Investors’ Guide 2018

Business Philosophy of U.S.M.Holdings
Our corephilosophy

BusinessvisionWe● Offer customers healthy, valuable choices in food
● Cultivate deep relationships to build prosperous local communities● Constantly pursue innovation and move with the times
In our business, we aim to● Offer products and services tailored to various lifestyle choices that give customers
access to a range of healthy, valuable foods● Create a corporate culture that supports employee self-fulfillment by providing skills
training and encouraging people to achieve their potential● Continually develop and grow over time while seeking to maximize enterprise value● Create new value based on fair dealings with our business partners for customer benefit● Welcome new companies into the group to help us meet the needs of local communities
and engage in fair, transparent corporate governance while respecting the managementof each member company of U.S.M. Holdings.

Outline of U.S.M. Holdings

Take responsibility for functions and roles for overall optimization and offer new value

Molding the constituent members, including the holding company, into a single businessgroup and making the best use of the individual parts while considering the whole
The Maruetsu, Inc.
Maruetsu brand development

The three formats are: “Maruetsu,” anenjoyable place to shop daily for fresh
food and other groceries; “Maruetsu
Petit,” an urban-format supermarket
tailored to city residents; and “Lincos,”a supermarket offering high-quality
merchandise and service (includes two
stores in China).

Kasumi Co., Ltd.
Kasumi brand development

The three supermarket formats are theflagship “Food Square” brand marketing new delights for mealtimes, thecore “Food Market” brand supplying
groceries to suit local tastes and customs, and a discount format offering
everyday low prices under the “Food
Off Stocker” brand.

MaxValu Kanto Co., Ltd.
MaxValu Kanto brand development

Stores trading under the “MaxValu”
format aim to maximize value for customers shopping for daily groceriesin terms of quality, price, range andservice, while the “MaxValu Express”
format offers convenience, competitive prices and surprising variety thatchanges daily for those shopping foreveryday necessities.

Network

Achieving synergy throughintegration of three companies
and promoting businessdevelopment responsive toconsumer needs

Main new stores and refurbished stores

Maruetsu Okubo-eki-make Store(Opened in October 2017)⃝ Location : Narashino-shi,
Chiba Prefecture⃝ Sales floor area : 608 tsubo
Implementing new forward-looking
initiatives centering on freshd e li c a t e s s e n, w hil e e mp h a s i z in gcommunication with customers

Development of stores deeply rooted
in local communities from customers’ viewpoints
The U.S.M. Holdings Group’s operations are in the region ofTokyo and the adjacent prefectures. Although this is Japan’s
richest and most promising retail market with expectations forsustainable growth in the future, competitions crossing overindustries are intensifying.
U.S.M. Holdings has an overwhelming share of this affluent
regional market and operates 511 supermarkets in the region.
In pursuit of future growth, while accelerating operational
efficiency through maximization of the economies of scale
and mutual utilization of infrastructure among the three companies, we also seek to upgrade the quality of our operations
to meet the needs of customers in each community, keeping
a tight focus on communities and paying attention to theneeds of local customers. By developing stores that create
and offer new value, U.S.M. Holdings will develop new supermarket store formats that gain the support of customers withthe aim of becoming the No. 1 supermarket chain in the
Greater Tokyo Area.

Food Square Kasumi Ryugasaki-Nakazato Store(Opened in December 2017)⃝ Location : Ryugasaki-shi,
Ibaraki Prefecture⃝ Sales floor area: 606 tsubo
Kasumi’s 100th store in Ibaraki Prefecture. Merchandising with an emphasis on
the relationship with the community, suchas offering of vegetables sourced fromlocal farmers and other local products

MaxValu Tatsumidai Store(Refurbished and opened in June 2017)⃝ Location: Ichihara-shi,
Chiba Prefecture⃝ Sales floor area: 825 tsubo
The store, which opened in 1996, wasentirely refurbished. Promoting customer
service, product selection, and store layout with the aim of becoming an indispensable store in the community

Fiscal year ended February 28, 2018: total of 15
new stores opened, expanding the network to 511 stores

Maruetsu
KasumiU.S.M. Holdings opened a total of 15 new stores in the fiscal
year ended February 28, 2018, split between Maruetsu (7)and Kasumi (8). A total of 7 stores were also closed (Maruetsu 5, Kasumi 2,) as part of a scrap-and-build policy to try to
maximize operational efficiency.

Gunma
Prefecture
6 stores

Number of stores (graph)■Maruetsu■Kasumi

451
32

151

■MaxValu Kanto

479
44

159

MaxValu Kanto

494
39

170

503
34

179

511

(stores)

34

185

Tochigi
Prefecture
9 stores6332

SaitamaPrefecture 55
90 stores

8

IbarakiPrefecture100
101 stores

14

Tokyo 142
158 stores

Striving to be No.1 in the region, we develop store formats aimed at increasing customer satisfaction.

