing economic disparity between major metropolitan areas and other regions, and thedeteriorating management environment surrounding small and medium-sized firms.
Turning to the main businesses of the Kanamoto group, as long as the current central and local government
policies are continued, the downward trend in local public works discussed earlier can be expected to continue
into the next fiscal year in response to the weakness of local economies. In addition, delays in construction
starts of properties can be noted in many instances because of strict application of the revised BuildingStandard Law, which encompasses revised anti-earthquake regulations. Although more normal conditions
appear set to return in the near future because the Ministry of Land, Infrastructure and Transport has eased
regulations somewhat, this situation is expected to have a significant impact on construction equipment rental
businesses, which has one foot firmly placed in the construction sector. For Kanamoto, the affect is expected
to be limited because a large proportion of the Company’s business is related to civil engineering works.
With regard to used construction equipment sales, on the other hand, used construction equipment demandis vigorous worldwide despite concerns about a slump in construction equipment demand in the U.S. becauseof the subprime loan problem. The affect of the U.S. demand trend on used construction equipment that
Kanamoto in particular sells is believed to be minimal under current conditions, because Kanamoto mainly
ships used equipment to China, Southeast Asia and the Middle East.
While the decrease in the amount of domestic construction investment is a negative factor for the construction
equipment rental business that is Kanamoto’s main business, to some extent this is offset by the accelerating
dependence on rentals for equipment used at construction sites as the construction industry continues its
efforts to rationalize. Furthermore, for Kanamoto there still are regions within Japan where the Company has
yet to open branches and develop its business. There remains substantial room to advance into the Tokyo
metropolitan area in particular, the market where the greatest domestic demand is anticipated. In addition
there is room to substantially increase earnings, including new support for large-scale projects that involve
ground improvement works, for example, which enable Kanamoto to take maximum advantage of its size, as
well as the event rental sector that Kanamoto is gradually expanding. The Company will strive to develop thesebusinesses in close cooperation with each affiliated company.
In addition, Shanghai Jinheyuan Equipment Rental Co., Ltd., which opened for business in Shanghai, China, is
off to a good start. In conjunction with Kanamoto’s strong used construction equipment sales, the Company
will seek to achieve robust expansion of its overseas operations.
The Company’s earnings projection for the fiscal year ending October 2008 is shown in the table below.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.9

Fiscal year ending October 2008

Projected Operating Results (November 1, 2007 -October 31, 2008)(Million yen, except for net income per share which is in yen)

Revenues

Full year
Consolidated

Current period results(FY Ended Oct. 2007)
Full year

Non-consolidated

Current period results
FY Ended Oct. 2007

Fiscal year ending October 2008

Operating

Ordinary

incomeincomeNet income per
Net income

share ofcommon stock

71,900

4,600

4,400

2,300

70.02

68,626

4,236

4,416

3,035

92.40

61,700

4,300

4,100

2,200

66.98

61,576

4,012

4,372

3,431

104.44

Projected Financial Position (November 1, 2007 -October 31, 2008)(Cash flow from operating activities)
Cash flow from operating activities is projected to be approximately identical to the amount in the consolidated
fiscal year under review because there are no factors that will result in material changes.
(Cash flow from investing activities)
Cash flow from investing activities is projected to be approximately identical to the amount in the consolidated
fiscal year under review because there are no factors that will result in material changes.
(Cash flow from financing activities)
Cash flow from financing activities is projected to be approximately identical to the amount in the consolidated
fiscal year under review because there are no factors that will result in material changes.
As a result of the above, the balance of cash and cash equivalents at the end of the next consolidated fiscal
year is projected to approximately the same as the balance at the end of the consolidated fiscal year underreview.

(4) Basic policies concerning distribution of earnings and current period dividends
As the basis of its earnings distribution policy, Kanamoto seeks to ensure a stable return of earnings to theextent possible, while taking into consideration its earnings level, payout ratio, and financial position from a
medium to long-term perspective. The Company has set a dividend payout ratio objective of at least 30%,
tempered for earnings conditions.
With regard to the dividend for the business period under review, in light of operating results for the
consolidated fiscal year ended October 2007, the Company proposes to increase the year-end dividend pershare by paying a special dividend of ¥2 per share in addition to the regular dividend per share of ¥9, bringing
the dividend for the entire consolidated fiscal year under review to ¥20 per share (This proposal requires theapproval of the Regular General Meeting of the Shareholders, which will be held in January 2008. This proposal
was previously reported in the press release dated September 20, 2007).
The Company will utilize its internal reserves by allocating funds for capital investment, including the
introduction of rental equipment assets that will serve as the source of future earnings, and for enhancing
shareholders’ equity.
To enable the Company to flexibly implement its capital policy, Kanamoto has established a system for making
purchases of treasury stock.

Summary of Company Financial Statements, FY Ended October 31, 2007

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(5) Special benefits plan for shareholders
As already reported on September 20, 2007, in 2008 Kanamoto will celebrate the tenth anniversary of theelevation of the Company’s stock to the First Section of the Tokyo Stock Exchange, and will take advantage ofthis occasion to establish a special benefits plan for shareholders. Shareholders owning at least 1,000 shares
who are described or recorded in the Register of Shareholders and List of Beneficial Shareholders as of October
31 (Date of Record) of each year will be able to choose their preferred items with a value equivalent to 3,000
yen from among fresh products from Hokkaido, the birthplace of Kanamoto, displayed in the Select for You
shopping catalog published by Hokuren.
The first year of the special benefits plan will be the consolidated fiscal year ended October 2007, and theCompany plans to enclose the catalog with its annual report for the 43rd Business Period.

(6) Business and other risks
The following risks are included among the business and accounting matters described in the Accounting
Bulletin (Consolidated) that might have an important influence on investors’ decisions. Statements concerning
future matters are judgments made by the Company based on information available at the present point intime.
a) Economic conditions
Because the construction-related businesses that are the main business of the Kanamoto group remain highly
dependent on public works, the stagnation of market growth and intensification of price competition resulting
from ongoing cutbacks in public works investment are continuing and the severity of the business environmentis expected to continue.
To minimize the affects from cutbacks in public works, the Kanamoto group is implementing various
management measures, such as shifting management resources to major metropolitan areas where private
sector demand is strong, and seeking to maintain and improve operating results. Nevertheless, there is apossibility future operating results including revenues will be negatively affected if further large reductions inpublic works or other changes affecting industry demand occur in the future.
b) Seasonal changes in operating results
Because budget decisions for public works are made in April of each year, there is a time lag of roughly six
months before construction actually begins. Therefore the construction-related businesses that are
Kanamoto’s main business experience a trend in which the busy season during each business period extends
from about October until the following March, and construction equipment rental demand reaches its
maximum peak during this period. As a result, the revenues and earnings of the Kanamoto group tend to beconcentrated in the Company’s interim accounting period (the six-month period from November through thefollowing April).
c) Interest rate fluctuations
The Kanamoto group allocates internal capital and procures funding from outside sources to meet its need forfunds to purchase rental equipment and other assets, make branch-related capital investments and provide
working capital for business activities. Although the Company takes steps to mitigate the affect of interest rate
fluctuations on its externally borrowed funds, including transactions to fix the interest rates paid on borrowed
funds to the extent possible, there is a possibility the operating results and financial position of the Kanamotogroup will be affected by future large changes in short-term interest rates.
d) Projected benefit obligation
The projected employee benefit obligation and costs of the Kanamoto group are calculated mainly based on
basic rates such as a discount rate and expected rate of return on pension assets. Because these basic rates
are determined in each annual review, they have a material affect on changes in the operating results andSummary of Company Financial Statements, FY Ended October 31, 2007

P.11

financial position of the Kanamoto group. There is a possibility the operating results and financial position of
the Kanamoto group might be negatively affected if the discount rate declines further or the yield on
investments deteriorates. Beginning from the consolidated fiscal year under review, Kanamoto has adopted
the cash balance system, and the Company will seek stabilization of the projected benefit obligation and costs
by offsetting the change in the projected benefit obligation and costs as a result of the discount rate andchange in projected benefits amount.
e) Asset impairment accounting for fixed assets
Beginning from the business period ending in October 2006, the Kanamoto group will apply the AccountingStandard for Impairment of Fixed Assets. There is a possibility the operating results and financial position of
the Kanamoto group might be negatively affected if the profitability of fixed assets declines because of factors
such as a marked deterioration in the Company's business environment in the future.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.12

II Current Conditions of the Company’s GroupThe Kanamoto Company group (Kanamoto and its affiliated companies) has organized its principal businessactivities around “businesses related to the Construction Equipment Rental Division” that are engaged in therental and sale of construction equipment and construction-related equipment parts, “businesses related to
the Steel Sales Division” that sell materials for construction such as steel products, and “businesses related to
the Information Products Division and Other Businesses” that rent and sell computers including workstations
and PC servers and computer peripheral equipment. The group is comprised of the parent company, fiveconsolidated subsidiaries and six non-consolidated subsidiaries. There are no companies that apply equity
method accounting to non-consolidated subsidiaries.
An explanation of the business activities and position of each company in the Kanamoto group, and therelationships to the group's segments by business category, is provided below.
[ Businesses related to the Construction Equipment Rental Division ]The Company’s Construction Equipment Rental Division, Daiichi Kikai Co., Ltd. (a consolidated subsidiary)and Kanki Corporation (a consolidated subsidiary) are engaged in the rental and sale of construction
equipment and machines used for construction. These two subsidiary companies borrow rental equipment
assets from the Company as needed in order to meet customer demand.
Assist Co., Ltd. (a consolidated subsidiary) and Comsupply Co., Ltd. (a non-consolidated subsidiary) areengaged in the rental and sale of furniture and fixtures and safety products, and SRG Kanamoto Co., Ltd. (aconsolidated subsidiary) rents and sells temporary materials for construction use. The Company borrows
rental assets from SRG Kanamoto Co., Ltd., Assist Co., Ltd. and Comsupply Co., Ltd. as needed to rent to othercompanies.
Kanatech Co., Ltd. (a consolidated subsidiary) sells modular housing units for temporary use. FlowtechnoCo., Ltd. (a non-consolidated subsidiary), is engaged in the technical development, manufacture and sale ofconstruction equipment for ground improvement works. Kanamoto purchases modular housing units for
temporary use and construction equipment for ground improvement from these two companies as needed torent to its own customers.
Furthermore, in February 2007 Kanamoto acquired the majority of the outstanding shares of Kyushu KensanCo., Ltd., and made the company and its company group firms subsidiaries of Kanamoto. This group of firms,
which is composed of Kyushu Kensan Co., Ltd., Kensan Fukuoka Co., Ltd., Kensan Techno Co., Ltd. and Center
Corporation Ltd., is engaged in the rental and sale of construction equipment in northern Kyushu (all four
companies are non-consolidated subsidiaries). Kyushu Kensan borrows rental equipment assets from
Kanamoto as needed in order to meet its customer demand.
Similarly, Shanghai Jinheyuan Equipment Rental Co., Ltd., an affiliated company established in February
2007 through a joint venture with a Chinese firm and the first overseas expansion of the Kanamoto group, is
engaged in the rental and sale of construction equipment and tools and the import and export of construction
materials.
[ 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 business.
[ Businesses related to the Information Products Division ]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.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.13

The companies and activities described above are shown in the following diagram illustrating their operating
businesses relationships.

Domestic Customers

Construction equipment rental

Kanamoto Co., Ltd.

Rental of construction related products and parts

Assist Co., Ltd.

Daiichi Kikai Co., Ltd.

Rental and sale of safety
products

Construction equipment
rentals and sales
Kanki Corporation

Comsupply Co., Ltd.

Construction equipment
rentals and sales

Rental of furniture, fixturesand safety equipment

Construction
Kyushu Kensan Co., Ltd.
Construction equipment rentals

Equipment Rental
Division

SRG Kanamoto Co., Ltd.
Rental and sale of temporary
materials for construction use

centered on foundation equipment

Kensan Fukuoka Co., Ltd.

Generator rentals

Overseas
Kensan Techno Co., Ltd.

Shanghai Jinheyuan Equipment Rental Co., Ltd.

Construction craneImport and export of construction equipment

rentals

and rental of construction materials

Center Corporation Ltd.

Small equipment
rentals

Steel Sales Division
Information Products Division

Customers and overseas
Supply of steel frames andSupply of modular
housing units

construction materials

trading companies in China

Design, manufacture and sale of related products

Kanatech Co., Ltd.
Design, manufacture and sale of modular
housing units for temporary use

Users, trading
companies, etc.

Flowtechno Corporation
Technical development, manufacture and saleof ground improvement equipment

Equipment supply,
technical assistance(Notes)(1) There are no non-consolidated subsidiaries to which equity method accounting is applied.
(2) Consolidated subsidiaries are indicated by white boxes, and non-consolidated subsidiaries are shown ingrey boxes. Dotted lines indicate the companies that are grouped in the same business classification(3) Arrows indicate business transactions. For details please see the text on the previous page.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.14

III

Management Policies

1) Basic policies concerning the Company’s business management
The Kanamoto group believes that seeking innovation, maintaining a dynamic corporate culture andcontinually pushing businesses forward, by regarding “customers’ interests as Kanamoto’s interests,” is thebest way to meet the expectations of shareholders and group stakeholders and ensure earnings growth.
Through this philosophy, Kanamoto practices group management with the objective of being a corporate groupthat can make a valuable and tangible contribution to society.

