MARUI GROUP Co., Ltd.
Financial Results Briefing for the Fiscal Year
Ended March 31, 2021
<Questions and Answers＞
Q.

This time, a huge amount of provision for loss on interest repayments
was recorded, we would like to confirm whether or not you will not haveto record the provision for loss on interest repayments for a while. I
would like to know again what level you estimated it at.

A. First of all, I would like to apologize for the large amount of money we
had to allocate due to our drastic misjudgment of the forecast. As a resultof increasing the amount of ¥19.4 billion at the end of the fiscal year,
the balance of interest repayments on the balance sheet is ¥22.8 billion
after.
As for the level, I recognize that common credit card companies andcredit loan companies generally make provisions for about 3 years, butin our case, the level exceeds ¥20 billion compared to ¥5 billion of lastyear, so I think that we have made a conservative provision in somerespects. As for the future situation, I cannot say for sure at this stage
that everything will be all right, but I recognize that at least some of therisks that we are concerned about have been mitigated by this provision
as the new medium-term management plan begins.

Q. FinTech business is doing quite well. Even in the midst of the economic
downturn, I think you have been able to maintain a steady trend of profit
growth in real terms. I would like to know the background of that. I thinkthat the travel business, which was one of your strong points, hasdeclined, but I would like to know where the growth is and what isdriving the overall growth.
1A. In terms of the status of our core business, the impact of COVID-19
resulted in only a slight increase in transactions in the fiscal year ended
March 2021, which is very disappointing.
On the other hand, there are some categories that are steadily growing,
and the transactions of ecommerce steadily expanded due to staying-athome consumption. It maintained a growth of about 1.3 times. And ourrent guarantee and other rent handling services we have strengthened
also increased 1.3 times last year, in fact driven by impact of COVID19, this also grew well.
It is expected that the impact of COVID-19 will continue for the next 2years and that full-fledged recovery will be in the fiscal year ending
March 2024. Until then, I think it will be a difficult situation at travel &entertainment, but we would like to maintain the growth of the handlingby firmly expanding what grows.

Q.

About retailing business, in the medium-term management plan, you
said you are taking a conservative view of the current fiscal year. But
from the graph, I think your plan is for profits to improve considerablyfrom this fiscal year to the next. I would like to more specifically know
about the background of this, or rather, what kind of measures you aregoing to take this fiscal year to eventually reach ¥12 billion.

A.

The retailing business is currently in a very difficult situation due to
COVID-19, and we apologize for the disappointing result. I think you
are asking why you are planning to expand your business to ¥12 billion
yen in the fiscal year ending March 2026 in the five years of themedium-term plan.
First of all, we are assuming that we will return to the level before
COVID-19 in the fiscal year ending March 31, 2024. Next, since thedamage from COVID-19 is very serious, we have factored ¥2 billion as
the risk of a deterioration in the real estate market. Therefore, the starting
point is ¥8 billion compared to the operating income of ¥10 billion of
the year before last. And, we explained that we starting from the ¥8billion, we would aim to increase profits by ¥4 billion after overcoming2the negative impact.
We started the transformation of the department store business last year,
before COVID-19, and have seen a steady response, so we believe that
we will be able to increase profits by proceeding with it.

Q. I think you say that co-creative investment plays a very important partin the mid-term plan. What have you noticed when you have made cocreative investment so far? This time too I think that you attach great
importance to the investors as a stakeholder and collaboration with them.
It's okay if it's qualitative rather than the impact of the amount of money,
so I would like to know that there was such a good story for the MARUIGROUP.
A.

In the medium-term management plan, I said that we position cocreative investment and stores as a platform for integrating online andoffline, and aim to become a platformer for them, together with FinTech.
As a result of what I've done so far, we have found that startups andemerging companies that originated from the Internet and online are
more evaluating the importance of stores and offline, and the effect ofexpanding their businesses and evolving by integrating their businesswith offline, than we expected.
We showed in document of financial results briefings the feedback andcomments of 3 people from 3 companies, there are many other people
who would like to grow their businesses further by collaborating withMarui, which is strong in store management and offline real estate, canconnect offline and online through FinTech. In a word, we feel that wehave a very strong response.