268

276

Feb. 2014

Feb. 2015

285

Feb. 2016

290

Feb. 2017

292

Kanagawa 2
Prefecture
47 stores 45

1

2

1

15
Chiba
Prefecture 37
100 stores48

Feb. 2018* The two Maruetsu stores in China are not included.
12

Message from the Management
In the consolidated fiscal year under review, althoughfurther in implementations while hourly wages continue to rise

spending per customer and average unit price at existingaccompanying a shortage of labor, and the burden of social

stores were mostly in line with expectations, the number of

security costs continues to increase.

customers was only 99.0% of that in fiscal 2016. We attri-

Finally, we set up a study group with an outside company

bute this result to our delay in responding to changes in theand initiated activities with the aim of constructing a logistics

market environment, such as the increased prominence ofsystem in pursuit of optimal efficiency as a Group. Going

the Internet, drugstores, and convenience stores, as well as

forward, we will consider solutions for workforce reduction

diversification of customer needs. By store location, regional

and laborsaving by introducing technologies such as the IoT

disparities became pronounced, with the numbers of cus-

and artificial intelligence, and proceed with implementation

tomers at stores in Saitama, Ibaraki, Gunma, and Tochigi

verification by partnering with an outside company.

falling to the 98% range compared to fiscal 2016. Although

In fiscal 2018, we will pursue greater speed and scale,until now we have pursued a strategy of achieving domi-

integrate functions and business processes common amongnance by enlarging or reducing sales floor area in accor-

the operating companies, and undertake cost reform ac-

dance with the size of each store’s catchment area, sincecompanying business structure reform with U.S.M. Holdings

this strategy has not led to the anticipated results in somedemonstrating its leadership.

areas, we consider it necessary to promptly pursue develop-

Implemented reform in four key areas
and achieved synergistic effects

Implemented major organizationalchanges and accelerated synergy
creation to achieve the objectives in
the medium-term business planIn fiscal 2017, we implemented the following initiatives for

In fiscal 2018, we implemented organizational changes inachieving the objectives in the medium-term business plan

March to accelerate synergy creation in the U.S.M. Holdings

in four key areas: merchandise reform, ICT reform, cost

Group. We established the Materials Procurement Department

structure reform, and logistics reform.

and the Purchasing Integration Promotion Department and, forment based on a new format.

Makoto Ueda

Chairman and
Representative Director

Motohiro Fujita
President andRepresentative Director

Speedily implementing reforms
in key areas and pursuing further synergy
to prepare for a new stage

the purpose of promoting back-office reform and sharing ofof sundries and clothing and centralized the purchasing

business infrastructure, established the Finance and Account-function. We also expanded joint procurement of jointly

ing Department and the ICT Development and Operation De-planned products and materials, and in October 2017

partment to integrate functions of finance and accounting sec-

launched the “eatime” brand for private-label merchandise.

tions and ICT sections of the operating companies.

As for the strengthening of fresh foods section, which

Furthermore, we established the Business Development

was a challenge, each operating company devised mea-

Department and the Digital Business Planning Department

sures and regularly shared information regarding their con-as pillars of future business development and will begin con-tents and results. However, since recently the correlation

sideration for establishment of a new supermarket model.

between measures to strengthen fresh foods and the num-Through promoting management by integrating the“Maximization of synergy through sharing of business infra-

ber of customers is weakening in some respects, more in-

U.S.M. Holdings, with the addition of above new depart-structure” and “Establishment of a new supermarket model

depth product development using the opportunity to rejuve-ments, and operating companies, we plan to accelerate theadapted to consumer changes.”nate existing stores is an urgent priority.

pace of reform to achieve objectives in the medium-term

Undertaking new format development
in anticipation of changes in the business environment

duce systems costs, and promoted strategic data utilization

In the cost structure reform, we continued to move aheadpress this in product offerings and services. We believe thatthrough promoting harmonization among the three operat-

Further changes in the business environment are predictedwith cost reduction through joint procurement, and began toinitiatives of individual stores are extremely important for ful-

ing companies and, in fiscal 2017, by shifting from harmoni-over the next 10 years, including regional disparities in the

integrate the finance and accounting function to increase

filling this mission and consider it important to reexamine

zation to integration stage. We have also formulated a medi-

demographic profile of the Greater Tokyo Area, changes inhead office efficiency. In our efforts to reduce selling, generalarea needs, transform our merchandising and services, andum-term business plan covering the three-year termhousehold structure and diet, ICT-driven technological inno-

and administrative expenses, although we worked to morerefine each store.

beginning in fiscal 2017 and are implementing reforms nec-

vation, and changes to the cost structure resulting from per-rigorously control total working hours by improving work effi-

essary for continued growth in line with the basic policies ofsonnel shortages.

ciency and introducing outsourced packaging, we must go

Rapidly and steadfastly implementing
the medium-term business plan
United Super Markets Holdings Inc. (U.S.M. Holdings) wasestablished in March 2015 as a joint holding company for
The Maruetsu, Inc., Kasumi Co., Ltd., and MaxValu Kanto
Co., Ltd. Under a basic policy of exploiting integration synergy to create original value, we have pursued synergy

3First, in merchandise reform, we integrated purchasing

Next, for ICT reform, we are continuing initiatives to reand systems development. Channel diversification is also
progressing rapidly, and we will respond expeditiously.