2) Management indicators established as objectives
Because the Kanamoto group’s core operations in the construction equipment rental business require asubstantial capital investment burden, which necessitates a profit and loss outlook extending over several
years, the Kanamoto group has always positioned growth in EBITDA+ (earnings before interest, taxes,
depreciation and amortization) as its most important management indicator, while also taking into
consideration ROI (return on investment).
Kanamoto has positioned the consolidated fiscal year ending in October 2008, the final year of the Company’s
long-term management plan “Metamorphose” (November 2003 through October 2008) as the year to pass thegrowth baton to the new long-term management plan that will begin in November 2008 (November 2008
through October 2013), and Kanamoto will continue to adhere firmly to its revenue growth and increased
earnings focus. Nevertheless, the period of the new long-term plan will be a period of various critical changes.
These include extremely uncertain construction demand, the increasing severity of competition among firms,
trends in rental unit prices, the direction for regional strategy including branch expansion, and the necessity of
pursuing a capital investment strategy to strengthen the Company’s lineup of models that comply with the Tier
III emissions regulations, while taking into consideration the Company’s response to changes in theaccounting system, including the introduction of a lease accounting system from the next consolidated fiscal
year. Depending on the Company’s response to these factors, the outlook will vary, and the Company therefore
has set prudent numerical targets.
(Millions of yen, except earnings per share which are in yen)
New objectives for the FY ending
October 2008
Consolidated operating
results
Non-consolidated
operating results

Revenues

71,900Ordinary income

4,400

Earnings per share¥70.02

Revenues

61,700Ordinary income
EBITDA+

4,100
19,435

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.15

a) Enhance the earnings-focused rental equipment asset portfolio (asset optimization strategy)
Together with continuing to optimize asset management periods by replacing rental assets with the latest
emissions-controlled models and lengthening rental periods, the Company will seek to increase the accuracyof its optimal asset portfolio and increase profit margins through measures such as strengthening its emphasison equipment boasting high returns.
b) Expand base network in the Tokyo metropolitan area and advance into regions where theCompany does not yet have branches
The Company has put its priority on establishing new branches in the Tokyo metropolitan area and regions
surrounding other large cities. Furthermore, in its approach to areas where it does not have branches, theKanamoto group is aggressively promoting more rapid expansion of its business area through M&A andalliances, while taking into consideration local conditions in markets where it will expand, rather than simply
establishing new branches. The Kanamoto group has positioned M&A as one growth engine for the future.
c) Strengthen activities in the Regional Special Procurement Sales Division
The Regional Special Procurement Sales Division, which is responsible for opportunities such as large-scale
projects, pursues business cooperation that extends across regions and individual firms, and this approach has
gradually taken root and generated positive results. In many cases this is linked to long-term, large-scalerentals for work such as the ground improvement MITS technique, the SDI technique for large-scale concrete
structure maintenance, and repair works in cooperation with Flowtechno Corporation, a member of theKanamoto group, and to unusual equipment utilized for major projects. Because these activities make aconsiderable contribution to revenues and earnings, the Company will strengthen the activities of this divisionin the future.
d) Build a powerful marketing organization and alliance group where customers are always
Number One
While Kanamoto has continued to gradually increase the number of agreements with various local
governments for responding to urgent requests following a disaster, the Company seeks to be a firm that isstrongly rooted in its local communities from many aspects, not merely through countermeasures against
natural disasters. The Company is building a community-based sales and marketing organization that canincrease synergistic effects and take maximum advantage of corporate scale, not only for Kanamoto but forcustomer firms and local governments as well, through cooperation with Kanamoto group companies andalliance firms that cover Japan from Hokkaido to Okinawa.
e) Pursue overseas development
Shanghai Jinheyuan Equipment Rental Co., Ltd., an affiliated company established in February 2007 througha joint venture with a Chinese firm and the first overseas expansion of the Kanamoto group, has achieved asmooth start centered on the construction equipment rental business. In the future this firm will focus on
meeting local needs, developing proactive sales and building a solid foundation for its business. On the other
hand, as used equipment is exported through buyers to countries around the world, Kanamoto’s used
construction equipment sales are gradually increasing the reputation of Kanamoto in various countries, andKanamoto will continue its efforts to increase such used equipment sales.
f) Develop new rental products and new businesses
The New Products Office, which has the objective of uncovering new rental products that meet customers’
needs, has achieved steady results with products such as equipment for the event rental business. Kanamoto
will continue its efforts to provide side support to the sales departments in the future.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.16

4) Issues to be addressed by the Company
The environment surrounding the Company remains severe, with many public works projects facing an
uncertain future because of stringent local finances. Competition among construction equipment rental firms
is becoming more aggressive, and the industry faces a period when management will be challenged across thefull range of marketing, sales, finance and management capabilities, with many firms expected to shutter theirdoors. The issue for Kanamoto will be to continue focusing on nationwide development, expanding its
businesses and realizing a solid foundation for earnings, while continuing to strengthen customers’ ties with
the Company and responding appropriately to new sectors. Kanamoto will build a strong sales and marketingorganization by successfully addressing each of the following issues.
a) Enhance marketing capabilities and customer strategies
As the leading firm in the construction equipment rental industry, Kanamoto strives to foster employees who
possess appropriate knowledge and skills. The Company also is taking steps to cultivate a new range ofcustomers, including sectors such as facilities maintenance, landscaping and gardening and events, by
diversifying the types of products it handles.
b) Emphasize group management and strengthen alliances
Kanamoto will strengthen cooperation among Kanamoto group companies from an operating, business andasset management standpoint, increase alliances with firms in every region of Japan and seek mechanisms
aimed at the creation of mutual earnings opportunities.
c) Reinforce Kanamoto’s financial strategy
Kanamoto is taking steps to further enhance funds procurement flexibility, while giving consideration toequipment plans including 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 by incorporating measures such as the liquidation of assets.
d) Continue to reduce costs
Because of the sharp rise in the price of crude oil, asset introduction costs are increasing. The Company willseek to maintain asset value by introducing assets based on the thorough use of benchmarks and optimize
asset maintenance costs based on its rental assets operating policies.
e) Compliance and internal controls
To create an organization that is aligned with society’s demands, Kanamoto has prepared ethical standards, acode of conduct and a compliance manual. The Company works to ensure every individual is thoroughlyfamiliar with these guidelines, and manages its organization in accordance with these materials. Moreover,Kanamoto has reaffirmed its management processes for maintaining reliable and trusted financial reporting,and is proceeding with tests of the operation of these new processes, with the goal of beginning their actual
application on November 1, 2008.
At each group company as well, Kanamoto is directing the development of systems similar to the Company’s
as quickly as possible, providing guidance to ensure the systems will operate as intended, and working toensure a group-wide organization for observing all laws is in place.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.17

IV

Consolidated Financial Statements(1) Consolidated Balance Sheets(Unit: Thousands of yen)
Prior Consolidated Accounting
Fiscal Year(As of October 31, 2006)
Classification

Notes

AmountPercent

Current Consolidated Accounting
Fiscal Year(As of October 31, 2007)
AmountChangefrom prior
year

Percent(Assets)
I

Current assets
1. Cash and deposits

18,398,312

11,913,890- 6,484,421

14,959,325

14,239,136- 720,189－

5,300,000

5,300,000

560,203533,600- 26,602

1,193,669

1,010,645- 183,023

6. Deferred tax assets

391,803

360,573- 31,230

7. Other752,572

457,321- 295,251- 523,650- 488,905

34,74533,326,262

39.1 - 2,405,973

9,523,031

164,836

6,671,521

39,630750,333

29,55725,906,130

26,268,316

362,186

246,544

46,172- 200,371

238,963- 20,936

2. Notes and accounts
receivable, trade*4

3. Negotiable securities
4. Inventory
5. Construction equipment

Allowance for doubtful
accounts
Total Current Assets
II

35,732,235

41.2

Fixed assets

1. Tangible fixed assets(1) Rental equipment assets

37,784,220

Accumulated depreciation

28,426,025(2) Buildings and structures

16,561,916

Accumulated depreciation

9,930,025(3) Machinery, equipment,
vehicles and delivery
equipment

4,322,961

Accumulated depreciation

3,602,186(4) Land(5) Construction in progress(6) Other

37,567,171
9,358,195

28,044,139
17,151,855

6,631,891

10,480,334
4,415,336

720,775

3,665,003

1,126,604

Accumulated depreciation

866,704

Total Tangible Fixed Assets

1,115,602
259,900
43,123,437

876,63849.7

43,498,339

51.1

374,901

2. Intangible fixed assets(1) Goodwill*５395,109275,797- 119,311(2) Other

141,585

137,516- 4,069

Total Intangible Fixed Assets

536,695

0.6

413,314

0.5- 123,381

3. Investments and otherassets(1) Investment securities(2) Other*１

6,224,097

6,610,180

386,083

1,874,002

2,070,164

196,162

Summary of Company Financial Statements, FY Ended October 31, 2007

P.18

Allowance for doubtful
accounts- 674,876- 762,464- 87,587

Total Investments andOther Assets

7,423,223

8.5

7,917,880

9.3

494,657

Total Fixed Assets

51,083,356

58.8

51,829,534

60.9

746,178

Total Assets

86,815,592

100.0

85,155,797

100.0 - 1,659,794

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

Notes

AmountPercent

Current Consolidated Accounting
Fiscal Year(As of October 31, 2007)
AmountChangefrom prior
year

Percent(Liabilities)
I

Current liabilities
1. Notes and accounts
payable, trade12,419,337

11,292,635- 1,126,702

2. Short-term bank loans

497,704

330,000- 167,704

3. Long-term bank loans
due within one year

10,077,496

8,972,356- 1,105,140

4. Corporate taxes payable

1,365,479

1,449,478

83,998

5. Accrued bonuses to
employees

511,737

552,926

41,1896. Accrued bonuses todirectors and auditors

5,500

－

- 5,500

7. Accounts payable, other

2,676,023

2,346,872- 329,151

8. Other

1,017,823

642,568- 375,254

Total Current Liabilities

28,571,100

25,586,836

30.1 - 2,984,263

II

32.9

Long-term liabilities

1. Long-term bank loans

16,031,111

15,718,705- 312,406

2. Accrued employees
retirement benefits

1,681,719

935,980- 745,738

129,214132,633

3,419

2,107,836

2,486,318

378,481242,843

321,805

78,961

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

20,192,724

23.3

19,595,442

23.0

48,763,825

56.2

45,182,279

53.1 - 3,581,545

1 Paid-in capital

9,696,717

11.2

9,696,717

11.4－

2 Capital surplus

10,960,869

12.6

10,960,869

12.9

－

3 Earned surplus

14,889,638

17.2

17,333,642

20.4

2,444,003

4 Treasury stock- 6,303- 0.1- 19,784- 0.1- 13,481

Total Long-term Liabilities
Total Liabilities- 597,281(Net Assets)
I

Owners’ equity

Summary of Company Financial Statements, FY Ended October 31, 2007

P.19

35,540,922

40.9

37,971,444

44.6

2,430,522

1 Valuation difference onother investment
securities

2,418,684

2.8

2,002,072

2.3- 416,611

Total Valuation andTranslation Adjustments

2,418,684

2.8

2,002,072

2.3- 416,611

Minority Interests

92,1590.1－－- 92,159

Total Net Assets

38,051,766

43.8

39,973,517

46.9

1,921,750

Total Liabilities andNet Assets

86,815,592

100.0

85,155,797

100.0 - 1,659,794

Total Owners’ Equity
II

III

Valuation and translation
adjustments

Summary of Company Financial Statements, FY Ended October 31, 2007P.20

(2) Consolidated Statements of Income(Unit: Thousands of yen)Classification
I

Notes

Prior Consolidated Accounting
Fiscal Year

Current Consolidated Accounting
Fiscal Year

From November 1, 2005
to October 31, 2006

From November 1, 2006
to October 31, 2007

AmountPercent

AmountChangefrom prior
year

Percent

Revenues from operations
1. Rental revenues

46,058,582

2. Sales

21,965,199

II

680,513

46,739,096
68,023,782

100.0 21,887,816 68,626,913

100.0- 77,382

Cost of revenues fromoperations

1. Cost of rental revenues

32,697,199

2. Cost of goods sold17,048,094

Gross profit
III Selling, general andadministrative expenses*１

Operating income

563,025

33,260,225
49,745,294

73.1 16,230,180 49,490,405

72.1- 817,914

18,278,487

26.9

19,136,507

27.9

858,020

14,210,350

20.9

14,899,972

21.7

689,622

4,068,136

6.0

4,236,534

6.2

168,397

IV Non-operating revenues
1. Interest revenue

2,467

44,782

42,314

2. Dividend income

40,396

51,715

11,318

3. Gain on sale ofinvestment securities

24,883

287,528

262,645

4. Insurance benefits

40,91038,877- 2,032

5. Rents received

90,90281,409- 9,493－

105,737

105,737

6. Cash bonus received
7. OtherV

116,103

315,6620.5

102,577

712,627

1.0- 13,525

Non-operating expenses
357,750

338,051- 19,699－

75,15575,155

3. New share issuance costs

14,762－- 14,762

4. Other

222,828

1. Interest expense
2. Loss on sale of notes
receivable

Ordinary income
VI595,3400.9

3,788,458

5.6

119,684

532,891

0.8- 103,143

4,416,270

6.4

627,811Extraordinary profits

1. Gain on sale or retirementof fixed assets

50,018921,056

871,037

2. Management gain on
investment partnershipenterprise

8,515

8,333

- 182

3. Gain on reversal of
allowance for doubtful
accounts

33,27021,109- 12,160

4. Compensation received

275,500－- 275,500*２

Summary of Company Financial Statements, FY Ended October 31, 2007

P.21

5. Gain on reversal of
accrued employees
retirement benefits
6. OtherVIII845,319－
27,421

394,726

0.6

5,018

845,319
1,800,836

2.6- 22,403

Extraordinary losses

1. Loss on sale or retirementof fixed assets*３52,366

68,231

15,865

2. Impairment loss

*４594,568890- 593,678

3. Valuation loss on
investment securities－

11,016

11,016

4. Amortization of goodwill－

331,425

331,425

5. Other

82,666

Income before taxes andadjustments
Corporate, local and business
taxes

1,767,872

Adjustment for corporate andother taxes- 77,965

Minority interest in income
Net income

729,600

1.1

3,453,583

5.1

37,597449,161

0.6- 45,069

5,767,945

8.4

2,314,361

2,286,833
1,689,906

2.5

21,024
1,742,652

410,200

518,961
2,697,033

3.9

488,165

0.0

35,4930.1

14,4682.6

3,035,418

4.4

1,292,765

Summary of Company Financial Statements, FY Ended October 31, 2007

P.22

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

Capital surplus

Earned surplus

Treasury stock

8,596,737

9,720,343

13,691,585- 186,594

1,099,980

1,097,046

Total Owners’
Equity31,822,071

Change of items during theconsolidated accounting fiscal
year
Issuance of new shares

2,197,026

Dividends from surplus(Note)- 268,677- 268,677

Dividends from surplus(interim dividends)- 268,622- 268,622- 7,300- 7,300

Directors and auditors’
bonuses from appropriationof earnings
Net income

1,742,652

Purchase of treasury stock
Disposal of treasury stock

143,480

1,742,652- 11,781- 11,781

192,072

335,552

Change of items other thanowners’ equity during theconsolidated accounting
fiscal year (net amount)-

Total changes of items during
the consolidated accounting
fiscal year

1,099,980

1,240,526

1,198,052

180,290

3,718,850

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

9,696,717

10,960,869

14,889,638- 6,30335,540,922

Summary of Company Financial Statements, FY Ended October 31, 2007

P.23

Valuation and translation adjustments

Balance at the end of theprevious consolidated
accounting fiscal year
(October 31, 2005)

Valuation differenceon other investment
securities

Total valuation andtranslation
adjustments

1,643,403

1,643,403

Minority interests

71,135

Total net assets

33,536,610

Change of items during theconsolidated accounting fiscal
year
Issuance of new shares

2,197,026

Dividends from surplus(Note)- 268,677

Dividends from surplus(interim dividends)- 268,622

Directors and auditors’
bonuses from appropriationof earnings- 7,300

Net income

1,742,652

Purchase of treasury stock- 11,781

Disposal of treasury stock

335,552

Change of items other thanowners’ equity during theconsolidated accounting
fiscal year (net amount)775,281775,281

21,024

796,305

Total changes of items during
the consolidated accounting
fiscal year

775,281775,281

21,0244,515,155

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

2,418,684

2,418,684

92,15938,051,766

Note: Based on the resolution of the General Meeting of the Shareholders on January 27, 2006.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.24

Current Consolidated Accounting Fiscal Year (From November 1, 2006 to October 31, 2007)(Unit: Thousands of yen)
Owners’ equity
Paid-in capital
Balance at the end of theprevious consolidated
accounting fiscal year
(October 31, 2006)

