Take and Give Needs / 4331

COVERAGE INITIATED ON: 2018.08.01 LAST UPDATE: 2021.03.30

Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.

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INDEX

How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report.

Executive summary ------3 Key financial data ------5 Recent updates ------6 Highlights ------6 Trends and outlook ------8 Quarterly trends and results ------8 Long-term management policy (out June 26, 2018) ------15 Business ------17 Business description ------17 Business segments ------20 Domestic Wedding segment ------21 Market and value chain------32 Competition ------36 Strengths and weaknesses ------41 Historical performance and financial statements ------43 Income statement ------43 Balance sheet ------45 Cash flow statement ------47 Historical performance ------48 Other information ------55 History ------55 News and topics ------57 Corporate governance and top management ------61 Dividend policy ------62 Major shareholders ------63 Employees ------63 Profile ------63

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Executive summary

Business overview

◤ Take and Give Needs Co., Ltd. (T&G) offers “house weddings,” which are marriage ceremonies and receptions held at a guest house rented for the occasion. According to the company, it has the top market share of the house wedding business in Japan by sales at 15%. In FY03/20, the company reported total sales of JPY63.7bn and an operating profit of JPY3.6bn, with the company’s mainstay Domestic Wedding segment accounting for roughly 80% of sales and operating profit.

◤ T&G was established in October 1998 when founder Yoshitaka Nojiri started a house wedding service in partnership with restaurants. In 2001, the company opened a directly operated house wedding facility, and from 2003 expanded operations nationwide ahead of peers, promoting the spread of house weddings across Japan.

◤ The main source of earnings in the Domestic Wedding segment is fees for planning and executing house weddings. The average customer spend for T&G’s house weddings rose after the company upgraded chapels and banquet halls, and this increase contributed to a gradual GPM improvement.

◤ In Q2 FY03/21, T&G fully withdrew from the Overseas and Destination Wedding business, which conducts weddings at resorts overseas and in Okinawa. Backed by the expansion of T&G facilities in Hawaii, Guam, Bali, and Okinawa, the number of weddings had increased steadily, and segment sales rose roughly 2.8x from JPY4.0bn in FY03/11 to JPY11.1bn in FY03/20, with CAGR at 10.71%. However, due to rising investment costs for East Asian markets and the global impact of the COVID-19 outbreak, business conditions took a sharp downturn in FY03/21. On September 18, 2020, T&G announced its intention to transfer all shares in Good Luck Corporation (GLC), the consolidated subsidiary running the business in this segment (the share transfer took place on September 30), and excluded GLC and its nine subsidiaries from consolidation.

Trends and outlook

◤ In FY03/20, the company reported full-year consolidated sales of JPY63.7bn (-4.8% YoY), operating profit of JPY3.6bn (-16.4% YoY), recurring profit of JPY3.4bn (-13.3% YoY), and net income attributable to owners of the parent of JPY1.0bn (-56.1% YoY). Sales and profits have been significantly impacted by increased wedding postponements caused by concerns over the spread of the novel coronavirus disease in Japan (from February 2020); subsequent requests from the Japanese government and local governments to refrain from going outside; and restrictions on overseas travel. About half of the 1,200 weddings and receptions scheduled for March 2020 were postponed to June–September 2020, as the company has decided not to charge for the postponements. The company consulted with its accounting auditor on the recoverability of fixed assets for directly operated facilities and recorded an impairment loss of JPY1.4bn as an extraordinary loss.

◤ The company issued its full-year FY03/21 forecast in ranges when announcing its Q1 FY03/21 results. It then revised its outlook for earnings from the operating profit level and below at the time of Q2 results announcement. On January 28, 2021, it once again lowered its forecast in light of the impact of the second state of emergency issued on January 7, 2021. The latest forecast calls for JPY18.5–20.0bn for sales (-68.6% to -70.9% YoY), JPY13.0–12.0bn in operating loss (versus operating profit of JPY3.6bn in FY03/20), JPY13.5–12.5bn in recurring loss (versus recurring profit of JPY3.4bn in FY03/20), and JPY18.5– 17.0bn for net loss attributable to owners of the parent (versus net income of JPY1.0bn in FY03/20). The revised forecast factors in customers’ postponing their weddings and an expected decline in average spend per wedding accompanying a decline in wedding guest count.

◤ The company announced its long-term management policy EVOL 2027 (covering the years from FY03/19 through FY03/28) in June 2018. The policy called for consolidated sales of roughly JPY100.0bn in FY03/28 supported by efforts to stabilize earnings in the mainstay Domestic Wedding business and cultivate the Hotel business into a new pillar of operations alongside the Overseas and Destination Wedding business. However, T&G intends to review its long-term management policy in light of the downturn in business performance under the impact of the COVID-19 outbreak and its full withdrawal from the Overseas and Destination Wedding business in Q2 FY 03/21. The company has not disclosed details, but it thinks its market share in the Domestic Wedding business may expand as the prevailing harsh business environment drives oligopolization. In the Hotel business, the company believes it can achieve its targets by moving forward with new hotel developments.

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Strengths and weaknesses

The company’s strengths are its established brand in the house wedding market; ability to develop markets by being an early mover, from house weddings to boutique hotels; and capable successors to support the founder. Weaknesses: reliance on the domestic wedding business, which is expected to see market contraction in Japan; impairment of unprofitable venues weighing on profit margins; and low asset efficiency amid maturing house wedding market (see the Strengths and weaknesses section for details).

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Key financial data

Income statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Sales 47,983 52,804 60,714 59,221 59,524 60,186 64,590 66,871 63,678 18,500〜20,000 YoY 2.7% 10.0% 15.0% -2.5% 0.5% 1.1% 7.3% 3.5% -4.8% -68.6〜-70.9% Gross profit 25,801 28,499 34,199 33,847 34,611 35,922 39,848 42,173 40,330 YoY 3.4% 10.5% 20.0% -1.0% 2.3% 3.8% 10.9% 5.8% -4.4% GPM 53.8% 54.0% 56.3% 57.2% 58.1% 59.7% 61.7% 63.1% 63.3% Operating profit 2,213 2,833 3,706 2,973 1,546 2,439 2,785 4,281 3,579 -13,000〜-12,000 YoY -3.0% 28.0% 30.8% -19.8% -48.0% 57.8% 14.2% 53.7% -16.4% OPM 4.6%5.4%6.1%5.0%2.6%4.1%4.3%6.4%5.6% Recurring profit 1,588 2,459 3,342 2,784 1,377 2,100 2,489 3,900 3,381 -13,500〜-12,500 YoY 3.0% 54.8% 35.9% -16.7% -50.5% 52.5% 18.5% 56.7% -13.3% RPM 3.3%4.7%5.5%4.7%2.3%3.5%3.9%5.8%5.3% Net income 453 1,086 1,370 1,008 230 360 888 2,283 1,003 -18,500〜-17,000 YoY 111.7% 139.7% 26.2% -26.4% -77.2% 56.5% 146.7% 157.1% -56.1% Net margin 0.9% 2.1% 2.3% 1.7% 0.4% 0.6% 1.4% 3.4% 1.6% Per-share data (JPY) Shares issued (year-end; '000) 1,297 1,306 13,059 13,059 13,059 13,059 13,059 13,059 13,059 EPS 347.7 83.2 104.7 77.8 17.8 27.9 68.6 176.3 77.5 -1,427.11〜-1,311.40 EPS (fully diluted) 347.7 ------Dividend per share 100.0 120.0 15.0 15.0 15.0 15.0 15.0 15.0 20.0 0.0 Book value per share 12,764 1,361 1,474 1,565 1,559 1,566 1,615 1,712 1,823 Balance sheet (JPYmn) Cash and cash equivalents 5,035 4,170 5,582 5,111 3,871 4,918 4,769 6,782 6,455 Total current assets 7,779 7,612 9,391 9,485 8,237 9,643 10,520 12,647 11,428 Tangible fixed assets 20,803 24,514 24,695 25,564 29,240 31,743 35,037 34,331 37,124 Intangible fixed assets 557 2,191 2,384 2,187 1,981 1,143 887 798 462 Investments and other assets 14,249 12,192 11,810 10,853 9,826 9,647 9,580 9,352 9,182 Total assets 43,390 46,510 48,282 48,091 49,286 52,176 56,025 57,130 58,197 Accounts payable 2,413 2,732 2,874 2,576 2,627 2,484 2,339 2,594 1,313 Short-term debt 8,585 5,243 6,017 5,494 4,890 7,111 6,300 6,731 7,884 Total current liabilities 15,158 13,270 15,839 14,058 13,648 16,510 15,597 17,084 16,175 Long-term debt 9,066 12,655 10,330 11,338 12,778 12,881 16,868 10,994 12,741 Total fixed liabilities 11,439 15,279 13,081 13,569 15,252 15,180 19,291 16,864 18,225 Total liabilities 26,598 28,550 28,921 27,628 28,901 31,690 34,889 33,949 34,400 Net assets 43,390 46,510 48,282 48,091 49,286 52,176 56,025 57,130 58,197 Total interest-bearing debt 17,651 17,898 16,347 16,832 17,668 19,992 23,168 17,725 20,625 Cash flow statement (JPYmn) Cash flows from operating activities 3,687 3,870 5,646 1,825 3,731 4,130 4,139 6,449 4,259 Cash flows from investing activities -880 -2,197 -1,769 -2,477 -5,471 -5,155 -6,708 -2,488 -7,038 Cash flows from financing activities -1,828 -2,377 -2,537 126 476 2,092 2,408 -1,956 2,293 Financial ratios ROA (RP-based) 3.6% 5.5% 7.1% 5.8% 2.8% 4.1% 4.6% 4.0% 5.9% ROE 2.7%6.0%7.2%5.1%1.2%1.8%4.3%10.0%4.3% Equity ratio 38.4% 38.2% 39.6% 42.2% 41.0% 38.9% 37.3% 40.2% 40.6% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Recent updates Highlights

On March 30, 2021, Shared Research updated the report following interviews with Take & Give Needs Co., Ltd.

On March 18, 2021, the company made an announcement regarding the conclusion of commitment line agreements.

The company announced that, at an extraordinary board meeting held on the same day, it had resolved to enter into commitment line agreements with the financial institutions outlined below.

The company already has overdraft facilities with an aggregate value of JPY16.5bn, securing sufficient funding at this time; see “Overdraft agreement” (April 21, 2020) and “Long-term borrowing and overdraft agreements” (June 19, 2020) under News and topics. However, with the possibility that the impact of the COVID-19 pandemic on business performance will remain prolonged, and with the management looking to implement growth strategies ahead of eventual recovery, the company will switch a part of its existing overdraft facility to a commitment line agreement. This will give the company flexible financing and further stabilize and strengthen its financial base.

The financial institutions with which these agreements are to be concluded and the terms of the amendment are as follows. The commitment line has a term of one year from the date of the agreement with each financial institution, at a variable interest rate linked to market rates with no collateral or guarantee. ・ Resona Bank, Ltd.: Overdraft agreement: current limit JPY5.0bn → limit amended to JPY4.0bn (expiry: April 30, 2021) Commitment line agreement: JPY1.0bn (planned agreement date: March 24, 2021) ・ Mizuho Bank, Ltd.: Overdraft agreement: current limit JPY5.0bn → limit amended to JPY4.0bn (expiry: April 24, 2021) Commitment line agreement: JPY1.0bn (planned agreement date: March 24, 2021)

On February 10, 2021, the company announced earnings results for Q3 FY03/21; see the results section for details.

On the same day, the company announced the recording of an extraordinary gain (employment adjustment subsidy).

On the same day, the company announced a third-party allotment of preferred shares, a partial amendment to its articles of incorporation, and a reduction in its capital and capital reserves.

The company announced that, at a board meeting held on the same day, it had resolved, among other matters, to issue preferred shares through a third-party allotment.

Overview of the third-party allotment of new shares (1) Class 1 preferred shares Payment date: April 20, 2021 Number of new shares to be issued: Class 1 Preferred Stock 2,000 shares Total issue amount: JPY2.0bn Allottee: The Norinchukin Bank, 2,000 shares

(2) Class 2 preferred shares Payment date: April 20, 2021 Number of new shares to be issued: Class 2 Preferred Stock 1,000 shares

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Total issue amount: JPY1.0bn Allottee: Tsunagu Investments, 1,000 shares

Purpose of offering The COVID-19 pandemic has caused the postponement or cancellation of wedding and reception events in Japan and overseas since March 2020. In particular, the company expected the Overseas and Destination Wedding business to require a longer period of time to recover than the domestic business. As such, on September 30, 2020, T&G withdrew from the Overseas and Destination Wedding business by selling all of its shares in Good Luck Corporation, which operated the business. After the state of emergency declaration was lifted in May 2020, there were fewer postponements and cancellations, and the business was recovering. However, after the second state of emergency was issued on January 7, 2021, the number of postponements to FY03/22 rose once again. As a result, the company posted a net loss attributable to owners of the parent of JPY13.2bn in cumulative Q3 FY03/21, with the consolidated equity ratio falling from 40.6% at end-FY03/20 to 20.0% at end-Q3 FY03/21.

As of February 10, 2021, the company had an overdraft facility of JPY16.5bn, and believes that it has sufficient funds for the time being. However, it decided to accept the investment from the allottees to strengthen its financial position in order to implement a growth strategy in anticipation of the end of the COVID-19 pandemic.

The company can collaborate with the Norinchukin Bank to procure flowers and foodstuffs for the Domestic Wedding business. In addition, the Singapore-based Tsunagu Investments has been collaborating with its Japanese portfolio companies since 2012 to provide management support and other services.

The company noted that it chose to move forward with a third-party allotment of new shares as it could raise funds without a sharp dilution or change in the shareholder structure. For details, please refer to the new release.

On January 28, 2021, the company announced revisions to its full-year earnings forecast for FY03/21.

Revisions to full-year FY03/21 earnings forecast

▷ Sales: JPY18.5–20.0bn (previous forecast: JPY22.0–25.0bn) ▷ Operating loss: JPY13.0–12.0bn (a loss of JPY12.0–10.0bn) ▷ Recurring loss: JPY13.5–12.5bn (a loss of JPY12.5–10.5bn) ▷ Net loss attributable to owners of the parent: JPY18.5–17.0bn (a loss of JPY16.5–14.5bn) ▷ Loss per share: JPY1,427.11–1,311.40 (loss per share of JPY1,273.49–1,119.13)

Reasons for revision Customers are postponing their weddings due to the impact of the second state of emergency declared on January 7, 2021. Since the first week of January, about 25% of weddings scheduled for January–March have been postponed to FY03/22 or later. Further, due to a fall in the number of guests and wedding invitees from areas covered by the state of the emergency declining to attend weddings, average spend per wedding is on a downtrend. Hence, in light of the expected decline in average spend per wedding in addition to its projection that about 40% of weddings would be postponed eventually, the company lowered its previous forecast.

The number of cancelled weddings remains at a low level. The company thinks that the postponement of weddings due to the impact of the second state of emergency will have a positive impact on earnings in FY03/22 and later.

For previous releases and developments, please refer to the News and topics section.

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Trends and outlook

Quarterly trends and results

Cumulative FY03/20 FY03/21 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3FY Est. Sales 16,012 32,741 49,086 63,678 2,602 6,183 14,348 18,500〜20,000 YoY 1.3% 0.0% -2.1% -4.8% -83.7% -81.1% -70.8% -68.6〜-70.9% Gross profit 10,049 20,632 30,982 40,330 1,666 3,964 9,214 YoY 1.3% -0.4% -1.9% -4.4% -83.4% -80.8% -70.3% Gross profit margin 62.8% 63.0% 63.1% 63.3% 64.0% 64.1% 64.2% SG&A expenses 9,195 18,417 27,334 36,750 5,149 12,067 17,994 YoY 1.4% -0.1% -1.4% -3.0% -44.0% -34.5% -34.2% SG&A ratio 57.4% 56.3% 55.7% 57.7% 197.9% 195.2% 125.4% Operating profit 854 2,214 3,647 3,579 -3,483 -8,103 -8,780 -13,000〜-12,000 YoY -0.4% -3.1% -5.6% -16.4% - - - Operating profit margin 5.3% 6.8% 7.4% 5.6% - - - Recurring profit 821 2,079 3,432 3,381 -3,563 -8,380 -9,135 -13,500〜-12,500 YoY 14.2% -0.5% -4.7% -13.3% - - - Recurring profit margin 5.1% 6.3% 7.0% 5.3% - - - Net income 468 946 1,814 1,003 -5,992 -13,159 -13,156 -18,500〜-17,000 YoY -2.5% -29.5% -20.7% -56.1% - - - Net margin 2.9% 2.9% 3.7% 1.6% - - - Quarterly FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3 Sales 16,012 16,729 16,345 14,592 2,602 3,581 8,165 YoY 1.3% -1.3% -6.1% -12.8% -83.7% -78.6% -50.0% Gross profit 10,049 10,583 10,350 9,348 1,666 2,298 5,250 YoY 1.3% -1.9% -4.8% -11.7% -83.4% -78.3% -49.3% Gross profit margin 62.8% 63.3% 63.3% 64.1% 64.0% 64.2% 64.3% SG&A expenses 9,195 9,222 8,917 9,416 5,149 6,918 5,927 YoY 1.4% -1.5% -4.1% -7.4% -44.0% -25.0% -33.5% SG&A ratio 57.4% 55.1% 54.6% 64.5% 197.9% 193.2% 72.6% Operating profit 854 1,360 1,433 -68 -3,483 -4,620 -677 YoY -0.4% -4.7% -9.2% - - - - Operating profit margin 5.3% 8.1% 8.8% - - - - Recurring profit 821 1,258 1,353 -51 -3,563 -4,817 -755 YoY 14.2% -8.2% -10.6% - - - - Recurring profit margin 5.1% 7.5% 8.3% - - - - Net income 468 478 868 -811 -5,992 -7,167 3 YoY -2.5% -44.5% -8.1% - - - -99.7% Net margin 2.9% 2.9% 5.3% - - - 0.0% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Quarterly sales Quarterly operating profit (JPYmn) Q1 Q2 Q3 Q4 (JPYmn) Q1 Q2 Q3 Q4 80,000 5,000 4,281 419 3,579 70,000 66,871 3,000 1,578 63,678 1,433 1,427 1,360 60,000 16,727 1,000 14,592 857 854 -68 50,000 -1,000 -3,483 17,402 40,000 16,345 -3,000

30,000 -5,000 16,941 16,729 -4,620 20,000 -7,000

10,000 8,165 -677 15,801 16,012 -9,000 3,581 2,602 0 -11,000 FY03/19 FY03/20 FY03/21 FY03/19 FY03/20 FY03/21

Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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By segment (cumulative) FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3 Sales 16,012 32,741 49,086 63,678 2,602 6,183 14,348 YoY 1.3% 0.0% -2.1% -4.8% -83.7% -81.1% -70.8% Domestic Wedding 13,399 26,488 40,584 51,145 498 3,846 11,890 YoY 1.9% -0.3% -1.9% -5.7% -96.3% -85.5% -70.7% % of total sales 83.7% 80.9% 82.7% 80.3% 19.1% 62.2% 82.9% Overseas and Destination Wedding 2,227 5,469 7,322 11,106 1,955 2,066 2,066 YoY 0.5% 1.3% -4.0% -0.6% -12.2% -62.2% -71.8% % of total sales 13.9% 16.7% 14.9% 17.4% 75.1% 33.4% 14.4% Other 385 783 1,179 1,426 148 270 390 YoY -11.3% 0.6% 3.4% -0.8% -61.6% -65.5% -66.9% % of total sales 2.4% 2.4% 2.4% 2.2% 5.7% 4.4% 2.7% Operating profit 854 2,214 3,647 3,579 -3,483 -8,103 -8,780 YoY -0.4% -3.1% -5.6% -16.4% - - - Domestic Wedding 1,735 3,354 5,836 5,709 -2,709 -5,985 -6,258 YoY 28.6% 15.9% 11.5% -2.3% - - - Operating profit margin 12.9% 12.7% 14.4% 11.2% - - - Overseas and Destination Wedding -360 -199 -832 -256 -375 -1,316 - YoY ------Operating profit margin ------Other -521 -941 -1,357 -1,874 -399 -802 -2,522 YoY ------Operating profit margin ------By segment (quarterly) FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3 Sales 16,012 16,729 16,345 14,592 2,602 3,581 8,165 YoY 1.3% -1.3% -6.1% -12.8% -83.7% -78.6% -50.0% Domestic Wedding 13,399 13,089 14,096 10,561 498 3,348 8,044 YoY 1.9% -2.4% -4.8% -18.0% -96.3% -74.4% -42.9% % of total sales 83.7% 78.2% 86.2% 72.4% 19.1% 93.5% 98.5% Overseas and Destination Wedding 2,227 3,242 1,853 3,784 1,955 111 - YoY 0.5% 1.9% -16.9% 6.7% -12.2% -96.6% - % of total sales 13.9% 19.4% 11.3% 25.9% 75.1% 3.1% - Other 385 398 396 247 148 122 120 YoY -11.3% 15.7% 9.4% -16.8% -61.6% -69.3% -69.7% % of total sales 2.4% 2.4% 2.4% 1.7% 5.7% 3.4% 1.5% Operating profit 854 1,360 1,433 -68 -3,483 -4,620 -677 YoY -0.4% -4.7% -9.2% - - - -147.2% Domestic Wedding 1,735 1,619 2,482 -127 -2,709 -3,276 -273 YoY 28.6% 4.9% 6.1% - - - - Operating profit margin 12.9% 12.4% 17.6% - - - - Overseas and Destination Wedding -360 161 -633 576 -375 -941 - YoY --59.0%----- Operating profit margin - 5.0% - 15.2% - - - Other -521 -420 -416 -517 -399 -403 -1,720 YoY ------Operating profit margin ------Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: Other includes corporate expenses.

