COMPANY RESEARCH AND ANALYSIS REPORTSPARX Group Co., Ltd.
8739
Tokyo Stock Exchange Prime Market

21-Aug.-2024
FISCO Ltd. Analyst

Yoichiro Shimizu

FISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Company overview......................................................................................................................................

01

2. Results trends........................................ ......................................................................................................

01

3. Medium- to long-term growth strategy.. ......................................................................................................

02■Company overview--------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company overview......................................................................................................................................

03

2. Business description. . ..................................................................................................................................

07

3. The Group’s strengths. . .......................... ......................................................................................................

09

4. The Group’s position in the market..............................................................................................................

11■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 13
1. FY3/24 results overview......................... ......................................................................................................

13

2. Past results trends................................. ......................................................................................................

14

3. Financial condition and management indicators. .........................................................................................

16

4. Outlook for FY3/25.. .....................................................................................................................................

17■Medium-term growth strategy---------------------------------------------------------------------------------------------------------------------- 17■Shareholder returns policy-------------------------------------------------------------------------------------------------------------------------------- 21

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/■ Summary
A pioneering, independent active investment company that balances
stability with high earnings by selecting investee companies throughthorough corporate research and an outstanding ability to create
hypotheses
1. Company overview
SPARX Group Co., Ltd. <8739> (hereinafter, “the Company”) is a pioneering, independent active investmentcompany founded in 1988 under the vision of “To Be the Most Trusted and Respected Investment Company in theWorld.” It has established unique investment methods, such as introducing the “long-short investment strategy*,”which has now become commonplace in the fund industry, for the first time in Japan. It was listed on JASDAQ
in 2001 and became the first Japanese independent active investment company to be listed on the Tokyo Stock
Exchange First Section in 2019. The Company continues to lead the industry as an active investment company.
Following the revision of the market classifications in April 2022, it is currently listed on the Prime Market.
*	A method for securing returns even when the stock market is down by buying undervalued stocks whose prices can be
expected to increase and short selling overvalued stocks whose prices are projected to go down.

The Group has four pillars that it is focusing on to achieve growth. These pillars are Japanese Equity, which invests
in Japanese equities; OneAsia, which invests in Korean and other Asian equities; Real Assets, which invests inrenewable energy power plants and other such assets; and Private Equity, which forms and manages funds for the
purpose of investing in startup enterprises (private-equity investment). It has set the goal of increasing assets undermanagement to ¥3 trillion by 2026, which would be double the amount at the end of FY3/21. In accordance with
its in-house investment philosophy of “Macro is the Aggregate of the Micro,” the Company performs highly detailed
research on individual companies to select its targets for investment, which makes it a company that can balancestability with high earnings and is its strength.
2. Results trends
In the FY3/24 consolidated results, operating revenue increased 23.5% year-on-year (YoY) to ¥16,498mn, operating
profit grew 31.1% to ¥7,476mn, ordinary profit rose 28.6% to ¥8,090mn, and profit attributable to owners of parent
increased 44.2% to ¥6,519mn, so both revenue and profits grew significantly. The market environment is trending
positively overall, and in this situation, assets under management (AUM) steadily increased, driven by JapaneseEquity, and management fees rose 12.0% to ¥14,258mn. In addition, benefiting from the favorable market environment, performance fees grew greatly, rising 463.8% to ¥2,054mn, which contributed to the increase in operating
revenue. Together with the rise in operating revenue, the Company controlled human resources costs and othercosts to appropriate levels, and as a result, the growth of operating profit was higher than that of revenue. In thissituation, base earnings*, which is an indicator of ongoing, stable profitability, also increased steadily, up 5.7% to¥6,348mn. In recent years, the growth of base earnings has been accelerating and it set a new record high in FY3/24.
*	B ase earnings are defined as management fees net of commissions paid minus fixed expenses and other ordinary
expenses. Highly variable factors like performance fees are not included, so base earnings are an important indicator forassessing the earnings stability of an investment company.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Summary