Q. You said that you are going to strengthen share buybacks. I think thebase of your plan is based on an operating cash flow of ¥230 billion butif we are unable to generate the ¥230 billion in cash flow, will thealternative plan be to cut back on investment? I think ¥50 billion share3

buybacks to improve the balance sheet seems to be unchanged, so will
there be a slight reduction of shareholder return?
A. FinTech is the heart of our profits right now, and this is a business where
we can expect a relatively steady cash flow as the balance andtransaction volume increase. Compared to the time when retailing was
the main source of revenue, we are not so worried about volatility in thatsense, or up and down fluctuations. Therefore, I believe that we will beable to meet your expectations in terms of shareholder returns andgrowth investment as I have described here.
Q.

I think co-creative investment has been working very well. You
mentioned the exit policy earlier, but if things are going well, I think that
continuing to maintain the capital relationship with Marui without
forcibly exiting could be possible. What do you think about this?

A. Our basic concept is that we will remain holding the shares as long as
we continue to work together.
However, there are some issues. I think there are 2 things. One is thebalance of investment securities in this B/S. As you know, this isunrealized gains, which are included in shareholders' equity, so there isa paradox that the larger this amount becomes, the lower the ROEbecomes. Our goal is to achieve ROE of 13% or higher, so we think it
would be better to sell some of our shares during the term.
Another thing is that, as we expand our co-creative investment in thefuture, in the case of venture investment and start-up investment,
impairment losses will occur consistently from the year after theinvestment is made. Therefore, we believe that it is necessary to sell at
least enough to offset this impairment, depending on the situation. In
other words, we should curb the growth of our balance sheet, especiallyour equity capital, and make up for impairment with a gain on sale as
the impairment will expand. I believe that we need to incorporate these2 ideas according to the balance.

Q.

According to the outlook for the fiscal year ending March 2022, the4transaction value of FinTech shopping credits is expected to be 114%
YoY, I would like to know the premise.
In fiscal year ending March 2021, this is that even though COVID-19
had an impact on the last fiscal year, you were still unable to acquire
new members during the fiscal year, and ended up gaining only a little
over 500,000 new members. As a result, the number of customers itself
has also declined. Considering the trend of returning to the level before
COVID-19 over the next 2 years, I wonder how many the number of
new members return this year. If the number of new members is 700,000
to 800,000 this year as it was in the past, it could be possible. I would
like to know about that how the shopping credit volume forecast of
114% was set.
A. First of all, as for the assumption for the shopping transaction volume,
114% comes up this time. Last year COVID-19 was just at the beginningand we did not know what would happen in the world. In particular, thetravel and hotel businesses were halted last year. Therefore, for the entire
year, the transaction volume of merchants resulted in remaining at 102%.
This year, we have gained some experience, and looking at themovement of customers from April to May, we have not seen theextreme decline that we saw last year. Therefore, we believe that there
will be a certain amount of reaction to last year's results in this fiscalyear. If I may talk about it in more detail, the major driving force will be
the transaction volume of ecommerce. Ecommerce, which grew by 1.3
times last year, is growing at a similar rate. As for travel & entertainment,
which experienced a large decline last year, we do not expect it to returnto the level of the year before last, but since the decline last year was alarge one, we expect it to return to some extent. Therefore, although
there will be quite a bit of awkwardness in each category, we think that
114% as a whole will be enough.
As for the impact of the decrease in new members, as you mentioned,
we had a very difficult time attracting new members last year, and thenumber of members decreased by about 110,000 at the end of last year.
Since new members do not account for a large portion of the totaltransaction volume, the decrease in the number of new members last5

year will have only a few tens of billions of yen impact on the transaction
volume in the current fiscal year. Therefore, we have maked this forecast
based on the fact that the biggest point of estimation is rather how theusage by existing members will be this year.
Q. I understand that the usage by existing members is more important thanthat by new members in terms of KPIs, but if you do not build up acertain scale of members, I think it will be difficult to achieve the growthof FinTech in 2026. Incidentally, as of the fiscal year ending March 31,2026, how many customers have you set?
A. First of all, fiscal year ending March 2021, there was a major closure ofcommercial facilities all over the country, including Marui, and there
was a significant drop by that. With the return of those members, weexpect the number of new members to return to over 700,000 this year.
By the way, by the final year of the medium-term management plan in
2026, we are currently planning to have about 8.5 million members.

