Message from the President

I am pleased to have this opportunity to report on the activities of Kanamoto and the Kanamoto Group during the first half of the Business Period ending October 31, 2016 and discuss our policies for the future.

During Kanamoto’s interim period, Japan’s economy overall traced a modest recovery trend as the weak yen and rising stock prices continued, corporate earnings improved and even the employment environment brightened. In the construction industry that is the Kanamoto Group’s main customer, earthquake restoration works and disaster countermeasure works in various regions were continued. While redevelopment projects in the Tokyo metropolitan area also increased, and demand in this region was vigorous as well, in other parts of Japan the pace of spending on public works projects on the whole eased somewhat because the government opted to not enact a large supplementary budget like the one implemented in the same period of the previous fiscal year. On the other hand, negative aspects in the form of higher labor unit costs resulting from a shortage of construction workers and a sharp rise in the cost of raw materials also were manifest. Work has also begun on two major projects, the 2020 Olympics and Paralympic Games to be held in Tokyo and the Linear Shinkansen. Based on the concentrated investment projected over the short term, and our conviction that construction equipment rentals must play an even greater role in the future, we will maintain our organization for responding rapidly to demand.

The Kanamoto Group will continue working to strengthen its business structure and improve its financial position for the future, while making progress on critical objectives based on the various measures in its Medium-term Management Plan BULL53 (FY2014 - FY2016). In our overseas operations, which we have positioned as an engine for medium to long-term growth, we have completed the opening of overseas affiliates and joint venture companies in mainland China, Hong Kong, Singapore, Indonesia, Vietnam, Thailand and the Philippines, and will actively promote business measures to secure earnings opportunities for the future.

We look forward to continuing to receive your unwavering support and encouragement for the Kanamoto Group in the future.

Kanchu Kanamoto, President and Chief Executive Officer