Seibu : Jun. 23, 2023 IR Meeting with the COO Q&A

Seibu Holdings Inc. IR Meeting with the CEO

Record of Questions and Answers

The following is a summary of the question and answer session from the IR Meeting with the CEO, held on June 23, 2023.

(Opening remarks from the Company's president, Mr. NISHIYAMA)

Hello. My name is Nishiyama. Thank you very much for taking time out of your busy schedules to join us today. We are always grateful for your comments, guidance, and suggestions at IR briefings, both in person and remotely. We also appreciate the advice that we receive through the IR department. Thank you for your continued support as we strive to improve our corporate value with my colleagues.

Let me also introduce myself. I am originally from Mizuho Financial Group. In 1987 I joined The Dai-Ichi Kangyo Bank, which underwent a three-way merger in 2002. In 2009, I resigned from the bank after working for a little over 22 years, and joined the Seibu Group. I vividly remember going for an interview in Tokorozawa on a midsummer evening, as if it were yesterday. My first posting in the Seibu Group was the Public Relations department. For about 10 years of my 22-year career at the bank, I worked in public relations. During the interview, the HR manager asked me, "What do you want to do when you join us?" I remember instantly answering, "I'll do anything." I had written everything I could think of on my resume. The HR manager said, "According to your resume, you have been in public relations for a long time, so shall we start you off there? That will suit our expectations to strengthen public relations." I replied, "That would make things easy." So I managed to get into the Seibu Group, I longed for, and here I am today.

There are a lot of positive aspects in public relations, and we have a wide range of businesses. Also, our business sites are everywhere in Japan, so many matters are brought to our attention, both big and small. It was a job with a significant crisis management element. I was later in charge of administration. The administration department is really dealing with crisis management. When I first joined, I was in Tokorozawa for about ten years, and whenever I was walking quickly or was a little busy, someone would come up to me and half-jokingly ask, "Is there an incident? What happened?" That's the way I had a friendly competition going with my colleagues in the operating companies, and we overcame together.

Meanwhile, the Company went public in 2014. We achieved a listing after nine years and four months of Seibu Railway's delisting. It was very moving to see President Goto, who is now CEO, ring "The Bell" at the TSE. Especially, when I saw a senior Seibu Railway employee scrunch up his face and start crying, it put me on the verge of tears myself. One year before, we had been the target of a TOB by a large shareholder at that time. We really overcame that as a team.

Next I started working concurrently at Seibu Railway and the Prince Hotel. Everyone was

1

anticipating the Tokyo Olympics, and the business improvements it would bring. In terms of operating results as well, apart from the 2008 financial crisis and the Tohoku Earthquake, we had been achieving increases in sales and profits every year. Our investors and shareholders had appreciated us. But then, before the Tokyo Olympics, came the pandemic, which no-one was expecting. Customer acquisition opportunities evaporated in an instant. Our customers evaporated in an instant. The financial results for March 2021 showed a net loss of 72.3 billion yen and an operating loss of 51.5 billion yen. Our profits disappeared instantaneously. When the damage to net assets and the drastic decline in cash flow became apparent, our sense of crisis was at its peak. Many of our business sites around the country had to close and we applied for employment adjustment subsidies for each business site. In the midst of all this, I was appointed Executive General Manager of the Corporate Planning Department in February 2021, worked with my colleagues to formulate the medium-term management plan at a rapid pace, and we announced this plan at the same time of the financial results on May 13, 2021.

In line with this medium-term management plan, we adhered to a disclosure policy of disclosing any matters that could be disclosed on a timely basis. We may encounter a similar pandemic in the future, but in such an event, we are determined to take steps to ensure that we avoid the same pitfalls.

My comments have become somewhat long, but let me tell you about my current responsibilities. First, the capital recycling business.

Next we will be moving on to Takanawa, Shinagawa, Shibakoen, Shinjuku and Takadanobaba. In terms of resorts, Hakone, Karuizawa and Furano. These are the areas where we are planning redevelopment. Our net interest-bearing debt is still around 760 billion yen, and we need to be prepared to diversify our financing sources, so we are embarking on the capital recycling business. For SRS to make the leap forward to become a general real estate company, we need to do asset management business professionally. We are now moving forward at a rapid pace to start on that. We will consider establishing private funds and private REITs that incorporate our own properties or development properties. As such, we are planning to use such finances for the generation of future development.