Q. About SG&A expenses in the current fiscal year, so the provision has
been made, I think it comes to a situation where the amount is reduced
once. Compared to the previous year, SG&A expense has decreased byabout ¥14.5 billion, I think the largest factor is the decrease in theprovision for loss on interest repayments, but is there anything else thatshould be taken into consideration?
A. The largest part of the consolidated SG&A expenses is that we do not
expect provision for interest repayment expenses this fiscal year. Thereis a decrease of about ¥23 billion for that, so that is most of the decrease.
Other than that, there will be a decrease in personnel expenses, etc. On
the other hand, in the area of FinTech, we expect that the cost of loyalty
points and card-related expenses will increase compared to last year, so
we are certain that the reason for the negative figure is interest
repayment expense.
Q. When you extend the image up to the fiscal year ending March 2026, I6

think there will be a certain amount of natural decline in the number ofpeople reaching retirement age in the population pyramid of yourcompany. What do you see as the trend in labor costs over the next 5years or so?
A. The number of personnel itself is expected to decrease by about 100
people every year, considering new employees, retirees, and naturalretirees, so the personnel cost will decrease by about ¥500 million or¥600 million every year.

Q. About the revenue recognition standard, your company shows them on
net amount after deduction of cost of sales, but I think there may besome point expenses as well. So in the specific revenue recognition
standard, how much will accounting sales decrease and how much will
expenses decrease? I think there will be little impact on operating
income, I would like to know about impact.
A. In terms of the revenue recognition standards that will be applied fromthis fiscal year, in our case, ecommerce sales were previously recorded
as full sales, but in terms of the content, there are quite a few
commissioned revenue, so that portion will be recorded as net sales.
In our case, points are not often used within MARUI GROUP, so we do
not need to reduce the amount of points from sales. It will only be forcommissioned sales in EC I mentioned earlier, so there will be no
significant impact. For more details, please refer to the FACTBOOK.

Q. If the number of new cardholders shifts from stores to the Internet, basedon the experience of COVID-19, I am somewhat concerned about thecost of acquiring cardholders outside of stores and whether the cocreation and new business activities will lead to an increase incardholders. Please tell us what you think about that as a company.
A. The cost of acquiring new members on the Internet tends to skyrocket
as more and more companies enter the market. On the other hand, many7

customers who join via online have a very high LTV, as they come to us
after independently comparing various card companies. Therefore, thekey to expanding members from the Internet in the future will be how
to increase the number of members while controlling costs, which may
be called low-cost operation. In such a situation, we issue very uniquecards related to anime and content, and we would like to utilize thesecards' fan club sites and media to increase the number of members while
keeping costs low. Rather than using affiliate advertising, which wouldincrease costs, we would rather use unique online media to increase thenumber of online members, thereby reducing costs and increasing thenumber of members with high LTV.

Q. There was talk that future investment will be involved in FinTech, butdoes it have a big impact on online membership of anime and content
cards? Is it a scenario that attracts new customers, acquires FinTech
members, and increases transactions?
A. That‘s right. There are 2 major synergies with co-creation partners. One
is being used in the services by the co-creation partners, and theexpansion of transactions by increasing the number of them. The otheris to recruit EPOS card members by co-creation investment partners. We
predict that the number of members will increase to about 100,000 after
5 years, and the synergy in terms of the increase in members and theincrease in transactions will become significant in the fiscal year ending
March 2026.

Q. I think you have been a front-runner in governance reform so far. I would
like to know if you are thinking of further increasing the value of theCompany by welcoming new members as candidates for an executive
officer and outside directors, as investee, ESG, and wellness. Could youtell us one more time?
A. Shown page 57 in the document of financial results briefings is what8

was posted in last year's Co-Creation Management Report. When you
look at it from the perspective of our 6 stakeholders, the gray area
indicates that we are able to meet their expectations in terms of financial
benefits, while the pink area indicates non-financial expectations. We
call the financial part "profit" and the non-financial part "happiness," butif you look at a laser chart like this, I think that the part we can meet interms of profits is less than half of their whole expectations. In thiscontext, we would like to ensure that we can meet the growing
expectations of future generations for sustainability and wellbeing, as
well as their expectations for companies. This is what we callstakeholder management, and in order to realize this stakeholder
management, we would like to start having stakeholders actually join
the management team. This is just the first phase, we have Mr.
Nakagami from Misaki Capital joining us as a shareholder, Mr. Pedersen
joining us in the area of sustainability, and Ms. Kojima, an executive
officer who has been very active in the area of wellbeing within theCompany, joining us. From now on, we would like to realize stakeholder
management in a step-by-step manner by having future generations andemployee representatives actually participate in the management.

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