CO-CREATION
Co-Creation Management Report 2017

About Co-Creation Management Reports

Contents
Section01

MARUI GROUP’s Vision for
Co-Creation Management

Section

02

02	Goal of Co-Creation Management—
Expansion of Intersection between the Happiness of Stakeholders
04 Message from the President
12	Dialogue 01: A Company that Profits and Grows Structurally
20

Co-Creation Management
Business Model

30

38

54

Section03

Co-Creation Management

Business Structure
History: Innovation of Business Structure in Line with the Times
20
MARUI GROUP of Today:
22
Reverse in Relationship between Retailing and FinanceDefinitions of Retailing and Finance: MARUI GROUP’s Retail-Nature
26
Business That is Attentive to the Needs of Individual Customers
Vision: Co-Creation Management Business Model
28
Retailing BusinessStructure: Retail Stores Serving as Points of Contact30
with 200 Million Customers a Year
Structure: Co-Creation Store Development
32
and Unique Omni-Channel Retailing Strategy
Perspective of Inclusion: Quest to Bring Joy to People of All Ages, Genders,34
and Physical Characteristics
Perspective of Inclusion: Co-Creation of Inclusive Products with Customers
36
FinTech Business
Structure: FinTech Business with Annual Growth Rates of 17%
38
Structure: Financial Services in Our Daily Lives
40
Perspective of Inclusion: Financial Inclusion of All Customers
42Perspective of Inclusion: Big Data and Co-Creation Credit Expertise44
Supporting MARUI GROUP
48 Dialogue 02: Financial Inclusion—The Essence of FinTech
Integrated Group Management
Standardized Group Platforms and Profession Changes
54
Organization that Utilizes Diversity
56
Healthcare Management Underpinning Personal Growth62
64 Dialogue 03: Healthcare Management Based on Data Analysis

MARUI GROUP would like to thank all of its stakeholders fortheir ongoing support and understanding. We would also liketo thank first-time readers of MARUI GROUP’s co-creation
management reports for taking interest in the Company.
Since its founding in 1931, MARUI GROUP has continued
to evolve its unique business model, which merges retailingand finance, in response to changes in the times and in consumer needs. Today, we are engaged in co-creation management, a practice that entails creating value together with all of
our stakeholders. Our goal is to co-create happiness, which isborn out of the harmony between the interests of all
stakeholders.
As part of these activities for co-creating value, MARUIGROUP has been publishing co-creation management

Co-Creation Management Reports

Co-Creation Sustainability Reports

Co-creation of customer happinesswith partners

MARUI GROUP’s vision
for 2020

Co-Creation Management

For All Customers

MARUI GROUP’s concept of corporate value

Theme for us as we advance toward the future

Harmony between the Interests andHappiness of All Stakeholders

An Inclusive Society
Offering Happiness to All

Step 1: Fiscal Year Ended March 31, 2015

Co-Creation Management
Declaration

Step 2: Fiscal Year Ended March 31, 2016

Co-Creation Management froma Corporate Value Perspective

72
78
79
82

Medium-Term Management Plan
Message from the CFO
Target Balance SheetTeam Supporting Co-Creation Management
84 Messages from External Directors
87 Corporate Governance
94 Directors, Audit & Supervisory Board Members, and Executive Officers
99 Overview of MARUI GROUP
100 Financial and Non-Financial Summary
102 Consolidated Balance Sheets103	Consolidated Statements of Income /Consolidated Statements of Comprehensive Income
104 Consolidated Statements of Changes in Net Assets
105 Consolidated Statements of Cash Flows
106 Notes to Consolidated Financial Statements
129 Independent Auditor’s Report
130 MARUI GROUP’s Business
132 MARUI GROUP Store Network
134 Ratings, Awards, and Recognition
136 From the Chief Editor

reports, its unique brand of integrated report, since 2015.
In this, our third co-creation management report, we aim tooffer a detailed picture of MARUI GROUP’s unique businessmodel and the potential for its future.
We have always viewed reports as having a three-year
cycle. This report, Co-Creation Management Report 2017,
will briefly touch on the concept of financial inclusion, andwe intend to focus primarily on this concept in Co-Creation
Sustainability Report 2017, which is scheduled to bereleased early next year.
Beginning with 2018, we plan to report on the co-creation management practices that represent the next stagefor MARUI GROUP, which will come into full swing this year.

Scheduled to be
published in
January 2018

Step 3: Fiscal Year Ended March 31, 2017

Co-Creation Management
Business Model
Realization of an inclusive society

No one excluded

Unique Business Model Merging
Retailing and Finance

MARUI GROUP’s Vision for
Financial Inclusion

Editorial Policy: Co-Creation Management Report was created with the aim of helping our shareholders, other investors, and various other stakeholders develop a better understanding of MARUI GROUP. This
report contains performance, business, and financial information centered on the Group’s corporate philosophy and business strategies. As an integrated report, it also comprehensively includes non-financial
information on the activities that support the Group’s sustainable growth. The International Integrated Reporting Framework released by the International Integrated Reporting Council in December 2013 wasreferenced in the development of this report.
Cautionary Notice regarding Forward-Looking Statements: Performance forecasts and other forward-looking statements contained in this report represent the Group’s best judgments based on information
available at the time of this report’s publication and therefore contain a degree of uncertainty. It is possible that actual performance could differ materially from these forecasts due to a variety of factors. Economic
conditions, foreign exchange rates, and stock price movements are among the factors that could have a major impact on performance.

Co-Creation Management Reportwww.0101maruigroup.co.jp/en/ir/lib/i-report.html

Co-Creation Sustainability Reportwww.0101maruigroup.co.jp/en/sustainability/lib/s-report.html

01Section01

MARUI GROUP’s Vision for Co-Creation Management

Goal of Co-Creation
Management—Expansion ofIntersection between theHappiness of Stakeholders

Customers

Business
partners

Investors

Expansion of
stakeholder interests(happiness)

Communities andSociety     
MARUI GROUP practices co-creation, which is aimed at co-creating the happiness ofall people together with stakeholders. The Company is supported by a wide range ofstakeholders, including customers, shareholders, other investors, business partners,
members of local communities and the greater society, and employees. Although theinterests of these various stakeholders are often seen to be in opposition, the reality isthat there is a significant intersection at which the interests and values of different stakeholders overlap. At MARUI GROUP, we see true corporate value as being able to expand
this intersection between the happiness of all stakeholders.
For this reason, it is crucial that we constantly evolve our business frameworks andpractices based on ongoing stakeholder engagement. Through such engagement andthe new ideas born therein, we will create new value. This is MARUI GROUP’s vision for
innovation and the ideal form of co-creation management that we pursue.

Employees

Corporate value

Intersection of all stakeholder interests

Expansion of this intersection

Improvement of corporate value

02

MARUI GROUP’s View of Corporate Value03

Message from the President

A Step toward a Future of
Creating Corporate Value
Emerging Issue

Hiroshi Aoi
President and Representative Director
Representative Executive Officer     First, let me begin by discussing our performance in thefiscal year ended March 31, 2017, the first year of ourcurrent five-year medium-term management plan.
During this year, we made smooth progress in advancing
this plan, achieving earnings per share (EPS) of ¥80.2,
an increase of 14% year on year, and return on equity(ROE) of 6.7%, up 0.7 percentage point. Both indicators
met their targets. Operating income grew 6%, rising forthe 8th consecutive year, to ¥31.3 billion, and a newrecord was set for cash dividends per share of ¥33, ¥11higher than in the previous fiscal year. In addition, returnon invested capital (ROIC) exceeded weighted average
cost of capital (WACC) as a result of our financial strategies for achieving an optimal capital structure.
Accordingly, we are at last poised to begin creating corporate value. Perhaps a more noteworthy accomplishment was MARUI GROUP’s inclusion in all three of theenvironmental, social, and governance (ESG) investment
indexes adopted by the Government Pension Investment
Fund of Japan in July 2017 (→P.134).
In this manner, MARUI GROUP took a step toward afuture of creating corporate value during the fiscal year
ended March 31, 2017. However, an issue also emerged.
Our total shareholder return (TSR) for this year was anegative 4.5%, well below the Tokyo Stock Price Index
average of 17%. Some may be curious why, despite a
massive increase in per share dividends from ¥22 to ¥33
on the back of a large 14% rise in EPS, the Company’s
TSR fell below the market average.
The reason was most likely that investors and otherstakeholders were unable to fully understand MARUIGROUP’s corporate value, and therefore could not evaluate the Company properly. Based on our interactions withstakeholders to date, we have identified two causes for thedifficulty in properly understanding and evaluating ourcorporate value.

Transition to a Structure in which ROIC Exceeds WACC
(Fiscal year ended March 31, 2017)

Inclusion in ESG Investment andSocially Responsible Investment Indexes

ROIC

3.1%

WACC

3.0%

Note: T
 HE INCLUSION OF MARUI GROUP CO., LTD. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTEA SPONSORSHIP, ENDORSEMENT OR PROMOTION OF MARUI GROUP CO., LTD. BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI.
MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

04

President Aoi on the roof of MARUI GROUP’s Nakano head office05

Message from the President

Message from the President

The first cause is trouble understanding the uniquebusiness model of MARUI GROUP. The second cause is
our failure to clearly describe our future initiatives or, inother words, our measures for addressing risks. In
Co-Creation Management Report 2017, we will endeavor
to more thoroughly explain MARUI GROUP’s businessmodel and the opportunities and threats we face.

1. MARUI GROUP’s Business Modelquestion, the organism would have to answer “both.”Although the inquirer would understand better if theEuglena were to say “animal” or “plant,” either answer
would entail denying its own identity. The Euglena cannot
do that, and neither can we. Just as Euglena species havedistinctive value due to their combining the characteristics
of both animals and plants, so too does MARUI GROUP
derive its unique corporate value from blending retailingwith finance.

Identity of Euglena

Reversal of Relationship between
Retailing and Credit Cards

A major characteristic of MARUI GROUP is the uniquebusiness model merging retailing and finance that it has
employed since its founding. For those of us on the insideof the Company, shaping our actions based on this model
is a natural part of everyday business. However, whenviewed from outside of the Company, this model has beendifficult to understand, with the meaning of “merging
retailing and finance” being particularly unclear. In fact, themost common question received from investors waswhether MARUI GROUP was a retailer or a financial company. We would always respond to this question by saying“both,” but, unfortunately, there were few who were able tofully grasp what we meant.
While this may be a bit of an unorthodox comparison,
the situation was similar to someone asking a species ofEuglena whether it is a plant or an animal. Faced with thisLet me go into a little more detail. MARUI GROUP was aretailer with approximately 6.4 million cardholders, andwe grew by having loyal cardholders shop at Marui stores.
Taking a different perspective, however, it could also be
said that MARUI GROUP was a financial company withstores where roughly 200 million customers shopped
each year. Either way, we have grown primarily throughretailing operations by providing credit cards as a tool tooffer customers greater convenience when shopping at
Marui stores.
Today, we are witnessing a shift in consumption fromgoods to experiences, which has also made it necessary
for us to change the relationship between retailing andcredit cards. In light of this trend, we transformed ourbusiness model by transitioning away from our previous
credit card, which was only usable at Marui stores, to a     

Balance Sheet Assets
Billions of yen

600

Fixed assets andother store assets

Increase in card shoppingtransactions following
EPOS card launch

Shift of growth focus fromretailing to credit cards

500

400

300

Credit card

operating receivables
Money Lending Business Act revision
Drop in cash advance transactions

200

100

06

Fiscal year ended
January 31, 1992

Fiscal year ended
March 31, 2006

new multipurpose card that can be used anywhere in theworld. This new card was the EPOS card launched in2006. Since issuing EPOS cards, our number of cardholders
has increased by 1.6 times, from about 4.0 million toaround 6.4 million, and card shopping transactions haverisen by approximately 8 times, from ¥180.0 billion to¥1,390.0 billion. Furthermore, although 100% of cardtransactions used to take place within Marui stores, thisfigure has since dropped below 10%. Previously, credit
cards supported the growth of our retailing operations.
However, as I have explained, this relationship has been
reversed, and now our stores are supporting the growth of
our credit card operations.
This change in business structure is most clearly
apparent on our balance sheet. In the past, the land,
structures, and other fixed assets that had supported
MARUI GROUP’s growth since its inception represented
a majority of assets. Everything changed in the fiscal year
ended March 31, 2014, when the balance of credit card
operating receivables came to account for more than halfof our assets. Since then, this balance has continued torewrite record highs.

Retailing and Finance—
Two Sides of the Same Coin
What I want to make perfectly clear is that this change inbusiness structure—this innovation—did not transform
MARUI GROUP from a retailer to a financial company, butrather that it led to our using the stores of our retailing
operations to drive the growth of our credit card operations. I mentioned that only less than 10% of total credit
card transactions are conducted at Marui stores. However,approximately 80% of cardholders applied at Marui stores,
clearly illustrating how both businesses are in a mutuallycomplementary relationship and are intrinsically linked.
For example, you could say that retailing and financeare two sides of the same coin for MARUI GROUP. If you
stand a coin on its edge and give it a spin, the spinningcoin will appear to take the shape of a sphere. Our business model is like this spinning coin, with no heads ortails, just one sphere of retailing and finance.
By taking a snapshot in time of this sphere, we canreport on our financial condition by showing the twocircles, one for retailing and one for finance, that would be

visible in this picture. A great deal of information can begleaned from this picture. One could take the perspectiveof looking at which circle is larger and which is smaller or
which is heads and which is tails. However, we see suchinformation as only supplementary and not as truly important to MARUI GROUP.
To MARUI GROUP, it is important for the “coin” to spin
more smoothly, gain speed, and ultimately draw a more
powerful and beautiful sphere.
For this reason, we do not segregate retailing andfinance. Rather, we share human resources, stores, anddata throughout our integrated business as we seek toimprove corporate value by evolving our unique businessmodel merging retailing and finance.

2. O pportunities and Threats Facedby MARUI GROUP     

Eight Operating Environment Changes
over the Next Decade
The ability for MARUI GROUP’s business model tocontinue creating corporate value into the future will hingeon our ability to furnish long-term responses to thechanges in the operating environment that will be seen
going forward.
I would therefore like to discuss the long-term operating environment changes we expect to see over the next
decade. Specifically, we have identified eight majorchanges projected to occur. In this report, we will look at
how these changes will unfold going forward, examine theopportunities and threats they will present for our business, and explain how MARUI GROUP intends to respond.
(1) Transition to e-commerce(2) Shift from goods to experiences(3) Emergence of a sharing economy(4) Declining birthrate and aging population(5) Increase in demand from inbound travelers(6) Rise of cashless payment methods(7) Change of focus from saving to investment(8) End of era of low interest rates


Fiscal year ended Fiscal year ended
March 31, 2014 March 31, 201707

Message from the President

Message from the President

Opportunities and Threats for the
Retailing Business
For the Retailing business, we see opportunities in the
projected increase in demand from inbound travelers.
However, we will also have to face numerous threats, thegreatest of which may be the transition to e-commerce.
As e-commerce becomes more prominent going forward,
it can be expected that conventional retailing businesses
selling goods at stores will begin to decline, a trend that isalready apparent in the United States and China. This
trend will be compounded by the shift from the consumption of goods to the consumption of experiences, which
will decrease demand for goods. This decrease is currently
visible with regard to apparel products, which have been
undergoing a noted decline in demand in recent years.

doubt be replaced by e-commerce sales, to place moreemphasis on tenants that provide dining, services, experiences, and other offerings that cannot be supplied via
e-commerce. The expansion of omni-channel retailing will
be conducted to deliver new value to consumers by evolving our retailing business in a manner that is complementary to e-commerce.
Meanwhile, we look to address the declining birthrate
and aging population by expanding our customer baseand increasing customer numbers through diversity andinclusion initiatives targeting customers. These initiatives
will include providing products, commercial facilities, andservices that can be enjoyed by all customers, regardlessof their age; physical characteristics, or if they have adisability; or gender, which will entail catering to members

At the same time, we project the emergence of a sharing
economy. “Sharing” also means a reduction in the consumption of goods, making it a threat to retail businesses.
Meanwhile, the declining birthrate and aging population
will result in a decrease in the number of consumers.
We have formulated two main measures for responding
to these changes. One measure is the transition to shopping centers and fixed-term rental contracts that we havebeen advancing under the medium-term management
plan or, in other words, the transformation of our businessmodel from focusing on a department store model toutilizing a real estate model. The other measure is the
expansion of omni-channel retailing. The transition to
shopping centers and fixed-term rental contracts entails
deemphasizing apparel tenants, whose services will noof the LGBT community. As for the emergence of a sharing
economy, we will respond by creating new businesses toexpand the scope of our operations.

Opportunities and Threats for the
FinTech Business
The greatest opportunities for the FinTech business will
come from the rise of cashless payment methods. The
transition to e-commerce, the shift from consumption of
goods to consumption of experiences, and the emergenceof a sharing economy will all contribute to the rise of cashless payment methods. Credit cards are a major componentof the FinTech business. In the credit card market, the riseof cashless payments has contributed to the continuationof 7% average annual growth rates over the past decade.

Opportunities and Threats to Be Faced by the Retailing Business over the Next Decade

Opportunities and Threats to Be Faced by the FinTech Business over the Next Decade

Present

Present
Opportunities

Increase in demand from inbound travelers
Inbound travelers: 20 million → Approx. 40 million

Rise of cashless payment methods

Transition to e-commerce

Opportunities

1. Transition to e-commerce; 2. Shift from goods to experiences;
3. Emergence of a sharing economy
Continuation of 7% average annual growth rates in line with the past decade

Ratio of e-commerce sales: 5% → 20%

Change of focus from saving to investment

Shift from goods to experiences

Portion of family financial assets represented by stocks and investment trust­receivables: 15% in Japan, and 30%–50% in Europe and U.S.

Threats

Continuation of 3% reductions in apparel product selling prices

Emergence of a sharing economy

Sharing economy usage ratio: 2% → 10%

Rise of cashless payment methods (cash advances)
Potential contraction of cash advance market

Threats

Declining birthrate and aging population

Working-age population: 71 million (7% reduction)

Transition to shopping centers and fixed-term rental

Improve business profitability by transitioning from a department store model
to a real estate model

Diversity and inclusion initiatives targeting customers

→P.32

→P.34

Compatibility with sharing economy through new businesses (goods, space)
10 yearsfromnow

New businesses (variety of financial services)

→P.40

Increase in cardholders; Usage of EPOS card as main card

→P.38

MARUI GROUP’s Response

Create business model integrating stores, credit cards, and the Internet

Emergence of payment options other than credit cards
MARUI GROUP’s Response

Expansion of omni-channel retailing

Rise of cashless payment methods (diversification of payment methods)→P.24

10 yearsfromnow
Note: Information on measures related to (8) End of era of low interest rates can be found on page 80.

08

09

Message from the President

Message from the President

We expect this 7% trend to be sustained going forward as
infrastructure is installed in preparation for the Tokyo
2020 Olympic and Paralympic Games. On the other hand,
the rise of cashless payments presents the threat of contraction in the cash advance market. In addition, technological progress could stimulate the diversification of
payment methods and consequently detract from thecredit card market.
Our responses to these trends include the shift in ourbusiness model from an in-house credit card to a multipurpose credit card—the EPOS card—which took place in2006, as well as the redefinition of our credit card services
business as the FinTech business, which was described in
our medium-term management plan. As the diversificationof payment methods detracts from the credit card market,
MARUI GROUP will evolve its operations into a FinTechbusiness in order to transform this threat into an opportunity while at the same time expanding the scope of its
business. This move will also enable us to take advantageof the opportunities presented by the change in people’s
focus from saving to investment.

Immunity to Downside Risks and Growth
Investments
To summarize, we will first transition to a real estate model
for stores in the Retailing business in order to part ways
with the declining department store model. This transition
will change the source of our earnings from product sales
to rent revenues, effectively guaranteeing stable earnings
that are almost completely unaffected by weather, trends,
inbound demand, or other external factors. Moreover, by
utilizing fixed-term rental contracts, we will be able toincrease the value of our shopping centers by periodicallyreplacing tenants, thereby realizing steady growth.
Compared to the prior department store model, thisreal estate model will lack in its ability to capitalize on
upside risks. However, it will be almost immune to downside risks, which is our main aim. During past periods ofGrowth Investments under Medium-Term Management Plan (5 Years)
Investment Policy
Rather than focusing on pure investment, engage in investments and alliances that
contribute to expansion and innovation of main business

Target Investment Areas

Investment-Based Alliances*strong economic growth, department store models operating with consignment agreements were able to exploit
upside risks over long periods of time. Today, the situationis quite the opposite. Not only are we in a period of low
economic growth, but stores that sell products are also
exposed to significant long-term risks arising fromchanges in consumer needs and the spread of e-commerce.
Next, we will pursue the creation of new value bytransitioning to a business model that can grow by taking
advantage of the e-commerce trend. Specifically, we will
promote omni-channel retailing to build a complementary
relationship between our retailing operations and our
e-commerce operations and provide value that cannot be
replaced solely by e-commerce. This approach will be
adopted in all conventional, product-selling retailing
operations, including Marui stores and private brands andeven tenants. In addition, we will capitalize on the greater
degree of freedom in stores granted by the real estatemodel to develop new, sharing businesses. These businesses will not be limited to sharing goods, but will also
include sharing spaces to foster communities amongcustomers and thereby respond to changes in lifestyles
and needs.
Under the current medium-term management plan, we
intend to invest ¥30.0 billion in new businesses leading
up to the fiscal year ending March 31, 2021. We havealready begun investments and collaboration aimed atadvancing omni-channel retailing, sharing economy, and
FinTech initiatives through open innovation.

forward-looking business model we envision for our
FinTech business.
Our quest to create value for the future has only justbegun. In this report, we have taken every possible angle
toward explaining the business model we are targeting,but I am aware that these explanations may still be insufficient. For this reason, we hope that investors will provide
us with their frank opinions as professionals.
We also desire to co-create corporate value throughengagement with our customers, business partners,
members of local communities and the greater society,employees, and all of our other stakeholders. I lookforward to your ongoing support and understanding.

August 2017

Hiroshi Aoi
President and Representative Director
Representative Executive Officer

Forward-Looking Business Models

Growth investments¥30.0 billionof ¥90.0 billion in
growth investments
to be conducted in
new businesses

FinTechPayment
services / Assetmanagement

Investments within MARUI GROUP
Investment Standards: ROI of more than 10%
Sharing
economyGoods / Space

Investments in venture companies that share
our vision and possess advanced technologies
Investment Standards: IRR of more than 30%

E-commerce
Investments in venture capital firms thatpossess vast, sharing networks anddiscerning eyes
Investment Standards: IRR of more than 15%* Investment in and collaboration with applicable companies
to be conducted based on investment standards by the
Research Department and the New Business Development
Department

10

MARUI GROUP aims to develop an unprecedented,
forward-looking retailing business model that is unlike
department stores, shopping malls, train station buildings,
fashion retail complexes, specialty shops, or anything else
seen before. By evolving our retail stores from a forwardlooking perspective, we anticipate that synergies can becreated with our FinTech business. There is only one financial
company in the world with stores where roughly 200
million customers shop each year, and that is MARUIGROUP. We plan to promote financial inclusion throughthe use of these stores, our approximately 6.4 million
cardholders, and big data that links our retailing operations with our credit card operations. Simultaneously
growing our credit card operations will create the

Messages from President Aoi can be accessed through the following links.
Fiscal Year Ended March 31, 2015:
Co-Creation Management Declarationwww.0101maruigroup.co.jp/en/ir/message/ceo_2015.html
Fiscal Year Ended March 31, 2016:
Co-Creation Management from a Corporate Value Perspective
www.0101maruigroup.co.jp/en/ir/message/ceo_2016.html

11Dialogue 01

Dialogue 01
A Company that Profits and Grows Structurally

Kazushige Okuno
Managing Director (CIO)
Norinchukin Value Investments Co., Ltd. (left)

Hiroshi Aoi
President and Representative Director
Representative Executive Officer
MARUI GROUP CO., LTD. (right)

A Company that
Profits and

12

The desire to see a company’s
corporate value improve is sharedby entrepreneurs and investors.
Although both parties are
partners in creating value, the roles
they play in this process arefundamentally different.
However, it is out of the interplay
between this shared perspective
and these differences that
entrepreneurs and investors areable to engage in a frank dialectic
to further their mutual growth andcontribute to the long-term
interests of society.

Grows Structurally

13

Dialogue 01

Dialogue 01

A Company that Profits and Grows Structurally

A Company that Profits and Grows Structurally

Dialectic with Companies from the Perspectiveof a Long-Term Investor     
Aoi: Mr. Okuno, your idea regarding long-term capital
allocation—that entrepreneurs and long-term investors
should be on the same side, but not on the same team—is very intriguing. An effective dialectic can be generated
due to both parties being on different teams on the sameside, that is to say, working for the same goal, and thisdialectic can enhance corporate value. In other words,
the returns of long-term investment contribute to theinterests of both parties.
Okuno: There are, of course, long-term investors that
seek to improve the corporate value of investment targets by joining the same team as these companies. It is
not so much that either approach is better, but is rather
that both approaches entail judging entrepreneurs bydifferent perspectives.
Aoi: Long-term investors that join the same team andthose that stay on different teams may have differing
investment styles, but I believe that they both share theperspective of creating something together with the companies in which they invest. MARUI GROUP’s corporate
philosophy is founded on the concept of creating together,or co-creation. Accordingly, I see corporate value as being
best created through close-knit relationships with investors, or by encouraging co-creation with both parties on
the same team. Your investment style, Mr. Okuno, represents a 180-degree turn from this idea.
Okuno: I have been conducting long-term investment incompanies, both domestic and overseas, for a decade.
Over this time, I have learned that quality companies sharesomething fundamental. Some may call this something
the essence of their business or their nature, but I refer toit as their “structure.” As investors, we survey various
industries and select the most “structurally robust companies” from these industries to invest in. The leaders ofcompanies will change over time. It is as Warren Buffett isalways saying; rather than focusing on leaders, it is betterto invest in companies that would still be successful even
if they did not have a leader.

Kazushige Okuno
Managing Director (CIO)
Norinchukin Value Investments Co., Ltd.

14

Entrepreneurs and long-term investors both decide towhich businesses they will allocate their capital by judging
the economic feasibility of each business, looking at thevalue they provide, their competitiveness, and the longterm trends then can expect to see. As seen in theacquisition of Sankyo Seiki Mfg. Co., Ltd., by NIDECCORPORATION, it is possible to alter the structure ofentire industries by allocating resources to peripheralbusinesses, all the while maintaining the strengths thatkeep a business running. Investors do not actively influence the structures of industries. However, if we can see
the logic behind a company’s earning mechanisms, we will
allocate resources to that company. As a result, we cometo invest in various companies regardless of their industry
or country. The desire to see a company’s corporate value
improve is shared by entrepreneurs and investors. With
this passion as a foundation, it is the interplay between
this shared perspective and the differences of both parties that enable them to engage in a frank dialectic.

Business Built on a Combination of Financeand Retailing Expertise     
Aoi: When I was in North America as part of our investor
relations activities, an institutional investor described
MARUI GROUP as having a “bad industry, but good management.” Although this individual was in favor of the new
business model we are creating, he stated that we may bein a bad industry in reference to our involvement in theretailing, department store, and credit card industries aswell as to our relatively low stock price. This investor was
unable to understand our unique position even when
I explained that MARUI GROUP’s credit card transactions
have been growing by 17% on average over the past
10 years and how our ratio of delinquent debt is thelowest in the industry at 1.45%.
Okuno: I personally feel that neither the retail industry nor
the financial industry is inherently a “bad industry.” Inthese industries, corporate managers are united in their
sentiment that connections with customers are of utmost
importance to providing value.

After graduating from the Faculty of Law at Kyoto University, Mr. Kazushige Okuno joined The
Long-Term Credit Bank of Japan in 1992. He later took positions at LTCB Securities and then
UBS Securities. In 2003, he joined The Norinchukin Bank and also received a Master’s in
Finance from the London Business School. Mr. Okuno started a project to manage a proprietaryinternal fund of long-term concentrated portfolios in 2007. This project was transferred to The
Norinchukin Trust and Banking Co., Ltd., in 2009, where Mr. Okuno provided fund advisory
services for other institutional investors, including pension funds. In 2014, he was reassigned toNorinchukin Value Investments Co., Ltd., a specialized company concentrating on the investment advisory business, where he remains today.

I have learned that quality companies share something
fundamental. I refer to it as their “structure.”    Kazushige Okuno

I have previously viewed MARUI GROUP as a retailer,
but I now think that the Company may actually be a financial company with retail operations. MARUI GROUP’s store
network enables it to gather information on customer
needs. Here, I see the business model of a financial company that understands retailing, or perhaps a retailer that
understands finance. This model is complemented by
MARUI GROUP’s profession change system, which allows
employees from retailing or finance backgrounds to be
relocated to other Group companies. MARUI GROUP is
unprecedented in having finance field connections withcustomers, despite being a retailer. I have high praise for
the Company’s business, which merges retailing andfinance. However, I also see a need to translate this business into concrete numbers or present it as a clear business model.
Aoi: We have continued to develop this business based ontacitly held knowledge, and it is therefore not uncommon
for people to request that we put forth a clear picture ofour business model. Our business model underwent a
drastic change when we sought to pull our retail stores outof a bad industry through business structure transformation. However, at a glance, our stores may not appear to bevery different from the department store model we had
employed previously. While one could say that it is enoughso long as our credit card operations grow and profit, if allof our business knowledge is tacit, we will not be able tofurnish an effective response should the operating environment change. It is therefore crucial that we transform
this tacit knowledge into explicit knowledge so that we cancontinue accurately transmitting it to new generations of
employees. This process will be vital to maintaining ourstrengths. If our knowledge can be transmitted in this way,
the Company will become structurally profitable, which is,in essence, the same as being structurally capable ofgrowing with a manager.
Okuno: That is part of what makes business models interesting. Business models are templates. Whether or notinvestors will be in favor of a business model is determined by whether or not that business model can belogically linked to numbers. This is an important fact toreflect upon.

Breakthrough Achieved by Merging Retailingand Finance     Okuno: It is also important for business models to bepredicated on some sort of major breakthrough. Looking
at MARUI GROUP as a financial company with sales
floors, I see numerous possibilities, such as providing

15

Dialogue 01

Dialogue 01

A Company that Profits and Grows Structurally

A Company that Profits and Grows Structurally

Our task going forward will be to find ways to link
the knowledge, expertise, and other wellsprings ofdifferentiation we have ­cultivated to date to thegrowth of our c­ ustomer base.
    Hiroshi Aoi

surplus capacity as a service. Businesses that are built on
fixed assets, such as commercial facilities, are inherently
sharing economies.
Aoi: We are transitioning to a real estate model for operating our stores. Under this model, our directly managed
sales floors function more as showrooms, with our main
focus being on e-commerce operations. Treating ourstores as real estate means that we do not need to sell
products like a department store; all we need to do is rent
space. For example, we could introduce tenants such as
shared offices, co-working spaces, or classrooms. We aim
to transform the sharing economy born out of such tenants into a new business.
Okuno: Changes to your business model will unlock awider range of opportunities, but will also expose you tothe risk of more competitors encroaching on your market.
For this reason, it is important for the Company to havethoroughly entrenched strengths. I suspect that MARUIGROUP’s main strength lies in its cardholder base.
Moreover, the cards you provide are equipped with IC
chips, which can be seen as a technology with the potential to create various new business opportunities.

16

Aoi: If we only provide functions that can be easily imitated, we will soon be overwhelmed by the competition,
making it impossible to grow or to secure sufficient profit
margins. We are thus looking to create a unique, membership-based business by combining our retailing operations
with our credit cards. This model will open up the possibility of offering membership and other subscription services, which we will in turn contribute to the growth ofcredit cards if we can encourage users to pay theirmonthly subscription fees with our credit cards. If customers continue using our cards, the inherent value of thesecards will grow, and our profit margins will increase rapidly. In this manner, I see success in business as hinging
on the degree to which a company is able to combine a
number of unique offerings.

Multi-Party, Two-Way Communication via
the Internet     
Okuno: When viewing a business model from an abstract
perspective, there are no doubt elements that will change
and others that will not. In identifying these elements, it isimportant not to be constrained by past history or successes, but instead to continually observe the situationfrom a fresh perspective. One area in which change will
occur pertains to the Internet. We have never before seen
an era that has been so interconnected by the Internet.
This new era is giving rise to a global trend toward individualism, with specific needs originating directly fromindividual people. Accordingly, it is no longer sufficient forcompanies to mass-produce a small lineup of products,
which has previously been the norm.
Aoi: That view really resonates with me. In order to share
our long-term operating environment analyses with Group
employees, we chose to hold a meeting at which we discussed the main differences from the 20th century that
we expect to see in the 21st century. The conclusion wereached was that the biggest difference would be thepresence of the Internet and the resulting changes informs of communication. In the past, communication has
generally been in the form of one-on-one communication
or of transmission for one individual to a “large group ofothers.” However, the advent of the Internet enabled twoway communication to take place between multiple parties. This new form of communication will likely result in
the emergence of consumer-to-consumer businessmodels that differ from traditional business-to-consumer
models. One example of such a model can be seen in
peer-to-peer Internet sales applications.
Okuno: I believe that one of MARUI GROUP’s strengths
lies in its connections with customers. These connections
could make it possible to, for example, issue straightbonds, which are normally aimed at professional investors,
to standard consumers. If this were to be done, it would
mean that both the asset and liability portions of the balance sheet would be directly connected to customers.
Given that it is when companies cannot pay back theirdebt that they go bankrupt, diversifying funding sources is
crucial to a company’s survival. The era of multi-party,
two-way communication via the Internet makes suchdiversification possible.

Alternative and Inclusion Perspectives for
Viewing Demographic Trends     
Okuno: Another change will be a decline in growth potential as a result of demographic trends. The fact that Japan’s
population of approximately 126.8 million people will
decline going forward seems self-evident, but is this actually true? Judging by this projected decline in population,
it would seem that Japan’s retail industry is doomed to fail.
However, if we look at urban areas, for example, we canfind areas in which the population is actually growing.
Institutional investors view demographic trends from thisalternative perspective when conducting investments, andthis perspective leads us to understand trends differently.
MARUI GROUP’s business model is interesting in how its
stores are concentrated in urban areas.
Aoi: At MARUI GROUP, we view demographic trends, suchas the aging and shrinking population and the decline in
the birthrate, from a perspective of inclusion. As such, we
aim to be a forerunner in the development of operations
that are inclusive of differently abled individuals, nonJapanese people, and members of the LGBT communityof people of all ages and genders. In the past, our credit
card services operations have sought to serve youths andyoung adults as well as people in the low- and middleincome brackets, demographics that were unable to takeadvantage of existing financial services. This experiencehas given us a sort of template to work from in promoting
inclusion. Taking your alternative perspective to demographic trends, it will be enough if the number of ourcustomers increases, even if the overall population declines.
Accordingly, our task going forward will be to find ways
to link the knowledge, expertise, and other wellspringsof differentiation we have cultivated to date to the growthof our customer base.
Okuno: In terms of creating value, entrepreneurs seek tocreate 1 from 0, while long-term investors, such as myself,
strive to efficiently grow the 1 created by entrepreneurs to
100. Conversely, if we provide equity to a company thatwill go from 0 to -1, this will quickly be transformed to a-100. In the most extreme cases, such as the financial
crisis of 2008, this -100 can bear the risk of setting off aglobal recession. In light of this risk, I always endeavor to
identify whether an entrepreneur will create 1 or -1
through my interactions with them. This is one way that
long-term investors contribute to a better world. I hopethat MARUI GROUP will remain a company that creates 1’s.
Aoi: To look at the same idea from a different perspective,
if a company chooses the wrong investor to become
engaged with, it will run the risk of being led in a baddirection. I enjoyed having this frank conversation with you
today. It was a clash of ideas between professionals of thebest possible kind and very refreshing. Looking ahead,I hope to pursue the type of mutual growth with investors
that you speak of in order to contribute to the long-term
interests of society.

17Section 02

Co-Creation
Management
Business Model
MARUI GROUP’s vision is for an inclusive society in which no one is excluded andhappiness is available to all. To this end, we are pursuing innovation in our businessto realize both sustainability and profitability while expanding upon the happinessthat exists at the intersection of the interests of all of our stakeholders.