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Q3 FY03/21 results (out February 10, 2021) Earnings summary Cumulative Q3 FY03/21 results (April–December 2020)

▷ Sales: JPY14.3bn (-70.8% YoY) ▷ Operating loss: JPY8.8bn (versus operating profit of JPY3.6bn in cumulative Q3 FY03/20) ▷ Recurring loss: JPY9.1bn (versus recurring profit of JPY3.4bn) ▷ Net loss: JPY13.2bn (versus net income of JPY1.8bn)

*Net loss/income refers to net loss/income attributable to owners of the parent.

▷ Sales and profit declined as the number of weddings held dropped by 6,232 YoY to just 2,982 due to the spread of COVID-19. ▷ SG&A expenses fell by JPY9.3bn YoY (-34.2% YoY), narrowing the operating loss. The main factors underlying the decrease in SG&A expenses were (1) a reduction in costs of about JPY2.8bn related to the transfer of shares of a subsidiary at the end of September 2020, which included the withdrawal from overseas offices and elimination of personnel expenses for 430 employees, and (2) a JPY 1.3bn decline in advertising expenses, which mainly reflects a 20% YoY decrease in printing fees for

printed advertising materials. In addition, the lower number of weddings handled resulted in about a 10% YoY decrease in referral fees paid to agents as a success fee in the month the wedding is held. Personnel costs and transportation costs continued to decline as the company makes more use of remote online work from home. ▷ Extraordinary gain: Employment adjustment subsidy of JPY1.7bn, gain on sale of overseas subsidiaries of JPY715mn. ▷ Extraordinary loss: JPY2.4bn in a part of SG&A expenses incurred during temporary closures of facilities, JPY1.5bn impairment loss on Overseas and Destination Wedding venues, JPY1.1bn loss on sale of shares in group subsidiaries, and JPY739mn loss on

business liquidation of overseas subsidiaries. ▷ Financing: Interest-bearing debt increased by JPY9.2bn.

Results by segment Cumulative Q3 FY03/21 (April–December 2020) results by segment are as follows.

Domestic Wedding business

▷ Segment sales: JPY11.9bn (-70.7% YoY) ▷ Segment loss: JPY6.3bn (versus segment profit in cumulative Q3 FY03/20 of JPY5.8bn) ▷ Sales breakdown: Directly operated facilities generated sales of JPY10.5bn (-71.2% YoY), consulting services JPY317mn (-74.1% YoY), and other services (lodging, restaurants, etc.) JPY1.1bn (-63.7% YoY). ▷ Directly operated facilities: At end-Q3 FY03/21, the company had 63 facilities and 93 venues (66 facilities and 101 venues at end-Q3 FY03/20). The company performed 2,982 weddings (versus 9,214 in cumulative Q3 FY03/20) with an average spend per wedding of JPY3.5mn (JPY3.9mn in cumulative Q3 FY03/20) and average visitor count per wedding of 49.1 (69.5 in cumulative Q3 FY03/20). ▷ Quarterly data on the number of weddings shows an improving trend following Japan’s first state of emergency during the COVID-19 pandemic, with the number rising from 82 in Q1 (April–June), to 834 in Q2 (July–September) and 2,066 in Q3 (October–December). The average spend per wedding also gradually improved, rising from JPY3.2mn in Q1, to JPY3.4mn in Q2, and JPY3.6mn in Q3, helping to lower the operating loss.

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Performance

Cumulative FY 03/ 19 FY 03/ 20 FY 03/ 21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 Domestic Wedding 13,151 26,566 41,376 54,259 13,399 26,488 40,584 51,145 498 3,846 11,890 YoY 11.2% 5.6% 3.6% 4.2% 1.9% -0.3% -1.9% -5.7% -96.3% -85.5% -70.7% Directly operated facilities 11,837 23,915 37,064 48,595 12,013 23,775 36,290 45,824 352 3,171 10,459 Domestic house wedding 10,765 21,653 33,487 43,954 10,833 21,409 32,605 41,175 337 2,973 9,703 TRUNK (HOTEL) 1,072 2,262 3,577 4,641 1,180 2,366 3,685 4,649 15 198 756 Number of weddings 3,086 6,207 9,562 12,537 3,070 6,073 9,214 11,596 82 916 2,982 Average spend (JPY'000) 3,827 3,846 3,871 3,868 3,910 3,911 3,935 3,947 - 3,378 3,532 Average visitor count 68.0 68.6 69.2 69.5 69.3 69.4 69.5 69.7 - 46.1 49.1 Consulting 354 713 1,179 1,587 430 829 1,223 1,535 12 124 317 Gross transaction value 325 649 1,080 2,410 1,692 3,168 4,714 - - - - Number of weddings 117 242 387 707 403 771 1,121 1,367 - - - Other 914 1,936 3,131 4,071 955 1,883 3,069 3,785 133 548 1,114 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Overseas and Destination Wedding business

▷ The company withdrew from the Overseas and Destination Wedding business as of end-Q2, having transferred shares in the group subsidiary operating the business. According to the company, the transfer of the Overseas and Destination Wedding business has been accomplished without affecting the domestic wedding business and other businesses operated by T&G as

the overseas business was operated by the subsidiary on a completely independent basis with no connection to T&G’s domestic businesses.

Performance

Cumulative FY03/19 FY03/20 FY 03/ 21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 Overseas and Destination Wedding 2,216 5,397 7,627 11,174 2,227 5,469 7,322 11,106 1,955 2,066 2,066 YoY 5.3% 5.0% 5.1% 3.5% 0.5% 1.3% -4.0% -0.6% -12.2% -62.2% -71.8% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Other businesses Other businesses include the financial and credit business, such as wedding loans, and the childcare business, among others.

▷ Segment sales: JPY390mn (-66.9% YoY)

For details on previous quarterly and annual results, please refer to the Historical financial statements section.

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Full-year company forecast

FY03/18 FY03/19 FY 03/ 20 FY 03/ 21 (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY A ct . 1H A c t . FY Es t . Sales 31,082 33,508 64,590 32,742 34,129 66,871 32,741 30,937 63,678 6,183 18,500〜20,000 YoY 7.7% 6.9% 7.3% 5.3% 1.9% 3.5% 0.0% -9.4% -4.8% -81.1% -68.6〜-70.9% Operating profit 683 2,102 2,785 2,284 1,997 4,281 2,214 1,365 3,579 -8,103 -13,000〜-12,000 YoY 19.0% 12.7% 14.2% 234.4% -5.0% 53.7% -3.1% -31.6% -16.4% - - OPM 2.2%6.3%4.3%7.0%5.9%6.4%6.8%4.4%5.6%- - Recurring profit 491 1,998 2,489 2,090 1,810 3,900 2,079 1,302 3,381 -8,380 -13,500〜-12,500 YoY 74.1% 9.9% 18.5% 325.7% -9.4% 56.7% -0.5% -28.1% -13.3% - - RPM 1.6%6.0%3.9%6.4%5.3%5.8%6.3%4.2%5.3%- - Net income 36 852 888 1,342 941 2,283 946 57 1,003 -13,159 -18,500〜-17,000 YoY 2.9% 162.2% 146.7% 3627.8% 10.4% 157.1% -29.5% -93.9% -56.1% - - Net margin 0.1% 2.5% 1.4% 4.1% 2.8% 3.4% 2.9% 0.2% 1.6% - - Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Full-year FY03/21 consolidated earnings forecast The company issued its full-year FY03/21 forecasts in ranges when announcing its Q1 FY03/21 results. It then revised its outlook for earnings from the operating profit level and below at the time of Q2 results announcement. On January 28, 2021, it once again revised down its forecast in light of the impact of the second state of emergency issued on January 7, 2021.

Revised FY03/21 earnings forecast

▷ Sales: JPY18.5–20.0bn (previous forecast: JPY22.0–25.0bn) ▷ Operating loss: JPY13.0–12.0bn (a loss of JPY12.0–10.0bn) ▷ Recurring loss: JPY13.5–12.5bn (a loss of JPY12.5–10.5bn) ▷ Net loss attributable to owners of the parent: JPY18.5–17.0bn (a loss of JPY16.5–14.5bn) ▷ Loss per share: JPY1,427.11–1,311.40 (loss per share of JPY1,273.49–1,119.13)

Reasons for revision Customers are postponing their weddings due to the impact of the second state of emergency declared on January 7, 2021. Since the first week of January, about 25% of weddings scheduled for January–March have been postponed to FY03/22 or later. Further, due to a fall in the number of guests and wedding invitees from areas covered by the state of the emergency declining to attend weddings, average spend per wedding is on a downtrend. Hence, in light of the expected decline in average spend per wedding in addition to its projection that about 40% of weddings would be postponed eventually, the company lowered its previous forecast.

The number of cancelled weddings remains at a low level. The company thinks that the postponement of weddings due to the impact of the second state of emergency will have a positive impact on earnings in FY03/22 and later.

According to the company, during the pandemic, couples planning a wedding are doing more background research before visiting prospective wedding ceremony facilities than was the case in more normal times. The visit ratio for T&G facilities (the ratio of couples who actually visit the company's facility after a first inquiry) has risen from 70–75% in the past to about 80%. In addition, the percentage of couples who book a wedding ceremony after visiting the company’s facilities has also risen. As a result, in some months the number of new contracts has been the same as in the previous year. The company also has said that the second state of emergency’s impact is less than the first’s and that the cumulative number of contracts as of February has recovered to about 60% of the previous year level.

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Measures implemented by the company in FY03/21

▷ Securing of operating funds: T&G entered into an overdraft agreement for JPY10.0bn in April 2020, and into long-term

borrowing and overdraft agreements for JPY3.5bn and JPY6.5bn, respectively, in June 2020. As of the end of December 2020,

the company had borrowed JPY8.3bn of the total JPY16.5bn overdraft amount, believing it would be able to secure the

funds for continued operation. However, with the possibility that the impact of the COVID-19 pandemic on business

performance will remain prolonged, and with the management looking to implement growth strategies ahead of eventual

recovery, the company switched a part of its existing overdraft facility to a commitment line agreement in March 2021.

▷ Reduction in SG&A expenses: The company reduced SG&A expenses by 34.2% YoY in cumulative Q3 FY03/21, with

group-wide cost reductions totaling about JPY6.9bn. It has also decided to postpone investment in facility renewals, with the

exception of Arferique Shirogane in Tokyo. ▷ Narrowing of operating loss: The exit from overseas offices following withdrawal from the Overseas and Destination Wedding business, the end-September transfer of all shares of the subsidiary operating that business, and the lower number of weddings held and temporary cessation of operations during the pandemic reduced the company’s operating loss by JPY2.8bn. ▷ Third-party allotment of preferred shares: In February 2021, the Board of Directors resolved to issue preferred shares in a third-party allotment. The issuance will raise JPY3.0bn in new funding that the company plans to use to implement a post-COVID-19 growth strategy, with JPY1.0bn going to the renewal of existing facilities and about JPY1.8bn to building

renovations, the purchase of wedding dresses, systems development, etc. ▷ Promotion of increased in-house production during COVID-19: T&G has been promoting in-house production of wedding dresses for some time now and has been strengthening its product lineup with original dresses produced by the company’s

dress coordinators based on customer input as well as imports reflecting the latest wedding dress fashion trends. The enhanced product lineup and strengthened customer referrals from the company’s wedding planners has led to the increased selection of the company's original dresses. According to the company, its in-house produced original wedding dresses are

now being selected by more than 80% of customers in the Tokyo–Yokohama and Kansai regions (up from, respectively, 66.0% and 67.9% previously) and by 82.6% of customers on a nationwide basis.

Response to COVID-19 pandemic Communication with customers who postponed weddings From late April, T&G sent a total of 380,000 emails to customers who postponed their wedding, with email topics covering company policies and a range of suggestions such as how to make the most of time spent at home, how to select a wedding dress, and how to shoot beautiful wedding pictures. According to the company, customer action rate was high; over 30% of the recipients opened such emails, and roughly 10% clicked on the enclosed links. Shared Research understands that these dedicated follow-up initiatives ensured customers remained committed to holding their wedding ceremony at a T&G facility, and ultimately contributed to a low cancellation rate as of May 2020. In Q2, the company continued its follow up initiatives, with the company’s president, Kenji Iwase, sending letters to the parents of customers before their wedding ceremonies detailing the safety measures in place, as well as thank-you letters after the ceremonies. In Q3, the company held online seminars on its YouTube channel to deliver basic wedding-preparation information and trends to customers who have postponed their wedding ceremonies. In addition, the company has been promoting non-contact support operations, such as WEB invitations that allow attendance confirmation online and credit-card pre-payments of congratulatory monetary gifts.

Email open rate = (number of emails opened / number of effectively delivered emails) x 100 (%) Click-through rate = (number of clicks / number of effectively delivered emails) x 100 (%) The industry-average email open and click-through rates are 13.9% and 6.9%, respectively (according to “Email Marketing Stats,” Smart Insights, April 2020)

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Formulation of internal guidelines to prevent the spread of COVID-19 infections On April 30, T&G formulated internal guidelines on resumption of operations ahead of industry regulators such as the Ministry of Health, Labour, and Welfare, which published the “Proposal for a New Lifestyle Format” on May 4, 2020, and the Bridal Institutional Association (BIA), which published industry guidelines on May 14, 2020. As weddings and receptions are events that typically bring together a large number of people in closed, crowded, and close-contact settings, the company started working on its guidelines in early April to ensure its customers could hold their weddings with peace of mind. Because weddings are not events that attract many and unspecified people and are mostly held in facilities with adjoining gardens, the company believes ventilation is not a major issue, and it has taken measures to implement social distancing. In addition, it started proposing holding weddings at outdoor facilities to couples planning a wedding from September 1, 2020 to end-March 2021.

T&G has repeatedly updated its guidelines, and is implementing robust infection prevention measures to provide couples with safe, secure environments while also ensuring that their wedding day is out of the ordinary. For example, apart from basic measures such as taking guests’ temperatures, checking physical condition, and using alcohol disinfectant, the company distributes a video on preventing infection in advance to invited guests by means of a QR code, and has installed clear plastic panels in reception venues at its directly operated facilities. Thanks to these thoroughgoing prevention measures at facilities nationwide, results of customer satisfaction surveys from 1H FY03/21 exceeded results from the previous year.

Company forecast versus results Results vs. Initial Est. FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales (Initial Est.) 47,759 48,500 50,000 58,000 62,000 61,500 60,000 65,000 66,000 67,500 Sales (Results) 46,716 47,983 52,804 60,714 59,221 59,524 60,186 64,590 66,871 63,678 Results vs. Initial Est. -2.2% -1.1% 5.6% 4.7% -4.5% -3.2% 0.3% -0.6% 1.3% -5.7% Operating profit (Initial Est.) 2,688 2,350 2,600 3,400 3,800 1,800 1,700 2,600 3,200 4,000 Operating profit (Results) 2,282 2,213 2,833 3,706 2,973 1,546 2,439 2,785 4,281 3,579 Results vs. Initial Est. -15.1% -5.8% 9.0% 9.0% -21.8% -14.1% 43.5% 7.1% 33.8% -10.5% Recurring profit (Initial Est.) 1,984 1,650 2,000 3,000 3,500 1,500 1,500 2,200 2,800 3,600 Recurring profit (Results) 1,541 1,588 2,459 3,342 2,784 1,377 2,100 2,489 3,900 3,381 Results vs. Initial Est. -22.3% -3.8% 23.0% 11.4% -20.5% -8.2% 40.0% 13.1% 39.3% -6.1% Net income (Initial Est.) 857 550 800 1,500 1,400 700 650 750 1,100 1,700 Net income (Results) 214 453 1,086 1,370 1,008 230 360 888 2,283 1,003 Results vs. Initial Est. -75.0% -17.6% 35.8% -8.7% -28.0% -67.1% -44.6% 18.4% 107.5% -41.0% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Long-term management policy (out June 26, 2018)

T&G announced its long-term management policy EVOL 2027 on June 26, 2018.

However, the company needs to review the policy due to impact of the COVID-19 outbreak, and plans to conduct its review from end-July 2020. In the Domestic Wedding business, T&G thinks its market share may rise and segment sales may exceed its original target of JPY50.0bn if the prevailing harsh business environment triggers a wave of bankruptcies among its peers and drives oligopolization. In the Hotel business, the company believes it can achieve its sales target of JPY30.0 by continuing new hotel developments. As it is unclear when the COVID-19 impact will subside, the company has decided to downsize and restructure its Overseas and Destination Wedding business, and accordingly believes it will be difficult to achieve its original sales target in this business.

The following is an outline of the long-term management policy as announced in 2018.

Vision: EVOL

Mission: Innovation in the hospitality industry

Group sales JPY100.0bn

Overseas and Destination Domestic Wedding Hotel Wedding

Continue improving the quality Offer resort wedding Create a market for of wedding ceremonies and experiences to global customers boutique hotels in Japan provide high value to customers

Sales: JPY50.0bn Sales: JPY20.0–30.0bn Sales: JPY30.0–40.0bn

Source: Shared Research based on company data

According to the long-term management policy, the company targets consolidated sales of JPY100.0bn in FY03/28, the final year of the plan. The sales target of JPY100.0bn breaks down to Domestic Wedding business JPY50.0bn, Hotel business JPY30.0– 40.0bn, Overseas and Destination Wedding business JPY20.0–30.0bn, and Other JPY5.0bn.

In the mainstay Domestic Wedding business, T&G plans to further strengthen earnings capability by controlling new openings, closing unprofitable venues, and reducing costs. It aims to enhance quality of its wedding ceremonies (high spend per wedding) through measures to ensure assignment of a wedding planner to each couple, exclusive use of a facility (i.e., exclusive use of an entire facility besides a wedding chapel such as a pool, garden, and banquet room) for each wedding, and customized ceremonies for each couple. Further, the company intends to focus on marketing activities that utilize social media such as Instagram and YouTube. Taking advantage of conducting one of the largest numbers of weddings in Japan, it plans to improve GPM with continued efforts to increase the share of in-house production of wedding dresses and tuxedos, gifts, and floral decorations.

In the Hotel business, T&G intends to open boutique hotels* (a new category in the Japanese market). It plans to open more TRUNK (HOTEL)s in central Tokyo and more localized boutique hotels in major regional cities (10 in total over the next 10 years). The company expects to attract foreign tourists to its directly operated hotels and positions the Hotel business as a growth business. It also plans to cultivate new resorts and wedding locations in the Overseas and Destination Wedding business to capture growing demand in Asia.

*A key feature of boutique hotels is stylish designer interiors. Most are small, high-end hotels with 10–100 rooms. Boutique hotels are already common in North America and Europe, where they are positioned midway between business and luxury hotels. TRUNK (HOTEL) is based on the Western boutique hotel model, incorporating concepts of socializing, and modified to suit Japanese central city locations.

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The Overseas and Destination Wedding business operates in a field with high barriers to entry, making it difficult for other companies to enter the field and make profit. Reasons include limited number of target destinations suitable for development and higher cost of sales (e.g., costs of establishing and operating domestic facilities and advertising expenses) compared with that of domestic wedding business. T&G intends to intensively open facilities in popular destinations of Hawaii, Guam, Bali, and Okinawa in a short period of time and target upper middle- and upper-class customers to realize significantly higher spend per wedding than the industry average. It will promote collaborations with unique facilities designed by renowned architects and designers as well as famous brands and creators in Japan and overseas with an aim of developing high value-added wedding ceremonies. The company plans to open new facilities mainly in the Overseas and Destination Wedding business and in its new Hotel business (directly operated hotels), which could benefit from market growth.