Regarding results forecasts for FY3/25, in investment trust management, discretionary investment management andinvestment advisory services, which is the Company’s primary business, the Company does not disclose forecasts
because it acknowledges the difficulty of making projections of future results given the fact that the business is greatly
affected by economic situations and market conditions. However, it started at the end of April 2024 with record high
AUM of ¥1.8933 trillion, and in addition, the outlook for the market environment is favorable, so at FISCO we thinkthat management fees will continue to trend at a high level.
3. Medium- to long-term growth strategy
As its medium- to long-term growth strategy, while steadily increasing the AUM of its four pillars of Japanese Equity,
OneAsia, Real Assets, and Private Equity, it has set the target of doubling AUM from ¥1.5356 trillion at the end of
FY3/21 to ¥3 trillion by March 2026. At the same time, it is focusing on developing its new business areas. It has
designated energy (including hydrogen), healthcare, and fintech as growth areas as they are expected to have highgrowth potential, and its policy is to increase the return on capital in all Group companies, while developing new
business areas, through the efficient allocation of management resources. While increasing the four pillars’ AUM
and pursuing improved ROE, in the medium- to long-term it is targeting operating profit of ¥10.0bn and market
capitalization of ¥100.0bn.
FISCO thinks that the Company will be able to find new areas with investment value that have been overlooked byinvestors through its cycle of thorough corporate research, outstanding investment hypothesizing, and rigorous,
hypothesis-based research on investment targets, which is the strength of the Group. In addition, the hypotheses
it derives from its thorough company research are novel and convincing, so the Company is likely to be able toadequately attract capital from investors. Also, when considering the recent strong performance of the Japaneseequities market, at FISCO we think its target of increasing AUM to ¥3 trillion by March 2026 is fully achievable.
Key Points
Independent active investment company with an investment philosophy of “Macro is the Aggregate of theMicro”• In FY3/24, revenue and profits increased significantly, while benefiting from the strong performance of themarkets• Term-end AUM reached a new record high, and in this situation, base earnings, which shows ongoing, stableprofitability, also set a new record high• Seeking to increase AUM to ¥3 trillion by March 2026, double the level of end-FY3/21•

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.

21-Aug.-2024

8739 Tokyo Stock Exchange Prime Market

https://www.sparxgroup.com/ir/

Summary

Results trends
Operating revenue (left)

Operating profit (right)

(¥mn)

(¥mn)
7,476

20,000

6,569

6,349

8,000

6,464
5,704

15,000

6,000

4,479
3,901
10,000

4,000

3,169
13,227

5,000

11,23914,295

12,476

16,49814,043

13,360
2,000

8,907

0

0
FY3/17

FY3/18

FY3/19FY3/20FY3/21

FY3/22

FY3/23

FY3/24

Source: Prepared by FISCO from the Company’s financial results■ Company overview
Pioneering active investment company with multiple competitive
advantages; unique investment philosophy of “Macro is theAggregate of the Micro”
1. Company overview
The Group is a pioneering, independent active investment company founded in 1988 by Shuhei Abe, the current
President and CEO, under the vision of “To Be the Most Trusted and Respected Investment Company in the World.”
Taught by world-famous investor George Soros, Abe’s investment method is unique and strategic, and the Company
was the first in Japan to introduce the “long-short investment strategy,” which is now commonplace in the fundindustry. The company name SPARX comes from a comment made by Soros when Abe explained his strategy tohim, saying, “I felt a spark in what you had to say.”(1) The “ARTS Spirit”
The Group also has a strong sense of mission as an independent investment company, and it is oriented toestablishing funds and developing investment trusts for the benefit of investors. Its “ARTS Spirit” is put forth asa basic starting point and putting this spirit into practice creates the Group’s value.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview

The “ARTS Spirit”
The Principles
of SPARX

We will always strive to achieve bigger goals in an ever-changing environment through our innovation, dedication and flexibility.
However, our principles will always be the same. These core principles are represented by what we call the “ARTS Spirit,” which
each employee realizes on an advanced level. In this way, we believe we can become an investment company that is trusted andrespected by society and investors.