I became President this April. The announcement was in February, and at that time, I went back to the basics and thought about what we really needed to do. We are of course in the middle of a major transformation of our business structure now, and we are committed to making sure that this is carried out properly. We are a B-to-C company. We have hotels and leisure, we have railway, we have buses. We even have taxis. We are a pure B-to-C company, with a fairly broad range of businesses, but the core is always customers. Before starting my new role, I went back to the basics, thinking about "customers" and "people." At the press conference when I took office, I said that "pursuit of expertise" and "people" would be my keywords. I have already talked about expertise. Seibu Holdings established a system for each company that enables or requires the company to pursue greater expertise and strive to become number one in its industry. Each person within those companies must also pursue expertise. I believe that people come first, people come second too,

2

and the third is fair profit. We want to make it easier for our employees to work. If we look outside of our Group, Japan in general is currently experiencing a general labor shortage. This has reinforced my belief that, as a B-to-C company, while we must attract and retain customers, at the same time, we must attract and retain employees.

Asset-light business strategy is often perceived as being about asset downsizing. We securitized 60 billion yen of assets to GIC on a book value basis, and in terms of scale, this represents 10% of the Hotel and Leisure business's assets of 600 billion yen. As I also mentioned at the briefing, this is a hybrid structure. We are not selling everything. SRS is examining each property to determine which ones should be held for the long term, which ones are better to hold, and which ones should be incorporated into the capital recycling business I mentioned earlier. For this we need real estate professionals, and we are training them at a rapid pace and opening the door for hiring from outside the Company.

It comes down to this: Customers are everything. In terms of hotels, before the pandemic, the Prince Hotel had 5 million guests a year. 1.3 million of those were inbound. That is how many customers we have.

For Seibu Railway, the population along railway lines is 5.5 million and the number of passengers is 1.5 million per day.

However, to put it simply, the railway transportation business has reached a ceiling regarding revenue from commuter passes. This is what all railway companies in Japan nationwide are facing. Now that COVID-19 has passed, newspapers and other media are reporting that there has been a shift from remote working to coming to work. However, this fiscal year, we are seeing the recovery in commuting plateau at about 80% of the pre-COVID-19 level.

On the other hand, non-commuter pass revenue is, little by little, beginning to show a gradual recovery. Although it is too early to predict with certainty, I expect that by the end of this fiscal year, non-commuter pass revenue will return to the pre-COVID-19 level.

According to the budget, the total of non-commuter pass and commuter pass sales from railway transportation will return to 94-95% of the pre-COVID-19 level by the end of this fiscal year, but any fare revisions we make would require approval by the government, and we must consider this issue from a variety of angles.

The other aspect is revitalization along railway lines. I believe we are fortunate to have railway lines with sightseeing spots, Chichibu, Kawagoe, Ikebukuro, Seibu Shinjuku, and Takadanobaba, and with elements from the city to a variety of nature. One proof of this is 'Moomins.' Japan was chosen as the place to create another Moomin Valley Park outside of Finland, and Hanno (Saitama Pref.) was chosen. We also renovated Hanno Station to Finnish specifications. Although attendance suffered during the pandemic, the number of visitors is recovering. This contributed to the number of passengers in Hanno Station.

There is also the Toshimaen site. The wish to use this site for Asia's first Warner Bros. Studio Tour was a topic of conversation, and Toshimaen was indeed selected as the site.

3

These are the strengths along our railway lines. As I mentioned earlier, 5.5 million people live along our railway lines, and 1.5 million people use our railway service every day. I believe that the customer creation function of a mass transit agency is significant.

Proof of this is the SEIBU PRINCE CLUB, a membership organization that was originally a hotel membership. The current number of members is 1.5 million. We used to have about 1 million members, and we had been trying to gradually increase the number to 1.2 million.

There is an application called "Seibu Lines App." This app allows you to book limited express tickets and check bus schedules. When you buy limited express tickets through this app, you can earn the SEIBU PRINCE CLUB points. We have also established a system whereby these points can be received under certain conditions such as by using the Seibu railway lines either repeatedly or on an off-peak basis. This instantly increased the number of SEIBU PRINCE CLUB members to

1.5 million. The synergy of customer creation functions along our railway lines has resulted in the number of members' increase.