Capital surplus

Earned surplus

Treasury stock

10,960,869

14,889,638- 6,3039,696,717

Total owners’
equity35,540,922

Change of items during theconsolidated accounting fiscal
year under review
Dividends from surplus(Note)- 295,732- 295,732

Dividends from surplus(interim dividends)- 295,682- 295,682

Net income

3,035,418

3,035,418

Purchase of treasury stock- 13,481- 13,481

Change of items other thanowners’ equity during theconsolidated accounting
fiscal year (net amount)-

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

2,444,003- 13,481

2,430,522

Balance at the end of theconsolidated accounting fiscal
year under review(October 31, 2007)

9,696,717

10,960,869

17,333,642- 19,784

37,971,444

Valuation and translation adjustments

Balance at the end of theprevious consolidated
accounting fiscal year
(October 31, 2006)

Minority interests

Valuation differenceon other investment
securities

Total valuation andtranslation
adjustments

2,418,684

2,418,684

Total net assets

92,15938,051,766

Change of items during theconsolidated accounting fiscal
year under review
Dividends from surplus(Note)-- 295,732

Dividends from surplus(interim dividends)-- 295,682

Net income-

3,035,418

Purchase of treasury stock-- 13,481

Change of items other thanowners’ equity during theconsolidated accounting
fiscal year (net amount)- 416,611- 416,611- 92,159- 508,771

Total changes of items during
the consolidated accounting
fiscal year under review- 416,611- 416,611- 92,159

1,921,750

Balance at the end of theconsolidated accounting fiscal
year under review(October 31, 2007

2,002,072

2,002,072-

39,973,517

Note: Based on the resolution of the General Meeting of the Shareholders on January 26, 2007.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.25

(4) Consolidated Statements of Cash Flows(Unit: Thousands of yen)
Prior Consolidated
Current Consolidated
Accounting Fiscal Year
Accounting Fiscal Year
(From November 1, 2005 (From November 1, 2006
to October 31, 2007)
to October 31, 2006)
Classification

Change fromprior year

Notes

I Cash flow from operating activities
Income before taxes and adjustments

3,453,583

5,767,945

2,314,361

Depreciation and amortization expense

4,792,624

4,648,677- 143,947

Impairment loss

594,568890- 593,678

Amortization of goodwill

136,546

395,108

258,561

Gain on sale or retirement of fixed
assets- 50,018- 921,056- 871,037

Loss on sale or retirement of fixed assets

52,366

68,231

15,865Gain on reversal of accrued employees
retirement benefits－- 845,319- 845,319

125,132

97,069- 28,062

Reclassification of cost of sales
associated with disposal of construction
equipment

6,866

25,597

18,730Reclassification of cost of sales
associated with disposal of rental assets

569,273

397,062- 172,210- 1,811,898- 2,095,742- 283,844

14,762－- 14,762－

11,016

11,016

Gain on sale of investment securities- 24,883- 287,528- 262,645

Increase (decrease) in allowance for
doubtful accounts- 502,887

52,842555,730

Increase (decrease) in accrued bonuses
to employees- 4,059

41,18945,248

Increase (decrease) in accrued bonuses
to directors and auditors

5,500- 5,500- 11,000

Increase in accrued employees
retirement benefits

155,725

99,580- 56,145

Increase in retirement allowances todirectors and auditors

18,741

3,419- 15,321

Interest revenue and dividend income- 42,863- 96,497- 53,633

Interest expense on installment
purchases of rental assets

42,90643,182276

Interest expense

357,750

338,051- 19,699

Increase (decrease) in accounts
receivable, trade- 630,235

720,189

1,350,424

Increase in inventory- 21,251- 27,730- 6,478

Installment purchases of assets forsmall-value rentals

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.26

Increase (decrease) in accounts
payable, trade

1,581,719- 1,126,702- 2,708,421

Increase (decrease) in accounts
payable, other

428,072- 76,564- 504,636

Directors and auditors’ bonuses paid

- 7,300

－

7,300

Other

489,036- 257,663- 746,699

Subtotal

9,729,787

6,969,749- 2,760,037

42,86390,47047,606

Interest expense- 400,061- 377,448

22,613

Payment of corporate and other taxes- 957,962- 2,202,835- 1,244,872

8,414,626

4,479,936- 3,934,690

Interest and dividends received

Cash flow from operating activities

Summary of Company Financial Statements, FY Ended October 31, 2007

P.27

Prior Consolidated
Current Consolidated
Accounting Fiscal Year
Accounting Fiscal Year
(From November 1, 2005 (From November 1, 2006
to October 31, 2006)
to October 31, 2007)
Classification

Change fromprior year

Notes

II Cash flow from investing activities
Revenue from redemption of term
deposits

3,018－- 3,018

Funds used for the purchase of tangible
fixed assets- 2,248,477- 2,059,416

189,061

Funds provided from the sale of tangible
fixed assets

931,262

1,875,374

944,112

Funds used for the purchase ofintangible fixed assets- 14,729- 64,781- 50,051

Funds used for the purchase ofinvestment securities- 465,832- 123,716

342,115

Funds provided from sale of investment
securities

1,353,015

527,674- 825,341－- 367,450- 367,450- 50,025- 1,199,992- 1,149,967－- 34,778- 34,778

2,556

20,077

17,520- 489,212- 1,427,009- 937,797- 79,660- 167,704- 88,043

8,200,000

9,550,000

1,350,000

Funds used to repay long-term bankloans

- 11,453,496- 10,967,546

485,950

Funds used for repayment of installment
obligations- 2,271,544- 2,047,202

224,342

2,182,264－- 2,182,264

Funds provided from disposal oftreasury stock

335,552－- 335,552

Funds used for the purchase of treasurystock- 11,781- 13,481- 1,699

Payment of dividends to parent
company- 537,300- 591,414- 54,114- 3,635,966- 4,237,348- 601,382

IV Increase (decrease) in cash andequivalents

4,289,448- 1,184,421- 5,473,869

V Balance of cash and equivalents at
beginning of period

14,108,863

18,398,312

4,289,448

18,398,312

17,213,890- 1,184,421

Funds used for the purchase of
consolidated subsidiary stock
Funds used for the purchase ofnon-consolidated subsidiary stock
Funds used for establishment ofaffiliated company
Other
Cash flow from investing activities
III Cash flow from financing activities
Decrease in short-term bank loans
Funds provided by long-term bank loans

Funds provided by issuance of stock

Cash flow from financing activities

VI Balance of cash and equivalents at endof the period*１

Summary of Company Financial Statements, FY Ended October 31, 2007

P.28

Significant Accounting Policies for the Consolidated Financial Statements
Prior Consolidated Accounting Fiscal Year Current Consolidated Accounting Fiscal Year
(From November 1, 2005
(From November 1, 2006
to October 31, 2006)
to October 31, 2007)
1. Companies included in the(1) Number of consolidated companies: 5(1) Number of consolidated companies: 5

consolidation
Assist Co., Ltd.

Assist Co., Ltd.

SRG Kanamoto Co., Ltd.

SRG Kanamoto Co., Ltd.

Kanatech Co., Ltd.

Kanatech Co., Ltd.

Daiichi Kikai Co., Ltd.

Daiichi Kikai Co., Ltd.
Kanki Corporation

Kanki Corporation(2) Number of non-consolidated(2) Number of non-consolidated

companies: 3companies: 6

Non-consolidated subsidiary company

Non-consolidated subsidiary company

name:

name:

Comsupply Co., Ltd.

Comsupply Co., Ltd.

Kanki Maintenance Co., Ltd.

Flowtechno Corporation

Flowtechno Corporation

Kyushu Kensan Co., Ltd.
Kensan Fukuoka Co., Ltd.
Kensan Techno Co., Ltd.
Center Corporation Ltd.

(Reason for exclusion from scope of(Reason for exclusion from scope of

consolidation)

consolidation)

The size of the non-consolidated

The size of the non-consolidated

subsidiaries is small and their total

subsidiaries is small and their total

assets, sales and fiscal year profit orassets, sales and fiscal year profit orloss (amount corresponding to equity)

loss (amount corresponding to equity)

and

and

retainedearnings(amount

retainedearnings(amount

corresponding to equity) are small incorresponding to equity) are small insize and do not have a material effectsize and do not have a material effect

on

on

the

consolidated

financialstatements.

theconsolidated

financialstatements.

Kanki Maintenance Co., Ltd. was
liquidated on October 3, 2006.
2. Matters pertaining toThree non-consolidated subsidiaries

application of equity

and two affiliated companies (Active

and two affiliated companies (Active

method accounting

Technology Corporation and Active

Technology Corporation and Shanghai

Power Corporation) have been omitted

Jinheyuan Equipment Rental Co., Ltd.)

from items to which equity method

have been omitted from items toaccounting is applied because their

which equity method accounting isrespective effect on consolidated net

applied because their respective effectincome or loss (amount corresponding

on consolidated net income or loss

to minority interest) and consolidated(amount corresponding to minority

earned(amount

interest)andcorresponding to minority interest) is

surplus(amount

immaterial and none of the companies

minority interest) is immaterial andis important to the Company's overall

none of the companies is important tooperations.

the Company's overall operations.

surplus

ActivePower

CorporationSix

non-consolidated

subsidiaries

consolidated

earnedcorresponding

to

was

liquidated on January 18, 2006, andKanki

Maintenance

Co.,

Ltd.

was

liquidated on October 3, 2006.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.29

3. Matters pertaining to the

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

consolidated subsidiaries

Kanki Corporation is August 31.

Same as at left

When preparing the consolidated
financialusedstatements

the

the

Company

subsidiaries'

financialstatements as of August 31, adjusted
forsignificant

transactions

thatoccurred between the subsidiaries'
fiscal year-end and the consolidation
date that have a material effect on the
consolidated financial results.
4. Accounting principles andstandards used for normal
accounting treatment(1) Appraisal standards andappraisal methods forprincipal assets

a. Negotiable securities

a. Negotiable securities

Other negotiable securities

Other negotiable securities

Securities with a market price
The

CompanyhasadoptedSecurities with a market pricetheSame as at left

market value method (the full amountof the valuation difference is charged
to net assets using the direct transfer
to capital method, with the disposal
cost

determined

by

the

movingaverage method) based on the market
price on the consolidated accounting
fiscal year closing date or similar
prices.
Securities without market prices

Securities without market prices

The Company has adopted the cost

Same as at left

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

depreciation

expenseaccordingthetob. Construction equipment

deductionofSame as at left

calculated

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

Lower of cost or market based on

Same as at left

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

The Latest Purchase Cost method

Same as at left

Summary of Company Financial Statements, FY Ended October 31, 2007P.30

(2) Depreciation methods forprincipal depreciable
assetsa. Tangible fixed assets
The

Companya. Tangible fixed assets

has

adoptedtheSame as at left

declining-balance method. Buildings
on

land

that

fixed-term

is

land

leased
lease

under

a

agreement,

however, are depreciated using thestraight-line

methodusing

theremaining period of the fixed-termlease as the depreciable life and zero
residualvalue.

consolidated
CompanyForcertainsubsidiaries,
has

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

but

excluding

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

b. Intangible fixed assets
The

CompanyhasadoptedthewithintheSame as at left

straight-line method.
Softwareforuse

Company is depreciated using thestraight-line method based on theassumed useful life for internal use (5years)(3) Accounting standards fordeferred assets

a. New share issuance costs──────

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

a. Reserve for doubtful accounts

a. Reserve for doubtful accounts

To provide for losses on doubtfulSame as at left

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

experience for normal accounts, plusanamountunrecoverableforamounts

projected
based

on

assessments of individual accounts.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.31

b. Accrued bonuses to employeesb. Accrued bonuses to employees

To fully provide for expenditures ofSame as at left

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

auditors

To fully provide for expenditures of──────

bonuses the Company will pay to
directors and auditors, an amount isappropriated to the reserve at the endof the consolidated accounting fiscal
year

to

providefortheliability

recognized during the period.
(Change in Accounting Policy)
In the past, the Company accounted
for directors and auditors’ bonuses asa decrease in unappropriated retained
earnings, based on the Proposal for
Appropriation of Retained Earnings
approved at the General Meeting of
the Shareholders. Beginning from thisconsolidated accounting fiscal year,
however, the Company will account for
directors and auditors’ bonuses as an
expense of the accounting period in
which

such

bonusesareaccrued,based on the Accounting Standard for
Directors’

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

and

adjustments

were¥5,500,000 less than they otherwise
would have been had the accounting
standards used in past periods been
applied.
The affect of this change on the
Company’s information by segment is
not material.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.32

d. Accrued employees retirement benefit
The
employees’

Company

providesaccruedd. Accrued employees retirement benefit

forSame as at left

retirement

benefits based upon the projectedamounts of the liability for accrued
employees retirement benefits and thevalue of pension assets at the end of
the consolidated fiscal year. At the endof each consolidated accounting fiscal
year, the Company appropriates anamount to the reserve to provide forthe liability recognized during theperiod. The difference based on an
actuarial calculation is charged toincome beginning in the consolidated
accounting fiscal year following theyear

in which incurred, with theamounts

allocated

proportionately

using the straight-line method, basedon a specified number of years (10years) that is less than the averageremaining period of employment for
employees at the time the difference
arises.
(Supplemental information)
During the consolidated accounting
fiscal year under review, the Company
revised its retirement benefits systemand transferred its defined benefit
corporate pension plan (fund-type) toa defined benefit corporate pension
plan(contract-type)simultaneously

andintroduced

a

cash

balance system. In conjunction withthis change, the Company has appliedthe“Accounting

for

the

Transfer

Between Retirement Benefit Plans”(Financial

AccountingStandards

Implementation Guidance No. 1).
In addition, during the consolidated
accounting fiscal year under review,certainconsolidated

revisedtheirsystems

andtermination

subsidiaries

retirement

benefits

transferredallowance

plans

their
to

a

defined contribution corporate pension
plan and termination allowance plan,and have applied the “Accounting fortheTransfer

BetweenRetirement

Benefit Plans” (Financial AccountingStandards Implementation GuidanceNo. 1).
The Company accounted for the¥845,319,000

affect

from

these

transfers in extraordinary profits as again on reversal of accrued employees
retirement benefits.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.33

Prior Consolidated Accounting Fiscal Year Current Consolidated Accounting Fiscal Year
(From November 1, 2006
(From November 1, 2005
to October 31, 2007)
to October 31, 2006)
e. Retirement allowances to directors andauditorse. Retirement allowances to directors andauditors

The

Company

providesfor

Same as at left

retirement allowances to directors andauditors based upon pertinent rules
andappropriated

to

the

account

proportionately at the end of theconsolidated accounting fiscal year
based upon length of service.
(5) Lease transactions

Forfinance

exceptfor

leaseleasestransactions
that

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

a. Hedge transactions

The Company accounts for hedge

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

standards

forfinancial

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

The Company uses currency swaps

Same as at left

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

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

c. Hedging policies

The Company’s use of derivative

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

The Company does not evaluate theSame as at left

effectiveness of its hedge transactions
becauseitcurrency

swap

can

assumethattransactions

its
and

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

until

it

is

terminated.

