TRUSCO Nakayama Corporation
Financial Results Briefing for the Fiscal Year Ended December 2022
February 9, 2023

Event Summary[Company Name]

TRUSCO Nakayama Corporation[Company ID]

9830-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Financial Results Briefing for the Fiscal Year Ended December 2022

[Fiscal Period]

FY2022 Annual[Date]

February 9, 2023

[Number of Pages]

39[Time]

15:30 – 17:00(Total: 90 minutes, Presentation: 49 minutes, Q&A: 41 minutes)[Venue]Webcast[Venue Size][Participants]

109[Number of Speakers]

6
Tetsuya Nakayama
Atsushi Kazumi

Tetsuhiro Mori
Atsushi Shimozu
Miki Fujitani

Mika Takahashi

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President
Director, General Manager of the Business
Management Department and General
Manager of the Digital Service Strategy
Department
General Manager of the Accounting
Department
Manager of the Corporate Planning
Department
Manager of Public Relations & Investor
Relations Section, Corporate Planning
Department
Corporate Planning and Public Relations &Investor Relations Section, Corporate
Planning Department

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Presentation
Takahashi: Thank you for your patience. The financial results briefing for the fiscal year ended December 31,
2022 of TRUSCO Nakayama Corporation will begin immediately. Thank you very much for your participation
today despite your busy schedule.
My name is Mika Takahashi of the Public Relations & Investor Relations Section, and I will be your moderator
today.
Today, we will hold a hybrid on-site and online event. Let me begin by introducing the attendees.
Tetsuya Nakayama, President.
Atsushi Kazumi, Director, General Manager of the Business Management Department and General Managerof the Digital Service Strategy Department.
Kazumi: This is Kazumi. Thank you very much.
Takahashi: Tetsuhiro Mori, General Manager of the Accounting Department.
Mori: Present.
Takahashi: Atsushi Shimozu, Manager of the Corporate Planning Department.
Shimozu: I am Shimozu. Thank you.
Takahashi: Miki Fujitani, Manager of the Public Relations & Investor Relations Section.
Fujitani: I am Fujitani. Thank you.
Takahashi: Thank you.
I will continue with a brief overview of today's proceedings. I, Takahashi, will first provide an overview of thefinancial results, followed by an explanation of the Company's initiatives by Mr. Nakayama, President. Afterthe explanation, there will be time for a Q&A session. After the Q&A, the briefing will end. Please allow
approximately one hour for this session.
The questions and answers for this year's event will be answered in the order of those in the audience andthose participating online. The video of this briefing will be shown on our official YouTube channel at a later
date.
I will now provide an overview of our financial results. We will also project the materials on the screen, butthey can also be downloaded from our website.

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2Let me begin by explaining our operating results. Please see page three.
Consolidated sales for the 60th fiscal year were JPY246,453 million, up 8.6% from the previous year and up
1.2% from the budget.
Gross profit of JPY52.16 billion, up 9.4% from the previous year and 0.9% from the budget.
Selling, general, and administrative expenses were JPY37,493 million, up 8.1% from the previous year and
0.1% from the budget.
Of this amount, depreciation and amortization totaled JPY6,667 million, down 3.8% from the previous yearand 2.7% from the budget.
Operating income was JPY14,667 million, up 12.8% from the previous year and 2.9% from the budget.
Ordinary income of JPY15,065 million, up 11.1% from the previous year and 3.2% from the budget.
Net income attributable to shareholders of the parent company JPY10,626 million, minus 8.4% from theprevious year, plus 6.7% from the budget.
Net income per share was JPY161.15, down JPY14.71 from the previous year and up JPY10.11 from the budget.
Dividend per share of JPY40, up JPY4.5 from the previous year and up JPY2 from the budget.
Sales of private brand products totaled JPY45,876 million, up 5.6% from the previous year.
Capital expenditures totaled JPY4,799 million.

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Next, please see page four.
As a digest of the financial results, direct shipment to users and strengthening of MRO stocker initiatives led
to the consolidation of routes to the Company by major customers, including e-business routes, and boosted
net sales.
While suppliers continued to reduce production and raise prices due to raw material shortages and otherfactors, sales volume increased due to ongoing inventory expansion and the prevention of lost sales
opportunities.
While selling, general, and administrative expenses were pushed up by the provision of extra bonuses to
employees to support their livelihood due to high prices and the rise in utility costs, cost-cutting efforts were
implemented at the company-wide level, including overtime and equipment purchases.
As a result, net sales and various profit items also achieved the plan at the beginning of the period.

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4Next, please see page five. This section discusses the results by segment.
Factory route sales of JPY170,606 million, up 5.1% from the previous year and down 0.7% from the budget.
E-business route sales of JPY51.576 billion, up 16.2% from the previous year and 3% from the budget.
Home improvement center route sales of JPY22,162 million, up 20.7% from the previous year and 13.9% fromthe budget.
Overseas route sales were JPY2,108 million, up 24.4% from the previous year and down 2.6% from the budget.

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Next, please see page six.
Capital expenditures totaled JPY4,799 million, including the renovation of POLARIO, an inventory
collaboration site with suppliers, a logistics center for inventory expansion, the new automated pallet
warehouse building at Planet East Kanto, and the new stock center in Sakai.

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Next, on page seven, we discuss selling, general, and administrative expenses.
The main reason for the increase was the payment of extra bonuses to all employees in H1 of the fiscal year
to support their livelihood in light of soaring prices and other social conditions.
In addition, freight and packing costs increased 12.5% YoY in line with the increase in sales, but the increase
factor, route shipments, is recorded as sales and borne by the customer.
Utility expenses also rose 66.7% YoY due to higher electricity rates and other factors but were 8.1%, orJPY37,493 million, higher than the previous year as a result of company-wide cost-cutting efforts andrestraints.
This is the end of the explanation of the 60th fiscal year results.

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Next, on page eight, I will explain the earnings forecast for the current fiscal year.
Effective from the beginning of the fiscal year ended December 31, 2022, the Company adopted theaccounting standard for revenue recognition. For the 61st fiscal year, we plan consolidated net sales of
JPY265,090 million, gross profit of JPY55,350 million, selling, general, and administrative expenses of
JPY39,650 million, operating income of JPY15,700 million, ordinary income of JPY15,970 million, net income
attributable to the parent company of JPY10,920 million, and cash dividends per share of JPY41.50.
For sales by route, please refer to the attached financial data analysis document.