T&G has not disclosed its operating profit targets in the long-term management policy. Shared Research projects stable cash flow from the Domestic Wedding business as a result of strengthened earnings capability and competitive advantage, leading to higher market share. Judging from historical earnings trends in the Domestic Wedding business, OPM of around 8% is in sight for the long term. Judging from the company’s overall direction of maintaining the profitability of the Domestic Wedding business while expanding earnings of the Overseas and Destination Wedding business and the Hotel business, consolidated OPM of around 7% are expected.

Long-term earnings outlook FY03/18 FY03/28 (SR est.) CA GR Operating Operating (JPYmn) Sales OPM Sales OPM Sales profit profit Domestic Wedding 52,450 3,914 7% 50,000 4,000 8% 0% Hotel 3,646 30 1% 30,000 3,600 12% 21% Overseas and Destination Wedding 10,801 602 6% 20,000 1,600 8% 6% Others 1,692 194 11% 5,000 500 10% 11% Company-wide expenses -3,999 -1,961 -5,000 -2,500 Total 64,590 2,785 4% 100,000 7,200 7% 4% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Business Business description Industry leader that pioneered the house wedding market in Japan T&G plans, organizes, and executes “house weddings,” which are wedding ceremonies and receptions held in large rented houses, usually with a garden. According to the company, it has the top market share of the house wedding business in Japan at 15%.

Overview of house weddings: House weddings refer to private wedding ceremonies and receptions held at classic, upscale Western-style residences. House weddings debuted in Japan when Press Work (now Anniversaire Inc., a subsidiary of AOKI Holdings [TSE1: 8214]) opened Ludens Tachikawa Wedding Village in 1997. In 2000, Best Bridal (now Tsukada Global Holdings) opened ArtGrace Club Shirogane in Shirogane, Tokyo.

T&G was established in October 1998 with three founding partners, including Yoshitaka Nojiri. With its initial priority being just to learn the house wedding business, T&G started off in the restaurant wedding business, working together with a number of different types of restaurants that operated in a standalone house. It was 2001 when the company made its first foray into direct management of house weddings with the opening of its own facilities, Ark Club Shoto and Arkangel Daikanyama. After ceding the lead to competitors such as Anniversaire and Best Bridal, in 2003 T&G stepped up the pace of new openings in regional markets and this along with accelerated efforts to establish a nationwide chain made house weddings known nationwide. T&G went public with a listing on NASDAQ Japan (now Tokyo Stock Exchange, JASDAQ market), three years after it was founded, moved its listing to the Second Section of the Tokyo Stock Exchange in 2004 and then to the First Section in 2006.

Exclusive use of facility for each wedding, with planner assigned to each couple Timeline of a wedding ceremony in Japan The timeline of a typical wedding in Japan is as follows. Customers (the prospective bride and groom) use wedding information services such as Zexy and Minna no Wedding to find a venue and make reservations to attend the so-called bridal fairs organized by the venues that appeal to them. At these fairs, sales reps interview participants to find out what they require, explain the features and selling points of the venue, and prepare a wedding plan and cost estimate. Prospective customers will usually tour several venues and sign a contract with the one best fitting their needs.

Sales reps work with their internal planning departments and with dress rental businesses, florists, and photographers to provide a customized service menu so they can accommodate constantly changing customer needs as much as possible. We note that many larger companies that used to outsource these services have brought them in-house in recent years.

Typical timeline of a wedding ceremony in Japan Timeframe Things to do Before 8 to 10 months Inform both sets of parents. Receive parental advice and develop a wedding general idea on preferred wedding styles. 6 to 8 months Prepare wedding rings and engagement gifts. Hold formal engagement ceremony or dinner. Attend bridal events hosted by wedding venues to get a feel for the venue, services offered, and atmosphere on the day. Make a reservation. 3 to 7 months Compile a guest list and print invitations. Select wedding outfits. Finalize details of ceremony and reception, including menu and seating plan. 1 to 3 months Arrange travel and accommodation for family members. Select gifts (including confectionery) for guests. Organize program for reception, including presentation and background music. Organize and book honeymoon and after-party. One month before wedding to Finalize food and gift counts for guests. day before wedding Final check of the proceedings with MC. Prepare monetary gifts for special guests. Wedding day Greet your guests with a smile and enjoy the big day! After wedding Thank your guests on departure and send gifts to those who could not attend. Source: Shared Research, based on Recruit and Zexy materials

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Wedding business process flows

Provide Pay Wedding Refer products and referral information wedding services fee venue services (Zexy, Minna no Wedding, Domestic Dress hire, Pay for Refer etc.) Request wedding wedding venue florist, products and customer services business referral photographer, company Customers etc. Wedding ceremony and reception services (prospective bride and Pay service fees groom)

Customer referral, sales alliance

Services Consumer credit and finance company, travel Pay service fees agency

Source: Shared Research, based on various materials

T&G house weddings A house wedding offers the wedding party exclusive use of a facility, enabling a more private function that is akin to having a wedding at a private home. In addition to a wedding chapel, the facility usually comes with a garden, and other facilities like a pool and banquet room. Since its founding, T&G has been assigning a dedicated wedding planner to each couple.

By offering full support, the planner can coordinate details and create a wedding unique to each couple. The company aims to maintain a competitive edge by meeting the needs of the bride and groom, and of all guests, by creating what it calls a “One Heart Wedding” (a moment in which the hearts of everyone attending the weeding is joined). It is this kind of service that the company calls the “T&G Standard.”

Expanded overseas and destination wedding facilities in Hawaii, Guam, Bali, and Okinawa T&G has alliances with foreign hotels and offers resort weddings packaging the use of hotel facilities and wedding chapels. These weddings are currently available in Hawaii, Guam, Bali, and Okinawa. Sales continue to grow as the number of facilities increases. The company also has a directly managed wedding venue in Taiwan and a wedding planning and management business in Indonesia in partnership with hotels, with the aim of attracting overseas customers. T&G is seeking to create new markets by offering wedding services based on Japanese-style hospitality in growing markets mainly in Asia.

Customer service center uses customer feedback to improve services and help assess employee performance T&G has its own customer center, which conducts follow-up questionnaires with all customers and their guests. The telephone surveys have a high response rate and the data collected is kept internally under central control.

The company uses the survey results to respond quickly to diversifying customer needs, strengthen its products, and design systems that create high added value to improve customer satisfaction. This customer feedback is also reflected in performance reviews of T&G employees such as wedding planners and service staff. This system is aimed at further boosting employee morale, and has been effective in improving employee satisfaction.

Business model for house weddings Shared Research produced a cost estimate of a house wedding in Tokyo assuming 80 guests, using estimates of facilities in Tokyo. The breakdown of the total cost of ceremony and reception of JPY3.6mn (excluding consumption tax) is as follows. Variable expense items depending on the number of guests are food and beverages, gifts, printed materials, and some floral decorations for a total of JPY1.9mn (JPY2.1mn including tax). Fixed expense items are venue rental, dress rental, hair, and makeup, photography and video, production, and some floral decorations for a total of JPY1.7mn (expenses are classified as fixed or variable from the customer’s perspective).

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The company generates revenues from the original wedding services it provides, utilizing the wedding facilities it operates and hotels and restaurants it partners with. Of the various expenses listed above, costly items are the wedding dresses, the hair and makeup services, and the wedding venue-related expenses. As the selection of these is often left to the discretion of the wedding planner, revenues depend on not only changes in the number of weddings but also on the company’s ability to profit on each of these expense categories.

Sample cost estimate for reception at house wedding facility (assuming 80 guests) Unit price Amount Category Unit s (JPY) (JPY) Food and beverages Full-course dinner 13,000 80 1,040,000 Wedding cake 1,000 80 80,000 Beverages for toasts 1,000 80 80,000 Snacks and beverages before ceremony 3,500 80 280,000 Subtotal 1,480,000 Gifts for guests Gift 3,000 56 168,000 Gift confectionery 2,000 56 112,000 Subtotal 280,000 Printed materials Invitation and seating chart 1,200 56 67,200 Seat card and menu 600 80 48,000 Subtotal 115,200 Floral decorations Main t able flow ers 50,000 1 50,000 Guest table flowers 5,000 10 50,000 Bouquet 30,000 1 30,000 Petal toss 300 80 24,000 Subtotal 154,000 Dress rental, hair, and makeup Wedding dress 200,000 1 200,000 Tuxedo 50,000 1 50,000 Accessories 30,000 1 30,000 Bride hairst yle 50,000 1 50,000 Bride preparat ions 5,000 1 5,000 Bride makeup 150,000 1 150,000 Groom makeup 10,000 1 10,000 Subtotal 495,000 Photography and video Group photo 20,000 1 20,000 Snapshots and album 150,000 1 150,000 Projector 10,000 1 10,000 Subtotal 180,000 Production Master of ceremonies 80,000 1 80,000 A udio, light ing, live music, ot her 70,000 1 70,000 Subtotal 150,000 Venue rental Chapel 300,000 1 300,000 Banquet hall 300,000 1 300,000 Lounge, w ait ing rooms 100,000 1 100,000 Subtotal 700,000 Total 3,554,200 Consumption tax 284,336 Grand total 3,838,536 Source: Shared Research based on company data Note: For gifts, invitation cards, and seating charts, unit figures are calculated at 70% assuming attendance by multiple family members who do not require these items.

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Business segments

▷ The company has three business segments: the Domestic Wedding segment, Overseas and Destination Wedding segment, and Other segment. In FY03/20, the Domestic Wedding segment accounted for 80.3% of consolidated sales, the Overseas and Destination Wedding segment 17.4% of sales, and the Other segment 2.2% of sales. (The company fully withdrew from the Overseas and Destination Wedding business in Q2 FY03/21, transferring the shares of the group subsidiary operating the business.) The operating profit generated by the Domestic Wedding segment exceeded consolidated operating profit; the Other segment finished FY03/20 in the red. ▷ While the Domestic Wedding business is the company’s mainstay business, the Overseas and Destination Wedding business has grown in importance over the last ten years and accounted for 17.4% of sales in FY03/20, double the FY03/11 figure of 8.6%.

Segment sales and profit FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn） Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Sales 46,716 47,983 52,804 60,714 59,221 59,524 60,186 64,590 66,871 63,678 YoY 1.5% 2.7% 10.0% 15.0% -2.5% 0.5% 1.1% 7.3% 3.5% -4.8% Domestic Wedding 41,253 42,036 46,138 52,902 50,059 49,433 49,568 52,096 54,259 51,145 YoY -0.4% 1.9% 9.8% 14.7% -5.4% -1.3% 0.3% 5.1% 4.2% -5.7% % of total sales 88.3% 87.6% 87.4% 87.1% 84.5% 83.0% 82.4% 80.7% 81.1% 80.3% Overseas and Destination Wedding 4,014 4,355 5,046 6,235 7,445 8,471 9,156 10,801 11,174 11,106 YoY 23.7% 8.5% 15.9% 23.6% 19.4% 13.8% 8.1% 18.0% 3.5% -0.6% % of total sales 8.6% 9.1% 9.6% 10.3% 12.6% 14.2% 15.2% 16.7% 16.7% 17.4% Other 1,448 1,591 1,619 1,577 1,715 1,620 1,461 1,692 1,437 1,426 YoY 6.2% 9.9% 1.8% -2.6% 8.8% -5.5% -9.8% 15.8% -15.1% -0.8% % of total sales 3.1% 3.3% 3.1% 2.6% 2.9% 2.7% 2.4% 2.6% 2.1% 2.2% Operating profit 2,282 2,213 2,833 3,706 2,973 1,546 2,439 2,785 4,281 3,579 YoY -9.4% -3.0% 28.0% 30.8% -19.8% -48.0% 57.8% 14.2% 53.7% -16.4% Domestic Wedding 3,890 3,580 4,540 5,598 4,841 3,438 3,469 3,944 5,846 5,709 YoY -6.1% -8.0% 26.8% 23.3% -13.5% -29.0% 0.9% 13.7% 48.2% -2.3% OPM 9.4% 8.5% 9.8% 10.6% 9.7% 7.0% 7.0% 7.6% 10.8% 11.2% Overseas and Destination Wedding 288 376 258 337 347 300 565 602 389 -256 YoY 166.7% 30.6% -31.4% 30.6% 3.0% -13.5% 88.3% 6.5% -35.4% - OPM 7.2% 8.6% 5.1% 5.4% 4.7% 3.5% 6.2% 5.6% 3.5% -2.3% Other 16 115 141 156 138 117 180 194 214 264 YoY - 618.8% 22.6% 10.6% -11.5% -15.2% 53.8% 7.8% 10.3% 23.4% OPM 1.1% 7.2% 8.7% 9.9% 8.0% 7.2% 12.3% 11.5% 14.9% 18.5% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Segment sales and OPM

(JPYbn) Domestic Wedding Overseas and Destination Wedding Other OPM

80.0 7.0% 6.4% 6.1% 70.0 1.4 5.6% 6.0% 5.4% 1.7 5.0% 1.4 1.6 1.5 60.0 1.7 1.6 11.2 4.9% 10.8 4.6% 6.2 11.1 5.0% 1.6 7.4 8.5 9.2 50.0 1.4 1.6 5.0 1 4.3% 4.0% 4.4 4.0 4.1% 40.0 2.6% 3.0% 30.0 52.9 54.3 50.1 49.4 49.6 52.1 51.1 46.1 2.0% 20.0 41.3 42.0

10.0 1.0%

0.0 0.0% FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Source: Shared Research based on company data

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Domestic Wedding segment

Business overview

▷ The Domestic Wedding segment consists of three subsegments: Directly operated facilities (89.6% of segment sales in FY03/20), Consulting (3.0%), and Other businesses (7.4%). ▷ The mainstay Directly operated facilities business handles the planning and execution of house weddings at proprietary venues. TRUNK (HOTEL), launched in May 2017, was added to the facility lineup in FY03/18 and the company launched the hotel business. The company is looking to its hotel business as one of its key growth drivers over the medium term, saying it expects to establish the hotel business as a separate segment in the future, after it has increased the number of hotels in operation. ▷ The company’s Consulting business manages weddings through partnerships with hotels and restaurants. Other businesses within the Domestic Wedding segment include lodging services, wedding dress rental, and restaurant operation.

Domestic Wedding FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn） Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Sales 41,253 42,036 46,138 52,902 50,059 49,433 49,568 52,096 54,259 51,145 YoY -0.4% 1.9% 9.8% 14.7% -5.4% -1.3% 0.3% 5.1% 4.2% -5.7% Gross profit - - - - 28,892 28,830 29,284 31,746 33,849 32,383 YoY - - - - -0.2% 1.6% 8.4% 6.6% -4.3% GPM - - - - 57.7% 58.3% 59.1% 60.9% 62.4% 63.3% SG&A expenses - - - - 24,051 25,392 25,815 27,802 28,003 26,674 YoY - - - - 5.6%1.7%7.7%0.7%-4.7% SG&A expenses - - - - 48.0% 51.4% 52.1% 53.4% 51.6% 52.2% Operating profit 3,890 3,580 4,540 5,598 4,841 3,438 3,469 3,944 5,846 5,709 YoY -6.1% -8.0% 26.8% 23.3% -13.5% -29.0% 0.9% 13.7% 48.2% -2.3% OPM 9.4% 8.5% 9.8% 10.6% 9.7% 7.0% 7.0% 7.6% 10.8% 11.2% Assets 34,930 32,668 36,010 35,504 35,364 37,420 37,358 41,913 39,491 41,563 Depreciation 1,064 1,074 1,121 1,416 1,348 1,671 1,761 2,231 2,198 2,278 Capital expenditures -3,164 -1,557 -2,781 -1,736 -2,535 -5,090 -3,454 -5,910 -2,482 -6,548 Goodwill - - 1,019 1,112 869 758 137 151 121 91 Number of employees 1,265 1,249 1,548 1,522 1,592 1,630 1,664 1,756 1,6851,651 Sales per employee 32.61 33.66 29.80 34.76 31.44 30.33 29.79 29.67 32.20 30.98 Number of employees YoY - -1.3% 23.9% -1.7% 4.6% 2.4% 2.1% 5.5% -4.0% -2.0% Sales per employee YoY - 3.2% -11.4% 16.6% -9.5% -3.6% -1.8% -0.4% 8.5% -3.8% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Domestic Wedding FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn） Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Sales 41,253 42,036 46,138 52,902 50,059 49,433 49,568 52,096 54,259 51,145 By segment Directly operated facilities 38,915 39,057 41,947 47,422 45,059 44,609 44,869 46,721 48,595 45,824 Domestic house wedding 43,07543,95441,175 TRUNK (HOTEL) 3,6464,6414,649 Consulting 1,764 2,304 2,835 2,832 2,220 1,942 1,557 1,637 1,587 1,535 Other 574 675 1,356 2,648 2,780 2,882 3,142 3,738 4,071 3,785 YoY -0.4% 1.9% 9.8% 14.7% -5.4% -1.3% 0.3% 5.1% 4.2% -5.7% Directly operated facilities 1.3% 0.4% 7.4% 13.1% -5.0% -1.0% 0.6% 4.1% 4.0% -5.7% Domestic house wedding -4.0%-5.9%-15.3% TRUNK (HOTEL) -27.3%0.2% Consulting -28.1% 30.6% 23.0% -0.1% -21.6% -12.5% -19.8% 5.1% -3.1% -3.3% Other 3.4% 17.6% 100.9% 95.3% 5.0% 3.7% 9.0% 19.0% 8.9% -7.0% % of total sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Directly operated facilities 94.3% 92.9% 90.9% 89.6% 90.0% 90.2% 90.5% 89.7% 89.6% 89.6% Domestic house wedding 82.7%81.0%80.5% TRUNK (HOTEL) 7.0%8.6%9.1% Consulting 4.3% 5.5% 6.1% 5.4% 4.4% 3.9% 3.1% 3.1% 2.9% 3.0% Other 1.4%1.6%2.9%5.0%5.6%5.8%6.3%7.2%7.5%7.4% Directly operated facilities No. of weddings 9,897 9,738 10,181 10,433 11,484 11,491 11,695 11,988 12,537 11,596 Average spend (JPY'000) 3,890 3,975 4,019 4,093 4,017 3,971 3,837 3,980 3,868 3,947 YoY No. of weddings -1.7% -1.6% 4.5% 2.5% 10.1% 0.1% 1.8% 2.5% 4.6% -7.5% Average spend (JPY'000) 3.1% 2.2% 1.1% 1.8% -1.9% -1.1% -3.4% 3.7% -2.8% 2.0% Consulting No. of weddings 638 805 1,026 1,605 1,901 1,700 1,226 563 707 1,367 YoY -33.9% 26.2% 27.5% 56.4% 18.4% -10.6% -27.9% -54.1% 25.6% 93.4% Directly operated facilities No. of facilities 61616869707069696764 No. of halls 87 87 99 101 103 105 103 105 102 94 Sales per directly operated facility Per facility 638 640 617 687 644 637 650 677 725 716 Per hall 447 449 424 470 437 425 436 445 476 487 YoY Per facility 1.3% 0.4% -3.7% 11.4% -6.3% -1.0% 2.0% 4.1% 7.1% -1.3% Per hall 1.3% 0.4% -5.6% 10.8% -6.8% -2.9% 2.5% 2.1% 7.1% 2.2% No. of weddings per directly operated facility Per facility 162 160 150 151 164 164 169 174 187 181 Per hall 114 112 103 103 111 109 114 114 123 123 YoY Per facility -1.7%-1.6%-6.2%1.0%8.5%0.1%3.3%2.5%7.7%-3.3% Per hall -1.7% -1.6% -8.1% 0.4% 7.9% -1.8% 3.8% 0.6% 7.7% 0.1% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Domestic Wedding business

(JPYbn) Sales Operating profit OPM (JPYbn) Operating profit Depreciation Capital expenditures EBITDA margin 15.6% 60.0 11.2% 12% 8.0 14.8% 20% 54.3 13.3% 52.9 52.1 2.2 2.3 50.1 51.1 1.4 49.4 49.6 6.0 12.0% 12.3% 12.4% 15% 50.0 46.1 10.8% 10% 1.3 11.9% 9.4% 10.6% 11.1% 1.1 10.3% 10.6% 2.2 9.8% 1.1 41.3 42.0 9.7% 4.0 1.1 1.7 1.8 10% 40.0 8% 5.6 4.8 3.4 3.5 5.8 5.7 8.5% 4.5 2.0 3.9 3.6 3.9 5% 7.6% 7.0% 7.0% 30.0 6% 0.0 0%

-1.6 -1.7 -2.0 -2.5 -5% 20.0 4% -3.5 -2.8 -2.5 -4.0 -3.2 -10% 10.0 2% 5.6 4.8 5.8 5.7 3.9 3.6 4.5 3.4 3.5 3.9 -6.0 -5.1 -15% -5.9 -6.5 0.0 0% -8.0 -20%

Source: Shared Research based on company data

Directly operated facilities Sales in the mainstay Directly operated facilities business are mostly fees paid for the wedding ceremonies and receptions held in T&G’s house wedding venues. Sales are calculated as the average customer spending (the average amount spent on a wedding ceremony and a reception) multiplied by the number of weddings held. In FY03/20, average customer spending came to JPY3,947,000 (+2.0% YoY) and there were 11,596 (-7.5% YoY) weddings held at T&G’s directly operated facilities.

