Kanamoto : Report of Business Operations for the 59th Business Period

Report of Business Operations for the 59th Business Period (Business Period ended October 2023) (Attachment to the Notification and Invitation to the 59th Regular General Meeting of the Shareholders) From November 1, 2022 to October 31, 2023

1. Analysis of Operating Results and Financial Position

1. Analysis of Operating Results

1. Summary of consolidated fiscal year operating results (From November 1, 2022 to October 31, 2023)

During the fiscal year under review, Japan's economy showed signs of a gradual recovery due to the normalization of economic activities accompanying the easing of regulations that were implemented in response to COVID-19. However, the outlook remained uncertain due to rising raw material prices caused by unstable international conditions as well as due to global monetary tightening, fluctuations in financial and capital markets and other factors.

In the construction industry in which the Group is involved, construction investment was relatively steady due to a gradual recovery of private sector construction investment in addition to stable public sector investment. However, in addition to concerns about delays in equipment supply due to rising construction costs and semiconductor supply shortages, the situation still requires monitoring mainly regarding restrained capital investment due to an economic recession.

In such circumstances, in order to achieve the goals of its Medium-Term Corporate Management Plan "Creative 60" (FY2020-2024), the Group promoted regional strategies to enhance profit margins and maximize synergistic effects by efficiently using management resources, and also promoted reorganizing the organizational structure and strengthening collaboration between departments, strengthened the asset management system in order to improve utilization rates and optimize the rental unit price, advanced its execution and management capabilities, and worked to expand the stable earnings foundation.

Consequently, in the fiscal year ended October 31, 2023, the Group reported net sales of ￥197,481 million, an increase of 5.0% year on year. On the earnings front, partly due to investment in human resources in preparation for the future in addition to increases in depreciation and selling, general and administrative expenses caused by an absorption-type merger within the Group, operating profit was ￥11,958 million, a decrease of 9.6% year on year, ordinary profit was ￥12,488 million, a decrease of 9.4%

year on year, and profit attributable to owners of parent was ￥6,721 million, a decrease of 19.5% year on year.

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

1. Summary of consolidated operating results by business segment [Construction Equipment Rental Business]

In the construction-related business, which is Kanamoto's core business, although there were differences by region, the strength of rental demand for construction equipment has continued to return due to the progress of various types of large-scale projects, such as the construction of semiconductor plants in Hokkaido and Kyushu, and security-related construction in addition to the continuation of redevelopment work in urban areas, extension projects for bullet trains and renewable energy-related work.

In addition to pursuing more efficient use of its assets in order to strengthen its ability to respond to various types of construction projects, etc., the Group also worked to solve issues related to the stable supply of rental equipment in relation to the increase of construction demand while it promoted technological development and business alliances aimed at realizing DX at construction sites and reducing environmental impact.

As a result, sales by region in this business were up 1.1% in the Hokkaido Region, up 8.4% in the Tohoku Region, up 5.0% in the Kanto & Koushinetsu Region, up 1.2% in the Nishi-nihon Region, and up 8.7% in the Kyushu & Okinawa Region.

Used construction equipment sales increased 5.0% year on year, as Kanamoto proceeded with sales in accordance with the initial plan in order to maintain an appropriate asset mix while carrying out the extension of the rental equipment operation period.

Reflecting these factors, the Group posted net sales in the construction-related businesses of ￥178,087 million, an increase of 4.5% year on year, and operating profit of ￥10,309 million, a decrease of 10.4% year on year.

[Other Businesses]

In the Group's other businesses, net sales was ￥19,393 million, an increase of 10.2% year on year, and operating profit was ￥1,144 million, a decrease of 7.1% year on year, as the business related to the Steel Sales Division as well as the business related to the Information Products Division and welfare-related business performed as planned.

	58th Business Period
Segment	Business Period ended
	October 2022
Construction Equipment	170,433
Rental Business
Other Businesses	17,594
Total	188,028

59th Business Period Business Period ended October 2023

178,087

19,393

197,481

(Millions of yen)

Change from

prior year (%)

4.5

10.2

5.0

1. Financing activities
   1) Funds Procurement
   Funds procurement through capital increase or the issuance of corporate bonds has not

been performed during the current consolidated fiscal year.

