MARUI CO., LTD.

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CONSOLIDATED STATEMENTS OF CASH FLOWS Marui Co., Ltd. and Its Consolidated Subsidiaries Eight months ended September 30, 2003, and years ended January 31, 2003 and 2002 Thousands of U.S. dollars Millions of yen (Note 3) 2003/9 2003/1 2002/1 2003/9 Cash flows from operating activities: Income before income taxes and minority interests ....................... ¥ 13,164 ¥ 30,978 ¥ 26,600 $ 118,595 Adjustments to reconcile income before income taxes and minority interests to net cash provided by (used in) operating activities: Depreciation and amortization .................................................... 12,242 18,780 18,038 110,288 Increase (decrease) in accrued bonuses....................................... 4,270 10 (283) 38,469 (Decrease) increase in severance and retirement benefits for employees and prepaid pension expense ............................. (33,343) 4,898 7,189 (300,387) Interest and dividends income .................................................... (389) (533) (548) (3,505) Interest expenses ......................................................................... 1,221 2,533 1,900 11,000 Issuance costs of bonds ............................................................... – 240 212 – Gain on sale of property and equipment ..................................... (623) (15) (3,568) (5,613) Gain on sale of investments in securities .................................... – – (17) – Gain on winding up of the non-contributory defined benefit pension plan .................................................................. (28,564) – – (257,333) Loss on disposal of property and equipment............................... 1,463 2,173 2,937 13,180 Loss on sale of investments in securities..................................... – 48 399 – Loss on devaluation of investments in securities ........................ 40 145 984 360 Loss on devaluation of property and equipment......................... 14,024 – – 126,342 Loss on devaluation of investment in an affiliated company ...... – 100 – – Loss on devaluation of golf memberships ................................... – – 26 – Decrease (increase) in receivables, less allowance for doubtful accounts...................................................................... 596 (8,062) (45,007) 5,369 (Increase) decrease in inventories ............................................... (474) 2,590 (2,833) (4,270) Increase in tax refund receivable ................................................. (7,220) – – (65,045) Increase (decrease) in payables – principally trade ..................... 6,926 (2,686) (2,277) 62,397 Increase in payables of lump-sum severance payments and special severance indemnities.................................................... 49,862 – – 449,207 Bonuses paid to directors............................................................. (86) (86) (86) (775) Other, net..................................................................................... (6,299) (3,150) 528 (56,748) Subtotal .................................................................................... 26,810 47,963 4,194 241,531 Interest and dividends income received in cash.......................... 413 523 572 3,721 Interest expenses paid in cash ..................................................... (711) (2,413) (1,801) (6,405) Income taxes paid in cash............................................................ (10,634) (17,649) (12,103) (95,802) Net cash provided by (used in) operating activities ................ 15,878 28,424 (9,138) 143,045 Cash flows from investing activities: Payments for purchase of property and equipment ........................ (11,493) (22,797) (29,754) (103,540) Proceeds from sale of property and equipment............................... 1,070 181 4,988 9,640 Purchases of investments in securities............................................ (22) (156) (34) (198) Proceeds from sale of investments in securities.............................. – 147 191 – Payments of leasehold deposits....................................................... (187) (2,169) (3,603) (1,685) Refunds of leasehold deposits ......................................................... 5,482 3,302 4,636 49,387 Other, net ........................................................................................ (173) 32 (1,402) (1,559) Net cash used in investing activities ........................................ (5,323) (21,460) (24,978) (47,955) Cash flows from financing activities: Net increase in short-term loans and long-term debt ..................... 11,690 5,450 6,810 105,316 Proceeds from issuance of bonds .................................................... – 39,760 39,788 – Redemption of convertible bonds ................................................... – (59,962) – – Payments for purchase of treasury stock ........................................ (10,510) (7,348) – (94,685) Dividends paid ................................................................................ (7,963) (8,110) (8,111) (71,739) Other, net ........................................................................................ (10) (11) (34) (90) Net cash (used in) provided by financing activities................. (6,793) (30,221) 38,453 (61,198) Net increase (decrease) in cash and cash equivalents ..................... 3,762 (23,257) 4,337 33,892 Cash and cash equivalents at beginning of year............................... 64,754 88,011 83,574 583,369 Increase in cash and cash equivalents due to inclusion of additional subsidiaries in the consolidation .................................. 100 – 100 901 Cash and cash equivalents at end of year......................................... ¥ 68,616 ¥ 64,754 ¥ 88,011 $ 618,162 See accompanying notes to consolidated financial statements. 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Marui Co., Ltd. and Its Consolidated Subsidiaries September 30, 2003 and January 31, 2003 and 2002 1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS Marui Co., Ltd. (the “Company”) and its consolidated subsidiaries (the “Companies”) maintain their accounts and records in accordance with the provisions set forth in the Japanese Commercial Code (the “Code”) and the Securities and Exchange Law and in conformity with accounting principles and practices generally accepted in Japan, which are different from International Accounting Standards and standards in other countries in certain respects as to application and disclosure requirements. Accordingly, the accompanying financial statements are intended for use by those who are informed about Japanese accounting principles and practices. The accompanying consolidated financial statements are a translation of the audited consolidated financial statements of the Company which were prepared in accordance with accounting principles and practices generally accepted in Japan from the accounts and records maintained by the Company and its consolidated