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Services T&G plans, designs, and executes house weddings and receptions. House weddings are held in a large Western-style house, usually with a garden, and the wedding party can enjoy private use of the facility instead of sharing the space with other parties.

The chapel (where the ceremony is performed) is a standalone facility designed to create an atmosphere similar to a Western wedding. T&G also caters the reception, and the meals can be customized.

Pricing (wedding ceremony and reception) According to the 2019 Zexy marriage trend survey by Recruit Bridal Souken, the average amount spent on a conventional wedding ceremony and reception in Japan was JPY3,549,000. This means the T&G customers on average spend about JPY300,000 more on their wedding ceremony and reception at one of T&G’s directly operated facilities than the national average. This makes sense, because as a general rule house weddings cost more than weddings at other venues because of the high value-added services.

Number of facilities and weddings performed After opening its first venue in 2001, the company focused on opening new facilities in regional areas and pursued an aggressive expansion program. In 2008 the number of facilities reached 62, but T&G’s earnings performance suffered from the hasty expansion, and the company posted its first loss since it was listed in FY03/08. The company stopped its expansion program and focused on improving profitability. The number of directly operated facilities has been stable at around 61 since FY03/09. In December 2012, the company made Bride’s Word Co., Ltd. (which had a track record of turning around unprofitable facilities) a subsidiary, acquiring its eight facilities, but held down the total number of facilities at the parent level by closing unprofitable ones. Even so, the number of weddings has been on a rise thanks to rising utilization rates following the remodeling of existing facilities, and this has become an important element underpinning growth.

Earnings model (per facility) Shared Research calculated the earnings of T&G’s average house wedding facility in Japan using the following earnings model. Assuming 100 Saturdays, Sundays, and public holidays per year (excluding the year-end/New Year and traditional summer holiday period) and two weddings performed per day, annual capacity per facility is roughly 200 weddings. We estimate 180 weddings per year, because Sunday afternoons are less popular due to the following day being a weekday. Based on an average customer spend of JPY4.0mn, annual sales per facility come to JPY720mn. Based on investment per facility (single banquet-room with a separate chapel) of JPY350mn (JPY300mn construction cost and JPY50mn guarantee) and an operating profit margin of 8% (the average over the past five years), operating profit would be JPY57.6mn. Assuming annual depreciation of JPY10mn (useful life of 30 years for buildings), cash flow from operating activities comes to JPY67.6mn. Return on investment (ROI) calculated as operating cash flow divided by investment is 19% and the company can recover its investment in about five years.

Earnings model of a directly operated facility (JPYmn) % of sales, other Sales 720 100% Number of weddings 180 Average spend 4 Operating profit 58 8% Depreciation 10 30-year depreciation of construction costs Operating cash flows 68 Investments 350 Construction 300 Guarantee deposits 50 ROI 19% Payback period (years) 5.2 Source: Shared Research based on company data

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Domestic House Wedding (exterior view)

Domestic House Wedding (chapel)

Source: Company data

Hotel business

▷ TRUNK (HOTEL), which the company opened in May 2017, is included in the Domestic Wedding business. Sales at TRUNK (HOTEL) were JPY4.6bn in FY03/20 (+0.2% YoY). We estimate that operating profit before the deduction of corporate

overhead expenses was around JPY700mn in its first year in operation. With an operating profit margin of around 20%, we believe the hotel business is making a significant contribution to earnings. ▷ T&G’s founder Yoshitaka Nojiri decided to open TRUNK (HOTEL), the core facility of the company’s new Hotel business, fueled by a wish to expand the scope of services in the Japanese hotel industry, just as he did for the wedding industry with house weddings. He set eyes on boutique hotels that were gaining increased presence in North America and Europe, and launched the business to start similar hotels in Japan. ▷ As with boutique hotels in Europe and the US, the customer base of TRUNK (HOTEL) includes trend-sensitive individuals, but the hotel also targets digital nomads (who work remotely) and those seeking eco-friendly lifestyles. TRUNK (HOTEL) positions itself as a multifunctional hotel (featuring a wedding venue, restaurant, café, bar, and multipurpose spaces), designed to showcase the latest trends while reflecting social awareness. The concept has been well received overseas and the hotel was named AHEAD* Asia’s Best New Concept of the Year 2018 for incorporating the “socializing”** concept in its design, products, and services. It was also ranked fourth in the AHEAD Asia Hotel of the Year category and has been featured in a range of

overseas media for its design and hospitality.

*AHEAD: the Awards for Hospitality, Experience, and Design; AHEAD Asia gives awards to the most innovative hotels in the Asia-Pacific region.

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**“Socializing” according to T&G is “to live true to oneself, without undue pressure, but with a life-sized social purpose.” The hotel advocates a new way for individuals to contribute to society through their day-to-day living; based on this concept, the interior and facilities of the entire TRUNK (HOTEL) are designed with a focus on social awareness.

▷ The first TRUNK (HOTEL) opened in Harajuku Jingumae (Shibuya, Tokyo) in May 2017. Weddings account for around 75% of sales, with guest accommodation, corporate events, restaurant, and bar accounting for the remaining 25%. The hotel has the capacity to hold around 700–800 weddings per year. The hotel has only 15 guest rooms. ADR of JPY59,784 in FY03/20 was significantly higher than the average nationwide ADR of JPY13,000, mainly because some of the rooms are suites with high unit prices. Foreign visitors account for 85% of guests, with 80% coming from North America and Europe. The coverage of TRUNK (HOTEL) by overseas media has contributed to brand recognition among visitors familiar with boutique hotels, which attracted these guests with both design and brand concept.

Long-term plan for the Hotel business

▷ The company commented that it plans to open a total of around 10 hotels by FY03/28, consisting of TRUNK (HOTEL)s in central Tokyo and more localized boutique hotels in major regional cities. For a TRUNK (HOTEL) in central Tokyo, the company

estimates investment per facility to be roughly on par with the first one at JPY1.5bn, to be recovered in 3.5–4 years. It estimates investment per regional boutique hotel at JPY1.0–1.5bn with a recovery period of up to seven years. Projections for annual sales per facility are JPY4.0bn for a hotel in central Tokyo (same as the first one), and JPY3.0bn for a regional boutique hotel.

Assuming eight of ten facilities are in full operation, the company forecasts Hotel business sales of JPY30.0bn in FY03/28. In addition to earnings from weddings on weekends and holidays, T&G plans to raise capacity utilization by providing lodging, hosting events on weekdays, and building theaters in regional hotels. The aim is to achieve higher profitability than the

existing Domestic Wedding business. The company forecasts operating profit in the Hotel business to reach JPY4.5bn (OPM of 15%) in FY03/28. ▷ In August 2019, T&G launched the TRUNK (HOUSE) in Kagurazaka, Shinjuku-ku, Tokyo to help raise recognition of the TRUNK brand. In the same month, it announced plans to open a second TRUNK (HOTEL) in Tomigaya, Shibuya-ku, Tokyo in the spring of 2023.

Business risk The company is looking to the hotel business as one of its key growth drivers going forward. Although the first TRUNK (HOTEL) is performing well, turning a profit shortly after opening, it significantly benefits from its prime location in Shibuya, an area that attracts trend-sensitive people from all over the world. The company plans to open more TRUNK (HOTEL)s in central Tokyo, but it could be difficult to find locations that have the same market needs as Shibuya. It is also unclear whether regional cities will be receptive to localized boutique hotels, which are a new category in Japan. The process from site selection to completion of a hotel takes roughly two and a half years: a year for site selection and signing the lease, and 18 months for construction. We thus see as risk factors the challenge of finding suitable hotel locations that match the needs of the boutique hotel market, localization of boutique hotels for regional cities, and the relatively long period before a hotel can open for business.

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TRUNK (HOTEL)

Source: Company data

Consulting and other businesses

▷ The Consulting business (3.0% of Domestic Wedding business sales in FY03/20) entails wedding management in alliance with hotels and restaurants. In this business, the company organizes and runs weddings held at partner hotels and restaurants, while partners provide catering services for these events. The company receives service fees from the marrying party and pays an outsourcing fee to the hotel or restaurant operator. T&G managed 707 weddings in FY03/19 (+25.6% YoY). In FY03/20, gross

transaction value reached JPY5.8bn (+142% YoY) and the number of weddings totaled 1,367 (+93.4% YoY). Full-year operation of Tokyo Kaikan contributed to the sharp YoY increases in gross transaction value and the number of weddings. ▷ Other businesses (7.4% of Domestic Wedding business sales in FY03/20) include lodging services, wedding dress rentals (T&G operates MIRROR stores in Omotesando, Marunouchi, and Yokohama), and restaurant operation.

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Facilities Directly operated house wedding facilities and partnerships (as of July 2020)

Source: Shared Research based on company data

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Overseas and Destination Wedding business Business overview

▷ Sales at the Overseas and Destination Wedding business are mainly from fees received for organizing wedding ceremonies and receptions. In this business, the company provides small ceremonies and receptions (mainly for family members) in partnership with resort hotels in Hawaii, Guam, Bali, and Okinawa. Sales are calculated as the average customer spending per wedding multiplied by the number of weddings held. The segment entails the planning and operation of weddings at overseas resorts and in Okinawa geared toward the domestic market (Japanese customers) and East Asian markets (Chinese and Taiwanese customers). In FY03/20, the Overseas and Destination Wedding business had a total of roughly 8,000 weddings across these markets. ▷ T&G fully withdrew from the Overseas and Destination Wedding business in Q2 FY03/21, transferring all shares in Good Luck Corporation, the group subsidiary that operated the business, to an outside company.

Overseas and Destination Wedding FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Act. Act. Sales 4,014 4,355 5,046 6,235 7,445 8,471 9,156 10,801 11,174 11,106 YoY 23.7% 8.5% 15.9% 23.6% 19.4% 13.8% 8.1% 18.0% 3.5% -0.6% Gross profit 4,495 5,277 6,113 7,479 7,661 7,252 YoY 17.4% 15.8% 22.3% 2.4% -5.3% GPM 60.4% 62.3% 66.8% 69.2% 68.6% 65.3% SG&A expenses 4,148 4,977 5,548 6,877 7,272 7,508 YoY 20.0% 11.5% 24.0% 5.7% 3.2% SG&A expenses 55.7% 58.8% 60.6% 63.7% 65.1% 67.6% Operating profit 288 376 258 337 347 300 565 602 389 -256 YoY 166.7% 30.6% -31.4% 30.6% 3.0% -13.5% 88.3% 6.5% -35.4% -165.8% OPM 7.2%8.6%5.1%5.4%4.7%3.5%6.2%5.6%3.5%-2.3% Assets 2,106 2,373 2,927 3,665 4,994 4,934 6,494 6,449 6,630 5,902 Depreciation 138 137 160 244 325 444 463 691 616 610 Capital expenditures -218 -71 -424 -758 -236 -991 -1,921 -583 -269 -587 Goodwill 13 10 223 175 127 79 47 31 0 0 Number of employees 166 185 234 274 332 377 449 475 492 543 Sales per employee 24.18 23.54 21.56 22.76 22.42 22.47 20.39 22.74 22.71 20.45 Number of employees YoY 18.6% 11.4% 26.5% 17.1% 21.2% 13.6% 19.1% 5.8% 3.6% 10.4% Sales per employee YoY 4.3% -2.6% -8.4% 5.5% -1.5% 0.2% -9.2% 11.5% -0.1% -9.9% Business locations Jakarta 012322 Taiwan 001111 Hawaii 1334456544 Guam 3333444555 Bali 1123333332 Okinawa 1112223346 Puhket 000013 Maldives 000001 Total 6 8 9 12 13 15 19 20 20 24 Sales per location 669 544 561 520 573 565 482 540 559 463 YoY -18.6% 3.0% -7.3% 10.2% -1.4% -14.7% 12.1% 3.5% -17.2% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: Number of employees comprises full-time and temporary employees including part-timers. Figures from FY03/08 to FY03/10 only include full-time employees. Note: Fiscal year-end for the Overseas and Destination Wedding business is December. Note: Numbers of business locations are as of end-March; figures per location are for reference purposes only.

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Overseas and Destination Wedding business

(JPYbn) Operating profit Depreciation Capital expenditures EBITDA margin (JPYbn) Sales Operating profit OPM 8.0 20% 12.0 10% 13.3% 8.6% 10.8 12.4% 2.2 2.3 11.2 11.1 1.4 6.0 12.3% 15.6% 15% 12.0% 1.3 11.9% 14.8% 10.0 8% 11.1% 1.1 10.3% 10.6% 1.1 1.1 2.2 7.2% 4.0 1.7 1.8 10% 7.4 9.2 8.0 5.6% 6% 8.5 5.6 4.8 3.4 3.5 5.8 5.7 6.2% 4.5 2.0 3.9 3.6 3.9 5% 5.1% 6.3 3.5% 6.0 3.5% 4% 5.0 4.0% 4.7% 4.4 0.0 0% 4.0 4.0 2% -2.0 -5% -1.6 -1.7 2.0 0% -2.8 -2.5 -2.5 -4.0 -3.2 -10% 0.6 0.6 -3.5 0.4 0.3 0.3 0.3 0.3 0.4 0.3 -2.3% 0.0 -2% -6.0 -5.1 -15% -0.3 -5.9 -6.5 -2.0 -4% -8.0 -20%

Source: Shared Research based on company data

Services

▷ T&G launched the Overseas and Destination Wedding business in 2007. The main service offered in this business is the planning and organization of wedding ceremonies and receptions in partnership with overseas hotels. The ceremonies are held in the company’s own wedding chapels. These weddings meet the needs of couples who want a private and affordable ceremony at an overseas resort. Customers can rent a broad range of wedding dresses, from imports to domestic off-the-shelf

dresses to dresses produced by T&G. The ratio of wedding dresses produced internally has increased over the years, contributing to GPM improvement (in the Tokyo and Yokohama areas, the ratio went up 26.4pp in three years from 63.5% in FY03/17 to 89.9% in FY03/19, but fell to 75.5% in FY03/20). ▷ The company also has subsidiaries in Hong Kong and Taiwan that send customers from other parts of Asia to the company’s resort facilities for weddings. In 2017 the numbers of resort weddings conducted by customers from Asia ex Japan grew significantly: +145% YoY in January–March, +108% YoY in April–June, +79% YoY in July–September, and +105% YoY in

October–December. ▷ In April 2010 the company established T&G Wedding Asia Pacific Co., Limited, with a view to expanding into Asia. In January 2011 it established a consolidated subsidiary in Shanghai, and opened a directly operated wedding salon in Shanghai in May

to begin a wedding planning and management business. Chairman Nojiri spearheaded the China effort and pushed forward the wedding business in partnership with a foreign-owned hotel in China. The company increased the number of local offices from five in FY03/13 to 12 in FY03/14 and 13 in FY03/15, but the business remained unprofitable from its start in FY03/10,

posting a maximum annual operating loss of JPY300mn. One of the main reasons hindering profitability is that partner hotels were owned by foreigners, who did not communicate well with their local employees responsible for outsourcing wedding planning and management. T&G decided to withdraw from the China business in 2015, and did so in 2016. ▷ Outside of China, the company offers local weddings in Taiwan and Indonesia. T&G opened a resort wedding salon in Taiwan in 2013, which has managed to capture the changing needs of local customers. The company opened its first local wedding facility in Taiwan in November 2016. In August 2016, it won a contract to plan and manage weddings in Jakarta in partnership with a hotel.

Pricing (wedding ceremony and reception) The company estimates that the average customer spend on a resort wedding ceremony and reception in Japan is just above JPY1.2mn: JPY200,000 for the wedding chapel, JPY400,000 for dress rental, JPY200,000 for the reception (average 20 guests x JPY20,000 per head), JPY200,000 for the photo album, and JPY100,000 for photo processing.

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Number of facilities and weddings The Overseas and Destination Wedding business had 24 facilities as of the end of FY03/20 (four in Hawaii, five in Guam, two in Bali, six in Okinawa, three in Phuket, two in Jakarta, one in Taiwan, and one in Maldives). In May 2020, the company opened another facility in Hawaii. It has increased the number of overseas facilities over the years in response to increasing demand for resort weddings by Japanese couples and growing number of resort weddings held by foreign couples from China and other Southeast Asian countries, but now plans to reduce the number of overseas facilities due to impact from the COVID-19 outbreak.

Overseas and Destination Wedding facilities

The Ginoza Resort: CHURA no KYOUKAI (Okinawa) Crystal Chapel (Guam)

The Diamond Head Chapel (Hawaii) The Moana Chapel (Hawaii)

Sheraton Laguna White Arrow Chapel (Guam) Seragaki Island Chapel (Okinawa)

Source: Company data

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Other businesses Business overview Other businesses include financing and travel services. These services essentially aim to support wedding customers. For example, the company provides financing services (through subsidiary Life Angel Co., Ltd.) that allow customers to postpone the payment of wedding fees—which are typically collected upfront—by taking out a loan.

In October 2017, the company opened Mono* Nursery to meet the needs of its female employees.

*Mono for Mono Nursery is derived from the particle “mo” in Japanese, which expresses inclusiveness. The concept of the nursery is to make it a happy place for children and adults, companies and communities, and in relation to work and child-rearing.

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Market and value chain

Domestic Wedding business

▷ The size of the marriage-related market in Japan is approximately JPY2.4tn, broken down to JPY1.4tn in wedding expenses (mainly the ceremony and reception), and JPY1.1tn in costs for setting up a new home (estimated by T&G based on Yano Research Institute’s Wedding Industry 2018 and a 2017 Zexy survey on preparations for setting up home as a newly married couple). ▷ In 2018, there were roughly 586,481 new marriages in Japan, with couples spending an average of total JPY3,549,000 on their wedding and reception. (Finalized marriage statistics from MHLW “Vital Statistics of Japan”, spending figures from 2019 Zexy marriage trend survey.)

Number of marriages and marriage rates (per 1,000 people): 1947–2018

('000 couples) Number of remarriages Number of first marriages Marriage rate (per 1000 people; right axis)

1,200 14.0

12.0 1,000

10.0 800

8.0

600

6.0

400 4.0

200 2.0

0 0.0 1947 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2018 Source: Shared Research based on statistics from Ministry of Health, Labor and Welfare Marriage Statistics Specified Report of Vital Statistics

The number of marriages in Japan peaked at over 1mn per year in 1970–1974 when the first wave of baby boomers reached approximately 25 years of age. Both the number of marriages and rates of new marriages began trending down most of the years since then, the exception being the late-1990s/early 2000s (when the children of baby boomers got married). Contributing factors are a declining and aging population (fewer people of marriageable age), people getting married later in life, and an increasing percentage of single people who do not intend to marry.

Average age of first marriage Mode of ceremonies to mark a wedding (2019 survey)

(Age) 32 31.1 31.1 31.1 31.1 30.4 30.5 29.8 30 29.4 29.4 29.4 29.4 28.8 28.8 No ceremony 28.4 28.5 28.6 Wedding 28.2 28 19.3% 27.8 portraits only 28 27.0 27 5.0% 26.3 25.9 Other type of 26 25.5 25.2 party Wedding 24.7 0.3% reception 51.1% 24 Family dinner with relatives 22 21.6%

20 1975 1980 1985 1990 1995 2000 2005 2009 2010 2015 2016 2017 2018 Wedding ceremony 2.7% Groom Bride

Source: Shared Research based on statistics from Ministry of Health, Labor and Welfare’s Source: Shared Research based on Recruit Bridal Souken “2019 Marriage Awareness “Vital Statistics of Japan 2018” Survey”

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Fragmented wedding market

▷ Shared Research estimates that around 56% of couples who got married in 2018 had a wedding reception (based on Recruit Bridal Souken’s “2018 Marriage Awareness Survey”), which means there were about 330,000 wedding receptions held nationwide. T&G organized 19,104 weddings in FY03/20 (total of weddings at directly operated facilities, partner hotels and restaurants, and resorts) for roughly a 6% market share. We can see that the domestic wedding business is fragmented and consists of many small and medium companies; even the industry leader T&G has only 6% of the market. ▷ According to Recruit Bridal Souken’s “2019 Marriage Awareness Survey,” 80.7% of couples getting married in 2018 had some kind of ceremony (including family dinners, and going to a photo studio for a wedding portrait) and 72.9% had a reception or family dinner to mark the occasion. Couples that did not celebrate the occasion with a special event accounted for 19.3%, a roughly 5pp increase from the previous survey. We assume couples who skip the marriage ceremony mainly do so for financial reasons. ▷ Wedding statistics broken down by age group show that 74.6% of couples marrying in their 20s and 74.5% for couples marrying in their 30s hold a wedding reception, but the rate comes to 56.7% for couples marrying in their 40s. As the age of couples goes up, so does the proportion of couples not holding a wedding reception. Put another way, as couples marry older, they also tend to have fewer wedding ceremonies and receptions.