ArigatoWe will act with respect and a sense of gratitude toward the people with whom we work and all people with whom we interact.

Responsiveness We will value agility as our main approach to change and will always respond quickly.
Thoroughness

We believe that activities with discernment and care generate innovative knowledge, and we will constantly keep on perfecting them.

Sympathy

We will interact with clients and colleagues in a harmonious and contributory manner. We believe that humility and sincerity lead tomutual growth and will act with a sense of propriety. We will be open-hearted and accepting of diversity in a flexible manner and will
create opportunities for free debate and discussion.

Source: Prepared by FISCO from materials provided by the Company(2) Investment philosophy
What is notable about the Company and a source of its competitive advantage is its investment philosophy of“Macro is the Aggregate of the Micro.” Abe puts a great deal of emphasis on this concept and ensures that it
penetrates the entire company. “Macro” in this context refers to major trends that are difficult to predict withaccuracy; for example, how the Japanese economy will trend going forward and which industries will experience
growth. On the other hand, “micro” here means companies’ daily business activities, and the qualities and policies
of its executives—those things that can be understood and are easy to predict. In other words, by rigorously
researching the activities of companies and the qualities of their executives and by accumulating this information,
the macro (major trends) comes into view. This thinking is expressed in the phrase, “Macro is the Aggregate of theMicro.” Based on this thinking, when actually making investments, discussions on the direction of the Nikkei Stock
Average or how portfolio company stock prices will trend are not emphasized; rather, fund managers visit individualcompanies based on their own hypotheses and engage in dialogue with executives—this is the emphasis.
Another major characteristic of the Company’s investment philosophy is that investment hypotheses are madeat the stage prior to selection of companies targeted for investment. An example would be hypothesizing, amid
calls for an emphasis on ESG, that there will be increasing societal need with respect to carbon-free companies.
Thorough corporate research is conducted based on investment hypotheses, which makes it possible to verify
the validity of the hypotheses and discover undervalued companies with healthy growth prospects.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview

The Company’s investment philosophy and approach

Source: The Company’s website

In FISCO’s view, the investment philosophy of “Macro is the Aggregate of the Micro” will become increasingly
important in order for the Company to have a competitive advantage. This is because of the penetration of artificial
intelligence (AI) into financial markets and the accelerating trend to leave investment up to AI. Investment via AI
involves training AI with an enormous amount of data on past stock price trends and having it predict future stock
prices statistically. However, corporate activities and the qualities and thinking of executives cannot be perceived
and understood without visiting the actual site and meeting with management. What determines the direction of
corporate performance is the accumulation of corporate activities and qualities of the management team, etc.,
and this is not something that can be predicted from past data using statistical methods. FISCO is in agreementwith the Company’s thinking.
In this way, by performing rigorous research on individual companies to select investment targets, the Company
has been able to maintain both stability and high earnings in financial markets that are fundamentally high risk
with high return, and it continues to lead the industry. The Company’s capital is ¥8,587mn (at the end of FY3/24),
and it has 186 Group employees (as of the same date).
Examples of excess return at the end of FY3/24
Strategy

Annualized return

Reference index

Excess return

Japanese Equity Active Long Only Investment Strategy

11.26%

4.24% (TOPIX)

7.03%

Japanese Equity Mid & Small Cap Investment Strategy

8.64%

5.87%*

2.77%

Japanese Equity Long-Short Investment Strategy

4.81%

4.30% (TOPIX)

0.51%

Japanese Equity Strategic Investment Strategy

10.19%

4.47% (TOPIX)

5.72%* Reference index: Russell/Nomura Japan Equity Style Index Mid and Small
Source: Prepared by FISCO from the Company’s results briefing materials

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05 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview

The Group’s Positive Investment Cycle

㼀㼔㼛㼞㼛㼡㼓㼔㻌㼏㼛㼞㼜㼛㼞㼍㼠㼑㻌㼞㼑㼟㼑㼍㼞㼏㼔㻻㼡㼠㼟㼠㼍㼚㼐㼕㼚㼓㻌㼍㼎㼕㼘㼕㼠㼥㻌㼠㼛㻌㼏㼞㼑㼍㼠㼑㻌㼔㼥㼜㼛㼠㼔㼑㼟㼑㼟UP

㻰㼕㼟㼏㼛㼢㼑㼞㼥㻌㼛㼒㻌㼏㼛㼙㼜㼍㼚㼕㼑㼟㻌㼣㼕㼠㼔㻌㼓㼞㼛㼣㼠㼔㻌㼜㼛㼠㼑㼚㼠㼕㼍㼘㻭㼏㼏㼡㼙㼡㼘㼍㼠㼕㼛㼚㻌㼛㼒㻌㼔㼕㼓㼔㻙㼝㼡㼍㼘㼕㼠㼥㻌㼕㼚㼒㼛㼞㼙㼍㼠㼕㼛㼚
Source: Prepared by FISCO through interviews

History
1989

Began investment advisory services in Minato-ku, Tokyo as SPARX Asset Management Co., Ltd.

1997

SPARX Asset Management Co., Ltd. licensed to provide discretionary investment management business

2000

SPARX Asset Management Co., Ltd. licensed to provide securities investment trust management businessChanged the Japanese name of SPARX Asset Management Co., Ltd.

2001

SPARX Asset Management listed on the JASDAQ Market

2005

Acquired a majority stake in Cosmo Investment Management Co., Ltd. (now SPARX Asset Management Korea Co., Ltd.), a Korea-based
asset management company, in order to develop investment activities in the Asian region

2006

Transitioned to a holding company structure, and SPARX Asset Management changed its name to SPARX Group Co., Ltd.; SPARX AssetManagement, a subsidiary, took over the asset management business

2012

SPARX Green Energy & Technology Co., Ltd. established to enter the renewable energy power generation business2014

Acquired a 100% stake in Japan Asset Trust Corporation in order to further expand the investment business for real assets, including
renewable energy power plants and real estate, and changed its name to SPARX Asset Trust & Management Co., Ltd.

2019

Assigned to the Tokyo Stock Exchange First Section
Invested in Sigma-i Co., Ltd., which provides solutions for quantum annealing technology research and development, and beganparticipating in its management

2020

Established SPARX Innovation for Future Co., Ltd. to administer and manage Space Frontier Investment Limited Partnership, which is aimed
at fostering globally competitive, Japan-based space companies

2021

Established Nomura SPARX Investment, Inc. with Nomura Holdings <8604> to manage investment corporations that invest in non-listedcompanies

2022

Transferred to the Prime Market through a reclassification of Tokyo Stock Exchange categories