business plan and create synergy worth 1.6 billion yen in
fiscal 2018.
The mission of supermarkets is to place importance oneach region’s food culture, lifestyles, and customs and ex-

We request your continued support of the U.S.M. Holdings Group.
4Medium-term Business Plan

Integration stage underway for growth over the next 10 years

Initiatives in fiscal 2018 for achieving the medium-term business plan objectives

In line with our medium- to long-term strategy covering the period up to fiscal 2025, U.S.M. Holdings will formulate and implement a medium-termbusiness plan every three years. Considering the three-year term of the first medium-term business plan launched in fiscal 2017 to be a period forlaying the foundation for realizing sustained growth in the future, which is based on the environmental change in the next ten years in the Greater Tokyo
area, we will offer new value attuned to customer needs.

In fiscal 2018, the Group will promote integrated business management to further accelerate the pace of reforms to achieve the objectives in the medium-term business plan. While respecting autonomous store management of each operating company and through promoting projects under the neworganizational structure with newly established departments, we will work to ensure creation of synergy that will contribute to higher profit on a consolidated basis.

For the new stageof growth over the next 10 years

Medium- to long-term strategic directions⃝ In-depth cultivation of the dominance strategy in— Accelerate the pace of reforms by shifting from theharmonization to the integration stage —the Greater Tokyo Area

Three key areas for integration specified and initiatives
implemented in order to speedily create synergy⃝ Format development and merchandise strate-

gies adapted to a new consumer profile<Basic policies>⃝ Maximization of synergy through sharing of busi-⃝ Construction of business infrastructure adapted⃝ Challenge for establishment of a new supermarket⃝ Across-the-board cost structure reform of sell-to the future business environment

ness infrastructure

ing, general and administrative expenses

model adapted to consumer changes

From the viewpoint of overall optimization, we have specified areas for integration that will contribute to higher profit of the Group and promote initiatives
under the leadership of U.S.M. Holdings. The three areas for integration are “functions to be shared,” “information to be shared,” and “functions forhandling common needs.” We are committed to ensure creation of synergy also through the implementation of three projects: “cost structure reform,”“merchandise reform,” and “logistics reform.”

U.S.M.H policy for fiscal 2018

Implemented reforms in four key areas to achieve the medium-term business plan objectives
In fiscal 2017, we promoted merchandise reform, ICT reform, cost structure reform, and logistics reform to achieve the objectives in the medium-termbusiness plan. In regard to ICT, starting with integration of procurement of merchandise and concentration of procurement functions, we are promoting
strategic data utilization and systems development. We are also promoting integration of finance and accounting functions while maintaining cost reduction through joint procurement. To establish the optimum logistics system for the entire Group, we set up a study group with an outside company
and initiated activities.
*ICT: Information & communication technology

Everyone at the Group will adopt the viewpoint of overall optimization andseek various forms of integration to ensure creation of synergy.
New functions

Information sharing● Development of new● Property development

Functional integration● Integration ofpurchasing● IT integration● Materials procurement● Accounting center

business formats● Training of experts● Digital business● Consideration of PC
functionsFiscal 2018

Three projects● Cost Structure Reform Project● Merchandise Reform Project● Logistics Reform Project

Creationof synergy¥1.6 billion(plan)

Fiscal 2017-2019 First medium-term business plan: targets

Establishment of the leading supermarket chain
in Japan by achieving synergy
Fiscal 2019

Operating revenue
Operating income
Operating income ratio
ROE

Long-term target

Company name Store opening plan

780.0-800.0 billion yen
20.0 billion yen
2.5%
6%

Maruetsu
Kasumi
MaxValu Kanto
Total

42 stores
30 stores
2 stores74 stores

Realization of the vision of
a company adapted to
evolving consumer needs
and aspirations

Operatingrevenue¥1trillion●Functions common to operating companies, such as systems section and materials procurement section, were integrated and reorganized into headquarters-level organizations
from the previous department-level organizations.
ously address areas that cannot be addressed by an operating company alone.

New departments to accelerate the pace of reforms
by working together with operating companies

Operating revenue 692.2 billion yen
Operating income
14.0 billion yen
Operating income ratio
2.1%

2020
2021
2022
Second medium-term business plan

2023
2024
2025
Third medium-term business plan

Business environment of U.S.M. Holdings

Issues in fiscal 2017

⃝ Regional disparities in the demographic profile of⃝ Examination of new store format development and

the Greater Tokyo Area and changes in the household structure⃝ ICT-driven technological innovation, and changes to the cost structure resulting from personnel shortages⃝ Channel diversification

5

Promotion of three projects●New departments were established to quickly respond to customer needs and to vigor-

Fiscal 2017

2017
2018
2019
First medium-term business plan

Reorganization to accelerate initiatives

store opening strategy by reexamining area needs⃝ Promotion of marketing and merchandise reform⃝ Response to rapid channel diversification⃝ Enhancement of efficiency through operational integration; workforce reduction and laborsaving
through IT utilization, etc.