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Continuing to page nine, selling, general, and administrative expenses for the 61st fiscal year.
Freight and packing expenses are expected to increase by 12.4%, or approximately JPY2,446 million, from theprevious year due to an increase in shipment volume resulting from higher sales, expansion of direct shipping
services to users in each segment, and anticipated higher transportation costs.
In addition, employee salaries and bonuses are projected to increase by 2.5%, or approximately JPY160 million,
over the previous year due to an increase in logistics course bonuses and the hiring of new employees.
On the other hand, depreciation and amortization expenses will decrease by 4.1%, or approximately JPY270
million, from the previous year due to the absence of large investments in the previous year.

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9Next, on page 10, we discuss capital expenditures for the current fiscal year.
Capital expenditures for the current fiscal year are projected to be approximately JPY13.7 billion.
In anticipation of further product data expansion in the future, we are revamping our internal productdatabase, Sterra.
In addition, the construction of buildings and installation of equipment is expected to begin at Planet Aichi,
which is currently underway.
In addition, as reported earlier, we will strive to strengthen our on-demand delivery system by building a newautomated pallet warehouse building at Logistics Center Planet East Kanto and introducing an automatedpallet warehouse at the newly built stock center in Sakai.

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We have also formulated a Three-Year Plan to visualize the results of our investment plan and to better assure
results from the current fiscal year.
Please see the plan for the 63rd fiscal year. For the 63rd fiscal year, we plan consolidated net sales of over
JPY300 billion, an operating margin of 6.6%, and an ordinary income of 6.7%.
We will continue to expand the number of items in stock and product data, and also provide services that
improve customer convenience and reduce environmental impact, such as order consolidation and direct
delivery services to users, and MRO stockers.
In anticipation of the launch of Planet Aichi in 2026, we will implement measures to improve customer
convenience, such as through the TRUSCO HACOBUne platform strategy, to achieve these plans.
Next, Mr. Nakayama, President, will continue with an explanation of the Company's initiatives. Please go
ahead, President Nakayama.
Nakayama: Yes. Once again, my name is Nakayama. Hello.
Immediately after we announced the Three-Year Plan, we started to set targets. Generally, numerical targets,
such as sales and profit targets, are set. However, our company is rather unusual in that we give priority toability targets, rather than numbers.
For example, we have over 560,000 items in stock now, and we are planning to become a company that canhave 1 million items in stock by 2030, or a company that can accept orders and ships 24 hours a day, 365 daysa year. It is a rather unusual company, where the priority is not so much on numerical targets as on what kindof capabilities the Company will have.
To this end, we continue to make various investments every fiscal year. From the outside, it is good to invest,
but there are doubts as to whether the investment will be reflected in the actual results.

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11While we were compelled to create a Three-Year Plan, it is hard to know what the sales will be in three years.
I think that even if your company were to make figures for the next three years if you were asked if you could
really do it, you would probably all tilt your head.
In any case, we would like you to look at this as just one guideline.

As you can see here, when an online retailer builds a logistics center, I’m sure the expectation that the role of
TRUSCO will decrease and sales will plummet is sure to pop into everyone's mind. I would like to talk a little
bit about that today to clear up those misconceptions.
Although this sounds like a plausible hypothesis, the reality is that contrary to the hypothesis, as you can see,
we have been growing at a double-digit rate for a long time.
During this period, MonotaRO built a huge logistics center. Amazon has also established a very large center,but I would like you to start with the fact that this has nothing to do with our performance—the fact that wehave been able to expand our business.

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I will now tell you why.
First, it is more cost-effective to drop-ship to suppliers without going through a logistics center.
To summarize, whether you are Amazon or MonotaRO, rather than shipping from your own logistics center,you simply send the data to a supplier like us who can drop-ship directly to the user who placed the order.
The company can send goods without any further action on its part, and sales increase without any further
action. It is very much a matter of convenience.
Therefore, MonotaRO and Amazon, as well as other companies, have not stopped placing orders even though
they have built logistics centers.
The key for online retailers is to touch as little of the product as possible. There may be an assumption that if
you have your own center, it is more profitable to ship from your own inventory, but in fact, this is not thecase. It is important to do business without touching products as much as possible.
I have written a lot about what that means when it comes to companies utilizing their own inventory, whichis the third item in number three.
First of all, when it comes to your own inventory, you have to place an order, and once the order is placed, it
is easy to say in words, but an enormous volume of cargo is piled up at the entrance of the logistics center. It
is also very time-consuming to open and unpack them.
After that, the goods that come out of the box must be checked to make sure that the quantity matches theslip, the so-called quantity check. Once that is done, now, we have to do inspections or sort the inventory towhich zone it should be placed. Then, we have to carry the goods through the warehouse, and then, we haveto put them on the shelves. Even a simple purchase like this requires that much time and effort.
Once an order is received, picking work is performed based on the order data, and then the picked goods areinspected to make sure they are correct, and then they are transported through the warehouse. In addition,

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we need to do order consolidation, which means that if one customer orders two items, we try to send them
together as much as possible.
Then, we have to enclose the slip, then we have to pack it, then we have to put a waybill saying where it’sgoing. Then, we have to sort them by shipping direction, whether it is Kyushu, Shikoku, or wherever. Then,the sorted items are loaded onto a basket cart. Then, at the end of the day, you load the truck, close the door,
and off you go, but this is a lot of work.
This means using a large amount of manpower. In addition to this kind of work, when we buy things ourselves,
we receive delivery receipts. We have to keep track of that delivery receipt and make sure the invoice iscorrect, and stuff like that. Then, the work of payment begins.
We have an unexpectedly large amount of work to do, and our company is very fond of this annoying work.
Well, not really. We don’t like doing this either, but it means that we have built a system that allows us to takecare of this kind of intrusive work.
For example, when you buy something, you receive a delivery note, and the goods arrive. The invoices comein on the closing date. In the normal sense, we would confirm that the delivery note and invoice are correct,
and if so, we would make the payment. We can't afford this kind of distraction.
When we receive a shipment of goods, we have a column called Receiving Inspection, which automaticallysends instructions for payment. After one month, we pay the manufacturer the sum of these instructions sent
during the inspections, and we do not receive any invoices from the manufacturer.
We have been reducing the number of obtrusive jobs one by one, and this is what I'm talking about.