18

19Business Structure

History

History

Business Structure

MARUI GROUP of Today

Innovation of Business Str ucture inLine with the Times

Words of Founder Chuji Aoi“Creditability should be built together
with customers”
Unique business model merging retailing and finance“Pioneer spirit of creating opportunities”
Adeptness at evolving and creating innovation in response to
the needs of the times

Japanese Asset Price Bubble

Age of Declining Birthrates and Aging Populations

Accumulation of physical goods

First Great
Innovation

PursuitPursuitof more-fulfillingof more-fulfilling
lifestyles
lifestyles
andandmarketmarketmaturity
maturity

Customers

New families

Customers

Younger generations

Products

Furniture, consumer electronics,
and other durable goods

Products

FashionCredit cards

Akai Card (Red Card) in-housecredit card

Credit cards Japan’s first credit card
StoresVisionMARUI GROUP’s Founding DNA

Over the 86 years since its founding, MARUI GROUP has continued to innovate and evolve its unique business model,
which merges retailing and finance, and the structure of its business in line with changes in the times and in the needsof customers. Currently, finance is becoming the main driver of our growth. However, we retain our stance of notsegregating retailing and finance. Rather, we will share human resources, stores, and data throughout our integrated
business as we seek to improve corporate value by evolving our unique business model merging retailing and finance.
Post-War Japanese Economic Miracle

Definitions of Retailing and
FinanceSecond Great
Innovation

Monthly installment payment
storesStoresThird Great
Innovation

FY2006
Began issuing
EPOS cards
EPS: ¥70.4

1966
Introduced industry’s first computer

All ages (everyone)

Products

Lifestyle proposals

1960
Issued first credit card in Japan

Real estate model

FY2015
Stabilized earnings
structures of stores
EPS: ¥58.9

FY2009Recorded first loss due inpart to financial crisis of 2008
EPS: –¥31.9
FY2007
Revision of
Money Lending
Business Act
EPS: ¥12.9

FY2021
Promotion of financial inclusion
EPS: Target of ¥130 or more

Credit cards Multipurpose EPOS card
StoresDepartment stores
FY1991
Achieved peak
performance
EPS: ¥103.2

Customers

FY2011
Recorded second loss
Commenced massive
business restructuring
EPS: –¥86.4

FY2017
EPS: ¥80.2

Earnings per share (EPS)
1931 Founding

Fiscal year ended
January 31, 1973

Fiscal year ended
January 31, 1980

Fiscal year ended
January 31, 1990

Fiscal year ended
January 31, 2000

Fiscal year ended
March 31, 2006

Fiscal year ended
March 31, 2010

Fiscal year ended
March 31, 2017

Furniture Sales through Installment Payments

Sales of Fashion on Credit

Lifestyle Proposals and Card Shopping Transactions

Founder: Chuji Aoi

Second leader: Tadao Aoi

Third leader: Hiroshi Aoi

Period as president: 1931–1972 (41 years)

Period as president: 1972–2005 (33 years)

Period as president: from 2005

At the time of its founding, MARUI GROUP’s business involved
selling furniture through monthly installment payments. Thesemonthly installment payments entailed both selling furnitureand providing credit, or, in other words, lending money, thus
representing a business model that merges retailing andfinance. In the years that followed, the Company pushedforward with the modernization of the installment payment
system, issuing Japan’s first credit card in 1960 and thenintroducing the industry’s first computer in 1966.

During the period of the post-war Japanese economic miracle,
income levels in Japan rose, leading other stores using themonthly installment payment system to focus on finance.
MARUI GROUP, meanwhile, turned its attention to fashion. Thistransition entailed a bold shift toward younger generations as
the Company’s customer base. We thus came to play a part in
the boom of the DC fashion brand. In addition, we began offering cash advances in 1981. By building upon these strategies,
we were able to achieve our peak performance in 1991.

Due to the impacts of the 2006 revision of the Money Lending
Business Act and the 2008 financial crisis, MARUI GROUP
was forced to record losses on two occasions. In light of thisdevelopment, we undertook a massive business restructuring.
In terms of customers, we drastically realigned our focus fromcatering primarily to younger generations to developing abusiness that wins the favor of customers of all ages. The launchof the multipurpose EPOS card in 2006 brought further change
as our earnings began to come less from cash advances and

20

Fiscal year ending
March 31, 2021

more from card shopping transactions. In 2014, we started
transitioning our stores toward real estate-model shopping
centers to enable them to provide experiences in addition to
the physical goods they had conventionally sold. This business structure transformation stabilized the earnings ofstores, allowing them to realize immunity to downside risks.
In addition, the transformation made it possible to undertakeco-creation store development initiatives with customers andincrease the number of visiting customers and purchases.
21

Business Structure

MARUI GROUP of Today

Reverse in Relationship between
Retailing and Finance

FinTech Business* : 84%

Retailing Business* : 16%2IT, etc.

MARUI GROUP of Today

Definitions of Retailing and
Finance

VisionBusiness Model Innovations

MARUI GROUP previously has been a retailer with finance functions, and the role of credit cards has thus been to
support stores. This relationship began to change with the launch of the EPOS card in 2006, after which card transactions started to increase rapidly. Although MARUI GROUP’s business model continued to be a merger of retailingand finance, the relationship between these functions was reversed, with finance becoming the main proponent ofgrowth. Today, our 31 nationwide stores are supporting the growth of credit cards as application centers.

2

History

Business Structure

MARUI GROUP’s business model has undergone innovations in three areas in response to changes in customer
consumption patterns: the rise of e-commerce and cashless payment methods, the declining birthrate and aging ofsociety, and other long-term social trends. By reinventing our business model, we will achieve immunity to downside risks while building a growth foundation capable of taking advantage of upside risks.
Customer base innovation

Change in focus from younger generations to all ages and inclusion of all customers

Retailing innovation

 hift from consignment buying system to real estate model for earnings structure andSpromotion of omni-channel retailing

Credit card innovation

 ransition from in-house card to multipurpose card and expansion of business scopeT
to include FinTech

Product sales

0.4%

3.5%

Services

Consignment sales

9.2%

6.5%

Cash advances

Tenant sales and others

6.6%

4.7%

Immunity to Downside Risks
Downside
Risk

Upside Risk Growth Foundation

UpsideRisk

Related business

1.2%

Card shopping

67.9%
Total Group Transactions*1¥1,933,685 million

Transition from Department Store Model toReal Estate Model

Evolution from In-House Card toMultipurpose Card

The transition from department stores that procureand sell products to real estate-model shopping
centers that receive payments from renting space
has stabilized earnings in the Retailing business.
Moreover, this transition has made it possible tointroduce more tenants offering food, services,and experiences.

Having received a direct license from Visa
Worldwide Japan Co., Ltd., we were able to evolve
our in-house card into a multipurpose credit card
usable anywhere in the world. Since then, card
shopping transactions have been expanding rapidly
in conjunction with customers’ shopping, posting
average annual growth rates of 17% and driving theoverall growth of MARUI GROUP.

Unique Omni-Channel Retailing Strategy
MARUI GROUP is gradually replacing its specialty
shops, which primarily deal in private brand products, with try-on stores, which integrate stores,
credit cards, and the Internet. These stores use acompletely new scheme in which customers canfreely try on samples and then make purchases
through the Company’s e-commerce website.
In the fiscal year ended March 31, 2017, total Group transactions*1 amounted to ¥1,933.7 billion, of which ¥326.3 billion,
or approximately 16%, was attributable to the Retailing business, with the remaining 84%, or ¥1,723.3 billion, coming fromthe FinTech business. In this manner, the FinTech business is currently driving the overall growth of MARUI GROUP.

Redefinition of Credit Card Services as
FinTechMARUI GROUP redefined its prior Credit Card
Services business as the FinTech business with theaim of providing financial services that can be usedby all. Offerings in this redefined business will
include various services, including new services that
respond to the diversification of payment methods
following the rise of cashless payment methods.

*1 Total Group transactions exclude intersegment transactions.
*2 Ratios are prior to eliminations.

2223

Business Structure

MARUI GROUP of TodayBusiness Structure

Retailing Business Earnings Structure
The Retailing business has previously used a model
based on the consignment buying system, which entails
procuring and selling products, meaning that revenue
was dependent on product sales. To address thisdependency, we are transitioning to a real estate model,
which involves gaining rent revenues from renting out
space, and will thus stabilize earnings. We aim to convert 100% of applicable floor space to this model by thefiscal year ending March 31, 2019. As we transition tothis real estate model by shifting toward shopping centers and fixed-term rental contracts, the amount ofconsignment revenues from tenants will decrease while
rent revenues from fixed-term rental tenants will
increase. Accordingly, the change in the earnings structure of the Retailing business is apparent when looking
at the distributions of sales under the consignment
buying system, rent revenue, and other items.
In conjunction with the transition to the real estatemodel, the key performance indicator (KPI) for specialty
stores, which primarily deal in co-creation private brandproducts, was changed from operating income margin to
net operating income yield (NOI yield), which indicatesthe anticipated yield in comparison to average market
rent fees. We have hurdle rates of NOI yield of more than
4% for urban stores and more than 7% for suburban
stores. Based on these rates, we will monitor real estatemarket prices in relation to specialty shops along withincome improvements in order to maximize asset efficiency for sales floors, storage space, and other assets.
This KPI is linked not only to income in a given year but
also to corporate value, as it incorporates consideration
for medium-to-long-term income from EPOS card

31 (25 Marui stores, 6 Modi stores)
Specialty stores primarily dealing in co-creation
private brands

Omni-channel
retailing

MARUI Internet shopping “marui web channel”
Short-term event try-on stores

Facility management anddistribution

Store renovation, advertising,property management
Building management
Distribution, IT, etc.

Distribution of Consignment Revenues andRent Revenue
FY2015FY2016FY2017

Consignment revenues

Rent revenue and others

applications and registrations for e-commerce sites.
Utilizing this indicator, we examine specialty shops todetermine which should remain open and which should
be closed.

Previously: Earnings Structure Based on Consignment Buying System
Deliver product

TenantPay procurement costs
after purchase bycustomerMarui store• Marui sales staff• Business partner sales staff

MARUI GROUP of Today

FinTech Business Earnings Structure

Overview of Operations
StoresHistory

While the Japanese credit card industry has been experiencing average annual growth of 7% in card transactions,
the FinTech business has been enjoying average annual
growth rates of 17% in transactions using its core EPOS
card. Looking at operating receivables, the amount of
installment sales accounts receivable (revolving andinstallment payments) exceeded the amount of operatingloans outstanding in the fiscal year ended March 31,
2013, illustrating the shift in the earnings structure of thisbusiness from cash advances to card shopping transactions. Today, card shopping transactions account for
approximately 81% of total transactions in the FinTechbusiness while cash advances only equate to around 8%.
The growth of credit card businesses is dependent on
increases in cardholder numbers, the ratio of cardholders
that remain active users, and the amount of transactions
per one card. We issue EPOS cards to around 700,000
new applicants each year, of which approximately 80%
apply through MARUI GROUP stores or e-commerce sites.
Located predominately in major cities with high people
traffic nationwide, the MARUI GROUP’s stores are integral
to acquiring new applicants. In addition, the transition to
the real estate model for stores in the Retailing business
reduces the amount of staff required to operate eachstore, enabling us to reallocate this staff to Epos Card Co.,
Ltd. We are thus able to position staff with extensive customer service experience and a retailing mind-set at EPOS
card application centers in the external facilities of collaboration partners, where these full-time staff members
will work to acquire new applicants. Looking at other areasof the FinTech business, revenues from housing and otherrent guarantee services have recently been rising in light ofDistribution of EPOS Card Applications by Venue(FY2017)
Sell productCustomer
Pay for product21.8%

Marui andModi stores

63.7%

Pay rent• Business partner tenant• MARUI GROUP specialty store• EPOS card application center

Marui and Modi stores

24

Overview of Operations
Credit cards

Financial services

IT

EPOS card
ROOM iD advanced-payment rent guarantee
service
ROOM GUARD Be comprehensive renters’
insurance plans
System development

Transition in Earnings Structure from Cash Advances
to Card Shopping
Card shopping transactions
Installment sales accounts receivable(revolving and installment payments)¥255.5 billion

Cash advances transactions
Operating loans outstanding¥140.6 billion

FY2010FY2013

FY2017the scheduled massive revision to the Civil Code pertaining to credit, which will be the first revision of this naturein 120 years. We also plan to grow the FinTech businessby increasing service revenues and expanding insurance
service and other existing high-margin operations that do
not require invested capital.

Distribution of Group Employees by Business

FY2014FY2015

11.4%

Going Forward: Earnings Structure Based on Real Estate Model
TenantVisionFY2013Collaboration partner
facilities and companies

EPOS Net

Rent space

Definitions of Retailing and
Finance

FY2016
Provide product, service,experience, etc.

MARUI Internet shopping“marui web channel”

Customer
Pay for product, service,experience, etc.

3.1%

Inside MARUI GROUP stores

78.2%

FY2017■ FinTech business ■ Retailing business ■ Administration, others

25

Business Structure

Definitions of Retailing and Finance

MARUI GROUP’s Retail-Nature
Business That is Attentive to the
Needs of Individual Customers
Since its founding, MARUI GROUP has remained committed to identifying the needs of individual customers basedon their lifestyles, striving to attentively cater to these needs with fine-tuned responses. As the Internet spreads toevery facet of our lives, MARUI GROUP will seek to evolve its retail-nature business to provide value that meets­customer expectations through combinations of financial and non-financial services.

Combinations of Financial and Non-Financial Services
In May 2017, Nobuchika Mori, commissioner of the
Financial Services Agency, delivered a speech entitled“Will FinTech create shared values?” During this speech,
Commissioner Mori stated that “Current product line-ups
differ from player to player, but none at the moment has a
combination of a wide range of financial and non-financial
services that can meet the customers’ needs, be it a financial institution or otherwise.” If one were to view MARUIGROUP’s FinTech business as a provider of “financial

services” and the Company’s Retailing business as a supplier of “non-financial services,” then MARUI GROUP
could be described as a “conglomerate that combines awide range of financial and non-financial services to offer
fulfilling lifestyles to all customers.” This would be an
accurate way of explaining the business model merging
retailing and finance that MARUI GROUP has developedsince its founding.

History

Business Structure

MARUI GROUP of Today

Definitions of Retailing and
Finance

VisionCustomer-Oriented Retail-Nature BusinessLeading Role as a New Player in the FinTech Market

In the past, there have been some who have looked at theindividual products and services offered by MARUIGROUP and have been led to believe that the Company’sbusiness model was divided into retailing and finance
operations. However, we see it differently. To us, retailingand finance are like two sides of the same coin, and thesetwo concepts cannot be separated from one another in
MARUI GROUP’s business. For example, EPOS cards andother financial services are provided through the retailstores that serve as our physical bases for card issuing,
and our credit cards are primarily used for shopping purposes. As such, EPOS cards can be seen as a financial
service intrinsically linked to non-financial services.
When looking at MARUI GROUP’s business from theperspective of the functions it provides customers, as
opposed to the perspective of a business operator, it isclear that both the Company’s financial services and its
non-financial services are inherently retail in nature as
they cater to consumers instead of companies. We see theideal form of MARUI GROUP’s retail-nature business as
being one that seeks to identify the needs of individual
customers based on their lifestyles in order to furnish
attentive and fine-tuned responses. By providing combinations of financial and non-financial services based on
this vision, we aim to contribute to the realization of aprosperous and inclusive society in which happiness isavailable to all.

In the aforementioned speech, Financial Services Agency
Commissioner Mori explains “As financial services become
more sophisticated along with the advance of FinTech, thecustomers will not be able to assess the technologies
behind the services they enjoy, and rather, they are likely
to select services based on their trust in companies andtheir employees who provide the services.” As artificial
intelligence, virtual currency, and other sophisticatedfinancial and non-financial services emerge, the competitiveness of financial institutions and other companies will
hinge on their ability to provide services that customers
judge as both valuable and trustworthy.
The history of MARUI GROUP was built together withcustomers. Beginning with monthly installment payment
sales and thus including consulting with customers about
payments, there has never been a clear distinction
between our financial and non-financial services. At thesame time, MARUI GROUP has been a trailblazer in providing services powered by advanced technologies, issuing Japan’s first credit cards and introducing the industry’s
first computer. The Company has thus evolved to possess
physical stores that serve as points of contact with customers as well as both financial and non-financial services. We are confident that MARUI GROUP will be able towin customer trust and play a leading role as a new player
in the FinTech market.

Definition of Business from a Business Operator
Perspective

Definition of MARUI GROUP’s BusinessExcerpts from “Will FinTech create shared values?” Speech Delivered by Financial Services Agency
Commissioner Nobuchika Mori in May 2017

“Current product line-ups differ from player to player, but none at the
moment has a combination of a wide range of financial and non-financial
services that can meet the customers’ needs, be it a financial institution
or otherwise.”Finance

Consumers

MARUI GROUP’s
Retail-Nature
Business

Retailing(department
stores, etc.)

Non-Financial Services

26

Companies

Consumers

Source: “Will FinTech create shared values?”, Financial Services Agency
www.fsa.go.jp/common/conference/danwa/20170525/01.pdf

Financial Services(credit cardcompanies, etc.)

Companies“As financial services become more sophisticated along with the advanceof FinTech, the customers will not be able to assess the technologies
behind the services they enjoy, and rather, they are likely to select services based on their trust in companies and their employees who provide
the services.”

Financial Services

Non-Financial Services

27

Business Structure

VisionHistory

Business Structure

Co-Creation Management
Business Model

MARUI GROUP of Today

Definitions of Retailing and
Finance

VisionMembers of LGBT community
representing a¥5,940 billion market

One 13inpeople in JapanMARUI GROUP strives to develop a business that turns issues into value through co-creation with
its various stakeholders. Japan is known for the various challenges it faces as a developed nation, in its aging
population and declining birthrate, and this country has a population of approximately 126.8 million diverse
individuals. It is the goal of MARUI GROUP to contribute to the realization of a prosperous and inclusive
society in which no one is excluded and happiness is available to all. The path to accomplishing this goalis MARUI GROUP’s vision for a co-creation management business model.

Total Group transactions

Differently abled individuals
in Japan

1,933.7 billion¥

8.6 million

Rakuchin Kirei series shoes
Total aggregate sales ofover

3.5 million
pairs

Customers visiting
Marui and Modi storesa yearSenior citizens
over age 65 in Japan

200

Approx.
millionFacilities

Unique Characteristics of
MARUI GROUP Realized throughIntegrated Group Management

 ransition to e-commerceTShift from goods to experiences
Emergence of a sharing economy
Declining birthrate andaging population
Increase in demand frominbound travelers
Rise of cashless payment methods
Change of focus from saving
to investment
End of era of low interest rates

Retailing

Finance

Rakuchin Kirei series

Management Base110
Creation of
New Demand

Value Creation

A Flourishing andInclusive Society
Offering
Happiness to All

EPOS cardholder
base comprising
primarily youths andyoung adults

6.36 million

Founding DNA“Creditability should be built
together with customers”“Pioneer spirit of creating opportunities”→P.92

Approx.
millionCustomer BaseMARUI GROUP
e-commerce sites

Customer-Focused Employees
Co-Creation Management

17%

Customers visiting
MARUI GROUP
e-commerce sites
a yearPrivate brandproducts

Changes inCustomers andSociety

34.8 million
Average annual growth rate
for EPOS card

Industry-leading income
per EPOS card

6,500

¥

Youths and adults aged
15 to 39 in Japan

Credit cards

33.7 million
Industry’s lowest ratio ofdelinquent debt
boasted by EPOS cards

1.45%
Non-Japanese individuals
living in Japan

2.3 million
28

As of March 31, 201729

Retailing Business

Structure

Retail Stores Serving
as Points of Contact with
200 Million Customers a Year
When viewed from the perspective of retailing, MARUI GROUP’s
greatest strength is its retail stores, which serve as points ofcontact with approximately 200 million customers a year. The
Company operates 31 large-scale commercial facilities predominately located in major cities with high people traffic
nationwide. The number of customers visiting these facilities
is constantly increasing. We are also expanding our contact
points in other locations, such as through the opening ofprivate brand stores in commercial facilities operated by othercompanies and the creation of EPOS collaboration cards.

Physical Stores in Prime Locations Functioning as
Customer Contact Points

Commercial facilities operated by AIM CREATE CO., LTD.

Marui Stores Located in Major Cities Nationwide
Shopping centers operated by MARUI CO., LTD.
Shibuya Modi

POINT 2

Opening of Specialty Stores Outside of Group Facilities
and Promotion of Omni-Channel Retailing

Yurakucho Marui

Gifu
Miyagi

Hyogo

Modi Stores Based on Regional Characteristics

Although the overall birthrate is declining and the population isaging in Japan, the population of urban areas is actually increasing, creating greater disparities between regions. MARUI GROUP’s
31 stores are located in prominent districts of major cities characterized by high convenience and people traffic. By employing
new floor layouts that invite daily visits, we are creating spaces atwhich customers gather naturally (→P.32).

AomoriFukuoka

Perspective of Inclusion

POINT 1

Hokkaido

Kyoto

Structure

Retailing BusinessSpecialty Stores
Stores opened as tenants in other commercial facilities
that sell private brand products from MARUI CO., LTD.

MARUI GROUP’s specialty stores deal in private brand products,
most notably the Rakuchin Kirei series of shoes (→P.36). These
stores are opened as tenants primarily in commercial facilities
operated by other companies in areas where there are no Maruistores. We similarly set up try-on stores (→P.33) as short-term
events at the facilities of other companies. Looking ahead,
MARUI GROUP aims to expand its range of contact points withcustomers by accelerating its unique omni-channel retailingstrategy, which takes advantage of the strengths of both physicalstores and e-commerce.

Shizuoka
Rakuchin Kirei Shoes Fit Studio, AEONMALL KISOGAWA

Ibaraki

Mito

SaitamaNagasaki

POINT 3

Omiya

Kawagoe

Support for EPOS Collaboration Card Partner Facilities
Utilizing Retailing Expertise

Soka
Shiki

Kagoshima

Oita

Aichi
Ikebukuro

Miyazaki

Osaka
Nakano Shinjuku

Tachikawa Kokubunji

Kashiwa
Kitasenju

Tokyo

Kichijoji
Yurakucho

MachidaShinurayasu

Mizonokuchi
Ebina

KawasakiSpecialty Stores (outside of Marui and Modi stores): 7
EPOS Card Application Centers (outside of Marui andModi stores): 14

30

Hiratsuka

Totsuka

Funabashi
Chiharadai

Kanagawa

Modi Stores: 6

Chiba
Kinshicho

ShibuyaMarui Stores: 25

Ueno

Yokohama

Employees from Epos Card Co., Ltd., with retailing experience
are positioned at the commercial facilities of collaboration­partners on a full-time basis. These individuals are able toexplain the benefits of collaboration cards for customers andfacility tenants directly to tenants, at the same time teachingthem the card promotion techniques employees have honed
based on their experience. In this manner, these employees help
foster understanding regarding EPOS cards while also utilizing
the retailing experience they have gained at Marui stores tocreate fans of partner facilities while expanding the Company’s
own cardholder base.

EPOS Card Application Centers Located inGroup and Other Facilities
Application centers staffed with extensive customer
service experience gained in the Retailing business

EPOS Card Application Center, Hakata Marui

31

Retailing Business

Structure

Co-Creation Store Development
and Unique Omni-Channel
Retailing Strategy
Amid the rapid spread of e-commerce, physical stores are faced with the need to provide services thatcannot be replaced by e-commerce or that are complementary to e-commerce. Recognizing this need,
MARUI GROUP invites customers to take part in the process of developing stores and new services in order
to identify unapparent issues and unmet needs so that it may create new value in tune with the times.

Store Development Based on Customers’ Perspectives Rather Than
Industry Conventions
MARUI GROUP’s stores are currently undergoing a transition to a real estate model, which will entail its revenue
source changing to rent revenues. This transition has
enabled us to move away from our previous apparelcentric focus to alter the amount of floor space at ourstores that is devoted to food, services, sundries, andother product categories catering to the long-term shift
from consumption of goods to consumption of experiences. Moreover, planning meetings with customers andtenants are held at individual stores so that these stores
can be developed based on customers’ perspectives

rather than industry conventions. For example, we havepositioned food vendors, which are of high demand
among customers of all ages and genders, in first floor andother entrance areas. These food vendors have effectively
drawn in customers that have gone on to shop on higher
floors. On the upper floors of stores, we have introduced
service providers that are closely linked to people’s everyday lives, including mobile phone providers, clinics, andEnglish schools. This new tenant distribution has caused
customers to gather naturally at upper floors, thereby
increasing earnings of these floors.

We open try-on stores at various commercial facilities
located throughout Japan as short-term events. Try-on
stores seamlessly link physical stores with Internet sales
to create a completely new type of sales floor designed toprovide customers with a smooth and highly satisfying
shopping experience. These stores display samples of all
sizes of certain products that customers can try on as
they please, while purchases are made through theInternet. Moreover, these try-on stores serve as a venue
for increasing EPOS cardholders along with the number ofcustomers registered for our Internet sales sites, thereby
contributing to medium-to-long-term income growth.

Mail-order and Internet sales initiatives
1988

Installed single-item product management system at all stores

2005

Began updating inventory information in real time based on­individual product movements

2006

Our co-creation store development efforts made us aware of a disparity between the conventions of the retailing industry and the actual needs of customers and tenants. At Hakata Marui,
which was opened in April 2016, initiatives to respond to the needs that became apparent
through planning meetings with customers included positioning food vendors on the first floor
and kitchen accessory and Kampo (traditional Japanese) medicine stores on higher floors.
This made for truly varied floor layouts. Finding tenants that catered to customer needs while
also meeting the Company’s requirements for net operating income yield was a struggle, andI was concerned about the low amount of floor space we were devoting to apparel products.
However, Hakata Marui was able to welcome 13.4 million customers in the first year after
opening its doors, a level similar to that of Yurakucho Marui. Now, I feel confident that thisstore development approach was the right one.

32

Established MARUI Internet shopping “marui web channel”
Commenced program referring customer to e-commerce website
sales through coupons attached to receipts

2007

Completed integration of inventories for physical stores and Internet sales
Began using store inventories to fill e-commerce orders

2008
2009

Integrated IDs for EPOS Net and MARUI Internet shopping“marui web channel”

2010

Started displaying stores dealing in specific items and inventories on
MARUI Internet shopping “marui web channel”

Integrated physical store and MARUI Internet shopping “marui web channel” purchase histories
Established official LINE accountExecutive officer
Managing Director, MARUI CO., LTD.
Director, AIM CREATE CO., LTD.

Launched nationwide try-on store initiative for private brand shoes

Opened Marui store on Wowma! Internet sales site operated byKDDI CORPORATION
Introduced AutoStore robotic warehouse system at Company
Internet sales distribution centers

Takayuki Shibao
Masahiro Aono

Commenced in-store pickup service for items ordered via MARUIInternet shopping “marui web channel”

Launched artificial intelligence-powered recommendation services

Employee Comment

Confidence in Highly Varied Floor Layouts

Physical store sales initiatives

Launched Voi mail-order sales catalog

1995

2017
Service providers closely linked to people’s
everyday lives located on upper floors

Purchases can be made through store-use tablets

Omni-Channel Retailing Initiatives

2016

Food floor developed on first floor based on
customer feedback

Perspective of Inclusion

Ideal Shopping Experiences for All

2015

Planning meeting held together with customers
and tenants

Structure

Retailing Business

Try-on Stores
Omni-Channel Retailing Division
MARUI CO., LTD.

Employee Comment

Try-on stores utilize a framework
created because some customers
came to recognize the quality of
Rakuchin Kirei series shoes only
after trying them on. Our initialstart had some bumps, but thisinitiative enabled us to deliver
Rakuchin Kirei series shoes toregions in which there are no
Marui stores. Looking ahead,I hope to further improve to help
provide customers with the best
possible shopping experiences.

Mariko Hagiwara
Rakuchin Kirei Shoes Fit Studio
Kinshicho MaruiMARUI CO., LTD.

At Kinshicho Marui, we opened atry-on store with no inventory on
a trial basis. Since this store was
opened, we have proceeded to
improve the quality of the shoes
we offer so that the store can bringjoy to as many customers as
possible, and the number ofcustomers commenting on thestore’s convenience continues toincrease. These comments are asource of encouragement in mydaily work.

33

Retailing Business

Perspective of Inclusion

Retailing Business

Quest to Bring Joy to People of
All Ages, Genders, and PhysicalCharacteristics
Looking forward to 2020, the year of the upcoming Tokyo 2020 Olympic and Paralympic Games,
MARUI GROUP is implementing various initiatives on its quest to bring joy to all customers, regardless of their age
and including people of all genders, such as members of the LGBT community, and people with disabilities.

Structure

Perspective of Inclusion

Improvement of Customer Service

Enhanced Drive to Inform Customers

Employees undergo Service Care-Fitter training to fostera spirit of hospitality and to learn how to accommodate
various customers. This training is conducted in-house by
11 Group employees that have acquired official instructor
qualifications. In addition, external lecturers are invited to
implement training for the Universal Manner Placement
Examination program and to perform LGBT training.
Employees also receive training on catering to the needsof inbound travelers performed by non-Japanese lecturers. With the skills gained, we aim to improve customer
service in order to foster an environment in which all
customers can enjoy shopping.

MARUI GROUP is engaged in various activities to keep
its customers informed on its efforts, particularly its cocreation store development initiatives for creating storesthat can be enjoyed by individuals of all genders andphysical characteristics. For example, we are proactively
communicating our co-creation initiatives through participation in the events of TOKYO RAINBOW PRIDE, an organization that aims to create a society in which individualsof all sexual orientations and sexual preferences are able
to live optimistically and to be themselves, while remaining
free from discrimination and prejudice.

Customer Diversity and Inclusion
Japan has a population of approximately 126.8 million
diverse individuals. If we adopt a perspective of creating
spaces in which all people can flourish, the issues faced
by Japan could be turned into opportunities.

MARUI GROUP strives to develop a business that creates
innovation for the benefit of everyone, effectively transforming such opportunities into value. This is the goal of
our customer diversity and inclusion initiatives.

MARUI GROUP’s concept of “all customers”
In training for assisting customers using wheelchairs, employees
learn how to operate wheelchairs through actual use.

Our booth at TOKYO RAINBOW PRIDE 2017 displaying
Rakuchin Kirei series shoes available in a wide range of sizes

Employees wear special goggles to show how objects appear
to someone with cataracts in senior citizen simulation training.

Competition sponsored by the Japan Blind Football Association,
which MARUI GROUP provides with the official suits for theJapan national team through a partnership agreement

Previously

Employee Comment

Ratio of Senior Citizens

Ratio of Differently Abled Individuals

Ratio of LGBT Community Members

The population of senior citizens over theage of 65 in Japan is 34.8 million.

In Japan, 8.6 million people havephysical or mental disabilities.

One in 13 people in Japan is part of
the LGBT community, representinga ¥5,940 billion market.

27.5%

Source: Population Estimates, Statistics Bureau,
Ministry of Internal Affairs and Communications

6.8%

Source: Annual Report on Government Measuresfor Persons with Disabilities, Cabinet Office,
Government of Japan, 2017

Groupwide Promotion of LGBT Understanding

7.6%

Source: LGBT Survey 2015, Dentsu Diversity Lab,DENTSU INC., 2015

Hitomi Kanazawa
Marui Future Project Team
Sustainability Department
MARUI GROUP CO., LTD.

34

When we participated in TOKYO RAINBOW PRIDE in May 2016, understanding of the LGBT community
within the Company was rather low. In the year that followed, however, we have seen a massive change in
employee awareness, denoted by the recent rise in divisions voluntarily requesting LGBT manner training.
During the period of TOKYO RAINBOW PRIDE in May 2017, rainbow flags were displayed at 12 Marui andModi stores. Event flyers and special edition paper shopping bags made for the event were also distributed.
Furthermore, a total of 80 employees volunteered to take part in the event’s main draw: the parade. These
employees marched in the parade while wearing original MARUI GROUP T-shirts. I view such developments
as a testament to how the concept of customer diversity and inclusion has become rooted throughout theGroup. I hope to plan other initiatives on this front in the future.

35

Retailing Business

Perspective of Inclusion

Structure

Retailing Business

Co-Creation of Inclusive Productswith Customers

Perspective of Inclusion

Customer Participation in Product Development

MARUI GROUP views product creation as the process of developing products that match the physical characteristics
of customers. We are thus establishing development and sales frameworks for supplying products that benefit all
customers, excluding no one regardless of their physical characteristics. We thereby seek to include and provide joy
to all customers and to forge a business model that creates new demand.

Development of Size Lineup Accommodating All Customers

At the time when development of the Rakuchin Kirei seriesof shoes was first started, a survey of EPOS cardholders
indicated that around 90% of them had felt discomfort
with their shoes. This survey made it clear that customers
were unable to find pumps satisfying all of their needs
with regard to fashion, comfort, and affordability. We thus
vowed to create just such shoes. We began by measuring
customers’ feet and analyzing the results to make original
shoe trees. We then held planning meetings together withcustomers that had expressed dissatisfaction with the
comfort of their shoes. The Rakuchin Kirei series of shoes
only consists of those products able to meet the strict
standards of customers after being refined through an
ongoing cycle of thinking and creating prototypes together
with customers.

Going forward

Previously• Standard industry sizes• Emphasis on design and other aesthetic qualities• Wide range of sizes accommodating all customers’ feet• Balanced focus on design, comfort, and priceShoe Size Range to Cover 100% of Foot Sizes

Sales of Women’s Shoes: Rakuchin Kirei Series¥5.2 billion

Rakuchin Kirei series shoes lineup
100% coverage¥4.7 billion¥4.5 billion

Total Aggregate
Sales of More Than

3.5 million

72% coveragepairsStandard
industry shoe
size range¥3.6 billion¥2.7 billion

Needs Related to Shoe Sizes
The foot sizes of adult women in Japan are said to range
from 20.5 cm to 26.0 cm. However, the standard range ofshoe sizes offered by the Japanese apparel industry isfrom 22.5 cm to 24.5 cm, which covers only 72% of thisStep 1
Planning Meetings with Customers

Step 2
Sample Inspections

80,000 people

Planning meetings held with customers
to uncover unmet needs that they
themselves were unaware of

Ongoing process of confirmation andrevision that continues until qualifyingscores are received from customers

Customer input received throughcustomer-participation community
website (Japanese only)

Step 4
Total Aggregate Sales ofMore Than

3.5 million
pairs

shoeslabo.0101.co.jp¥1.6 billion

27.0cm

FY2010FY2017

Customers’ Shoe-Related Concerns

Shoes that Go Unworn after Purchase

Ratio of customers expressing dissatisfaction withthe comfort of shoes

Ratio of customers responding that they stopped wearing
shoes due to size issues or pain

Based on survey of EPOS cardholders conducted when developmentof Rakuchin Kirei series shoes had just begun

Based on survey of EPOS cardholders conducted when developmentof Rakuchin Kirei series shoes had just begun

90%

36

from approx.

by 1,000 people
per year¥70 million
24.5cmStep 3Customer Input

held 60 times
per year

Employee Comment

22.5cmrange of foot sizes. With the Rakuchin Kirei series of shoes,
we expanded the range of sizes we offer from 7 sizes to
16 sizes, covering foot sizes from 19.5 cm to 27.0 cm,
in order to accommodate customers wanting to buy shoesthat were previously unable to due to their physical characteristic of having small or large feet. This process led to the
Rakuchin Kirei series of shoes covering 100% of foot sizes,
giving all customers the opportunity to enjoy these shoes
and thereby selling more than 3.5 million pairs to date.

Product Creation Efforts for the Benefit of All Customers¥0.7 billion

19.5cmRakuchin Kirei series of shoes (Japanese only)
voi.0101.co.jp/voi/webshop/customer_portal/index.jsp

41%

Ai Saiki
Shoes Business Section
Omni-Channel Retailing Division
MARUI CO., LTD.

Employee Comment

I have been involved with the
Rakuchin Kirei series of shoes as amember of the sales staff since its
launch, and I was well aware ofcustomers’ concerns regarding
shoes. We are currently in theprocess of creating an environment that will encourage as manycustomers as possible to experience the comfort and wide rangeof sizes provided by these shoes.
Specific efforts in this regard
include renovating shoe sales
floors and establishing new ones.
I am driven in these efforts by thecomments of satisfied customers.

Miki Goi
Shoes Business Section
Omni-Channel Retailing Division
MARUI CO., LTD.

We are intensely focused on
developing products that meetcustomer needs based on the
input gathered from customers
during planning meetings. After
expanding our size lineup,­customers expressed their appreciation by stating how they wereable to feel the joy of fashion andfinding shoes that fit. Knowing that
I have been able to enrich the livesof customers is a major source of
motivation. In future productdevelopment activities, I will
maintain my approach of earnestly
incorporating customer input.

37

FinTech Business

Structure

FinTech Business with Annual Growth
Rates of 17%
Transactions in MARUI GROUP’s FinTech business havecontinued to grow at an average rate of 17% per year, well
above the average of 7% for the credit card industry.
Previously, we offered an in-house card that was only
usable at MARUI GROUP stores, but everything changed
when we received a direct license from Visa Worldwide

Structure

FinTech BusinessJapan Co., Ltd., allowing us to begin offering the EPOS
card, a multipurpose card that is usable anywhere in theworld. Since its launch in 2006, the EPOS card has contributed to ongoing growth in card shopping transactions,driving the growth of not only the FinTech business but
also of MARUI GROUP as a whole.

Transactions in MARUI GROUP’s FinTech Business

Perspective of Inclusion

POINT 1

Cardholder Base Consisting Largely of Youths andYoung Adults and Generating High Profitability
We set low credit limits for new applicants, making iteasier for students, minors, and other individuals whose
income will only start growing in the future to receive
credit cards. As a result, for approximately 30%*1 of ourcardholder base, the EPOS card was their first evercredit card. In addition, we encourage cardholders to
upgrade to Gold cards, which feature no annual fees,
based on their usage frequency and amounts.
Approximately 25% of cardholders currently carry Goldor Platinum cards. Moreover, Gold cardholders tend tomaintain consistently high rates of using revolving andinstallment payments while making transactions in larger
amounts, contributing to higher earnings.

Cardholders by Age
EPOS Card■ Age 39 and below ■ Age 40 and above Industry*2■ Age 39 and below ■ Age 40 and above 

EPOS Card

4897

GOOD
THRU
有効期限

On-the-Spot, In-Store Issuance Made Possible by
IT-Powered Operations

MONTH / YEAREPOS cardholders

6.36 million

Card shopping­transactions outside ofMarui stores

Card shopping­transactions at
Marui stores¥354.9 billion

Cash advancetransactions
Services,
IT, etc.
FY200738

System management and development at MARUI GROUP
is handled by Group company M & C SYSTEMS CO., LTD.
This company develops over 100 systems a year and iscapable of delivering speedy service and installing cuttingedge technologies. Thanks to systems developed by thiscompany, we are able to issue EPOS cards on the spotusing store tablets in as little as 20 minutes, a world
record. In fact, the EPOS card is an IC-chip-equipped Visa
card to be issued in this manner. By enabling customers toreceive their EPOS card on the spot and use it immediately, we make it more likely that their EPOS card will
become their main card, thereby realizing higher rates ofactive card users.