Acceleration ofsynergy creation

Materials Procurement
Department

Purchasing Integration
Promotion Department

Back-office reform
Sharing of business
infrastructure

Finance and Accounting
Department

ICT Development andOperation Department

Establishment of a
new supermarket
model

1 Cost Structure Reform Project
Across-the-board reduction of
expenses and structural reformof selling, general and administrative expenses as well as cost
reduction through functional integration to achieve good results

2 Merchandise Reform Project
Synergy creation mainly by accelerated development of “eatime” private-brand products,
development of exclusive products, joint procurement, andjointly planned products

3 Logistics Reform Project
Business Development
Department

Digital Business Planning
Department

Consider with the goal of realizing the next-generation logistics network plan and the
new center plan, and also improve logistics efficiency of
existing stores

6

Business Efforts

Introduction of a long-awaited
new brand

Kasumi Co., Ltd.

October 2017 marked the debut of “eatime,” the Group’s first

Developing unique and appealing stores thatplay an integral role in local communities

brand of private-label merchandise at all Maruetsu, Kasumi,
and MaxValu Kanto stores. Based on the concept of proposing
new values to customers, “eatime” is a brand of original merchandise conceived by the three food supermarket compa-

Corporate Datanies in pursuit of deliciousness, with a focus on food cultures
Head office

Nishiohashi, Tsukuba-shi, Ibaraki Prefecture

Established

June 1961

lent products from southern Italy: whole tomatoes using San

Capital

100 million yen

Marzano tomatoes, a variety characterized by sweetness andNumber of stores

185 stores

umami, and five IGP-certified long and short pasta products.

Number of employees 11,333

In March 2018, we launched a choice extra virgin olive oil*As of February 28, 2018of various regions and specialties rooted in regions.
As phase one of the brand rollout, we launched six excel-

purely extracted from Ortice olives produced in Benevento in
the Campania region of southern Italy.

With the aim of building stores loved by thecommunity by listening to customer feedback
and employees’ ideas, Kasumi promoted initiatives to become the base for living in local communities
where customers can find something new, experience something interesting, or cultivate new relationships. Especially, enrichment of “Eat-in” spaces was promoted primarily at new stores and various events
held at individual stores utilizing employees’ ingenuity and relationships with the local community attracted
many customers.

■ Creating appealing merchandise layouts and strengthening EDLP measures for daily necessities

We plan to accelerate the pace of product introductionand enhance the product lineup.

Kasumi strove for product selection and merchandise development based on six key concepts: “Delicious,
safe, and worry-free,” “Fresh and new,” “Health,” “Simple and convenient,” “Community,” and “Fun andfulfillment.” The company also strengthened measures to offer daily necessities every day at low prices(ELDP) to increase sales volumes. As a result, in the fiscal year ended February 28, 2018, Kasumi’s
non-consolidated operating revenue rose 2.6% year on year to ¥269,289 million, while operating income
fell 6.1% to ¥5,897 million.

“eatime” website

https://eatime.jp

The Maruetsu, Inc.

MaxValue Kanto Co., Ltd.

Promoting creation of attractive products,
including greater selection of fresh delicatessen
featuring seasonal ingredients

Community-focused supermarket chain
pursuing customer satisfaction through store
layout and merchandise

Corporate Data
Head office

Higashi-Ikebukuro, Toshima-ku, Tokyo

Established

October 1945

Capital

100 million yen

Number of stores

292 stores

Number of employees 16,409*As of February 28, 2018

■ Initiatives in the fiscal year
ended February 28, 2018
Having positioned the fiscal year ended February 28, 2018 as the year to achieve operational reform through involvement of all personnel, Maruetsu focused on operational reform, store development reform, and response to future growth. In October 2017, led by the New Store Development Promotion
Project, Maruetsu Okubo-eki-mae Store opened, which introduced new merchandising and services for new
stores and refurbished stores.

■ Focus on laborsaving measures, such as improvement of efficiency oforder placement and store operation
Key initiatives in the fiscal year ended February 28, 2018 included expanded introduction of partial self-checkout
systems at 189 stores as a laborsaving measure as well as the introduction of the Delicatessen Menu Order-placing System, which simplifies order placing, and the Total LSP System, which is designed for establishment of efficient store operation, at all stores. In addition, to respond to the trend toward delicatessen products,
Maruetsu promoted introduction of fresh delicatessen featuring seasonal fresh ingredients mainly at refurbishedstores. As a result, in the fiscal year ended February 28, 2018, Maruetsu’s non-consolidated operating revenuerose 0.7% year on year to ¥375,556 million, and operating income rose 3.4% to ¥7,841 million.
7■ Initiatives in the fiscal year
ended February 28, 2018

Corporate Data
Head office

Kameido, Koto-ku, Tokyo

Established

December 2009

Capital

100 million yen

Number of stores

34 stores

Number of employees 1,852*As of February 28, 2018

■ Initiatives in the fiscal year
ended February 28, 2018
During the fiscal year ended February 28,
2018, MaxValu Kanto focused on three measures: “Strengthening of Store Competitiveness,” “Overhaul of the Cost Structure,” and “Reform of the
Corporate Culture,” inspired by the new vision of creating “pleasure of shopping.” The company launched
and implemented processes for resolving issues at each store based on the new vision.