In

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.34

(7) Accounting standards for
consumption tax

Consumption tax is taken out of all
StatementofIncomeitems

Same as at left

andBalance Sheet items, except mainly
for receivables and payables.
5. Valuation of consolidated

The

Companyhasadoptedthesubsidiary assets andmarket value appraisal method for theliabilities

evaluation of assets and liabilities ofSame as at left

consolidated subsidiaries.
6. Amortization of goodwill

The remainder is amortized over fiveand negative goodwill

years using level amortization, except

Same as at left

for extremely small amounts that are
written off completely in the year inwhich they occur.
7. Items included in cash andFunds included in cash (cash andequivalents on the

cash equivalents) on the Consolidated

Consolidated Statement ofStatement of Cash Flows include cash

Cash Flows

on

hand,

deposits

that

can

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.35

Changes in Important Matters Used as the Basis for Preparation of the Consolidated
Financial Statements
Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)(Accounting Standard for Impairment of Fixed Assets)

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)──────

Beginning from this consolidated accounting fiscal
year, the Company has adopted the Accounting Standard
for Impairment of Fixed Assets (“Opinion Concerning
Establishment of Accounting Standard for Impairment of
Fixed Assets” (Business Accounting Council, August 9,2002) and “Implementation Guidance for the AccountingStandard for Impairment of Fixed Assets” (AccountingStandards Board of Japan, October 31, 2003, Financial
Accounting Standard Implementation Guidance No. 6).
As a result, income before taxes and adjustments
decreased by ¥594,568,000.
The affect of this change on the Company's information
by segment is described in the relevant section.
The total amount of the impairment loss is deducted
directly from the balance for each asset based on therevisedstandards

forpreparationof

consolidated

financial statements and other rules.
(Accounting Standard for Presentation of Net Assets in the──────

Balance Sheet)
Beginning from this consolidated accounting fiscal
year,

the

Companyhasadoptedthe“AccountingStandard for Presentation of Net Assets in the Balance
Sheet” (Accounting Standards Board of Japan Statement
No. 5 dated December 9, 2005) and the “Guidance on
Accounting Standard for Presentation of Net Assets in the
Balance Sheet” (Accounting Standards Board of Japan
Guidance No. 8 dated December 9, 2005).
The amount corresponding to the total of shareholders’equity based on the past accounting standard is¥37,959,606,000.
The net asset portion of the consolidated balance sheet
for the consolidated accounting fiscal year under review
was prepared based on the revised consolidated financial
statements rules.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.36

Change in Presentation Method
Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)(Consolidated Balance Sheets)(Consolidated Balance Sheets)

1. Beginning from the current consolidated fiscal year, the１．

──────

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

corresponding
adjustment

standards

to“goodwill”

andaccount” based on thepreviously

appliedwere¥64,000,000 and ¥331,109,000, respectively.
(Consolidated Statements of Income)(Consolidated Statements of Income)１．

1. Until the previous consolidated accounting fiscal year,──────

the Company reported cash bonus received as aseparate category in “Other” under non-operating
revenues. For the consolidated fiscal accounting year
under review, the Company has reported this item
separately because the amount exceeded 10% of total
non-operating revenues.
The amount of “cash bonus received” at the end of
the previous consolidated accounting fiscal year was¥30,584,000.
２．

2. Until the previous consolidated accounting fiscal year,──────

the Company reported loss on sale of notes receivable
in “Interest expense” under non-operating expenses.
For the consolidated fiscal accounting year underreview, the Company has reported this item separately
becausetheamountexceeded

10%

of

total

non-operating expenses.
The amount of the “loss on sale of notes receivable”
at the end of the previous consolidated accounting
fiscal year was ¥40,716,000.
(Consolidated Statements of Cash Flows)(Consolidated Statements of Cash Flows)

1. Beginning from this consolidated accounting fiscal year,theamountforgoodwill

amortization１．

──────

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.37

Notes to the Financial Statements(Notes to the Consolidated Balance Sheets)
Prior Consolidated Accounting Fiscal Year(As of October 31, 2006)

Current Consolidated Accounting Fiscal Year(As of October 31, 2007)

1. Matters related to non-consolidated subsidiaries and

1. Matters related to non-consolidated subsidiaries andaffiliated companies are as follows.
Investment securities (stocks)

affiliated companies are as follows.
55,025,000

2. Guarantees

Investment securities (stocks)

1,307,796,000

2. Guarantees

Joint and several guarantees ofbank loans to employees (Bank ofTokyo-Mitsubishi UFJ, others)

27,162,000

Joint and several guarantees ofbank loans to employees (Bankof Tokyo-Mitsubishi UFJ, others)

23,144,000

Guarantee for borrowing liabilities
of Flowtechno Corporation, a
non-consolidated subsidiary

100,000,000

Guarantee of borrowing liabilities
of Flowtechno Corporation, a
non-consolidated subsidiary

100,000,000

Guarantee of borrowing liabilitiesof Shanghai Jinheyuan
Equipment Rental Co., Ltd., anaffiliated company

168,960,000

Guarantee of finance leaseliabilities of Shanghai Jinheyuan
Equipment Rental Co., Ltd., anaffiliated company

70,973,000

Total

127,162,000

Total
3. Discount on notes receivable, trade347,861,000

4. Liquidation of receivables based on receivables

307,034,000

4. Liquidation of receivables based on receivablestransfer facility

transfer facility
Notes receivable, trade

3. Discount on notes receivable, trade

363,078,000

5,734,296,000

Notes receivable, trade

4,971,036,000

Liquidated claims bearing a right of recourse to the

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

Company and included in the balance of notes

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

receivable, trade transferred total ¥1,017,362,000.

5. Intangible fixed assets and goodwill includes negative

5. Intangible fixed assets and goodwill includes negative

goodwill of ¥1,188,000 and goodwill of ¥64,000,000.

goodwill of ¥594,000 and goodwill of ¥60,800,000.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.38

(Notes to the Consolidated Statements of Income)Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)

1. Major expense categories and amounts included in

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

selling, general and administrative expenses

Employee salaries and wages

Employee salaries and wages

5,529,726,000

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

746,963,000
1,587,085,000
45,529,000
510,328,000
5,500,000
304,966,000
18,741,000

136,546,000

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

833,686,000

Rents

1,551,266,000

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

166,598,000
552,610,000－
283,831,000
18,460,000

63,682,000

2. Gain on sale or retirement of fixed assets
49,905,000
110,000
3,000
50,018,000

3. Loss on sale or retirement of fixed assets

Land

906,198,000

Buildings and structures

14,413,000

Other

444,000

Total

921,056,000

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

5,854,852,000

Depreciation expense(Loss on sale of fixed assets)
108,000

Land

26,859,000Land

2,428,000

Other

420,000

Other

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

Rental equipment

24,055,000

Buildings and structures

Buildings and structures
Machinery, equipment anddelivery equipment
Other

21,261,000

Machinery,

2,464,000

delivery equipment

Total

52,366,000

1,763,000

Other
Total

equipment

17,489,000
8,902,000
and

9,195,000
5,364,000
68,231,000

Summary of Company Financial Statements, FY Ended October 31, 2007

P.39

Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)
4. Impairment loss

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)
4. Impairment loss

During this consolidated accounting fiscal year theDuring this consolidated accounting fiscal year the

Kanamoto Group incurred an impairment loss on the

Kanamoto Group incurred an impairment loss on thefollowing asset groups.

following asset groups.

Location

Use

Asset

Location

Kamakura City,

Tomakomai City,

Kanagawa Prefecture

Hokkaido

Use

Asset

Dormant assets

Land

Kanazawa City,
Ishikawa Prefecture Dormant assets

Land

Muroran City,
Hokkaido
Five other locations

Asset groupings used by the Kanamoto Group to

Asset groupings used by the Kanamoto Group to

apply asset impairment accounting are based on theapply asset impairment accounting are based on theblock classified as the smallest segment for whichblock classified as the smallest segment for which

profitability can be determined regularly by business.

profitability can be determined regularly by business.

Specifically, dormant assets are grouped as units thatSpecifically, dormant assets are grouped as units thatgenerate independent cash flow.

generate independent cash flow.

For certain dormant assets for which the asset value

For certain dormant assets for which the asset value

was less than book value, the Company reduced bookwas less than book value, the Company reduced bookvalue to the recoverable value, and accounted for thevalue to the recoverable value, and accounted for the

reduction as an impairment loss (¥594,568,000) under

reduction as an impairment loss (¥890,000) under

extraordinary losses. This ¥594,568,000 was for land.

extraordinary losses. This ¥890,000 was for land.

The recoverable value for this asset group is

The recoverable value for this asset group ismeasured according to net sales price, and the land ismeasured according to net sales price, and the land isevaluated using the inheritance tax assessment value

evaluated using the inheritance tax assessment value

based on the land tax assessment value or otherbased on the land tax assessment value or otheramount as a base.

amount as a base.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.40

(Notes to the Consolidated Statement of Changes in Net Assets)
Prior consolidated accounting fiscal year (From November 1, 2005 to October 31, 2006)
1. Class of shares issued and number of shares, treasury stock and number of shares(Thousands of shares)
Increase in number Decrease in number Number of shares at
Number of shares atof shares during the of shares during thethe end of thethe end of priorcurrent
current
current
consolidated
consolidated
consolidated
consolidated
accounting fiscal
accounting fiscal
accounting fiscal
accounting fiscal
year
year
year
year
Number of shares issued
Common stock (Note 1)

30,2532,619－

32,87230,2532,619－

32,872

Common stock (Note 2, 3)

400

12

400

13

Total

400

12

400

13

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

Class of stock

Total dividend(‘000 yen)

Dividend pershare (yen)Common stock

268,677

Common stock

268,622

Date of record

Payment date

9.00

October 31, 2005

January 27, 2006

9.00

April 30, 2006

July 18, 2006

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

Class of stock

Total dividend Source of funds Dividend per(‘000 yen)for dividend
share (yen)Date of record

Payment date

January 26, 2007
Regular General
Meeting of theCommon stock

295,732

Earnedsurplus

9.00

October 31, 2006 January 29, 2007

Shareholders

Summary of Company Financial Statements, FY Ended October 31, 2007

P.41

Current consolidated accounting fiscal year (From November 1, 2006 to October 31, 2007)
1. Class of shares issued and number of shares, treasury stock and number of shares(Thousands of shares)
Increase in number Decrease in number Number of shares at
Number of shares atof shares during the of shares during thethe end of thethe end of priorcurrent
current
current
consolidated
consolidated
consolidated
consolidated
accounting fiscal
accounting fiscal
accounting fiscal
accounting fiscal
year
year
year
year
Number of shares issued

32,872－－32,87232,872－－32,872

Common stock (Note 2, 3)

13

12

－

25

Total

13

12

－

25

Common stock (Note 1)
Total
Treasury stock(Notes) The number of treasury stock shares of common stock increased by 12,000 shares throughpurchases of shares comprising less than one investment unit.
2. Matters pertaining to subscription rights and treasury stock subscription rights
The Company had no material items to report.
3. Dividends(1) Dividends paid
Resolution

Class of stock

Total dividend(‘000 yen)

Dividend pershare (yen)Common stock

295,732

Common stock

295,682

Date of record

Payment date

9.0

October 31, 2006

January 26, 2007

9.0

April 30, 2007

July 17, 2007

January 26, 2007
Regular General
Meeting of the
Shareholders
June 8, 2006
Board of Directors(2) Dividends for which the date of record falls in the current consolidated accounting fiscal year andthe dividend payment date is in the following fiscal year
Resolution

Class of stock

Total dividend Source of funds Dividend per(‘000 yen)for dividend
share (yen)Date of record

Payment date

January 29, 2008
Regular General
Meeting of theCommon stock

361,311

Earnedsurplus

11.0

October 31, 2007 January 30, 2008

Shareholders

Summary of Company Financial Statements, FY Ended October 31, 2007

P.42

(Notes to the Consolidated Statements of Cash Flows)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)

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 deposits account

18,398,312,000

Term deposits with a maturity－

longer than 3 months
Cash and cash equivalents

Cash and deposits account

11,913,890,000

Negotiable securities

5,300,000,000

Cash and cash equivalents

17,213,890,000

18,398,312,000

2. Details of major non-cash transactions

2. Details of major non-cash transactions

The amount of assets and 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¥2,004,757,000 respectively.

¥2,119,697,000 respectively.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.43

(Notes for Leasing Transactions)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)
1. Finance lease transactions except for leases that

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)
1. Finance lease transactions except for leases thattransfer ownership of the property to the lessee.

transfer ownership of the property to the lessee.

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

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

outstanding balances at the end of the consolidated

fiscal year accounting period

fiscal year accounting period

Acquisition
Outstanding
Acquisition
pricebalanceprice (¥’000)(¥’000)(¥’000)Acquisition
price(¥’000)Acquisition
price(¥’000)

Outstandingbalance(¥’000)Rental assets

39,777,357

17,228,654

22,548,702

Rental assets

45,501,035

19,202,671

26,298,363

Other assets

313,056

194,312

118,744

Other assets

255,555

192,203

63,35140,090,413

17,422,966

22,667,447

45,756,590

19,394,875

26,361,715

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

6,355,705,000

Within one year

7,485,431,000

15,869,153,000

After one year

18,550,608,000

After one year
Total

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

Total

26,036,039,000(3) Amount of lease payments, depreciation expense
and interest expense

Lease payments

6,471,623,000

Lease payments

7,880,775,000

Depreciation expense

5,912,597,000

Depreciation expense

6,822,747,000Interest expense

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

Interest expense

744,755,000(4) Accounting method for amount equivalent todepreciation expense

Straight-line depreciation using the lease term as

Same as at left

the depreciable life and zero residual value.
(5) Accounting method for amount equivalent tointerest expense(5) Accounting method for amount equivalent tointerest 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

2,150,840,000

Within one year

After one year

5,381,216,000

After one year

Total

7,532,057,000

Total

1,857,756,000
4,153,706,000
6,011,462,000

Summary of Company Financial Statements, FY Ended October 31, 2007

P.44

(Notes Related to Negotiable Securities)
Negotiable securities
1. Other negotiable securities with market prices

Type

Negotiablesecurities
whosebalance ontheconsolidatedbalancesheet
exceeds theacquisition
price
Negotiablesecurities
whosebalance ontheconsolidatedbalancesheet is lessthan theacquisition
price(1) Stocks(Unit: Thousands of yen)

Prior consolidated accounting fiscal year

Current consolidated fiscal year

(As of October 31, 2006)(As of October 31, 2007)

Acquisition
price

Amountreported ontheconsolidatedbalance sheet

Valuation
profit or loss

Acquisition
price

Amountreported ontheconsolidatedbalance sheet

Valuation
profit or loss

1,550,751

5,640,940

4,090,189

1,527,075

4,908,799

3,381,723

－

－

－

－

－

－

15,375

15,420

45

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

1,566,126

5,656,360

4,090,234

1,527,075

4,908,799

3,381,723(2) Bonds
a. Government
bonds
b. Corporatebondc. Other(3) Othernegotiablesecurities
Subtotal(1) Stocks