Trends in wedding ceremonies and receptions

('000 cuoples) Number of marriages Receptions / Marriages 800 75.0%

69.3% 68.4% 70.0% 750 67.5% 66.5% 67.0% 65.4% 65.0% 65.0% 700 62.4% 62.4%

59.7% 58.7% 60.0%

650 55.3% 55.7% 55.0% 731 720 726 600 708 700 50.0% 662 669 661 644 635 621 550 607 586 45.0%

500 40.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Shared Research based on Recruit Bridal Souken “Marriage Awareness Survey,” AOKI Holdings FY03/16 briefing material (Anniversaire Inc.’s bridal business)

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Average total customer spend on wedding ceremonies and receptions

(JPY'000) Tokyo area Nationwide

4,000

3,855 3,779 3,800 3,724 3,707 3,706

3,600 3,567 3,510 3,549 3,597 3,575 3,461 3,417 3,548 3,549 3,527 3,379 3,365 3,400 3,438 3,270 3,404 3,337 3,307 3,200 3,257 3,122 3,187 3,174

3,000 2,911 3,031 2,928

2,800 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Shared Research based on Recruit Bridal Souken “2019 Marriage Awareness Survey”

Features of domestic wedding market The main features of the domestic wedding market are as follows:

◤ Average customer spend is high at JPY3–4mn. Wedding bookings are a leading indicator of earnings and sales are easy to control, because the lead time from booking of a wedding to recording sales is relatively long at six to eight months.

◤ In most cases, couples have their wedding ceremony and reception near their hometown. The average cost of weddings varies considerably between regions, and many exhibit regional characteristics such as incorporating local customs into the ceremony or reception.

◤ The contrast between peak and off-peak seasons (spring and fall are preferred over summer and winter) is strong. Auspicious days in the traditional Japanese calendar are favored for the wedding date and inauspicious days are avoided.

◤ It is a capital-intensive industry requiring substantial upfront investment on facilities (wedding halls, banquet rooms, and dressing rooms), decorations, parking lot (regional venues), and more.

◤ Advertising expenses paid to wedding information services tend to be a significant outlay, because the company must find a constant stream of new customers as most people only get married once and thus there are no repeat or regular customers.

Customers usually tour several wedding venues before making a decision. Skilled wedding planners who quickly gain a solid understanding of customer needs and make them an attractive offer are essential to increasing the contract rate. A company’s performance can fluctuate depending on wedding planners’ relocation or retirement. Thus, securing skilled wedding planners is a key competitive strategy.

Outlook on domestic wedding market

▷ We assume the domestic wedding market will contract in the medium term due to falling birth and marriage rates and falling percentage of couples having wedding ceremonies and receptions. Marriages have become more diverse in recent years, with a growing number of couples opting not to have a wedding and simply registering their marriage with the local government, while the trend of marrying later in life has been accompanied by an increase in remarriages. ▷ In the domestic wedding market, T&G aims to cultivate latent demand for wedding ceremonies and receptions by communicating information on their significance and importance as well as proposing new styles of wedding ceremony and reception in keeping with diversifying personal value systems.

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Overseas wedding market

▷ The overseas wedding market is extremely large compared with the Japanese market. This is especially true of the wedding market in Asia, which is of primary concern to T&G, and the company believes that with the growing awareness of weddings the wedding market in Asia will continue to expand rapidly in the years ahead. ▷ According to the Wedding Journal, the bridal market in China as of 2017 was already worth JPY24.1tn, or roughly ten times the size of the Japanese market (about JPY2.4tn). The Wedding Journal also forecasts that the Chinese bridal market will continue to grow, reaching JPY69.0tn by the year 2021. ▷ With regard to trends at the major facilities currently operating under T&G’s overseas wedding business, surveys show that of the nearly 50,000 marriages of couples who live in Hong Kong (where T&G has a locally incorporated subsidiary), roughly 20% held their wedding ceremony overseas. In Taiwan, out of 138,000 couples married more than 10% held their wedding ceremony overseas (according to the Wedding Journal). From the perspective of both market size and growth rates, this makes the Overseas and Destination Wedding segment a key component of the company’s growth strategy going forward.

(In Q2 FY03/21, T&G fully withdrew from the Overseas and Destination Wedding business, transferring the business to an outside company and undertaking organizational realignment.)

China bridal market (forecast)

(JPYtn) 80

69.0 70

60 54.7

50 41.9 40 31.9 30 24.1

20

10

0 2017 2018 2019 2020 2021 Source: Shared Research based on forecast by Wedding Journal (Issue 100)

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Competition Industry peers Major listed companies in the house wedding business with nationwide operations include T&G, Tsukada Global Holdings Inc. (TSE1: 2418), Watabe Wedding Corporation (TSE1: 4696), Anniversaire Inc. (unlisted; subsidiary of AOKI Holdings [TSE1: 8214]), and Escrit Inc. (TSE1: 2196). Companies with regional operations include IKK Inc. (TSE1: 2198) and Brass Co., Ltd. (TSE1: 2424).

Main competitors in wedding market

Latest full-year results Ticker Company Sales OPM ROE Description (JPYmn) （％） （％） Leader in the house wedding market. Operates nationwide. Has Aoyama Geihinkan as its core 4331 Take and Give Needs 63,678 5.6 4.3 facility

2418 Tsukada Global Holdings 61,121 10.4 7.0 Focuses on large facilities, led by The Strings Omotesandoh. Operates InterContinental Tokyo Bay

Pioneer in overseas wedding. Located in 11 countries. Operates Hotel Gajoen Tokyo and Hotel 4696 Watabe Wedding 39,049 3.0 6.5 Mielparque Tokyo Focuses on large facilities. First to open a house wedding facility in Japan. Became a subsidiary of (Unlisted) Anniversaire 22,270 2.0 na AOKI Holdings in 2002 Focuses on urban areas (station buildings) Operates in four formats including wedding halls, house 2196 Escrit 31,430 4.9 6.2 weddings, hotels, and restaurants

2198 IKK Wedding 20,190 9.6 11.0 Headquartered in Saga, and mainly covers regional cities in Kyushu, Hokuriku, Tohoku, Shikoku

2424 Brass 10,390 5.4 10.6 Headquartered in Nagoya and operates in Tokai region

Source: Shared Research based on data from the various companies Note: Figures may differ from company materials due to differences in rounding methods. Note: Watabe Wedding Corporation had an irregular nine-month period in FY12/19 as it changed its fiscal year-end; Anniversaire is unlisted.

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Financial performance of peers

Take and Give Needs Tsukada Global Holdings Watabe Wedding Anniversaire (4331) (2418) (4696) (unlisted)

(JPYmn) FY03/18 FY03/19 FY03/20 FY12/17 FY12/18 FY12/19 FY03/18 FY03/19 FY12/19 FY03/18 FY03/19 FY03/20 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Revenue 64,590 66,871 63,678 57,253 60,197 61,121 45,135 48,458 39,049 27,173 25,433 22,270 Gross profit 39,848 42,173 40,330 18,540 19,599 21,107 31,037 32,945 26,268 7,876 7,136 SG&A expenses 37,063 37,892 36,750 14,272 14,349 14,724 30,269 32,368 25,109 5,067 4,966 Operating profit 2,785 4,281 3,579 4,268 5,249 6,383 768 577 1,159 2,809 2,169 439 Recurring profit 2,489 3,900 3,381 4,119 5,257 6,222 677 738 1,358 Net income 888 2,283 1,003 2,203 2,424 2,565 171 218 705 ROE 4.3% 10.0% 4.3% 6.4% 7.0% 7.0% 1.6% 2.1% 6.5% ROA (RP-based) 4.6% 4.0% 5.9% 4.9% 6.0% 6.5% 3.0% 3.0% 5.5% OPM 4.3% 6.4% 5.6% 7.5% 8.7% 10.4% 1.7% 1.2% 3.0% 10.3% 8.5% 2.0% Total assets 56,025 57,130 58,197 84,447 90,862 99,343 24,354 24,436 25,087 41,161 39,451 37,315 Net assets 21,136 23,181 23,797 35,781 37,081 37,404 10,451 10,577 11,138 Equity ratio 37.3% 40.2% 40.6% 40.5% 39.1% 37.7% 42.8% 43.3% 44.4% Operating CF 4,139 6,449 4,259 7,062 5,871 7,297 3,222 2,409 1,835 Investing CF -6,708 -2,488 -7,038 -3,976 -196 -12,838 -4,174 -2,769 -2,017 Financing CF 2,408 -1,956 2,293 -3,572 3,704 9,686 2,268 -1,237 -100 Cash and deposits 4,769 6,782 6,455 14,986 24,117 28,259 6,685 5,067 4,614 Interest-bearing debt 23,168 17,725 20,625 35,240 39,501 44,651 3,350 2,200 2,300 Net debt 18,399 10,943 14,170 20,255 15,384 16,392 -3,335 -2,867 -2,314

Escrit IKK Wedding Brass (2196) (2198) (2424)

FY03/18 FY03/19 FY03/20 FY10/17 FY10/18 FY10/19 FY07/17 FY07/18 FY07/19 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Revenue 31,700 33,303 31,430 18,172 20,009 20,190 8,967 9,712 10,390 Gross profit 17,799 18,696 17,944 9,827 10,988 11,212 5,599 6,076 6,540 SG&A expenses 15,849 16,504 16,398 8,006 8,920 9,280 4,780 5,385 5,981 Operating profit 1,950 2,191 1,547 1,821 2,068 1,932 818 691 559 Recurring profit 1,830 2,123 1,499 1,839 2,095 1,956 793 709 582 Net income 665 1,078 456 1,319 1,365 1,350 495 227 369 ROE 10.7% 15.6% 6.2% 12.7% 12.2% 11.0% 17.3% 7.0% 10.6% ROA (RP-based) 6.8% 8.1% 6.2% 9.5% 10.4% 9.3% 10.1% 8.0% 5.9% OPM 6.2% 6.6% 4.9% 10.0% 10.3% 9.6% 9.1% 7.1% 5.4% Total assets 27,104 25,114 23,229 19,809 20,610 21,539 8,462 9,297 10,479 Net assets 6,479 7,316 7,479 10,708 11,790 12,916 3,153 3,322 3,623 Equity ratio 23.9% 29.1% 32.2% 54.1% 57.0% 59.8% 37.3% 35.7% 34.6% Operating CF 1,826 3,164 2,918 1,198 3,624 2,050 1,168 1,125 929 Investing CF -2,098 -831 -1,203 -3,533 -1,185 -2,095 -1,815 -1,291 -2,049 Financing CF -855 -2,341 -2,347 694 -1,278 -91 410 442 926 Cash and deposits 4,804 4,568 3,934 3,731 5,277 5,146 672 990 797 Interest-bearing debt 10,967 8,879 6,834 4,805 3,744 3,776 3,493 3,992 4,987 Net debt 6,163 4,311 2,900 1,073 -1,456 -1,370 2,821 3,043 4,190 Source: Shared Research based on materials from the various companies Note: Figures may differ from company materials due to differences in rounding methods. Note: Watabe Wedding Corporation had an irregular nine-month period in FY12/19 as it changed its fiscal year-end.

Profitability

▷ Comparing operating profit margins of listed house wedding operators, we still find operating profit margins at around 10% at IKK and Tsukada Global Holdings, and between 4% and just below 7% at T&G, Brass, and Escrit. Watabe Wedding, which has changed its fiscal year-end from March to December, has seen an increase to 3.0%, while Anniversaire has seen a decline to 2.0%. ▷ Looking at ROE, we find ROE has declined across the board except at Tsukada Global Holdings, Watabe Wedding, IKK, and Brass, which have not been affected by the COVID-19 outbreak because of their different fiscal year-ends. (No ROE figure is available for Anniversaire owing to its status as one of the business segments under AOKI Holdings.)

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Cost analysis

Take and Give Tsukada Global Watabe Anniversaire Escrit IKK Wedding Brass Needs Holdings Wedding (unlisted) (2196) (2198) (2424) (4331) (2418) (4696)

FY03/20 FY12/19 FY12/19 FY03/20 FY03/20 FY10/19 FY07/19 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 63,678 61,121 39,049 22,270 31,430 20,190 10,390 Cost of sales 23,348 40,014 12,781 22,270 13,486 8,978 3,850 SG&A expenses 36,750 14,724 25,109 - 16,398 9,280 5,981 Advertising expenses 4,146 4,062 - - 3,558 - 1,763 Salaries and allowances 10,360 3,110 8,722 - 3,192 2,740 748 Rents 6,327 800 3,747 - 4,061 - 664 Depreciation 2,905 3,140 1,310 1,438 1,402 950 591 Others 13,012 3,612 11,330 - 4,184 5,590 2,214 Operating profit 3,579 6,383 1,159 439 1,547 1,932 559 % of s a le s Cost of sales 36.7% 65.5% 32.7% - 42.9% 44.5% 37.1% SG&A expenses 57.7% 24.1% 64.3% - 52.2% 46.0% 57.6% Advertising expenses 6.5% 6.6% - - 11.3% - 17.0% Salaries and allowances 16.3% 5.1% 22.3% - 10.2% 13.6% 7.2% Rents 9.9% 1.3% 9.6% - 12.9% - 6.4% Depreciation 4.6% 5.1% 3.4% 6.5% 4.5% 4.7% 5.7% Others 20.4% 5.9% 29.0% - 13.3% 27.7% 21.3% Operating profit 5.6% 10.4% 3.0% 2.0% 4.9% 9.6% 5.4% Source: Shared Research based on data from the various companies Note: Figures may differ from company materials due to differences in rounding methods. Note: Watabe Wedding Corporation had an irregular nine-month period in FY12/19 as it changed its fiscal year-end.

CoS ratio and SG&A expense ratio Many companies do not precisely disclose their cost of sales breakdown, but the main costs are purchasing costs of food and beverages, dresses, flowers, and other materials, as well as outsourcing costs. Tsukada Global Holdings has relatively high CoS ratio but relatively low SG&A expense ratio. We believe this is because unlike its competitors, it books a large portion of personnel expenses (salaries and allowances) under cost of sales as a variable expense, and includes depreciation under the cost of sales as well.

Higher personnel expenses relative to sales at T&G T&G’s SG&A expense ratio is on the high side (57.7% in FY03/20) because its personnel expenses relative to sales are comparatively high. In terms of its operating profit margin, T&G falls roughly in the middle of the pack. As discussed later, T&G operates many facilities nationwide and most of them are small or medium-sized. Shared Research believes this puts T&G at a disadvantage when it comes to improving management efficiency compared with its peers that operate large facilities, and consequently T&G has higher personnel expenses relative to sales.

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Comparison of Domestic wedding businesses

Take and Give Tsukada Global Watabe Wedding Anniversaire Escrit IKK Wedding Brass Domestic Wedding Needs Holdings (4696) (unlisted) (2196) (2198) (2424) (4331) (2418)

FY03/20 FY12/15 FY12/19 FY03/20 FY03/20 FY10/19 FY07/19 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Domestic Wedding Hotels and Domestic Domestic Wedding Wedding Business segment Bridal-related Wedding business Weddings Wedding Operations Services Sales 51,145 33,427 21,606 25,433 28,672 19,393 10,390 Directly operated facilities 45,824 Operating profit 5,709 6,320 686 2,169 3,017 1,893 559 OPM 11.2% 18.9% 3.2% 8.5% 10.5% 9.8% 5.4% Assets 41,563 29,332 6,530 39,451 17,874 21,539 10,480 Depreciation 2,278 1,949 448 1,508 1,491 1,130 652 Capital expenditures 6,548 941 727 480 1,055 1,485 2,172 No. of facilities 64 18 10 13 23 19 21 No. of halls 94 54 No. of weddings 11,596 9,651 5,708 5,304 4,806 2,643 Average spend (JPY'000) 3,947 3,464 4,456 5,406 4,035 3,931 Per unit data Sales per facility (JPYmn) (Directly operated facilities) Per facility 716 1,857 2,161 1,956 1,247 1,021 495 Per hall 487 619 No. of weddings per facility Per facility 181 536 439 231 253 126 Per hall 123 179 Source: Shared Research based on data from the various companies Note: Figures may differ from company materials due to differences in rounding methods. Note: Figures for Tsukada Global Holdings are from FY12/15 when the company had a domestic wedding business segment. Note: Number of weddings and average customer spend at Escrit are for ceremonies and receptions held at directly operated facilities assuming more than 30 guests. Note: Watabe Wedding Corporation had an irregular nine-month period in FY12/19 as it changed its fiscal year-end.

Number of weddings and average customer spending Looking at average customer spending, Tsukada Global Holdings and Watabe Wedding do not disclose average customer spending, but we think their average is similar to Anniversaire and T&G, because Tsukada Global Holdings operates large facilities and Watabe Wedding’s flagship facility is a well-known, high-end wedding hall Hotel Gajoen Tokyo. According to the 2019 Zexy marriage trend survey, the average market price of a wedding ceremony and reception was JPY3,549,000 nationwide. House wedding operators’ average customer spend is above the market average, because they provide high value-added services.

Sales and number of weddings per facility Comparing sales per facility (excluding Watabe Wedding), companies with large facilities have higher sales, such as Anniversaire and Tsukada Global Holdings, followed at a great distance by Escrit. Companies with small and medium facilities have lower sales: T&G and Brass. Similarly, Anniversaire and Tsukada Global Holdings were top in the number of weddings per facility.

Employee productivity Comparing productivity per employee, Tsukada Global Holdings and Anniversaire have sales of more than JPY35mn per employee, and T&G sales of more than JPY30mn per employee. The top-two companies are the ones with large facilities that have greater management efficiency and are able to increase productivity per employee. Companies with relatively low sales per employee are Brass and IKK. Productivity per employee appears to be lower for these companies because they mainly operate small and medium facilities; T&G has a large number of facilities around the country, and Brass and IKK operates facilities in regional areas.

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Employees

Take and Give Tsukada Global Watabe Wedding Anniversaire Escrit IKK Wedding Brass Domestic Wedding Ne e d s Holdings (4696) (unlisted) (2196) (2198) (2424) (4331) (2418)

FY03/20 FY12/15 FY12/19 FY03/20 FY03/20 FY10/19 FY07/19 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons.

Domestic Wedding Hotels and Domestic Domestic Wedding Wedding Business segment Bridal-related Wedding business Weddings Wedding Operations Services

Number of employees 1,651 953 1,005 687 1,070 710 385 Per unit data Sales per employee (JPYmn) 31.0 35.1 21.5 37.0 26.8 27.3 27.0 No. of employees per facility 26 53 101 53 47 37 18 Source: Shared Research based on data from the various companies

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Strengths and weaknesses

Strengths

◤ An established brand in the house wedding market: Founded in 1998, T&G pioneered the house wedding market and established itself as the leading brand in the business (15% market share based on company estimate). It has a wealth of information and an established brand from years of handling wedding operations. According to comparatively recent surveys, wedding halls and house wedding facilities have increased their share of the wedding ceremony and reception market from 30% in 2003 to 54% in 2017, although the number of marriages in Japan peaked at 1.1mn in 1972 (first wave of baby boomers) and 0.8mn in 2001 (children of baby boomers), and has declined thereafter to around 0.59mn in 2018 (sources: Yano Research Institute “Wedding Industry 2018” and Recruit Bridal Souken “Zexy marriage trend survey” nationwide and Greater Tokyo editions). The wedding market overall will likely continue to shrink amid Japan’s falling birth rate, potentially causing a market shakeup (including consolidation). Even in this context, T&G is well positioned as the leading company with an established brand in the house wedding market.

◤ Ability to develop markets by being an early mover, from house weddings to boutique hotels: Driven by the management prowess of founder Yoshitaka Nojiri, T&G pushed the concept of customized weddings and developed a new “house wedding” service, which offered customers exclusive rental of a wedding venue and the assistance of a dedicated wedding planner. The company opened its first proprietary house wedding facility in 2001 and accelerated openings into regional areas from 2003, popularizing the concept nationwide. With the market entry of multiple house wedding operators, the format became a mainstream wedding style, and the company’s growth momentum weakened. Chairman Nojiri led efforts to explore new businesses amid this change in operating environment and established TRUNK Co., Ltd. in December 2016 to start a hotel business, introducing boutique hotels (common in Europe and North America, positioned midway between business and luxury hotels) to Japan. The first directly operated TRUNK (HOTEL) opened in Shibuya in 2017. T&G sees the boutique hotel business, a new hotel category in Japan, as its next growth driver.