As the next page shows, based on the above points that I have rambled on about, this online shopping
company can now do business reasonably quickly by simply throwing order data to a drop-shipping company,
which is TRUSCO. Like this, they can do business reasonably and quickly by just throwing it to TRUSCO. This is
the kind of mechanism that is at work here.

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If that is the case, I think the question arises as to why they are building large logistics centers. As I mentioned
here, most companies in the world are not able to drop-ship. As I mentioned briefly above, there are virtuallyno companies in our industry that offer drop-shipping services to users.
Therefore, I hope you recognize that such logistics centers are for companies that do not have or cannot havesuch distribution or drop-ship functions.
Although not mentioned here, I would like to remind everyone that most judgments of companies are madeon a P&L basis, which is also important. Sales and profits are important, but unless we take a hard look at thebalance sheet, we will not be able to see what kind of strength the company has or what areas it is focusing
on. I would also like to ask for a proper analysis of the company in terms of P&L plus B/S.

Enough complaining, let's move on.
Regarding order consolidation and shipping directly to the customer, the phrase order consolidation may not
be familiar to you, but it is exactly what we mean when we say order consolidation. This is a very good way
to help the environment.
Today, here, I brought a box, Amazon's box. I thought I would wash my car for the first time in 20 years lastsummer, so I placed an order with Amazon for car wash products. I think I asked for about five items, brushes,
shampoo, and sponges.
However, four of these boxes arrived, and they were huge. Well, it's hard to receive them all, and they are inthese boxes one at a time. Can’t something be done about this? It’s shown on the left side of this painting,this picture.
It’s not easy. In every household, it is usually the father's job to dispose of cardboard boxes. The wife justplaces the order, and it is usually the husband's job. In its current form, it is not only labor intensive, but also
places a huge burden on the environment.

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Do you know why this is happening? The priority for e-commerce operators is to speed up shipments, andeven if there is inventory in the same center within a logistics center, the timing of picking will vary dependingon where it is placed. The ironclad rule for e-commerce operators is to ship everything as soon as it comes
out, so the work of consolidating orders is a secondary or even a tertiary priority.
We have a systema streamer, or rather, a device for consolidating orders, so when you order from us, we try
to pack as much as possible in one box and send as many as we can in one shipment. If possible, we are trying
to create a situation where people can receive something like this picture of me on the right, with smiles on
their faces.
We have also been working on direct delivery to users for the past several years. Direct delivery to users may
not sound familiar, so I will use the easiest example to explain. If the wholesalers of medicines didn’t send
medicines to hospitals or pharmacies but directly to patients instead, this would be direct delivery to users.
Therefore, in our case, we do not send products to Amazon, or MonotaRO, we have been talking about
Amazon and MonotaRO all the time, but our service is very popular because we do not send products to thoseplaces, but directly to the places that have been ordered to on Amazon and MonotaRO.

As I mentioned earlier, the number has been increasing every year, and last year, about 3,550,000 pieces weresent, although I don't think any wholesaler would send such a large number.
This is a service that cannot be provided by others in the same industry. If we were to ask our competitors ifthey could ship directly to users, they would say, "Yes, we can do that, too." But while they can ship 2, 3, or
10 packages a day, it would be extremely difficult to ship more than 10,000 packages every day.
We would like to increase our contribution to environmental preservation through the order consolidation
mentioned earlier, together with direct delivery to users, while at the same time expanding our own sales.

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The third is the ultimate MRO stocker for immediate delivery.
MRO is our industry term for maintenance, repair, and operation. These are tools and consumables used infactories. We are now starting to install stockers for what we call MRO, which refers to a variety of
miscellaneous products, not machines or equipment.
To put it simply, we place shelves on the factory floor and place products that match the needs of ourcustomers.
Currently, 775 installations have been completed nationwide, with many more under negotiation. We are
currently unable to keep up with requests. If possible, this is what I would like to do, to increase this more andmore. The sales figures are still very small, and we are still in the process of starting to work on them. We aretrying to create a system that will allow us to sell approximately JPY300,000 per case per month.
This MRO stocker has no more risk for the user. Everything from shelves to products is our so-called asset.
The customers are very happy because there is no risk involved in placing and using the products, and theyreceive a delivery note only for the amount they have purchased. We would like to grow this as one of the
new MRO and distribution trends in the future.
Next, I would like to talk a little about environmental issues.
Nowadays, many people talk about SDGs and sustainability, but I often feel that the more people talk about
SDGs and sustainability, the less they are doing.
TV stations, especially daytime TV, are doing something about SDGs.
I go to bed pretty early and get up early. If I'm up early, I'm up around 2:30 AM, and I usually get up around4:00 AM. When I turn on the TV, I see a lot of programs that I don't think should be on the air, not that they
are bad programs, but I think that if we are going to talk about SDGs, we should just stop broadcasting late atnight.

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17Because it takes electricity to turn on the TV, it takes electricity to broadcast, and it takes a very large amountof energy on the one hand while talking about SDGs on the other hand, I think this is a contradiction like noother.

What I am trying to say is that what you are doing is important. And in my opinion, it's not enough to justwear a rainbow-colored badge. It's quite interesting to see how long they have been doing this and the criteria
they use to determine when they are doing it.
Regarding SDGs, we have been doing this for 25 years, not just the past two years or three years, talking about
environmental conservation efforts. The starting point of the idea, which has been in the works for 25 years,
is that the world will not forgive us if we do not work on the SDGs.
25 years ago, the term carbon dioxide had not even come out, and we were trying to reduce energy
consumption in the Company's operations as much as possible, so we have come up with a variety of ideas. I
think it is also important to cut to the chase and ask how long they have been doing this to tell if they are realor fake.