81,23074,019- 7,211

39,23635,158- 4,078(2) Bonds
a. Government
bonds
b. Corporate
bond

－

－

－

－

－

－

－

－

－

－

－

－

c. Other

－

－

－

－

－

－

(3) Othernegotiablesecurities

145,500

123,340- 22,160

103,000

87,203- 15,796

Subtotal

226,730

197,359- 29,371

142,236

122,361- 19,874

1,792,856

5,853,719

4,060,862

1,669,311

5,031,160

3,361,849

Total

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

Current Consolidated Accounting Fiscal Year

(From November 1, 2005

(From November 1, 2006

to October 31, 2006)

to October 31, 2007)

Selling amount

Total gain on sale

Total loss on sale

24,883－

1,324,642

Selling amount
523,733

Total gain on sale

Total loss on sale

287,528－

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

Prior consolidated accounting fiscal year

Current consolidated fiscal year

(As of October 31, 2006)(As of October 31, 2007)

Amount shown on the consolidatedbalance sheet

Amount shown on the consolidatedbalance sheet

Other negotiable securities
Unlisted stocks
Negotiable certificates ofdeposit
Other

229,400

211,400－

5,300,000

85,95359,822

Summary of Company Financial Statements, FY Ended October 31, 2007

P.45

4. Planned future redemption amounts of other securities that have a maturity date
(Unit: Thousands of yen)
Prior consolidated accounting fiscal year

Current consolidated fiscal year

(As of October 31, 2006)(As of October 31, 2007)

Type
Withinone year(1) Bonds
a. Government
bonds

After one
After five
year andAfter tenyears within
within fiveyears
ten years
years

Withinone year

After one
After five
year andAfter tenyears within
within fiveyears
ten years
years

－

－

－

－

－

－

－

－

b. Corporate bonds－－

15,420

－

－

－

－

－

c. Other

－

－

－

－

－

－

－

－

(2) Other negotiablesecurities

－

－

－

82,620－－－87,203

Total

－

－

15,42082,620－－－87,203

Summary of Company Financial Statements, FY Ended October 31, 2007

P.46

(Notes related to Derivative Transactions)
1. Notes related to transaction conditions
Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)

a. Contents and purpose of derivative transactions

a. Contents and purpose of derivative transactions

The

Kanamoto

agreements

and

Group

uses

currency

forwardswap

exchangetransactions

Same as at leftfor

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

swaps,

forwardexchangeagreements and interest swaps
Hedged transactions
Foreign currency-denominated straight bonds,
import payment liabilities and loans
Hedging policy
The Company’s use of derivative transactions islimited to hedging risk within the scope of theCompany’s assets and liabilities subject to market
fluctuation risk.
Method for evaluating the effectiveness of hedges
The Company does not evaluate the effectiveness of
its hedge transactions because it can assume its
currency swap transactions and forward transactions
will completely offset market fluctuations or changes
in cash flow from the time the hedge begins until it isterminated. In addition, the Company’s interest swap
transactions fulfill the requirements for special ruleaccounting, and the Company has elected to use thisin place of an evaluation of effectiveness.
b. Transaction matching policyb. Transaction matching policy

The Kanamoto Group has adopted a policy of using

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.47

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)

Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)
c. Transaction-related risksc. Transaction-related risksSame as at left

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

d. Transaction risk management system
Same as at left

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

transaction market prices

Forward agreements and currency swap transactions

Same as at left

accounted for on the Company’s financial statements
throughconversion

currency-denominatedliabilities

by

being

of

the

money

relevant

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

2. Notes related to transaction market prices etc.
Prior consolidated accounting fiscal year (As of October 31, 2006)
The Company had no material items to report.
Current consolidated accounting fiscal year (As of October 31, 2007)
The Company had no material items to report.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.48

（Notes related to accrued employees retirement benefit）
1. Summary of the employees retirement benefit system adopted by the Company
The Company and certain consolidated subsidiaries have established a defined-benefit pension
system (cash balance system) and defined contribution pension system. Other consolidated
subsidiaries have adopted termination allowance plans. In addition, when an employee retires orleaves the Company, in some cases the Company pays an additional retirement amount that is notcovered by the reserve for accrued employees retirement benefit when using actuarial accounting
based on retirement benefit accounting.
In addition, during the consolidated accounting fiscal year under review two consolidated
subsidiaries transferred their termination allowance plans to a defined contribution corporate
pension plan. There was no monetary affect (projected benefit obligation) from this change.
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, 2006)(1) Liability for accrued employees retirement benefit(2) Pension assets(3) Liability for unreserved accrued employees
retirement benefit (1) ＋(2)(4) Unrecognized transitional obligation(5) Unrecognized actuarial differences(6) Unrecognized past years’ service obligation (change
in liability)(7) Net liability shown on the consolidated balance
sheets (3) + (4) + (5) +(6)(8) Prepaid pension expense(9) Accrued employees retirement benefits (7) -(8)(Note)

Current consolidated
accounting fiscal year
(As of October 31, 2007)- 4,702,213- 4,205,807

3,136,068

3,277,759- 1,566,144- 928,048－－- 115,575- 7,932－－- 1,681,719- 935,980－－- 1,681,719- 935,980

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.49

3. Details of accrued employees retirement benefit expense
Prior Consolidated Accounting
Fiscal Year
(From November 1, 2005
to October 31, 2006)

Current Consolidated
Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)(1) Service costs (Note)

320,452

306,260(2) Interest costs

84,39083,475(3) Expected return on plan investments（reduction）

114,322

122,562－- 845,319

14,446

16,658(6) Amortization of transitional obligation－－(7) Employees retirement benefit expense

304,966- 561,487(4) Amortization of prior service cost(5) Write-off of expense for actuarial based difference(Notes) 1. The employees retirement benefit expenses at consolidated subsidiary companies that have adopted the simple
method are included in service costs.
2.When it transferred its defined benefit corporate pension plan (fund-type) to a defined benefit corporate pension
plan (contract-type) and introduced a cash balance system, the Company recognized a liability for past service
obligation (amount of reduction in liability).
The Company accounted for the ¥845,319,000 expensed portion of past service obligation in extraordinary
profits.

4. Matters related to the basis for accounting for the accrued employees retirement benefit andother items
Prior consolidated accounting Current consolidated accounting
fiscal year
fiscal year
(As of October 31, 2006)(As of October 31, 2007)(1) Discount rate

2.00

2.00

(2) Expected rate of return on plan investments

4.00

4.00

Service period fixedService period fixed

benefit basis

benefit basis－－

10 years beginning from the

10 years beginning from thenext consolidated accounting

next consolidated accounting

fiscal year

fiscal year－－

(3) Method of allocating projected benefits to periodsof service(4) Amortization period of past years’ service liability(5) Amortization period for actuarial differences(6) Number of years for amortization of one-timevaluation difference for change in accounting
standards

Summary of Company Financial Statements, FY Ended October 31, 2007

P.50

(Notes Related to Tax Effect Accounting)Prior consolidated accounting fiscal year

Current consolidated accounting fiscal year

(As of October 31, 2006)(As of October 31, 2007)

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 in allowance for doubtful
accounts
Disallowance of deferred business
taxes
Excess accrued employees
retirement benefit
Amount in excess of limit for
retirement benefit
Amount in excess of limit for
accrued bonuses to employees
Disallowance of excess
depreciation
Impairment loss

206,998,000
108,752,000
670,546,000
52,202,000
208,963,000
280,174,000
240,205,000

Amount of loss carried forward

1,347,600,000

Other

417,663,000

Deferred tax assets subtotal
Valuation reserve

3,533,108,000- 1,722,052,000

Total deferred tax assets
Deferred tax liability
Valuation difference on otherinvestment securities
Net deferred tax assets

1,811,055,000

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

Deferred tax assets
Amount in excess of limit forinclusion in allowance for doubtful
accounts
Disallowance of deferred business
taxes
Excess accrued employees
retirement benefit
Amount in excess of limit for
retirement benefit
Amount in excess of limit for
accrued bonuses to employees
Disallowance of excess
depreciation
Impairment loss

150,159,000
110,081,000
368,470,000
53,584,000
223,382,000
267,690,000
240,565,000

Amount of loss carried forward

1,409,813,000

Others400,650,000

Deferred tax assets subtotal
Valuation reserve

3,224,399,000- 1,823,543,000

Total deferred tax assets
Deferred tax liability
Valuation difference on otherinvestment securities
Net deferred tax assets

1,400,855,000

1,358,187,000
42,668,000

Disclosure item:

Disclosure item:
Current assets - Deferred tax assets

391,803,000

Current assets - Deferred tax assets

360,573,000

Fixed assets - Deferred tax assets－

Fixed assets - Deferred tax assets－

Long-term liabilities- 221,336,000

Long-term liabilities- 317,904,000

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

40.4％

（Adjustment）
Local tax equalization
Items not included permanently in losses
such as expense accountAffect from application of asset
impairment accounting for fixed assets
Consolidated subsidiary losses
Other
Burden ratio for corporate and othertaxes after application of tax effectaccounting

Statutory corporate tax rate

40.4％

（Adjustment）
2.7％
1.2％
4.0％
0.9％
△0.3％
48.9％

Local tax equalization
Items not included permanently in losses
such as expense accountAffect from application of asset
impairment accounting for fixed assets
Goodwill amortization amount excluded
from expenses
Consolidated subsidiary losses

1.6％

Other
Burden ratio for corporate and othertaxes after application of tax effectaccounting

0.8％

0.6％
0.0％
2.3％
1.1％
46.8％

Summary of Company Financial Statements, FY Ended October 31, 2007

P.51

(Business Segment Information)
1. Segment Information by Type of BusinessPrior consolidated accounting fiscal year (From November 1, 2005 to October 31, 2006)(Unit: Thousands of yen)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

61,102,406

6,485,485

435,890

68,023,782－

68,023,782

－

－

－

－

－

－

Eliminations
or entire
Consolidated
company

Total

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

61,102,406

6,485,485

435,890

68,023,782－

68,023,782

Operating expenses

57,289,724

6,441,515

404,783

64,136,023- 180,377

63,955,645

Operating income

Total

3,812,682

43,97031,106

3,887,758

180,377

4,068,136

II. Assets, depreciation expenseand capital disbursements
Assets53,583,485

2,064,832

764,240

56,412,558

30,403,033

86,815,592

Depreciation expense

4,758,291

1,942

10,3024,770,536

22,0884,792,624

Capital disbursements

251,464－－

251,464

343,103594,568

Operating expenses

4,664,401

939－

4,665,341

734,632

5,399,973(Notes) 1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, the natureof the business and the business markets.
2. Principal products, by businessBusiness

Principal products

Construction equipment
rentals

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

Steel sales

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

Information products andother businesses

Computers and peripheral devices, telecommunications-related
equipment

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.52

Consolidated fiscal year under review (From November 1, 2006 to October 31, 2007)(Unit: Thousands of yen)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

63,072,214

5,120,674

434,024

68,626,913－

68,626,913

－

－

－

－

－

－

Eliminations
or entire
Consolidated
company

Total

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

63,072,214

5,120,674

434,024

68,626,913－

68,626,913

Operating expenses

59,017,423

5,130,682

402,403

64,550,509- 160,130

64,390,378

Operating income

Total

4,054,791- 10,008

31,621

4,076,403

160,130

4,236,534

II. Assets, depreciation expenseand capital disbursements
Assets52,362,530

1,403,383

750,501

54,516,415

30,639,382

85,155,797

Depreciation expense

4,615,601

3,154

10,096

4,628,852

19,825

4,648,677

Capital disbursements

890

－

－

890

－

890

4,689,313

22,059－4,711,373

1,481,060

6,192,434

Operating expenses(Notes) 1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, the natureof the business and the business markets.
2. Principal products, by businessBusiness

Principal products

Construction equipment
rentals

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

Steel sales

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

Information products andother businesses

Computers and peripheral devices, telecommunications-related
equipment

3. The total amount for assets that were eliminated or included in the categories for all companies was¥30,639,382,000 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 theprior consolidated fiscal year and the current consolidated fiscal year.
3. Foreign sales
Prior consolidated accounting fiscal year (From November 1, 2005 to October 31, 2006)
There are no pertinent items to report because the Company did not have any foreign sales.
Current consolidated accounting fiscal year (From November 1, 2006 to October 31, 2007)
The Company has omitted a description of foreign sales because foreign sales are less than 10% ofconsolidated revenues.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.53

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

Name

Address(Thousandyen)Line ofvoting rights

business or owned (Indirect)
position(%)

Balance at end

Relationship

Percentage of

Capital or

Concurrently
serving as
director etc.

Business

TransactionofDetails ofamountconsolidated

transaction(ThousandAccountyen)relationshipfiscal year
(Thousandyen)

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

Kiyohiro Tsuji

－

－

－

－

－

agreement with

2,400

－

－

5,068

－

－

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

Akio Hashimoto

－

－

－

－

－

compensation,

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

Selling,
Real estate
Kanamoto

own theGround52,006

Capital Co., Ltd.

majority of

directly own

Chuo-ku,leasing85.25% andagreement

indirectly own

2

Sapporo, Japangeneral andLease of land
1,200

lease

for branchvoting rights in－
administrati
ve expenses

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.54

Current consolidated accounting fiscal year (From November 1, 2006 to October 31, 2007)(1) Directors and individual large shareholders, etc.
Balance at end

Relationshipfunding
Attribute

Name

Address(Thousandyen)

TransactionofDetails ofamountconsolidated

transaction(Thousand

Percentage of

Capital orLine ofvoting rights

business orowned (Indirect)

position(%)

Concurrently
serving as
director etc.

Business

Accountyen)relationshipfiscal year
(Thousandyen)

Kanamoto’s

Company for

President andwhich directors

close relatives

and relatives
own theKanamoto

Chuo-ku,majority of

Capital Co., Ltd.

Sapporo, Japan

52,006voting rights inReal estate

directly own

leasing85.25% andagreement

indirectly own

Selling,
2

GroundLease of land

lease

for branch

1,200

－
administrati
ve expenses

2.79% of total

equitygeneral andoutstanding

calculation

shares
Notes andKanamoto’s

Company for

Purchase,

Purchase, sale,sale, repair,

repair andand importimport andand export

export of steel

of products

materials

which directors

Purchase,

directors andand relatives

sale, repair

close relatives

and importdirectly own

and export

100.00% of

voting rights inof steeltotal

Groundequitymaterials

outstanding

lease

own theKanasteel Co.,

Muroran,majority ofLtd.

Hokkaido

30,000accounts
receivable,

2,643

trade
Notes and
60,594accounts
payable,31,549trade

1

sharescalculation

415,042

Purchaseand sale of
byproducts

Selling,

Lease of landfor branch

2,686

officegeneral and－administrati
ve expenses
Non-operati

Sale of steel
scrap

2,126

ng
－
revenues,
other

Kanamoto’s

Company forwhich directors

Sale, repair,and relatives
own theKanax Co., Ltd.

majority of

Muroran,
Hokkaido

and rental of
10,000steel sheet
floor plates

voting rights in

etc.

equitydirectors anddirectly own
100.00% of

sharesKanamoto’s
Sale, repair,own theKanarentem

Muroran,majority ofLtd.