◤ Capable successors supporting the founder: T&G aggressively opened new facilities from 2003 onward, when it began expanding its house wedding business to regional areas. However, it posted a net loss two years running (JPY2.8bn in FY03/08 and JPY1.0bn in FY03/09), because the rapid expansion program inflated fixed costs and undermined the service capability of existing facilities, which led to lower customer satisfaction. Then president and representative director, Nojiri sought to turn the company around by visiting all facilities in Japan, halting expansion and instead improving services at existing facilities. In June 2010, Nojiri invited corporate turnaround expert Kenji Chishiki to become T&G’s second president (Nojiri became the chairman). Under Chishiki’s leadership, the company reviewed its HR system, including recruitment and training, strengthened the organization, including the functions of the management council, and implemented cost restructuring. Kenji Iwase took over as the company’s third president in June 2015. Iwase took steps to improve earnings, such as withdrawing from the business in Shanghai (in FY03/14–FY03/15 T&G’s wedding business in China failed to be profitable), negotiating lower rents for domestic facilities, and reducing fixed expenses by closing unprofitable facilities. Under his leadership, the company also sought to improve customer satisfaction by acquiring its own warehouse (approximately 1,200sqm) for storage of various venue decorations and opening a customer center to improve the quality of response to initial inquiries.

Weaknesses

◤ Reliance on the domestic wedding business, which is expected to see market contraction in Japan: The domestic wedding market is likely to contract in the longer term amid trends such as falling birth and marriage rates in Japan and fewer people having wedding ceremonies and receptions. The percentage of couples marrying without a ceremony or reception and simply registering the marriage with a local government has increased due to changing values or for financial reasons, and the number of remarriages is up amid the trend of marrying later in life. In addition to house weddings, T&G began offering hotel weddings in TRUNK (HOTEL), but both the house and hotel wedding businesses are still domestic wedding businesses and thus their growth potential appears limited.

◤ Smaller, less efficient facilities and impairment of unprofitable venues weighing on profit margins: Compared with industry peers, the company’s SG&A expense ratio was a high 57.7% (largely due to high personnel expense ratio) and its

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operating profit margin a low 5.6% in FY03/20. The company books impairment loss by grouping its facilities into basic units, booking an impairment loss on facilities with negative cash flow from operating activities and those forecast to have negative cash flow from operating activities. It has booked an average extraordinary loss of over JPY740mn in the past five fiscal years. T&G has a large number of facilities around the country and most of them are small or medium in size. For this reason, its productivity per employee is relatively low compared to operators of larger facilities, and the company must continuously exit unprofitable facilities as a result.

◤ Low asset efficiency amid maturing house wedding market: T&G entered the hotel business in May 2017, when it opened its first directly managed TRUNK (HOTEL). However, industry peers started running their own hotels ahead of T&G and are expanding hotel operations through acquisitions. They have improved management efficiency by converting to larger facilities and raising capacity utilization rates on weekdays by offering accommodation and providing venues for various events. T&G has a competitive edge in terms of house weddings due to its specialization, but revenue opportunities are limited to weddings and the company is lagging behind in addressing other needs. For instance, more efforts can be devoted to promote sales targeting existing customers (i.e., service offerings such as celebration plans for wedding anniversaries other than the widely-celebrated 25th and 50th anniversaries, party plans at hotel restaurants, and special accommodation packages). As a result, the company’s ROA (recurring profit-based) remains at 5.9% and its total asset turnover rate at only 1.10. Its Domestic Wedding business has an asset turnover rate of 1.37, below the average of 1.49 for five industry peers.

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Historical performance and financial statements

Income statement

Income statement FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 46,716 47,983 52,804 60,714 59,221 59,524 60,186 64,590 66,871 63,678 YoY 1.5% 2.7% 10.0% 15.0% -2.5% 0.5% 1.1% 7.3% 3.5% -4.8% Cost of sales 21,762 22,181 24,305 26,514 25,373 24,913 24,263 24,741 24,697 23,348 YoY 1.8% 1.9% 9.6% 9.1% -4.3% -1.8% -2.6% 2.0% -0.2% -5.5% Cost ratio 46.6% 46.2% 46.0% 43.7% 42.8% 41.9% 40.3% 38.3% 36.9% 36.7% Gross profit 24,954 25,801 28,499 34,199 33,847 34,611 35,922 39,848 42,173 40,330 YoY 1.2% 3.4% 10.5% 20.0% -1.0% 2.3% 3.8% 10.9% 5.8% -4.4% GPM 53.4% 53.8% 54.0% 56.3% 57.2% 58.1% 59.7% 61.7% 63.1% 63.3% SG&A expenses 22,672 23,588 25,666 30,493 30,874 33,065 33,483 37,063 37,892 36,750 YoY 2.4% 4.0% 8.8% 18.8% 1.2% 7.1% 1.3% 10.7% 2.2% -3.0% SG&A ratio 48.5% 49.2% 48.6% 50.2% 52.1% 55.5% 55.6% 57.4% 56.7% 57.7% Operat ing profit 2,282 2,213 2,833 3,706 2,973 1,546 2,439 2,785 4,281 3,579 YoY -9.4% -3.0% 28.0% 30.8% -19.8% -48.0% 57.8% 14.2% 53.7% -16.4% OPM 4.9% 4.6% 5.4% 6.1% 5.0% 2.6% 4.1% 4.3% 6.4% 5.6% Non-operating income 55 81 107 140 177 166 40 184 112 157 Interest income 171212111196643 Other 38 69 95 129 166 157 34 178 108 154 Non-operating expenses 796 706 480 504 366 334 378 480 493 355 Interest expenses 570 508 398 332 279 246 202 377 344 336 Other 226 198 82 172 87 88 176 103 149 19 Recurring profit 1,541 1,588 2,459 3,342 2,784 1,377 2,100 2,489 3,900 3,381 YoY -18.1% 3.0% 54.8% 35.9% -16.7% -50.5% 52.5% 18.5% 56.7% -13.3% RPM 3.3% 3.3% 4.7% 5.5% 4.7% 2.3% 3.5% 3.9% 5.8% 5.3% Extraordinary gains 60 145 25 116 35 29 142 0 0 Extraordinary losses 1,943 483 251 417 523 789 1,333 748 855 1,458 Pretax profit -342 1,250 2,233 3,041 2,261 623 796 1,883 3,044 1,923 Income taxes, other -601 753 1,101 1,624 1,228 378 415 981 753 963 Income taxes 132 441 867 1,899 834 588 817 942 1,179 Income tax adjustments -733 311 234 -275 393 -209 -402 -188 -215 Implied tax rate 175.7% 60.2% 49.3% 53.4% 54.3% 60.7% 52.1% 52.1% 24.7% 50.1% Net income attributable to non-controlling interests 45 44 45 49 24 14 20 13 7 -44 Net income attributable to owners of the parent 214 453 1,086 1,370 1,008 230 360 888 2,283 1,003 YoY -42.3% 111.7% 139.7% 26.2% -26.4% -77.2% 56.5% 146.7% 157.1% -56.1% Net margin 0.5% 0.9% 2.1% 2.3% 1.7% 0.4% 0.6% 1.4% 3.4% 1.6% Net financial income -553 -496 -386 -321 -268 -237 -196 -371 -340 -333 Non-operating income (expenses) -741 -625 -373 -364 -189 -168 -338 -296 -381 -198 Extraordinary gains (losses) -1,883 -338 -226 -301 -523 -754 -1,304 -606 -855 -1,458 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Sales Sales at directly operated facilities in the core Domestic Wedding business are calculated as average customer spending multiplied by the number of weddings held.

Cost of sales The consolidated cost of sales ratio fell 9.9pp from 46.6% in FY03/11 to 36.7% in FY03/20. The cost of sales includes variable costs such as the cost of food and beverages and outsourcing costs. The company has been able to reduce the cost of food and beverages as a percent of sales using strategic purchasing to take advantage of volume discounts and otherwise increase the efficiency of the purchasing process. On the outsourcing cost front, T&G also has been able to reduce costs by pulling more and more of wedding dress production in house. T&G has been especially successful in this regard in the Kanto and Kasai areas, maintaining the proportion of wedding dresses produced in house above 70% (75.5% in FY03/20).

SG&A expenses Main SG&A expense items are advertising, salaries and allowances, rents, and depreciation. The consolidated SG&A expense ratio fell from 53.5% in FY03/08 to 48.1% in FY03/10, as the company recorded a net loss in FY03/08 and FY03/09, which prompted business process reviews. However, the SG&A expense ratio topped 50% again at 50.2% in FY03/14 (+1.6pp YoY) and resumed an upward trend, reaching 57.4% in FY03/18 (+9.1pp from FY03/13). Expenses have increased due to strengthening directly operated facilities, opening new overseas bases, and opening TRUNK (HOTEL) in Tokyo. The SG&A expense ratio remained at elevated levels in FY03/19 due to the increase in spending on facility remodeling and new hotel openings. It further rose in FY03/20 due to opening and operating costs for new facilities in the Overseas and Destination Wedding business.

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Advertising expenses These include advertising fees paid to wedding information services for bridal magazine and online ads, and commissions paid to referral agents. Wedding information services include Zexy (magazine and website), Minna no Wedding, Hanayume, and other websites, and many other businesses like Zexy Navi and MyNavi Wedding that operate wedding venue referral centers. These businesses are important ways to attract customers, because their users gather information, make inquiries, and sign up to tour venues. Although online media have become more influential in recent years, the number of companies providing services has also increased, resulting in an upward trend in advertising expenses. In FY03/20, the company streamlined advertising based on cost-effectiveness in an effort to reduce costs.

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Balance sheet

Balance sheet FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ASSETS Cash and deposits 4,094 5,035 4,170 5,582 5,111 3,871 4,918 4,769 6,782 6,455 Notes and accounts receivable 234 344 444 539 522 596 686 716 842 642 Operating loans receivable 1,082 1,382 1,848 1,648 1,778 1,940 2,150 2,656 3,287 2,774 Inventories 52 54 101 98 140 167 206 284 245 264 Prepaid Expenses 544 477 512 694 786 847 840 835 925 1,049 Deferred tax assets 462 379 320 510 288 415 380 426 0 0 Other 1,467 -6,220 2,089 2,014 2,681 2,426 2,665 3,548 3,949 3,086 Allowance for doubtful accounts -52 -66 -24 -46 -43 -85 -52 -58 -96 -68 Total current assets 6,801 3 7,612 9,391 9,485 8,237 9,643 10,520 12,647 11,428 Buildings and structures 10,851 10,680 13,630 13,463 13,910 15,886 15,573 18,651 18,205 17,286 Equipment, machinery, and vehicles 3 1 34 34 26 18 13 19 12 11 Tools, furniture, and fixtures 391 407 472 519 645 878 1,027 1,442 1,407 1,307 Land 9,661 9,661 10,085 9,973 9,973 10,882 10,894 11,153 11,207 15,284 Lease assets 17 5 167 596 572 578 503 3,661 4,571 4,460 Construction in progress 2 45 124 107 436 995 3,730 109 121 101 Total tangible fixed assets 20,927 20,803 24,514 24,695 25,564 29,240 31,743 35,037 34,331 37,124 Total intangible fixed assets 607 557 2,191 2,384 2,187 1,981 1,143 887 798 462 Investment securities 121 131 45 45 45 31 31 31 21 21 Shares in subsidiaries and affiliates 103 92 267 56 17 0 0 Long-term loans receivable 1,157 1,030 917 880 630 537 444 338 168 134 Long-term prepaid expenses 636 548 484 558 508 430 360 342 184 166 Deferred tax assets 2,107 1,902 1,733 1,885 1,713 1,789 2,214 2,317 2,9203,118 Guarantee deposits 12,243 10,629 9,010 8,421 7,760 7,113 6,714 6,757 6,113 5,808 Other 20251921232426142129128 Allowance for doubtful accounts -90 -16 -16 -92 -93 -154 -159 -347 -183 -193 Investments and other assets 16,297 14,249 12,192 11,810 10,853 9,826 9,647 9,580 9,352 9,182 Total fixed assets 37,832 35,610 38,898 38,890 38,605 41,048 42,533 45,505 44,483 46,769 Total deferred assets Total assets 44,634 43,390 46,510 48,282 48,091 49,286 52,176 56,025 57,130 58,197 LIA BILITIES Notes and accounts payable 1,867 2,413 2,732 2,874 2,576 2,627 2,484 2,339 2,594 1,313 Short-term debt 6,593 8,585 5,243 6,017 5,494 4,890 7,111 6,300 6,731 7,884 Income taxes payable 17 450 639 1,511 204 328 697 937 736 814 Accounts payable 2,5092,3782,2942,9922,101 Provision for bonuses 352 403 466 519 537 447 523 516 702 695 Other 3,769 3,307 4,190 4,918 5,247 2,847 3,317 3,211 3,329 3,368 Total current liabilities 12,598 15,158 13,270 15,839 14,058 13,648 16,510 15,597 17,084 16,175 Long-term debt 12,800 9,066 12,655 10,330 11,338 12,778 12,881 16,868 10,994 12,741 Accumulated impairment loss on long-term lease assets 1,563 1,176 915 640 421 306 227 149 22 0 Asset retirement obligations 1,094 1,080 1,114 1,134 1,109 1,230 1,243 1,219 1,202 1,284 Other 130 117 595 977 701 938 829 1,055 4,646 4,200 Total fixed liabilities 15,587 11,439 15,279 13,081 13,569 15,252 15,180 19,291 16,864 18,225 Total liabilities 28,186 26,598 28,550 28,921 27,628 28,901 31,690 34,889 33,949 34,400 NET A SSETS Capital stock 5,239 5,264 5,264 5,264 5,264 5,264 5,264 5,264 5,264 5,264 Capital surplus 5,185 5,210 5,210 5,210 5,210 5,210 5,208 5,208 5,208 5,208 Retained earnings 6,282 6,605 7,561 8,770 9,584 9,612 9,779 10,478 12,568 13,246 Treasury stock -211 -212 -213 -214 -215 -218 -211 Shareholders' equity 16,706 17,079 18,035 19,033 19,846 19,873 20,037 20,735 22,822 23,507 Deferred hedge gains (losses) 8 47 165 30 35 34 0 22 Foreign currency translation adjustments -343 -412 -266 21 267 292 209 143 125 81 Accum. other comprehensive income -343 -412 -257 69 432 323 244 177 125 104 Other 0222221886 Non-controlling interests 84 123 180 257 183 187 203 216 226 180 Total net assets 16,447 16,792 17,960 19,361 20,463 20,385 20,485 21,136 23,181 23,797 Total liabilities and net assets 44,634 43,390 46,510 48,282 48,091 49,286 52,176 56,025 57,130 58,197 Working capital -1,581 -2,015 -2,187 -2,237 -1,914 -1,864 -1,592 -1,339 -1,507 -407 Total interest-bearing debt 19,393 17,651 17,898 16,347 16,832 17,668 19,992 23,168 17,725 20,625 Net debt 15,299 12,616 13,728 10,765 11,721 13,797 15,074 18,399 10,943 14,170 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

Assets The company has a large fixed asset weighting, because it operates its own wedding facilities. Fixed assets accounted for 80.3% of all assets at the end of FY03/20. Main fixed assets are buildings and structures, land, and guarantee deposits.

Tangible fixed assets

▷ Tangible fixed assets increased by JPY11.2bn between FY03/09 and FY03/18, including buildings and structures valued at JPY6.8bn and land valued at JPY1.5bn. T&G has building lease agreements for four of its directly operated facilities and lease

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assets totaled JPY503mn in FY03/17. In FY03/18, a sale and lease back transaction accompanying the opening of TRUNK (HOTEL) increased lease assets by 3.2bn over FY03/17 to JPY3.7bn, where they remained in FY03/19. Building and structures increased by JPY3.1bn and land by JPY259mn in FY03/18 due to the new TRUNK (HOTEL), establishing new facilities in overseas resorts, and remodeling of domestic facilities. ▷ Tangible fixed assets increased by JPY2.8bn in FY03/20 due to the purchase of land for the flagship Aoyama Geihinkan facility in Tokyo.

Liabilities Interest-bearing debt was reduced from JPY22.5bn in FY03/08 to JPY16.3bn in FY03/14 as T&G made efforts to repay loans and improve financial soundness. However, it began to trend up again thereafter due to the opening of new facilities in Kyoto and Yokohama in FY03/16, reaching JPY23.2bn in FY03/18. Interest-bearing debt was reduced by JPY1.9bn YoY in FY03/19 as strong results allowed the company to repay long-term debt. Short and long-term borrowings increased by JPY2.9bn in FY03/20 as the company procured loans to purchase land for Aoyama Geihinkan.

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Cash flow statement

Cash flow statement FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cash flows from operating activities (1) 1,449 3,687 3,870 5,646 1,825 3,731 4,130 4,139 6,449 4,259 Cash flows from investing activities (2) -2,138 -880 -2,197 -1,769 -2,477 -5,471 -5,155 -6,708 -2,488 -7,038 Free cash flow (1+2) -689 2,807 1,673 3,877 -652 -1,740 -1,025 -2,569 3,961 -2,779 Cash flows from financing activities 232 -1,828 -2,377 -2,537 126 476 2,092 2,408 -1,956 2,293 Depreciation and amortization (A) 1,313 1,313 1,383 1,774 1,824 2,143 2,276 2,978 3,001 3,045 Capital expenditures (B) -841 -796 -699 -65 -1,903 -5,385 -4,980 -6,261 -2,359 -6,961 Working capital changes (C) 471 -434 -172 -50 323 50 272 253 -168 1,100 Simple FCF (NI + A + B - C) 215 1,404 1,942 3,129 606 -3,062 -2,616 -2,648 3,093 -4,013 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Cash flows from operating activities Net cash flow from operating activities vary mainly according to pretax profit, as well as depreciation and amortization expenses, and income tax payments. In recent years, net cash flow from operating activities has stabilized with the help of solid growth in net income and increases in depreciation stemming from additional purchases of tangible fixed assets. In FY03/20, net cash flow from operating activities declined by JPY2.2bn YoY due to a drop in pretax profit caused by impact from the COVID-19 outbreak.

Cash flows from investing activities Net cash flow from investing activities is mainly affected by the acquisition of tangible fixed assets. Capital expenditures began to increase from JPY699mn in FY03/13 to JPY1.9bn in FY03/15, and soared to higher levels in the three years to FY03/18 then came down in FY03/19. In FY03/19, net cash flow from investing activities was positive for the first time in four years. In FY03/20, however, net cash flow from investing activities turned negative again due to the purchase of land for Aoyama Geihinkan.

▷ JPY5.4bn in FY03/16 on new facilities in Kyoto and Yokohama ▷ JPY5.0bn in FY03/17 on TRUNK (HOTEL), new facility in Okinawa, new local facility in Taiwan, and remodeling in Japan ▷ JPY6.3bn in FY03/18 on TRUNK (HOTEL), new facility in Guam, and remodeling in Japan ▷ JPY2.4bn in FY03/19, including remodelings of domestic facilities

Cash flows from financing activities Net cash flow from financing activities was negative between FY03/12 and FY03/14 due to loan repayments, but turned positive in FY03/15 due to an increase in interest-bearing debt and moved further into positive territory after that. Although there was a JPY221mn net decrease in borrowings in FY03/18 due to repayments (-JPY2.7bn YoY), cash inflow from financing activities increased as a result of inflow from a sale and lease back transaction (+JPY3.3bn YoY). Net cash flow from financing activities moved back into negative territory in FY03/19 as the company took advantage of the strong earnings and increased the repayment of interest-bearing debt. In FY03/20, net cash flow from financing activities turned up again due to an increase in loans procured to purchase land.

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Historical performance

1H FY03/21 results (out November 10, 2020) Earnings summary 1H FY03/21 results (April–September 2020)

▷ Sales: JPY6.2bn (-81.1% YoY) ▷ Operating loss: JPY8.1bn (versus operating profit of JPY2.2bn in 1H FY03/20)

Fixed expenses were down in line with T&G’s withdrawal from overseas bases, while cost cutting efforts yielded a 34.5% YoY reduction in SG&A expenses, resulting in an operating loss that was JPY1.3bn smaller than the forecast.

▷ Recurring loss: JPY8.4bn (versus recurring profit of JPY2.1bn) ▷ Net loss: JPY13.2bn (versus net income of JPY946mn)

*Net loss/income refers to net loss/income attributable to owners of the parent.