■ Strengthening competitiveness of existing stores and promoting reform of the cost structure
Regarding strengthening of store competitiveness, the company promoted proactive measures centeringon vitalization of the existing stores, strengthened price competitiveness, through promotion events including price reduction of TOPVALU products to show appreciation to customers, worked to resolve issues ofindividual stores, and enhanced merchandise layout development capabilities by assigning supervisors.
Regarding overhaul of the cost structure, the company thoroughly reviewed the overall costs and strove toimprove store operation. With a view to reforming the corporate culture, the company revised its employee
performance awards system to enhance employee motivation. As a result, in the fiscal year ended February
28, 2018, MaxValu Kanto’s non-consolidated operating revenue fell 4.7% year on year to ¥43,480 million,
while operating income rose 69.5% to ¥184 million.
8

CSR Activities
U.S.M. Holdings’ Basic Policy on the Environment

Environmental Impact Reduction and CO2 Reduction

The United Super Markets Holdings Group recognizes that environmental problems constitute a critical global issue andmakes concerted efforts to protect the global environment, helping to build a sustainable recycling society through soundbusiness activities that foster social and economic development and harmonious coexistence with local communities.

1. We actively work to conserve resources and energy through our business activities.
2. We work to develop and popularize environmentally friendly products and materials.
3. We promote waste reduction and The Three R’s: reuse, reduce and recycling.
4. We contribute to local environmental protection activities and strive for harmony with local
communities.

■ Recycling Activities■ Food bank

The Group companies install recycling bins at the front of each of
their stores and collect recyclable resources such as food trays,
milk cartons, and PET bottles. Kasumi, in particular, collects recycled resources at Recycling Stations installed at all stores and sorts
and stores them at the Kasumi Recycling Center, which performs
primary processing.

Kasumi has been donating food products to a food bank sinceNovember 2016. From companies and other donors, the foodbank receives safe food items with no quality issues that are discarded for various reasons and donates them to welfare facilities
and other organizations that need food.
Through these food donations to a food bank in the region where
Kasumi has stores, Kasumi reduces wastage of food products with
unexpired best-before dates and use-by dates and effectively utilizes
food products.

■ “Visualization” of the amount of waste discharged■ Carbon Offsetting

Maruetsu has introduced at morethan 200 supermarkets, mainly its
eponymous stores, a waste
weighing and management system that quantifies the amount ofwaste discharged at each store.
By “visualizing” waste discharged
from its stores, Maruetsu is working to curtail waste emissions byincreasing employee commitment
to waste reduction.

Since the previous year, Maruetsu has been engaged in a carbon
offset initiative to offset CO2 emitted in the manufacture of the plastic grocery bags it provides for customers, purchasing the right to emit CO2
equivalent to the amount absorbed inforest conservation activities conductedby Iwate Prefecture, Tome City in Miyagi
Prefecture, and Kitakata City in Fukushima Prefecture. In addition to contributing to global warming mitigation, thisinitiative also supports environmental
protection activities and local communities in areas that were stricken by theGreat East Japan Earthquake.

5. We familiarize employees with this policy, nurture a spirit of environmental protection in eachindividual, and engage in group-wide activities that involve all employees.
6. We announce this environmental policy to our employees and the public and strive to provide
information on our activities proactively.

U.S.M. Holdings engages in CSR
activities from three perspectives.

Environmental
impact reduction andCO2 reduction

The U.S.M. Holdings Group engages in CSR activities from three perspectives: “Environmental Impact Reduction
Safety and security

and CO2 Reduction,” “Safety and Security,” and “Contributions to Society.” We contribute to local communities

Contributions tosocietyand our stakeholders through our CSR activities.
August 2017
●Maruetsu ●Kasumi ●MaxValu Kanto●Rikuzentakata Tanabata Festival Experiential
Learning●Donations to eel resource conservation activities●Opened a nutrition care station under The Japan
Dietetic Association’s certification program
October 2017
February 2018●●●Sale of 24 Hour Television charity shirts and ●Engaged in a carbon offset●Winning of the Carbon
fundraising
initiative
Offset Gran Prix

Major initiatives in fiscal 2017
March 2017
●AEON Happy Yellow
Receipt Campaign●Guide dog training
center tours
2017年 3月

May 2017●Held the Kasumi Empathy
Creation Forest tree-planting festival
4月

5月

April 2017
●Support for the Kasumigaura Marathon,setting up of aid stations

6月

7月

8月

July 2017●Dispatched delegates of
the Natures Kids

●Maruetsu forest conservation volunteer

program

9月

10月

11月

12月 2018年

1月

2月

September 2017

November 2017

●Started health consultation●Reconstruction assistance calendar “Ashita (Tomorrow)at the ALCO Koshigaya
Store eat-in corner2018” charity activities●Started health consultation at the Okubo Ekimae Storeeat-in corner●Set up aid stations at the Tsukuba Marathon