Hokkaido

voting rights inand rental of
5,000

steel sheet
floor plates
etc.

equity1of products

directors andPurchase,close relatives
directly own
100.00% of

and importand export

outstanding

Company for

and relatives

sale, repair,totalcalculation

which directors

Purchase,close relatives

sale, repair,1

total
outstanding

and importand exportof products

Notes and

Sale, repair,and rental ofsteel sheet floor

69,608accounts
payable,plates etc.

tradeSale, repair,Notes andand rental ofsteel sheet floor

17,106

plates etc.

accounts
payable,36,177

6,018

trade

sharescalculation

Notes: 1. The transaction amounts shown in (1) above do not include consumption tax; consumption tax is included in thefiscal year-end balance.
2. Terms of the transactions and the Company’s policy for deciding terms of the translations(1) Prices for the sales transactions to the Company indicated above are determined by referring to market prices,and the payment terms are identical to the terms for other normal transactions.
(2) The Company makes its decisions on land leases and land sales based on assessed values by a real estateappraiser and the price level of nearby similar properties.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.55

(Per Share Information)
Prior Consolidated Accounting Fiscal Year
(From November 1, 2005
to October 31, 2006)
Net assets per share

Current Consolidated Accounting Fiscal Year
(From November 1, 2006
to October 31, 2007)¥1,155.22

Net income per share of common stock

Net assets per share¥57.41

Net income per share of common
stock after adjustment for potential
ordinary shares¥1,216.98¥92.40Net income per share of common stock
Net income per share of common
stock after adjustment for potential
ordinary shares－－

The Company has not reported net income per share of

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

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

would have a dilution effect.

(Supplemental Information)
Beginning from this consolidated accounting fiscal year,
the Company has adopted the revised AccountingStandard for Earnings Per Share (Accounting Standards
Board of Japan Statement No. 2 dated January 31, 2006
(revised 2006) and the Guidance on Accounting Standard
for Earnings Per Share (ASBJ Guidance No. 4 dated
January 31, 2006 (revised 2006). There are no material
items to report as a result of this change.
(Note) The basis for calculating consolidated fiscal year earnings per share and earnings per share after adjustment forpotential ordinary shares is as follows.
(Unit: Thousands of yen)
Prior Consolidated Accounting
Fiscal Year
(From November 1, 2005
to October 31, 2006)

Current Consolidated Accounting
Fiscal Year
(From November 1, 2006
to October 31, 2007)

1,742,652

3,035,418－－

Net income related to common stock

1,742,652

3,035,418

Average number of outstanding shares
during the fiscal year

30,357,093

32,852,040

Net income per share of common stock
Net income
Amount not attributed to common stock
shareholders

Summary of latent stock not included in thecalculationof

consolidated

fiscal──────

──────

year

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

Summary of Company Financial Statements, FY Ended October 31, 2007

P.56

Company Financial StatementsV

1. Comparative Balance Sheets(Unit: Thousands of yen)
Prior Fiscal Year(As of October 31, 2006)
Classification

Notes

AmountCurrent Fiscal Year(As of October 31, 2007)

Percent

Changefrom prior
year
Percent

Amount(Assets)
I

Current assets
17,461,345

11,115,248- 6,346,096

2,876,924

2,255,833- 621,090

10,734,102

10,825,811

91,709－5,300,000

5,300,000

5. Merchandise inventory259,214227,690- 31,524

6. Construction equipment

968,243770,099- 198,144

7. Supplies

61,64967,323

5,673

8. Prepaid expenses

243,706

229,844- 13,862

9. Deferred tax assets

384,442355,902- 28,540

10. Loans to affiliatedcompanies

100,000－- 100,000

11. Other

350,702

178,753- 171,948- 456,245- 435,092

21,15330,891,414

37.3 - 2,092,670

9,297,639

210,126

5,502,751

40,502952,093

18,688729,096

32,497

2,403

414

227,907- 18,342

25,634,236

25,996,422

362,186

8. Construction in progress

246,544

46,172- 200,371

Total Tangible Fixed Assets

42,308,785

1. Cash and deposits
2. Notes receivable, trade*４

3. Accounts receivable, trade
4. Negotiable securities

Allowance for doubtful
accounts
Total Current Assets
II

32,984,085

39.5

Fixed assets(1) Tangible Fixed Assets
1. Rental equipment
Accumulated depreciation

26,646,008

2. Buildings

6,300,982

3. Structures

12,165,963
6,663,211

5,462,248

4,166,919

3,988,185

Accumulated depreciation

3,054,780*１

Accumulated depreciation

3,214,825

933,405

4,222,490

4,124,204
3,427,606

5. Vehicles and delivery
equipment

3,493,394

696,598

35,888

Accumulated depreciation

33,898

6. Tools, furnishings andfixtures38,98836,584

1,989

1,049,851

Accumulated depreciation
7. Land26,315,583

9,087,513

11,763,231

Accumulated depreciation

4. Machinery and equipment

35,613,223

35,733,522

803,601*１

1,045,691
817,784

246,24950.6

42,754,487

51.5

445,701

Summary of Company Financial Statements, FY Ended October 31, 2007

P.57

Prior Fiscal Year(As of October 31, 2006)
Classification

Notes

AmountCurrent Fiscal Year(As of October 31, 2007)

Percent

Changefrom prior
year
Percent

Amount(2) Intangible Fixed Assets
1. Goodwill

64,00060,800- 3,200

2. Software

42,74946,9234,174

3. Telephone subscription
rights40,51240,512－

Total Intangible Fixed
Assets147,2610.2

148,2350.2974(3) Investments and Other
Assets
1. Investment securities

6,115,087

5,249,609- 865,478

2. Stock of affiliatedcompanies

1,029,332

2,649,554

1,620,221

8,107

8,107

－

4. Long-term loan toaffiliated company

500,000

900,000

400,000

5. Claims in bankruptcy,
claims in reorganizationand other similar claims

197,310

252,556

55,246

6. Long-term prepaid
expenses

47,71052,9355,224

7. Deferred tax assets

50,933－- 50,933

8. Insurance reserve

59,19130,921- 28,269

9. Long-term guaranty
money deposited

998,388960,852- 37,536

10. Other

19,418－- 19,418

Allowance for doubtful
accounts- 385,941- 430,758- 44,816

Reserve for investment
losses- 565,171- 565,171－

Total investments andother assets

8,074,368

9.7

9,108,607

11.0

1,034,239

Total Fixed Assets

50,530,415

60.5

52,011,330

62.7

1,480,915

Total Assets

83,514,501

100.0

82,902,745

100.0- 611,755

3. Advances

Summary of Company Financial Statements, FY Ended October 31, 2007

P.58

Prior Fiscal Year(As of October 31, 2006)
Classification

Notes

AmountPercent

Current Fiscal Year(As of October 31, 2007)

Changefrom prior
year
Percent

Amount(Liabilities)
I

Current liabilities
1. Notes payable, trade*２

8,246,886

7,660,014- 586,871

2. Accounts payable, trade*２

2,522,512

2,456,499- 66,012

3. Long-term bank loans due
within one year

9,935,000

8,818,000- 1,117,000

4. Accounts payable, other2,562,743

2,211,522- 351,220

236,233

246,693

10,459

6. Corporate taxes payable

1,291,556

1,406,425

114,868

7. Consumption and othertaxes

193,662

137,908- 55,754

8. Deposits

33,822

37,8444,022

9. Accrued bonuses to
employees

437,693

499,457

61,7645,500－- 5,500

11. Equipment notes payable

340,345

175,331- 165,013

12. Other428,603108,885- 319,717

23,758,582

28.7 - 2,475,976

5. Accrued expenses

10. Accrued bonuses todirectors and auditors

Total Current Liabilities
II26,234,559

31.4

Long-term liabilities

1. Long-term bank loans

15,120,000

14,926,000- 194,000

2. Long-term accrued
expenses

2,030,031

2,353,188

323,157

3. Accrued employees
retirement benefits

1,663,537

928,956- 734,581

90,261

89,386- 875－

58,72658,726

4. Retirement allowances todirectors and auditors
5. Long-term deferred tax
liability
Total long-term liabilities
Total Liabilities

18,903,829

22.6

18,356,256

22.1

45,138,388

54.0

42,114,839

50.8 - 3,023,549- 547,572

Summary of Company Financial Statements, FY Ended October 31, 2007

P.59

Prior Fiscal Year(As of October 31, 2006)
Classification

Notes

AmountCurrent Fiscal Year(As of October 31, 2007)

Percent

Changefrom prior
year
Percent

Amount(Net Assets)
I

Owners’ equity
1

Paid-in capital

2

Capital surplus

9,696,717

11.6(1) Capital legal reserve

10,817,389

10,817,389(2) Other capital surplus

143,480

143,480
10,960,869

Total capital surplus
3

13.1

9,696,717

11.7－

10,960,869

13.2

－

Earned surplus
1,375,287

1,375,287

19,601

19,601

General reserve

11,831,684

12,931,684

Earned surplus brought
forward2,084,192

3,823,794(1) Earned legal reserve(2) Other earned surplus
Reserve for advanced
depreciation of fixed
assetsTotal earned surplus
4Treasury stock
Total Owners’ Equity

II

Valuation and translation
adjustments

1

Valuation difference onother investment
securities
Total valuation andtranslation adjustments

15,310,766

18.4

18,150,368

21.9

2,839,602- 6,303- 0.0- 19,784- 0.0- 13,481

35,962,049

43.1

38,788,170

46.8

2,826,120

2,414,062

1,999,735

2,414,062

2.9

1,999,735

2.4- 414,327

Total Net Assets

38,376,112

46.0

40,787,905

49.2

2,411,793

Total Liabilities and Net Assets

83,514,501

100.0

82,902,745

100.0- 611,755

Summary of Company Financial Statements, FY Ended October 31, 2007

P.60

2. Comparative Statements of Income(Unit: Thousands of yen)Classification
I

Notes

Prior fiscal year

Current fiscal year

(From November 1, 2005
to October 31, 2006)(From November 1, 2006
to October 31, 2007)

AmountPercent

AmountPercent

Operating revenues
820,809

42,633,799

1. Rental revenues

41,812,990

2. Sales

18,940,955 60,753,945

100.0 18,942,988 61,576,788

30,482,810

30,953,269

IIChange fromprior year

100.0

2,032

Cost of revenues

1. Cost of rental revenues

470,458

2. Cost of goods sold
Balance of merchandise
inventory at beginningof period

253,508259,214

5,706

Merchandise inventory
purchases

13,889,685

13,197,038- 692,646

538,040

531,914- 6,126

14,681,234

13,988,167- 693,067

Merchandise received
from other accounts
Total
Balance of merchandise
at end of period*２259,214 14,422,020

227,690 13,760,477- 31,524

Total cost of revenues

44,904,830

73.9

44,713,746

72.6- 191,084

Gross profit

15,849,115

26.1

16,863,041

27.4

1,013,926

III Selling, general andadministrative expenses
1. Freight-out

58,98657,010- 1,976

2. Vehicle fuel expense

139,812152,135

12,323

3. Advertising and public
relations expense

136,688

134,953- 1,735

4. Transfer to allowancefor doubtful accounts－

123,403

123,403

5. Director compensation

77,535

83,157

5,622

4,766,693

5,018,232

251,539

7. Bonuses

917,503

958,082

40,579

8. Transfer to accrued
bonuses to employees

437,693

499,457

61,764

9. Transfer to accrued
bonuses to directors
and auditors

5,500

－

- 5,500

10. Transfer to retirement
allowances to directors
and auditors

11,14010,613- 527

11. Employees retirement
benefit expense

285,223

271,007- 14,216

6. Salary allowance

Summary of Company Financial Statements, FY Ended October 31, 2007

P.61

12. Travel andtransportation expenses

239,287

309,882

70,595

13. Entertainment
expenses

70,516

66,902- 3,614

14. Insurance premiums

98,50489,579- 8,925

15. Communications
expense336,030

333,882- 2,147

16. Maintenance andrepairs

100,981

102,797

1,816

17. Consumables expense

301,152

305,3074,154

18. Utilities

245,702

241,721- 3,981

19. Taxes and publiccharge366,944427,374

60,42920. Welfare expenses

795,018

848,085

53,066

21. Depreciation andamortization expense

729,618

768,998

39,3791,519,994

1,478,443- 41,551

22. Rent
23. Other expenses

492,786 12,133,316

20.0

569,054 12,850,084

20.9

76,2683,715,798

6.1

4,012,957

6.5

297,158

Operating income
IV Non-operating
revenues
9,272

36,502

27,229－15,285

15,285

3. Dividend income

38,48650,745

12,2594. Gain on sale ofinvestment securities

24,883

287,528

262,645

250,919

195,809- 55,110

40,91038,877- 2,032－

104,680

104,680

1. Interest revenue
2. Interest revenue onnegotiable securities

5. Rents received*１

6. Insurance benefits
7. Cash bonus received
8. Other*１

196,908561,3800.9

123,499852,930

1.4- 73,409

V Non-operating
expenses
326,636

312,601- 14,035－

68,66968,6693. Stock issuance expense

14,762－- 14,762

4. Other

196,528

1. Interest expense
2. Loss on sale of notes
receivable

Ordinary income
VI537,9260.9

3,739,252

6.1

111,714492,985

0.8- 84,813

4,372,901

7.1

633,649

Extraordinary profits

1. Gain on disposal of fixed
assets
2. Valuation gain on
investment enterprisepartnership*３50,018920,700

870,681

8,515

8,128

- 386

Summary of Company Financial Statements, FY Ended October 31, 2007

P.62

3. Reversal of allowancefor doubtful accounts

32,142

19,538- 12,604

4. Compensation received

255,500－- 255,500－

845,319845,319

5. Gain on reversal of
accrued employees
retirement benefits
6. OtherVII

14,175360,351

0.6

2,841

1,796,528

2.9- 11,334

Extraordinary losses

1. Loss on sale or disposal
fixed assets*４49,84563,90814,062

2. Impairment loss

*５594,568890- 593,678

3. Valuation loss on
investment securities－

11,016

11,016

4. Management loss on
investment partnershipenterprise－

11,641

11,641

5. Transfer to reserve forinvestment losses

84,997－- 84,997

6. Transfer to reserve for
doubtful accounts foraffiliated company
stock

17,786

8,311- 9,475

7. Other

62,518

Income before taxes
and adjustments
Corporate, local andbusiness taxes

1,684,230

Adjustment forcorporate and othertaxes- 114,543

Net income

809,716

1.3

3,289,887

5.4

19,858

115,626

0.2- 42,659

6,053,803

9.8

2,763,916

2,203,734

1,569,686

2.6

1,720,201

2.8

419,052

519,504

2,622,787

4.2

533,596

3,431,016

5.6

1,710,814

Summary of Company Financial Statements, FY Ended October 31, 2007

P.63

Detailed Statement of Cost of Rental Revenues(Unit: Thousands of yen)Classification

Notes

Prior Fiscal Year

Current Fiscal Year

From November 1, 2005
to October 31, 2006

From November 1, 2006
to October 31, 2007

AmountPercent

AmountChangefrom prior
year

Percent

Rent

16,908,191

55.5

17,398,229

56.2

490,037

Repair expense

2,640,970

8.7

2,860,409

9.3

219,438

Freight charges

5,158,322

16.9

5,219,204

16.9

60,882

3,785,558

12.4

3,659,317

11.8- 126,241

943,3993.1

751,987

2.4- 191,412

1,046,368

3.4

1,064,121

3.4

17,75330,482,810

100.0

30,953,269

100.0

470,458

Depreciation expense*２

Consumables expense
Other costs

*３

Total

Note *1

Cost of rental revenues is the direct cost
incurred to receive revenues from therental of construction equipment andother goods.