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So, with that in mind, please turn to the next page, which is the one I mentioned earlier, about orderconsolidation.
This is just a rough estimate, but this is a reduction of about 11,365 tons of CO2 emissions per year, and I am
wondering if it is several times this amount. I think that each one counts a little, maybe a little more, so I think
we are reducing much more CO2 emissions.
We do not only sell items, as I explained earlier, but also repair and restore them, such as with our repair shop
and Naojiro service. And of course, if we ship directly to the user, for example, what used to take one or two
deliveries now goes in just one. That is how we have been able to make various reductions.
What’s most common here is fixed-cost logistics, which is our most distinctive feature. Normally, delivery ismade by Kuroneko Yamato or Sagawa. If you think about this, if you normally ship like this, this is a one-way,
onetime thing.
So, it's fine if you only have to do it once, but if you receive a product, you may have to deal with a lot ofthings, such as, "No, this isn’t the right product," "I want it replaced," "I want it repaired," etc. Our basic
delivery system is this so-called fixed-cost type, which I want you to imagine as the Yamanote Line.
We have such a delivery network that goes round and round and round and round to a set number ofcustomers every day. After a delivery has been made to some customers, others can return products, or they
can have them repaired. This is a system that can be used in a very interactive manner, which also leads tosignificant environmental conservation.

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The next image is the one I was working on in a hurry yesterday, and you may wonder what I am talking about
when I say ceiling fan installation, which is what we used to do. I don't have it here, but what we can installnow, as much as possible, is a ceiling fan.
When we talk about fans, everyone thinks they are turned on in the summer. This is a big mistake. It is actuallyin the winter. In winter, as you know, warm air rises to the top, so people say their feet are cold and chilly. Insuch a case, if you turn the fan on, it will make your feet very warm.
In summer, when the fan is turned on, all the hot air that accumulates above comes down below and all the
air must be cooled. Therefore, in the summer, when the air is being cooled, it is wrong, and in the winter, youwill be warm when you use it.
Also, fluorescent lights with motion sensors, which detect when someone enters the logistics center and turns
on the lights in blocks, are said to save energy, but there is so much more. Each of our fluorescent lamps isequipped with a motion sensor so that when you enter an aisle, the lights are turned on only up to the point
where you enter. It is really thorough. This has been done for about five years or six years now, and so on.
And then there is the use of underground cold air, which you may not be familiar with. This building has aseismic isolation layer, and the air in the seismic isolation layer and foundation layer is generally 3 degrees
Celsius to 5 degrees Celsius lower than the outside temperature. By sucking air from the seismic isolation layer
and blowing it out to each floor, the air conditioner can keep the building cool in summer and warm in winter,thus saving a great deal of energy. I could go on and on.
As for the elimination of the goods receipts, I think we issue about 30 million per year. Usually, when wedeliver an item, we give you a receipt for the item along with the merchandise, and you stamp it, and we takeit back and keep it.
We still do such things in the modern world, but we stopped doing them more than 20 years ago because we
decided to stop wasting our time. We only take delivery slips and merchandise with us, and not storing suchitems. This also reduces paper emissions.

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I don't think I'll be able to finish today if I do this one by one, so I'll leave it at that. Also, since I brought it here,
I made this jumper a little over 20 years ago. It is cold working in the office or the warehouse, so we madethese fleece jackets for the office in 2002, I think it was 21 years ago.
21 years ago, fleeces were pajamas. I was once ridiculed by someone who asked me if I was working in mypajama. This is by far the warmest, and we had already thought about energy conservation by lowering theheating temperature a little. And we've also already included something like this Gore-Tex jumper for a longtime.
Also, as a secret weapon, I have a vest like this. This vest has titanium woven into the inside, and when worn,it was so warm that a coat is not needed. This was especially useful when I used to go to funerals and could
not wear a coat. This is what we do, including the stuff for warmth like this.
Also, for PR, it's called a non-gas sprayer. When was this made? This was also more than 20 years ago. Usually,
when we think of a sprayer, we think it contains LP gas, and when we press the button, it sprays. However,these sprays emit gases into the atmosphere, so we thought it would be better to reduce the amount of gas
emitted into the atmosphere. We have developed these products.
Then, there's the regular duct tape, which we’re all used to seeing. For me, I'm like, why is there a hole here,
enough for my fist to fit in, and because there is this hole, the size of the waste increases. We developed thissmall two-inch paper tube because we thought conventional duct tapes were a waste of space, and we
decided that only the fingers could fit in the tube. There is double the number of meters wound here.
Therefore, the amount of waste can be reduced, and storage space can be made smaller, and thedevelopment of such products has been underway for more than 20 years.
And I don't think I've ever seen this before. This is a return cushion. The set includes a soft sponge, a hardsponge, and urethane. When shipping, we use these folding containers for various products. Normally, you
would put pieces of paper or some other non-damaging protective material on top of this, but in fact, this one
holds it down just fine when you put it in like this. I am not Zhenji Peking. Maybe that’s a bit too old. Look, it
doesn't fall off. This is a very resource-efficient way to use the product over and over again, and this was alsodone about 20 years ago.
So, although we do not have a badge, we have been thinking about environmental issues with great
enthusiasm.

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That's enough for today, and we will move on to the next page.
As Mr. Takahashi explained earlier, the construction of Planet Aichi will begin in Kitanagoya City, Aichi
Prefecture. We are currently in the process of designing the new facility, and it is scheduled to start operationin July 2026.
The warehouse area is almost twice as large as the current logistics center in Saitama, and the center will beable to cover Aichi Prefecture, the Tokai region, Ise, Osaka, and as far as Kyushu. We will try to manage atarget of 1 million items there.
We have a variety of delivery methods, such as direct delivery to users, pickup, store visits, and deliveries, so
this is one of the Company's most important investments as we are trying to respond to all of these. We would
like to be proactive in this regard.

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Next, we have a variety of private brand products that are useful in the field, such as our private label brand,
TRUSCO. We would like to brush up on this in various ways and expand it a bit more.
This is especially true for the aerosol product pictured here. We need to focus more on small, consumableitems, and we would like to brush up on our efforts so that they will be more visible to everyone.

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The next initiative is the users’ voice.
I won't say any more difficult things, but our Orange Book, a catalog of products we handle, still has such
thickness. Here, the thickness has actually been more than halved.
While we must think about the environment, we cannot afford to reduce the number of products we carry,so we have attached QR codes to all of our products. In a nutshell, you can see the items, but if you want to
see the details, you can use the QR code, which means that the number of pages has been reduced very much.
We are going to do something a little more interesting in the future, and we are trying to fuse the digital andanalog worlds. Paper catalogs are more like onetime items. Once printed, that’s it. Since we have put a QR
code on the product, a user clicks on the QR code, and users can make requests, where he or she could request,
if there is a longer nozzle or a more powerful motor, and so on.
We are sure that the people who buy the product will have such comments about our products. Through ouruser's voice system on the QR code, we and the manufacturer will share such information in real-time, which
will lead to the development of new products and so on.
We are trying to turn this paper catalog into a tool for two-way traffic. Many people think that paper catalogs
are just a waste of time, but in fact, paper catalogs are very popular in the manufacturing field. The reality isthat there are many problems with eliminating them. We are coming up with these ideas to combine digitalwith various other things.