▷ Sales and profit declined as temporary facility closures and wedding dates being pushed back due to the spread of COVID-19 resulted in the number of weddings held dropping by 5,157 YoY to just 916. ▷ Breakdown of JPY1.7bn extraordinary gain: Employment adjustment subsidy of JPY980mn, gain on sale of overseas subsidiaries of JPY715mn ▷ Breakdown of JPY5.7bn extraordinary loss: JPY2.4bn in a part of SG&A expenses incurred during temporary closures of facilities, JPY1.5bn impairment loss on Overseas and Destination Wedding venues, JPY739mn loss on business liquidation of overseas

subsidiaries, and JPY1.1bn loss on the sale of shares in group subsidiaries. ▷ Withdrawal from Overseas and Destination Wedding business: T&G transferred all shares in Good Luck Corporation (GLC) to an outside company and former partner. Withdrawal resulted in the exclusion of GLC and its nine subsidiaries from

consolidation. ▷ Increased interest-bearing debt: Short-term borrowings increased by JPY6.7bn and long-term borrowings by JPY1.0bn from end-March 2020 to cover current working capital needs.

Results by segment 1H FY03/21 (April–September 2020) results by segment are as follows.

Domestic Wedding business

▷ Segment sales: JPY3.8bn (-85.5% YoY) ▷ Segment loss: JPY6.0bn (versus segment profit in 1H FY03/20 of JPY3.4bn) ▷ Sales breakdown: Directly operated facilities generated sales of JPY3.2bn (-86.7% YoY), consulting services JPY124mn (-85.0% YoY), and other services (lodging, restaurants, etc.) JPY548mn (-70.9% YoY). ▷ Directly operated facilities: At end-1H FY03/21, the company had 63 facilities and 92 venues (66 facilities and 101 venues at end-1H FY03/20). The company performed 916 weddings (versus 6,073 in 1H FY03/20) with an average spend per wedding of JPY3.4mn (JPY3.9mn in 1H FY03/20) and average visitor count per wedding of 46.1 (69.4 in 1H FY03/20). ▷ The TRUNK (HOTEL) resumed operation in July 2020, and T&G says the number of restaurant customers is on a recovery trend. In terms of lodging, however, given the high inbound guest rates prior to the COVID-19 outbreak (85% as per FY03/20 results), current room occupancy rates remain low, at 20–30%.

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Overseas and Destination Wedding business Since the segment fiscal period ends in December, consolidated reporting includes results from April to June 2020.

▷ Segment sales: JPY2.1bn (-62.2% YoY) ▷ Segment loss: JPY1.3bn (segment loss of JPY199mn in 1H FY03/20) ▷ Sales and profit declined in Q2, because the business was temporarily closed. Under the state of emergency declaration by the Japanese government, overseas travel restrictions and stay-at-home directives made it impossible to hold wedding ceremonies. Only a few facilities in Okinawa resumed operations in June 2020. ▷ The company withdrew from the Overseas and Destination Wedding business as of end-Q2, having transferred shares in the group subsidiary operating the business. The company says that, because this segment was operated separately from T&G per se, withdrawal will not affect the Domestic Wedding or Other businesses.

Other businesses Other businesses include the financial and credit business, such as wedding loans, and the childcare business, among others.

▷ Segment sales: JPY270mn (-65.5% YoY)

Q1 FY03/21 results (out August 7, 2020) Earnings summary Q1 FY03/21 results (April–June 2020)

▷ Sales: JPY2.6bn (-83.7% YoY) ▷ Operating loss: JPY3.5bn (versus operating profit of JPY854mn in Q1 FY03/20) ▷ Recurring loss: JPY3.6bn (versus recurring profit of JPY821mn in Q1 FY03/20) ▷ Net loss: JPY6.0bn (versus net income of JPY468mn in Q1 FY03/20)

*Net loss/income refers to net loss/income attributable to owners of the parent.

▷ Sales declined and the company posted an operating loss due to temporary closures and postponements of weddings caused by the spread of COVID-19. ▷ SG&A expenses came in at JPY5.1bn (-44.0% YoY). Cost reductions amounted to JPY1.7bn due to lower advertising costs, the postponement or cancellation of non-essential measures, and lower variable costs due to a decline in the number of weddings.

In addition, part of the personnel costs and rent expenses incurred during temporary facility closures were recorded as extraordinary losses, resulting in a JPY4.0bn YoY reduction in SG&A expenses. ▷ Booking of extraordinary losses: The company booked JPY3.9bn in extraordinary losses. It booked JPY2.3bn in extraordinary losses on fixed costs incurred due to the shortening of operating hours and temporary closure of its facilities in line with the government’s declaration of a state of emergency due to the spread of COVID-19. The company also booked JPY1.5bn in impairment losses on the fixed assets of facilities owned in the Overseas and Destination Wedding business, where the company also booked JPY81mn in losses on the liquidation of business in line with a reduction in business locations. ▷ Reversal of deferred tax assets: After examining the potential for recovering deferred tax assets in the Overseas and Destination Wedding business, the company booked JPY419mn as deferred income taxes. ▷ Short- and long-term borrowings increased by JPY7.0bn compared to end-FY03/20 as the company secured immediate working capital for personnel costs and rent. Meanwhile, the company’s equity ratio decreased by 9.8pp to 30.8% due to the reversal of retained earnings of JPY6.1bn.

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Results by segment Q1 FY03/21 (April–June 2020) results by segment are as follows.

Domestic Wedding business

▷ Segment sales: JPY498mn (-96.3% YoY). The sales decline was mainly driven by the number of weddings held dropping by 2,988 YoY at directly operated facilities. ▷ Segment loss: JPY2.7bn (versus segment profit in Q1 FY03/20 of JPY1.7bn). GPM was down 10.0pp YoY due to food losses caused by rescheduling and the recording of purchase costs of delivered items. According to the company, SG&A expenses in the Domestic Wedding business declined by JPY3.8bn YoY, but was unable to offset the drop in sales, resulting in a segment loss. ▷ Sales breakdown: Directly operated facilities generated sales of JPY352mn (-97.1% YoY), consulting services JPY12mn (-97.2% YoY), and other services (lodging, restaurants, etc.) JPY133mn (-86.1% YoY). ▷ Directly operated facilities: At end-Q1 FY03/21, the company had 63 facilities and 93 venues (67 facilities and 102 venues at end-Q1 FY03/20). The number of weddings held was 82 (-97.3% YoY). ▷ As a result of measures taken to prevent wedding cancellations, the number of customers postponing their wedding dates increased and the order backlog of weddings planned for FY03/22 rose 274.6% YoY. This was mainly driven by the fact that

the company waived fees for postponements as a part of its measure to prevent cancellations. The company is also proposing two-part wedding plans and smaller weddings to avoid the three Cs (closed spaces, crowded places, close-contact settings), but most customers are electing to postpone rather than to reduce the size of the wedding, and the postponement period is

getting longer.

Overseas and Destination Wedding business

▷ Segment sales: JPY2.0bn (-12.2% YoY). The revenue for January‒March 2020 is reflected in Q1 results as the fiscal year for the Overseas and Destination Wedding business ends in December. The company noted that the impact of the coronavirus

pandemic was less severe compared to its domestic business. ▷ Segment loss: JPY375mn (segment loss of JPY360mn in Q1 FY03/20). ▷ Despite a recovery trend in orders on the reorganization of the sales headquarters and a review of the employee training system, the number of weddings declined due to the effects stemming from the spread of COVID-19. ▷ As there is little certainty about wedding services resuming after travel restrictions are lifted, the company is downsizing or closing facilities across all regions, especially in East Asian markets.

Other businesses Other businesses include the financial and credit business, such as wedding loans, and the childcare business, among others.

▷ Segment sales: JPY148mn (-61.6% YoY)

Full-year FY03/20 results (out May 21, 2020) Earnings summary FY03/20 results (April 2019–March 2020)

▷ Sales: JPY63.7bn (-4.8% YoY) ▷ Gross profit: JPY40.3bn (-4.4% YoY; gross profit margin up 0.2pp YoY) ▷ Operating profit: JPY3.6bn (-16.4% YoY)

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▷ Recurring profit: JPY3.4bn (-13.3% YoY) ▷ Net income: JPY1.0bn (-56.1% YoY)

*Net income refers to net income attributable to owners of the parent.

▷ At the time of its Q3 results briefing on February 7, 2020, T&G made upward revisions to its FY03/20 forecast. The company had expected sales to fall short of initial forecast due to closures of unprofitable locations in the Domestic Wedding business and the impact from natural disasters (typhoon Hagibis) in 2019, but on the other hand, it had expected profits to exceed initial forecast thanks to sales of products with higher gross profit margins. T&G had anticipated profits to grow for the fifth consecutive year. ▷ Moving into Q4, however, the company’s operating environment changed dramatically due to the COVID-19 outbreak. Sales and profit fell YoY due to (1) increased wedding postponements by customers attributable to the state of emergency declaration by the Japanese government, requests from local governments to refrain from going outside, and restrictions on overseas travel, and (2) temporary facility closures nationwide. Sales fell by JPY2.6bn and profit declined by JPY1.4bn due to impact from the COVID-19 outbreak. ▷ The company consulted with its accounting auditor on the recoverable amount of fixed assets for directly operated facilities and recorded a JPY1.4bn extraordinary loss, reflecting losses on retirement of assets accompanying renewals of five facilities in

Japan, four chapels in Guam, and restaurants, as well as losses on sales of unprofitable facilities. Consequently, net income declined further, falling 56.1% YoY.

Results by segment FY03/20 (April 2019–March 2020) results by segment are as follows.

Domestic Wedding business

▷ Segment sales: JPY51.1bn (-5.7% YoY). Wedding facilities have been closed temporarily from April 8, 2020, with restaurant facilities closed from March 31, 2020. ▷ Segment profit: JPY5.7bn (-2.4% YoY). The decline in profit due to the COVID-19 outbreak was JPY1.3bn, but the YoY drop in segment profit was only JPY137mn thanks to ongoing initiatives to improve profitability. ▷ Sales breakdown: Directly operated facilities generated sales of JPY45.8bn (-5.7% YoY), consulting services JPY1.5bn (-3.2% YoY), and other services (lodging, restaurants, etc.) JPY3.8bn (-7.0% YoY). ▷ Directly operated facilities: At end-FY03/20, the company had 64 facilities and 94 venues (67 facilities and 102 venues at end-FY03/19). The number of wedding orders was 11,596 (-7.5% YoY). ▷ Hotel business: Posted a 0.2% YoY increase in sales to JPY4.6bn. Sales at TRUNK (HOTEL) have expanded steadily since its launch, but cancellations of weddings and accommodation bookings due to the COVID-19 outbreak led to a decline of JPY157mn in sales and a decrease of JPY137mn in profit. The company group’s hotels were temporarily closed from March 30 to June 30, 2020. ▷ Factors adversely impacting sales: Segment sales fell JPY3.1bn YoY, reflecting a decline of JPY642mn from the closure of three facilities (due to unprofitability or expired lease), and a drop of JPY2.5bn from a decrease in the number of weddings (-7.6% YoY) as over 600 couples postponed their weddings due to impact of typhoons or the COVID-19 outbreak. ▷ Factors adversely impacting profit: The operating profit margin rose 0.4pp YoY from 10.8% to 11.2% due to success with ongoing measures to increase profit such as improving profitability through the closure of loss-making facilities and selling highly profitable products. However, this was offset by the impact of wedding postponements caused by the COVID-19

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outbreak, resulting in a YoY decline in segment profit.

Cancellation rate only reached 5%, but large number of wedding postponements weighed on FY03/20 results As mentioned above, the postponement of weddings by roughly 600 couples had an impact on FY03/20 results, but the company says the cancellation rate due to the COVID-19 outbreak was 5% from end-February to end-April 2020. It attributes this to success in rapidly implementing measures in response to the abrupt changes in its operating environment, an ability honed through the company’s experiences in the wake of the Great East Japan Earthquake and various major typhoons. The company decided in mid-February to waive rescheduling fees and cancellation fees, and notified this policy to customers who were planning a wedding. It relied on the customer relationship management (CRM) service it has developed to inform customers. In addition, the company took creative steps to hold on to postponed weddings, surprising couples who had postponed their wedding by sending them a letter from President Iwase and wedding hall staff along with a bottle of champagne on the originally scheduled wedding date, and we understand it received many messages of gratitude from such customers in response.

Overseas and Destination Wedding business

▷ Segment sales: JPY11.1bn (-0.6% YoY). The main reason for the decline in sales was a reduction in the number of destination weddings by Japanese customers. ▷ Segment loss: JPY256mn (segment profit of JPY389mn in FY03/19). The gross profit margin fell 3.3pp YoY due to growth in sales at the low-margin travel agency business. SG&A expenses rose due to an increase in facility expenses and opening expenses for new directly operated salons in Hiroshima, Nagoya, and Ginza, as well as for new sales offices in Shanghai and

Beijing, and this pushed profit down.

▷ Because the Overseas and Destination Wedding business closes its books in December, its results were not affected by the COVID-19 outbreak. The company says the business saw a substantial drop in customers in Japan and overseas, but this was offset by a move to in-house services in the travel agency business (ancillary to the wedding business), and sales declined only modestly as a result. ▷ Domestic market (Japanese customers): The decline in sales as a result of a decrease in the number of wedding orders was JPY67mn. Sales counters and wedding facilities nationwide have been temporarily closed since April 8, 2020. ▷ East Asian markets (Chinese, Taiwanese, and other customers): The number of weddings were up YoY thanks to an increase in the number of facilities. Since January 31, 2020, T&G facilities in East Asia, including China, have been temporarily closed.

Other businesses Other businesses include the financial and credit business, such as wedding loans, and the childcare business, among others.

▷ Segment sales: JPY1.4bn (-0.8% YoY) ▷ Segment profit: JPY264mn (+23.4% YoY)

Cumulative Q3 FY03/20 results (out February 7, 2020) Earnings summary Cumulative Q3 FY03/20 results (April–December 2019)

▷ Sales: JPY49.1bn (-2.1% YoY) ▷ Operating profit: JPY3.6bn (-5.6% YoY) ▷ Recurring profit: JPY3.4bn (-4.7% YoY) ▷ Net income: JPY1.8bn (-20.7% YoY)

*Net income refers to net income attributable to owners of the parent.

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▷ Consolidated sales declined 2.1% YoY to JPY49.1bn. In the mainstay Domestic Wedding business, sales fell by 1.9% YoY as the number of weddings fell 3.6% YoY to 9,214. Sales also fell in the Overseas and Destination Wedding business, reporting a 4.0% YoY decline due to fewer bookings in the domestic market (targeting customers in Japan). ▷ Consolidated operating profit was down 5.6% YoY to JPY3.6bn. Although efforts to improve cost efficiencies were successful, leading to profitability improvement in the Domestic Wedding business, they were not enough to offset the increase in SG&A expenses associated with investments in new facilities for the Overseas and Destination Wedding business, resulting in an overall decline in operating profit.

Results by segment Cumulative Q3 FY03/20 (April–December 2019) results by segment are as follows.

Domestic Wedding business

▷ Segment sales: JPY40.6bn (-1.9% YoY) ▷ Factors adversely impacting sales: At the mainstay directly operated facilities, sales fell by 2.1% YoY to JPY36.3bn as the number of domestic house weddings declined. Although consulting sales grew 3.7% YoY, it was not enough to offset the decline in domestic house weddings. ▷ Segment profit: JPY5.8bn (+11.5% YoY) ▷ Factors driving increase in segment profit: Improvement in profitability as a result of the closure of unprofitable facilities, streamlining of advertising based on cost effectiveness, and an increase in average spend per wedding driven by service charges for decorative items and enhanced sales efforts for highly profitable products resulted in double digit segment profit

growth.

A breakdown of sales is as below.

Directly operated facilities

▷ Domestic house wedding: The number of weddings declined by 348 YoY due to facility closures (-3 facilities YoY) and a typhoon (-70 wedding bookings vs forecast), resulting in sales of JPY36.3bn (-2.1% YoY). ▷ Hotel business (included in directly operated facilities): The number of wedding orders increased 1.8% YoY.

Consulting

▷ Gross transaction value and the number of weddings increased driven by steady orders at Tokyo Kaikan, resulting in sales growth of 3.7% YoY to JPY1.2bn. For other services (e.g. lodging and restaurants), the average daily rate (ADR) for hotel rooms was JPY63,040. The ratio of foreign visitors remained high at 87%, but sales declined by 2.0% YoY to JPY3.1bn as the number of restaurant guests decreased.

Overseas and Destination Wedding business

▷ Segment sales: JPY7.3bn (-4.0% YoY). The decline in sales was mainly attributed to a decrease in bookings in the domestic market. ▷ Segment loss: JPY832mn (segment profit of JPY39mn in Q3 FY03/19). The segment loss expanded due to an increase in SG&A expenses driven by opening expenses for the newly established directly operated sales salons in Hiroshima, Nagoya, and Ginza, as well as sales offices in Shanghai and Beijing, and investment in a new facility in Phuket.

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▷ Domestic market (targeting customers in Japan): The average spending per wedding rose, but the number of wedding bookings decreased. With the reorganization of the sales structure, 10 directly operated sales salons started operations. According to the company, the number of new orders recovered to the same level as Q3 FY03/19. ▷ East Asian markets (targeting customers in China [including Hong Kong], Taiwan, and other regions): Full-scale operations of the sales offices in Shanghai and Beijing, which were established in April 2019, began in Fall 2019. As the lead time from order receipt to wedding commencement ranges between three to five months, the two offices have not contributed to sales as of Q3 FY03/20 (fiscal year for the Overseas and Destination Wedding business ends in December). The number of weddings increased 3.4x over the last four years accompanied by an increase in the number of facilities in operation, but expenses exceeded sales, pushing profits down.

Other businesses Other businesses include the childcare business as well as services that support wedding customers such as the financial and credit business, which issues wedding loans.

▷ Segment sales: JPY1.2bn (+3.4% YoY) ▷ Segment loss: JPY1.4bn (loss of JPY1.4bn in Q3 FY03/19)

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Other information

History

Year Event

Oct. 1998 Take and Give Needs Co., Ltd. (T&G) established

Jun. 2001 Began house wedding business with directly operated facilities

Dec. Stock listed on NASDAQ Japan (now Tokyo Stock Exchange JASDAQ market)

Feb. 2004 Stock listed on Tokyo Stock Exchange Second Section

Jun. 2005 Invested in GOOD LUCK Corporation

Jul. Established LIFE ANGEL Co., Ltd., and began financing business

Feb. 2006 Established Anniversary Travel Co., Ltd., and began travel business Mar. Stock listed on Tokyo Stock Exchange First Section Jan. 2007 Began Overseas and Destination Wedding business by making GOOD LUCK Corporation a consolidated subsidiary (73.8% stake)

Apr. Acquired additional stake in GOOD LUCK Corporation (91.8% stake)

Dec. 2012 Made Bride's Word Co., Ltd. a consolidated subsidiary

Aug. 2013 Established subsidiary of GOOD LUCK Corporation in Taiwan

Sep. Opened salon in Taiwan to capture destination wedding customers from Asia in earnest

Dec. 2016 Established And Company Co., Ltd., and began nursery operation

Established TRUNK Co., Ltd., and began hotel business

Sep. 2017 Established Dressmore Co., Ltd., and began wedding dress hire business

Apr. 2018 Absorbed Bride's Word Co., Ltd.

Source: Shared Research based on company data

Historical performance since October 1998

(JPYmn) Sales (right axis) Recurring profit Net income (JPYmn) 10,000 80,000

70,000 8,000

60,000 6,000

50,000

4,000

40,000

2,000

30,000

0 20,000

-2,000 10,000

-4,000 0 FY03/99 FY03/01 FY03/03 FY03/05 FY03/07 FY03/09 FY03/11 FY03/13 FY03/15 FY03/17 FY03/19

Source: Shared Research based on company data Note: The company began releasing consolidated results in FY03/07. 1998–2004: Nojiri built on success of a teenage venture to become an entrepreneur T&G’s founder Yoshitaka Nojiri was born in Edogawa, Tokyo, in 1972. His father was an electrical and building contractor. Observing his father’s tradesman mentality motivated Nojiri to start his own business. In his third year at Meiji Nakano Junior High School, he joined a group of Teamers,* and was soon after struck by the idea of selling leather jackets and Levis to students in his Teamer circles. He sold apparel to around 2,500 high school students, and teenagers wearing these leather jackets and denims began to stand out in Shibuya. They were featured in men’s magazines as representing a new fashion trend known as Shibuya Casual (the first street fashion trend originating in Japan that started in Shibuya), which soon spread nationwide. Magazine

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headlines usually mentioned the word Teamer and spawned a social phenomenon called Teamer Culture. As a senior high school student, Nojiri organized dance parties for fellow students. These parties became so popular that 300 tickets priced at JPY5,000 each sold out as soon as they went on sale. Through these experiences, Nojiri learned that by identifying latent needs and spreading the word via media, he could start a trend. This was the beginning of his entrepreneurship that later led to the launch of T&G’s house wedding business.