Source: Prepared by FISCO from the Company’s homepage

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview

2. Business description
The Group has four pillars that it has established as focus areas. Japanese Equity, which invests in Japanese equities;
OneAsia, which invests in Korean and other Asian equities; Real Assets, which invests in renewable energy power
plants and other such assets; and Private Equity, which forms and manages funds for the purpose of investing instartup enterprises. On this basis, it provides investment trust management, discretionary investment management,
investment advisory and other related services.
(1) Japanese Equity and OneAsia
SPARX Asset Management Co., Ltd. handles Japanese Equity, and SPARX Asset Management Korea Co., Ltd.
and SPARX Asia Investment Advisors Limited primarily handle OneAsia. Equity investment is conducted based on
strategies that include the Japanese Equity long-short strategy, Japanese Equity focus all cap strategy, JapaneseEquity mid & small cap strategy, Japanese Equity market neutral strategy, and Japanese Equity Value Creation
Strategy. At the end of FY3/24, the AUM of Japanese Equity and OneAsia had both grown significantly, up 37.8%
from the end of the previous period to ¥1,313.1bn and up 40.2% to ¥126.2bn, respectively. Japanese Equity
benefitted from the favorable market environment, and the AUM of every investment strategy, except that of themarket neutral investment strategy, steadily increased. In particular, with the establishment of the new SPARX Value
Creation Japan Equity Fund in May 2023, the AUM of the value creation investment strategy grew significantly from
¥2.5bn at the end of the previous period to ¥107.8bn. At FISCO, we think the AUM of the Japanese Equity investment strategy as a whole will grow steadily in the future as well. In March 2023, the Tokyo Stock Exchange (TSE)requested that all listed companies in the Prime and Standard markets take action on cost of capital-conscious
management and share price. Based on this request, each company has been implementing measures, such as
improving the return on capital and increasing shareholder returns, and they have been focusing on increasing
corporate value by allocating cash efficiently while being conscious of the cost of capital. However, even in thissituation, although the percentage of companies with a P/B ratio of less than 1x is decreasing, the percentage
of TOPIX 500 companies with a P/B ratio of less than 1x was still 133 companies, or about 26%, as of January2024 (cited from Ministry of Economy, Trade and Industry materials). Compared to other markets, such as in the
US and Europe, the percentage of companies with a P/B ratio of below 1x is relatively high. But to look at this in
another way, it can be said that the corporate value of Japanese companies has significant potential for growth.
As companies become increasingly aware of their cost of capital and share prices, going forward it is expectedthat they will continue to focus on increasing their corporate value through generating profits and other means.
As companies pursue higher corporate value and P/B ratios, the level of investor attention on Japanese equities
is expected to trend at a stably high level. Therefore, at FISCO we think that the Company’s Japanese Equity
investment strategy is highly likely to generate a stable inflow of investment funds.
In addition, the Company’s training of local fund managers and the establishment of a high quality management
system are progressing well, and we expect OneAsia’s AUM to also trend steadily. In particular, we anticipate
capital inflows to accelerate against the backdrop of Asia’s high growth potential. According to the latest forecasts
by the IMF, the Asia region’s actual GDP growth rate was 5.0% in 2023 and will be 4.5% in 2024 and 4.3% in 2025.
In particular, the growth rates of India, for which the Company’s policy is to develop it as a foundation fund, willbe 7.8%, 6.8%, and 6.5% in 2023 to 2025, while the annual growth rates of Indonesia in the same years will be
5.0%, 5.0%, 5.1%, so their high growth is expected to continue. Based on the Company’s investment philosophy
and its thorough company research, we can expect it to continue to discover companies with high potential inmarkets that are maintaining high growth, so we think it is highly likely that the inflow of capital will increase frominvestors responding to this strategy.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview(2) Real Assets
Within Real Assets, development, management, and operation of renewable energy power plants, including
solar power plants, is handled by SPARX Green Energy & Technology Co., Ltd. Investment in the phase frompower plant development to the start of operations (called “green field” investment) is handled by SPARX AssetManagement. Further, “brown field” investment in power plants already up and running is handled by SPARX
Asset & Trust Management Co., Ltd. The main investments have been made in solar, wind, and biomass power
plants. When knowledge regarding the investment target is insufficient, experienced partners are enlisted andinvestment is conducted with them, which makes it possible to invest in high-quality real assets and generate highearnings. AUM at the end of FY3/24 increased 7.9% from the end of FY3/23 to ¥285.5bn, of which ¥280.1bn
was invested in renewable energy power facilities. The number of investments increased by 5 YoY to 347 (approx.
702 MW), and the number of plants selling electricity increased by 5 YoY to 345 (approx. 647 MW). These
investments are steadily generating returns, and investments in renewable energy appear to be making steadyprogress. As a result, the Company ranks fourth in the ranking of renewable energy (solar and wind) generationin Japan. With the intensification of natural disasters and the global trends for decarbonization and controllingrising temperatures, there is a strong social need for solar power generation and other renewable energy sources.
At the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28)
in 2023, the target was set to “triple the global renewable energy generation capacity by 2030.” Japan is also
focusing as a country on promoting renewable energy. Although the FIT (Feed-in Tariff) system introduced in 2012
has significantly increased the percentage of the power supply from renewable energy sources (from 10.4% in
FY2011 to 21.7% in FY2022), it will be necessary to further promote renewable energy in order to achieve thetarget of 36% to 38% by FY2030. In addition to this favorable external environment, by utilizing the knowledge
about renewable energy that the Company has accumulated so far in order to discover highly profitable investment
targets, at FISCO we think it is highly likely that it can steadily raise funds from investors.
Real assets generating stable revenue