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We recently received the Good Career Company Award 2022 Grand Prize for our company's efforts. If you ask
me to explain what kind of award it is, I can't really explain it either. I think the Ministry of Health, Labour, andWelfare is doing a good job of implementing various initiatives related to people, but it is difficult to determine
the scope of the project.
Recently, they picked up the 360-degree evaluation called Open Judge System, which is a personnel evaluation
system that my company has been implementing for more than 20 years.
We are making various efforts, which we do not consider new, but we are making various efforts.
We usually have transfers once every five years, but in that case, we always transfer across departments. For
example, people who were in logistics could be transferred to the commodity department, and people in thecommodity department to human resources. In this way, we try to ensure that employees can acquire avariety of skills as much as possible.
One slightly different aspect is the in-house side job system that we started about three years ago. I was often
told that the ban on side jobs would be lifted, but at that time I thought that if my secretary, for example,
went to another company to work from 5:00 PM, I would be offended.
From this trivial matter, I looked into it to see if side jobs within the Company would be possible. My secretary,
Tahara, is not allowed to have a second job in the secretarial section, but if, for example, she went to a logistics
center on her day off to work on shipments, this would be allowed as a second job within the Company. And
we could pay, JPY1,700 per hour, or something like that, and that could be paid as a daily wage by calculation.
Therefore, we decided that it would be better for the Company to have them experience and learn various
jobs within the Company than to have them go to other companies and do such work. I love to buck the trend,
and I think it is a big mistake to think that if you are doing something according to the trend, you are great,
and I have introduced this new system.

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I have said many things, but the last thing I would like to say is that I advocate management that is not foundin textbooks. If things worked according to the textbooks, the world would be full of successful people, but
the reality is that there are not even a handful of successful people.

Therefore, rather than following the textbooks, I think it is important to come up with a unique and original
system that is not found in the textbooks. I believe that we should be a company that can continue tointroduce new ideas in various forms, regardless of the industry, and I would like to keep doing my best for
this.

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With that, I will conclude my explanation of our efforts. Thank you very much for your attention.
Takahashi：Thank you, President Nakayama.

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Question & Answer

Takahashi [M]: We will now move on to the question-and-answer period.
As explained at the beginning of this presentation, we will be taking questions and answers from those in theaudience and those online in that order. If you have any questions, please raise your hand and tell us thename of your company, your name, and the content of your question. If you have any questions, please raise
your hand.
Hiramatsu [M]: My name is Hiramatsu. Thank you.
Nakayama [M]: Yes, thank you.
Hiramatsu [M]: I've been thinking about the mannequin's thumb being in the good job position since a whileago. Someone must have done it.
Nakayama [M]: Yes. I know who did it, I do.
Hiramatsu [Q]: I see. No, I don't care about the details of the numbers.
In the past week or two, AI has been coming up in the media, ChatGPT, Metaverse, and so on. I think yourcompany is working with Cinnamon and feeding them more and more formal and informal data, but I wonder
if we will see some great results from your company soon.
I have high expectations that we will enter the era of implementation of AI-based services that can help reduce
CO2 emissions and provide convenience to customers in a short period, starting this year or next.
Nakayama [A]: We haven't made any announcement, but we are using AI for inventory management. The
total inventory now is still around JPY43 billion, so if we don't get that under control, we will be in trouble.
Then, the other thing is that the lead time for delivery is now approximately 12 hours, or 13 hours, orsomething like that. The time it takes to receive an order from a customer and deliver the product.
However, the shortest time is about an hour and a half, and the longest is a little longer, over weekends. In
any case, we are trying to develop a method to shorten the lead time for delivery, even by 30 minutes or anhour every year, and we are using this method in various ways.
Do you know what an equivalency search is? We are trying to use AI to find out what kind of products areavailable that have similar capabilities. It is taking a long time because someone has to input the data properlyat first, but eventually, we will be able to provide online shopping services such as, "This is out of stock, but
we have this kind of product," "This is a high-end product," "This is a low-priced product," and so on. We are
now in the process of preparing to offer such services.
Hiramatsu [Q]: Thank you very much.
As well as the equivalents, there is something I'm wondering about at the bottom of page 41 of the thicker
version of this document you gave me, MRO Stocker 2.0 linked to the user purchasing system.
I thought this would be useless without a smart stocker, but now that it's finally linked, and also there's asimilar product search function, it's definitely better to recommend similar products. I think the gross profit

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margin would be higher if we offer the same functionality at a lower price, and in fact, it is our private label
product.
Nakayama [A]: It is a similar product I just mentioned.
Hiramatsu [Q]: Similar products and this MRO Stocker 2.0, which was one more up there. It was part of thethemes or issues of this year.
Nakayama [A]: MRO stockers are also smart, or rather, the products you use, or the products you specify, areplaced first. We will also change some of the products we stock according to the season, such as summer andwinter, so we are still working on that, but only gradually.
Since MRO stockers only began to take off in earnest around the middle of last year or the year before, ourpriority is how to place products that will meet the needs of our users.
Hiramatsu [Q]: I'm sorry, but since there doesn't seem to be anything else, this is the third one, but in thearea of human capital, all the companies are now saying that they need to raise labor costs. It's all about
securing people, or rather, human resources.
As seen here with the Good Career Award 2022, students nowadays are very attentive to this kind of thing,
and they are also attentive to Eruboshi and Kurumin, so if we don't take good people, there will be a gradualgap in performance within a year or two in all industries. I wonder if the quality of the students and applicants
is improving and if the number of applicants is increasing.
Nakayama [A]: Basically, regarding your question, I feel that we have been able to secure good humanresources steadily.
However, I think it is very difficult to judge whether they are resources or not. If I were asked how many
people around me were considered to be human resources, I would feel that there were not that many.
If anything, real human resources are those who are serious about the work they are doing and how hard theywork. No matter how much ability you have, it is no good if you are doing business in a way that neglects yourcustomers. I believe that people who take their work seriously are the best human resources, so I am trying
to create a system that will help them become such people as much as possible.
This can't be done through education. Rather than education, I believe that the most important humanresource education is how to create work that will be praised by customers.
Therefore, I believe that the most important thing is to create a company structure that enables us to do ourjobs in a way that our customers always praise us for our help and appreciation.
Hiramatsu [M]: Thanks, I understand very well. Thank you.
Nakayama [M]: Thank you very much.
Takahashi [M]: Thank you very much. Does anyone have any other questions?
Nakayama [M]: Go ahead.
Murakami [M]: My name is Murakami. Thank you very much.
Nakayama [M]: Thank you very much.

