MARUI CO., LTD.

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severance and retirement benefit pension plans—a non-contributory defined benefit pension plan supported by the government, a lump-sum severance and retirement payment plan and a privately held pension plan—based on rates of pay, length of service and certain other factors. Effective February 1, 2001, the Companies adopted the new accounting standard, “Opinion on Setting Accounting Standard for Employees’ Severance and Pension Benefits”, issued by the Business Accounting Deliberation Council on June 16, 1998. The excess of the present value of the future obligations required for severance and retirement benefit plans over the total of the fair value of the pension plan assets as of February 1, 2001, and the obligations for severance and retirement benefits recorded as of February 1, 2001 (the “net transition obligation”), amounted to ¥5,395 million and was expensed and presented as a special loss in the year ended January 31, 2002. Actuarial gains and losses are amortized using the straightline method over the estimated average remaining service lives (from ten years to fourteen years) of employees commencing with the following period. As a result of the adoption of the new accounting standard, in the year ended January 31, 2002, income before income taxes decreased by ¥5,395 million compared with what would have been recorded under the previous accounting standard. In connection with enforcement of the Defined Benefit Enterprise Pension Law, the Company and some of its consolidated subsidiaries received approval from the Minister of Health, Labor and Welfare for winding up the non-contributory defined benefit pension plan supported by the government and exemption from payment of future benefits on March 18 and September 26, 2003. Under this condition, the Company and some of its consolidated subsidiaries adopted the Accounting Standard Implementation Guidance No. 1, “Implementation Guidance on Accounting Standard for the Transitions Between the Retirement Benefit Plans”, issued by the Accounting Standards Board of Japan. In accordance with the standard, the Company and some of its consolidated subsidiaries recorded a gain which was the difference between the present value of the future obligations for retirement benefit plans and the pension plan assets, which were related to the dissolution, and unamortized actuarial losses corresponding to the dissolved portion of present value of the future obligations charged to income. As a result of adopting the accounting standard, gain on winding up of the non-contributory defined benefit pension plan amounted to ¥28,564 million ($257,333 thousand) and it was recognized as special gains for the fiscal period ended September 30, 2003. As a part of management reforms, many of the Company’s employees transferred to the Company’s subsidiaries in accordance with the transition toward the new personnel system on September 30, 2003. Also, the Company’s consolidated subsidiaries demolished their privately held pension plan and lump-sum severance and retirement payment plan on September 30, 2003. As a result, the Company and its consolidated subsidiaries reversed the severance and retirement benefits for employees amounted to ¥34,814 million ($313,640 thousand) for the payment of lump-sum severance and retirement payment, and also recognized loss on partial termination of privately held pension plan and loss on partial termination of lump-sum severance and retirement payment plan as part of special losses amounted to ¥396 million ($3,568 thousand), on September 30, 2003 in accordance with the Accounting Standard Implementation Guidance No. 1, “Implementation Guidance on Accounting Standard for the Transitions Between the Retirement Benefit Plans”, issued by the Accounting Standards Board of Japan. (j) SEVERANCE AND RETIREMENT BENEFITS FOR DIRECTORS AND CORPORATE STATUTORY AUDITORS For directors and corporate statutory auditors, the Companies offer a lump-sum retirement benefit plan. The Companies accrue 100% of amounts calculated based on the Companies’ retirement rules under the assumption that all directors and corporate statutory auditors retired from the Companies on the balance sheet date in order to prepare future payments of retirement benefits. Retirement benefits to be paid to directors and corporate statutory auditors are subject to an approval of the general meeting of stockholders before the retirement benefits are paid in accordance with the Code. (k) APPROPRIATION OF RETAINED EARNINGS Cash dividends and bonuses to directors and corporate statutory auditors are recorded in the fiscal period or year when the proposed appropriation of retained earnings is approved at the general meeting of stockholders. (l) STOCKHOLDERS’ EQUITY Under the Commercial Code of Japan, the entire amount of the issue price of shares is required to be accounted for as capital, although a company may, by resolution of its Board of Directors, account for an amount not exceeding one-half of the issue price of the new shares as additional paid-in capital, which is included in capital surplus. Effective October 1, 2001, the Commercial Code provides that an amount equal to at least 10% of cash dividends and other cash appropriations shall be appropriated and set aside as a legal earnings reserve until the total amount of legal earnings reserve and additional paid-in capital equals 25% of common stock. The legal earnings reserve and additional paid-in capital may be used to eliminate or reduce a deficit by resolution of the stockholders’ meeting or may be capitalized by resolution of the Board of Directors. On condition that the total amount of legal earnings reserve and additional paid-in capital remains being equal to or exceeding 25% of common stock, they are available for distribution by resolution of the stockholders’ meeting. Legal earnings reserve is included in retained earnings. The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company in accordance with the Commercial Code. Effective from the period ended September 30, 2003, the components of the stockholders’ equity are presented in accordance with the change in Japanese disclosure requirements. (m) TREASURY STOCK AND REDUCTION OF STATUTORY RESERVES The Companies have adopted Accounting Standard No. 1, “Accounting Standard for Treasury Stock and