Same as at left

Note *2

The Company posted rental equipment
asset
depreciation
expenseof¥3,533,016,000
andconstruction
equipment depreciation expense of¥252,542,000.

The Company posted rental equipment
asset
depreciation
expenseof¥3,460,445,000
andconstruction
equipment depreciation expense of¥198,871,000.

Note *3

Other costs consisted mainly of taxes
and public charges of ¥420,603,000,
insurance premiums of ¥571,332,000
and interest of ¥34,522,000 related to
installment payment purchases of rental
equipment assets.

Other costs consisted mainly of taxes
and public charges of ¥437,506,000,
insurance premiums of ¥566,629,000
and interest of ¥37,340,000 related to
installment payment purchases of rental
equipment assets.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.64

3. Statement of Changes in Net Assets
Prior Fiscal Year (From November 1, 2005 to October 31, 2006)(Unit: Thousands of yen)
Owners’ equity
Capital surplus

Earned surplus
Other earned surplus

Paid-in
capitalOctober 31, 2005 balance

Capital legal
reserve

8,596,737

9,720,343

1,099,980

1,097,046

Othercapitalsurplus－

Total capitalsurplus

Earnedlegal
reserve

9,720,343 1,375,287

Fixed
assetsReserveforadvanceddepreciati
on－Generalreserve

Earnedsurplusbrought
forward

Total earned
surplus11,831,684

928,192

14,135,164

Treasurystock

Total Owners’
Equity- 186,594

32,265,650

Changes of items during the
fiscal year
Issuance of new shares

1,097,046－

2,197,026- 19,601－－

Transfer to reserve foradvanced depreciation of
fixed assets－

Dividends from surplus(Note)－- 268,677- 268,677- 268,677

Dividends from surplus(interim dividends)－- 268,622- 268,622- 268,622

Directors and auditors’
bonuses from appropriationof earnings－- 7,300- 7,300- 7,300

Net income－

1,720,201

1,720,201

1,720,201

Purchase of treasury stock－－- 11,781- 11,781

143,480

143,480－

192,072

335,552

Disposal of treasury stock

19,601

Net changes of items otherthan owners’ equity during
the fiscal year
Total changes of items during
the fiscal year

1,099,980

1,097,046

143,480

1,240,526－

19,601－ 1,155,999

1,175,601

180,290

3,696,399

October 31, 2006 balance

9,696,717

10,817,389

143,480

10,960,869 1,375,287

19,601

11,831,684 2,084,192

15,310,766- 6,30335,962,049

Summary of Company Financial Statements, FY Ended October 31, 2007

P.65

Valuation and translation
adjustments
Valuation difference
Total valuation andon other investment
translation
securities
adjustments
October 31, 2005 balance

1,637,603

Total Net Assets

1,637,603

33,903,254

Issuance of new shares－

2,197,026

Transfer to reserve foradvanced depreciation of
fixed assets－－

Dividends from surplus(Note)－- 268,677

Dividends from surplus(interim dividends)－- 268,622

Directors and auditors’
bonuses from appropriationof earnings－- 7,300

Net income－

1,720,201

Purchase of treasury stock－- 11,781

Disposal of treasury stock－

335,552

Changes of items during the
fiscal year

Net changes of items otherthan owners' equity during
the fiscal year

776,458

776,458

776,458

Total changes of items during
the fiscal year

776,458

776,458

4,472,857

2,414,062

2,414,062

38,376,112

October 31, 2006 balance

Note: Based on the resolution of the General Meeting of the Shareholders on January 27, 2006.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.66

Current fiscal year (From November 1, 2006 to October 31, 2007)(Unit: Thousands of yen)
Owners’ equity
Capital surplus

Earned surplus
Other earned surplus

Paid-in
capitalOctober 31, 2006 balance

Capitallegal
reserve

9,696,717 10,817,389

Fixed

Other
capitalsurplus

Total capitalsurplus143,480

10,960,869 1,375,287

LegalassetsReserve foradvanceddepreciationearnedsurplusGeneralreserve

19,601 11,831,684

Earnedsurplusbrought
forwardTotal
earnedsurplus

Total
Owners’EquityTreasurystock

2,084,192 15,310,766- 6,303 35,962,049

Changes of items during the
fiscal year
Transfer to general reserve－

1,100,000 - 1,100,000－－

Dividends from surplus (Note)－- 295,732- 295,732- 295,732

Dividends from surplus(interim dividends)－- 295,682- 295,682- 295,682

Net income－

3,431,016

3,431,016

3,431,016

Purchase of treasury stock－－- 13,481- 13,481

2,839,602- 13,481

2,826,120

Net changes of items otherthan owners’ equity during the
fiscal year
Total changes of items during
the fiscal year
October 31, 2007 balance

－

－

－

9,696,717 10,817,389

143,480－

10,960,869 1,375,287

Valuation and translation
adjustments
Valuation difference
Total valuation andon other investment
translation
securities
adjustments
October 31, 2006 balance

2,414,062－－

1,100,000

19,601 12,931,684

1,739,602

3,823,794 18,150,368- 19,784 38,788,170

Total net assets

2,414,062

38,376,112

Transfer to general reserve－－

Dividends from surplus(Note)－- 295,732

Dividends from surplus(interim dividends)－- 295,682

Net income－

3,431,016

Purchase of treasury stock－- 13,481

Changes of items during the
fiscal year

Net changes of items otherthan owners’ equity during
the fiscal year

- 414,327- 414,327- 414,327

Total changes of items during
the fiscal year

- 414,327- 414,327

2,411,793

October 31, 2007 balance

1,999,735

1,999,735

40,787,905

Note: Based on the resolution of the General Meeting of the Shareholders on January 26, 2007.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.67

Significant accounting policies
Item
1. Valuation standards andvaluation methods fornegotiable securities

Prior fiscal year

Current fiscal year

From November 1, 2005
to October 31, 2006

From November 1, 2006
to October 31, 2007

Common stock of subsidiaries andaffiliated companies
The Company has adopted the cost
method based upon the moving
average method
Other negotiable securities
Negotiable securities with a market on asecurities exchange
The Company has adopted theCommon stock of subsidiaries andaffiliated companies
Same as at left

Other negotiable securities
Negotiable securities with a market on asecurities exchange
Same as at left

market value method (the full amountof the valuation difference is charged to
net assets using the direct transfer tocapital method, with the disposal cost
determined by the moving averagemethod) based on the market price on
the fiscal year closing date or similar
prices

2. Appraisal standards andappraisal method forconstruction equipment

3. Appraisal standards andOther negotiable securities without amarket price

Other negotiable securities without a

The Company has adopted the cost
method based upon the moving
average method

Same as at left

Amount after deduction of depreciation
expense calculated according to thedeclining-balance method from theoriginal prices, by separate fiscal year ofpurchase

Same as at left

(1) Merchandise inventories

appraisal method for

Lower of cost or market based on themerchandise inventories

last-in, first-out methodmarket price(1) Merchandise inventories
Same as at left

and supplies(2) Supplies(2) Supplies

The Latest purchase cost method
4. Depreciation method for
fixed assets(1) Tangible fixed assets
The Company has adopted thedeclining-balance method. Buildings onland that is leased under a fixed-term
land lease agreement, however, aredepreciated using the straight-line
method using the remaining period of
the fixed-term lease as the depreciable
life and zero residual value.
The depreciable lives mainly used by
the Company are as follows.

Same as at left
(1) Tangible fixed assets
Same as at left

Rental assets 5-10 years
Buildings
31-34 years(2) Intangible fixed assets
Software for use within the Company
is depreciated using the straight-line
method based on the assumed usefullife for internal use (5 years).

(2) Intangible fixed assets
Same as at left

Summary of Company Financial Statements, FY Ended October 31, 2007

P.68

(3) Long-term prepaid expenses
The
Companyhasstraight-line depreciation.
5. Deferred assets(3) Long-term prepaid expenses
adoptedSame as at left

(1) Stock issuance expense---------

The full amount is accounted for as
an expense when the funds are
expended.
6. Accounting standards for(1) Allowance for doubtful accounts(1) Allowance for doubtful accounts

allowances and reserves
To provide for losses on doubtful
accounts such as accounts receivable,
the Company charges to income anamountbasedonactualloss
experience for normal accounts, plus
an amount for projected unrecoverable
amounts based on assessments ofindividual accounts.
(2) Accrued bonuses to employees

Same as at left

(2) Accrued bonuses to employees

To fully provide for expenditures ofbonuses the Company will pay toemployees, an amount is appropriatedto the reserve during the fiscal year
based upon a salary estimate amount.

Same as at left

(3) Accrued bonuses to directors and(3) Accrued bonuses to directors andauditors

auditors

To fully provide for expenditures ofbonuses the Company will pay to
directors and auditors, an amount isappropriated to the reserve at fiscal
year-end to provide for the liability
recognized during the period.

------(Change in accounting policy)
In prior years, the Company
accounted for directors and auditors
bonusesasadecreaseinunappropriated earnings based on
approval of resolution for appropriationof retained earnings at the General
MeetingoftheShareholders.
Beginning in the current fiscal year,
however, the Company will account forsuch bonuses as an expense of theaccounting period in which suchbonuses are accrued, based on the
Accounting Standard for Directors'
Bonus (Accounting Standards Board ofJapan Accounting Standard Statement
No. 4). As a result of this change,
operating income, ordinary income andincome before taxes and adjustments
were ¥5,500,000 less, respectively,
than they otherwise would have been
had the accounting standard used inprior fiscal years been applied.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.69

(4) Accrued employees retirement(4) Accrued employees retirement

benefits

benefits

The Company provides for
accrued employees retirement benefits
based upon the projected amounts of
the liability for accrued employees
retirement benefits and the value ofpension assets at the end of the fiscal
year. At the end of each fiscal year, theCompany appropriates an amount to
the reserve to provide for the liability
recognized during the period. Past
years’ service liabilities are fully written
off in the year incurred.

Same as at left

The difference based on an actuarial
calculation is charged to income
beginning in the fiscal year following
the year in which incurred, with theamounts allocated proportionately
using the straight-line method, basedon a specified number of years (10years) that is less than the averageremaining period of employment for
employees at the time the difference
arises.
(Supplemental information)
During the fiscal year under review,
the Company revised its retirement
benefits system and transferred its
defined benefit corporate pension plan(fund-type)to

corporateadefinedbenefitpensionplan(contract-type), and simultaneously
introduced a cash balance system. In
conjunction with this change, theCompany has applied the “Accounting
for the Transfer Between Retirement
Benefit Plans” (Financial AccountingStandards Implementation GuidanceNo. 1).
The Company accounted for the¥845,319,000

affect

from

these

transfers in extraordinary profits as a
"gain

on

reversalofaccruedemployees retirement benefits"(5) Retirement allowances to directors(5) Retirement allowances to directors

and auditors

and auditors

The
Company
providesfor
retirement allowances to directors andauditors based upon pertinent rules
and appropriated to the account at theend of the fiscal year proportionately
based upon length of service.

Same as at left

Summary of Company Financial Statements, FY Ended October 31, 2007

P.70

(6) Reserve for investment losses(6) Reserve for investment losses

The Company provides for losses
from the decline in real prices of assets
such as the stock of subsidiarycompanies that are subject to asset
impairment accounting by applying
internally established standards thattake into consideration subsidiarycompany operating results and asset
quality.

Same as at left

7. Lease transactions

For finance lease transactions except
for leases that transfer ownership of theproperty to the lessee, rent expenses arecharged to income as payments are
made.

Same as at left

8. Hedge transactions(1) Hedge transactions
The Company accounts for hedge(1) Hedge transactions
Same as at lefttransactions using allocations based on
accounting standards for foreign
currency-denominated transactions,and special rule accounting based on
accounting standards for financial
products.
(2) Hedge methods and hedgedtransactions
The Company uses currency swaps
and forward transactions in order toavoid the currency fluctuation risk
related to the Company’s foreign
currency-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.
(3) Hedging policies
The Company’s use of derivativetransactions is limited to hedging risk
within the scope of the Company’s
assets and liabilities subject to market
fluctuation risk.
(4) Method for evaluating theeffectiveness of hedges
The Company does not evaluate theeffectiveness of its hedge transactions
because it can assume that its currency
swap
transactions
andforwardtransactions will completely offset
market fluctuations or changes in cash
flow from the time the hedge begins
until it is terminated. In addition, theCompany’s interest swap transactions
fulfill the requirements for special ruleaccounting, and the Company has
elected to use this in place of anevaluation of effectiveness.

(2) Hedge methods and hedgedtransactions
Same as at left

(3) Hedging policies
Same as at left

(4) Method for evaluating theeffectiveness of hedges
Same as at left

Summary of Company Financial Statements, FY Ended October 31, 2007

P.71

9. Other significant mattersfor preparation of the fiscal
year financial statements(1) Accounting treatment of consumptiontax(1) Accounting treatment of consumption
tax

Consumption tax is taken out of all
Statement of Income items andBalance Sheet items, except mainly forreceivables and payables.

Same as at left

Summary of Company Financial Statements, FY Ended October 31, 2007

P.72

Changes in Important Matters Used as the Basis for Preparation of the Company Financial
Statements
Prior fiscal year
From November 1, 2005
to October 31, 2006

Current fiscal year
From November 1, 2006
to October 31, 2007

(Accounting Standard for Impairment of Fixed Assets)------

Beginning from this fiscal year, the Company has
adopted the Accounting Standard for Impairment of
Fixed Assets (“Opinion Concerning Establishment of
Accounting Standard for Impairment of Fixed Assets”(Business Accounting Council, August 9, 2002) and“Implementation Guidance for the Accounting Standard
for Impairment of Fixed Assets” (Accounting Standards
Board of Japan, October 31, 2003, Financial AccountingStandard Implementation Guidance No. 6).
As a result, income before taxes and adjustments
decreased by ¥594,568,000.
The total amount of the impairment loss is deducted
directly from the balance for each asset based on therevised standards for preparation of company financial
statements and other rules.
(Accounting Standard for Presentation of Net Assets in the------

Balance Sheet)
Beginning from this fiscal year, the Company has
adopted the “Accounting Standard for Presentation of
Net Assets in the Balance Sheet” (Accounting Standards
Board of Japan Statement No. 5 dated December 9,2005) and the “Guidance on Accounting Standard for
Presentation of Net Assets in the Balance Sheet”(Accounting Standards Board of Japan Guidance No. 8
dated December 9, 2005).
The amount corresponding to the total ofshareholders’ equity based on the past accounting
standard is ¥38,376,112,000.
The net asset section of the balance sheet for the
fiscal year under review was prepared based on therevised financial statements rules.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.73

Change in Presentation Method
Prior fiscal year
From November 1, 2005
to October 31, 2006

Current fiscal year
From November 1, 2006
to October 31, 2007

(Company Balance Sheets)(Company Balance Sheets)

1. Beginning from this fiscal year, the Company will report“goodwill” as “goodwill,” based on based on the revised
financial statements rules.
2. Until the prior fiscal year, “long-term guaranty money
deposited” was reported as an item in “Other” under
Investments and Other. For this fiscal year, theCompany has reported this item under a separate
classification because the amount exceeds 1% of total
assets.
The amount of “long-term guaranty money
deposited” at the end of the prior fiscal year was¥768,406,000.