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29Murakami [Q]: I have several things, first of all, I think that logistics costs will rise as the so-called 2024
problem, with stricter overtime regulations and such for logistics drivers. I think there are ways to deal with
this, such as increasing the ratio of in-house logistics or reducing the number of suppliers.
Nakayama [A]: Regarding logistics, there are both internal and external issues. In terms of internal problems,
I think it comes down to the so-called shortage of our delivery personnel. This has not been a very big problem
so far. Right now, we have about 300 trucks in operation nationwide. Almost now, we have switched todelivery by our employees to almost half.
We are trying to switch from contracting with such carriers to in-house delivery as much as possible, so weare making progress in this area.
For example, in this building, whether Yamato Transport or Sagawa comes, they can bring in or take out theircargo on the sixth floor, and the cargo is concentrated on the sixth floor. We have them all concentrated on
the sixth floor.
Normally, we would go to each floor and say, "Hello, hello, hello," and take and pull luggage, but we felt sorry
for them if they had to do this. We are cooperating with them.
When I mentioned this to the president of Yamato Transport the other day, he was very pleased and said that
this was something to be commended. We have also automated our logistics centers to a great extent, butthere is not a last mile, but a last five meters.
It was fine up to the point where it came automatically, but there was a so-called step between the truck andthe platform. The problem is how to get over this bump. If we can get over this bump, we can realize asituation where drivers who come for pickup can quickly load and quickly return home. So, we are in theprocess of selecting such machines, but we also need to think outside the Company.
When we do this, the shipping companies will be able to sense our sincerity, which will lead to better service,including for various receiving and shipping issues. I would like to get through this.
Murakami [Q]: Secondly, I am very grateful to you for the figures you have produced for the Three-Year Plan,but of course, the point is to increase capacity, as I think you have explained.
In the Three-Year Plan, you have set various numerical targets, but what are the most prioritized targets?
Nakayama [A]: In terms of the Three-Year Plan, I would say sales and gross profit margin. Net income for theyear. Yes. If I had to choose between net income and sales, I would say that net income has a higher priority.
However, as I mentioned earlier, when it comes to numerical targets or capability targets, if we stick to thenumerical target of, say, net income, if this investment leads to an increase in depreciation and we cannot
achieve the so-called net income, then we will be forced to wait for the investment or carry it over to nextyear, which completely defeats the purpose.
We place more emphasis on the ability targets than on the numbers, as I mentioned. Therefore, I am sorry to
say that I am not confident about what the priority is, but it is about how to acquire such abilities that wehave to do.
To expand on this story a bit, we have also received the so-called Digital Transformation Grand Prix. Last year,
we were also awarded the digital transformation description, but the point of this was that we had set a goalfor our ability to do this, and if we wanted to have 1 million items in stock, we could no longer do it without
digital power. So, in the end, I think that the increased use of digital technology was highly evaluated.

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30And if I may add something else, stock prices have been falling despite all the digital transformation in thenewspapers. That, you know, I thought it wasn’t right to link digital transformation to stock prices. Because,
while we are making various capital investments to obtain digital transformation, if we also must takedepreciation, it will put some pressure on earnings. I'm not sure why they would come up with that idea, but
I would like you to understand that it is a bit of a blur to me.
Murakami [M]: Yes, thank you.
Takahashi [M]: Thank you very much. Does anyone have any other questions?
Akiyama [M]: Thank you for your presentation.
Nakayama [M]: Thank you very much.
Akiyama [Q]: My name is Akiyama.
This is a little related to what Hiramatsu just asked you about, but I was hoping that you could boast a bit
about your human resource development.
In the section on business operations, last year's brief mentioned job rotation across departments, but thisyear's brief refers to job rotation, various course selections, and various challenge systems. I was able to hear
about the President's thoughts on the establishment of the personnel department earlier, but I waswondering if there were various allowances in terms of the system as well and if there are any institutional
benefits that you are proud of.
Nakayama [A]: As well as various systems, our company is a trading company, but we also have inventory andlogistics, and I think that we have a very advanced system for selling.
Looking at it from the other side, we are now in a situation where we can sell without too much difficulty.
Therefore, I have heard from time to time that TRUSCO's employees are not so gung-ho when viewed within
the industry.
I think that's a bit unfortunate, but that doesn't mean that we can't turn back the dial, and I was thinking that
we should thoroughly enhance our system even further. At first glance, it may seem that such enthusiastic orgung-ho personnel would be better, but the most important demand of the customer is convenience,
convenience.
Therefore, I believe that others will never be able to compete with that convenience. So, anyway, we should
be a company that can provide the best convenience, not only to the industry, but also to the world.
In doing so, it is necessary to have the ability to create convenience, so I would like to nurture people in thisarea to help the Company grow. Therefore, although various systems are in place, whether or not thesesystems are directly linked to human resource development is a bit of a different matter.
Rather, I think that if we work on how we can further enhance our company to the point where it is convenientand useful for customers at manufacturing sites and production sites, the people will follow.
Akiyama [Q]: Thank you very much.
Sorry, just one more thing on a related note. I am very grateful that you included the number of retirees inthe thick analytical data. Looking at the trend, the overall turnover rate is about 5%, which is a little higher
than before and lower than last year.