Reduction of Statutory Reserves”, issued by the Accounting Standards Board of Japan on February 21, 2002. The effect on the accompanying consolidated financial statements would be immaterial. (n) ACCOUNTING FOR LEASES Finance lease transactions, except those leases for which the ownership of the leased assets is considered to be transferred to the lessee, are accounted for in the same manner as operating leases. (o) INCOME TAXES The Companies provide for income taxes applicable to all items included in the consolidated statements of income regardless of when such taxes are currently payable. Income taxes based on temporary differences between tax and financial reporting purposes are reflected as deferred income taxes in the consolidated financial statements using the asset and liability method. (p) NET INCOME PER SHARE Basic net income per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Effective February 1, 2003, the Company adopted the new accounting standard for earnings per share and related guidance (Accounting Standards Board Statement No. 2, “Accounting Standard for Earnings Per Share” and Financial Standards Implementation Guidance No. 4, “Implementation Guidance for Accounting Standard for Earnings Per Share”, issued by the Accounting Standards Board of Japan on September 25, 2002). 20
The new accounting standard requires calculating net income available to common stockholders by deducting of amounts not belonging to common stock (e.g. bonuses to directors appropriated from retained earnings which is to be resolved at the annual 3. TRANSLATION INTO UNITED STATES DOLLARS The accompanying consolidated financial statements are stated in Japanese yen. The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers, using the prevailing exchange rate at September 30, 2003, which stockholders’ meeting held after the period-end) from net income to figure out the basis for the net income per share. The effect on net income per share by the adoption of the new accounting standard would be immaterial. was ¥111 to U.S.$1. The convenience translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange. 4. RECONCILIATION OF “CASH” AND “CASH AND CASH EQUIVALENTS” Millions of yen Thousands of U.S. dollars 2003/9 2003/1 2003/9 Cash shown in the consolidated balance sheet ................................................................................... ¥68,616 ¥64,754 $618,162 Cash equivalents.................................................................................................................................. – – – Cash and cash equivalents................................................................................................................... ¥68,616 ¥64,754 $618,162 5. INVENTORIES Inventories consist of the following: Thousands of Millions of yen U.S. dollars 2003/9 2003/1 2003/9 Merchandise ........................................................................................................................................ ¥50,911 ¥50,268 $458,658 Work in progress ................................................................................................................................. 804 920 7,243 Supplies ............................................................................................................................................... 326 378 2,937 Total ......................................................................................................................................... ¥52,041 ¥51,566 $468,838 6. SECURITIES (i) Acquisition costs, book value and fair value of securities with available fair value as of September 30 and January 31, 2003, are as follows: Held-to-maturity debt securities Millions of yen Thousands of U.S. dollars 2003/9 2003/1 2003/9 Book Fair Book Fair Book Fair value value Difference value value Difference value value Difference Securities with available fair value exceeding book value: Government bonds...................................................... ¥ – ¥ – ¥ – ¥ – ¥ – ¥ – $ – $ – $ – Corporate bonds.......................................................... 10,000 10,017 17 10,000 10,011 11 90,090 90,243 153 Others.......................................................................... – – – – – – – – – Total.....................................................................¥10,000 ¥10,017 ¥17 ¥10,000 ¥10,011 ¥11 $90,090 $90,243 $153 Securities with available fair value not exceeding book value: Government bonds...................................................... ¥ – ¥ – ¥ – ¥ – ¥ – ¥ – $– $– $ – Corporate bonds.......................................................... – – – – – – – – – Others.......................................................................... – – – – – – – – – Total..................................................................... ¥ – ¥ – ¥ – ¥ – ¥ – ¥ – $ – $ – $ – Available-for-sale securities Millions of yen Thousands of U.S. dollars 2003/9 2003/1 2003/9 Acquisition Book Acquisition Book Acquisition Book cost value Difference cost value Difference cost value Difference Securities with book value exceeding acquisition costs: Equity securities.......................................................... ¥2,176 ¥5,937 ¥3,761 ¥917 ¥3,229 ¥2,312 $19,604 $53,487 $33,883 Bonds........................................................................... – – – – – – – – – Others.......................................................................... – – – – – – – – – Total..................................................................... ¥2,176 ¥5,937 ¥3,761 ¥917 ¥3,229 ¥2,312 $19,604 $53,487 $33,883 Securities with book value not exceeding acquisition costs: Equity securities.......................................................... ¥7,700 ¥5,101 ¥(2,599) ¥8,948 ¥5,720 ¥(3,228) $69,369 $45,955 $(23,414) Bonds........................................................................... – – – – – – – – – Others.......................................................................... – – – – – – – – – Total..................................................................... ¥7,700 ¥5,101 ¥(2,599) ¥8,948 ¥5,720 ¥(3,228) $69,369 $45,955 $(23,414) 21
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 and 20: CONSOLIDATED STATEMENTS OF STOCKHOL
Page 21: NOTES TO CONSOLIDATED FINANCIAL STA
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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