1.

------

2.

------(Company Statements of Income)(Company Statements of Income)1.

1. Until the previous fiscal year, the Company reported------

cash bonus received as a separate category in “Other”
under non-operating revenues. For the fiscal year
under review, the Company has reported this item
separately because the amount exceeded 10% of total
non-operating revenues.
The amount of "cash bonus received" at the end of
the previous fiscal year was ¥29,909,000.
2.

------

2. Until the previous fiscal year, the Company reported
loss on sale of notes receivable in “Interest expense”
under non-operating expenses. For the fiscal year
under review, the Company has reported this item
separately because the amount exceeded 10% of total
non-operating expenses.
The amount of the “loss on sale of notes receivable”
at the end of the previous fiscal year was ¥33,967,000.

3.

------

3. Until the previous fiscal year, the Company reported
management

loss

on

investment

partnershipenterprise as a separate category in “Other” under
extraordinary losses. For the fiscal year under review,
the Company has reported this item separately
becausetheamountexceeded

10%

of

total

extraordinary losses.
The amount of the “management loss on investment
partnership enterprise” at the end of the previous fiscal
year was ¥18,303,000.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.74

Notes to the Financial Statements(Notes to the Balance Sheets)
Prior Fiscal Year(As of October 31, 2006)

Current Fiscal Year(As of October 31, 2007)*1. Reduction to book value*1. Reduction to book value
Amounts for assets acquired for which accumulated

Amounts for assets acquired for which accumulated

book values were reduced by government subsidies

book values were reduced by government subsidies

Machinery and equipment

5,044,000

Machinery and equipment

5,044,000

Land

3,569,000

Land

3,569,000

Total

8,613,000*2. Affiliated companies

Total

8,613,000*2. Affiliated companies

Amounts classified as liabilities owed to affiliates

Amounts classified as liabilities owed to affiliates

Current liabilities

Current liabilities

Notes and accounts payable,
trade

567,668,000

3. Contingent liabilities

trade597,709,000

3. Contingent liabilities

Joint and several guarantee ofbank loans to employees (Bankof Tokyo-Mitsubishi UFJ Limited,
other)

27,162,000

Guarantee of consolidated
subsidiary debt (Assist Co., Ltd.)

10,000,000

Guarantee of consolidated
subsidiary debt (Kanatech Co.,Ltd).

200,000,000

Guarantee of consolidated
subsidiary debt (Kanki
Corporation)

1,008,000,000

Guarantee of consolidated
subsidiary debt (Flowtechno
Corporation)

100,000,000*4. Liquidation of receivables based on receivables

Joint and several guarantees ofbank loans to employees (Bankof Tokyo-Mitsubishi UFJ Limited,
other)

23,144,000

Guarantee of consolidated
subsidiary debt (Kanatech Co.,Ltd.)

150,000,000

Guarantee of consolidated
subsidiary debt (Kanki
Corporation)

882,000,000

Guarantee of non-consolidated
subsidiary debt (Flowtechno
Corporation)

100,000,000

Guarantee of affiliated company
debt (Shanghai Jinheyuan
Equipment Rental Co., Ltd.)

168,960,000

Guarantee of affiliated company
finance lease liabilities(Shanghai Jinheyuan Equipment
Rental Co., Ltd.)70,973,000*4. Liquidation of receivables based on receivablestransfer facility

transfer facility
The Company liquidates receivables based on a

The Company liquidates receivables based on areceivables transfer facility.

receivables transfer facility.
Notes receivable, trade

Notes and accounts payable,

5,734,296,000

Notes receivable, trade

4,971,036,000

Liquidated claims bearing a right of recourse to the

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

Company and included in the balance of notes

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

receivable, trade transferred total ¥1,017,362,000.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.75

(Notes to the Statements of Income)Current fiscal year
(From November 1, 2006
to October 31, 2007)

Prior fiscal year
(From November 1, 2005
to October 31, 2006)*1. Transactions with affiliates*1. Transactions with affiliates

Seconded employees’ salaries

110,824,000

Seconded employees’ salaries

53,928,000

Rents received

160,017,000

Rents received

114,400,000*2. Balance in other accounts transferred to cost ofrentalequipment

assetsandconstruction

Construction equipment
Total

Building

6,308,000

Construction equipment

538,040,000

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

construction

Total

506,579,000
25,334,000
531,914,000

Land

906,198,000

Building

14,413,000

Machinery and equipment
Total

88,000920,700,000*4. Loss on sale or retirement of fixed assets(Loss on sale of fixed assets)
Buildings

and*3. Gain on sale or retirement of fixed assets*4. Loss on sale or retirement of fixed assets

Land

assetsRental equipment assets

Tools, furnishings and fixtures
Total

equipment

531,732,000*3. Gain on sale or retirement of fixed assets
Land

rentalequipment soldequipment sold
Rental equipment assets*2. Balance in other accounts transferred to cost of(Loss on sale of fixed assets)
2,428,000
108,000(Loss on retirement of fixed assets)

Land

26,859,000(Loss on retirement of fixed assets)
Rental equipment assets

15,627,000

Rental equipment assets

21,854,000

Buildings

6,613,000

Buildings

16,225,000

Structures

1,385,000

Structures

5,036,000

Machinery and equipment

8,501,000

Machinery and equipment

2,327,000

Tools, furnishings and fixtures

4,203,000

Tools, furnishings and fixtures

1,680,000

Other

Vehicles and delivery equipment

136,000

Other

48,000

Total

Total

716,000
63,908,000

49,845,000

Summary of Company Financial Statements, FY Ended October 31, 2007

P.76

Current fiscal year
(From November 1, 2006
to October 31, 2007)

Prior fiscal year
(From November 1, 2005
to October 31, 2006)*5. Impairment loss

*5. Impairment loss
During this fiscal year the Kanamoto Group incurred
an impairment loss on the following asset groups.
Location

Use

Kamakura City,
Kanagawa Prefecture
Kanazawa City,
Ishikawa Prefecture Dormant assets
Muroran City,
Hokkaido
Five other locations

Asset

During this fiscal year the Kanamoto Group incurred
an impairment loss on the following asset groups.
Location

Use

Asset

Tomakomai City,
Hokkaido

Dormant assets

Land

Land

Asset groupings used by the Kanamoto Group to

Asset groupings used by the Kanamoto Group to

apply asset impairment accounting are based on theapply asset impairment accounting are based on theblock classified as the smallest segment for whichblock classified as the smallest segment for which

profitability

profitability

business.

canbedetermined

regularly

bySpecifically, dormant assets are grouped

as units that generate independent cash flow.

can

be

determined

regularlybybusiness. Specifically, dormant assets are grouped
as units that generate independent cash flow.

For certain dormant assets for which the asset

For certain dormant assets for which the asset

value was less than book value, the Company

value was less than book value, the Company

reduced book value to the recoverable value, andreduced book value to the recoverable value, andaccounted for the reduction as an impairment loss

accounted for the reduction as an impairment loss(¥594,568,000) under extraordinary losses. This(¥890,000)¥594,568,000 was for land.

¥890,000 was for land.

under

extraordinary

losses.

This

The recoverable value for this asset group is

The recoverable value for this asset group ismeasured according to net sales price, and the landmeasured according to net sales price, and the landis evaluated using the inheritance tax assessment

is evaluated using the inheritance tax assessment

value based on the land tax assessment value orvalue based on the land tax assessment value orother amount as a base.

other amount as a base.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.77

(Statements of Changes in Net Assets)
Prior fiscal year (From November 1, 2005 to October 31, 2006)
Class of treasury stock and number of shares(Thousands of shares)
Number of shares at Increase in number Decrease in number Number of shares at
end of prior fiscal of shares during the of shares during the end of the current
current fiscal year
current fiscal year
year
fiscal year
Treasury stock
Common stock(Notes) 1, 2

Total

400

12

400

13

400

12

400

13

(Notes) 1. The number of treasury stock shares of common stock increased by 12,000 shares throughpurchases of shares comprising less than one investment unit.
2. The number of treasury stock shares of common stock decreased by 400,000 shares throughdisposals of treasury stock.
Current fiscal year (From November 1, 2006 to October 31, 2007)
Class of treasury stock and number of shares(Thousands of shares)
Number of shares at Increase in number Decrease in number Number of shares at
end of prior fiscal of shares during the of shares during the end of the current
current fiscal year
current fiscal year
year
fiscal year
Treasury stock
Common stock(Note)

Total

13

12

－

25

13

12

－

25

(Note) The number of treasury stock shares of common stock increased by 12,000 shares throughpurchases of shares comprising less than one investment unit.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.78

(Notes to Leasing Transactions)
Prior fiscal year
(From November 1, 2005
to October 31, 2006)

Current fiscal year
(From November 1, 2006
to October 31, 2007)

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 fiscal year

outstanding balances at the end of the fiscal year

Acquisition
price(¥’000)

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

36,236,228

16,177,904

20,058,323

Other assets

275,184

184,247

90,93636,511,412

16,362,152

20,149,260

Total(2) Outstanding balance of future lease payments at
the end of the fiscal year

Acquisition
price(¥’000)

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

40,639,357

17,673,899

22,965,457

Other assets

255,555

192,203

63,35140,894,913

17,866,103

23,028,809

Total(2) Outstanding balance of future lease payments at
the end of the fiscal year

Within one year

5,815,719,000

Within one year

6,773,121,000

After one year

13,838,896,000

After one year

15,876,130,000

Total

19,654,616,000(3) Amount of lease payments, depreciation expense
and interest expense

22,649,251,000

Total(3) Amount of lease payments, depreciation expense
and interest expense

Lease payments

5,812,109,000

Lease payments

7,058,248,000

Depreciation expense

5,344,449,000

Depreciation expense

6,087,072,000Interest expense

595,986,000(4) Accounting method for amount equivalent todepreciation expense

Interest expense

640,634,000(4) Accounting method for amount equivalent todepreciation expense

Straight-line depreciation using the lease term as

Same as at left

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

Interest method using the difference between totallease 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

1,938,033,000

Within one year

1,660,523,000

After one year

4,808,904,000

After one year

3,766,563,000

Total

6,746,938,000

Total

5,427,086,000（Negotiable Securities）
For the prior fiscal year (as of October 31, 2006) and this fiscal year (as of October 31, 2007), thestock of the Company’s subsidiary companies and affiliated companies did not have a market price.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.79

(Notes Related to Tax Effect Accounting)Prior fiscal year
(As of October 31, 2006)

Current fiscal year
(As of October 31, 2007)

1. Major factors creating deferred tax assets and deferred

1. Major factors creating deferred tax assets and deferred

tax liabilities

tax liabilities
Deferred tax assets

Deferred tax assets
Amount in excess of limit forinclusion in allowance for doubtful
accounts
Disallowance of deferred business
taxes
Excess accrued employees
retirement benefit
Amount in excess of limit for
retirement benefit
Amount in excess of limit for
accrued bonuses to employees
Disallowance of excess
depreciation
Impairment loss

186,301,000

Disallowance of reserve forinvestment losses
Other

228,329,000

102,760,000
663,311,000
36,465,000
179,049,000
274,669,000
240,205,000

Amount in excess of limit forinclusion in allowance for doubtful
accounts
Disallowance of deferred business
taxes
Excess accrued employees
retirement benefit
Amount in excess of limit for
retirement benefit
Amount in excess of limit for
accrued bonuses to employees
Disallowance of excess
depreciation
Impairment loss

124,770,000

228,329,000

110,081,000
365,919,000
36,111,000
201,780,000
261,445,000
240,565,000

342,036,000

Disallowance of reserve forinvestment losses
Other

Deferred tax assets subtotal

2,253,130,000

Deferred tax assets subtotal

1,893,266,000

Valuation difference on negotiablesecurities- 181,376,000

Valuation difference on negotiablesecurities- 240,565,000

Total deferred tax assets

2,071,754,000

Total deferred tax assets

1,652,701,000

Deferred tax liability
Valuation difference on otherinvestment securities
Net deferred tax assets

324,262,000

Deferred tax liability
1,636,377,000
435,376,000

Disclosure classifications:

Valuation difference on otherinvestment securities
Net deferred tax assets

1,355,525,000
297,176,000

Disclosure classifications:
Current assets

384,442,000

Current assets

355,902,000

Property and equipment

50,933,000

Property and equipment

58,726,000

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

40.4％

（Adjustment）
Local tax equalization
Items not included permanently in
losses such as expense accountAffect from application of asset
impairment accounting for fixed
assetsAffect from special deduction forincome such as expropriations
Burden ratio for corporate and othertaxes after application of tax effectaccounting

Statutory corporate tax rate

40.4％

（Adjustment）
2.7％
1.0％
4.2％
- 0.6％
47.7％

Local tax equalization
Items not included permanently in
losses such as expense accountAffect from application of asset
impairment accounting for fixed
assetsBurden ratio for corporate and othertaxes after application of tax effectaccounting

1.4％
0.6％
0.0％
42.4％

Summary of Company Financial Statements, FY Ended October 31, 2007

P.80

(Per Share Information)
Current fiscal year
(From November 1, 2006
to October 31, 2007)

Prior fiscal year
(From November 1, 2005
to October 31, 2006)
Net assets per share
Net income per share of common
stock
Net income per share of common
stock after adjustment for potential
ordinary shares

1,167.90 Yen

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

56.67 Yen－

The Company has not reported net income per share of

1,241.77 Yen
104.44 Yen－

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

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

would have a dilution effect.

(Supplemental Information)
Beginning from the current fiscal year, the Company
hasadoptedtherevisedAccountingStandardfor

Earnings Per Share (Accounting Standards Board ofJapan Statement No. 2 dated January 31, 2006 (revised2006) and the Guidance on Accounting Standard for
Earnings Per Share (ASBJ Guidance No. 4 dated January
31, 2006 (revised 2006). There are no material items toreport as a result of this change.
Note: The basis for calculating net income per share and net income per share on a fully diluted basis is provided below.
(Unit: Thousands of yen)
Current fiscal year
(From November 1, 2006
to October 31, 2007)

Prior fiscal year
(From November 1, 2005
to October 31, 2006)
Net income per share
Fiscal year net income
Amountnotattributable

to

major

shareholders
Fiscal year net income related to common
stock
Average number of shares outstanding
during the fiscal year

1,720,201

3,431,016－－

1,720,201

3,431,016

30,357,093

32,852,040------

Summary of latent common stock not------

included in the calculation of net income pershare on a fully diluted basis because it will
not have a dilution effect(Material Events after the Close of the Consolidated Fiscal Year)
The Company had no material items to report.

6. Others(1) Changes to Directors
There are no pertinent items.
(2) Other
There are no pertinent items.

Summary of Company Financial Statements, FY Ended October 31, 2007

P.81