HAKUHODO DY INCORPORATED : Update on progress under the Medium-Term Business Plan (with Commentary)

Greetings, I am Hirokazu Toda, President & CEO of Hakuhodo DY Holdings Inc.

Please allow me to provide an explanation on the progress we are making under the Hakuhodo DY Group's Medium-Term Business

Plan.

The Group has continued to pursue proactive business development under its Medium-Term Business Plan covering the period through March 2019, which this slide demonstrates.

As you can see, we made upward revisions to the plan's targets in November 2016, and I would like to explain the progress we made in the first half of FY2018 with the various initiatives we are pursuing to reach these revised targets.

Please look at the next slide.

First, I will talk about revenue.

In the first half of FY2018, the large-scale sale of Mercari shares provided a temporary boost to revenue. Accordingly, I will provide an explanation on revenue that uses year-on-year comparisons on an actual basis, which excludes this temporary impact.

During the first half of FY2018, revenue grew significantly on an actual basis, up 15.9%, due not only to the steady growth of existing operating companies but also to the positive impact of companies newly acquired through M&A. If we look at the three-year average since we revised the Medium-Term Business Plan's targets, the CAGR for revenue is in double digits, rising to 11.1%.

Breaking down the factors behind the increase in revenue over the five-year period starting from FY2013, the base year for reference, the increase can be attributed almost equally to organic growth and growth through M&A as well as to growth in our domestic and international operations. As you can see, the Group has grown very much in keeping with the projections it made for the period of the plan.

In Japan, our main area of operations, we realized robust revenue growth by increasing our market share and improving our gross margin. This, combined with overseas M&A centered on the strategic operating unit kyu, helped drive overall revenue growth.

In addition, international revenue now accounts for 21.2% of our total overall revenue, thereby exceeding our target level under the Medium-Term Business Plan.

Moving on, I will explain in order the main measures we are implementing to strengthen our organization and response capabilities, which are featured on this slide, centered on the

Medium-Term Business Plan's three growth drivers.

Please turn your attention to the next slide.

First, I will talk about "strengthening of sei-katsu-sha data-driven marketing response capabilities."

Since adopting "strengthening of sei-katsu-sha data-driven marketing response capabilities" as a growth driver in November 2013, we have strengthened our core technologies, which are listed at the bottom of this diagram, and expanded our data & system development, centered on the Sei-katsu-sha Data Management Platform, as you can see in the middle of this diagram. At the same time, we have developed various marketing solutions that leverage our core technologies and data & system development.

Furthermore, we have put together teams of experts who specialize in data marketing and have an abundance of practical experience. These teams have provided over 200 client companies with a wide range of marketing solutions, all of which have garnered high praise. In addition, we have recently developed and

launched Sei-katsu-sha DATA WORKS™, a suite of solutions that allows us to fully leverage our various marketing solutions.