POINT 34.03 million

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY201731%
69%■ Male ■ Female 

POINT 2
Total transactions

Unique Collaboration Scheme Supporting
Nationwide Expansion
As part of our efforts to expand our cardholder base, we
issue collaboration cards together with partner facilities andcompanies from other industries. We establish EPOS card
application centers as tenants at partner facilities, whichallows us to position application centers across Japan.
Furthermore, although standard collaboration cards only
grant cardholders access to the benefits of the one partnerthat corresponds to their card, EPOS collaboration cards
allow holders to use the benefits of all partners with justone card. This unique scheme is beneficial for customers
and collaboration partners as well as for MARUI GROUP.

26%
74%

Cardholders by Gender*1 Source: Epos Card Co., Ltd.

¥1,723.3 billion

52%
48%

Industry*2

51%
49%

■ Male ■ Female *2 Source: Consumer Credit Statistics from Japan (FY2016), Japan Consumer
Credit Association

NEWS

Receipt of 16th Porter Prize by MARUI GROUP’s
Credit Card Services Business
MARUI GROUP’s credit
card services businesshas a long history datingback to its founding andthe installment payments offered then thatgained additional depth
when the Company
issued Japan’s first credit card in 1960. This business was awarded the16th Porter Prize. The rationale for this selection included a high evaluationof factors such as how we ensure the convenience of credit card issuance inrecognition of our cards’ position in supporting retail, how our cards arelargely held by customers under the age of 40 due to our policy of building
creditability together with customers, and the large ratio of revolving
payment usage.
www.porterprize.org/english/pastwinner/

About the Porter Prize
The Porter Prize is an award that was created in July 2001 to bestow
recognition on Japanese companies that have achieved and maintained
superior profitability in a particular industry by implementing uniquestrategies based on innovations in products, processes, and ways ofmanaging. The name of the award is derived from Professor Michael E.
Porter of Harvard University.

39

FinTech Business

Structure

FinTech Business

Financial Services in Our Daily LivesMARUI GROUP only provides financial services, such as payment and borrowing services, through its credit cards.
In the future, however, the Company will strive to expand its offerings to include services for saving, increasing, andlending money as well as for encouraging others and preparing for contingencies. We will engage in open innovation
activities with venture and other FinTech companies to develop such services in various fields.

Structure

Perspective of Inclusion

Pay 
Easy and Smooth Payment
In March 2017, it became
possible to use Apple Pay
with all EPOS cards. EPOS
cardholders are now able toregister their card with their iPhone or Apple Watch, a simple
process that allows for smooth payments at convenience
stores and other locations.

Learn Money Seminars for EPOS Cardholders
We hold Money Seminars for EPOS cardholders conducted by financial planners. Approximately 80% of theindividuals that apply for these seminars are in their 30s
or younger, verifying the high level of interest in financial
services among young adults.

Encourage 

Learn
Lend

Encourage

Increase

DonatePlatform

Trial Introduction of Bitcoin Virtual Currency
In August 2017, we introduced, on a trial basis, aservice at Shinjuku Marui
Annex that allows payments
to be conducted using the bitcoin virtual currency. The
decision to test this service was based on the April 2017
revision to the Payment Services Act as well as the rapid
rise in individuals in possession of bitcoins in Japan. The
service itself used the bitFlyer wallet smartphone application provided by bitFlyer, Inc., Japan’s largest bitcoin broker.

Donate 
Save

PrepareConserve

Borrow
Pay

Employee Comment

A Card Usable by All Customers When and Where They Need It

Hironobu Mamuro
Credit Management Department
Epos Card Co., Ltd.

40

In 2006, after receiving a direct license from Visa Worldwide Japan Co., Ltd., we began issuing EPOS cards,
the world’s first IC-chip-equipped Visa card to be issued on the spot in stores (system is patent pending).
When the Retailing business began developing stores to cater to customers of all ages, we followed suit bystarting up a Groupwide project pertaining to credit cards. Through this project, discussions regarding theideal form of our credit card were carried out over the course of a year. The conclusion we reached was that
our credit card should be a card that is usable by all customers when and where they need it. We thus
decided to transition from our previous in-house credit card to a multipurpose credit card. On-the-spot,
in-store issuance of an IC-chip-equipped credit card was an unprecedented feat, even for Visa, and thiscompany’s high security standards made negotiating for this privilege difficult. Luckily, MARUI GROUP had
all of its system development, information security management, and card issuance procedures conducted
through a Group company, which enabled us to tackle this challenge through a concerted Groupwide effort.
Eventually, we succeeded in receiving approval from Visa thanks to this strength.

Cards Designed by Differently Abled Artists
We held a card designcontest for differently
abled artists. Two of thesubmissions were
Shining Life
Colorful Orange
Art by Ken Tamura
Art by Yuko Miura
selected via customer
vote and then transformed into actual cards in June 2017.
The issuing fee for a card with one of these designs is ¥500.
All of this amount is donated to SHOUGAISHA JIRITSU
SUISHIN KIKOU ASSOCIATION, an organization that supports the independence of differently abled individuals.
Donations through EPOS Points
MARUI GROUP has included a donation option on the listof EPOS point exchange options, providing an outlet for
cardholders who wish to contribute to society. Wellmeaning cardholders can choose from among 14 donation targets that have been sorted into four categories:
support for children’s education through UNICEF, humanitarian and refugee aid, environmental and regional support, and support for differently abled individuals.

Monthly Rent Advanced-Payment
Rent Guarantee Service
The ROOM iD advanced-payment rent guarantee service
bundles advanced payment and guarantee services for
renters. This service eliminates the need for renters to
identify a guarantor when moving into an apartment,
which has become increasingly more difficult due to thedeclining birthrate and aging population.
Communication of Anime Content to the WorldMARUI GROUP established the Anime Business
Department in April 2016 to spearhead efforts to communicate anime content to the world. Anime is an art form
Japan prides itself on and is said to have a market value of¥12 trillion on an annual basis. The department engages
in collaborative initiatives that increase the value of anime
works and creates EPOS cards with original animeinspired designs, much to the delight of fans.

Otomate EPOS CARD

Capcom EPOS CARD

Gintama EPOS CARD©IDEA FACTORY Co., Ltd. /DESIGN FACTORY INC.

©CAPCOM CO., LTD.
ALL RIGHTS RESERVED.

©Hideaki Sorachi / SHUEISHA /TV TOKYO / DENTSU / BNP / Aniplex

Employee Comment

Yoshiki Murabayashi
Anime Business Department
MARUI GROUP CO., LTD.

The Gintama EPOS CARD wasissued following MARUI GROUP’s
participation in the production
committee for the live action
Gintama movie. This card proved
immensely popular, with more than
10,000 cards being issued in only
two months. I am proud to knowthat the card and store promotions
I carried out based on my experience at Epos Card helped make
Gintama an even greater hit.

41

FinTech Business

Perspective of Inclusion

FinTech Business

Financial Inclusion of All Customers
MARUI GROUP’s vision for financial inclusion is to provide financial services that can enrich the lives ofyounger generations and everyone else. This vision shares the same perspective as a core concept of the United
Nations Sustainable Development Goals—the idea that no one will be left behind.

Services for Younger Generations and Everyone ElseIn the past, financial services have primarily been for thewealthy. The concept of FinTech seeks to break awayfrom this tradition by providing financial services thatcan be used by everyone, regardless of their income orage. MARUI GROUP sees its mission as being topromote financial inclusion by supplying financial
services to everyone. Accordingly, we strive to provide
financial services that enrich the lifestyles of everyone,
particularly the youths and young adults for whom
existing financial services lie out of reach.

Structure

Perspective of Inclusion

Concept of a Prosperous Society

MARUI GROUP’s Vision of Inclusion

The impetus for MARUI GROUP turning its focus to everyone was the question of what exactly constitutes a prosperous society. An issue faced by Japan is disparity
between individuals. When looking at the country, we saw
that, although many were successful at accumulating
material wealth, there were some that were excluded fromthis pursuit.
In terms of products, the industry standard sizes for
women’s shoes, for example, only covered the foot sizes of
72% of Japanese women, excluding many for use of theseproducts. The world of financial services was even moreexclusive, as the majority of services were only provided toa limited group of wealthy individuals. Recognizing thisfact led us to conclude that society could not be said to betruly prosperous unless products and services are madeavailable to all individuals. Moreover, we came to realizethat it would not be enough to simply provide inclusive
financial services as social contributions; we would needto also craft these services into a business model that
could achieve sustainable growth.

A large portion of MARUI GROUP’s customers are aged
18 to 39. The Company history began with a business ofhelping young adults that could not purchase expensive
furniture in single payments, and this spirit lives on in ouroperations today. Based on our unique credit philosophy,
we have set credit limits for new applicants lower thanthose of other companies in order to make it easier for
university students and minors without credit card experience to apply. Accordingly, the EPOS card is the first cardfor many of our cardholders, and we have thus been able
to forge long-term relationships with these customers.
Among developed countries, the portion of financial
assets that are in the form of savings is thought to be thehighest in Japan. Of the approximately ¥1,700 trillion
worth of financial assets in the country, only 6.6% are heldby households headed by people in their 30s or below.
Nonetheless, the number of youths and young adults
focused on preparing for the future is rising. Looking at thesocial issues expected to arise in the future, MARUI GROUP
is branching out from the conventional payment andborrowing services provided through credit cards to offer
a wider variety of financial services in its FinTech business,
including those for saving, increasing, and lending money,
offering monetary encouragement, and preparing for the
future. Moreover, we hope to supply these services toyouths and young adults as well as to everyone else.

Households in Japan by Income Level

Total Financial Assets in Japan by Ageof Head of Household

Wealthy

YouthsProvision of financial services to younger generations
and all other customers

Inability of People under the Age of 40
to Secure Sufficient Financial Assets

Increasing Emphasis on Preparing
for the Future Among People Aged 18–39

Ratio of the approximately ¥1,700 trillion worth of financial
assets in Japan owned by households headed by people intheir 30s or younger

Ratio of people preparing for the
future through saving or investment

6.6%

58.2%

Based on Presentation on Inheritance Tax and Donation Tax,
Ministry of Finance, October 2015

Based on Public Opinion Survey Concerning People’s Lifestyles,
Cabinet Office, June 2017

■ Less than ¥3 million ■ Less than ¥5 million ■ Less than ¥7 million ■ Less than ¥10 million ■ More than ¥10 million 

33.3%
23.6%
16.5%
14.9%
11.7%

Based on Comprehensive Survey of Living Conditions, Ministry of Health, Labourand Welfare, 201642

■ Age 39 and below ■ Age 40–49 ■ Age 50–59 ■ Age 60–69 ■ Age 70 and above 

6.6%
12.7%
21.2%
34.1%
25.4%

Based on Presentation on Inheritance Tax and Donation Tax, Ministry of Finance,
October 2015

43

FinTech Business

Perspective of Inclusion

FinTech Business

Big Data and Co-Creation Credit
Expertise Supporting MARUI GROUP
Since its founding, MARUI GROUP has operated under the basic belief that creditability should be built
together with customers. As opposed to being assigned credit based on a customer’s age, profession, or income,we feel that credit must be shaped through a customer’s usage and payment records. This belief has led to our ratio ofdelinquent debt being the lowest in the industry at 1.45%.

Basic Credit Philosophy
The credit standards MARUI GROUP uses in judging credit
card applications and setting credit limits are based on the
belief that creditability should be built together with customers, which we have adhered to since the time of theCompany’s founding. This belief clearly distinguishes
MARUI GROUP from other companies, which generallybase judgments primarily on a customer’s age, profession,and income, as the Company instead seeks to build­trusting relationships with customers in accordance with
their credit card usage frequency and amounts after­application approval.

In the United States, credit cardholders are assigned creditscores based on their credit histories, and these scores
are stored by credit institutions. In addition to credit card
usage, credit scores also take into account factors such as
housing and automobile loan repayment history, outstanding debt amounts, and other credit information to assign
individuals a score of 300–850. The average credit scoreis around 680, and individuals with scores of less than
660 are considered to be in the subprime range. Roughly
30% of all people in the United States are in this subprime
range (see Figure 1). Credit scores are not only referenced
when applying for credit cards or bank loans, but also
when seeking employment or renting housing. In thismanner, credit scores are used to judge various aspects ofpeople’s lives, and the level of a person’s creditability is
decided based on their credit history.
Figure 1: Distribution of Consumers by Credit Score
in the United States30%         Utilize big data based on credit expertise
accumulated since founding
Reduce credit limits to issue credit cards to customers
that would be denied by other creditors andlower refusal rates

Credit Monitoring         Founder’s belief that creditability should
be built together with customers:
the principle of co-creation

Perspective of Inclusion

U.S. Credit Scores and MARUI GROUP’s Big Data

Less than 660
Subprime

Initial Credit

Structure

More than 750
Prime

40%

Similarly, MARUI GROUP uses credit-related big datacollected based on customers’ payment histories. Whenissuing a credit card to a first-time applicant, we conduct
examinations based on external credit histories while alsoutilizing our unique credit expertise. This expertise has
been accumulated over the course of MARUI GROUP’s
history, beginning with the sale of furniture throughmonthly installment payments at the time of the Company’s
founding, and is based on our co-creation philosophy ofbuilding creditability together with customers. Our credit
framework does not entail assigning credit to customers,
but rather involves setting a credit limit that is within theirmeans and gradually increasing this limit based on theirusage history. Through this framework, our cardholder
base has come to largely comprise university students andminors without credit card experience and adults aged 18
to 39. Furthermore, 30% of these individuals received
their first ever credit card from MARUI GROUP. From ourfounding up until today, we have continued to amass
extensive amounts of data on customers’ credit histories.
This data has allowed us to develop wide-ranging expertise with regard to credit, which helps us identify the cases
in which credit limits accurately match customers’ means
and the cases in which a customer will likely become acredit delinquent. Based on this expertise, we are able toincrease the accuracy of credit examinations. This dataand expertise have evolved into the big data that serves as
the initial credit standards used by MARUI GROUP in
issuing credit cards.

Based on Fair Isaac Corporation

Increase credit limits based on post-application
approval usage history, specifically frequency
and amounts

Credit Philosophy of Building Creditability Together with Customers

MARUI GROUP’s Basic Credit Philosophy

CreditCreditability should be built together with customers based on usage and payment histories, regardless of age,profession, or income.

Delayed payments Responsibility lies with both the customers and the creditor, and a payment solution should be sought together.
Customers that
do not passexaminations

44

Such customers should be refused (while expressing appreciation for applying), and we must continue seeking to
improve the accuracy of credit examinations to lower refusal rates.

Through EPOS cards, we seek to provide customers with their first credit card and encouragethem to use this card over the long term. To this end, we set initial credit limits lower thanother credit providers in order to supply financial services, namely credit cards, to thosecustomers that could not receive a card elsewhere. This approach has led to a large portion of
EPOS cardholders being adults aged 18 to 39, a demographic that tends to have a strong
inclination to make purchases. In monitoring customer credit, we use our credit management
platform and seek to raise customers’ credit limits based on usage history, and have maintained the industry’s lowest ratio of delinquent debt as a result. It is common for customers
without credit experience or that do not have bank accounts to fail to pass initial credit examinations and therefore not be issued a credit card. At MARUI GROUP stores, however, ourrefusal rate for credit card issuances is only 8%, whereas other providers exclude a muchgreater number of individuals, as indicated by the industry average refusal rate of 23%. Thisdifference is a product of MARUI GROUP’s credit philosophy of building creditability together
with customers.

Toshikazu Takimoto
Managing Executive Officer
Responsible for FinTech Business

45

FinTech Business

Perspective of Inclusion

U.S. Credit Cycle and MARUI GROUP’s Ratio of
Low Delinquent Debt

Improvement of Credit Standard Accuracy Using
Artificial Intelligence

In the United States, there is an ongoing cycle in whichloans to subprime individuals leads to an increase in therate of overdue debt, which causes lenders to refrain from
subsequently lending, in turn stimulating a decrease in therate of overdue debt. This is referred to as the “credit
cycle” (see Figure 3). The current stage of this cycle is theone in which its overdue debt rates rise, meaning thateven credit card companies with impressive transaction
volumes cannot ensure that this topline growth will translate to higher profit. When viewed from an inclusion perspective, altering lending volumes based on the credit
cycle will not be at all helpful in reducing customers’ concerns for their livelihood or in resolving issues surrounding
subprime borrowers.
MARUI GROUP’s own experience is a counter example
to the credit cycle. Although the ratio of delinquent debt
rose temporarily over the period from 2005 to 2008, due
in part to the impacts of the revision of the Money Lending
Business Act, this ratio has continued to decline thereafter,
recently reaching the industry low of 1.45%. At the sametime, EPOS card transactions have been growing at an
average rate of 17% per year, dwarfing the Japanesecredit industry average of 7% per year. This ability to defy
the standard set by the U.S. credit cycle indicates thatMARUI GROUP’s business represents a model for achieving sustainable growth while simultaneously realizing
financial inclusion (see Figure 4).

A major characteristic of MARUI GROUP’s credit standards
is that they are based on credit information relating to individual customers’ shopping habits and lifestyles. In 2016,
we conducted an experiment using artificial intelligence(AI) to verify the accuracy of our standards for Gold card
applications. This experiment indicated a difference
between the Gold card application standards used by theCompany and those selected by AI. The results also
showed that our credit standards are distinct from those ofother companies using AI. At the moment, we are monitoring the usage patterns of the individuals that AI has newly
selected as Gold card candidates to further improve theaccuracy of our credit standards (see Figure 2).

Director and Senior Executive Officer
General Manager, IR Department
In charge of Corporate Planning and ESG Promotion

46

Perspective of Inclusion

Figure 3: Credit Card Receivables and Ratio of Overdue Debt (More Than 90 Days Overdue) in the United States

Increase inlending

Credit card
receivables

Increase inlending

Limitation of lending

Increase in overdue(delinquent) debt
Increase in overdue(delinquent) debt

Decrease in overdue(delinquent) debt

Ratio ofoverdue debt

Figure 2: C omparison of Gold Card Application
Standards
2003
MARUI GROUP’s
Gold card application
standards

Gold card application
standards selectedby AI

Opportunity for
MARUI GROUP

Realization offinancial inclusion

Discovery of new customers

Unprecedented Business Model Not Seen Anywhere Else in the World

Hirotsugu Kato

Structure

FinTech Business

When I was visiting the United States as part of our investor relations activities in July 2017,a credit card industry analyst asked how, despite having a customer base primarily consistingof youths and young adults, we were able to achieve industry-leading levels of growth while
maintaining and even decreasing the ratio of delinquent debt for EPOS cards. It was throughthis exchange that I first learned of the credit cycle. In the United States, if the number ofsubprime cardholders goes up, the rise in lending to these cardholders will almost assuredly
cause an increase in the ratio of delinquent debt. This principle is common sense within theindustry in the United States. However, EPOS cards deny this principle by maintaining averageannual growth of 17% combined with a decreasing ratio of delinquent debt. This accomplishment is no doubt a result of the credit expertise, currently grounded in co-creation and big
data, that we have unconsciously exercised since the Company’s founding. This particularinvestor relations visit made me recognize that MARUI GROUP’s business model is unprecedented, not being seen anywhere else in the world. At the same time, I came to realize thatthe strengths of the Company were not accurately understood. Addressing this issue will be atask for future investor relations activities.

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: Compiled by the Company based on Quarterly Report on Household Debt and Credit, Federal Reserve Bank of New York

Figure 4: EPOS Card Operating Receivables and Ratio of Delinquent Debt
¥488.8 billion
Growth in revolving and­installment payments and othercard shopping transactions

Ratio of delinquent debt

EPOS card
operatingreceivables

Decline in ratio of delinquentdebt in conjunction with increasein credit examination accuracy

1.45%
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

47

Dialogue 02

Dialogue 02
Financial Inclusion—The Essence of FinTech

Financial Inclusion—The Essence of FinTech
We arranged for a discussion between Masakazu Masujima, a leading authority on
FinTech, and President Aoi on the possibilities that will be unlocked by FinTech andfinancial inclusion at MARUI GROUP.

There are times when data alone will
not be enough to encourage someone
to commit. It is important to consult
with someone to get that final push.

Masakazu Masujima

Hiroshi Aoi

Partner, Mori Hamada & Matsumoto
Advisory Board Member,
MARUI GROUP CO., LTD.

President and Representative Director
Representative Executive Officer
MARUI GROUP CO., LTD.

Financial inclusion is the process ofcreating the data on which credit isbuilt together with customers.
Hiroshi Aoi

Masakazu Masujima

48

49

Dialogue 02

Dialogue 02

Financial Inclusion—The Essence of FinTech

Financial Inclusion and Co-Creation     Aoi: “Financial inclusion is the essence of FinTech.”Hearing those words from you, Mr. Masujima, in the springof 2016 left a strong impression on me. Those words
awakened me to the fact that FinTech is the path MARUIGROUP should pursue given our focus on inclusion. I also
recall your mentioning that the financial crisis of 2008 led
to the pursuit of this financial inclusion.
Masujima: Whether a company is in finance or in someother business, it cannot succeed without the support of awide range of stakeholders. However, the type of financial
businesses of the past only offered limited options, forcing
consumers to choose from those available to them. This
lack of scope led to Wall Street being dominated by thegreed of such financial businesses, which began sacrificing the powerless for their own gain, pulling the trigger for
the financial crisis of 2008. From the aftermath of thefinancial crisis emerged people that sought to provide
financial services for those who had been excluded fromsuch services previously. At that point, the needs that were
present in society were able to be sufficiently met by the
resources available, creating what could, in an overarchingsense, be seen as the start of the financial inclusion trend.
Aoi: Prior to the financial crisis, there was a move to use
financial engineering to create frameworks that would
enable subprime individuals to purchase homes. However,these frameworks were hollow and lacked substance, likea sandcastle, triggering the financial crisis as they crumbled. Conversely, FinTech is backed by solid technologies
and insight, giving it the necessary substance.

Masakazu Masujima
Partner, Mori Hamada & Matsumoto
Advisory Board Member, MARUI GROUP CO., LTD.

Mr. Masakazu Masujima graduated from the Faculty of Law at the University ofTokyo and from Columbia Law School. He has held positions at the Palo Alto officeof Wilson Sonsini Goodrich & Rosati P.C., in the Supervisory Bureau of the
Financial Services Agency, as a member of the Blockchain Study Group of the
Ministry of Economy, Trade and Industry, and as a member of the Review
Committee for the Sharing Economy of the National Strategy Office of Information
and Communications Technology under the Cabinet Secretariat.

50

Financial Inclusion—The Essence of FinTech

Masujima: You are exactly right. At that time, what people
called “financial technology” was, in fact, nothing morethan financial engineering and calculation. There was a
logical backing to these “technologies,” but not a practicalor real-world backing. Today, we have this backing in theform of data. The technologies of today enable us to constantly collect and monitor data.
Aoi: MARUI GROUP was founded in 1931. At that time,
our business involved selling furniture through monthly
installment payments, enabling younger generations topurchase these items on installment plans. When I think
about it now, it seems as though this business could beseen as promoting a type of financial inclusion.
Masujima: That was a period in which industry was
growing, meaning that individuals, particularly younger
generations who had just joined the workforce, could noteasily borrow money. At the same time, this was a period
in which various goods and commodities were becoming
available. The monthly installment payment system arose
as a means of providing these items to people who
wished to purchase them, but lacked the means. Thissystem could thus be seen as embodying the philosophyof what we now call financial inclusion.
Aoi: Konosuke Matsushita, founder of Panasonic
Corporation, spoke of what he called his “Tap Water
Philosophy.” Basically, this philosophy stated that if electronics could be created at low costs, people would
quickly come to use these products as readily as they use
tap water. This process would free housewives from thehassle of doing laundry. At the time, a quality washingmachine would be quite expensive. As such, it is said thatthe advent of installment payments and credit greatly
aided in normalizing the sale of these items. Knowledge of
MARUI GROUP’s contributions throughout history is amajor source of motivation for me.
Masujima: It is my understanding that, for example, whena young adult that has moved from the country to the city,
only living on a limited allowance from their parents, tries
to pay with a credit card, Marui sales staff may caution
them against overspending. In this, one can see thatMARUI GROUP is attentive to its customers’ needs in thetruest manner. I think it is spectacular how, rather thansimply viewing customers as a source of profit, theCompany has based its business on forging long-term
relationships with young adults.

We have been looking for ways to provide
services that help young adults
accumulate assets in a manner that gives
them a clear vision of their future.
Hiroshi Aoi

Aoi: That attitude is an important part of MARUI GROUP’s
legacy. Among the words left by our founder, perhaps myfavorite saying is that creditability should be built together
with customers, rather than assigned to customers. I was
moved when I first heard these words. Finance based on
this idea of creating together is, with perhaps the exception of microfinance, almost nonexistent outside of
MARUI GROUP, whether you look at Japan or even theentire world.

Value Created by Combining Data     
Aoi: I find issue with the recent overemphasis of data.
There is no doubt a lot of data, and there are some issues
that can be resolved by analyzing big data using artificial
intelligence. However, this reliance on data can lead topeople being excluded from financial services. True inclusion is the process of creating data together, which equates
to building creditability together. This process is fundamentally different from that of making one-sided decisions
based purely on the data that has been collected.
Masujima: An interesting perspective can be taken withregard to data. This perspective relates to how data is notbound by the stereotypes that people impose on others.
For example, people tend to group others into categories,
such as “housewife” or “young businessman,” and makejudgments on this basis, despite the fact that each individual is actually quite different. Product data can only
give information on purchases made. Meanwhile, the full
spectrum of financial data and non-financial data can tell
us how the money to make a purchase was obtained,
whether or not the purchaser had sufficient money at thetime, and other facts. When both financial data and nonfinancial data are combined, it becomes easier to determine what recommendations should be made to
individual customers at a given time, and this is when data
exhibits its true value.

Concern for the Future among Young Adults     
Aoi: Awhile back, I was watching an interview with people
that had just reached adulthood in which they were asked
about their resolutions for that year, and the responses
were quite shocking. The first respondent said “cuttingback on spending”; the second replied “saving.” Currently,
around 70% of young adults have come to harbor concerns regarding money. Not knowing exactly how toaddress these concerns, they tend to turn to conservationand saving. However, conservation and saving alone are
not enough to alleviate such concerns or prepare for the
future. In light of this situation, we have been looking forways to provide services that help young adults accumulate assets in a manner that gives them a clear vision of
their future. It is true that young adults may lack resources.
However, if they accumulate assets gradually, they shouldbe able to continue building upon their portfolios nomatter how the market may fluctuate. This is an area weplan to focus on going forward.
Masujima: By analyzing Google search results, I learned
that people tend to live the majority of their lives, fromtheir 20s to their 70s, worried about money. I suspect thisworry is a result of uncertainty for the future translating
into monetary concerns. For this reason, I see a need forservices that adapt to the circumstances of individual

51

Dialogue 02

Dialogue 02

Financial Inclusion—The Essence of FinTech

Financial Inclusion—The Essence of FinTech

New Yardstick of Value Created by
Virtual Currency

Any entity would be evaluated based on
the value it provides to society. This would
be the ultimate form of inclusion.
Masakazu Masujima

customers in real time. If a service could, for example,
analyze a customer’s current situation to project the patterns that their life may follow in the future, this service
could transform concern for money into hope for the
future. The support for asset accumulation that you speakof is one service with this potential. The benefits of asset
accumulation include how it enables individuals to get aclearer vision of their future, thereby allowing them tolive more fully in the present. In addition, I think it ispossible to create services that entail working together
with a customer, perhaps a car lover, to help them findsupport for purchasing a car without bankrupting themselves and then providing post-purchase lifestyle advice
to this individual.

Co-Creation between Data and People     
Aoi: The lifestyle advice you speak of refers to financial
advisory services, if I am not mistaken. We have a desire toprovide the younger generation with investment and asset
management services, but we first must overcome the
obstacle of finding a way to effectively solicit these services
to such individuals. Jumping straight into investment may be
a little bit overwhelming for some. For this reason, I think it
would be simpler to ease these individuals into investment
by grabbing their attention through providing knowledge
about money or some other means of sparking their interest.
Masujima: Once a system has been developed, the costs
will not change if it is supplied to one person or to one
million people. In fact, it is better to provide this system to52

one million people as this will yield more accurate andvaluable data than offering it only to one. However, services cannot be provided by systems alone; it takes a
combination of systems and people. When faced with amajor decision, there are times when data alone will not
be enough to encourage someone to commit to one
option. In these cases, it is important to consult withsomeone and share information to get that final push to
make a decision.
Aoi: One particularly interesting tidbit of information
I learned when speaking with financial planner Aya Maeno
was how Ms. Maeno always begins by asking her clients
what exactly they want to accomplish. For example, if acertain customer is very fond of their pets, Ms. Maeno willadvise them on ways to cut back on spending that do not
detract from the funds they devote to their pets. In working to alleviate people’s concerns regarding money, Ms.
Maeno adopts an approach of helping them accomplish
their true goals and live the lives they desire.
Masujima: I think that this approach is the essence ofengagement. The same principle underlies MARUIGROUP’s credit operations. If you provide a service thatmakes it apparent to customers that they are moving
toward the future they desire, they will see no need to partways with this service.
Aoi: There are countless ways in which data can beutilized, and the forms in which data and human interactions can be combined are equally vast. Accordingly,
there is still a great deal of possibilities for us to explore
in this area.

     
Masujima: The yardstick for the value of a company isgenerally considered to be its stock price. However, somehave begun suggesting that this may not be the best
measure, and virtual currency is presenting the possibilityof a new yardstick. One form of value created by companies is social capital, and there is no guarantee that thistype of value will be accurately reflected in a company’s
stock price. Accordingly, if a financial instrument that is
capable of more accurately reflecting a company’s value
were to appear, there would be reason to consider usingthat instrument as the new yardstick.
Aoi: In the stock market of today, there is a great deal ofinterest in investment based on environmental, social, andgovernance concerns, and this trend itself is an indicationof the rising influence of external factors on companies.
Now, companies that are unable to effectively consider theinterests of wider ranges of stakeholders will not be able tosurvive over the medium-to-long term. This trend is anextension of what you just mentioned about new yardsticks for value, and is a representation of how people are
increasingly recognizing this as the path we must take.
Masujima: Virtual currency does not issue dividends,
and you will not become any richer just by being inpossession of it. However, if everyone possesses thiscurrency and desires to use it, the value of the currency
will go up. Here, we see the possibility for the Company
to create, say, “MARUI coins.” If the number of people inpossession of these coins rises, their value will increase
as will the assets of the people holding them. In thismanner, virtual currency can forge a connection withcoin-holders that is even closer than the connection
formed by making customers into shareholders. My
vision for virtual currency is this kind of link formed
through the financial service of coins.
Aoi: That is an amazing vision. This is the first time I haveheard someone speak of virtual currency as a tool forbuilding a sustainable system that will overcome theissues of capitalism to surpass this system. However,I suspect that not everyone involved with virtual currency
shares your vision.
Masujima: Many people simply see virtual currency as ameans of making money. Nonetheless, I believe that, if
this vision for virtual currency were to become a reality,
it would lead to the advent of a world in which any
entity, be it a nonprofit organization, an individual, or acompany, would be evaluated based on the value it
provides to society, and in which its ongoing successwill be contingent on this value. This would be the ultimate form of inclusion.

53

Integrated Group Management

Integrated Group Management

Standardized Group Platforms andProfession Changes

Organization that Utilizes Diversity

Healthcare Management
Underpinning Personal Growth➀ Standardized Group Platforms and Profession Changes

Profession Change Relocation
for Cultivating Human Resources
and Future Innovation
MARUI GROUP adopted a holding company system in
2007, through which it now oversees 10 Group companies.
The transition to this system was meant to enable Group
companies to specialize while allowing for integrated management of all companies in order to create the foundations
for a forward-looking business model that prevents individual businesses from becoming isolated.
In addition, all of the Group’s approximately 6,000
employees can undergo profession changes between Group
companies. It is common for people, after having worked in asingle profession for a number of years, to go about theirjobs without putting much thought into their practices.
However, being placed in a new profession can kindle a fresh
sense of inquisitiveness and allow employees to escapepreconceptions. Such transitions are not only beneficial forthe employees undergoing profession changes, but also forthe new workplaces in which they are placed. By increasing
the number of employees that undergo a profession change,
we aim to cultivate employees that embody a customer-firstmentality and are adept at responding to change in order tomake the Group a more fertile ground for innovation.

Employees grow to embody
a customer-first mentality andbecome adept at responding tochange and make proposals
based on the Group’s perspectiveof merging retailing and finance.
Employees that have experienced
various professions are able toview customer needs from a retailperspective and make proposals
that go beyond the conventions ofeach industry.

Profession Changes
through Shared Human

Retailing

Made Possible
Resource System

Ratio of Employees Changing Positions
between Group Companies

FinTechApprox.

34%

Aggregate total from April 2013–April 2017
(Excludes officers and managers)
Space Production,
Commercial Facility Management,
and Advertising

Apparel Distribution
Internet Sales Support

Percentage of Employees Who Experienced
Personal Growth after Profession Change

Approx.
IT Systems

Total Building Management

Loan Collection

Real Estate Rental

Small-Amount Short-Term
Insurance Policy BusinessSupport for Group Companies

86%

According to the results of a survey carried out in November 2016

4 色指定 :M100+Y60+BL20%
特色 :PANTONE 207

Employees gain sales floor staff
experience at MARUI CO., LTD.,to teach them about
customer needs.

MARUI GROUP CO., LTD.

All employees first join
MARUI GROUP CO., LTD.

Platform Supporting         Profession Changes

ShareGroupwide

54

Human resourceand salarysystems

Work hours

Welfare systems

Labor union

Post-Professional Change Monitoring

Health insuranceunion• Self-declaration system allowing employees to declare the professions
and divisions in which they are interested in working (twice a year)• Meetings and on-the-job training providing opportunities for discovery
for employees who have changed their profession as well as their newcolleagues
55

Integrated Group Management

Integrated Group Management

Standardized Group Platforms andProfession Changes

Organization that Utilizes Diversity

Healthcare Management
Underpinning Personal Growth➁ Organization that Utilizes Diversity

Promotion of All Employees’
Efforts to Benefit Customers
In the medium-term management plan launched in thefiscal year ended March 31, 2015, promoting diversity
has been defined as one of the strategies for realizing
MARUI GROUP’s corporate philosophy, which calls for us
to “continue evolving to better aid our customers” and“equate the development of our people with the development of our company.” Our goal in promoting diversity is tocreate an organization in which each of our approximately
6,000 employees can exercise their individual talents
and feel energized and motivated in their work. Society iscurrently undergoing changes, and the values and needsof people are diversifying. In order to respond to thesechanges, we need employees to put forth their uniquestrengths, forming teams when individual effort is notenough. Moreover, we must build upon our ability to utilize
these endeavors on the part of employees to improve
corporate value. To achieve these objectives, we are­cultivating a corporate culture in which all employees are
accepting toward one another’s individuality and reforming systems to make sure employees are motivated in theirwork as they tackle new challenges and grow. In addition,
we are implementing management reforms to utilize thisculture and these systems in promoting diversity.

Medium-Term Management Visionary Committee
The Medium-Term Management Visionary Committee is aforum for discussing various topics that will be importantto the future of Group management. In the past, meetings
were primarily focused on explanations of management
policies and other such matters. However, topics are now
selected that require a medium-term perspective and forwhich initiatives will be advanced with a timeline of threeto-five years. While this committee was previously only
open to members of Group management, any interested
employee is able to apply for participation, and meetings
have been held almost every month since. Active discussion is conducted among the around 320 members thatare selected from the approximately 1,000 applications
received for each meeting. Furthermore, we regularly
invite outside lecturers to conduct special lectures.

Committee Meeting Discussion Topics
2016 Topics
Analysis of MARUI GROUP’s operating environment andfuture projections
Medium-term management plan for Retailing and
FinTech segments
Hakata Marui co-creation initiatives
Report on interactions with investors
Retail industry and MARUI GROUP as viewed by an analyst:
Special lecture by Mizuho Securities Co., Ltd.
Vision for the world realized through FinTech and MARUIGROUP’s business therein:
Special lecture by Advisory Board member
Masakazu Masujima
Retail industry and MARUI GROUP as viewed by a businesscolumnist:
Special lecture by Shiho Innami of the Toyo Keizai Online
Department of Toyo Keizai Inc.

2017 Topics

Three Themes for Promoting Diversity
1. Corporate culture in which theindividuality of every employee
is respected

2. Systems and frameworks supportingthe contributions of all employees

3. M anagement reforms for utilizing
diversity• Cross-Group profession change system• Initiatives led by Medium-Term
Management Visionary Committee• Official Groupwide project teams• Work style reforms (reduction of overtime)• Systems for supporting employees inbalancing their work with childrearing
and long-term care of family members• Communication reforms• Opportunities for everyone to participate
in management• Corporate culture facilitating self-growthDistribution industry as seen through trends in China,
the United States, and Japan:
Special lecture by Nomura Research Institute, Ltd.
Social environment as it pertains to MARUI GROUP and
future outlook
Future created by the fashion business:
Special lecture by Representative Director Yoko Ohara of
Women’s Empowerment in Fashion
Strategies for competing viewed as stories—requirements
for effective strategies:
Special lecture by Professor Ken Kusunoki of the Graduate
School of International Corporate Strategy at Hitotsubashi
University
Medium-term management plan for Retailing and
FinTech segments
Capitalizing on Security and Potential of Money:
Special lecture by Aya Maeno, Representative Director ofCras Inc. and Representative of FP Office will

56

57

Integrated Group Management ➁ Organization that Utilizes Diversity

Hiroshi Nakada
Telecommunication Networks,
Store System Development Department

M & C SYSTEMS CO., LTD.

I am responsible for developing the systems
for try-on stores. It was previously difficult tounderstand just who exactly I am making
these systems for. Through participation in
the Medium-Term Management Visionary
Committee, however, I gained an understanding of the overarching trends in society andwithin the Company, helping me better
determine the extent to which systems canbenefit customers and how these systems
can be improved. Identifying needs canfacilitate the future co-creation of value.