Points of contact with our customers are really important. The number of Prince Hotel's 86 business sites will be increased to 250. We will expand the number of business sites to further expand our points of contact with our customers around the world. We are far behind Marriott's scale, but we are aiming to accumulate fee income as an operator-only business.

At the point of contact with customers, the important thing is the service spirit of those in charge on the front lines and the feeling of hospitality of each of them. In my internal message addressing the Company when I assumed office, I brought up an old story about European bricklayers as an example. As many of you may know, bricklayers in Europe were engaged in laying bricks. When the first one was asked what he was doing, he said he was laying bricks. Walking a little further and asking another, he responded we are putting up a cathedral. I believe that an organization should be a group like the latter one. I believe that each person has a wild spirit. I hope that our employees will bring out that wildness. I believe it is important for us to become a Group brimming with such practical wisdom, with the people on the front lines of the service industry taking leadership on the spot, making decisions and executing them in a flexible manner.

In order to do so, we must also delegate authority. Without delegating authority, front-line employees cannot make decisions on their own.

I would like to talk about the desired image of the president. With everyone's leadership, we create the brand image of the Seibu Group with each of our responses. We have a Group slogan of "Smiles Ahead." We have been working on this Group Vision and values up until now, and I want to make sure that they permeate our operations. These values will surely differentiate us from our competitors in the long run. It is my belief that these values are not just a minimum standard, but a driving force.

Q1. You mentioned that you are going to increase 86 hotels into 250 hotels, but do you have any innovative schemes that are unique to your company in the method and development leading up to that 250? While all of your rivals are also trying to develop hotels, do you have any innovative designs in your development methods? You are rebranding the Hyatt Regency Osaka this time,

4

but are there any other similar schemes on the way to 250 hotels? The goal of increasing the number of hotels to 250 is very high, and it is difficult for outsiders to understand what the path is.

A1. Increasing the number of hotels from 86 to 250 is an extremely high target for us too.

Our advantage is that we acquired a company specializing in MC operations (Management Contracts for contracted operations) called StayWell Holdings (SW) in 2017. As we increase the number of hotels to 250 in the future, we plan to utilize SW's knowledge and expertise to a significant degree. The head office functions and know-how of SW and SPW will also be fully integrated. Employees from SPW and SW are already working back and forth between each other, which is a good stimulus.

In about three years from this fiscal year, we are looking to increase the number of hotels by 20, both domestically and internationally. In order not to miss any opportunities, we will announce widely and universally that we have become an operations-only specialist and build a system that can immediately start discussions on the first call when there is an owner who wants to start a hotel, or when an owner wants to change operators.

In addition, collaboration between accommodations facilities and banquet halls is our specialty in Japan. For the G7 Hiroshima Summit, The Grand Prince Hotel Hiroshima was selected as the venue and we were able to provide the world's best MICE (Meetings, Incentives, Conferences and Exhibitions) event. We were also able to fulfill our mission as a venue provider for the G7 Foreign Ministers' Meeting at the Karuizawa Prince Hotel and the G7 Ministers' Meeting on Climate, Energy and Environment at the Sapporo Prince Hotel. We will increase locations of operating hotels with banquet hall facilities.

Q2. Is there anything that you would change in your approach to inbound tourism? You mentioned the use of apps, and around the time of the listing, there was talk of teaming up with Marriott in order to increase the number of visitors from Europe and the US. I would like to hear from you about how you "intend to evolve in this way."

A2. Amid the ban on group tours from China to Japan not yet being lifted, we will build a portfolio focused on the US and other countries. Guests from Europe and the US stay longer and have a higher average daily rate (ADR) and spending rate on food and beverages.

The Prince Sakura Tower Tokyo in Takanawa has been a member of Marriott's Autograph Collection since before COVID-19, and its ADR has especially risen among the group of Takanawa and Shinagawa hotels with 5,000 rooms. The Prince Gallery Tokyo Kioicho, Shinjuku Prince Hotel, and Ikebukuro Sunshine City Prince Hotel are also completely back to their pre- pandemic levels, as they have always had the foundation necessary to accommodate inbound guests.

As for whether we will be partnering with Marriott again in the future, we have no particular plans to do so at this time. We will seek to attract customers through our own website infrastructure, although we will use help for some hotels. We will also use the partnership with GIC to increase the number of locations and inbound demand.

5