2) Capital investment

Capital investment implemented by the Kanamoto Group during the current consolidated fiscal year totaled ￥43,926 million. This included purchases of rental equipment of ￥38,553 million, and investments in assets used by the group, including the establishment, relocation and expansion of branches, of ￥5,372 million.

• Main branches newly established in the Corporate Group >

During the consolidated fiscal year under review, Kanamoto newly opened 3 branches .

Kanamoto Co., Ltd.

New branches: Inzai Branch(Inzai City, Chiba Prefecture)

Ota Branch(Ota City, Gunma Prefecture)

Higashikawa Equipment Center (Higashikawa Town, Kamikawa County, Hokkaido)

Closed branches: Rikuzentakata Branch(Rikuzentakata City, Iwate Prefecture)

Office of the Keihin District of East Japan Works (Kawasaki-ku,

Kawasaki-shi)

1. Transfer, absorption, division or new establishment of businesses The Company had no material items to report.
2. Receipt of businesses from other companies

The Company had no material items to report

1. Succession to rights and obligations concerning the businesses of other corporations etc. by absorption and merger or absorption and division

The Company had no material items to report

1. Acquisition or disposal of shares, other equity or subscription rights to shares of other companies

The Company had no material items to report

1. Financial position and profit and loss in the current business period and three immediately prior business periods

(Millions of yen except per share data, which are in yen)

	56th Business Period	57th Business Period	58th Business Period	59th Business Period
	(current consolidated fiscal year)
Category	(Business Period	(Business Period	(Business Period
(Business Period ended
	ended October 2020)	ended October 2021)	ended October 2022)
	October 2023)
Net sales	179,053	189,416	188,028	197,481
Ordinary income	14,268	15,391	13,780	12,488
Profit
attributable to	8,466	8,907	8,345	6,721
owners of parent
Net income per	221.45	235.55	224.64	185.40
share
Total assets	301,533	303,754	305,320	316,440
Net assets	126,188	134,917	140,611	143,677
Net assets per	3,150.30	3,357.10	3,571.98	3,729.73
share

Note：1. During the 57th Business Period, the Company finalized the provisional accounting treatment for business combinations. As a result, figures for the 56th Business Period are amounts that reflect the finalization of the provisional accounting treatment.

2. Given that the Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29 of March 31, 2020) and relevant ASBJ regulations from the beginning of the 58th Business Period, the above figures for the 58th Business Period (Business Period ended October 2022) and onward are amounts subsequent to the application of said accounting standard and relevant ASBJ regulations.

(4) Issues to be Addressed by the Company

In the construction equipment rental business, which is a core business of the Kanamoto Group, it is important to select rental assets that match the characteristics of sales areas and customers' needs. Based on the collected data, the Company must build an asset portfolio structure aimed at maximizing operational efficiency and establish a strong earnings structure with a detailed operation. In addition, the Company also needs to aspire to be a "general rental company" that provides one-stop and comprehensive customer service, not just rental of goods.

1) Strengthen human resources training, and also Kanamoto Group alliances

In the construction equipment rental industry, intensifying competition between companies could lead to a trend of mergers and acquisitions due to a further increase in distinction and selection. The Company will make efforts to develop employees with the knowledge and skills appropriate for a leader in the construction equipment rental industry, and we will work to develop human resources that can adapt to business expansion in Japan and overseas.

Also, in order to expand the business domains that are essential for the Company to become a general rental company, we will strengthen cooperation with the Group companies and relationships with alliance companies to increase synergy effects between the Group.

2) Deepen asset strategies

In introducing rental assets, we give top priority to market needs, but in recent years the particulars of domestic construction demand, such as ICT techniques, are changing, and therefore we ultimately determine the composition of the assets to be introduced and appropriate amount thereof by thoroughly examining the market and earnings characteristics not only at present, but also looking forward.

To improve operational efficiency of assets, the Group will work to further strengthen systems for collaborative cohesion within the Group.