The Medium-Term
Management Visionary
Committee

Integrated Group Management

MARUI GROUP’s corporate philosophy
calls for us to “continue evolving tobetter aid our customers” and “equate
the development of our people withthe development of our company.”
Based on this philosophy, we
have established Groupwide committees and project teams with members
recruited through open application.
Employees seeking to participate areasked to submit short essays when
applying based on which participants
are selected. In this section, we present messages from 10 individuals thathave participated in the Medium-Term
Management Visionary Committee.

Equate the Developmentwith the Development ofStandardized Group Platforms andProfession Changes

Organization that Utilizes Diversity

Healthcare Management
Underpinning Personal Growth

Maki Takayanagi

Kazumasa Takahashi

Yukito Takamura

Sales Planning Section, Sales Planning Division

Women’s Accessory Sales Floor, Yurakucho Marui

Leasing Department, Space Production Division

MARUI CO., LTD.

MARUI CO., LTD.

AIM CREATE CO., LTD.

Participation in the Medium-Term Management
Visionary Committee enables one to view
matters from a broader perspective and alonger timetable. It can be expected thatsocial trends will evolve more quickly andbecome more diverse going forward. This
will result in the standards for customers’purchasing decisions becoming more
complex. When I look to the future, I see
MARUI GROUP’s co-creation management,
which involves co-creating customer happiness together with stakeholders, becoming
even more important.

The pressures of daily work can cause one tofocus only on their own agenda. Through myparticipation in the Medium-Term Management
Visionary Committee, however, I was remindedof the Group’s goals, which gave a clearer
vision of the fundamental aim of my work. To“continue evolving to better aid our customers” is a part of our corporate philosophy
and also an important goal for everyone at
the Group. Even if our work is different, allGroup members share an understanding of
the importance of the customer. I therefore
feel that our visions are aligned.

The Medium-Term Management Visionary
Committee has made reflective thought acommon habit of mine, enabling me to be
more receptive to changes in my surroundings and to act from a forward-looking
perspective. In my current position, I feelthat I am providing store environment
solutions that incorporate elements forvarious businesses. I am always endeavoring
to utilize the information gained throughmeetings and my daily studies to tackle newchallenges in the now.

of Our People
Our Company

Emi Murata

Azusa Morimoto

Tetsuya Nakamura

Mari Yamamoto

Go Yamaguchi

Asuka Uemura

Rakuchin Kirei Shoes Fit Studio, Kinshicho Marui

Real Estate Business Section, Real Estate Business Department

Internet Marketing Section, Omni-Channel Retailing Division

Sales Section 3, Home Business Division

E-Commerce Website Section, Internet & Fulfillment Division

Marui Shoes Sales Floor, LaLaport Shonan Hiratsuka

MARUI CO., LTD.

MARUI GROUP CO., LTD.

MARUI CO., LTD.

Epos Card Co., Ltd.

MOVING CO., LTD.

MARUI CO., LTD.

When I participated in the Medium-Term
Management Visionary Committee, I was
reminded that the Fit Studio try-on store
I work at uses a new business model that
arose from the overlap between several
areas of the Group. We are seeking to further
improve this model’s ability to satisfy customers through a concerted Groupwide
effort. For example, we have increased theconnection speeds of sales-use tablets andenhanced our systems to allow for smoothcoordination between EPOS card application and Internet sales site registration.

As I am currently working shortened hours,
I recognized the Medium-Term Management
Visionary Committee as an opportunity toeasily maintain an understanding of theCompany’s strategies. Moreover, participation helped me figure out how to incorporate
my desires and commitment into my work.
Everyone plays a “lead role” at MARUI GROUP,
and the growth of each individual is linked to
the growth of the Company. Even if my timeworking is short, I still want to do my best to
benefit customers.

Working in one place can make it difficult tobreak away from preconceived notions tocreate fresh ideas. Participation in the MediumTerm Management Visionary Committee
enabled me to adopt a wider range of­perspectives. This also helped me to think interms of a medium-to-long-term timetable.
I am currently engaged in e
­ -commerce
operations. At my workplace, I share myfindings with coworkers who could notparticipate in the committee so that we canmove ahead with a forward-looking perspective based on a common understanding.

When I first joined, I was focused only onpleasing the customers in front of me.
However, through participation in theMedium-Term Management Visionary
Committee, my eyes were opened to awider range of concerns, including theworking environment for us employees,
our relationships with business partners,
and changes in the operating environmentfor MARUI GROUP. In the future, I hope topractice co-creation management with afocus on bringing happiness to myself andto those around me.

I have found participation in the MediumTerm Management Visionary Committee
to be a prime opportunity to reflect on mycurrent work. My first profession changebrought me to MOVING, where I saw firsthand the strength granted to MARUI by
possessing its own distribution and IT systems.
In the past, I had been engaged in Internet
sales as a buyer. My current position is also
related to e-commerce, but it requires acompletely different perspective. Exposure
to this different perspective broadened
my horizons.

Personal growth comes when you act based on
new ideas or different perspectives and movebeyond preconceptions. Personal growth has
the potential to drive the growth of the Group.
The Medium-Term Management Visionary
Committee is an opportunity to gain anunderstanding of social trends and of MARUIGROUP’s strengths and find means of incorporating this newfound understanding into
one’s work. In addition, discussions with othercommittee participants lead to various new
discoveries. I have thus come to view the otherparticipants as comrades in mutual growth.

5859

Integrated Group Management ➁ Organization that Utilizes Diversity

Integrated Group Management

Standardized Group Platforms andProfession Changes

Organization that Utilizes Diversity

Healthcare Management
Underpinning Personal Growth

Learn about
Individuality

Forum for learning how to approach others
based on the Enneagram of Personality,
which puts forth nine personality types
Daily-use sign language lesson taught by Group employees withhearing impairments

Exhibition of OUT IN JAPAN collection ofphotographs of members of the LGBT community by famous photographer Leslie Kee

Garnering Great Support for Inclusion
MARUI GROUP promotes co-creation management to co-create the happiness of customers together withall of its stakeholders. We have turned our eyes to inclusion as a means of unlocking opportunities forthe future in response to social issues and customer needs, which change together with the times.

Learn about the
Body and Mind

Yoga lesson for teaching employees how to relax their bodies andminds and focus on themselves in the moment“Mizuno Style Ninja School” for supporting the physical development of children

Testing station for “vein age,”bones, lung capacity, and dorsal
muscle and grip strength

Special LectureCreation of an Organization That
Utilizes Diversity

Haruaki Deguchi
Founder of LIFENET INSURANCE COMPANY

Special Lecture
Inclusion for Innovation— Changing the Future with Barrier Value

Toshiya Kakiuchi
President, Mirairo Inc.

Talk Event

Inclusion Fes 2017
Co-Creation of Happiness for Everyone

Experience
Others’ Situations

Promoting inclusion through our business will requirea corporate culture in which the individuality of every
employee is accepted and respected. To facilitate thecultivation of such a culture, we held Inclusion Fes 2017,
an event for employees, in August 2017. This event provided a venue for fostering awareness among employees
and allowing them to experience their differences firsthand. The event garnered great support for inclusion, witharound 1,500 employees and family members attending
during its two-day period.

Lesson in which people learn
how to assist individuals using
wheelchairs and operate
wheelchairs through actual use

Encounter with Paralym Art,
Supporting Differently Abled Individuals

Thane Camus
Director, SHOUGAISHA JIRITSU SUISHIN KIKOUASSOCIATION

60

This event was planned primarily by the diverse
members of official Groupwide project teams,
namely the Marui Future Project Team, Healthcare
Management Project Team, and Diversity ProjectTeam. These individuals used the event as anopportunity to communicate the activities of theirproject team and the principles they embody.
www.0101maruigroup.co.jp/en/sustainability/

Opportunity to experience being guided by aseeing-eye dog by using eye masks to shutout vision feedback

Specialized pregnancy simulation jackets used to teach about thedifficulties and joy of pregnancy

61

Integrated Group Management

Integrated Group Management

Standardized Group Platforms andProfession Changes

Healthcare Management
Underpinning Personal Growth

Organization that Utilizes Diversity➂ Healthcare Management Underpinning Personal Growth

Healthcare Management as a Strategy
for Further Energizing Employees
In MARUI GROUP’s healthcare management, we strive toencourage employees to think through the lens of healthand act accordingly in order to become more energizedand thereby increase corporate value. For this reason, it isimportant to take the perspectives of preventing healthissues and also energizing employees and enabling them
to work happier. Healthcare management has been defined
as an objective of the medium-term management plan,
which we are promoting on a Groupwide basis throughcoordination between the activities of the HealthManagement Division and MARUI GROUP’s health­insurance union. These activities have earned us muchpraise, leading the Company to earn the highest rank in
Development Bank of Japan Inc.’s DBJ Employees’ HealthManagement Rated Loan Program in October 2016 andto be included in the Excellent Enterprise of Health andProductivity Management—White 500, a joint program
launched by the Ministry of Economy, Trade and Industry,
the Tokyo Stock Exchange, and Nippon Kenko Kaigi, in
February 2017.

Level of Energy+

High

Average Monthly Overtime of 3.7 Hours
MARUI GROUP views healthcare management as one
aspect of workstyle reforms, and has thus diversified its
workhour management and working systems since 2008.
As part of these efforts, overtime reduction policies andtargets have been set for each positon and shifts areformulated systematically for stores using up to 50 working patterns defined in 10-minute increments. Moreover,work processes are being optimized on a Groupwide
basis. For example, processes related to delivering andreturning products to storage and other back-office procedures at stores are handled by Group companies to enable
store employees to be primarily positioned in customer
service roles. As a result, average monthly overtime hours
per person were down to 3.7 in the fiscal year ended
March 31, 2017, while average annual overtime hours
decreased to 44. Average monthly overtime among head
office employees was 7.2 hours in the fiscal year ended
March 31, 2017, representing a roughly two-thirds reduction compared with the fiscal year ended March 31, 2008,
while average monthly overtime at our 31 stores nationwide was 0.8 hours, making for a 90% reduction from thesame year. These reductions have improved productivity
along with personnel expense efficiency.

Resilience Program for Improving AwarenessBeginning with Senior Management
More energizedand productive
than previously

0

Not ill

In need of preventive activities and quick response
measures to reduce risks–Groupwide Healthcare Management Project Team
Resilience Program for senior management
Analyses utilizing health examination data

Healthcare examinations undergone by
100% of employees
Self-care training sessions held 260 times a year
Appointment of female wellness leaders

The understanding of senior management is necessary
to enable employees to become more energized andmotivated in their work. Based on this recognition,
MARUI GROUP has implemented the Resilience Program,which targets general managers and other members ofsenior management and encourages them to develop
lifestyle patterns that increase their energy and the energyof those around them with regard to their body, mood,mental state, and thinking. In this program, 360-degree
evaluations are conducted through feedback from theprogram participants, their subordinates, and their family
to analyze data on the participants’ own energy levels andtheir influence on others. The influence of managers isgreat, and we are already witnessing a rise in healthcare
management awareness among senior management andemployees as illustrated by voluntary initiatives driven by
employees at each workplace.

Average Monthly Overtime Hours per Person
20 hours

10.9 hours

Head office

7 hours
Consolidated
Stores

7.2 hours
3.7 hours
0.8 hours

FY2008FY2017

Overtime Reduction and Benefits
FY2008FY2017

BenefitAverage annual overtime hours
per person

130 hours

44 hours–86 hours

Total overtime payments¥3.3 billion¥0.8 billion–¥2.5 billion

6.8%

2.6%

–4.2ptEmployee turnover rate
(excluding mandatory retirement)

Evolution of Healthcare Promotion Activities
1962	Establishment of MARUI GROUP’s health insurance union
1970	Opened Marui Health Insurance Union Building
2008 Commencement of overtime reduction project
2011	Start of Health Improvement Program by MARUIGROUP’s health insurance union	Established Health Management Division andappointed dedicated Company physicians2013	Introduced physical and mental health consultation hotline
2014	Began analyzing health examination data of all employees and relationship between lifestyle patterns andattitudes toward work	Started holding self-care training sessions for all
employees
	Appointed wellness leaders nationwide to help alleviate women’s health concerns
2016	Introduced Resilience Program to energize senior managers
in terms of their body, mood, mental state, and thinking
	Incorporated new healthcare management items into
labor agreements
	Established outside advisory board and began analyzing healthcare management practices and data	Formulated Groupwide Healthcare Management
Project Team2017	Began promoting healthcare management as one
aspect of workstyle reforms

62

63

Dialogue 03

Dialogue 03
Healthcare Management Based on Data Analysis

Healthcare Management
Based on Data Analysis
We spoke with Dr. Yuji Yamamoto, who is responsible for analyzing employee
health data, about how to illustrate the link between health and performance at
MARUI GROUP as well as the concept of proactive healthcare management.

Yuji Yamamoto

Reiko Kojima

PhysicianRepresentative Director,
MinaCare Co., Ltd.
Advisory Board Member,
MARUI GROUP CO., LTD.

MD
General Manager,
Health Management Division
Company Physician
MARUI GROUP CO., LTD.

Employees feeling happier and more­energized will make MARUI GROUP
a stronger company.
Reiko Kojima

Healthcare management contains
the word “health” because health isindeed a management issue.
Yuji Yamamoto

64

65

Dialogue 03

Dialogue 03

Healthcare Management Based on Data Analysis

Healthcare Management Based on Data Analysis

Sustainable Growth Augmented by Sound
Physical and Mental Health     Yamamoto: Healthcare management is an important but
not entirely new concept. The reason this concept is garnering so much attention now is due in part to the nationwide discussion on how best to improve productivity,
which has involved such developments as the promotionof workstyle reforms. People have thus once again cometo recognize healthcare management as a major conceptthat relates to this issue. In terms of frameworks, we havejust recently collected the data necessary for verifying andtracking the benefits of healthcare management. Anotherimportant development is how companies have come torecognize that a medium-to-long-term perspective ishealthier than becoming preoccupied with short-term
gains and that it is important for a diverse range of
employees to be able to work in good physical and mental
health. In other words, the current era is one in which theobvious must be acknowledged as such.
Kojima: The healthcare management activities of companies are generally aimed at preventing illness. However,I feel that the ability for a company to grow sustainably
can be augmented by going a step further to ensure that
employees are in good physical and mental health. The
World Health Organization states that “Health is a state ofcomplete physical, mental and social well-being and not
merely the absence of disease or infirmity.” This viewcoincides with that of MARUI GROUP.
Yamamoto: Recently, I found myself in a discussion about
the role of e-commerce sites and healthcare management
in an aging society. There were conflicting opinions about
e-commerce sites. Some praised their ability to give seniorcitizens unable to leave their homes access to shopping
venues, while others pointed out how such sites will
reduce the need for seniors to move, accelerating their
physical decline. No conclusive answer has been reached
to resolve this dilemma. This type of conflict is one aspectof healthcare management. As the population of Japan
continues to age, companies will need to consider thehealth-related approach that management will adopt
toward senior customers and society.
Kojima: MARUI GROUP’s corporate philosophy states that
we should “continue evolving to better aid our customers”
and “equate the development of our people with thedevelopment of our company.” Based on this philosophy,
we are practicing co-creation management in which we
aim to co-create the happiness of customers together withall of our stakeholders. However, we cannot hope to contribute to customer happiness if our employees are nothappy and energized. For this reason, we conduct healthcare management by coordinating the preventive measures advanced by the Group’s health insurance unionwith the proactive healthcare measures of the HealthManagement Division.
Yamamoto: It is only recently that the term “healthcare
management” came to be used inside the Company.
However, MARUI GROUP has been implementing policies
and initiatives that are congruent with the concept ofhealthcare management for so long that employees were
probably unaware of them. At least, this is how I see itfrom my outside perspective. I first began to hold this view
when I looked at the initiatives of the Group’s health insurance union, with which I have had relations since 2011,
and this view was reinforced by my conversations with theCompany’s management and with yourself, Dr. Kojima.

Relationship between Health and Performanceas Illustrated through Data     
Kojima: MARUI GROUP has been analyzing health examination data for its roughly 6,000 employees since 2014,
allowing us to see the relationship between lifestyle patterns and attitudes toward work. On questionnaires, we
had around 2,800 employees respond “I am careful
about the quantity and the types of food I eat,” while

The concept of healthcare management
seeks to redefine medical expenses asfuel for strategies or as investments.
Yuji Yamamoto

about 1,400 employees answered the opposite. We­performed a cross-analysis comparing this data with data
regarding attitude toward work, which was scored out of
100 points based on items including outlook toward­adversity and the ability to utilize talents to tackle newchallenges. There was an overall difference of approximately 10 points between employees careful about theirdiet and those that are not (see Analysis Result 1). Similarly,
the “I get sufficient sleep” item was linked to an even moresignificant difference of approximately 15 points in attitude

toward work (see Analysis Result 2). These results haveremained consistent for the past three years.
Yamamoto: Even if a company had collected health examination data, no other company would have thought ofusing it in such a manner. This is the norm, and it just goesto show how high above the norm MARUI GROUP is. I
think that the Company has always held this commitment
to health, but was only just recently able to give it form.
Kojima: The types of health data generally disclosed bycompanies include the rates of smokers and of employees

Analysis Result 1

Analysis Result 2

The 2,852 employees that responded “I am careful about thequantity and the types of food I eat” showed a more optimistic
attitude toward their work and better workplace communication incomparison to the 1,401 employees stating that they are not careful.

The 1,424 employees that responded “I get sufficient sleep” showeda more optimistic attitude toward their work and better workplacecommunication in comparison to the 2,798 employees stating thatthey do not get sufficient sleep.

Careful
2,852 employees
Not careful 1,401 employees
I utilize my strengths and individual talents
to tackle new challenges.

Get sufficient sleep
1,424 employees
Do not get sufficient sleep 2,798 employees
I utilize my strengths and individual talents
to tackle new challenges.
76

70

There is someone at work
I can consult with.

I understand what is
expected of me at work.

62

70

Yuji Yamamoto
PhysicianRepresentative Director,
MinaCare Co., Ltd.
Advisory Board Member,
MARUI GROUP CO., LTD.

66

Dr. Yuji Yamamoto graduated from the Faculty of Medicine at the University of Tokyo in 1999, after which
he worked in cardiovascular medicine and other departments. In 2007, he became the first Japanesephysician to receive a Master of Business Administration from Harvard Business School. Dr. Yamamoto iscertified by The Japanese Society of Internal Medicine and the Japan Medical Association. To date, he hasserved as a fellow at the Japan Science and Technology Agency; Capital Medica Co., Ltd.; the Cabinet
Secretariat’s Medical Innovation Promotion Office; and the Center for Clinical Research at Keio University
School of Medicine. Today, Dr. Yamamoto acts as a researcher at Sony Computer Science Laboratories, Inc.
In 2014, he received an award in The Entrepreneur Awards Japan program. He is a medical 2035 advisor
to the Ministry of Health, Labour and Welfare, and also holds his namesake Yuji Yamamoto Seminars.
www.minacare.co.jp (Japanese only)

64

62

There is someone at work
I can consult with.

62

74

62
68

64

78

60
64

64
76
74

I feel as though I am respectedin the workplace.

I understand what is
expected of me at work.

60

76

I take an optimistic outlook
toward adversity.

78

I feel as though I am respectedin the workplace.

I take an optimistic outlook
toward adversity.

Note: Based on health examination data from the fiscal year ended March 31, 201767

Dialogue 03

Dialogue 03

Healthcare Management Based on Data Analysis

Healthcare Management Based on Data Analysis

We aim to energize society and cultivate
happiness through the health of
employees. We are thoroughlycommitted to building such a company
while leveraging everyone’s strength.
Reiko Kojima

with obesity. When we thought about how such data
would be received by employees, we realized that thisdata would be insufficient in drawing a clear link between
health and work. It is vital that we be able to illustrate howhealth can affect work performance. It was for this reason
that we sought to use your specialties in analyzing healthdata to clarify the link between health and performance.
These analyses found that employees getting sufficient
sleep and rest demonstrated high levels of performance inthe following year that were statistically significant. This
correlation was even apparent when controlling for factors
such as age, rank, and gender. Moreover, employees thatexercising twice or more a week for over a year also showed
improvements in performance in the following year.
Yamamoto: Data illustrating the link between sleep andexercise and performance will also likely display a link to
the Company’s overall performance. As such, this data isimportant to both employees and the Company, whichshould also make it clear to customers and investors why
MARUI GROUP practices healthcare management.
What I would like to emphasize here is that healthcare
management contains the word “health” because healthis indeed a management issue. In the past, medical
expenses have been seen primarily as a source of costs.
The concept of healthcare management seeks to redefine
medical expenses as fuel for strategies or as investments.
Tracking changes in health examination data over theyears will allow you to predict the “costs” that mightarise from health risks or the loss of an opportunity togenerate revenue.

68

Frameworks Promoting Autonomous Thought
and Action     
Kojima: In 2016, MARUI GROUP created a new section
on healthcare promotion in its labor agreements, whichconstitute the highest level regulation within the
Company. This section clearly identifies the healthcare
management obligations of the Company and employees, enabling us to deploy systematic initiatives. In addition, we established the Healthcare Management Project
Team in November 2016, an official, Groupwide project
team. The aim of this team is to promote a healthcare
management culture of autonomous thought and action
on the part of employees. Seeking to respect employee
autonomy, we selected participants for the project teamfrom among volunteers, who were first asked to submit ashort essay detailing the reason they wanted to participate. The project team proved immensely popular, andthe number of applications received was so great that
only one in five volunteers was actually able to participate. A diverse team of 51 members was selected, ranging from new employees to those in their 50s. This teamgathered from stores across Japan once a month todiscuss healthcare management promotion measures fora solid day each meeting. These members also played acentral role in promoting initiatives at theirown workplace.
Yamamoto: When starting up a new business, it iscommon to begin by aligning those involved along thesame vector. With regard to health, however, efforts areusually limited to one event-like workshop or a lecturefrom an external instructor.
Kojima: The project team thoroughly discussed the goals
that MARUI GROUP should pursue in terms of health.
After six months of deepening their understanding withregard to health, the project team finally reached a consensus on our new healthcare management slogan: “All in
the name of happiness—Energize yourself with a healthy
mind and body.” Between Healthcare Management Project
Team members and the wellness leaders, roughly one in
20 Group employees is involved in promoting health.
At the same time, we also realize the necessity ofunderstanding among management. Seeking to encouragesenior managers to energize themselves, and anticipatinga subsequent ripple effect to spread through the organization, we introduced the Resilience Program in February
2016, which targets general managers and other highlevel managers. This program consists of a two-day intensive course, after which participants strive to develop
lifestyle patterns that increase their energy with regard
to their body, mood, mental state, and thinking over a
10-month period. A 360-degree evaluation of the participants’ own energy levels and their influence on othersis then conducted through feedback from the program
participants, their subordinates, and their family.
Comparing the energy levels of program participants andindividuals that have not participated, the difference wasclear, with participants much more adept at working in a
dedicated manner and taking effective breaks. Feedback
from subordinates indicated a noted increase in the ability of certain supervisors to control their emotions whilefamily members spoke of how they took part in this undertaking alongside the participant. Going forward, we willcontinue to target both employees and managers to
become a company that helps energize society and cultivate happiness through the health of employees. We arethoroughly committed to building such a company whileleveraging everyone’s strength.

Yamamoto: Such a proactive approach will allow all
employees taking part in these initiatives to talk about
healthcare in their own words, and this attitude will surely
come to permeate the entire organization. It is wonderfulwhen people are able to discuss what exactly healthcare
management means to them.

Optimization of Healthcare Management
Portfolio with More Accurate Data     Yamamoto: A global survey found that, when companies
are concerned with employee health, employees are
more motivated and loyal toward their company, whichhas quantifiable benefits in the form of lower employee
turnover rates. Qualitatively, there can be no doubt thata stance of valuing employee health will have positive
benefits for a company. It is impossible to put an exact
value on the contributions that employee loyalty and low
turnover rates make to profits. However, it only seems
natural that such characteristics would make for stronger
organizations.
Kojima: Looking ahead, we hope to develop indicatorsthat will make it even easier to understand and illustrate
the link between health and productivity and performance.
These indicators will be used to propel healthcare management initiatives forward as part of our corporate
activities.
Yamamoto: Seeking out the most ideal healthcare management practices for MARUI GROUP, the ones that best
contribute to its profits, business continuity, and development, will lead to the creation of a healthcare management
portfolio. In this portfolio, we should be able to see alogical scenario backing these practices.

69Section 03

Co-Creation
Management
MARUI GROUP sees all of its business assets as being borrowed from society.
It is our duty to effectively utilize these “borrowings” and then return them to society
with “interest.” This belief forms the foundation for our management practices.

70

71

Medium-Term Management Plan

Medium-Term Management Plan

Basic Policy of the Medium-Term Management PlanMARUI GROUP’s 3 Focus KPIs

It is stated in MARUI GROUP’s corporate philosophy that
we should “continue evolving to better aid our customers”
and “equate the development of our people with thedevelopment of our company.” Based on this philosophy,
our mission is to co-create the happiness of all of our
stakeholders, including our customers, employees,

Based on its concept of co-creation management, MARUIGROUP views all of its business assets as being borrowed
from society. We believe that this view will help clarify ourefforts to achieve harmony between stakeholder interestsand improve corporate value. The Company is committed
to effectively utilizing these “borrowings” and then returning them to stakeholders with “interest.” In line with thisbelief, MARUI GROUP identified three key performanceindicators (KPIs) for gauging Groupwide performance
beginning with the fiscal year ended March 31, 2017.
These KPIs include return on equity (ROE) and earnings
per share (EPS), which are both indicators that have been
selected based on the Company’s emphasis on improvements to medium-to-long-term corporate value, as well as
return on invested capital (ROIC), which is an indicator of
profitability in the Company’s main business.

business partners, local communities, shareholders, andother investors, together with these stakeholders. Seeking
to heighten the corporate value that will arise from thisprocess, we are moving ahead with a five-year mediumterm management plan with the fiscal year ending March
31, 2021, as its final year.

MARUI GROUP’s 3 Focus KPIs with the Fiscal Year Ending March 31, 2021

Achieve ROE of more than 10%, ROIC of more than 4%, and EPS of more than ¥130

Plan Framework
Improvement of corporate

Creation of new businesses

value through integrated

through transformation ofcapital structure and further

Group operations

Group businesses

improvement of productivity

Return on Equity (ROE)
More than 10%

6.7%
6.0
4.5

2.1

1.6

5.0

5.2

1.8

–2.7

Development of optimal–7.9

Specific Initiatives

StoresRetailing

FinTechImprove capital productivity by completing transition to a business structure focused on
shopping centers and fixed-term rental contracts and deploying next-generation lifestyleoriented shopping centers

FY2008Return on Invested Capital (ROIC)

Utilize store renovation, distribution, building management, and other retailing expertise in an
integrated manner and advance business-to-business operations

Credit cards

Increase number of EPOS card fans across Japan and reinforce collaboration with commercial
facilities and companies while maintaining high profit margins and simultaneously expanding
business scale

Financial services

Expand revenues from rent guarantee, insurance, and other services utilizing credit know-how
to improve ROIC through business requiring minimal invested capital

IT

Support expansion of Group business scope by utilizing new technologies to improve­customer convenience

Optimal capital structure

Create structure in which ROIC consistently exceeds capital costs by improving ROIC throughincome growth and establishing optimal capital structure suited to Group business structure

Growth investments

Develop commercial facilities utilizing shopping center and fixed-term rental know-how, invest
in venture companies to acquire new technologies, and execute other growth investments for
improving corporate value

Productivity improvement

More than 4.0%

3.3
3.0

More than ¥1303.3

¥80.24

3.1%

70.68
56.29

58.87

48.43

2.1

24.91

1.9

18.65

19.19

1.7

1.1

–31.90

1.0

Utilize human resources as necessitated by business portfolio as a united MARUI GROUP
to further improve Group productivity–86.36
FY200872

3.0

FY2021
TargetEarnings per Share (EPS)

Develop business focused on Internet sales while expanding scope of try-on stores that
Omni-channel retailingcombine Group expertise and other unique business models
Facility managementand distribution

FY2017FY2017

FY2021
Target

FY2008FY2017

FY2021
Target73

Medium-Term Management Plan

Medium-Term Management Plan

Progress in Retailing Business and Future Strategies Transition to Shopping Centers and
Fixed-Term Rental Contracts
Over the five-year period leading up to the fiscal year
ending March 31, 2019, the Retailing business is set toundergo a transition in its stores from the consignment
buying system, which entails procuring and selling products, to a real estate model, which involves renting out
space. As part of this transition, the source of our earnings
will change from product sales to rent revenues. In thefiscal year ended March 31, 2017, progress in the shift
to shopping centers and fixed-term rental contracts was
faster than anticipated. We converted 62% of applicablefloor space to this new model and aggregate operating
income improvement realized was ¥2.9 billion. As a resultof this progress, the amount of inactive floor space was also
greater than expected, resulting in a decline in operating
income for the Retailing business. Regardless, this is only atemporary decline stemming from the transition period.
Response to Shift from Consumption of Goods toConsumption of Experiences
In conjunction with the shift to shopping centers andfixed-term rental contracts, we are moving away fromour previous, fashion-centric stores to developStores: Total Fixed-Term Rental Contract Floor Spaceand Targets

lifestyle-oriented stores focused on food, services, andsundries. The first store that opened under the real estatemodel was Hakata Marui. This store has continued toexperience forecast-exceeding customer numbers since
its opening in April 2016, and net operating income yield(NOI yield) achieved its target of more than 4% for thisstore. In addition, we are moving ahead with co-creation
store development initiatives that incorporate the desiresof local customers at previously existing stores. As part ofthese efforts, Shizuoka Marui and Kashiwa Marui, which
previously consisted as two buildings, were renovated tobe reopened with each building functioning as a separate
Marui or Modi store. The Marui stores opened in spring2016 while their Modi counterparts were opened in thefall of the same year. Going forward, we will not limit ourselves to the previous model of stores that sell products.
Instead, MARUI GROUP’s stores will be used to provide
space that is an intrinsic benefit of physical stores to theapproximately 200 million customers that visit thesestores each year while taking full advantage of theirprime locations in front of train stations in urban centers.
In addition, stores will be home to a new business ofproviding sharing economy services (accommodations
and space) in order to uncover new customer needs.

Promotion of Omni-Channel Retailing throughIntegrated Group Operation

Total E-Commerce Sales and Target

Factors Affecting Operating Income in Retailing Segment(for Period of Medium-Term Management Plan)¥24.0
billion¥21.3
billion

200,000m2
160,000m2

Specialty shops dealing primarily in private brand products will target medium-to-long-term earnings growth inorder to contribute to improved corporate value. To thisend, we are verifying profitability in existing businesses
based on earnings in the fiscal year ended March 31, 2017,as well as on the lifetime value (LTV) originating fromEPOS card applications and registrations for the MARUIInternet shopping “marui web channel” e-commerce site.
In addition, MARUI GROUP has continued to open try-on
stores, a type of short-term event store that combines theability to experience products firsthand offered by physical stores with Internet sales. In the fiscal year ended
March 31, 2017, 47 such events were held at commercial
facilities nationwide. In addition, we are introducing try-on
stores at a wider range of existing physical stores, with major
examples including the permanent try-on stores dealing in
women’s shoes and apparel established at Kinshicho
Marui and Shizuoka Marui. In terms of e-commerce operations, a Marui store was opened on the Wowma! Internet
sales site operated by KDDI CORPORATION in February
2017. This store is expected to contribute to higher total
e-commerce sales by broadening our points of contact
with the approximately 38 million au customers.

15,000m¥15.2
billion40,000m2

OperatingincomeFY2015
Ratio of fixed-term
rental contracts(Year-end)

7%

Operating income
improvement(Aggregate)—

FY201620%

FY201762%¥0.9 billion ¥2.9 billion

FY2018(Target)

FY2019(Target)

84%

100%

—

¥6.0 billion

Ratio of fixed-term rental contracts = Fixed-term rental contracted floor space ÷Total floor space capable of being contracted as fixed-term rental
Sections not applicable for fixed-term rental contracts: Sections not applicablefor fixed-term rental contracts based on requests of building owners, directly
managed sales floors, event spaces, food sales floors, etc.

Fiscal year ended March 31, 2017:
Ratio of fixed-term rental contracts (year-end): 62%
Operating income improvement (aggregate): ¥2.9 billion

74

¥10.7
billionSenior Executive Officer
President andRepresentative Director,
MARUI CO., LTD.

MARUI GROUP is shifting to shopping centers and fixed-term
rental contracts in order to develop lifestyle-oriented storesand stabilize earnings while also transforming its businessmodel through the promotion of omni-channel retailing. These
initiatives are stimulating significant changes in frontline
operations. Our goal in these new initiatives is to respond to
the needs of customers to bring them the joy they desire. This
goal is shared with the co-creation activities we have continued to advance together with customers, business partners,
and other stakeholders. MARUI GROUP boasts numerous
unique strengths. These strengths include our stores poised
in prime locations, our co-creation private brand products,
our IT and distribution systems supporting our store ande-commerce operations, and the customer service andsales skills of our employees. By combining these strengths,
MARUI GROUP will develop distinctive businesses to create
new value decades into the future.

Operating income +¥1.0
to be generated
through omni-channel billion
retailing

Incomeimprovements fromtransition to
fixed-term rental
contracts

120,000m2

2

Hajime Sasaki

Poor sales ofconsignment
agreement sales
floors

Impacts ofinactivefloor space±¥0billion±¥0
billion–¥3.3
billion+¥3.8
billionMore than¥18.0 billion

Operating income of
facility managementand distribution+¥6.0
billionIncome decline at
non-fixed rental stores
FY2007FY2017 FY2018(Target)Fiscal year ending March 31, 2018 (Target):Total e-commerce sales: ¥24.0 billion

FY2016FY2021(Target)75

Medium-Term Management Plan

Medium-Term Management Plan

Progress in FinTech Business and Future Strategies Integrated Group Operations Supporting Growth

Increases in Cardholder Numbers
and Usage Rates and Amounts

Total transactions in the FinTech business have continued
to display average annual growth rates of 17% since
the launch of the EPOS card in the fiscal year ended
March 31, 2007, and total transactions amounted to¥1,723.3 billion in the fiscal year ended March 31, 2017.
This impressive growth is a result of increases in credit
card transactions following a rapid rise in credit usage
driven by e-commerce and the shift toward consumptionof experiences. Although the scale of EPOS card transaction volumes is still small in comparison to the transaction
volumes of other companies, we are maintaining highprofitability and efficiency. This is made possible by integrated Group operations. MARUI GROUP’s operations
have long been characterized by efficiency realized
through the utilization of both stores and the Internet.
Features of this operational style include face-to-facepromotion of card application by Retailing business personnel, the ability to apply for cards via the Internet andpick them up in stores, and the option to convert to Goldcards in stores. Going forward, we will continue to leverage the competitive edge granted by the Group’s systems
development company to swiftly respond to customer
needs while also boosting competitiveness by ensuringhigh card usability.

A total of 800,000 new cardholders were expected to beacquired during the fiscal year ended March 31, 2017,
due to the opening of Hakata Marui, but the actual number
only came to 740,000 as a result of difficulty recruiting
cardholders for collaboration cards outside of MARUIGROUP facilities. Nonetheless, we stand committed tospreading EPOS cards throughout Japan by stepping up
collaboration with commercial facilities, which are in thebest position to leverage the strengths of EPOS cards. At
the same time, we will increase cardholder numbers by
pursuing collaboration with partners operating in fields
with high growth potential, including e-commerce andservice content.
We also took steps to respond to customer needs andincrease convenience. These steps included expanding
the range of affiliates at which installment payments canbe used and improving the method of changing to revolving payments when paying. As a result, revolving andinstallment payment transactions grew, contributing tohigher earnings.

Comparison with Competitors (Figures from FY2017, segment based; Source: MARUI GROUP)

Growth in card shopping transactions is currently being
driven by Gold and Platinum cards. The number of Goldand Platinum cardholders rose 18% year on year, to 1.6
million, representing 25% of our cardholder base, andapproximately 70% of all card shopping transactions
could be attributed to these cardholders. MARUI GROUP
will seek to increase the number of Gold and Platinum
cardholders along with their usage amounts through theintroduction of loyalty programs and other initiatives.

Yoshinori Saito
Senior Executive Officer
President andRepresentative Director,
Epos Card Co., Ltd.

MARUI GROUP has continued to provide payment settlement
and other financial services via credit cards. Recently, Japan’s
declining birthrate, aging population, and pension issues have
led youths and young adults to harbor concern for their future,
which in turn has inspired them to take interest in investment,
conservation, and other money-related areas. It was based onthese trends that MARUI GROUP decided to establish the
FinTech Business Department in April 2017. Going forward,
we will leverage the Group’s management resources andpromote open innovation with various companies to expand
the range of the financial services we provide with the aim ofrealizing financial inclusion. For example, we plan to offer
services for saving and increasing money and for preparing
for the future.

Response to Diversifying Payment Methods
Payment methods are growing more diverse amid therapid expansion of the mobile payment market, with new
options being provided by overseas companies newly
entering the market as well as by new payment services,
including Rakuten Pay and Coiney. To respond to theseemerging payment methods, MARUI GROUP will seek toprovide optimal payment services based on the trends
seen in society and among customers. For example, apayment service using the Origami Pay platform wasintroduced at Shibuya Modi on a trial basis in August
2016, and EPOS cards were made compatible with theApple Pay service in March 2017.

FinTech: Medium-Term Transaction Volume, Operating Income, and Cardholder Targets
Total transactions of FinTech business

Only one-fourth as many cardholders as other companies but incredibly high revenues per active card
Cardholders

Transactions*1
26.46 million

26.92 million

6.36 million
MARUI GROUP
CO., LTD.

Company A

Company B¥2,500.0 billion ~ROIC¥4,700 billion¥4,900 billion¥1,700 billion

2.7
times

2.8
times

MARUI GROUP
CO., LTD.