Year-round continuous initiatives●● Donations to the Japan Guide Dog Association● 5 a DAY hands-on harvest tours● Donation of 1% of pet food sales of maruetsu365 to the Japan Guide Dog Association● Dietary education classes for seniors at mobile sales centers● Guide Dog Friends Club

● Training of food educators and food instructors

greening funds●●● Donation of the proceeds from the sale of bottle caps collected at stores for use inpurchasing vaccines●●● Bring your own shopping bag campaign●●● Collection of recyclable resources● Operation of a recycling center● Promotion of waste visualization and reduction of food product waste through theintroduction of a waste weighing and management system● Reduction of food product waste and donations to a food bank that effectively utilizes

food products with unexpired best-before dates and use-by dates●●● Recycling of food leftovers

Safety and Security Initiatives● Conduct of supermarket tours● Guide dog contact campaigns● Donation of an amount equivalent to 1% of drink vending machine sales for use as

9●Maruetsu ●Kasumi ●MaxValu Kanto● “Boxed Lunch Day” dietary education project for junior high school students● Health support, including measurement of health data and provision of advice on

nutrition, launched in fiscal 2018

● Training of service care-fitters●● Promotion of employment of persons with disabilities● Welcoming of social studies field trips● Participation in community events that place importance on ties with local communities● “Clean & Green Day” cleanup activities at stores and near the head office on theeleventh of each month● Donations to the World Wildlife Fund (presentation of donations)■ Voluntary Inspections for Radioactive Substances■ ISO 22000 and ISO 9001 Quality Management Certification

The Group has put in place an inspection system for radioactive
substances to enable customers to purchase food productswith confidence and peace of mind. Maruetsu and Kasumi conduct voluntary product inspections and disclose on
their websites the results ofsampling inspections offresh produce, milk, tofu,
and other products.

Maruetsu has obtained certification under the ISO 22000 international standard for food safety management systems at its fresh
food processing centers for fresh meat and fresh fish and attests
that it provides customers with safe, high-quality food products.
Rose Corporation Co., Ltd., a Kasumi Group company that produces and processes boxed lunches and prepared foods, has obtained certification under the ISO 9001 international standard for
quality management systems and engages in rigorous quality control that ensures customer peace of mind.

●● Voluntary inspections for radioactive substances

10

CSR Activities

Corporate GovernanceCorporate GovernanceContributions to Society■ Support for Guide Dog Training■ Great East Japan Earthquake Reconstruction Assistance

The Group supports guide dog training through monetar y
donations and is conducting activities to raise understanding and support for guide dogs. Maruetsu conducts events
such as guide dog training center tours for customers.
Maruetsu has continuously made dona tions to the Japan
Guide Dog Association (JGDA ) since 1993 through activities to raise funds for guide dog training, and the cumulative amount donated by fiscal 2017 was approximately 281
million yen. Kasumi periodically holds meetings of the Kasumi Guide Dog Friends Club (Kasumi Modoken FriendClub) with JGDA support.

Since the Great East Japan Earthquake of 2011, Kasumi has continuously
engaged in activities to assist the city of Rikuzentakata, which was devastated in that disaster. Its companywide charity activities based on a reconstruction assistance calendar, “Ashita (Tomorrow) Calendar,” are in theirseventh year, and the total amount of donations to the Rikuzentakata Elementary and Junior High School Reconstruction Fund amounted to ¥107.57
million. Rikuzentakata Tanabata Festival Experiential Learning (Rikuzentakata Tanabata Matsuri Taiken Gakushu) has been held since 2012. At the timeof the Tanabata Festival, held on August 7 each year, elementary school
students from areas where stores are located and new Kasumi employees
visit Rikuzentakata for two nights and three days. By helping with the preparations for and joining
in the Tanabata Festival, the participants
deepen their interact i ons w i t h ot her s andlearn the importance ofbonds between people.

■ Collection of PET Bottle Caps to Purchase Vaccines■ Happy Yellow Receipt Campaign

The Group companies collect PET bottle caps at their storesand donate the proceeds from the sale of the caps to theJapan Committee, Vaccines for the World’s Children (JCV) for
use in purchasing vaccines for children around the world.
(Some stores do not participate.)

All MaxValu Kanto stores are continuing AEON’s “Happy Yellow
Receipt” initiative. Each year, during the three-day period fromMarch 9 to 11 they participate in the “Happy Yellow Receipt Campaign” to support children in areas devastated by the Great East
Japan Earthquake. During the campaign, customers who visit thestores send their wishes through their purchases.

Basic Policy on Corporate Governance

Board of Directors⑴ Respect the autonomy and independence of the operatingcompanies and ground corporate governance in the basic
principles, vision, and mission formulated at the time theCompany was established based on the common principles“Customer-first” and “Contribution to local communities.”

The Board of Directors consists of nine directors (including
three outside directors). The Board meets once a month, inprinciple, and holds extraordinary meetings as necessary. The
five Audit & Supervisory Board members attend Board of Directors meetings. At Board meetings, the directors deliberate andresolve matters prescribed by law and matters set forth in the
Board of Directors Regulations and oversee the execution ofbusiness by the directors on the basis of regulatory complianceand appropriate risk management. As a pure holding company,
the Company requires the operating companies to report to theCompany important resolutions and governs the appropriate
execution of business operations by the operating companies.