3) Optimizing Maintenance Costs

Maintaining and improving rental asset value is the very lifeline of the construction equipment rental business, and maintenance costs are essential to that end, but we aim to reduce the cost ratio by consolidating and optimizing the expertise of the Group in terms of expenditures.

4) Increasing profitability

The Company recognizes the importance of establishing a link between our efforts and increasing profitability. With this goal in mind, we will work on training personnel,

strengthening cooperation inside the Group and through alliances, enhancing asset strategy, and streamlining maintenance costs. In order to ensure the effective utilization of management resources, we will either consolidate, close or merge business offices of alliance companies that have experienced profitability drops as a result of operational redundancy in a region, and changes in the external environment. Moreover, as the purchase prices of the Company's main rental assets are rising, we aim to improve the utilization of those rental assets and take measures to adjust the rental unit price to appropriate pricing while carefully explaining to customers the reasons behind this.

5) Promotion of overseas business

At each overseas business location, the Group will strive to create a stronger underpinning for revenue through strengthening the sales structure, including partner strategies, and giving utmost attention to asset and revenue management.

The Group aims to continue to further enhance overseas businesses as future growth engines.

1. Main businesses (As of October 31, 2023)

Activities	Main products and services
	Rental and sale of equipment and instruments for use in construction,
Construction Equipment	temporary materials for construction use, safety products for the
Rental Businesses	construction industry, measuring instrument and modular housing units
	for temporary use
	Sale of steel products such as steel bar, steel plate and round bar, contract
Other Businesses	construction, rental and sale of computers and computer peripheral
equipment、 Rental and sales of social-welfare-service and nursing-care
	equipment

1. Main offices of the Kanamoto Group (As of October 31, 2023)

1. Main offices and facilities

Kanamoto's Head Office and Operations Control Headquarters are located in Chuo-ku in Sapporo, Hokkaido, and the Company's Business Coordination Headquarters is located in Minato-ku in Tokyo.

The number of branches in each of the Company's operating regions is shown below.

■ Number of offices by region (excluding non-operating divisions)

			Construction Equipment		Other Businesses
			Rental Business
	Region
	Kanamoto		Consolidated	Kanamoto	Consolidated
				subsidiaries	subsidiaries
	Hokkaido		81		27	3		0
	Tohoku		58		36	0		0
	Kanto		42		29	1		5
Japan	Chubu		24		9	0		0
Kinki		9		16	0		9
	Chugoku		4		4	0		11
	Shikoku		4		1	0		1
	Kyushu		4		80	0		25
Overseas	China		0		3	0		0
Australia		0		10	0		0
Total			441	55
2) Number of Kanamoto Group employees
							Number of
							employees
Construction Equipment Rental Business				3,373
Other Businesses						338
All companies (shared)						199
		Total				3,910

Notes：1. Figures are the number of full-time employees and do not include directors, temporary or part-time employees.

1. 1. The number of employees increased by 78 compared to the end of the previous fiscal year.
   2. Employees designated as "All companies (shared)" are individuals affiliated with management departments who cannot be classified in a specific segment.
2. Number of Kanamoto employees

Number of	Change compared		Average length of
with end of prior	Average age
employees	service
fiscal year
2,020	－8	39.6	12.5 years

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

employees.

1. Important parent company affiliates and subsidiary companies

1. Parent company affiliates

The Company had no items to report.