Company A

Company B

Cardholders

3.9%

8.0 million ~2.2%¥2,100.0 billion ~1.1%
MARUI GROUP
CO., LTD.

Company A

Company B

7.0 million ~*1 Total for card shopping, cash advance transactions, etc.

Operating Income per Active Card

Revenue¥23,400

6.36 million

Expenses¥16,900
Revenue¥14,300
Income ¥6,500

MARUI GROUP CO., LTD.

76

¥1,723.3 billion

Expenses¥13,800
Income ¥500

Company A

Revenue¥10,600

Expenses¥8,200FY2017FY2018(Target)¥27.1 billion¥30.1 billion

FY2019(Target)FY2020(Target)FY2021(Target)Income ¥2,400
Company B

Operating income¥40.0 billion ~77

Message from the CFO

Target Balance Sheet

POINT

01

Target Balance Sheet

Total assets forecast to reach ¥1 trillion in the fiscal year ending March 31, 2021, due to increased operating receivables
Optimal capital structure defined as having equity ratio of approximately 30%
Total assets ¥1 trillion

Total assets ¥730.1 billion
Liabilities ¥448.0 billion

Operatingreceivables¥413.9 billion

Interest-bearing debt

¥359.3 billion

Fixed assets, others

Shareholders’ equity¥281.6 billion

Liabilities ¥532.2 billion

Operatingreceivables¥488.8 billion

Interest-bearing debt

Shareholders’ equity

Fixed assets, others

Construction of an Optimal Capital Structurein Conjunction with Business Transformation

Interest-bearing debt

¥590.0 billion¥273.9 billion

Shareholders’ equity

Fixed assets, others¥300.0 billion
Equity ratio 30%

Equity ratio 34%

FY2016

Senior Managing Executive
Officer and CFO

Operatingreceivables¥680.0 billion¥434.3 billion

Equity ratio 39%

Motohiko Sato

Liabilities ¥730.0 billion

Total assets ¥806.6 billion

FY2017In the past, although the asset portion of our balance sheet
was oriented toward finance, the liability portion remained
unchanged from the days when retailing was more prominent in our operations, as indicated by high levels of shareholders’ equity. As part of the provisions of themedium-term management plan with the fiscal year ending
March 31, 2021, as its final year, we will procure funds inthe form of interest-bearing debt to address the projected

FY2021 (Forecast)rise in operating receivables with the aim of maintaining alevel of interest-bearing debt that is equivalent to 90% of
operating receivables. As for the equity ratio, we will target
a ratio of approximately 30%, the level we have deemed to
be optimal.
In the fiscal year ended March 31, 2017, interestbearing debt amounted to ¥434.3 billion, rising to a level
equivalent to 89% of operating receivables.

POINT

02

In the fiscal year ended March 31, 2017, the first year of
the plan, total Group transactions rose 14% year on year,to ¥1,933,685 million, on the back of strong card shopping transactions in the FinTech business. At the sametime, operating income increased for the eighth consecutive year, to ¥31,253 million, and net income attributableto owners of parent grew for the sixth consecutive year, to¥18,724 million. This income growth coupled with theeffects of share buybacks and dividend increases led
return on equity (ROE) to rise by 0.7 percentage point, to6.7%, while earnings per share (EPS) was up 14%, to¥80.2. Return on invested capital (ROIC), meanwhile,
decreased 0.2 percentage point, to 3.1%, following lower
income in the Retailing business. As a result of our steadily
advancing financial strategies, ROIC exceeded weighted
average cost of capital (WACC).
Seeking to ensure that we can accomplish the targets
set forth by the medium-term management plan for thethree key performance indicators (KPIs)—ROE, ROIC, andEPS—these KPIs have been broken down in each businessto provide KPIs for frontline operations. As a result, two
new business and sales floor KPIs were established for78

specialty shops in the Retailing business: net operating
income yield (NOI yield) and lifetime value (LTV). We also
took steps to make it easier for all employees to understand the KPIs and to shape their daily work accordingly.
In April 2017, a project was started up to inform employees about operating environment changes pertaining to
MARUI GROUP’s operations and to business in generaland our view of corporate value, and the topics of why the
KPIs are necessary and what is needed to accomplish
related targets are subjects of active discussion.
With regard to the balance sheet we target, we are in
the process of achieving an optimal level for shareholders’equity out of consideration for the increase in operatingreceivables in the FinTech business that has continued
since the launch of the EPOS card in 2006. However, weare of course aware of the fact that, should the businessmodel targeted by MARUI GROUP change, so will its ideal
capital structure. Accordingly, the construction of an optimal balance sheet will be an ongoing process conductedin conjunction with the creation of new businesses and thetransformation of existing businesses currently underway
and with an eye to long-term corporate value gains.

Creation of Corporate Value through ROIC Exceeding WACC

Surplus income achieved in the fiscal year ended March 31, 2017, through steady advance of financial strategies that
aim to achieve structure in which ROIC consistently exceeds weighted average cost of capital (WACC)
by increasing ROIC and lowering capital costs
ROIC
ROIC

ROIC

3.3%

WACC

3.1%

Liability costs

FinTechROIC 3.9%≤ 3.3%–3.7%

FinTechROIC 3.9%

0.3%

Capital costs

Retailing
ROIC 3.5%

7%–8%FY2016>

Liability costs

FinTechROIC 4.1%

Liability costs

Retailing
ROIC 5.3%

Capital costs

0.2%

Capital costs

7.2%

FY2017

We will increase ROIC by growing financial service revenues in the FinTech business and transitioning to shopping centers and fixed-term rental contracts in the Retailingbusiness. Meanwhile, we will deploy financial strategies ofincreasingly procuring funds in the growing FinTech business through low-cost interest-bearing debt to reduce the

WACC

4%

3.0%

Retailing
ROIC 2.5%

>

WACC

2%–3%

0.3%–1%

7%–8%

FY2021 (Forecast)overall capital costs of the Group.
As a result of the steady progress of financial strategies
based on the above policies, MARUI GROUP succeeded increating a structure in which ROIC exceeds WACC in thefiscal year ended March 31, 2017.

79

Target Balance Sheet

Target Balance Sheet

POINT

03

POINT

05

Cash Flow Forecasts

Five-year aggregate core operating cash flow of ¥230.0 billion forecast for period of new medium-term management plan
Allocation of cash flows to growth investments and shareholder returns to achieve ongoing growth andimprove capital efficiency
Existing businesses

Fund procurement throughincurring interest-bearing
debt and liquidation ofreceivables

Growth investments

Increase in operatingreceivables in FinTech¥230.0 billion¥260.0 billion

Core operating cash flow

Growth investments &Shareholder returns¥230.0 billion¥90.0 billion

Investments in new business fields¥30.0 billion

Shareholder returns¥110.0 billion¥200.0 billion

Procurement¥60.0 billion+

High Growth Coupled with High Returns

Continuous, long-term dividend increases in conjunction with EPS growth and targeting a payout ratio of 40% or more
MARUI GROUP positions returning profits to shareholders
as an important management priority. The medium-term
management plan targets a consolidated payout ratio of
40% or more. In line with this policy, we issued our highest
ever dividend payment of ¥33 per share in the fiscal year
ended March 31, 2017, and plan to raise dividend

Stable, long-term dividend increases
Share buybacks
EPS in fiscal year ending March 31, 2021

Allocation

130

More than ¥(Forecast)

Breakdown

Excluding the anticipated increase in operating receivables, core operating cash flow is expected to amount to¥230.0 billion over the period of the medium-term management plan. We will allocate ¥200.0 billion of thisamount to growth investments and shareholder returns.
Growth investments of ¥90.0 billion will be conducted, of
which ¥30.0 billion will be used to expand and transformthe Company’s business through investments in new

business fields and collaborative ventures. We intend touse the remaining ¥110.0 billion for enhancing shareholder returns through dividend increases and sharebuybacks. We will evaluate cash flows when considering
share buybacks, targeting the ideal timing for improving
capital efficiency and increasing shareholder returns.
Acquired treasury stock will, in principle, be canceled.

¥91 (Forecast)

gh

Hi

t
ow
Gr

EPS

Stable, long-term
dividend increases¥80Interest-Bearing Debt and Interest Expense Forecasts

Difference if interest rates
came to pre-monetaryeasing levels¥71
Cash dividends
per share¥56¥48

FY2011

R

Cash dividends per share¥33
5th consecutive yearof higher dividends¥434.3 billion¥264.7 billion¥2.5 billion

gh
Hi

u
et

¥37 (Forecast)¥59

Approx.
¥900.0 billion

Interestbearing debt
Interest
expensessrn

Preparation for future procurement risks by procuring funds through debt with longer maturity periods andfixed interest rates while arranging level repayment schedules

Earnings per
share (EPS)¥1.7 billion

FY2017MARUI GROUP will stabilize its financial base by procuring funds primarily through borrowings and bonds while
maintaining a level of interest-bearing debt equivalent to
90% of operating receivables.
On March 31, 2017, liabilities were roughly ¥170.0
billion higher than six years ago. Regardless, interest
expenses in the fiscal year ended March 31, 2017, were
down ¥0.8 billion primarily due to monetary easing­measures. To mitigate risks of future interest rate hikes,
80

h

EPS

POINT

04

payments to ¥37 in the fiscal year ending March 31,
2018, making for the sixth consecutive year of increased
dividends. Going forward, we will target high growth coupled with high returns, which is to be realized throughongoing dividend increases based on long-term growthin EPS.

MARUI GROUP will procure funds through debt withlonger maturity periods and fixed interest rates whilearranging level repayment schedules. Currently, the­average maturity period for debt is over 6 years, roughly
double the recovery period for revolving payment receivables, and the portion of debt that uses fixed interest rates
is 65%. We will procure funds in a manner that ensures
the Company’s performance will not fluctuate substantiallyshould interest rates rise.

¥22

¥19

FY2026 (Forecast)

¥18
¥14

¥19

¥15

Cash dividends
per share
FY2012FY2013

Consolidated
payout ratio

FY2014FY2015FY2016FY2017FY2018(Forecast)

73.0%

31.0%

32.0%

Share buybacks

—

—

—

FY2020(Forecast)

FY2021(Forecast)

40% or more

30% or more

Total return ratio

FY2019(Forecast)125.3%

227.5%

147.5%

113.3%¥15.0 billion ¥35.0 billion ¥20.7 billion ¥15.0 billion

81

Team Supporting Co-Creation Management

Team Supporting Co-Creation Management

As of June 26, 2017

From back left

Tadashi Ooe

External Audit &Supervisory Board
Member

Hideaki Fujizuka

Tomoo Ishii

Masao Nakamura

Koichiro Horiuchi

Hiroshi Aoi

Etsuko Okajima

Audit & Supervisory
Board Member(Full time)

Director

Director

Hirotsugu Kato
Director

Tetsuji Sunami

Audit & Supervisory
Board Member(Full time)

Takehiko Takagi
External Audit &Supervisory
Board Member

From front left

Masahiro Muroi
External Director

82

External Director

President andExternal Director
Representative Director

83Messages from External Directors

It has been nine years since I became an external director
at MARUI GROUP. The Company has continued to practice management driven by a strong passion and a commitment to innovation. The concept of co-creation
management and other benefits that are appearing now
are the products of reforms that MARUI GROUP has been
implementing for years.
For example, the transition toward shopping centersand fixed-term rental contracts in the Retailing businessmay appear to have been a sudden change to those outside of the Company. On the contrary, however, the ideal
form for MARUI GROUP’s Retailing business had long
been percolating in President Aoi’s mind. When he wasable to feel confident that the aforementioned transition
was the appropriate course, the gears spun into motion.
The redefinition of the Credit Card Services business as
the FinTech business was a similar process. The Company
was not likely aware of the term “FinTech” seven or eight
years ago. However, a business model merging retailingand finance has always been important to MARUI GROUP.
When searching for means of creating new businesses,
several options were explored. In the end, the Company
was able to affirm that FinTech was the appropriate
approach. Even among the Board of Directors, the emergence of the word “FinTech” felt like a natural progression.
The role of external directors is viewed to be monitoringand supervising management. I personally have been
managing a company for several years, and I primarily
seek to help management exercise restraint, for example,
by suggesting that we consider timing a little more, rather
than focusing on spurring management forward. MARUIGROUP has a corporate culture of listening to customer
input that dates back to its founding. As such, meetings ofthe Board of Directors are very frank with discussions
based on an atmosphere of mutual respect. The
Nominating and Compensation Committee is memberedby President Aoi, External Director Okajima, and myself,
meaning that officer nominations and compensation arechecked by a committee comprising a majority of external
directors. I feel as though the Company’s compensation
systems have been clear and appropriately linked to roleand performance since I was appointed. However, anotherstep forward was taken when the Company introduced a
new medium-to-long-term incentive system based on the2016 evaluation of the Board of Directors’ effectiveness.
MARUI GROUP is truly a company characterized by its
ability to evolve with the times.
August 2017

Messages from External Directors

Realized Benefitsof Past Reforms         Koichiro Horiuchi
External Director

Strategic Development of
Prospective Leaders
through the Start of the
Co-Creation Management
Academy        Etsuko Okajima
External Director

I see MARUI GROUP’s co-creation management as ahighly sophisticated social experiment through which asort of “MARUI GROUP ecosystem” may be created.
MARUI GROUP’s stakeholder management, which entails
creating needs together with the Company’s stakeholders
to provide value, is an undertaking that has significant
meaning to society. MARUI GROUP has also recently beenworking together with venture companies to create newvalue. All of these initiatives would not be possible without
President Aoi’s keen foresight.
However, the type of leadership exercised by President
Aoi is not the traditional type of leadership that essentiallyinvolves issuing orders. Rather, it is a gentler type of leadership that involves cultivating understanding within
employees to inspire them to act voluntarily. President Aoi
accomplishes this by holding frequent forums for explaining his strategies, establishing several Groupwide project
teams based on volunteer participation, and involving
employees that interact directly with customers and arehighly knowledgeable about frontline operations in theprocess of producing innovation through co-creation.
MARUI GROUP’s corporate philosophy contains thephrase “equate the development of our people with thedevelopment of our company.” This philosophy drives theCompany to foster employees capable of thinking andacting autonomously, which contributes to the propensity
for decisive action and the swift exploration of options thatare characteristics of MARUI GROUP.
My background is in supporting the development ofleadership skills. I am active in discussions regarding thestrategic cultivation of future presidents and other members of management at meetings of the Nominating andCompensation Committee and the Board of Directors, andI have helped create the future leader development program. When it becomes time to appoint a new president in
10 or 20 years, the requirements of management will havegrown more complicated, making the position even morechallenging. Bold structural reforms require the foresightnecessary to conduct management from a long-term
perspective, looking at least 10 or 15 years into the future.
The Co-Creation Management Academy was establishedwith an eye to long-term management. Through this program, we will select around 20 employees aged 20 to 49
from among applicants with the aim of strategically cultivating a total of 200 prospective leaders over the next 10
years. After completing the program, participants will put
the concepts they learned to practical application as they
are given opportunities to make management decisions
under uncertain circumstances.
August 201784

85

Corporate Governance

Messages from External Directors

MARUI GROUP Corporate Governance Guidelines
www.0101maruigroup.co.jp/pdf/cgg_en.pdf
Corporate Governance Reportwww.0101maruigroup.co.jp/pdf/cgr_en.pdf

External Director

Audit & Supervisory
Board Members

External(Independent)

External(Independent)

7

In addition to its Board of Directors and Audit &Supervisory Board, MARUI GROUP has established theManagement Committee, the highest decision-making
body; the Nominating and Compensation Committee;
six committees that manage business risks, promote
speedy process improvements, and prevent accidents;
and the Compliance Promotion Board, which oversees
these committees.

43

Nominating and Compensation
Committee Members

Executive Officers

173

External(Independent)

Female322Ordinary General Meeting of Shareholders
Appoint / Dismiss
Coordinate

Appoint / Dismiss

Appoint / Dismiss
Select / Discharge

Audit
Audit &
Supervisory Board

Board of Directors
ReportNominating andCompensation
Committee

DirectPresident

ReportManagement
Committee

ReportCompliance Promotion Board
Chairman: Representative Director,
Representative Executive Officer

Members: 15 (including 3 directors and 2 Audit & Supervisory Board members)
ReportCommittees
Coordinate

Public Relations IR Committee

Chairman: PresidentInternal Control Committee

Chairman: Senior Managing Executive Officer Members: 14

Members: 9

Environment CSR Promotion Committee

Chairman: Managing Executive Officer

Members: 10

Personal Information Protection Promotion Committee Chairman: Senior Executive Officer

Members: 9

Safety Control Committee

Chairman: Senior Executive Officer

Members: 12

Insider Trading Prevention Committee

Chairman: Senior Managing Executive Officer Members: 6

Report / Participate
Audit Department• Executive in charge of audits• Executive in charge of internal control

Consult

General Affairs Department• Executive in charge of legal affairs• Executive in charge of personal
information protection

Audit
Internal
Notification
SystemHead Office
Divisions

MARUI Group Code of Conduct

ReportCommunicate

August 2017

Directors

Audit

Masahiro Muroi

MARUI GROUP’s corporate philosophy calls for us to“continue evolving to better aid our customers” and “equate
the development of our people with the development ofour company.” Accordingly, we support the passion of
employees to aid customers to create a virtuous cycle inwhich the growth of employees and the Company arereciprocally linked in order to improve corporate value.
Reinforcing corporate governance is thus a top priority.
We endeavor to practice sound, transparent, and efficient management to heighten earnings capacity.

Legal Advisor        Corporate Governance:
Emphasizing Corporate Value

Accounting Auditor

Appropriate Risk Taking
Supporting Ongoing
Growth Strategies

I was appointed as an external director at MARUI GROUP
in June 2017. My background is in the IT industry, andI hope that my experience at the forefront of advanced
technology and digital innovation will be helpful to theGroup in formulating growth strategies.
At Nomura Research Institute, Ltd., over the course of
more than 20 years, I experienced large-scale IT systemdevelopment projects, cutting-edge technology-related
research and business alliances at Silicon Valley in the
United States, the creation of new businesses and services
utilizing IT, and solutions development projects conducted
through collaboration with IT venture companies. After
that, I spent 13 years as an officer in the head office,where I worked in back-office areas including corporate
planning, human resources, public relations, investor
relations, risk management, and CSR. In the investor
relations department, I spent eight years speaking directlywith countless institutional investors from Japan, Europe,
the Americas, and Asia. That experience proved invaluable
in conducting corporate governance reforms later on.
The strength of MARUI GROUP lies in its ability to
pursue self-improvement even when faced with a highly
volatile operating environment. The needs of consumers,of course, change with the times, and, globally, we areseeing the rapid advance of a digital revolution. In the
midst of such trends, MARUI GROUP is undertaking boldbusiness reforms to make omni-channel retailing, FinTech,and digital content central aspects of its business. It is also
moving forward with governance reforms, including theestablishment of the Nominating and Compensation
Committee, the revision of officer compensation systems,
and the implementation of a future leader development
program, which demonstrate just how progressive theCompany is.
Self-improvement entails risks. Transforming businessmodels and introducing state-of-the-art IT technologies,
in particular, are accompanied by exposure to new anddifficult-to-predict risks. As an external director that is also
designated as an independent director, I will rigorously
evaluate the appropriateness of MARUI GROUP’s strategies and the extent of new risks that may accompany
these strategies. At the same time, I will adopt an objective
and balanced approach toward my duties and towardvoicing opinions, recognizing that appropriate risk taking
can support ongoing growth strategies.

Group Companies
Stores / Specialty Stores / Offices

ReportConsult

Committee Membershipwww.0101maruigroup.co.jp/pdf/committee_members_en.pdf

8687

Corporate GovernanceInitiatives for Reinforcing Corporate Governancewww.0101maruigroup.co.jp/en/sustainability/theme04/governance.html

Evaluations of the Board of Directors’ Effectiveness
The Company has been performing annual evaluations of the Board of Directors’ effectiveness since the fiscal year ended
March 31, 2016, with the aim of improving the effectiveness of the Board of Directors. In these evaluations, all directors
and Audit & Supervisory Board members complete a self-evaluation survey of the effectiveness of the Board of Directors
with regard to such aspects as the scale and composition of the Board of Directors, operating procedures, decision-making
processes, and roles and responsibilities. Based on the results of this survey, information on the current evaluation of theBoard of Directors and the issues it faces are shared and constructive discussions are held in order to formulate measures
for the future. In the fiscal year ended March 31, 2017, the evaluation found the Board of Directors to be functioning effectively, as was also the case in the fiscal year ended March 31, 2016.

Results of Effectiveness Evaluation from the Fiscal Year Ended March 31, 2016
Areas Applauded• Active discussion centered on external directors appointed by reducing the total number of directors• Respect for opinions of external directors• Incorporation of perspectives of shareholders, investors, and other stakeholders

Corporate GovernanceFuture Leader Development Program
MARUI GROUP unveiled its Co-Creation Management
Academy future leader development program in April 2017with the aim of cultivating human resources capable ofpromoting management reforms for driving ongoing
improvements in corporate value. This program is based on
open application, and each year 20 candidates are selectedfrom among volunteers. Those selected are submitted to a
one-year training curriculum developed under the guidanceof third-party institutions and external directors to instill inthem a management perspective. Participants continue tobe nurtured into future leaders through their actual work
even after the program is completed.
Name

Co-Creation Management Academy• Cultivate future leaders capable of supporting MARUI GROUP’s management into the future• Foster fundamental leadership skills including basic thinking, strategy forming, and project management• Help participants form their own visions so that they can exercise leadership in guiding the organization

Issues Identified
1 Failure to link director compensation to medium-to-long-term performance
2 Lack of successor development programs

Response to Issue 1

Response to Issue 2

In June 2016, director compensation systems were revised to increase the portion of variable compensation through the introduction of performance-linked stock-based compensation to serve as
medium-to-long-term incentives and performance-linked bonuses to serve as short-term incentives.
In May 2016, the Nominating and Compensation Committee was established with external
directors serving as its primary members. This committee discusses director nomination andmanagement compensation to ensure objectivity and transparency in this regard.
In April 2017, a future leader development program was instituted, based in part on input received
from external directors, and the Co-Creation Management Academy program was launched.

Aims• Promote cross-organizational networking and endow perspectives emphasizing overall optimization• Create community of program participants through follow-up monitoring of participants beginning from the following
fiscal year after they complete the program• Encourage participants to seek internal and external learning opportunities in fields other than those in which theygenerally work to broaden their perspectives and foster resourcefulness

Applicable ages
Guidance

20–49
Mikiharu Noma, Associate Professor Graduate School of International Corporate Strategy, Hitotsubashi University
External directors of MARUI GROUP

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Application by
employees aged
20–49

Evaluation basedon essays, etc.

Approximately 20
participants selectedeach year

One-year training
curriculum forlearning from amanagement
perspective

Experience gained
through practicalapplication ofconcepts

Participants growinto future leaders
over next
10–15 years

Results of Effectiveness Evaluation from the Fiscal Year Ended March 31, 2017
Issues and Future Measures• After the June 2016 revision of compensation systems, a third-party evaluation was conducted, which found that the
portion of variable compensation was low in comparison to other companies. The Company is engaged in ongoing
examinations of compensation ratios based on social trends with the aim of effectively linking director compensation
to medium-to-long-term improvements in corporate value.
• The future leader development program was only just introduced in April 2017 and is therefore not yet complete interms of development provisions or implementation procedures. The Company will continue to adjust this program
while seeking out the ideal form for development provisions, including future positioning and promotions, as well as
for implementation procedures from a medium-to-long-term perspective.

88

Medium-to-Long-Term Development of Human Resources—A Wellspring of Corporate Value

Mikiharu Noma
Associate Professor,
Graduate School ofInternational Corporate Strategy,
Hitotsubashi University

The goal of the Co-Creation Management Academy is to cultivate future leaders for MARUI GROUP. The first group ofparticipants in this program consisted of 21 members, eight of whom were women, and these members were of all ages
and of diverse perspectives. Also, a number of these individuals excelled at adopting a perspective focused on overall
optimization, as opposed to individual optimization, which was most likely a product of MARUI GROUP’s program forrelocation at Group companies. Moreover, the participants had a strong sense of responsibility fueling a passion tocontribute to the future of management. When formulating the curriculum for the Co-Creation Management Academy,
I focused on two main points. The first point was to broaden participants’ knowledge while elevating their viewpoint to
the level required of management. The second point was to hold in-depth discussions on how to respond to new industrial revolutions, FinTech, and other disruptive innovations. Over the period of one year, participants were submitted toan ongoing process of input, which included reviews of case studies, discussions with leaders, and identification ofissues faced by MARUI GROUP, and reflection. The medium-to-long-term development of human resources forms awellspring of corporate value. I look forward to seeing the fledglings from the Co-Creation Management Academy cometo soar as future leaders, and I am confident in their ability to do so.

89Corporate GovernanceCorporate GovernanceDiscontinuation of Takeover Defense Measures

Engagement with Stakeholders

At the Ordinary General Meeting of Shareholders held in June 2008, the Company received approval to implement takeover defense measures. These measures were later discontinued at the Ordinary General Meeting of Shareholders held in
June 2017. This decision was made based on trends regarding recent takeover defense measures as well as the results ofdiscussions with institutional investors and other domestic and overseas shareholders. In light of these exchanges, it was
judged that the discontinuation of these measures would facilitate efforts to contribute to the common interests of theshareholders of the Company by strengthening corporate governance, advancing the medium-term management plan, andfurther improving corporate value.

MARUI GROUP views corporate value as the intersection between the interests and happiness of all stakeholders.
The Company’s policy of co-creation management is also extended to corporate governance as we practice constructive
engagement with all stakeholders.

Establishment of an Advisory Board
In July 2016, the Advisory Board was established to formulate strategies for accomplishing the goals of the medium-term
management plan and for realizing medium-to-long-term improvements to corporate value. We welcomed one new member
to this committee in July 2017, raising the total number of members to four. The purpose of the Advisory Board is to enable
MARUI GROUP to receive multifaceted advice and proposals from external experts with insight into business strategies andvarious business areas. We anticipate that such advice will be a powerful asset in the Groupwide pursuit of improved corporate value as we seek to address the rapidly changing operating environment and the diversifying society. Regular monthly
meetings of the Advisory Board are held, at which representatives from relevant areas attend, and advice is also sought on
specific themes.

Advisory Board Members

Tadasu Ohe
President,
PLANTEC ASSOCIATES INC.

Masakazu Masujima
Partner,Mori Hamada & Matsumoto

Yuji Yamamoto
PhysicianRepresentative Director,
MinaCare Co., Ltd.

Meyumi Yamada (New)
Executive Director,
Chief Quality Officer,
istyle Inc.

90

Area of Specialty and Past Activities
Mr. Tadasu Ohe graduated from the Graduate School of Engineering at the Universityof Tokyo and also completed a Master’s course at this university. After working at thearchitecture firm of Kiyonori Kikutake, he established PLANTEC ARCHITECTS INC. in1985. Mr. Ohe provides MARUI GROUP with store renovation and distribution center
environment improvement proposals to help the Company better utilize its real estatefrom the user’s perspective.

Mr. Masakazu Masujima graduated from the Faculty of Law at the University of Tokyoand from Columbia Law School. He has held positions at the Palo Alto office of Wilson
Sonsini Goodrich & Rosati P.C., in the Supervisory Bureau of the Financial Services
Agency, in Blockchain Study Group of the Ministry of Economy, Trade and Industry,
and in the Review Committee for the Sharing Economy of the National Strategy Officeof Information and Communications Technology. Mr. Masujima provides MARUIGROUP with advice in relation to the development of the FinTech business.
→P.48 Dialogue 02

Co-Creation with Customers

Co-Creation with Shareholders and Other Investors

The planning meetings we hold with customers are not just a venue forsoliciting customer feedback; they are a co-creation activity that invites
customers to take part in the value creation process for developing
stores and products that all customers choose.

Through coordination between the IR Department and the ESG
Promotion Department, MARUI GROUP has been enhancing communication with investors and stepping up information disclosure. These
initiatives have earned the Company praise, with it receiving various
awards and being included in numerous indexes.

Planning Meetings Held with Customers

Institutional Investors Met withMore Than

600

300

Fiscal year ended March 31, 2017

Co-Creation with
Communities and Society

Co-Creation with Business Partners

Co-Creation with Employees

The Marui Group Procurement Policy wasformulated in 2016, and we conduct surveys
and on-site investigations together withbusiness partners to ensure a stable supply of
products and confirm partners’ human rights
and work environment initiatives.

Our intra-Group project teams, including
the Diversity Project Team, Marui Future
Project Team, Healthcare Promotion Project,
Medium-Term Management Visionary
Committee, and other such forums, provide
opportunities for employees to discussand share thoughts with individuals fromother companies.

MARUI GROUP is engaged in co-creation
activities with society. It participated in the
TOKYO RAINBOW PRIDE 2017 LGBT pride
event and held an event that utilized theanime series Osomatsu-san. We aim toincrease the number of EPOS card collabo­
ration partners.

Business Partners Participatingin Explanatory Forums

Employees Participating in
Intra-Group Project Teams

Number of Visitors Attending
TOKYO RAINBOW PRIDE 2017

Dr. Yuji Yamamoto graduated from the Faculty of Medicine at the University of Tokyoin 1999, after which he worked in cardiovascular medicine and other departments.
He is certified by The Japanese Society of Internal Medicine and the Japan Medical
Association. Today, Dr. Yamamoto fulfills his current role while also acting as a
researcher at Sony Computer Science Laboratories, Inc. He helps MARUI GROUP
analyze the relationship between health and productivity as part of its healthcare
management efforts while also offering guidance on how to be included in healthcare
management-related indexes. →P.64 Dialogue 03
Ms. Meyumi Yamada graduated from the Department of Biological Science andTechnology at Tokyo University of Science. She first gained experience at a cosmetics
manufacturer. Building upon the cosmetics e-mail magazine that she had been
distributing personally, Ms. Yamada drafted plans for @cosme, Japan’s largest cosmetics and beauty information website, in 1999, and took part in starting up its
website. She has also been a member of consumption- and Internet-related committees under the Ministry of Economy, Trade and Industry. Ms. Yamada provides MARUIGROUP with advice on omni-channel retailing strategies from a woman’s perspective.

Approx.

For planning Hakata Marui

Approx.

100

Fiscal year ended March 31, 2016

Approx.

320

Fiscal year ended March 31, 2017

100,000
May 7-8, 201791

Corporate Governance

Sustainability Management
As it seeks to provide enriching lifestyles to all customers, MARUI GROUP is turning its attention to inclusion. One of thecore concepts of the United Nations Sustainable Development Goals, which have been adopted by Japan and 192 othercountries around the world, is the idea that no one will be left behind, an inherently inclusion-based sentiment. This concept
is the same as directives of MARUI GROUP’s management. We seek to promote inclusion through our business activities byconducting co-creation together with all of our stakeholders. This is the way we will go about creating an inclusive societythat offers happiness to all.
To reinforce the management systems for supporting these efforts, we established the ESG Promotion Department in
October 2016 and changed the name of the CSR Promotion Department, which was initially created in 2005, to the
Sustainability Department in April 2017.

Core Theme 1

Customer Diversity and Inclusion
We will seek to develop products, services, and stores that bring joy to all
customers, regardless of their age, gender, or physical characteristics.

Core Theme 2

Workplace Inclusion

Corporate Governance

Responsible Procurement Practiced Together with
Business Partners
The MARUI GROUP Procurement Policy was formulated in2016. A step ahead of the announcement of this policy,
the Company held an explanatory forum for roughly 100
business partners related to its private brands. At this
explanatory forum, we discussed the importance ofaddressing human rights, labor, and other issues acrossthe supply chain, explaining MARUI GROUP’s policies inthis regard while using actual cases. Business partners
participating in the forum expressed their understandingof our stance.
In 2017, we began conducting surveys and on-site
audits of business partners with regard to initiatives
regarding the supply and procurement of safe and trustworthy products as well as human rights, labor, and otherissues. On-site audits involve meetings with dedicatedstaff from the Sustainability Department as well as inspections at the domestic and overseas factories of manufacturing subcontractors. Through these inspections, we
confirm the environmental measures and working conditions at these factories.

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Surveys of business
partners

Confirmation offactory and otherconditions based on
survey results

Communication
through on-site
meetings bydedicated staff

Feedback on activities
to be continued andimprovements tobe pursued

Sharing of informationon conditions andfurther initiatives withbusiness partners

Promotion of
improvements
together withbusiness partners

Based on MARUI GROUP’s corporate philosophy of striving to “continue evolving
to better aid our customers” and “equate the development of our people with thedevelopment of our company,” we will provide all employees with venues throughwhich they can excel.

Core Theme 3

Ecological Inclusion
We will develop eco-friendly businesses that are considerate of natural capital andpropose ecologically sound lifestyles that are in harmony with nature and theenvironment.

Core Theme 4

Co-Creation Corporate Governance
We will develop management frameworks that include stakeholders in order toachieve harmony between the interests and the happiness of all stakeholders.

Tracking of Environmental Footprint across the Value Chain
The Company has traditionally calculated emissions of CO2
and other greenhouse gases based on Scope 1 and Scope 2of the Greenhouse Gas Protocol, and it began calculating
emissions under Scope 3 during the fiscal year ended March
31, 2014. We are thereby able to track environmental
impacts across the entire value chain, including direct
and indirect emissions from MARUI GROUP (Scope 1 andScope 2) as well as emissions from raw material procurement,
transportation, and products purchased by customers.
Through this type of traceability that exceeds the boundariesof the Group, we are advancing initiatives for reducing environmental impacts together with customers, business partners, communities, and society as a whole.