⑵ Maintain transparency and fairness in decision-making toensure appropriate cooperation with shareholders andother stakeholders.
⑶ Regard shareholders with whom appropriate cooperation
can be achieved from a medium- and long-term perspective, particularly customer shareholders who provide opinions through their daily shopping, and other stakeholders
as important partners. Create an environment that enables
constructive dialogue with these stakeholders and develop
a framework to reflect their feedback in management.

Audit & Supervisory Board
The Audit & Supervisory Board consists of five corporate auditors (including three outside corporate auditors). The Board
meets once a month, in principle, and holds extraordinary
meetings as necessary. At Board meetings, the corporate auditors receive reports on, discuss, and resolve important audit-related matters. The corporate auditors audit the legality ofthe execution of duties by the directors, the status of assets,
and other matters in accordance with the audit policy anddivision of duties established by the Audit & Supervisory
Board. The Audit & Supervisory Board convenes meetings ofthe Group Auditor & Supervisory Board Liaison Committee forthe purpose of cooperating with the corporate auditors andinternal audit departments of the operating companies, strives
to ensure highly effective auditing, and works to reinforce thegovernance function and internal audit function.

⑷ On the basis of (1) to (3) above, demonstrate a healthy
entrepreneurial spirit by ensuring rationality in the management decision-making process and strive for theCompany’s sustained growth and enhancement of medium- and long-term corporate value by realizing promptand decisive decision-making.

(As of May 21, 2018)

Corporate Governance Structure

Directors and Corporate Auditors(as of May 21, 2018)

General Meeting of Shareholders
Election/Dismissal

The U.S.M. Holdings Group’s dietary education activities

Oversight

Audit &
Auditing
Supervisory Board(Corporate auditors)

Collaboration
Reportingcorners that provide practical food support that can be incorporated in people’s lives. They
provide data obtained using four types of measuring instruments and offer health advice from
dieticians and national registered dieticians.

EATPIA certified as a nutrition care station
EATPIA is a place staffed by national-registered dieticians and dieticians that supports customers’ at-home dining and disseminates and puts into practice information that enriches food andliving. In August 2017, EATPIA became the first in the supermarket industry to be certified as anutrition care station under The Japan Dietetic Association’s certification program.

11

Accounting auditor/Audit corporation

Health support
Beginning in fiscal 2018, Group supermarkets are utilizing their eat-in corners as health support

Board of Directors(Directors)

Collaboration

Collaboration

Audit & Supervisory
Board Committee(Group corporate auditors)

Auditing

ReportingOversight/
Policyreinforcement

Oversight Election/
Dismissal

Accounting auditing

President andRepresentative
Director

Management
Council
Resolution/
Approval

ReportingInternal Audit Department
・Internal control
・AuditingInternal
auditing

Corporate departments
ReportingManagement guidanceApproval of important matters

Corporate auditors/
Audit departments

Reporting

Subsidiaries

Resolution/
Approval

Chairman and
Representative Director

Makoto Ueda

President andRepresentative Director

Motohiro Fujita

Representative Director

Daisuke Tezuka

Director

Ryota Furuse

Director

Toshiki Ishii

Director and Advisor(part-time)

Motoya Okada

Outside Director(part-time)

Koji Yamazaki

Independent Outside Director(part-time)

Shigekazu Torikai

Independent Outside Director(part-time)

Naoko Makino

Corporate Auditor(Standing)

Tsutomu Uchida

Corporate Auditor(Standing)

Tatsuo Mizuhashi

Outside Corporate Auditor(part-time)

Akira Sasaoka

Outside Corporate Auditor(part-time)

Shigeru Koyama

Independent Outside Corporate
Auditor (part-time)

Shinobu Okamoto
12Consolidated Financial Statements (As of February 28, 2018)

Stock Information (As of February 28, 2018)

Consolidated Balance Sheet
Account(Millions of yen)

17’ 2

18’ 2

Assets25,709383

389

Inventories

16,871

16,964

Accounts receivable - other

17,36918,198

Number of shares authorized 500,000,000 shares

18’ 2

Net sales

670,475

677,557

Number of shares issued

131,681,356 shares

Cost of sales

481,350

485,287

Number of shareholders

68,912Gross profit

189,124

192,269

14,331

14,691

46,78547,443ー

5,000

Operating revenue

17,5003,400

Operating gross profit

203,456

206,961

Income taxes payable

2,548

2,150
1,997

192,892

Provision for bonuses

1,939

Selling, general and administrative expenses 189,136
14,32014,068ー

1,373

Non-operating income

567

521

701

402

Notes and accounts payable - trade
Short - term loans payable
Current portion of long-term loans payable

Operating income

Deferred tax assets

1,916

2,469

Other

2,700

3,337

Provision for loss on store closings

103

239

Non-operating expenses

Provision for doubtful accounts

(142)

(124)