2) Subsidiaries

Company name	Capital	Kanamoto's	Main activities
(Millions of yen)	ownership (%)
Assist Co., Ltd.	136	100.0	Rental and sale of furniture, fixtures and safety
products
Kanatech Co., Ltd.			Design and sale of modular housing units for
100	100.0	temporary use
Kanki Co., Ltd.	99	100.0	Rental and sale of construction equipment
			Developing a business in the rental and design,
			manufacture and sale of specialized equipment
KG Flowtechno Co., Ltd.	20	100.0	used for projects such as ground improvement
			work and the construction of underground
			structures
CENTRAL Co., Ltd.			Rental and sales of construction machinery,
410	100.0	equipment, temporary house
SOOKI HOLDINGS Co., Ltd.	1	100.0	Holding Company
Daiichi Kikaisangyo Co., Ltd.	20	100.0	Rental and sale of construction equipment
Toyo Industry Co., Ltd.	31	100.0	Shield tunneling method-related peripheral
equipment rentals and sales
			Rental and sales of construction machinery,
NISHIKEN CO., LTD.	1,119	80.6	temporary materials for construction use,
social-welfare-service and nursing-care
			equipment
Unite Co., Ltd.	1,144	66.9	Rental and sale of road construction equipment,
road construction works
Kanamoto (China)	2,376	100.0	Rental and sale of construction equipment
Investment Co., Ltd.
Kanamoto Australia Holdings	5,687	100.0	Holding Company
Pty Ltd

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

(8) Primary lenders and amount of borrowing (As of October 31, 2023)

Financial institution	Loan balance
(Millions of yen)
MUFG Bank, Ltd.	6,715
North Pacific Bank, Ltd.	6,340
The 77 Bank, Ltd.	4,995
The Hokkaido Bank, Ltd.	4,640
JA - Hokkaido Shinren	4,405
Mizuho Bank, Ltd.	2,720
The Norinchukin Bank	2,455
THE NISHI-NIPPON CITY BANK, LTD.	1,310
The Aomori Bank, Ltd.	1,220
The Bank of Fukuoka, Ltd.	1,125

1. Basic Policy Concerning Distribution of Earnings and Dividends for the Consolidated Fiscal Year under Review and Next Consolidated Fiscal Year

Distribution of earnings to shareholders is a key management issue. The dividend policy of Kanamoto is to provide shareholders with a consistent and stable dividend regardless of the business environment. Furthermore, the Company aims to implement profit distribution in line with earnings performance. Moreover, it is the basic policy of Kanamoto to sufficiently build up its retained earnings, which is essential for strengthening financial position and to implement aggressive business expansion.

For the fiscal year ended October 2023, the Board of Directors has decided to pay a year-end dividend of ￥40 and an annual dividend of ￥75 per share (which includes an interim dividend of ￥35).

Furthermore, the Company aims to allocate retained earnings to capital investments, including facilities investment for rental equipment and other assets. Note that the company is putting a share buyback program into place to facilitate the flexible implementation of capital policies.

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

2. Matters Concerning the Company's Stock

Summary of Common Stock (As of October 31, 2023)

1) Total number of shares authorized 130,000,000 shares

2) Shares issued and outstanding	38,742,241 shares
(including 2,681,810 shares of treasury stock)
3) Number of shareholders	8,631
4) Principal shareholders (ten largest)
	Number of	Percentage of
	shares held
Shareholder name	total
(Thousand
	(%)
	shares)
The Master Trust Bank of Japan, Ltd. (Trust account)	4,623	12.82
Custody Bank of Japan, Ltd. (Trust account)	2,696	7.48
ORIX Corporation	960	2.66
Kanamoto Capital Company	915	2.54
SMBC Nikko Securities Inc.	899	2.49
The Hokkaido Bank, Ltd.	888	2.47
Tokio Marine & Nichido Fire Insurance Co., Ltd.	802	2.23
North Pacific Bank, Ltd.	763	2.12
Denyo CO., Ltd,	625	1.73
HOKUETSU INDUSTRIES CO., LTD.	619	1.72

Notes：1. Percentage of total is calculated excluding treasury shares (2,681 thousand shares).

1. 2. The Company holds treasury share numbering 2,681 thousand shares. However, the Company is excluded from the above list of Principal shareholders.

2. Status of shares granted to officers of the Company as compensation for their execution of duties during the fiscal year under review

Classification	Number of shares	Eligible for issuance
Directors	8,600 shares	7 directors

Note： Details of the Company's share-based remuneration are presented in "2) Matters concerning non-monetary remuneration, etc.

6) Other important matters concerning stocks

Pursuant to a resolution made at the Board of Directors meeting held on December 9, 2022, the Company acquired 900,300 shares of treasury stock through buying on the