C A P I TA L P O L I C YDEVELOPMENT OF OPTIMAL BALANCE SHEETMATCHED TO BUSINESS STRUCTURE REFORMS
At the time of formulation of the previous medium-term management plan, MARUI GROUP was supported by its credit card business, which has been consistently generating earnings since
the launch of the EPOS card in 2006. This situation made for a business structure through which the Company was able to sustain steady growth. The targeted balance sheet defined in thisplan was based on the transition to this business structure driven by the FinTech segment. As a result of this emphasis, we were able to build the balance sheet we targeted by optimizing the03
C A P ITA Lcapital structure in this segment.
The balance sheet we are targeting in the fiscal year ending March 31, 2026, the final year of the new medium-term management plan, will require us to optimize the capital structure of the Retailingsegment, which generates stable cash flows. Our balance sheet will also see a large shift in the ratio of capital allocations from tangible assets to intangible assets in conjunction with the creation of a
new business model incorporating forward-looking investments. The forward-looking investments driving this shift, which include co-creative investments and new business investments, have thepotential to produce significant returns, but also carry significant risks. For this reason, we intend to limit the amount of assets associated with forward-looking investments to the scope of shareholders’ equity. With this focus, MARUI GROUP will reorient its investments toward intangible assets with the goal of improving corporate value by evolving into an intellectual creation company.

Balance Sheet Targeted under Medium-Term Management PlanPOLICY

FinTech¥1.2 trillion

Equity ratio

Approx. 25%

Optimization ofequity ratio

Equity ratio¥900.0 billion

Approx. 10%

Forward-Looking
Investments

Retailing

70%

40%

¥250.0 billion

Completely
within scope ofshareholders’ equity¥290.0 billion¥120.0 billion¥100.0 billion¥70.0–¥80.0 ¥70.0–¥80.0billion
billionTotal assets Shareholders’equityTotal assets Shareholders’equityTotal assets Shareholders’equityTotal assets Shareholders’equityFY202618

03_CAPITAL POLICY

Shift Toward Investment in Intangible Assets

Capital Allocation Plan (April 1, 2021–March 31, 2026)

In the fiscal year ended March 31, 2019, the amount invested in intangible assets
surpassed the amount invested in tangible assets. Moreover, investments in intangible
assets in the fiscal year ended March 31, 2020, were 7.6 times higher than in the fiscal
year ended March 31, 2015, and twice the amount invested in tangible assets. OurGrowthinvestments

portfolio of intangible assets will be growing over the five years following the fiscalyear ended March 31, 2022, as we have earmarked ¥80.0 billion of the core operating
cash flow to be generated over this period for forward-looking investments and otherInvestments in existing
businesses:¥50.0 billion

Forward-looking investments:¥30.0 billion

growth investments in intangible assets. In addition, we plan to allocate ¥50.0 billion toshare buybacks for the purpose of optimizing our capital structure and ¥100.0 billion toshareholder returns, which will comprise ¥80.0 billion in dividend payments and anadditional ¥20.0 billion in share buybacks.

Core operating
cash flow

Amounts of Investment in Tangible and Intangible Assets¥230.0 billion

Capitaloptimization

Share buybacks:¥50.0 billion

Investments inintangible assets¥13.1 billion

Shareholderreturns

Investments intangible assets¥5.8 billion

FY2008FY2019FY202219

Dividend payments:¥80.0 billion
Share buybacks:¥20.0 billion

03_CAPITAL POLICY

Redefinition of Human Capital Investments

Human Capital Investments

Investments in human resources under the previous medium-term management plan
were primarily limited to education and training purposes. However, we have since35%

reframed these investments as human capital investments, and half of the personnel
expenses for co-creative teams, for employees involved in new businesses, and forseconded employees, which were previously considered R&D expenses, will becounted as human capital investments going forward. This new definition for humancapital investments also includes the personnel expenses incurred during the first year

Ratio of human capital investments
to total personnel expenses¥12.0 billion

22%

after employees have undergone intra-Group profession changes as well as investments in okos Co., Ltd., an incubation company (see figure below). The total level ofhuman capital investments is scheduled to be raised to ¥12.0 billion in the fiscal year
ending March 31, 2026. These investments are projected to account for 35% of all
personnel expenses, an increase from the ratio of 22% seen in the fiscal year ended
March 31, 2022. As we expand human capital investments anticipated to contribute to¥7.7 billion

future earnings, we will pursue medium- to long-term improvements in corporate value,as opposed to single-year earnings.

Breakdown of Human Capital Investments (FY2022)
Others• Personnel expenses incurred during firstyear after intra-Group profession changes• Investments in okos Co., Ltd.

Research and development expenses• New business-related personnel expenses• Co-creative team-related personnel expenses• Personnel expenses related to seconded employees

Human resource investments• Education and training• Medium-Term Management Visionary Committee, project teams, participation in initiatives¥4.5billion¥2.2billion¥1.0billion

Human capitalinvestments¥7.7 billion
FY202220FY2023(Target)

FY2024(Target)FY2025(Target)FY2026(Target)03_CAPITAL POLICY

Pursuit of High Growth Coupled withDividends and Share Buybacks

Consistent,long-term increases
in dividends

High Returns

Total return ratio of 70%
Payout ratio of 55%

The capital policies implemented for the purpose of achieving our targeted balance
sheet have enabled us to achieve an optimal capital structure in which return on equity¥30.0 billion(ROE) consistently surpasses cost of shareholders’ equity, and return on invested
capital (ROIC) exceeds weighted average cost of capital (WACC). Meanwhile, MARUIGROUP is targeting high growth coupled with high returns through ongoing dividend
increases in conjunction with long-term growth in earnings per share (EPS). For thefiscal year ended March 31, 2022, the Company issued annual dividend payments of¥52 per share, while share buybacks totaling ¥30.0 billion were conducted in this fiscalyear. Going forward, consistent, long-term increases in dividends will be implemented
with the goal of achieving a payout ratio of 55% and a total return ratio of 70% in thefiscal year ending March 31, 2026, the final year of the medium-term management plan.
Dividends
per share

¥51

¥50

Capital Efficiency Indicators
FY2020

FY2024 (Target)

FY2026 (Target)

EPS (yen)

117.0

140.0

200.0

ROE (%)

8.8

10.0

13.0

Cost of shareholders’ equity (%)

6.9

8.0

8.0

ROIC (%)

3.7

3.8

4.0

WACC (%)

3.0

3.4

3.4

¥52

Share
buybacks¥7.0 billion

FY202021

FY2021

FY2022

FY2026(Target)