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Once again, when I look at a ranking of large companies with low employee turnover, I see that the so-called
low turnover rate is around 3% or 4%, and I wonder if a company with a 5% turnover rate is not necessarily alow-turnover company from the numbers.
I think there are a variety of human resources in this area, with some people coming in and some people goingout, and I wonder what the President's perception of a moderate situation in this area is. I know this is a
strange way to ask, but what is your understanding of the current situation in this area?
Nakayama [A]: Yes. I don't look at the turnover rate in detail, but recently I've been watching TV, and there
are so many commercials for programs about changing jobs. Like, it is a little too much. I won't mention
individual names, but I see this kind of advertising again and again, and although there are not zero employees
who are inspired by such things and change jobs, I don't think there are many.
I am rather old-fashioned if you will, but my principle is that, if possible, I want my employees to work until
retirement once they are hired by the Company. In the past, I used to think that you should stay until
retirement at all costs, but recently I have changed that a bit. I would like to have a company where people
find themselves naturally working until retirement, with a sense of connection between employees and theCompany that is not too tight or too loose. We want them to work for us for a long time if possible.
The retirement age is now 65, and employment is extended from 65 to 70. After 70, part-time workers areallowed to work until 75, but if they wish, they can work until 78 or 79. We are a rather loose company likethat.
There are a few people over 70 who are working now, maybe three. I guess there are a few more. Many ofthem quit when they reach 75 or so, but surprisingly, they have been with us for a long time, and I am gratefulfor that.
Akiyama [M]: Yes, sir. Thank you very much.
Takahashi [M]: Thank you very much. Does anyone have any other questions?
Nakayama [M]: Go ahead.
Shimoda [M]: Excuse me, my name is Shimoda.
Nakayama [M]: Thank you very much.
Shimoda [Q]: In the 60th fiscal year data analysis document, on page 30 of the thicker document, there is asection on the number of accounts sold and the number of corporations. When we look at the changes overthe past 10 years, we see that the number of corporations has remained almost flat, while the number ofaccounts sold has risen steadily. The first question is how this is achieved.
Nakayama [A]: I'll go one by one. That is because we are doing more business with companies that havemultiple accounts, rather than a single account, but a very large number of accounts, so although the numberof companies we do business with has not increased much, the number of accounts has increased significantlywith companies that have many branches.
Shimoda [Q]: Thank you very much.
The second is on the same page, and I am a little embarrassed to ask this of a bank, but I am wondering if theamount of money that is uncollectible due to bankruptcy is not much at all anymore. I would like to ask thissecond question as I wonder what kind of efforts you are making to do this.

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Nakayama [A]: Thank you very much for listening.
In 2005, how many years ago now, we completed the total abolition of bill transactions. This is the biggest
factor. Basically, the biggest factor is that we have stopped using cash, or rather, bills of exchange for bothpurchases and sales.
There are various ranks in the information from the box office when you stop bills of sale. We have a very
strict rule that the lowest-ranked customer, for example, must either pay a two-month deposit or cease
trading. Basically, we now have JPY2 or more billion in security money, something quite a bit.
But let me tell you, the good thing about us is that we have a system where if the score improves, we returnthe deposit, which is not possible in a bank. It would be normal not to return the deposit, but we do. Whenthings get worse again, we get them back, and this kind of exchange takes place. It was thanks to this process.
In the past, the average amount getting stuck was about JPY100 million each year. There was a year when thelargest amount of money that got stuck was about JPY600 million, but we decided that we could no longer dosuch a thing, so we made drastic reforms, including the abolition of all bills, and the result is what you see
today.
So, I am not worried about bankruptcy, actually. I used to wonder what it would be like if I got a phone callevery day, but now I am almost without worry about this.
Shimoda [M]: Thank you very much.
Takahashi [M]: Thank you very much. Does anyone have any other questions?
We will then move on to a question-and-answer session with the online participants.
Go ahead, Mr. Watanabe.
Watanabe [M]: I am Watanabe. Thank you very much for your explanation.
Nakayama [M]: Thank you very much.
Watanabe [Q]: Sorry to be a bit numerical, but there are a couple of points.
The first point is that you mentioned earlier that drop shipments have been very effective due to the increasein online sales, and I think 2021 and 2022 saw an acceleration in e-business route sales.
If Amazon or MonotaRO has something in common with your company, if it would be more efficient to ask
your company to do it, if they are actively submitting items to your company when there is an overlap, I would
like to know if this trend is accelerating and a little bit about the reasons for this acceleration.
Nakayama [A]: First of all, there is a combination of reasons, including the drop shipments, but also thecontents of the drop shipments.
Basically, you keep your own inventory, and if the user who places the order is near your logistics center, yousend the order from your place, or if the user is far away, for example in Hokkaido or Kyushu, we send theorder. Since each product is quite complicated, it is difficult to simply say that it is like this.
In addition, not only online retailers, but also home improvement centers are now putting a lot of effort into
not only store sales, but online sales, and this has been a big push.

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In addition, some conventional machine tool dealers are also focusing on online sales because they feel that
regular door-to-door sales are not enough, so the expansion of sales here is also contributing. The figures
show that, relatively speaking, the focus is gradually shifting from face-to-face sales to online sales.
Watanabe [Q]: Is it my understanding that the drop-ship is functioning, and also that until now, about three
to four major companies probably supported your company's sales very well, but the number of customers isincreasing?
Nakayama [A]: Yes. Without a doubt, drop-shipping is the most effective. Home improvement centers alsofind drop shipments to be the most attractive feature because if they only send the order to the store, thecustomer has to go to the store to pick it up, even though they have received the order directly from thecustomer. Customers would rather you just send them their products to their homes.
There are not many vendors who can do this, so we believe that the demand for drop shipments from home
improvement centers is very great for us.
Watanabe [Q]: I understand.
Secondly, I am sorry that this is also about numbers, but since you have provided a mid-term plan, I haveabout two questions about this.
In three years, it is not certain, but you expect sales to increase by about 7% each year. I know that you havebeen making various capital investments, and I think that you have always said that your company is acompany that is not affected by the economy, or that you want to grow without being affected by the
economy.
I think that the Company's various initiatives have made it more and more convenient to use, and I wonder if
there is a sense of confidence or perhaps a sense that the Company has developed such a system to deal withthe economic environment.
Nakayama [A]: Yes. The foundation of the medium-term plan completely ignores the economic environment.
About the average annual growth of about 7%, this figure is based on our current capital investment and thesophistication of our logistics equipment, which should result in at least this level of growth. As you say, there
is no longer any conversation within the Company about the current economic situation, and we believe that
we can secure this level of profit with this level of investment.
If you ask me if I am confident, I am not too sure. However, in the recent COVID-19 crisis, we have only
experienced a 3% drop in sales, compared to an average 10% or greater drop in our industry with somerecording 30% or 50% drops.
As was the case in the current fiscal year, while there were many price hikes due to holding inventory,
unrealized gains from inventory were also generated. I think that the inventory measures have been good in
various areas. I would like to continue to think in terms of moving forward along those slightly unique lines.
Watanabe [Q]: I understand. Sorry, this is a bit long.
I think the decrease in depreciation and amortization expenses will be a major factor in the double-digit
increase in profits in the next fiscal year and three years later, but as stated earlier, you are making
investments.