Provision for shareholder benefit program

259

278

Ordinary income

14,185

14,18864,26966,945

Other

20,50021,040Extraordinary income

1,068

ー

Total current liabilities

89,63682,922Extraordinary losses

3,302

6,255

Income before income taxes and minority interests

11,951

7,932

Non-current assets

Non-current liabilities
13,55024,500

Income taxes - current

4,590

4,689

Deferred tax liabilities

133

150

Income taxes - deferred92(4,203)

Provision for loss on subleases

143

99

Total income taxes

1,039

485

Net defined benefit liability

1,539

4,683

Net income

7,268

7,446

Loss attributable to non-controlling interests

(81)

(5)

Profit attributable to owners of parent

7,350

7,452

Long-term loans payable

Property, plant and equipment
Buildings and structures, net

64,32364,956

Land

43,55843,811Other, net

20,38020,726

Asset retirement obligations

4,688

5,485

Total property, plant and equipment

128,261

129,494

Other

8,833

8,310

28,88839,585

Total non-current liabilities

Intangible assets

Total liabilities

Goodwill

14,662

13,843

Other

2,717

2,711

Total intangible assets

17,38016,554

Investment securities

7,024

Capital stock

Retained earnings
Treasury stock

8,554

Total shareholders' equity

ー218

Accumulated other comprehensive income

Guarantee deposits

32,78832,159

Other

1,660

Provision for doubtful accounts

Deferred tax assets
Net defined benefit asset

Total investments and other assets
Total non-current assets
Total assets

5,038

6,804

Consolidated Statement of Cash Flows (Millions of yen)

Shareholders' equity

Capital surplus

Investments and other assets

118,524 122,507

Net assets
10,00010,000104,319 104,320
22,09927,590(8)(3,751)

136,410 138,159

Account

17’ 2

18’ 2

Cash flows fromoperating activities

16,682

21,060Cash flows frominvesting activities(20,294) (16,238)

Cash flows fromfinancing activities(608)(4,270)

(80)

(13)

Valuation difference on available-for-sale securities

(3)

(54)

Effect of exchange rate change on
cash and cash equivalents

Foreign currency translation adjustment

1,616

254

238

474

774

(4,300)538

Remeasurements of defined benefit plans

Net decrease in cash andcash equivalents

(379)

(299)

Total accumulated other comprehensive income

725

958

Cash and cash equivalents
at beginning of period

29,47025,16946,132

49,053

Share acquisition rightsー

52

25,16925,708Non-controlling interests

381

369

Cash andcash equivalents at end of period

191,774 195,102
256,043 262,047

Total net assets

Stock Information

17’ 2Provision for loss on liquidation ofbusiness of subsidiaries and associates

Total current assets

13

Account

18’ 2

Current liabilities
25,170Notes and accounts receivable - trade

17’ 2Liabilities

Current assets
Cash and deposits

Account

Consolidated Statement of Income (Millions of yen)

Major Shareholders
Number ofshares held
(thousand shares)

Percentage ofshares held(%)

Aeon Market Investment Co., Ltd.

67,15952.35

U.S.M.H. Group Business Partners
Shareholding Association

3,094

2.41

The Kambayashi ScholarshipFoundation

2,300

1.79

Japan Trustee Services Bank, Ltd.
(Trust Account)

2,108

1.64

Aeon Co., Ltd.

1,629

1.27

Nippon Access Inc.

1,482

1.15

Japan Trustee Services Bank, Ltd.
(Trust Account 5)

1,250

0.97

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

1,123

0.87

KOKUBU GROUP CORP.

1,099

0.85

Mitsubishi Shokuhin Co., Ltd.

1,078

0.84

Shareholder nameNote: Percentages of shares held are calculated excluding 3,407,091 shares of treasury stock.

Distribution of Shares by Shareholder Type
Foreign corporations etc.

3.37％

Securities firms

2.59％

Financial institutions

9.03％

Treasury stock

0.26％
Individuals and other

20.38％

Other Japanese corporations

64.37％

137,518 139,539

Total liabilities and net assets 256,043 262,047
14

Corporate Data (As of February 28, 2018)
Corporate Data

Our Website

EstablishedMarch 2015

Capital10 billion yen

Visit U.S.M. Holdings Website and find out more about us.
Our website offers a variety of content, including the latest

Business

Management of supermarket business

news from us, introduction of our businesses, IR information,

Head office

1 Kanda Aioi-cho, Chiyoda-ku, Tokyoand financial information.

https://www.usmh.co.jp/
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Head office: 5-51-12 Higashi-Ikebukuro, Toshima-ku, Tokyo

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Business

Supermarket business for retail sales of foods,
household goods, apparel, etc.

Head office: 599-1, Nishiohashi, Tsukuba-shi, Ibaraki Prefecture

MaxValu Kanto Co., Ltd.
Business

Supermarket business for retail sales of foods,
household goods, apparel, etc.

Head office: 5-30-3 Kameido, Koto-ku, Tokyo“eatime” website

https://eatime.jp/
eatimeStock Exchange Code: 3222

1 Kanda Aioi-cho, Chiyoda-ku, Tokyo 101-0029, Japan
TEL: +81-3-3526-4761
URL: http://www.usmh.co.jp/