Teamers: Groups of trendy senior high school students who imitated street gangs and gathered in the streets of Shibuya’s entertainment district in the 1980s and 1990s.

2005–2008: Inspired by overseas weddings, resolved to start up customized wedding business in Japan After graduating from Meiji University in 1995, Nojiri joined Sumitomo Marine and Fire Insurance Company (now Mitsui Sumitomo Insurance Group Holdings) with a view to beginning his own business in the future. He worked in the Tokyo Corporate Sales Department and was assigned to a team that supported startups. Capitalizing on his experience of running popular dance parties as a high school student, he made events coordination his area of strength. His friends called on him to organize parties after wedding receptions. When visiting a member’s club for a meeting, he encountered a foreign couple getting married at a white-walled mansion with a pool and garden rented exclusively for the occasion. For 40 years since the period of rapid economic growth starting around 1955, the vast majority of weddings in Japan were held at wedding halls or hotels (hotels accounted for roughly 50% and wedding halls 40% in 1995), and most weddings were standardized and run like an assemly line. Nojiri identified a latent need for more personalized weddings and decided to start a wedding business.

1998–2006: Pioneered house wedding market A team of three, including Nojiri, founded T&G (Take and Give Needs) in 1998. The company’s name came from “give and take” (the team’s final choice), but the team reversed the words. “Needs” was added to reflect the company’s motto of capturing latent needs to provide services that satisfy customers. Initially the company provided a house wedding service in partnership with restaurants, since its priority was to accumulate knowledge of the business. The company opened its first directly operated facility in Daikanyama, Tokyo, in 2001, which marked the start of T&G’s house wedding business utilizing proprietary venues. In 2003 it began expanding into regional areas to build a nationwide network, cultivating the business and gaining recognition throughout Japan in return. The company listed on NASDAQ Japan (now Tokyo Stock Exchange JASDAQ market) three years after it was founded, moved to Tokyo Stock Exchange Second Section in 2004, and to the First Section in 2006.

2007–2009: Posted loss for two consecutive years due to corporate structure falling behind rapid increase in the number of facilities T&G began accelerating the opening of new facilities in the regional areas from 2003, but it could not repeat the success of its Tokyo facilities without modifications. Most weddings in Japan are conducted near the bride and groom’s hometown, requiring strong regional characteristics. The average cost of weddings varies considerably between regions, and many weddings incorporate local customs and traditions into the ceremony or reception. Thus, promotional activities to attract customers and the quality of services could not keep up with the fast pace of opening new facilities, with new facilities increasing the capex and fixed expense burden. Formulaic sales and a shortage of experienced employees led to a decline in quality and employee motivation, hurting contract rates and profitability. T&G posted a net loss of JPY2.8bn in FY03/08, followed by a net loss of JPY1.0bn in FY03/09. Then president and representative director, Nojiri sought to turn the company around by visiting all facilities in Japan, apologizing to employees and calling on them to go back to the founding principle of putting customers first. The company halted the expansion (at 61 facilities in 2009) and worked to improve services at existing facilities. T&G launched the Overseas and Destination Wedding business in 2007 and outsourced hotel wedding operations in 2010.

2010–2014: Corporate restructuring led by second president Kenji Chishiki In June 2010, shortly after returning to profitability in FY03/10, Nojiri stepped down as president and representative director to become chairman, naming Kenji Chishiki as his successor. Chishiki was the first president of Kanebo Cosmetics Inc., a subsidiary of Kanebo Ltd., which restructured under the oversight of the Industrial Revitalization Corporation of Japan. He had a reputation as a corporate turnaround expert who restructured Kanebo Cosmetics in a short period of time. Under his leadership, the company reviewed its HR system, including recruitment and training, strengthened the organization, including the functions of

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the management council, and implemented cost restructuring. In 2012, T&G made Bride’s Word (a company specializing in facility restoration and the operation of heritage buildings and hotels) a consolidated subsidiary and started businesses in these areas. T&G also set up a customer center to improve the quality of response to new inquiries.

2015–present: Seeking to strengthen business base further under third president Kenji Iwase After the failure of the Chinese wedding business in FY03/14–FY03/15, third president Kenji Iwase took over in June 2015. Under Iwase, the company took steps to improve earnings, such as withdrawing from the business in Shanghai, negotiating lower rents for domestic facilities, and reducing fixed expenses by closing unprofitable facilities. The company also sought to improve customer satisfaction by acquiring its own warehouse (approximately 1,200sqm) for storage of fittings to fulfill customers’ requirements for venue decorations. Utilizing the customer center established to improve the quality of response to initial inquiries, the company conducted follow-up surveys by telephone of all couples who used its wedding service. With a high response rate, these surveys have been reflected in employee performance reviews, further raising the motivation of employees who had already demonstrated motivation.

News and topics November 2020 On November 10, 2020, the company announced revisions to its full-year FY03/21 earnings forecasts.

Revised full-year FY03/21 consolidated earnings forecast

▷ Sales: JPY22.0–25.0bn (unchanged) ▷ Operating loss: JPY12.0–10.0bn (previous forecast: JPY15.0–12.0bn) ▷ Recurring loss: JPY12.5–10.5bn (previous forecast: JPY15.5–12.5bn) ▷ Net loss*: JPY16.5–14.5bn (previous forecast: JPY16.5–13.0bn) ▷ EPS: -JPY1,273.49 to -JPY1,119.13 (previous forecast: -JPY1,273.49 to -JPY1,003.36) *Net loss attributable to owners of the parent

Reasons for revision Sales in 1H FY03/21 were more or less in line with the company’s forecast, and the group as a whole reduced expenses including the reduction of fixed expenses through withdrawal from overseas businesses. As a result, the operating loss and recurring loss finished narrower versus the company’s forecasts. However, the net loss was worse than expected, because the company booked a loss on the sale of shares in group subsidiaries and a loss from the disposal of businesses (mainly subsidiaries in East Asia), as well as making a reversal of part of its deferred tax assets.

1H results have come in largely ahead of the company’s forecasts, and the percentage of weddings being performed has been recovering with the number of customers wishing to postpone their wedding date decreasing toward 2H. As such, the company expects the operating loss for the full year to shrink more than its previous FY03/21 forecast. That being said, the company continued to release its forecasts as a range, because the impact of the COVID-19 pandemic on its earnings remains highly uncertain.

On the same day, the company announced the booking of extraordinary gain and loss, and reversal of some deferred tax assets.

The company announced that the earnings impact of the transfer of shares in consolidated subsidiary Good Luck Corporation (GLC) had been confirmed as follows.

1) The company booked a JPY1.1bn loss on the sale of shares in an affiliate associated with the transfer of shares 2) The company booked a JPY715mn gain from the sale of shares in an affiliate, having sold all shares it holds in a subsidiary of GLC in Taiwan

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3) The company booked a JPY666mn expense incurred in the liquidation, etc., of overseas subsidiaries as a loss on business liquidation

The company applied for the employment adjustment subsidy to mitigate the impact of the COVID-19 pandemic, recording JPY987mn in subsidy payments received as extraordinary gain. Having discussed the recoverability of deferred tax assets of the Domestic Wedding segment, the company decided to reverse some of it, booking JPY807mn as income taxes in Q2.

The above changes have been reflected in Q2 FY03/21 results.

September 2020 On September 18, 2020, the company announced a change in its consolidated subsidiary (due to a share transfer), and that it expects to record an extraordinary loss.

At a meeting of the board of directors held on September 18, 2020, the company resolved to enter into a share transfer agreement to transfer all of the shares it holds in consolidated subsidiary Good Luck Corporation (GLC) to Ken Real Estate Lease Ltd (Ken). The company expects to post an extraordinary loss in relation to this transfer.

Profitability had become an issue in the Overseas and Destination Wedding business operated by subsidiary GLC due to increasing investment costs for the East Asian markets over several years and an intensifying competitive environment. Further, the company expects that it will take a long time for the business to recover because there are no prospects for the easing of travel restrictions and normalization of air routes due to the COVID-19 pandemic. Accordingly, the company has decided to transfer its shares in GLC to Ken, which is expected to generate synergies as it cooperates with a range of hotel chains in Japan and overseas as well as operating its real estate business.

The removal of the Overseas and Destination Wedding business from the scope of consolidation will have the effect of increasing FY03/21 consolidated operating profit and recurring profit by approximately JPY1.6bn. However, because the share transfer is expected to result in the company posting a JPY1.6bn extraordinary loss, the company has not amended the target ranges of the consolidated earnings forecast announced on August 7, 2020.

The company stated that it plans to review its long-term management policy on the basis of the reconstruction of its business portfolio, and will make further announcements regarding such review.

August 2020 On August 7, 2020, the company announced revisions to its FY03/21 consolidated earnings and dividend forecasts.

Full-year FY03/21 consolidated earnings forecasts Sales: JPY22.0bn–JPY25.0bn (previously: TBD) Operating loss: JPY15.0bn–JPY12.0bn (previously: TBD) Recurring loss: JPY15.5bn–JPY12.5bn (previously: TBD) Net loss*: JPY16.5bn–JPY13.0bn (previously: TBD) Net loss per share: JPY1,273.49–JPY1,003.36 (previously: TBD) Dividend per share: JPY0.00 (previously: TBD) *Net loss/income attributable to owners of the parent

On the same day, the company announced the reversal of deferred tax assets and the booking of extraordinary losses.

June 2020 On June 25, 2020, the company announced a disposal of treasury stock as stock compensation.

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The company announced that it approved a disposal of treasure stock as stock compensation at a board of directors meeting held of the same day.

At a board of directors meeting held on May 24, 2019, T&G decided to introduce a stock compensation program with transfer restrictions, for directors excluding outside directors with the goal of providing an incentive to continually improve the corporate value of the company, and promoting the further sharing of values with shareholders. The company attained shareholder approval for the program at the 21st annual general meeting of shareholders on June 26, 2019.

Based on the program, the company will dispose of treasury stock in order to allot ordinary shares of T&G to eligible directors in exchange for the monetary compensation claims provided by the company to directors as compensation in kind for services provided from June 26, 2019 to June 25, 2020.

Overview of disposal of treasury stock Disposal date: August 1, 2020 Number and type of shares: 9,100 ordinary shares Disposal price per share: JPY696 Total value of shares to be disposed: JPY6,333,600 Allottees: Three executive directors of T&G

On June 19, 2020, the company announced that it had entered into long-term borrowing and overdraft agreements.

The company announced that it had entered into long-term borrowing and overdraft agreements in order to secure liquidity in hand, with the objective of stabilizing its financial base even if future sales are affected by the spread of the novel coronavirus extending into the longer-term.

Summary of the long-term borrowing Lender: The Shoko Chukin Bank, Ltd. Loan amount: JPY3.5bn Loan implementation date: June 2020 Loan period: 15 years Interest: Fixed rate

Summary of overdraft agreement Lenders: Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank, Ltd., and MUFG Bank, Ltd. Overdraft limit: JPY6.5bn Contract date: June 2020 Contract period: One year from contract date Interest: Variable, linked to market interest rate

The company expects that the effect of these agreements on consolidated FY03/21 earnings will be minor.

May 2020 On May 21, 2020, the company announced earnings results for full-year FY03/20; see the results section for details.

On the same day, the company announced the main differences between its full-year consolidated forecast and its actual results, and the booking of extraordinary losses.

On the same day, the company announced a reduction in executive compensation.

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T&G announced a reduction in executive compensation with the aim of reducing expenditures as the company expects its FY03/21 results to be significantly impacted by temporary suspension of business and other measures in response to the COVID-19 outbreak. The reduction in compensation applies for May and June 2020; compensation for the period from July 2020 to June 2021 will be reviewed at a later date.

April 2020 On April 24, 2020, the company announced that it will postpone its full-year FY03/20 consolidated earnings announcement.

T&G decided to postpone its FY03/20 earnings announcement, which was originally scheduled for Wednesday, May 13, 2020 (from 3:30pm). According to the company, to ensure safety of its staff and the accounting auditors involved in the settlement of accounts amid the COVID-19 outbreak, the auditors have been divided into small teams that are taking turns visiting the company. As a result, the audit process has required more time than usual. The postponement is intended to secure enough time for T&G to conduct its accounting audit stringently. The company now plans to hold the earnings announcement on Thursday, May 21 (from 3:30pm). It says the postponement will have no effect on its FY03/20 earnings forecast, as the company has already announced a revision to the forecast on April 21.

On April 21, 2020, the company announced a revision to its full-year FY03/20 consolidated earnings forecast.

In response to performance trends caused by the spread of the novel coronavirus, the company revised the full-year FY03/20 consolidated earnings forecast it had released on February 7, 2020.

Revised full-year FY03/20 consolidated earnings forecast

▷ Sales: JPY63.5bn (previous forecast of JPY66.0bn) ▷ Operating profit: JPY3.5bn (JPY4.5bn) ▷ Recurring profit: JPY3.3bn (JPY4.2bn) ▷ Net income*: Undetermined (JPY1.8bn) ▷ EPS: Undetermined (JPY135.09) *Net income attributable to owners of the parent

Reasons for revision The company revised its full-year FY03/20 forecasts when announcing Q3 results (February 7, 2020) and again on April 21, 2020. T&G now targets consolidated sales of JPY63.5bn (-5.0% YoY), operating profit of JPY3.5bn (-18.2% YoY), and recurring profit of JPY3.3bn (-15.4% YoY), while leaving net income attributable to owners of the parent undetermined (JPY2.3bn in FY03/19). Two revisions were made because of an increase in wedding postponements caused by concerns over the spread of the novel coronavirus disease in Japan that began to rise in February 2020; subsequent requests from the Japanese government and local governments to refrain from going outside; and restrictions on overseas travel.

Of the 1,200 weddings and receptions scheduled for March 2020, about 600 were postponed to June—September 2020, but the company decided not to charge for the postponements out of consideration for its social responsibility to prevent the spread of the infection. As a result, sales, operating profit, and recurring profit are expected to fall short of the company’s revised forecast, which was released at the same time as its cumulative Q3 results. The company left net income forecasts undetermined as it is consulting with its auditor to determine the recoverability of fixed assets for directly operated facilities.

On the same day, the company announced that it had signed an overdraft agreement.

The company announced that it concluded an overdraft agreement to improve liquidity in case the spread of the novel coronavirus infection were to have a prolonged impact on the company’s business and its sales were to continue declining.

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▷ Lenders: Resona Bank, Ltd. and Mizuho Bank, Ltd. ▷ Overdraft limit: JPY10.0bn ▷ Contract period: One year from contract date ▷ Interest rate: Floating interest rate linked to market rates ▷ Collateral: Unsecured, unguaranteed

The company expects that this overdraft agreement will have minimal impact on consolidated FY03/21 results.

On April 7, 2020, the company announced it would temporarily shut down operations to prevent the spread of COVID-19.

Having carefully considered the deep impact of the COVID-19 outbreak, the company announced the following regarding operation at facilities managed by its group.

1. Facilities and events held at such facilities The company will not hold weddings or receptions during the period outlined below at any of the facilities managed by its group in Japan. In addition, it will temporarily shut down operations at its group facilities, including 31 directly operated facilities in areas subject to the state of emergency.

2. Shutdown period Period covered by the state of emergency declaration

3. Impact on earnings The company is currently reviewing impact on its consolidated earnings in FY03/21, and will disclose related information as soon as it has completed its review. It also plans to reflect its findings into its earnings forecasts for FY03/21, which are slated for release on May 13.

Corporate governance and top management Corporate governance Capital structure Controlling shareholders None Parent company ticker - Organizational form, directors Organizational form Company with Audit & Supervisory Board Number of directors per Article of Incorporation 10 Directors' term of office per Articles of Incorporation1 year Number of directors 6 Number of independent outside directors 2 Voluntary establishment of committee(s) corresponding to Nomination Committee Y or Remuneration Committee Number of Audit & Supervisory Board members (per Articles of Incorporation) 5 Number of Audit & Supervisory Board members 4 Number of independent outside members of Audit & Supervisory Board 1 Total number of independent outside directors 3 Ot her Disclosure of directors' compensation No disclosure on individual directors Policy to determine amount and calculation method of remuneration N Corporate takeover defenses N Source: Shared Research based on company data

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Top management

Yoshitaka Nojiri, Chairman and Representative Director

Apr. 1995 Joined Sumitomo Marine & Fire Insurance Co., Ltd. (now Mitsui Sumitomo Insurance Co., Ltd.)

Oct. 1998 Established Take and Give Needs Co., Ltd. (T&G); President and representative director

Jun. 2010 Chairman and representative director, T&G (current position)

Chairman and representative director, GOOD LUCK Corporation

Apr. 2013 President, T&G Wedding Asia Pacific Co., Ltd.

Dec. 2016 President and representative director, TRUNK Co., Ltd. (current position)

Aug. 2017 Director, GOOD LUCK Corporation (current position)

Apr. 2019 Chairman and representative driector, T&G

Kenji Iwase, President and Representative Director

Mar. 1990 Joined Nagoya Kanko Hotel

Oct. 2002 Joined Take and Give Needs Co., Ltd. (T&G)

Jan. 2007 Sales director, T&G

Jun. 2008 Operation director, wedding business division, T&G

Jun. 2009 Director and sales director, wedding business division, T&G

Jan. 2014 Director and general manager of business managing division, T&G

Jun. 2015 President and director, T&G (current position)

Mar. 2016 Chairman and representative director, Bridesword Co., Ltd.

Dec. President and representative director, And company Co., Ltd. (current position)

Sep. 2017 President and representative director, The Dressmore Co., Ltd. (current position)

Aug. 2018 President and representative director (current position)

Apr. 2019 President and representative director, head of corporate planning and head of hotel business division, T&G (current position)

Source: Shared Research based on company data

Dividend policy

T&G’s basic dividend policy is to improve the value of shares in the longer term through business growth, improvement of capital efficiency, and other measures, while maintaining stable dividend payments to shareholders every fiscal year. The company started paying an interim dividend from FY03/20 and increased its annual dividend payment from JPY15 per share in FY03/19 to JPY20 per share in FY03/20. Details for FY03/21 will be determined at a later date.

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Major shareholders

Shareholding Top shareholders Shares held ratio

Yoshitaka Nojiri 2,460,950 18.99% Tokyo Weld Co., Ltd. 1,045,970 8.07% The Master Trust Bank of Japan, Ltd (Trust account) 785,400 6.06% Unimat Life Corporation 543,200 4.19% Weld Trading Co., Ltd. 450,000 3.47% INTERACTIVE BROKERS LLC 330,800 2.55%

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/FIN/LUXEMBOURG 317,500 2.45% FUNDS/UCITS ASSETS

DFA INTL SMALL CAP VALUE PORTFOLIO 276,950 2.13% Japan Trustee Services Bank, Ltd. (Trust account 9) 271,000 2.09% Japan Trustee Services Bank, Ltd. (Trust account) 252,300 1.94% SUM 6,734,070 51.98%

Source: Shared Research based on company data (as of March 31, 2020) Note: Treasury stock held by T&G is deducted from total shares issued in the calculation.

Employees

Number of employees FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Consolidated Number of employees 1,545 1,879 1,902 2,036 2,101 2,196 2,364 2,320 2,341 Number of temporary employees (annual average, not included above) 1,064 1,320 1,267 1,184 1,001 886 1,127 1,031 852 Parent Number of employees 1,319 1,377 1,325 1,369 1,378 1,406 1,322 1,565 1,506 Number of temporary employees (annual average, not included above) 1,050 1,103 1,042 910 733 633 667 879 712 Average age 30.530.730.930.831.131.6313232 Average years of service 3.33.53.84.04.34.74.85.15.3 Average salary (JPY'000) 4,425 4,456 4,458 4,375 4,368 4,313 4,353 4,3774,443 Source: Shared Research based on company data (as of March 31, 2020)

Profile

Company Name Head Office Take and Give Needs Co., Ltd. 2-3-12, Higashi-Shinagawa, Shinagawa-ku, Tokyo Phone Exchange Listing +81-3-6833-1122 First Section of the Tokyo Stock Exchange Established Listed On October 19, 1998 March 2006 Website Fiscal Year-End https://www.tgn.co.jp/company/english/company/index.html March IR Contact IR Web Corporate Planning Division https://www.tgn.co.jp/company/english/company/ir/

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