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Am I right in my understanding that you have already completed a certain level of major investments, andalthough you will continue to invest, you have already entered a phase where depreciation and amortization
expenses are declining, so basically, you should be able to generate profits in the next few years? Could tell
us about it?
Nakayama [A]: Yes. About half of the total depreciation expense is related to digital equipment, and the otherhalf is related to logistics equipment and investment. Although the recent capital expenditures seem toindicate a slight decrease in depreciation, we do not believe that any of our capital expenditures have reached
the end of the road.
If we place a compass on a map of Japan, for example, from the perspective of Chugoku and Shikoku, thedistance is too far unless we build a logistics center in the Okayama area, and the logistics center in Kyushu
does not have an automatic shipping function, so we need to upgrade it a little more. Like this, we are still
rapidly making more investments.
In terms of the timing of the past three years, it may look as if depreciation has peaked a bit, but I don't thinkit has. I am not sure if it will grow again in the future as digital-related projects emerge, but I consider it aninvestment for growth.
Watanabe [M]: I understand very well. Thank you very much.
Nakayama [M]: Thank you very much.
Takahashi [M]: Thank you very much. Please continue with your question, Mr. Kanamori.
Kanamori [M]: My name is Kanamori. I would like to ask three questions.
Nakayama [M]: Yes, please.
Kanamori [Q]: I think we're running out of time, so I'll keep it simple, but the first question is on page five,which you used as a slide today, you have the sales and gross profit margin by sales route. The direction ofthis gross profit margin varies from route to route, but can you tell us why it is going up or down, and why the
direction is different for each of them?
Nakayama [A]: First of all, the gross profit margin for the factory was plus 0.7, minus 1.4, and 1.2. While thisis not a trend, in particular, the amount per transaction is getting larger for the e-business route. The largest
transaction is a single transaction of about JPY13 billion per year, so the gross profit margin of the e-businessroute is slightly declining due to the impact of the gross profit on price negotiations. We have to do something
about this, so we are taking some measures starting this fiscal year.
Then, there is the home improvement center route, which also has significant sales growth. It has grown by
20%. This is not because we did a pretty good job, but rather it is due to the so-called accounting changes byhome improvement centers.
We are getting a lot of offers that say, "We can't make much profit, but we need your help, TRUSCO.” This isa situation where each manufacturer can order from us, which is fine, but we have to negotiate a little on thepurchase price. If there is any particular trend, it is usually something like that.
Kanamori [Q]: Thank you.

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The second question is about the capital investment on slide six, which shows the renovation of the productdatabase, Sterra, and the strengthening of the logistics center network. Can you briefly tell us what kind of
results you expect from this?
Nakayama [A]: Regarding Sterra, it's our number one product database, so anyway, I'd like to see a little more,
what do you call it, how much was the number of items up to?
I'll let Kazumi get back to you on the Sterra.
Kazumi [A]: I'm Kazumi, in charge of Digital Strategy.
As of now, about 2.5 million items are already registered in the Sterra product database. However, we areplanning to accelerate the expansion of this product database to approximately 10 million items shortly.
We have renewed the system, including these aspects, and we can see the effects of this renewal in terms ofour product lineup and the convenience it provides to our customers.
As you know, our logistics center network includes many draw boards and marketing teams. If this were to behalted, it would result in a huge opportunity loss, so we are now working to strengthen the network for thisarea. The reason for this is to expand sales, of course, to build a network to provide stable services.
Nakayama [M]: May I?
Kanamori [Q]: Yes, thank you.
Lastly, you mentioned earlier that you are ignoring the business climate, so I was wondering if you could tellme a little bit about that.
Looking at monthly sales, I am wondering if there has been a bit of a slowdown in terms of monthly sales andbusiness day impact in December. Is it a sign that business confidence is weakening in some way, or is it a signthat prices are going up and up, and that this is ultimately reducing the amount being purchased?
You have been in business for a long time, and can you tell us a little about the past, such as how these trends
are a sign that business confidence is worsening or slowing down, or that the signs have not yet appeared?
We would like to know about them.
Nakayama [A]: As I mentioned earlier, we are not in the business of relying on business conditions; we aretrying to grow based on our policies. So, to be honest, I have never really cared much about what the sign
says.
So, last year, we started taking sales volume on a piece-rate basis, rather than just monetary sales. I realized,
especially last year, there were a lot of price hikes, so people are saying that sales are up, but maybe it's
because of the price hikes.
I checked, and it was about 8%, or is it 7.5%, both in terms of volume and quantity sold. We are currently
selling about 225,780,000 units, which is an increase of about 7.5%. This means that we were able to increase
not only the price, but also the sales volume. You mentioned the monthly figures for January of this year.
Maybe it's a little weak.
Kanamori [Q]: I mentioned the December announcement, the December one that has already beenannounced.
Nakayama [A]: The one we have already presented? I see.
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36No, I don't feel the performance was particularly weak in any way, and I don't feel it's particularly weakbecause I think we had some of the highest numbers ever recorded in a single day, I believe, in December.
Kanamori [M]: I understand. Thank you.
Nakayama [M]: Yes, thank you.
Takahashi [M]: Thank you very much. Since there seem to be no further questions, the question-and-answer
period is now over. If you have any further questions, please feel free to contact us by e-mail or by phone.
With that, we will conclude the financial results briefing for the fiscal year ended December 31, 2022. Thankyou very much for listening today.
Nakayama [M]: Thank you very much, everyone. Thank you to everyone on the web as well.
[END]______________
Document Notes
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Speaker speech is classified based on whether it [Q] asks a question to the Company, [A] provides ananswer from the Company, or [M] neither asks nor answers a question.
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