Scope 3 Emissions Data (Fiscal Year Ended March 31, 2017)
Emissions by
MARUI GROUP
Scope 1 & 2:
110,000t-CO2

Emissions from Procurement to Delivery
Scope 3: 340,000t-CO2

Post-Purchase Emissions
Scope 3: 150,000t-CO2

Total Greenhouse
Gas Emissions
across the
Supply Chain
600,000 t-CO2

Process for Establishing Core Themes
Focusing our concept of co-creation management and the impact this approach will have on society, the environment, and natural capital, we examined the issues andopportunities this approach will create, based on which we defined four core themes for initiatives from the perspective of inclusion. In formulating these themes, we held
meetings with ESG-minded investors, sustainability experts, nonprofit organizations, and other stakeholders in the greater society as well as with customers, business partners,
and Group officers and employees. In addition, we referenced the ratings of ESG evaluation institutions; internal and external guidelines, such as those of the Global Reporting
Initiative, ISO 26000, the Sustainability Accounting Standards Board, and the International Integrated Reporting Council; and the SDGs.
More details on initiatives based on core themes can be found on the Company’s sustainability website, which was renovated on July 1, 2017.
www.0101maruigroup.co.jp/en/sustainability/

Raw material
procurement

Product
production

ProductdeliverySales
in stores

Customertransportation

Product use andrecycling

The Company calculates emissions volumes based on the Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain, released by the
Ministry of the Environment and the Ministry of Economy, Trade and Industry. The results of Scope 3 emissions calculations have been confirmed by Mizuho Information &Research Institute, Inc.
Scope 3 Emissions Data
www.0101maruigroup.co.jp/en/sustainability/theme03/environment_01.html

9293Directors, Audit & Supervisory Board Members, and Executive Officers

Directors, Audit & Supervisory Board Members, and Executive Officers

As of June 26, 2017

Directors

Audit & Supervisory Board Members

Hiroshi Aoi

Koichiro Horiuchi

Etsuko Okajima

Hirotsugu Kato

Hideaki Fujizuka

Tetsuji Sunami

President and Representative Director
Shares held: 1,538,300
Born: January 17, 1961

External Director
Shares held: 0
Born: September 17, 1960

External Director
Shares held: 0
Born: May 16, 1966

Director
Shares held: 4,500
Born: July 30, 1963

Audit & Supervisory Board Member (Full time)
Shares held: 600
Born: September 1, 1955

Audit & Supervisory Board Member (Full time)
Shares held: 2,000
Born: August 13, 1958

Jul. 1986 Joined the Company
Apr. 1991 Director and General Manager,
		 Sales Planning Headquarters
Apr. 1995	Managing Director and
Deputy General Manager,
		 Sales Promotion Headquarters and		General Manager, Sales Planning Division
Jan. 2001 	Managing Director and General Manager,
		 Sales Promotion Headquarters
Jun. 2004 	Executive Vice President andRepresentative Director
Apr. 2005 President and Representative Director
Oct. 2006 	President and Representative Director
Representative Executive Officer(Incumbent)

Apr. 1983 	Joined Long-Term Credit Bank of Japan
Mar. 1988 	Joined FUJI KYUKO CO., LTD.
General Manager, Corporate Planning
Division, FUJI KYUKO CO., LTD.
Jun. 1988 Director, FUJI KYUKO CO., LTD.
Feb. 1989 	Senior Managing Director,
FUJI KYUKO CO., LTD.
Jun. 1989 	Representative Director and Senior
Managing Director, FUJI KYUKO CO., LTD.
Sep. 1989 	President and Representative Director,
FUJI KYUKO CO., LTD. (Incumbent)
Jun. 2008 External Director (Incumbent)
Jun. 2012	External Audit & Supervisory Board
Member, Yamanashi Chuo Bank, Ltd.
(Incumbent)

Apr. 1989 Joined Mitsubishi Corporation
Jan. 2001 Joined McKinsey & Company
Jul. 2005 	Representative and CEO,GLOBIS Management Bank
Jun. 2007 	President & CEO, ProNova Inc.
(Incumbent)
Jun. 2014 	External Director, Astellas Pharma Inc.
(Incumbent)
External Director (Incumbent)
Mar. 2016 	Outside Director,
Link and Motivation Inc. (Incumbent)

Apr. 1980 	Joined Mitsubishi Bank Ltd. (currently
The Bank of Tokyo Mitsubishi UFJ, Ltd.)
Jun. 2007	Executive Officer and General Manager,
General Affairs Dept.,
The Bank of Tokyo Mitsubishi UFJ, Ltd.
Jun. 2010 	President and Director,
Chitose Kosan, Co., Ltd.
Apr. 2012 	Director, Senior Executive Managing
Officer and Group President ofCorporate Center, Olympus Corporation
Apr. 2015 	Director, Olympus Corporation
Jun. 2015 	Audit & Supervisory Board Member(Full time) (Incumbent)

Mar. 1981	Joined the Company
Jan. 2002 	General Manager, Store Planning Division,
Sales Promotion Headquarters
Oct. 2004 	General Manager, DM Business Division,
Sales Promotion Headquarters
Apr. 2006 	Representative and CEO,Marui Voi, Co., Ltd.
Oct. 2007 	Managing Director,
M & C SYSTEMS CO., LTD.
Apr. 2011 	Representative and CEO,MRI Co., Ltd.
Jun. 2014 	Audit & Supervisory Board Member(Full time) (Incumbent)

Participation in committees:
Management Committee (Chairman)
Compliance Promotion Board (Chairman)
Public Relations IR Committee (Chairman)
Nominating and Compensation Committee

Participation in committees:
Nominating and Compensation CommitteeMar. 1987 	Joined the Company
Apr. 2015 	Executive Officer and General Manager,
Corporate Planning Division
Oct. 2015 	Executive Officer and General Manager,
Corporate Planning Division and
IR Department
Jun. 2016	Director and Senior Executive Officer,
General Manager, Corporate Planning
Division and IR Department
Oct. 2016	Director and Senior Executive Officer,
General Manager, Corporate Planning
Division and IR Department
In charge of ESG Promotion
Apr. 2017	Director and Senior Executive Officer,
General Manager, IR Department
In charge of Corporate Planning and
ESG Promotion (Incumbent)
Managing Director,
M & C SYSTEMS CO., LTD. (Incumbent)

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee

Participation in committees:
Compliance Promotion Board
Internal Control Committee

Masahiro Muroi

Masao Nakamura

Tomoo Ishii

Tadashi Ooe

Takehiko Takagi

External Director
Shares held: 0
Born: July 13, 1955

Director
Shares held: 20,800
Born: June 11, 1960

Director
Shares held: 17,500
Born: July 16, 1960

External Audit & Supervisory Board Member
Shares held: 71,700
Born: May 20, 1944

External Audit & Supervisory Board Member
Shares held: 3,400
Born: January 23, 1945

Apr. 1978	Joined Nomura Computer System
Co., Ltd. (currently Nomura ResearchInstitute, Ltd.)
Jun. 2000	Member of the Board,
Nomura Research Institute, Ltd.
Apr. 2002	Senior Corporate Managing Director,
Member of the Board,
Nomura Research Institute, Ltd.
Apr. 2009	Representative and Senior Executive
Managing Director, Member of the Board,
Nomura Research Institute, Ltd.
Apr. 2013	Representative and Vice President,
Member of the Board,
Nomura Research Institute, Ltd.
Jun. 2016	External Director, Ryoden Corporation(Incumbent)
Jun. 2017 External Director (Incumbent)

Apr. 1983 Joined the Company
Apr. 2007 	Executive Officer and General Manager,
Group Business Promotion DivisionJun. 2008 	Director and Executive Officer,
General Manager, Corporate Planning
Division and General Manager,
Business Development Division
Apr. 2011 	Managing Director andManaging Executive Officer
President and Representative Director,
MARUI CO., LTD.
Apr. 2015 	Director and Managing Executive Officer
Responsible for Retailing and StoreOperation BusinessPresident and Representative Director,
MARUI CO., LTD.
Apr. 2016 	President and Representative Director,
AIM CREATE CO., LTD. (Incumbent)
May 2016	Director and Managing Executive Officer
Responsible for Retailing Business(Incumbent)

Apr. 1983 Joined the Company
Apr. 2007 	Executive Officer and General Manager,
Group Compliance DivisionJun. 2009 	Director and Executive Officer,
General Manager, General Affairs Division
Apr. 2013 	Director and Executive Officer,
General Manager, Personnel Division
Apr. 2015 	Director and Managing Executive Officer,
and Chief Operating Officer,
Healthcare Promotion andGeneral Manager, Personnel Division
In charge of General Affairs and
Healthcare Promotion
Apr. 2016	Director and Managing Executive Officer,
and Chief Operating Officer,
Healthcare Promotion
In charge of General Affairs, Personnel
and Healthcare Promotion (Incumbent)
Apr. 2017	President and Representative Director,
MOVING CO., LTD. (Incumbent)
Director, MARUI FACILITIES Co., Ltd.
(Incumbent)

Apr. 1969 Registered as Attorney
Apr. 1989 	Practicing-Attorney,
Professor for Civil Advocacy,
Legal Training and Research Instituteof the Supreme Court of Japan
Mar. 1994 	Outside Audit & Supervisory Board
Member, Canon Inc. (Incumbent)
Jun. 2004 	External Audit & Supervisory Board
Member (Incumbent)
Jun. 2011 	Director, Jeco Co., Ltd. (Incumbent)
Jun. 2015 	Outside Director,
Nissan Chemical Industries, Ltd.
(Incumbent)

Jul. 2001 	Chief, Kanazawa Regional
Taxation Bureau
Jul. 2002 President, National Tax College
Jul. 2003	Retired from National Tax
Administration Agency
Aug. 2003 	Registered as Certified Public
Tax Accountant
May 2006 	External Audit & Supervisory Board
Member, TOH-TEN-KOH Corporation(Incumbent)
Jun. 2008 	External Audit & Supervisory Board
Member (Incumbent)
Jun. 2010 	External Audit & Supervisory Board
Member, KAWADA TECHNOLOGIES, Inc.
(Incumbent)

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee
Internal Control Committee
Insider Trading Prevention Committee

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee

94

Participation in committees:
Nominating and Compensation Committee

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee
Environment CSR Promotion Committee
Safety Control Committee

Number of shares held as of March 31, 201795

Directors, Audit & Supervisory Board Members, and Executive Officers

Directors, Audit & Supervisory Board Members, and Executive Officers

Executive Officers

Hiroshi Aoi

Motohiko Sato

Masao Nakamura

Nariaki Fuse

Hajime Sasaki

Yoshinori Saito

Representative Executive Officerr
Born: January 17, 1961

Senior Managing Executive Officer
Born: December 17, 1953

Managing Executive Officer
Born: June 11, 1960

Senior Executive Officer
Born: June 3, 1959

Senior Executive Officer
Born: November 24, 1963

Senior Executive Officer
Born: July 25, 1962

Jul. 1986	Joined the Company
Apr. 1991	Director and General Manager,
Sales Planning Headquarters
Apr. 1995	Managing Director and
Deputy General Manager,
Sales Promotion Headquarters andGeneral Manager, Sales Planning Division
Jan. 2001 	Managing Director and General Manager,
Sales Promotion Headquarters
Jun. 2004 	Executive Vice President andRepresentative Director
Apr. 2005 	President and Representative Director
Oct. 2006 	President and Representative Director
Representative Executive Officer(Incumbent)

Mar. 1977 Joined the Company
Jun. 2005 	Director and General Manager,
Group Corporate Planning DivisionJun. 2008	Managing Director andManaging Executive Officer
Apr. 2012 	Senior Managing Director andSenior Managing Executive Officer
Apr. 2015 	Director and Senior Managing
Executive Officer, and CFO
In charge of Corporate Planning and Finance
Responsible for Credit Card Services
Business and Information Systems
Jun. 2016 	Senior Managing Executive Officer and CFO
In charge of Corporate Planning,
IR and Finance
Apr. 2017	Senior Managing Executive Officer and CFO
In charge of IR and Finance (Incumbent)

Apr. 1983 	Joined the Company
Apr. 2007 	Executive Officer and General Manager,
Group Business Promotion DivisionJun. 2008 	Director and Executive Officer,
General Manager, Corporate Planning
Division and General Manager,
Business Development Division
Apr. 2011 	Managing Director andManaging Executive Officer
President and Representative Director,
MARUI CO., LTD.
Apr. 2015 	Director and Managing Executive Officer
Responsible for Retailing and StoreOperation BusinessPresident and Representative Director,
MARUI CO., LTD.
Apr. 2016 	President and Representative Director,
AIM CREATE CO., LTD. (Incumbent)
May 2016	Director and Managing Executive Officer
Responsible for Retailing Business(Incumbent)

Mar. 1982 	Joined the Company
Apr. 2007 	Director, M & C SYSTEMS CO., LTD.
Apr. 2011 	Executive Officer
Managing Executive Officer,
M & C SYSTEMS CO., LTD.
Apr. 2013 	President and Representative Director,
M & C SYSTEMS CO., LTD. (Incumbent)
Jun. 2013 	Director and Executive Officer
Apr. 2015 	Senior Executive Officer
In charge of Audit andInformation Systems
Apr. 2016 	Senior Executive Officer and CIO
In charge of Audit (Incumbent)

Mar. 1986 	Joined the Company
Oct. 2007 	Director and General Manager,
Card Planning Division, Epos Card Co., Ltd.
Apr. 2012 	Director and General Manager,
Private Brand Department, MARUI CO., LTD.
Apr. 2013 	Executive Officer
Apr. 2014 	Managing Director and General Manager,
Specialty Store Department,
MARUI CO., LTD.
Jun. 2014 	Director
Apr. 2015 	Director and Senior Executive Officer
Responsible for Retailing and StoreOperation Business
Senior Managing Director, MARUI CO., LTD.
Director, Epos Card Co., Ltd.
Apr. 2016 	Senior Executive Officer (Incumbent)
President and Representative Director,
MARUI CO., LTD. (Incumbent)

Mar. 1986 	Joined the Company
Jul. 2008 	Executive Officer
General Manager, Financial Department
Apr. 2011 	Director and General Manager, Direct
Marketing Department, MARUI CO., LTD.
Apr. 2013 	Director and General Manager,
Collaboration Card Business Department,
Epos Card Co., Ltd.
Oct. 2013 	Director and General Manager,
Sales Promotion Department,
Epos Card Co., Ltd.
Apr. 2015	Managing Director, Epos Card Co., Ltd.
Director, M & C SYSTEMS CO., LTD.
(Incumbent)
Apr. 2016 	Senior Executive Officer (Incumbent)
President and Representative Director,
Epos Card Co., Ltd. (Incumbent)
Director, MRI Co., Ltd. (Incumbent)

Participation in committees:
Management Committee
Compliance Promotion Board
Internal Control Committee
Safety Control Committee (Chairman)

Participation in committees:
Management Committee
Compliance Promotion Board
Internal Control Committee
Personal Information Protection
Promotion Committee

Participation in committees:
Management Committee (Chairman)
Compliance Promotion Board (Chairman)
Public Relations IR Committee (Chairman)
Nominating and Compensation Committee

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee
Internal Control Committee (Chairman)
Insider Trading Prevention Committee (Chairman)

Participation in committees:
Management Committee
Compliance Promotion Board
Internal Control Committee
Personal Information Protection
Promotion Committee (Chairman)

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee

Toshikazu Takimoto

Tomoo Ishii

Takashi Wakashima

Hirotsugu Kato

Yoshiaki Kogure

Masahiro Aono

Managing Executive Officer
Born: November 5, 1959

Managing Executive Officer
Born: July 16, 1960

Managing Executive Officer
Born: November 19, 1956

Senior Executive Officer
Born: July 30, 1963

Executive Officer
Born: September 5, 1960

Executive Officer
Born: March 4, 1962

Mar. 1982 	Joined the Company
Mar. 2006 	Director, Epos Card Co., Ltd.
General Manager,
Credit Card Services Division
Mar. 2009 	Executive Officer and General Manager,
Group Profit Improvement Division
Oct. 2009 	Director, Epos Card Co., Ltd.
Apr. 2011 	Managing Director, Epos Card Co., Ltd.
Apr. 2012 	President and Representative Director,
Epos Card Co., Ltd.
Jun. 2012 	Director and Executive Officer
Apr. 2015 	Managing Executive Officer
In charge of Credit Card Services BusinessPresident and Representative Director,
Epos Card Co., Ltd.
Apr. 2016 	Managing Executive Officer
Responsible for FinTech Business(Incumbent)
President and Representative Director,
MARUI HOME SERVICE Co., Ltd.
(Incumbent)

Apr. 1983 Joined the Company
Apr. 2007 	Executive Officer and General Manager,
Group Compliance DivisionJun. 2009 	Director and Executive Officer,
General Manager,
General Affairs Division
Apr. 2013 	Director and Executive Officer,
General Manager, Personnel Division
Apr. 2015 	Director and Managing Executive Officer,
and Chief Operating Officer,
Healthcare Promotion andGeneral Manager, Personnel Division
In charge of General Affairs and
Healthcare Promotion
Apr. 2016	Director and Managing Executive Officer,
and Chief Operating Officer,
Healthcare Promotion
In charge of General Affairs, Personnel
and Healthcare Promotion (Incumbent)
Apr. 2017	President and Representative Director,
MOVING CO., LTD. (Incumbent)
Director, MARUI FACILITIES Co., Ltd.
(Incumbent)

Mar. 1981 	Joined the Company
Jun. 2006 	Director, Deputy General Manager,
Sales Promotion Headquarters andGeneral Manager, Sales Planning Division
Apr. 2011 	Director and Executive Officer
President and Representative Director,
MOVING CO., LTD. (Incumbent)
Apr. 2013 	Director and Executive Officer
In charge of CSR Promotion andReal Estate Business & Architecture
President and Representative Director,
Totsuka Commercial Buildings
Management Co., Ltd. (Incumbent)
Jun. 2013 	President and Representative Director,
Nakano Suncuore Co., Ltd. (Incumbent)
Jun. 2015 	Director and Managing Executive Officer
In charge of CSR Promotion and Real
Estate Business & Architecture
Director, AIM CREATE CO., LTD. (Incumbent)
Apr. 2017	Director and Managing Executive Officer
In charge of Sustainability and Real EstateBusiness & Architecture (Incumbent)

Mar. 1987 Joined the Company
Apr. 2015	Executive Officer and General Manager,
Corporate Planning Division
Oct. 2015 	Executive Officer and General Manager,
Corporate Planning Division and
IR Department
Jun. 2016 	Director and Senior Executive Officer
General Manager, Corporate Planning
Division and IR Department
Oct. 2016	Director and Senior Executive Officer,
General Manager, Corporate Planning
Division and IR Department
In charge of ESG Promotion
Apr. 2017	Director and Senior Executive Officer,
General Manager, IR Department
In charge of Corporate Planning and
ESG Promotion (Incumbent)
Managing Director,
M & C SYSTEMS CO., LTD. (Incumbent)

Apr. 1983 	Joined the Company
Mar. 2006	General Manager,
Group Financial Department
Apr. 2007 	Executive Officer (Incumbent)
Jul. 2008 	General Manager, Personnel Division
Oct. 2009 	General Manager, Voi Business
Department, MARUI CO., LTD.
Apr. 2011 	General Manager,
Corporate Planning Division
Apr. 2013 	President and Representative Director,
MARUI FACILITIES Co., Ltd. (Incumbent)
May 2013 	President and Representative Director,
Shiki City Development Co., Ltd.
(Incumbent)
Apr. 2015 	Director, MARUI HOME SERVICE Co., Ltd.
(Incumbent)

Mar. 1984 	Joined the Company
Mar. 2008 	General Manager, Women’s Clothing andAccessories Department, MARUI CO., LTD.
Apr. 2010 	General Manager, Women’s Fashion
Department, MARUI CO., LTD.
Apr. 2011 	Director and General Manager, Business
Promotion Department, MARUI CO., LTD.
Apr. 2013 	Executive Officer (Incumbent)
Apr. 2014 	Director and General Manager,
Store Business Promotion Department,
MARUI CO., LTD. (Incumbent)
Apr. 2015 	Managing Director, MARUI CO., LTD.
(Incumbent)
Director, AIM CREATE CO., LTD.
(Incumbent)

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee

96

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee
Environment CSR Promotion Committee
Safety Control Committee

Participation in committees:
Management Committee
Compliance Promotion Board
Environment CSR Promotion Committee (Chairman)

Participation in committees:
Management Committee
Compliance Promotion Board
Public Relations IR Committee
Internal Control Committee
Insider Trading Prevention Committee

Participation in committees:
Management Committee
Compliance Promotion Board
Internal Control Committee

Participation in committees:
Management Committee
Safety Control Committee

97

Overview of MARUI GROUP

Directors, Audit & Supervisory Board Members, and Executive Officers

As of March 31, 2017

Company Overview

Yuko Ito

Mayuki Igayama

Junko Tsuda

Executive Officer
Born: June 2, 1962

Executive Officer
Born: June 19, 1964

Executive Officer
Born: May 25, 1972

Mar. 1986 	Joined the Company
Oct. 2007 	General Manager,
Construction Department (Incumbent)
Apr. 2012 	Director and General Manager,
Creative Management Department
Deputy General Manager,
Space Production Business Division,
AIM CREATE CO., LTD.
Apr. 2014 	Executive Officer (Incumbent)
Apr. 2016 	Director and General Manager,
Design Management Department
Deputy General Manager,
Space Production Business Division,
AIM CREATE CO., LTD.
Oct. 2016	Director and General Manager,
Creative Management Department
Deputy General Manager,
Space Production Business Division,
AIM CREATE CO., LTD. (Incumbent)

Mar. 1987 	Joined the Company
Apr. 2009 	General Manager,
New Business Department
Oct. 2009 	Deputy General Manager,
Voi Business Department,
MARUI CO., LTD.
Apr. 2012 	General Manager,
Direct Marketing Department,
MARUI CO., LTD.
Apr. 2014 	Director and General Manager,
Direct Marketing Department,
MARUI CO., LTD.
Apr. 2015 	Executive Officer (Incumbent)
Director, MOVING CO., LTD. (Incumbent)
Apr. 2016 	Director and General Manager,
Omni-Channel Retailing Division
MARUI CO., LTD. (Incumbent)

Mar. 1995 	Joined the Company
Apr. 2014 	Store Manager, Nakano Marui,
MARUI CO., LTD.
Apr. 2015 	Executive Officer
Director and Store Manager,
Marui Family Shiki,
MARUI CO., LTD.
Apr. 2017	Executive Officer and General Manager
New Business Development Department(Incumbent)

Participation in committees:
Management Committee
Environment CSR Promotion Committee

Participation in committees:
Management Committee
Compliance Promotion Board

Distribution of Shares Held by Shareholder TypeNameMARUI GROUP CO., LTD.

Head office3-2, Nakano 4-chome, Nakano-ku,
Tokyo 164-8701, Japan

Date of foundation

February 17, 1931

Date ofestablishment

March 30, 1937

Capital¥35,920 million

Business activities

Corporate planning and management forGroup companies conducting Retailingbusiness and FinTech businesses

StoresMarui: 25 located in Kanto, Tokai,
Kansai, and Kyushu regions

Foreign institutions
and individuals
64,897,000 shares(27.8%)

Executive Officer
Born: August 6, 1963

Executive Officer
Born: July 16, 1969

Mar. 1986 	Joined the Company
Apr. 2007 	Store Manager, Kobe Marui,
MARUI CO., LTD.
Oct. 2008	General Manager, Brand Development
Department, MARUI CO., LTD.
Apr. 2012 	General Manager,
CSR Promotion Department
Apr. 2015 	Director and General Manager,
Collaboration Card Business Department,
Sales Promotion Department,
Epos Card Co., Ltd.
Apr. 2016 	Executive Officer (Incumbent)
Director and General Manager,
Sales Promotion Department,
Epos Card Co., Ltd. (Incumbent)

Apr. 1992 	Joined MOVING CO., LTD.
Apr. 2015	Store Manager, Shinjuku Marui Annex,
MARUI CO., LTD.
Oct. 2015 	General Manager,
Pre-Opening Development Office,Anime Business Department
Apr. 2016 	General Manager,
Anime Business Department (Incumbent)
Apr. 2017 	Executive Officer (Incumbent)

Participation in committees:
Management Committee
Personal Information Protection
Promotion Committee

Participation in committees:
Management Committee

Securities companies
7,101,000 shares(3.0%)

Other companies
within Japan
37,344,000 shares(16.0%)*2 Individuals and others includes 4,202,450 shares of treasury stock.

452,100m2

Number of
employees

5,732

Major Shareholders
Number of shares Percentage of
total shares(Thousands ofissued*3 (%)
shares)Name(Group total, excludes temporary employees)

The Master Trust Bank of Japan, Ltd.
(Trust Account)30,135

13.1

Japan Trustee Services Bank, Ltd.
(Trust Account)

17,144

7.5

GOLDMAN, SACHS & CO. REG

6,185

2.7

Aoi Real Estate Co., Ltd.

6,019

2.6

Accounting auditor KPMG AZSA LLC

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

5,808

2.5

Stock Information

Trust & Custody Services Bank, Ltd.
(Securities Investment Trust Account)

5,460

2.4

Japan Trustee Services Bank, Ltd.
(Trust Account 9)

4,179

1.8

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

3,814

1.7

Toho Co., Ltd.

3,779

1.6

AOI SCHOLARSHIP FOUNDATION

3,234

1.4

Main banks

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust andBanking Corporation
Mizuho Bank, Ltd.
Development Bank of Japan Inc.

Stock listing

Tokyo Stock Exchange, First Section(loan margin trading issues)

Securities code

8252

Number of
1,400,000,000
authorized shares

Masahisa Aoki

233,660,417 shares

Modi: 6 located in Kanto and Tokai region
Total sales
floor area

Participation in committees:
Management Committee
Personal Information Protection
Promotion Committee

Miyuki Kawara

Financial institutions
97,543,000 shares(41.7%)

Individuals andothers*2
26,773,000 shares(11.5%)

Number of common 233,660,417
shares issued*1
Number ofshareholders*3 Percentage of total shares issued is calculated excluding treasury stock andincluding 502,300 shares held under the Board Incentive Plan Trust schemeand the Employee Stock Ownership Plan Trust scheme.

24,080*1 Number of common shares issued includes 4,202,450 shares of treasury
stock, equivalent to 1.8% of the total number of shares of common stock issued.

Stock Price
Closing price for Company stock (Yen)

Nikkei 225 (Yen)
30,0002,500

24,000

2,000
1,500

18,000

Nikkei 225

12,0001,000
Closing price for Company stock

500

6,000

0

0

Trading volume (Thousands of shares)
100,000
80,00060,00040,00020,000098

2008/1

2009/1

2010/1

2011/1

2012/1

2013/1

2014/1

2015/1

2016/1

2017/199

Financial and Non-Financial Summary

FACT BOOK
www.0101maruigroup.co.jp/en/ir/lib/fact.html

MARUI GROUP CO., LTD., and its consolidated subsidiaries

ESG DATA BOOK
www.0101maruigroup.co.jp/en/sustainability/lib/databook.html

Financial and Non-Financial Summary

Millions of yen
Fiscal years ended March 31

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Total Group transactions
Retailing*1
FinTech*1
Eliminations*2
Total operating revenues*3
Revenue*3
Gross profit
Selling, general and administrative expenses
EBITDA*4
Operating income
Net income (loss) attributable to owners of parent
Segment income*1
Retailing*1
FinTech*1
Retailing and Store Operation*1
Credit Card Services*1
Retailing-Related Services*1
Total assets
Shareholders’ equity
Installment sales accounts receivable
Consumer loans outstanding
Interest-bearing debt
Net cash provided by (used in) operating activities
Core operating cash flow*5
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Cash and cash equivalents
Capital investments
Depreciation and amortization
Earnings (loss) per share (yen)Net assets per share (yen)Cash dividends per share (yen)Payout ratio (%)
Total return ratio (%)
Operating income margin (%)*6
Return on equity (%)
Return on invested capital (%)
Return on assets (%)
Equity ratio (%)
Stock price at year-end (yen)Market capitalization (including treasury stock) (billions of yen)Price earnings ratio (times)
Price book-value ratio (times)
Number of common shares issued (including treasury stock)
Number of shares of treasury stock
Total number of employees
Ratio of female employees (%)
Ratio of female managers (%)
Employee turnover rate (excluding mandatory retirement) (%)
Total number of stores
Total sales floor area (thousand m 2)
EPOS cardholders (including Akai Card)(ten thousands of members)
Ratio of delinquent debt (%)
Energy consumption (GJ)
GHG emissions (Scope 1 & 2) (t-CO2)*7 *8
GHG emissions (Scope 3) (t-CO2)*7 *8

—
—
—
—
—
552,140
210,288
166,599
61,41543,688
4,248

—
—
—
—
—
493,533
177,565
159,382
36,87018,183
7,603

—
—
—
—
—
447,400
160,125
150,986
28,5229,138(8,750)—————419,255
149,926
139,488
29,695
10,438
5,104

—
—
—
—
—
406,472
144,736
129,940
30,457
14,795(23,638)—————
412,408
147,240
129,224
33,08518,015
5,251

—
—
—
—
—
407,366
148,172
123,886
35,23724,285
13,255

1,297,250———
253,077
416,460
156,642
129,495
37,134
27,146
15,4091,469,111———
249,847
404,947
159,448
131,406
38,33828,042
16,036

1,703,353
341,478
1,473,539(111,664)
245,867—
160,035
130,419
39,286
29,615
17,771

1,933,685
326,327
1,723,254(115,896)
237,022—
165,964
134,711
41,374
31,25318,724——
19,30921,892
6,913
740,373402,61051,310248,464
239,308
23,828—(28,025)6,300
44,72230,293
17,727
12.92
1,233
28.0
216.7
646.1
7.9
1.0
—
6.1
54.4
1,445
532.7
111.8
1.2
368,660,417
42,222,840
8,154
39.9
—
—
28
381.4

—
—
10,645
5,740
6,772
695,491
336,445
73,781
222,534
277,537
13,919—3,134(32,241)
29,53523,64918,686
24.91
1,207
28.0
112.4
911.3
3.7
2.1
1.9
2.4
48.4
1,061
338.0
42.6
0.9
318,660,417
39,913,811
7,147
44.4
—
—
25
381.4

—
—
1,252
6,725
3,740
685,351
310,818
88,761
207,117
292,061
15,316—(18,234)
2,409
29,026
24,073
19,384(31.90)
1,135
28.0
—
—
2.0
(2.7)
1.0
1.1
45.4
523
166.6
—
0.5
318,660,417
44,918,979
7,085
44.6
—
—
25
444.8

—
—
37
10,272
2,509
664,357
312,188
95,871
191,486
283,676
30,811—(13,034)(14,519)
32,283
17,39819,257
18.65
1,140
14.0
75.1
75.1
2.5
1.6
1.1
1.5
47.0
678
216.0
36.4
0.6
318,660,417
44,941,174
6,847
44.7
—
—
25
453.3

—
—
2,110
13,704
1,568
628,910284,526
111,760
158,707
264,692
30,280—(7,033)(22,926)
32,603
14,332
15,661(86.36)
1,039
14.0
—
—
3.6
(7.9)
1.7
2.2
45.2
537
171.1
—
0.5
318,660,417
44,946,398
6,492
44.4
—
—
26
457.8

—
—
7,547
10,6192,567
615,130
289,975
142,995
132,280
245,175
24,897—(3,913)(23,660)
29,928
7,941
15,069
19.19
1,059
14.0
73.0
73.0
4.4
1.8
2.1
2.8
47.1
690
219.8
36.0
0.7
318,660,417
44,947,345
6,218
44.4
—
—
27
458.4

—
—
9,885
13,177
3,792
624,173
303,637
171,187
123,739
243,762
5,111—
435(5,571)
29,940
7,665
10,951
48.43
1,109
15.0
31.0
31.0
6.0
4.5
3.0
3.9
48.6
975
310.6
20.1
0.9
318,660,417
44,948,289
6,101
44.3
6.4
2.8
27
453.1

—
—
10,562
15,634
4,523
664,019
315,446
213,466
125,215
264,824(9,227)—(6,791)
16,14130,053
11,238
9,988
56.29
1,152
18.0
32.0
32.0
10.7
5.0
3.0
4.3
47.5
885
282.0
15.7
0.8
318,660,417
44,901,353
5,966
44.5
7.3
2.3
27
446.5

—
—
8,074
20,126
3,333
675,627
306,795
227,121
128,030
277,839
12,31025,484(3,867)(7,267)31,229
9,786
10,296
58.87
1,166
19.0
32.3
125.3
11.2
5.2
3.3
4.2
45.4
1,365
380.3
23.2
1.2
278,660,417
15,588,364
5,918
44.6
8.5
2.0
27
444.0

10,65823,094
7,856
22,186
3,674
730,126
281,610
279,763
134,107359,324(35,310)
26,788(4,063)40,71932,575
12,882
9,670
70.68
1,161
22.0
31.1
227.5
12.0
6.0
3.3
4.1
38.6
1,613
449.4
22.8
1.4
278,660,417
36,270,334
5,899
45.5
8.9
1.6
28
441.8

7,759
27,111———
806,575
273,883
348,191
140,569
434,327(45,955)
28,188
1,995
47,63036,245
15,696
10,121
80.24
1,196
33.0
41.1
147.5
13.2
6.7
3.1
4.1
34.0
1,513
353.5
18.9
1.3
233,660,417
4,704,750
5,732
45.1
10.0
2.6
31
452.1

403
3.42
—
142,006
—

429
4.22
—
125,628
—

437
3.91
—
122,136
—

476
3.19
—
130,600
—

476
3.35
—
114,900
—

487
3.10
—
96,300—498
2.32
1,998,182
86,765—542
1.84
2,525,815
119,129
550,612591
1.68
2,350,595
111,216
530,595613
1.57
2,305,099
103,613509,070636
1.45
2,341,454
118,183
489,439*1 Beginning with the fiscal year ended March 31, 2017, the prior segments of Retailing and Store Operation, Credit Card Services, and Retailing-Related Services werereorganized into the Retailing and FinTech segments.
*2 Eliminations under total Group transactions represent the deduction of credit card transactions recorded in Retailing.
*3 Beginning with the fiscal year ended March 31, 2016, the display method was changed from total value display to net value display, the portion that represents income to
the Company, for sales recorded through sale or return arrangements. In conjunction with this change, the previous “operating revenues” line item was replaced with the
new “revenue” line item.

100*4 EBITDA (earnings before interest, taxes, and depreciation and amortization) = Operating income + Depreciation and amortization*5 Core operating cash flow represents net cash provided by (used in) operating activities less the increase in operating receivables.
*6 Operating income margin is calculated using operating revenues for the fiscal year ended March 31, 2013, and prior fiscal years and revenue for the fiscal year ended
March 31, 2014, and subsequent fiscal years.
*7 Scope 1 & 2 represent GHG emissions from the Group. Scope 3 represents GHG emissions from areas including raw material procurement, transportation, and use bycustomers. Scope 3 emissions calculations are verified by Mizuho Information & Research Institute, Inc.
*8 In the fiscal year ended March 31, 2014, the scope of data collection was expanded to include the entire Group.

101Consolidated Balance Sheets

Consolidated Statements of Income /Consolidated Statements of Comprehensive Income

MARUI GROUP CO., LTD. and Its Consolidated Subsidiaries
As of March 31, 2016 and 2017MARUI GROUP CO., LTD. and Its Consolidated Subsidiaries
For the fiscal years ended March 31, 2016 and 2017

Millions of yen
2016

AssetsCurrent assets:
Cash and deposits (Notes 7 and 23)

2017

Thousands of
U.S. dollars (Note 1)2017¥   32,586¥   36,257$  323,723

Inventories
Deferred tax assets (Note 12)
Other
Total current assets

7,459
279,763
134,107(7,800)413,530
12,7595,569
21,594
486,040

4,840
348,191
140,569(9,352)484,249
10,437
6,934
20,920558,799

43,214
3,108,848
1,255,080(83,500)
4,323,651
93,187
61,910186,785
4,989,276

Property and equipment (Note 14):Land
Buildings and structures
Construction in progress
Other
Accumulated depreciation
Property and equipment, net

99,683
261,491
420
34,523(221,121)
174,996

103,540
257,647
195
33,547(216,277)
178,654924,464
2,300,419
1,741
299,526(1,931,044)
1,595,125

Investments and other assets:
Investment securities (Notes 7 and 8)
Investments in unconsolidated subsidiaries and affiliates (Note 7)
Intangible assets
Leasehold and other deposits (Note 7)
Deferred tax assets (Note 12)
Other
Total investments and other assets
Total assets

19,610772
6,502
34,895
4,619
2,688
69,088¥ 730,126

18,110872
6,295
34,0316,870
2,941
69,121¥ 806,575

161,696
7,785
56,205
303,848
61,33926,258617,151$ 7,201,562

Notes and accounts receivable–trade (Note 7)
Accounts receivable–installment (Notes 5 and 7)
Operating loans (Notes 6 and 7)
Allowance for doubtful accounts (Note 7)

Liabilities and net assets
Current liabilities:
Accounts payable–trade (Note 7)
Short-term loans payable and current portion of long-term loans payable (Notes 7 and 11)
Current portion of bonds payable (Notes 7 and 11)
Commercial paper (Notes 7 and 11)
Income taxes payable (Note 7)
Provision for bonuses
Provision for point card certificates
Provision for loss on redemption of gift certificates
Other
Total current liabilities
Non-current liabilities:
Bonds payable (Notes 7 and 11)Long-term loans payable (Notes 7, 9, and 11)
Deferred tax liabilities (Note 12)
Provision for loss on interest repayment
Provision for loss on guarantees
Provision for stock benefits (Note 4)
Asset retirement obligations (Note 13)
Other
Total non-current liabilities
Total liabilities
Contingent liabilities (Note 17)
Net assets (Note 16)
Shareholders’ equity:
Capital stock
Authorized: 1,400,000,000 shares of common stock
Issued:				 278,660,417 shares as of March 31, 2016 and
233,660,417 shares as of March 31, 2017
Capital surplus
Retained earnings
Treasury stock (Note 27)
36,270,334 shares as of March 31, 2016 and 4,704,750 shares as of March 31, 2017
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Total accumulated other comprehensive income
Subscription rights to shares (Note 15)
Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these consolidated financial statements.

102

Consolidated Statements of Income
Revenue (Note 14)
Cost of sales (Notes 14 and 18)
Gross profit
Selling, general and administrative expenses (Notes 14 and 19)
Operating income
Non-operating income (expenses):
Interest income
Dividend income
Gain on bad debt recovered
Gain on sale of property and equipment (Note 14)
Gain on sale of investment securities
Interest expenses
Financing expenses
Loss on retirement of property and equipment (Note 20)
Loss on closing of stores (Note 20)
Impairment loss (Note 21)
Loss on sale of investment securities
Loss on interest repayment
Provision for loss on interest repayment
Other, net

Millions of yen
2016

2017

2017

¥245,867
85,832160,035
130,419
29,615¥237,022
71,057
165,964
134,71131,253$2,116,267
634,437
1,481,821
1,202,776
279,044

86
370
1,190
—
972
(1,797)(296)(1,920)—(107)——(1,201)(5)(2,709)26,905

103
338
1,231
13,659208(1,682)(187)(2,918)(1,310)
(291)
(330)
(377)
(11,487)(164)(3,210)28,043919
3,017
10,991
121,955
1,857(15,017)(1,669)(26,053)(11,696)(2,598)(2,946)(3,366)(102,562)(1,464)(28,660)
250,383

5,676
3,434
9,110
17,79423¥ 17,771

10,420(1,126)
9,293
18,74924¥ 18,724

93,035(10,053)
82,973
167,401214$  167,178

2016

2017

2017

   80.24
80.24
33.00

$ 0.710.71
0.29

1,196.23

10.68

Income before income taxes¥ 24,318
48,32430,00010,000
4,731
3,756
6,586
159
30,601
158,477¥ 15,850
50,82720,000
5,000
7,214
3,671
9,181
158
33,150145,051$  141,517
453,812
178,571
44,64264,41032,776
81,973
1,410
295,982
1,295,098

80,000191,000
1,855
6,078
164
–
881
9,567
289,547
448,025

85,000273,500
4,003
11,487197
179
887
11,928387,184
532,236758,928
2,441,964
35,741
102,562
1,758
1,598
7,919
106,500
3,457,000
4,752,107

Income taxes (Note 12)
Income taxes–current
Income taxes–deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent
Per share data (Note 26)
Net income per share:
Basic
DilutedCash dividends
Net assets per share

Thousands of
U.S. dollars (Note 1)

Yen¥   70.68
70.67
22.00

1,161.81¥

U.S. dollars (Note 1)

The accompanying notes are an integral part of these consolidated financial statements.

35,92035,920320,71491,307210,237

91,307
155,079

815,241
1,384,633(54,238)
283,226(7,389)274,918(65,973)2,454,625(1,616)(1,616)53437
282,101¥730,126(1,034)(1,034)2453
274,339¥806,575(9,232)(9,232)17
4,044
2,449,455$7,201,562

Consolidated Statements of Comprehensive Income
Net income
Other comprehensive income (Note 22):
Valuation difference on available-for-sale securities
Total other comprehensive income
Comprehensive income

Millions of yen
2016

2017

Thousands of
U.S. dollars (Note 1)
2017¥17,794¥18,749$167,401(2,598)(2,598)¥15,196

581
581¥19,331

5,187
5,187
$172,598¥15,172¥19,306$172,375

23

24

214

Comprehensive income attributable to:
Owners of parent
Non-controlling interests
The accompanying notes are an integral part of these consolidated financial statements.