subsidiaries and were filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Securities and Exchange Law. In preparing the accompanying consolidated financial statements, certain reclassifications and modifications have been made in the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. The consolidated statements of stockholders’ equity for the eight months ended September 30, 2003, and for the years ended January 31, 2003 and 2002, have been prepared for the purpose of inclusion in the consolidated financial statements, although such statements were not customarily prepared in Japan and not filed with the regulatory authorities. The Company and its consolidated subsidiaries changed the year-end from January 31 to March 31 in accordance with the resolution of change in a part of the Company’s articles at the annual general meeting of the stockholders held on April 25, 2003. As the transitional period of the change of the fiscal year-end, the most recent fiscal period ended September 30, 2003, which consists of the eight months from February 1, 2003 to September 30, 2003. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its significant subsidiaries, which are all Japanese corporations. All companies in Japan are required to consolidate all significant investees which are controlled through substantial ownership of majority voting rights or through certain other means. The application of this rule to the Company’s consolidated financial statements had no effect. All significant intercompany transactions and unrealized profits among the Companies have been eliminated in consolidation. Investments in 20%–50% owned affiliates are carried at cost, since the amounts are insignificant. In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority stockholders, are evaluated using the fair value at the time the Company acquired control of the respective subsidiaries. The excess of investment cost over the net assets of a subsidiary acquired is amortized on a straight-line basis over a period of five years. However, the excess is charged (or credited) to income in the period of acquisition when the amounts are immaterial. (b) CASH AND CASH EQUIVALENTS In preparing the consolidated statements of cash flows, cash, readily-available deposits and short-term highly liquid investments with maturities of not exceeding three months at the time of purchase are considered to be cash and cash equivalents. (c) UNEARNED FINANCE CHARGES At the balance sheet date, unearned finance charges included in receivables of merchandise sales under installment sales and consumer loans are deferred. (d) INVESTMENTS IN SECURITIES Effective February 1, 2001, the Companies have adopted the “Accounting Standard for Financial Instruments”, issued by the Business Accounting Deliberation Council on January 22, 1999. Upon applying this accounting standard, all companies are required to examine the intent of holding each security and classify those securities as (a) securities held for trading purposes, (b) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt securities”), (c) equity securities issued by subsidiaries and affiliated companies and (d) all other securities that are not classified in any of the above categories (hereafter, “available-for-sale securities”). Based on the examination of the intent of holding, the Companies classified their securities as held-to-maturity debt securities, equity securities issued by subsidiaries and affiliated companies and available-for-sale securities. Held-to-maturity debt securities maturing within one year from the balance sheet date are included in current assets. Other securities are included in investments in securities. Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by subsidiaries and affiliated companies that are not consolidated or accounted for using the equity method are stated at cost by the moving average method. Availablefor-sale securities with available fair market values are stated at the market value. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of stockholders’ equity. Realized gains and losses on sale of such securities are computed by the moving average method. Availablefor-sale securities without available fair market value are stated at cost by the moving average method. (e) ALLOWANCE FOR DOUBTFUL ACCOUNTS Effective February 1, 2001, the Companies have adopted the “Opinion Concerning Establishment of Accounting Standard for Financial Instruments”, issued by the Business Accounting Deliberation Council on January 22, 1999. Under this accounting standard, the Companies provide for a sufficient allowance for doubtful accounts to cover probable losses on collection by estimating uncollectible amounts individually in addition to amounts for possible losses based on actual losses on collection in the past. (f) MERCHANDISE INVENTORIES Merchandise inventories are principally determined on the retail inventory method and are stated at cost, which is lower than market. (g) PROPERTY AND EQUIPMENT AND DEPRECIATION Property and equipment are carried at cost. Depreciation is computed over the estimated useful lives of the assets on a declining-balance method. Estimated useful lives of the assets are as follows: Number of years Buildings.................................................................. 39–50 Improvements.......................................................... 3–15 Store fixtures and equipment .................................. 3–10 (h) INTANGIBLE ASSETS AND AMORTIZATION The Companies amortize intangible assets (except for software to be sold) based on the straight-line method in accordance with the Japanese Corporate Tax Law. The annual amortization of software to be sold is provided by the greater of the amount computed using the expected sales revenues or the amount computed using the straight-line method over the expected marketable period (within three years). (i) SEVERANCE AND RETIREMENT BENEFITS FOR EMPLOYEES Employees severing their connection with the Companies on retirement are generally entitled to annuity payments covered by three 19
Page 1 and 2: MARUI CO., LTD. Eight-Month Fiscal
Page 3 and 4: ENHANCING THE MARUI BRAND Thanks to
Page 5 and 6: Further, we sought to heighten the
Page 7 and 8: ENHANCING THE MARUI BRAND ENHANCING
Page 9 and 10: cater to a wide range of customers.
Page 11 and 12: etirement benefits to employees tra
Page 13 and 14: CONSOLIDATED OPERATIONS In the fisc
Page 15 and 16: NON-CONSOLIDATED FIVE-YEAR SUMMARY
Page 17 and 18: Thousands of U.S. dollars Millions
Page 19: CONSOLIDATED STATEMENTS OF STOCKHOL
Page 23 and 24: The new accounting standard require
Page 25 and 26: 9. LEASES (a) Pro forma information
Page 27 and 28: (b) The reconciliation between the
Page 29 and 30: INDEPENDENT AUDITORS’ REPORT To t
Page 31 and 32: 2 City Ueno 3 Family Mizonokuchi 4
Page 33 and 34: ADMINISTRATIVE SERVICES Marui Smart
Page 35 and 36: CORPORATE DATA (As of September 30,

MARUI CO., LTD.

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