103

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash FlowsMARUI GROUP CO., LTD. and Its Consolidated Subsidiaries
For the fiscal years ended March 31, 2016 and 2017MARUI GROUP CO., LTD. and Its Consolidated Subsidiaries
For the fiscal years ended March 31, 2016 and 2017

Millions of yen
Shareholders’ equity

Capital stock

CapitalsurplusRetainedearnings¥35,920¥ 91,307¥197,875¥(19,290) ¥305,813

Dividends from surplus(5,391)(5,391)	Net income attributable to ownersof parent

17,771

Balance as of April 1, 2015

Millions of yen

Accumulated othercomprehensive income

Treasury stock

Total

2016

Valuationdifference on
available-forsale securities

Total

Subscription
rights toshares

Noncontrollinginterests

Total net
assets

¥ 982

¥ 982

¥ 39

¥420

¥307,255

Changes of items during period:

Purchase of treasury stock
Disposal of treasury stock(17)

17,771

17,771(35,002)(35,002)(35,002)

54

36

36

—

—

—

—

Retirement of treasury stock	Transfer from retained earnings
to capital surplus

17

(17)

—

—

12,361¥35,920¥ 91,307(5,391)	Net changes of items other thanshareholders’ equity(2,598)(2,598)13

16(2,568)(22,586)(2,598)(2,598)13

16(25,154)¥210,237¥(54,238) ¥283,226¥(1,616)¥(1,616)

¥ 53

¥437

¥282,101

Dividends from surplus(6,386)(6,386)

	Net income attributable to ownersof parent

18,724

Total changes of items during period
Balance as of April 1, 2016

(34,947)

Changes of items during period:

Purchase of treasury stock
Disposal of treasury stock(6,386)

18,724

18,724(20,698)(20,698)(20,698)

(1)

53

51

51

Retirement of treasury stock(67,494)

67,494——

	Transfer from retained earnings
to capital surplus

67,495(67,495)

—

—

—

—

(55,157)¥35,920¥ 91,307¥155,079

	Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance as of March 31, 2017

581

581

(51)

16

546

(8,308)

581

581

(51)

16

(7,761)¥ (7,389) ¥274,918¥(1,034)¥(1,034)

¥   2

¥453

¥274,339

46,849Thousands of U.S. dollars (Note 1)
Accumulated othercomprehensive income

Shareholders’ equity

Capital stock

Balance as of April 1, 2016

$320,714

CapitalsurplusRetainedearnings

Treasury stock

Total$ 815,241 $1,877,116 $(484,267) $2,528,803

Valuationdifference on
available-forsale securities$(14,428)

Total

Subscription
rights toshares

Noncontrollinginterests

Total net
assets$(14,428)$ 473$3,901$2,518,758

Changes of items during period:
Dividends from surplus(57,017)

	Net income attributable to ownersof parent

167,178

Purchase of treasury stock
Disposal of treasury stock(57,017)(57,017)

167,178

167,178(184,803)(184,803)(184,803)

(8)

473

455

455

Retirement of treasury stock(602,625)

602,625——

	Transfer from retained earnings
to capital surplus

602,633(602,633)———(492,473)

	Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance as of March 31, 2017—
$320,714

5,187

5,187

(455)

142

4,875

(74,178)

5,187

5,187

(455)

142

(69,294)$ 815,241 $1,384,633 $ (65,973) $2,454,625$ (9,232)$ (9,232)$  17$4,044$2,449,455

418,294

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Increase (decrease) in provision for point card certificates
Increase (decrease) in provision for allowance for doubtful accounts
Increase (decrease) in provision for loss on interest repayment
Increase (decrease) in provision for bonuses
Interest and dividend income
Interest expenses
Loss (gain) on retirement of property and equipment
Loss (gain) on sale of property and equipment
Loss (gain) on sale of investment securities
Decrease (increase) in notes and accounts receivable–trade
Decrease (increase) in accounts receivable–installment
Decrease (increase) in operating loans
Decrease (increase) in inventories
Increase (decrease) in accounts payable–trade
Other, net (Note 21)
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Income taxes refund
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of investment securities
Proceeds from sale of investment securities
Payments for leasehold and other deposits
Proceeds from collection of leasehold and other deposits
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Net increase (decrease) in commercial paper
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury stock
Cash dividends paid (Note 16)
Other, net
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 23)

2017

Thousands of
U.S. dollars (Note 1)
2017¥ 26,905
9,670
1,996
(310)
(6,574)
(7)
(457)
1,797
655
—
(972)
(1,006)(52,641)(6,076)
4,145(2,683)(2,657)(28,215)388(1,811)(5,741)
68(35,310)¥ 28,043
10,121
2,595
1,552
5,409
(85)
(441)
1,682
1,149
(13,659)
122
2,618(68,428)(6,461)
2,800(8,468)
4,505(36,943)350(1,692)(7,882)
212(45,955)$ 250,383
90,36623,16913,857
48,294(758)(3,937)15,017
10,258(121,955)
1,089
23,375(610,964)(57,687)
25,000(75,607)40,223(329,848)
3,125(15,107)(70,375)
1,892(410,312)(9,058)
—
(678)
3,340
(619)
1,485
1,467
(4,063)(18,059)
14,607
(399)
2,016
(275)
2,097
2,009
1,995

(161,241)
130,419(3,562)18,000(2,455)18,723
17,937
17,812(6,042)—97,000(17,500)
24,875(17,000)(35,035)(5,391)(185)
40,7191,345
31,229¥ 32,575

7,502(5,000)92,500(15,000)
24,883(30,000)(20,711)(6,386)(157)
47,6303,670
32,575¥ 36,245

66,982(44,642)825,892(133,928)
222,169(267,857)(184,919)(57,017)(1,401)
425,267
32,767
290,848$ 323,616

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

104

105

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

MARUI GROUP CO., LTD. and Its Consolidated Subsidiaries
As of and for the fiscal years ended March 31, 2016 and 2017

1. BASIS OF PRESENTATION(4) Investment securities

The accompanying consolidated financial statements of MARUI GROUP CO., LTD. (“the Company”) and its consolidated subsidiaries (collectively, “the Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments andExchange Act of Japan and its related accounting regulations as well as in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial
Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form that is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in the 2016 consolidated financial statements to conform to theclassifications used in 2017.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company isincorporated and operates.
As permitted by the regulations under the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements in Japanese yen
do not necessarily agree with the sums of the individual amounts.
The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto were translated
from the presented Japanese yen amounts into U.S. dollar amounts at the rate of ¥112 = $1, the approximate rate of exchange
at March 31, 2017, and were then rounded down to the nearest thousand. As a result, the totals shown in the accompanying
consolidated financial statements in U.S. dollars do not necessarily agree with the sums of the individual amounts. This translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan. Suchtranslation should not be construed as a representation that Japanese yen could be converted into U.S. dollars at that or any
other rate.

Investment securities held by the Group are all classified as available-for-sale securities.
Available-for-sale securities with a determinable market value are stated at fair value based on the market value at the balance sheet date, and unrealized gains or losses, net of applicable income taxes, are reported as a separate component of net
assets. Cost of securities sold is computed based on the moving-average method. Available-for-sale securities without a determinable market value are stated at cost determined by the moving-average method.
Investments in unconsolidated subsidiaries and affiliates are stated at cost determined by the moving-average method.

(5) Inventories
Inventories are measured at the lower of cost determined by the monthly weighted-average method or net selling value.

(6) Depreciation and amortization
Property and equipment (excluding leased assets) are depreciated by the straight-line method.
Intangible assets are amortized by the straight-line method. Capitalized computer software costs for internal use are amortized by the straight-line method over the estimated useful lives (within five years).
For finance leases which do not transfer ownership of the leased assets to the lessee, leased assets are depreciated by thestraight-line method over the lease terms with no residual value.

(7) Allowance for doubtful accounts
The allowance for doubtful accounts is stated at the amount determined based on the historical experience of bad debt withrespect to ordinary receivables (“general reserve”), plus an estimate of uncollectible amounts determined by reference to specificdoubtful receivables of customers experiencing financial difficulties (“specific reserve”).

(8) Provision for bonuses

2. SIGNIFICANT ACCOUNTING POLICIESThe provision for bonuses is accrued at the fiscal year-end to which such bonuses are attributable.

(1) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The consolidated financial statements as of and for the fiscal years ended March 31, 2016 and 2017, include the accounts of
the Company and its nine significant subsidiaries.
Under the control or influence concept, those companies in which the Company, either directly or indirectly, is able to exercise control over operations are consolidated, and those companies over which the Company has the ability to exercise
significant influence are accounted for using the equity method. For the fiscal years ended March 31, 2016 and 2017, there
was no subsidiary or affiliate accounted for using the equity method. Investments in the remaining unconsolidated subsidiaries
and affiliates are stated at cost. If the equity method of accounting was applied to the investments in these companies, the effecton the accompanying consolidated financial statements would not be material.
All significant intercompany balances and transactions have been eliminated in consolidation.
The fiscal year-end of all consolidated subsidiaries is March 31, the same as that of the Company.

(9) Provision for point card certificates
Credit points are awarded to customers when they make purchases using the Group’s member card and, upon request, theCompany will issue gift certificates or allow customers to use their accumulated credit points for their payment.
The provision for point card certificates is accrued to the estimated amount required based on the balance of credit points
awarded to card members outstanding at the fiscal year-end.

(10) Provision for loss on redemption of gift certificates
The monetary value of gift certificates and other certificates that have not been redeemed for a set period of time after issuanceis recognized as income. However, some gift certificates and other certificates can be redeemed after the recognition of income.
The provision for loss on redemption of gift certificates is provided at the estimated amount to be redeemed in the future
based on historical experience.

(2) Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rates
prevailing at the consolidated balance sheet dates. All revenues and expenses associated with foreign currencies are translated
into Japanese yen at the exchange rates prevailing when such transactions were made. The resulting exchange gains or losses
are credited or charged to income.

(11) Provision for loss on interest repayment
The provision for loss on interest repayment is provided to the estimated amount of repayment claims on consumer loaninterests at the fiscal year-end. Based on the current situation in which repayment claims continue to increase although theactual repayments decrease, the Company re-examined the amount of provision and recorded the necessary amount as ofMarch 31, 2017.

(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, the Group considers cash on hand, readily available deposits, and highly
liquid short-term investments with maturities of three months or less when purchased that are exposed to an insignificant risk ofchanges in value to be cash and cash equivalents.

106(12) Provision for loss on guarantees
The provision for loss on guarantees is provided at the estimated amount of loss arising from the Group’s guarantee obligationsof customers’ liabilities in relation to loans to individuals from financial institutions with which the Group has guarantee service
arrangements.

107Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(13) Provision for stock benefits(2) The Company’s shares held at the trust

The provision for stock benefits is provided at the estimated amount for stock benefits to directors and employees at the fiscal
year-end in accordance with the internal rule for stock delivery.

The Company’s shares held at the trust are carried at their book value at the trust (excluding incidental expenses) and accounted
for as treasury stock under net assets. The book value and the number of shares as of March 31, 2017 are ¥479 million($4,276 thousand) and 340,800 shares, respectively.

(14) Basis for revenue recognition
The charges for installment sales and interest income on consumer loans are recognized on an accrual basis based on theremaining loan balances.

(15) Hedge accounting
The Group utilizes interest rate swaps to mitigate the fluctuation risk of interests on loans payable.
The Group applies the special accounting treatment for interest rate swaps as all requirements for this treatment are fulfilled. The Group omits the evaluation of hedge effectiveness for interest rate swaps under the special accounting treatment.

(16) Consumption taxes
National and local consumption taxes are accounted for by the tax-excluded method. Non-deductible consumption tax andother taxes imposed on fixed assets are recorded as expenses as incurred.

3. CHANGE IN PRESENTATION
Consolidated Statements of Income
The account “Impairment loss,” which was previously included in “Other, net,” is shown separately for the fiscal year ended
March 31, 2017. The balance in the previous fiscal year has been reclassified to conform to the current year’s presentation.
As a result, the amount of ¥107 million included in “Other, net” for the fiscal year ended March 31, 2016 is reclassified as“Impairment loss” of ¥107 million.

Officer Remuneration Board Incentive Plan Trust
Effective from the fiscal year ended March 31, 2017, the Company also introduced the “Officer Remuneration Board Incentive
Plan Trust (“BIP Trust”)” to provide an incentive to (i) Directors and Executive Officers (excluding External Directors and nonresidents in Japan) of the Company and (ii) Directors of 10 subsidiaries of the Group (excluding External Directors andnon-residents in Japan; collectively, with the Directors and Executive Officers of the Company, the “Executives”).

(1) Overview of the plan
The Company will set up a trust with the Executives who fulfill certain requirements as beneficiaries, by contributing funds toacquire the Company’s stock. The trust will acquire the Company’s own stock from the stock market for the number of sharesrequired for delivering to the Executives based on the prescribed internal rule for stock delivery. Then, in accordance with theinternal rule, the Company will make a delivery or payment of its shares and cash equivalents to the amount obtained by converting a part of the shares into cash based on the rank of each Executive and degree of achievement of the performance target.
The Company applies the “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc.
through Trusts” (PITF No. 30, March 26, 2015) for the accounting treatment of the plan.

(2) The Company’s shares held at the trust
The Company’s shares held at the trust are carried at their book value at the trust (excluding incidental expenses) and accounted
for as treasury stock under net assets. The book value and the number of shares as of March 31, 2017 are ¥217 million($1,937 thousand) and 161,500 shares, respectively.

Application of Implementation Guidance on Recoverability of Deferred Tax Assets

4. ADDITIONAL INFORMATION
Stock Benefit Employee Stock Ownership Plan Trust
Effective from the fiscal year ended March 31, 2017, the Company introduced the “Stock Benefit Employee Stock Ownership
Plan Trust (“ESOP Trust”)” to provide an incentive to the Group’s employees holding senior management positions (hereinafter
the “Senior Managers”), aiming to enhance their commitment to further improve the business performance and corporate value
over the medium-to-long term.

Effective from the fiscal year ended March 31, 2017, the Company applied the “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016).

5. ACCOUNTS RECEIVABLE–INSTALLMENT
The following balances for lump sums receivable and revolving receivable were securitized and are therefore excluded from theconsolidated balance sheets as of March 31, 2016 and 2017:(1) Overview of the plan
The Company will set up a trust with the Senior Managers who fulfill certain requirements as beneficiaries, by contributing funds
to acquire the Company’s stock. The trust will acquire the Company’s own stock from the stock market for the number of sharesrequired for delivering to the Senior Managers based on the prescribed internal rule for stock delivery. Then, in accordance with
the internal rule, the Company will make a delivery or payment of its shares and cash equivalents to the amount obtained byconverting a part of the shares into cash based on the rank of each Senior Manager and degree of achievement of the performance target.
The Company applies the “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc.
through Trusts” (PITF No. 30, March 26, 2015) for the accounting treatment of the plan.

108

Millions of yen
2016

Card shopping:
Lump sums receivable
Revolving receivable¥55,000
13,9282017¥55,000
9,290

Thousands of
U.S. dollars (Note 1)
2017$491,071
82,946109

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

6. LOAN COMMITMENTS(2) Estimated fair value of financial instruments

Certain consolidated subsidiaries that operate in the credit card business provide consumer loan services to customers.
The unused balance of loans contingent with the loan commitments was as follows:

Carrying value, fair value, and the difference between them as of March 31, 2016 and 2017, are summarized below.
Financial instruments for which the fair value is extremely difficult to determine are excluded from the following table(See Note 2 on page 117).

Millions of yen

Total loan limits
Amount executed as loans
Unused balance

Thousands of
U.S. dollars (Note 1)

2016

2017

2017

¥1,090,691
134,107¥  956,583¥1,139,270
140,569¥  998,701$10,172,053
1,255,080$ 8,916,973

Under the provisions of the loan service contract, the Group is able to decline a loan request or decrease a loan limit whena customer’s financial condition or other circumstances change. Thus, the total unused balance will not necessarily be executed
as loans.

7. FINANCIAL INSTRUMENTS(1) Status of financial instruments(a) Policy on financial instruments
The Group raises necessary funds for business operations through bank loans and corporate bond issuance. Temporary surplus
funds are invested in highly safe short-term deposits. Derivative transactions are utilized to avoid the interest rate fluctuation risk
on loans. The Group does not use derivative transactions for speculative purposes.

(b) Financial instruments, their risks, and the risk management system
Accounts receivable–installment and operating loans are exposed to the credit risk of customers. In accordance with the internalrisk management rules, the Group mitigates such risk by monitoring and evaluating the credit status of each customer by meansof third-party personal credit information agencies and the Group’s own credit monitoring system.
Investment securities primarily consist of shares issued by business partners and are exposed to both credit risk and market
risk. The Group mitigates such risks by regularly monitoring the share price and the financial condition of the issuers.
Leasehold and other deposits consist of security deposits to rent properties for stores.
Accounts payable–trade is settled in the short term.
Long-term loans payable with a floating interest rate is exposed to interest rate fluctuation risk. The Group utilizes interest
rate swaps to avoid such risk by fixing the future interest rate.

110

Millions of yen
2016(1) Cash and deposits(2) Notes and accounts receivable–trade(3) Accounts receivable–installment
		 Allowance for doubtful accounts*1(4) Operating loans
		 Allowance for doubtful accounts*2(5) Investment securities:
		Available-for-sale securities(6) Leasehold and other deposits
Assets, total(1) Accounts payable–trade(2) S hort-term loans payable and current
portion of long-term loans payable(3) Current portion of bonds payable(4) Commercial paper(5) Income taxes payable(6) Bonds payable(7) Long-term loans payable
Liabilities, total
Derivative transactions

2017

Carrying value

Fair value

Difference

Carrying value

Fair value

Difference¥ 32,586
7,459
279,763(5,246)
274,517
134,107(2,114)
131,993¥ 32,586
7,459¥    ——¥ 36,257
4,840¥    ——

312,365

37,847

385,860

43,904

152,737

20,744¥ 36,257
4,840
348,191(6,236)
341,955
140,569(2,349)138,219

157,324

19,10519,3298,404¥474,290¥ 24,318

19,3298,324¥532,801¥ 24,318—(80)¥58,510¥    —

17,4296,993¥545,695¥ 15,850

17,4296,902¥608,615¥ 15,850—(90)¥62,919¥    —

48,32430,00010,0004,731
80,000191,000¥388,374¥     —

48,32430,00010,0004,731
80,650191,382¥389,407¥     —

—
—
—
—
650
382
¥ 1,032¥    —

50,82720,0005,000
7,214
85,000273,500¥457,391¥     —

50,82720,0005,000
7,214
85,049272,556¥456,498¥     —

—
—
—
—
49
(943)
¥  (893)¥    —*1 The amount presents the total of general reserve and specific reserve for accounts receivable–installment.
*2 The amount presents the total of general reserve and specific reserve for operating loans.
.

111Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Thousands of U.S. dollars (Note 1)
2017
Carrying value(1) Cash and deposits(2) Notes and accounts receivable–trade(3) Accounts receivable–installment
		 Allowance for doubtful accounts(4) Operating loans
		 Allowance for doubtful accounts(5) Investment securities
		Available-for-sale securities(6) Leasehold and other deposits
Assets, total(1) Accounts payable–trade(2) Short-term loans payable and current portion of long-term loans payable(3) Current portion of bonds payable(4) Commercial paper(5) Income taxes payable(6) Bonds payable(7) Long-term loans payable
Liabilities, total
Derivative transactions

Fair value

Difference$  323,723 $  323,723
43,214
43,214
3,108,848(55,678)
3,053,169 3,445,178
1,255,080(20,973)
1,234,098 1,404,678$     ——

155,616
62,437$4,872,276$  141,517
453,812
178,571
44,64264,410758,928
2,441,964$4,083,848$       —

—(803)$561,776$     —————
437
(8,419)$    (7,973)$     —

155,616
61,625$5,434,062$  141,517
453,812
178,571
44,64264,410759,366
2,433,535$4,075,875$       —392,000

170,580

Liabilities:		(1) Accounts payable–trade, (2) Short-term loans payable and current portion of long-term loans payable, (3) Current
portion of bonds payable, (4) Commercial paper, and (5) Income taxes payable		 The fair value approximates their carrying value because of their short maturities.
		 (6) Bonds payable		The fair value is based on the present value calculated by discounting the sum of principal and interests using aninterest rate, for which credit risk and redemption periods are taken into account.
		 (7) Long-term loans payable		The carrying value of long-term loans payable with a floating interest rate approximates its fair value since the interest
rate reflects the market rate in the short term. Thus, carrying value is used as its fair value. The fair value of long-termloans payable hedged by interest rate swaps under special accounting treatment is calculated by discounting the sumof principal and interests accounted for together with interest rate swaps using a reasonably estimated interest rateapplied to similar borrowings. The fair value of long-term loans payable with fixed interest rates is calculated bydiscounting the sum of principal and interests using an interest rate that would be applied to similar new borrowings.
		 Derivative transactions
		 See Note 9, “DERIVATIVE TRANSACTIONS,” for details.
Note 2. Financial instruments whose fair value is extremely difficult to determine
Millions of yen

Note 1. Calculation method for fair value of financial instruments and information on securities and derivative transactions
Assets:		 (1) Cash and deposits and (2) Notes and accounts receivable–trade		 The fair value approximates their carrying value because of their short maturities.

2016

Unlisted stocks
Part of security deposits¥ 1,053
28,1032017¥ 1,553
27,796

Thousands of
U.S. dollars (Note 1)
2017$ 13,866
248,178

Unlisted stocks are not included in (5) Investment securities in the table on page 116, as there were no market prices
available and it is extremely difficult to determine the fair value. Similarly, part of security deposits is not included in (6)Leasehold and other deposits.

		 (3) Accounts receivable–installment and (4) Operating loans		The fair value is determined as their present value by discounting, using the risk-free rate, their future cash flows
adjusted for their credit risk identified in the credit control process. With regard to bad receivables and loans, allowance for doubtful accounts is estimated based on the present value of their estimated future cash flows. The fair value
approximates the amount of carrying value less allowance for doubtful accounts. Thus, the amount of carrying valueless allowance for doubtful accounts is used as fair value.
		 (5) Investment securities
		 The fair value is based on quotes on an exchange.
		 (6) Leasehold and other deposits		The fair value is determined as their present value by discounting future cash flows at the risk-free rate adjusted for
credit risk premium. The amount includes the current portion of leasehold and other deposits.

112

113

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

8. INVESTMENT SECURITIESNote 3. Redemption schedule for monetary claims and securities with maturities
Millions of yen(1) Information on available-for-sale securities as of March 31, 2016 and 2017, is as follows:

2016

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Millions of yen

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥ 32,586
7,459
154,581
62,913
1,352¥258,892¥     ——
83,29470,885
2,986¥157,166¥    ——
23,502245
2,218¥25,966¥    ——
18,386
63
1,846¥20,296
Millions of yen

2017

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥ 36,257
4,840
186,538
66,131
745¥294,512¥     ——
107,079
74,2433,770¥185,094¥    ——
29,073138
721¥29,932¥    ——
25,50056
1,755¥27,312

Thousands of U.S. dollars (Note 1)
2017

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years$  323,723
43,214
1,665,517
590,455
6,651$2,629,571$       —
—956,062
662,883
33,660$1,652,625$      —
—259,580
1,232
6,437$267,250$      —
—227,678500
15,669$243,857

2016

Carrying value exceedingacquisition cost:
StocksSubtotalCarrying value not exceedingacquisition cost:
StocksSubtotal
Total

2017

Carrying value

Acquisition cost

Difference

Carrying value

Acquisition cost

Difference¥ 9,072
9,072¥ 8,5108,510¥  562562¥10,633
10,633¥ 9,956
9,956¥  677677

10,256
10,256¥19,329

12,544
12,544¥21,054(2,287)(2,287)¥(1,725)

6,795
6,795
¥17,429

8,959
8,959
¥18,915(2,164)(2,164)¥(1,486)

Thousands of U.S. dollars (Note 1)
2017

Carrying value exceedingacquisition cost:
StocksSubtotalCarrying value not exceedingacquisition cost:
StocksSubtotal
Total

Carrying value

Acquisition cost

Difference$ 94,937
94,937$ 88,892
88,892$  6,044
6,044

60,66960,669$155,616

79,991
79,991$168,883(19,321)(19,321)$(13,267)

Unlisted stocks in the amount of ¥281 million and ¥681 million ($6,080 thousand) as of March 31, 2016 and 2017,
respectively, are not included in the table above since their market price is not readily available and it is extremely difficult todetermine their fair value.

See Note 11, “SHORT–TERM LOANS PAYABLE AND LONG–TERM DEBT,” for the schedule of aggregate annual maturities oflong-term loans payable and long-term debt.

114

115

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

10. LEASES(2) Information on sale of available-for-sale securities for the fiscal years ended March 31, 2016 and 2017, is as follows:
Millions of yen
2016
Proceeds
from sales

Stocks
Total

Gains

¥3,340¥3,3402017
Proceeds
from sales

Losses

¥972
¥972

¥0
¥0

Gains

¥2,016¥2,016¥208¥208

Losses¥330¥330

Stocks
Total

Losses$18,000$18,000$1,857$1,857$2,946$2,9469. DERIVATIVE TRANSACTIONS
For the fiscal years ended March 31, 2016 and 2017, the Group’s derivative transactions were limited to interest rate swaps
that qualified for hedge accounting and met the requirements for the special accounting treatment for interest rate swaps as
described below. There were no derivative transactions for which hedge accounting was not applied.
Hedge accounting method:
Special treatment for interest rate swaps
Type of derivative transactions:Interest rate swaps, receive floating / pay fixed
Hedged item:
Long-term loans payable
Millions of yen

Total

Due after one year

¥27,000¥22,000

Fair value

*

2016

Total

Due after one year

¥22,000¥17,000

Fair value*¥ 7,049
9,485¥16,5342017$ 34,473
189,955$224,428

Total

Due after one year

$196,428$151,785

Fair value

*

2017

¥12,058
8,881¥20,939

Thousands of
U.S. dollars (Note 1)
2017$107,660
79,294$186,955

11. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
Short-term loans payable and current portion of long-term loans payable as of March 31, 2016 and 2017, consisted of thefollowing:
Millions of yen
2016

2017
Contract amount* Interest rate swaps under the special accounting treatment are accounted for as an integral component of the long-term loans payable designated as hedged items. Thus,
their fair value is included in that of long-term loans payable.

116

Millions of yen

Thousands of U.S. dollars (Note 1)

2017
Contract amount2017¥ 3,861
21,275¥25,136

The future minimum lease receipts under non-cancellable operating leases were as follows:

Within one year
Over one year
Total

2016

¥ 4,782
25,136¥29,919

Thousands of
U.S. dollars (Note 1)(As a Lessor)(3) When the fair value of investment securities declines by 30% to 50%, the Group recognizes an impairment loss after
comprehensively evaluating the recoverability of the market price. No significant impairment loss on investment securities
was recognized for the fiscal years ended March 31, 2016 and 2017.

Contract amountMillions of yen

Within one year
Over one year
Total

2017
Gains

The Group capitalizes leased assets under finance leases that do not transfer ownership. These assets mainly comprise buildings and properties in connection with the Retailing segment.
The future minimum lease payments under non-cancellable operating leases were as follows:

2016

Thousands of U.S. dollars (Note 1)
Proceeds
from sales(As a Lessee)

Short-term loans payable
Current portion of long-term loans payable
Total¥33,324
15,000¥48,3242017¥40,827
10,000¥50,827

Thousands of
U.S. dollars (Note 1)
2017$364,526
89,285$453,812

Annual weighted-average interest rates of short-term loans payable were 0.36% and 0.27% and those of current portion of
long-term loans payable were 0.42% and 0.65% for the fiscal years ended March 31, 2016 and 2017, respectively.
Annual weighted-average interest rates of commercial paper, due within a year, were 0.001% and (0.01)% for the fiscal
years ended March 31, 2016 and 2017, respectively.

117

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

12. DEFERRED TAX ACCOUNTING

Long-term debt as of March 31, 2016 and 2017, consisted of the following:
Millions of yen

0.28% long-term loans from banks and others due through 2028,
excluding current portion
13th series unsecured 1.51% corporate bond, due 201718th series unsecured 0.97% corporate bond, due 2017
20th series unsecured 0.79% corporate bond, due 2017
21st series unsecured 0.57% corporate bond, due 2017
22nd series unsecured 0.85% corporate bond, due 2019
23rd series unsecured 0.342% corporate bond, due 2016
24th series unsecured 0.582% corporate bond, due 2018
25th series unsecured 0.344% corporate bond, due 2019
26th series unsecured 0.562% corporate bond, due 2021
27th series unsecured 0.337% corporate bond, due 2020
28th series unsecured 0.543% corporate bond, due 2022
29th series unsecured 0.050% corporate bond, due 201930th series unsecured 0.130% corporate bond, due 2021
Lease obligation
Less: Current portion
Total

Thousands of
U.S. dollars (Note 1)

2016

2017

2017

¥191,000
10,00010,00010,00010,0005,000
10,00010,00010,00010,00015,00010,000——¥273,500——
10,00010,0005,000—
10,00010,00010,00015,00010,00015,00010,000$2,441,964——
89,28589,28544,642—89,28589,28589,285
133,928
89,285
133,928
89,285

1,868
302,868
30,149¥272,719

1,719
380,219
20,149¥360,070

15,3483,394,812
179,901$3,214,910

Millions of yen
Year ending March 31

Bonds payable

2018
2019
2020
2021
2022 and thereafter
Total¥ 10,000
31,00040,00042,000160,500¥283,500¥ 20,000
10,00030,00015,00030,000¥105,000

118

Millions of yen
2016

Thousands of U.S. dollars (Note 1)
Long-termloans payable

Bonds payable

Lease obligation¥  149 $   89,285
149
276,785
149
357,142149
375,000
1,121 1,433,035¥1,719 $2,531,250$178,571
89,285
267,857
133,928
267,857$937,500$ 1,330
1,330
1,330
1,330
10,008$15,348

Lease obligation

Deferred tax assets:
Depreciation
Impairment loss
Provision for loss on interest repayment
Provision for point card certificates
Net unrealized loss on non-current assets
Provision for bonuses
Net operating loss carried forward
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for special account for advanced depreciation of non-current assets
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Deferred tax assets, net

2017

Thousands of
U.S. dollars (Note 1)
2017¥ 6,016
5,232
2,114
2,291
1,357
1,293
1,105
4,990
24,403(7,192)¥17,210¥ 5,741
5,073
3,982
3,194
1,353
1,263
315
6,034
26,958(6,969)¥19,988$ 51,258
45,29435,55328,517
12,08011,2762,812
53,875
240,696(62,223)$178,464¥ 8,5234350¥ 8,877¥ 8,332¥ 9,900
23
263¥10,187¥ 9,801$ 88,392
205
2,348$ 90,955$ 87,508

Income taxes consist of corporation, inhabitants’, and enterprise taxes. Reconciliations between the statutory tax rate andthe effective tax rate reflected in the consolidated statements of income were as follows:

The aggregate annual maturities of long-term debt subsequent to March 31, 2017, are as follows:
Long-termloans payable

Major components of deferred tax assets and deferred tax liabilities as of March 31, 2016 and 2017, were as follows:

Statutory tax rate
Adjustments:
Permanent differences such as entertainment expenses, etc.
Permanent differences such as dividends
Change in valuation allowance
Inhabitants’ tax
Difference in tax rates of consolidated subsidiaries
Tax credit
Adjustments due to changes in tax rate
Other
Effective tax rate

2016

2017

33.1%

30.9%

0.3
(0.1)
(0.8)
0.6
2.1
(1.3)
0.4
(0.4)
33.9%

0.3
(0.1)
(0.9)
0.5
3.6
(1.5)
—
0.3
33.1%

119

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

13. ASSET RETIREMENT OBLIGATIONS

15. SUBSCRIPTION RIGHTS TO SHARES(1) Asset retirement obligations recognized on the consolidated balance sheets

For the fiscal year ended March 31, 2016, the amount of costs incurred for subscription rights to shares (“stock options”) was¥50 million and was included in selling, general and administrative expenses. No stock option is granted for the fiscal year
ended March 31, 2017.
The outline of stock options of the Company is as follows:

The Group’s asset retirement obligations mainly include the cost of restoring the store sites to their original condition under thereal estate lease contracts of stores. The Group calculated its asset retirement obligations by assuming the lease period as the
expected period of use and applying discount rates of 0.00% to 1.38%.
Asset retirement obligations as of March 31, 2016 and 2017, consisted of the following:
Millions of yen
2016

Beginning balance
Increase due to acquisition of property and equipment
Increase due to change in estimate*
Adjustments due to passage of time
Decrease due to fulfillment of obligation
Ending balance

¥635
348
80
2
(93)
¥974

2017

¥974
7
—
4
(93)
¥892

Thousands of
U.S. dollars (Note 1)
2017$8,696
62
—
35
(830)
$7,964* The reasonable estimate of obligation became available for stores to be closed.

While the Group estimates asset retirement obligations based on the real estate lease contracts of stores, it is not possible toreasonably estimate the cost of restoring the store sites to their original condition under the general lease contracts since theperiod of use is not clearly determined. Therefore, the Group does not recognize the asset retirement obligations for stores otherthan those that are planning to be closed.

14. INVESTMENT AND RENTAL PROPERTY
Certain consolidated subsidiaries hold commercial properties, including land, for rental in the Tokyo metropolitan area and otherareas. The net rental income in connection with these properties for the fiscal years ended March 31, 2016 and 2017, was¥5,320 million and ¥10,929 million ($97,580 thousand), respectively. For the fiscal year ended March 31, 2017, the Group
recognized ¥13,659 million ($121,955 thousand) of gain on sale of property and equipment, primarily land. The rental income
was included in revenue and the associated rental expenses were included in cost of sales and selling, general and administrative expenses. The carrying value and the fair value of such assets were as follows:
Millions of yen

Thousands of
U.S. dollars (Note 1)

2016

2017

2017

¥32,367
12,873¥45,240¥95,079¥ 45,240
41,008¥ 86,249¥159,321$  403,928
366,142$  770,080$1,422,508*1 Carrying value represents the amount on the consolidated balance sheets that is carried at the acquisition cost less accumulated depreciation.
*2 Major items are the increases due to reclassification of holding purposes of properties in the amounts of ¥12,900 million and ¥37,267 million ($332,741 thousand) for
the fiscal years ended March 31, 2016 and 2017, respectively.
*3 Fair value is based on the appraised value provided by third-party real estate appraisers.

120

Title and number of granteesType and number of shares to be issued upon
exercise of stock options
Granted date
Vesting conditions
Eligible service period
Exercise period(2) Asset retirement obligations other than those recognized on the consolidated balance sheets

Carrying value*1:
Beginning balance
Changes during the year*2
Ending balance
Fair value*3

Date of resolution

2013

2015

2016

June 27, 2012
7 Directors and5 Executive Officersof the Company
Common stock
52,000 shares
August 3, 2012
No provision
No provision
From April 1, 2013
to March 31, 2023

June 26, 2014
8 Directors and5 Executive Officersof the Company
Common stock
43,500 shares
July 11, 2014
No provision
No provision
From April 1, 2015
to March 31, 2025

June 25, 2015
4 Directors and
12 Executive Officersof the Company
Common stock
32,000 shares
July 10, 2015
No provision
No provision
From April 1, 2016
to March 31, 2026

The following table describes the scale and changes in stock options that existed during the fiscal year ended March 31,
2017. The number of stock options is translated into the number of shares.
Number of shares
2013

Before vested:
As of March 31, 2016
GrantedForfeited
VestedAs of March 31, 2017
After vested:
As of March 31, 2016
VestedExercised
Forfeited
As of March 31, 2017
Yen

Exercise price
Average exercise price
Fair value at granted date¥    1
1,481
485

2015

2016

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

2,600
—
2,600
—
—

2,100
—
2,100
—
—

32,000—30,600—1,400

U.S. dollars(Note 1)$0.008
13.22
4.33

Yen

¥    1
1,479
844

U.S. dollars(Note 1)$0.008
13.20
7.53

Yen

¥    1
1,577
1,589

U.S. dollars(Note 1)$0.00814.08
14.18

Since it is difficult to reasonably estimate the number of stock options that will expire in the future, the number of stock
options that were forfeited is shown as the number of vested options.

121Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

16. NET ASSETS

The following table summarizes the number of shares of common stock, issued and outstanding, and treasury stock:

Under the Companies Act of Japan (“the Act”), the entire amount paid for new shares is required to be designated as capitalstock. However, a company may, by resolution of the Board of Directors, designate an amount not exceeding one-half of theprice of the new shares as additional paid-in capital, which is included in capital surplus. The legal earnings reserve is included
in retained earnings in the accompanying consolidated balance sheets.
The Act provides that an amount equal to at least 10% of the amount to be disbursed as distributions of capital surplus(other than additional paid-in capital) and retained earnings (other than legal earnings reserve) be transferred to additional
paid-in capital and the legal earnings reserve, respectively, until the total of additional paid-in capital and the legal earnings
reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders’ meeting, or by resolution of the Board of
Directors if certain conditions are met.
Under the Act, additional paid-in capital and the legal earnings reserve may not be distributed as dividends; the Act allows
all additional paid-in capital and all legal earnings reserve to be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated financial
statements of the Company in accordance with Japanese laws and regulations.

Number of shares
2016

2017

Common stock, issued and outstanding:At the beginning of the year
		 Decrease due to retirement of treasury stock
At the end of the year

278,660,417—
278,660,417

278,660,417(45,000,000)
233,660,417

Treasury stock:
At the beginning of the year
		 Increase due to purchase of treasury stock in the stock market
		 Increase due to acquisition of stock through BIP Trust and ESOP Trust		 Increase due to purchase of odd lot shares
		 Decrease due to retirement of treasury stock
		 Decrease due to exercise of stock options
		 Decrease due to sale of stock to odd lot shareholders
At the end of the year

15,588,364
20,723,600
—
1,770
—
(43,400)—
36,270,334

36,270,334
12,966,300
502,300
1,178(45,000,000)(35,300)(62)
4,704,750

The following tables summarize the dividends paid for the fiscal years ended March 31, 2016 and 2017:2016
Resolution

Class ofshare

Total amount of dividend(Millions of yen)

Dividend per share (Yen)Annual general meeting ofshareholders held on June 25, 2015
Board of Directors’ meeting held on
November 6, 2015

Commonstock
Commonstock¥2,630

¥10

2,761

11

Record date

Effective date

March 31,
June 26,2015
2015
September 30, December 4,
2015
2015

17. CONTINGENT LIABILITIESThe Group has commitments to guarantee customers’ liabilities in relation to personal loans to individuals from financial institutions with which the Group has guarantee service arrangements.
As of March 31, 2016 and 2017, the amounts of the Group’s guarantee obligations were ¥23,018 million and ¥25,428
million ($227,035 thousand), respectively.

2017

Resolution

Annual general meeting ofshareholders held on June 29, 2016
Board of Directors’ meeting held on
November 4, 2016

Class ofshare

Commonstock
Commonstock

Total amount of dividend

Dividend per share(Thousands of(Millions of
U.S. dollars)yen)(Note 1)(Yen)

(U.S. dollars)(Note 1)

¥2,666 $23,803

¥11

$0.09

3,719

16

0.14

33,205

Record date

Effective date

March 31,2016
September 30,
2016

June 30,
2016
December 5,
2016

Note: The amount of dividend resolved at the Board of Directors’ meeting held on November 4, 2016 includes ¥8 million ($71 thousand) of dividend for the BIP Trust and
ESOP Trust.

18. COST OF SALESFor the fiscal years ended March 31, 2016 and 2017, cost of sales included the revaluation loss on inventories in the amountsof ¥94 million and ¥48 million ($428 thousand), respectively.

19. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the fiscal years ended March 31, 2016 and 2017, were as follows:
Millions of yen

Dividends with a record date during the fiscal year ended March 31, 2017, but with an effective date subsequent to thefiscal year ended March 31, 2017, were as follows:
Total amount of dividend
Resolution

Class ofshareAnnual general meeting ofCommonshareholders held on June 26, 2017 stock

Dividend per share(U.S.
dollars)(Note 1)

Record date

Effective date

¥3,900 $34,821 Retained ¥17 $0.15
earnings

March 31,2017

June 27,
2017(Thousands of(Millions of
U.S. dollars)yen)(Note 1)

Source(Yen)

Note: The amount of dividend resolved at the annual general meeting of shareholders held on June 26, 2017 includes ¥8 million ($71 thousand) of dividend for the BIP
Trust and ESOP Trust.

122

Advertisement
Provision for point card certificates
Provision for allowance for doubtful accounts
Salaries and allowances
Provision for bonuses
Rent
Depreciation and amortization
Other

Thousands of
U.S. dollars (Note 1)

2016

2017

2017

¥ 13,941
6,586
7,289
32,7703,513
15,782
8,614
41,920¥130,419¥ 12,425
9,181
9,610
32,0233,441
16,3088,960
42,760¥134,711$  110,937
81,97385,803285,919
30,723
145,607
80,000381,785$1,202,776

123

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

20. LOSS ON RETIREMENT OF PROPERTY AND EQUIPMENT AND LOSS ON CLOSING OF STORES

23. CASH FLOW STATEMENTS

Loss on retirement of property and equipment for the fiscal years ended March 31, 2016 and 2017, consisted of the following:

Reconciliations of cash and cash equivalents in the consolidated statements of cash flows to accounts and amounts in theaccompanying consolidated balance sheets as of March 31, 2016 and 2017, were as follows:

Millions of yen

Buildings and structures
Furniture and fixtures

Thousands of
U.S. dollars (Note 1)

2016

2017

2017

¥  546
1,374¥1,920¥  9881,930¥2,918$ 8,821
17,232$26,053

For the fiscal year ended March 31, 2017, the Group recognized ¥1,310 million ($11,696 thousand) of loss on closing ofstores, which primarily consisted of restoration costs involved in the closing of stores.

Millions of yen
2016

Cash and deposits
Time deposits with maturity in excess of three months
Cash and cash equivalents¥32,586(11)¥32,5752017¥36,257(11)¥36,245

Thousands of
U.S. dollars (Note 1)
2017$323,723(98)$323,616

24. SEGMENT INFORMATION
21. IMPAIRMENT LOSS

(1) Overview of reportable segments

The impairment loss recognized for the fiscal year ended March 31, 2017, is as follows:

The Group defines its reportable segments as a component of the Group for which separate financial information is available
and whose operating results are regularly evaluated by the Board of Directors to make decisions about how resources are to beallocated among the Group and assess their performance.
The Group consists of the following two reportable segments identified by products and services: “Retailing” and “FinTech.”
The Retailing segment engages in management of commercial property rental, retailing operations of clothes and accessories, store design, advertising, apparel distribution maintenance, and management of buildings and other facilities. The
FinTech segment engages in the credit card services, the consumer loans, and the rent payment guarantee businesses, IT systems, and real estate rental.

Use

StoresLocation

Kawasaki store
Kawasaki, Kanagawa, etc.

Thousands ofMillions of yen U.S. dollars (Note 1)

Type of assets

Buildings and structures
Other
Total

¥278
12
¥291

$2,482107$2,598The Group has grouped its fixed assets by either store or rental property, which is the minimum cash-generating unit.
The carrying value of each asset group is written down to its respective recoverable amount and in doing so is recognized as
an impairment loss.
The Group estimated the recoverable amount of each asset group based on value in use or fair value less costs to sell. If a
store reports continuous operating losses, the Group evaluates that the value in use of the store is zero since positive cash flows
cannot be expected in the future. If a store is planned to be closed or disposed of, the Group evaluates that the fair value lesscosts to sell is zero.
For the fiscal year ended March 31, 2016, the disclosure was omitted due to immateriality.

(2) Basis of measurement for the amounts of segment revenue, segment income or loss, segment assets, andother items
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “SIGNIFICANT ACCOUNTINGPOLICIES.”
Segment income is measured on the basis of operating income. Intersegment sales and transfers are accounted for basedon the prevailing market price.
Millions of yen
2016

22. COMPREHENSIVE INCOME
Millions of yen
2016

Valuation difference on available-for-sale securities:
Amounts incurred for the year
Reclassification adjustments
Before tax effect adjustment
Tax effect
Valuation difference on available-for-sale securities
Total other comprehensive income¥(2,117)(972)(3,089)491(2,598)¥(2,598)

2017

¥116
122
238
343
581
¥581

Thousands of
U.S. dollars (Note 1)
2017$1,035
1,089
2,125
3,062
5,187
$5,187

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortizationIncrease in property andequipment and intangible assets

Retailing

Reportable segment
FinTechTotal¥163,231
6,159¥169,390¥ 10,658¥291,250¥ 82,636
2,539¥ 85,176¥ 23,094¥455,449¥  8,029
10,675Adjustment *1

Consolidated *2¥245,867
8,699¥254,566¥ 33,753¥746,699¥     —
(8,699)¥ (8,699)¥ (4,138)¥(16,572)¥245,867—¥245,867¥ 29,615¥730,126¥  1,653¥  9,683¥    (12)¥  9,670

2,448

13,124(684)

12,439*1 Adjustment to segment income consists of intersegment elimination of ¥1,534 million and corporate expenses of ¥(5,673) million that are not allocated to eachreportable segment. Adjustment to segment assets mainly consists of intersegment elimination of ¥(286,850) million and corporate assets of ¥268,207 million, whichmainly present the Company’s loans in connection with the Group’s cash management system.
*2 Segment income is reconciled to operating income on the consolidated statements of income.

124

125

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Millions of yen
2017
Retailing

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortizationIncrease in property andequipment and intangible assets

Reportable segment
FinTech

Total

Adjustment *1

Consolidated *2¥ 94,909
2,192¥ 97,101¥ 27,111¥536,050¥237,022
8,168¥245,190¥ 34,870¥833,656     —(8,168)¥ (8,168)¥ (3,616)¥(27,081)¥237,022—¥237,022¥ 31,253¥806,575

¥

¥

1,759

¥ 10,182¥    (61)¥ 10,121

2,040

16,416(719)

15,696

14,376¥

Thousands of U.S. dollars (Note 1)
2017

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortizationIncrease in property andequipment and intangible assets

Retailing

Reportable segment
FinTechTotal$1,268,866
53,348$1,322,223$   69,276$2,657,196$  847,401
19,571$  866,973$  242,062$4,786,160$   75,196
128,357

Related party information where directors and their close relatives substantially own a majority of the voting rights is as follows:
2016¥142,113
5,975¥148,089¥ 7,759¥297,606
8,422

25. RELATED PARTY INFORMATION

Adjustment *1

Consolidated *2$2,116,267
72,928$2,189,196$  311,339$7,443,357$      —
(72,928)$ (72,928)$ (32,285)$(241,794)$2,116,267—$2,116,267$  279,044$7,201,562$   15,705$   90,910$    (544)$   90,366

18,214

146,571(6,419)140,142

Name ofcompany

Nakano Co., Ltd.

Seiwa Kogyo
Co., Ltd.

Location

Capital(Millions of yen)

Shinjuku,
Tokyo

¥10

Shinjuku,
Tokyo

¥10

BusinessRealestaterentalRealestaterentalVotingrightsRelationshipTransaction

Amount(Millions of yen)

Direct Property
0.9% rental
Concurrent
position as
director
Direct Property
0.7% rental
Concurrent
position as
director

Property
rental¥42

Property
rentalstores¥42

Account name

Balance(Millions of yen)

Leasehold andother deposits
Other current
liabilities¥41

Leasehold andother deposits

191

1

The monetary amounts above do not include consumption taxes. Terms and conditions for rental agreements are determined similarly to those of third-party transactions.
2017*1 Adjustment to segment income consists of intersegment elimination of ¥2,037 million ($18,187 thousand) and corporate expenses of ¥(5,654) million ($(50,482)
thousand) that are not allocated to each reportable segment. Adjustment to segment assets mainly consists of intersegment elimination of ¥(362,554) million($(3,237,089) thousand) and corporate assets of ¥335,571 million ($2,996,169 thousand), which mainly present the Company’s loans in connection with the Group’s
cash management system.
*2 Segment income is reconciled to operating income on the consolidated statements of income.

Name ofcompany

Location

Capital(Millions of yen)

Business

VotingrightsRelationshipTransaction

Nakano Co., Ltd.

Shinjuku,¥10 RealTokyo($89 thousand) estate(Note 1) rental

Direct Property
1.0% rental
Concurrent
position as
director

Property
rentalSeiwa Kogyo
Co., Ltd.

Shinjuku,
10 RealTokyo($89 thousand) estate(Note 1) rental

Direct Property
0.7% rental
Concurrent
position as
director

Property
rentalstoresAmount(Millions of yen)Account name

Balance(Millions of yen)

¥42 Leasehold and($375 thousand) other deposits(Note 1)Other current
liabilities¥41($366 thousand)(Note 1)
1($8 thousand)(Note 1)32 Leasehold and191($285 thousand) other deposits ($1,705 thousand)(Note 1)
(Note 1)

The monetary amounts above do not include consumption taxes. Terms and conditions for rental agreements are determined similarly to those of third-party transactions.

Change in reportable segments
The Group previously classified its business segments into three reportable segments: “Retailing and Store Operation,” “Credit
Card Services,” and “Retailing-Related Services.” In order to further improve its corporate value through integrated Group
operations, the Group redefined and reorganized its business segments into two reportable segments: “Retailing” and “FinTech.”
The segment information for the fiscal year ended March 31, 2016, was restated based on the current classificationof segments.
Disclosures on related information with regard to the concentration of products and services, location, and major customers
have been omitted since there was no relevant information to be disclosed.
For the fiscal years ended March 31, 2016 and 2017, an impairment loss of ¥107 million and ¥291 million($2,598 thousand), respectively, was reported by the Retailing segment.

126

127

Independent Auditor’s Report

Notes to Consolidated Financial Statements

26. PER SHARE INFORMATION
Net income per share, both basic and diluted, for the fiscal years ended March 31, 2016 and 2017, is as follows:Yen

Net income per share
Diluted net income per share

2016

2017

¥70.6870.67¥80.24
80.24

U.S. dollars (Note 1)
2017

$0.71
0.71

Thousands of shares

Weighted-average number of outstanding shares
Diluted shares:
Assumed exercise of stock options

2016

2017

251,434

233,346

27

8

Net income per share is computed based on the net income attributable to shareholders of common stock and theweighted-average number of outstanding shares.
For the computation of net income per share and diluted net income per share, the number of shares held by BIP Trust and
ESOP Trust is deducted from the weighted-average number of outstanding shares (293 thousand shares for the fiscal year
ended March 31, 2017).

27. SUBSEQUENT EVENTAt the Board of Directors’ meeting held on May 11, 2017, the Company resolved to acquire treasury stock in accordance with
Article 156 of the Companies Act as applied with relevant changes in interpretation pursuant to the provisions of Article 165,
paragraph (3).
Reason for acquisition
Based on the medium-term business plan to be achieved by the fiscal year ending March 2021, the Group aims to achieve
profitable growth by innovating Group business and integrating operations in light of potential changes in the business environment. As its financial strategy, the Group will effectively utilize basic operating cash flows that will be generated in the next five
years in order to optimize capital structure for the business; thus, the Group will enhance investment growth and shareholder
return. The Group will improve its corporate value by achieving the following targets: an ROE of 10%, an ROIC of 4%, and an
EPS of ¥130 as early as possible.
Based on these Group strategies, following the acquisition of treasury stock in the total amount of ¥20,000 million($178,571 thousand) in the fiscal year ended March 31, 2017, the Company resolved to acquire treasury stock as follows:(i) Class of shares(ii) Maximum number of shares to acquire(iii) Maximum amount for acquisition(iv) Acquisition period

128

Common stock
12 million shares (5.24% of total outstanding shares)¥15,000 million ($133,928 thousand)From May 12, 2017 to March 31, 2018

129

MARUI GROUP’s Business

MARUI GROUP’s Business

As of August 31, 2017
See page 99 for an overview of MARUI GROUP CO., LTD.

MARUI CO., LTD.

Epos Card Co., Ltd.

AIM CREATE CO., LTD.

MOVING CO., LTD.

Marui store business operation, original sales and private brandoperation and development, online shopping and mail-order,
outside specialty store business

Credit card business, credit loan business

Commercial facility proposal, design and interior decoration,
operation and management, operation of Modi stores,­advertisement planning and creation

Trucking business, forwarding, and other businesses

3-2, Nakano 4-chome, Nakano-ku, Tokyo 164-8701, Japan
Tel: 03-4574-0101 (Receptionist)

3-2, Nakano 4-chome, Nakano-ku, Tokyo 164-8701, Japan
Tel: 03-3384-0101 (Receptionist)

5-1, Bijogihigashi 2-chome, Toda-shi, Saitama 335-0032, Japan
Tel: 048-233-1000 (Receptionist)

34-28, Nakano 3-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 03-5340-0101 (Receptionist)

www.eposcard.co.jp (Japanese only)

www.0101.co.jp.e.ex.hp.transer.com

www.moving.co.jp (Japanese only)

www.aim-create.co.jp (Japanese only)

M & C SYSTEMS CO., LTD.

MARUI FACILITIES Co., Ltd.

MARUI HOME SERVICE Co., Ltd.

MRI Co., Ltd.

Software development, computer operation

Building management service business, security service
business

Real estate rental businessCollection and management of receivables business, credit
check business

3-2, Nakano 4-chome, Nakano-ku, Tokyo 164-8701, Japan
Tel: 03-5343-0100 (Receptionist)
www.m-and-c.co.jp (Japanese only)

34-28, Nakano 3-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 03-6361-0101 (Receptionist)

34-28, Nakano 3-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 03-3229-0101 (Receptionist)

www.marui-hs.co.jp (Japanese only)

34-28, Nakano 3-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 03-4574-4700 (Receptionist)

www.marui-facilities.co.jp (Japanese only)

www.mri-s.co.jp (Japanese only)

Epos Small Amount and Short Term InsuranceCo., Ltd.

MARUI KIT CENTER CO., LTD.

Small-amount short-term insurance policy businessToda Product Center, Second Building, 5-1, Bijogihigashi
2-chome, Toda-shi, Saitama 335-0032, Japan
Tel: 048-421-7351 (Receptionist)

Supply pickup, product inspection, various printing services

34-28, Nakano 3-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 03-4546-0101 (Receptionist)
www.epos-ssi.co.jp (Japanese only)

Shigeru Hase
Positions Assumed
through Profession
ChangesMenswear,
Kinshicho Marui,
MARUI CO., LTD.

■ ontract Insurance,
C
Funabashi Marui,
MARUI CO., LTD.

■ ard Application Center,
C
Kobe Marui,
Epos Card Co., Ltd.

■ ard Application Center,C
Shinjuku Marui Main
Building,
Epos Card Co., Ltd.

■

130

Kayo Shimohashi■ eceivable Collection
R
Division, MRI Co., Ltd.

■ ecurity Services Division,S
MARUI FACILITIES Co., Ltd.

Tomoe Jinbo

Asami Okumura■

 ard Application Center,C
Ueno Marui, MARUI CO., LTD.

■ ields, Kokubunji Marui,F
MARUI CO., LTD.

■

 ccounting Section,
A
Financial Department,
MARUI GROUP CO., LTD.

■ lanning Division, Epos Small
P
Amount and Short Term
Insurance Co., Ltd.

■■

Masato Higashigaito■ omen’s Shoes,
W
Yurakucho Marui,
MARUI CO., LTD.

 omenswear,
W
Oimachi Marui,
MARUI CO., LTD.

■ ales Department,S
MARUI HOME SERVICE
Co., Ltd.

 inance Promotion
F
Department,
Epos Card Co., Ltd.

■ ales Planning Division,S
MARUI CO., LTD.

Yuko Hata■ ales Department,
S
AIM CREATE CO., LTD.

■ esign Department,
D
AIM CREATE CO., LTD.

Takahiko Sayama■

 omen’s Purses,
W
Kashiwa Marui,
MARUI CO., LTD.

■

 eneral Men’s Item Shop,G
Kitasenju Marui,
MARUI CO., LTD.

■C ustomer Systems,
M & C SYSTEMS CO., LTD.
Systems Department,
Epos Card Co., Ltd.

Yuri Higuchi■■

 omen’s Fashion
W
Merchandise,
Yurakucho Marui,
MARUI CO., LTD.
 ccounting Section,
A
Financial Department andResearch Department,
MARUI GROUP CO., LTD.

Akira Iizuka

Takeshi Morohashi■

 ard Application Center,C
Omiya Marui,
Epos Card Co., Ltd.

■ ales Services, Shinjuku
S
Marui Main Building,
MARUI CO., LTD.

■

Logistics, MOVING CO., LTD.

■■ ffice Service,O
MARUI KIT CENTER CO., LTD.

 uyer, Purses Section,B
MARUI CO., LTD.

■ ollaboration Card BusinessC
Department,
Epos Card Co., Ltd.

Takaaki Kawajiri■

 ields, Ikebukuro Marui,F
MARUI CO., LTD.

■

 eneral Men’s Item Shop,G
Omiya Marui,
MARUI CO., LTD.

■ isato Fulfillment Center,
M
MOVING CO., LTD.

131

MARUI GROUP Store Network

MARUI GROUP Store Network

As of April 30, 2017

Marui Stores
Name

Tokyo

Kanagawa

SaitamaSpecialty Stores (outside of Marui and Modi stores)
Sales floor area

Transactions(m2)(billions of yen)

OpenedAddress

Name

Address

Telephone

Marui Shoes SENDAI PARCO 2 Store

4th Floor, SENDAI PARCO 2, 3-7-5 Chuo, Aoba-ku, Sendai-shi 980-8450

022-212-8350

MARUI MODELIZUMI PARK TOWN Tapio Store

1st Floor, IZUMI PARK TOWN Tapio, 6-5-1 Teraoka, Izumi-ku, Sendai-shi 981-3204

022-342-5950

Tokyo

Marui Shoes
LaLaPort Tachikawa Tachihi Store

1st Floor, LaLaPort Tachikawa Tachihi, 935-1 Izumi-cho, Tachikawa-shi 190-0015

042-540-6235

Kanagawa

Marui Shoes
LaLaport Shonan Hiratsuka

1st Floor, LaLaport Shonan Hiratsuka, 10-1 Amanuma, Hiratsuka-shi 254-8510

0463-25-5101

Chiba

Marui Shoes & Bags / Watches
LaLaPort TOKYO-BAY Store

2nd Floor, South Building, LaLaPort TOKYO-BAY, 2-1-1 Hama-cho, Funabashi-shi 273-8530

047-421-7264

Aichi

Rakuchin Kirei Shoes Fit Studio
AEONMALL KISOGAWA(Permanent try-on store)

1st Floor, AEONMALL KISOGAWA, 25-1 Aza-minamiyatsugaike, Kuroda, Kisogawa-cho,
Ichinomiya-shi 493-0001

0586-84-2131

Oita

Marui ShoesAMU PLAZA OITA Store

2nd Floor, AMU PLAZA OITA, 1-14 Kanamemachi, Oita-shi 870-8550

097-573-3220

Telephone

Shinjuku Marui

30,59026.1

September 10, 1948

3-30-13 Shinjuku, Shinjuku-ku 160-0022

03-3354-0101

Ikebukuro Marui

12,170

5.8

January 20, 1952

3-28-13 Nishi-Ikebukuro, Toshima-ku 171-0021

03-3989-0101

Shibuya Marui

4,240

4.4

October 1, 1958

1-22-6 Jinnan, Shibuya-ku 150-0041

03-3464-0101

Kinshicho Marui

22,99011.3

September 2, 1983

3-9-10 Kotobashi, Sumida-ku 130-0022

03-3635-0101

Ueno Marui

16,39013.1

August 24, 1985

6-15-1 Ueno, Taito-ku 110-8502

03-3833-0101

Kitasenju Marui35,30034.2

February 27, 2004

3-92 Senju, Adachi-ku 120-8501

03-5244-0101

Yurakucho Marui

18,50022.3

October 12, 2007

2-7-1 Yurakucho, Chiyoda-ku 100-0006

03-3212-0101

Nakano Marui

4,950

5.3

February 17, 1931

3-34-28 Nakano, Nakano-ku 164-0001

03-3382-0101

Kichijoji Marui

11,9505.5

October 30, 1960

1-7-1 Kichijojiminami-cho, Musashino-shi 180-8552

0422-48-0101

Miyagi

Machida Marui

7,550

6.1

September 20, 1980

6-1-6 Haramachida, Machida-shi 194-0013

042-728-0101

Kokubunji Marui

14,30012.5

March 1, 1989

3-20-3 Minami-cho, Kokubunji-shi 185-8562

042-323-0101

Marui City Yokohama

16,77010.0

September 20, 1996

2-19-12 Takashima, Nishi-ku, Yokohama-shi 220-0011

045-451-0101

Kawasaki Marui

12,3103.9

March 11, 1988

1-11 Nisshin-cho, Kawasaki-ku, Kawasaki-shi 210-0024

044-245-0101

Name

Address

Telephone044-814-0101

Chitose Outlet Mall Rera
Rera EPOS Card Application Center

Rera EPOS Card Application Center, 1-2-1 Kashiwadai Minami, Chitose-shi 066-8765

0123-27-3511

Feeeal Asahikawa
EPOS Card Application CenterFeeeal Asahikawa EPOS Card Application Center, 1st Underground Floor, Feeeal Asahikawa,
8-108 1 Jodori, Asahikawa-shi 070-0031

0166-29-6711

ELM EPOS Card Application Center

ELM EPOS Card Application Center, 2nd Floor ELM, 517-1 Fujimaki, Karakasayanagi,
Goshogawara-shi 037-0004

0173-38-4311

MONA Shinurayasu
MONA Card Application Center

MONA Card Application Center, MONA Shinurayasu, 2nd Floor, 1-5-1 Irifune, Urayasu-shi 279-0012

047-390-5411

MALLAGE KASHIWA
EPOS Card Application Center

MALLAGE KASHIWA EPOS Card Application Center, 2nd Floor, MALLAGE KASHIWA, 2-3 Oyamadai,
Kashiwa-shi 277-0837

04-7137-1411

unimo Chiharadai
EPOS Card Application Center

unimo Chiharadai EPOS Card Application Center, 2nd Floor, unimo Chiharadai, 3-4 Chiharadai Nishi,
Ichihara-shi 290-0194

0436-40-5411

Gifu

MALera GIFUEPOS Card Application Center

MALera GIFU EPOS Card Application Center, 2nd Floor, MALera GIFU, 1100 Mitsuhashi,
Motosu-shi 501-0497

058-320-5811

Marui Family
Mizonokuchi

32,260Marui Family Ebina

19,500

9.3

April 19, 2002

1-6-1 Chuo, Ebina-shi 243-0483

046-232-0101

Omiya Marui

13,970

7.1

September 28, 1982

2-3 Sakuragi-cho, Omiya-ku, Saitama-shi 330-9501

048-642-0101

Soka Marui

16,530

4.1

February 21, 1992

2-9-1 Takasago, Soka-shi 340-0015

048-922-0101

21.1

September 12, 1997

1-4-1 Mizonokuchi, Takatsu-ku, Kawasaki-shi 213-0001

EPOS Card Application Centers (outside of Marui and Modi stores)

Hokkaido

Aomori

Marui Family Shiki

18,900

11.6

February 25, 2000

5-26-1 Hon-cho, Shiki-shi 353-0004

048-487-0101

Chiba

Kashiwa Marui

8,220

3.3

April 24, 1964

1-1-11 Kashiwa, Kashiwa-shi 277-0005

04-7163-0101

Ibaraki

Mito Marui

13,300

2.5

July 25, 1970

1-2-4 Miyamachi, Mito-shi 310-0015

029-225-0101

Shizuoka

Shizuoka Marui

7,920

2.5

September 21, 1969

6-10 Miyukicho, Aoi-ku, Shizuoka-shi 420-0857

054-252-0101

Osaka

Namba Marui17,00010.8

September 22, 2006

3-8-9 Namba, Chuo-ku, Osaka-shi 542-0076

06-6634-0101

Hyogo

Kobe Marui

6,940

4.5

October 3, 2003

1-7-2 Sannomiya-cho, Chuo-ku, Kobe-shi 650-0021

078-334-0101

Kyoto

Kyoto Marui

8,760

4.2

April 27, 2011

68 Shin-cho, Shijodori-Kawaramachi-Higashiiru,
Shimogyo-ku, Kyoto-shi 600-8567

075-257-0101

Aichi

Hoshigaoka Terrace
EPOS Card Application Center

Hoshigaoka Terrace EPOS Card Application Center, East 1st Floor, Hoshigaoka Terrace,
16-50 Motomachi, Hoshigaoka, Chikusa-ku, Nagoya-shi 464-0802

052-788-7311

Fukuoka

Hakata Marui

15,000

8.5

April 21, 2016

9-1 Chuogai, Hakataeki, Hakata-ku, Fukuoka-shi 812-0012

092-415-0101

Hyogo

ASPIA AKASHIEPOS Card Application Center

ASPIA AKASHI EPOS Card Application Center, 1st Underground Floor, ASPIA AKASHI,
6-1 Higashi-Nakanomachi, Akashi-shi 673-0886

078-915-0611

HUIS TEN BOSCHEPOS Card Application Center

HUIS TEN BOSCH EPOS Card Application Center, 2nd Floor, Passage, HUIS TEN BOSCH,
8-2 HUIS TEN BOSCH-cho, Sasebo-shi 859-3292

0956-27-0971

Sasebo 5bangai
EPOS Card Application Center

Sasebo 5bangai EPOS Card Application Center, A-106, 1st Floor, Promenade East Zone, Sasebo 5bangai,
2-1 Shinko-cho, Sasebo-shi 857-0855

0956-37-3711

Oita

AMU PLAZA OITAJQ CARD EPOS Card Application DeskJQ CARD EPOS Card Application Desk, 302, 3rd Floor, AMU PLAZA OITA, 1-14 Kanamemachi,
Oita-shi 870-0831

097-513-2411

Miyazaki

BonBelta Tachibana
Tachibana EPOS Card Application Center

Tachibana EPOS Card Application Center, 1st Floor, West Wing, BonBelta Tachibana,
3-10-32 Tachibanadorinishi, Miyazaki-shi 880-8586

0985-35-4811

Kagoshima

AMU PLAZA KAGOSHIMAJQ CARD EPOS Card Application DeskJQ CARD EPOS Card Application Desk, 2nd Floor, AMU PLAZA KAGOSHIMA, 1-1 Chuo-cho,Kagoshima-shi 890-0053

099-812-6411

Chiba

Modi Stores
Name

Sales floor area

Transactions(m2)(billions of yen)

OpenedAddress

Telephone

Shibuya Modi

9,840

6.7

November 19, 2015

1-21-3 Jinnan, Shibuya-ku 150-0041

03-4336-0101

Machida Modi

13,7208.5

September 28, 2006

6-2-6 Haramachida, Machida-shi 194-0013

042-812-2700

Kanagawa

Totsuka Modi

16,5808.7

March 15, 2007

10 Totsuka-cho, Totsuka-ku, Yokohama-shi 244-0003

045-862-0135

Saitama

Kawagoe Modi

7,850

1.9

March 24, 2007

4-2 Wakita-cho, Kawagoe-shi 350-1122

049-227-5950

Chiba

Kashiwa Modi

10,5901.7

October 27, 2016

1-2-26 Kashiwa, Kashiwa-shi 277-0005

04-7195-0101

Shizuoka

Shizuoka Modi

5,540

0.3

November 19, 2016

6-10 Miyukicho, Aoi-ku, Shizuoka-shi 420-0857

054-252-0101

Tokyo

Nagasaki

The AOI SCHOLARSHIP FOUNDATION was established by MARUI GROUP founder Chuji Aoi with the aim ofcontributing to the development of people that can shape the future of Japan and benefit society. Over the morethan 40 years since its establishment, this foundation has helped fund the education of high school anduniversity students while facilitating networking between students receiving scholarships and past graduates.

Group of new
university students
supported in thefiscal year ending
March 31, 2018132

Established: January 1973 (became an incorporated public interest foundation in 2012)
Director: Tadao Aoi (Honorary Chairman of MARUI GROUP)
Total amount of scholarships provided: ¥1,746 million
Total number of students supported: 1,549
(As of April 2017)
Office: 3-2, Nakano 4-chome, Nakano-ku, Tokyo 164-8701, Japan (located at MARUI GROUP head office)Telephone: 03-5343-0351

133

Ratings, Awards, and Recognition
MARUI GROUP Websites

MARUI GROUP established the IR Department in October 2015 and then the ESG Promotion Department in October 2016 to enhance communication with institutional investors and ESG rating institutions, earning much praise from external organizations. We have also identified the promotion ofdiversity and healthcare management as key measures under the medium-term management plan with the aim of improving corporate value.

MARUI GROUP was chosen for inclusion in the FTSE4Good Index Series,
comprising companies selected by FTSE Russell for meeting evaluation
standards based on ESG criteria.

MARUI GROUP was included in the FTSE Blossom Japan Index. This index
is meant to reflect the performance of Japanese companies that meetvarious ESG-related requirements, and industry is therefore not consideredwhen selecting companies for inclusion.

MARUI GROUP was included in the MSCI Japan ESG Select Leaders Index*.
This ESG index comprises Japanese companies with relatively high MSCIESG Ratings in each industry selected from among the top 500 companies
in terms of market capitalization after excluding those companies with thelowest MSCI ESG Rating of CCC.

MARUI GROUP has been included in the MSCI Japan Empowering Women
Index*, an ESG index for Japanese stocks consisting of companies thatexhibit gender diversity excellence in each industry, based on the Global
Industry Classification Standard, selected from among the top 500 companies in terms of market capitalization.

Rating and Investment Information, Inc.
MARUI GROUP has been granted a rating of A- for its overall debt repayment capacity with regard to financial liabilities.

● ESG indexes of Japanese stocks utilized by the Government Pension Investment Fund* THE INCLUSION OF MARUI GROUP CO., LTD. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS,
TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP,
ENDORSEMENT OR PROMOTION OF MARUI GROUP CO., LTD. BY MSCI OR ANY OF ITS AFFILIATES. THE
MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND
LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

134

MARUI GROUP has been selected for inclusion in the Dow Jones
Sustainability Asia Pacific Index, the Asia Pacific division of the Dow Jones
Sustainability Index series, a major global socially responsible investment
index series.

MARUI GROUP was selected for inclusion in the Morningstar Socially
Responsible Investment Index. This index compiles the stock price of listedcompanies in Japan that display excellence in terms of social contributions
based on ESG concerns and human resource-related matters.

MARUI GROUP was awarded the 16th Porter Prize out of recognition for
how we ensure the convenience of credit card issuance, how our cards arelargely held by customers under the age of 40, and the large ratio of
revolving payment usage.

MARUI GROUP Ranked High Among Retail Sector­Companies in the 2017 All-Japan Executive Team
Rankings Released by U.S. Financial Industry Magazine
Institutional Investor
Honored Companies

Combined No. 3

Best IR Companies

Combined No. 1, Buy Side No. 1,
Sell Side No. 2

Best CEOBuy Side No. 3

Best Analyst Days

Combined No. 2

The All-Japan Executive Team Rankings is a ranking of major listed Japanesecompanies compiled by U.S. financial industry magazine Institutional
Investor, based on votes from institutional investors and securities analysts
from around the world. In 2017, votes were received from 1,007 institutional investors and securities analysts from 368 institutions.

More detailed information on these and other awards and recognition can befound on the Company’s corporate website.
www.0101maruigroup.co.jp/en/ci/award.html

MARUI GROUP was listed among the Companies
Exhibiting Excellence in Promoting Women’s
Empowerment in the SMBC Nadeshiko Loans andPrivate Placement Bonds selection out of reflectionof the Company’s establishment of women’s
empowerment indexes for measuring the empowerment of female employees.

MARUI GROUP was included in the Excellent
Enterprise of Health and Productivity
Management—White 500 selection. This
inclusion acknowledged our proactive healthcare
management approach that goes beyond simply
addressing lifestyle diseases and mental healthissues in an attempt to energize employees.

Out of recognition for its ongoing initiatives,
MARUI GROUP received a silver rating in the
PRIDE INDEX. This index is compiled by workwith Pride, an organization that aims to help
realize comfortable working environments formembers of the LGBT community.

MARUI GROUP was presented with the Best IRAward in the 2016 IR Award program due to thepraise earned through the Company’s improvement of disclosure materials based on investor
input, the publication of co-creation management
reports, and other highly distinctive initiatives.

MARUI GROUP CO., LTD.

Corporate, IR, sustainability, and recruit informationwww.0101maruigroup.co.jp/en/

Email Newsletter (Japanese only)
MARUI GROUP distributes an email newslettercontaining information on the latest topics and financial
results as well as details on events and surveys.
www.0101maruigroup.co.jp/ir/infomail/reg.html

Retailing Business

Marui store and product informationwww.0101.co.jp.e.ex.hp.transer.com

MARUI GROUP received the highest rank in theDevelopment Bank of Japan Inc.’s proprietary
DBJ Employees’ Health Management Rated Loan
Program. We were rated highly for setting sectionlevel targets for indicators related to overtime andother measures for entrenching healthcare
management on a Groupwide basis.
MARUI Internet shopping “marui web channel” (Japanese only)
voi.0101.co.jp

MARUI GROUP was ranked 1st for the first timein the retail category of the 2016 Awards for
Excellence in Corporate Disclosure presented by
the Securities Analysts Association of Japan.

MARUI GROUP was awarded an A- climatechange score due to the high evaluation of its
management of CO2 emissions volumes and its
establishment of the Environment CSR
Promotion Committee.

FinTech Business

Epos Card Co., Ltd. (Japanese only)
www.eposcard.co.jp

135

From the Chief Editor
Thank you for reading Co-Creation Management Report 2017 to its end. I suspectmany were a bit surprised at the statement on the cover.
Three years have passed since we published our first co-creation management
report in 2015. We view these three years as one cycle, and both our co-creation
management reports and our co-creation sustainability reports were compiled basedon this cycle. In the first year of this cycle, we made our co-creation management
declaration. The theme of the reports in the second year was co-creation management from a corporate value perspective. This report explains our co-creation management business model. We hope that, by reading the reports from all of theseyears, you will gain a deeper understanding of MARUI GROUP’s concept of co-creation management. Past reports are available on the Company’s corporate website.
We invite you to read these reports if you have not already done so.
This report looks to future initiatives, covering MARUI GROUP’s business model,
risks to be seen going forward, and other aspects related to this theme, which shareholders, investors, and other stakeholders have expressed significant interest in
during conversation conducted to date. We have endeavored to make the contents ofthis report as easy to understand as possible through the use of diagrams, graphs,
and data. In addition, the discussions with stakeholders that proved immensely
popular in the previous year’s report have been increased in this year’s report inorder to examine the Company’s quest to create value from various angles. However,
we understand that this may still be insufficient to providing a full understanding of
MARUI GROUP’s unique business model and initiatives for the future. We view ourreports as a tool for communication with our stakeholders, and thus aim to answer
any questions you may have through these reports.
Our co-creation management reports are meant to provide a platform for expanding the scope of co-creation activities through communication with all of the Group’s
stakeholders. We would therefore like to ask that readers of this report feel free tooffer your frank opinions and any requests you may have as such input will be key to
evolving these reports.
I look forward to your ongoing support of MARUI GROUP.

Takahiro Matsumoto
Chief Editor of Co-Creation Management Report 2017
General Manager, Public Relations Office, General Affairs Department,
MARUI GROUP CO., LTD.

Contact
MARUI GROUP CO., LTD.
3-2, Nakano 4-chome, Nakano-ku, Tokyo 164-8701, Japan
Tel: 03-3384-0101 (Receptionist)
Fax: 03-5343-6615
Email: koho-ml@0101.co.jp
For inquiries:
Please contact the Public Relations Office in the General Affairs Department for inquiries about corporate
information, the IR Section in the IR Department for inquiries about IR and financial information, the Sustainability
Department and the ESG Promotion Department for inquiries about sustainability information, and the General
Affairs Section in the General Affairs Department for inquiries about stock-related information.

136

Co-Creation Management Report 2017

Publication date: October 2017
Publisher: MARUI GROUP CO., LTD. / Co-Creation Management Promotion Project Team
Planning and production: EDGE INTERNATIONAL, INC.
Printed in Japan