Wind power plant

Biomass power plant

Solar power plant

Solar power plant

Source: The Company’s website

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview(3) Private Equity
SPARX Asset Management and SPARX AI & Technologies Investment Co., Ltd. invest in foreign and domestic
startups on the themes of intelligent technologies, robotics, technologies for a hydrogen-based society, electrification, new materials, carbon neutrality, and the SDGs. For investments in startup companies to bear fruit takes
a considerable amount of time, but investments have been made in Sansan, Inc. <4443> (listed June 2019),
MEDLEY, INC. <4480> (listed December 2019), freee K.K. <4478> (listed December 2019), FIXER Inc. <5129>(listed September 2022) and other startups that have held an IPO.
Private Equity is characterized by funds being formed jointly with major companies. One example is Mirai Creation
Fund III, which started in October 2021. Its investors include major companies like TOYOTA MOTOR COPORATION<7203> and Sumitomo Mitsui Banking Corporation. In April 2024, the Company established the Space Frontiers
Fund II, and major companies such as Toyota Motor Corporation and MUFG Bank, Ltd. are also participating
in it as investors. At FISCO, we highly evaluate this fund for realizing investment from major companies throughthorough research of individual companies and excellent hypothesis-building capabilities. This is because, precisely
as only the “micro” is fully known, the Company is able to raise funds from investors as not only can it create a fundin an attractive field that investors themselves are unaware of, but it can also create hypotheses that are rational
and persuasive. In fact, the Company ranks third in the ranking of venture capital fundraising in Japan. Moreover,the management period of these funds is 10 years and in practical terms there is no cancellation during this period,
so stable revenue is expected, the same as from Real Assets. According to the Startup Development Five-Year
Plan formulated by the current Japanese government in 2022, the target is to achieve a total investment amountin startup companies of ¥10 trillion by 2027, which is 10 times the amount of when the plan was formulated.
Compared to overseas, the scale at the current time is still small, but in addition to the government’s support
for startups, the Company’s strategy has high earnings potential, so it is anticipated that the level of interest in
this investment strategy will rise. Particularly in the space field that the Company is focusing on, the government
has established the Space Strategy Fund from the viewpoint of strengthening national security, and it is aiming
to contribute around ¥1 trillion to companies and universities over 10 years. The government is creating various
policies to develop startup companies, and in this situation, it is expected that that scope and scale of startup
companies will expand and the market itself will grow even more. Based on this trend, at FISCO we think it ishighly likely that the flow of funds from investors responding to the Company’s strategy will accelerate.
Private Equity is a field where the Group is able to exhibit its strengths, and also a field that the Group intends togrow. FISCO believes that Private Equity is an area that embodies the essence of the Group, which has achieved
growth by creating new investment domains overlooked by clients.
3. The Group’s strengths
The Group has the following five strengths: 1) Bottom-up corporate research and outstanding ability to makehypotheses, 2) Outstanding ability to ask questions, 3) High earnings rate, 4) Human resources development throughan open corporate culture, and 5) Investment from a long-term standpoint.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview(1) Bottom-up corporate research and outstanding ability to make hypotheses
Thorough, bottom-up corporate research and an outstanding ability to make hypotheses are based on theinvestment philosophy, “Macro is the Aggregate of the Micro,” that has been instilled throughout the Company.
As discussed above, “Macro is the Aggregate of the Micro” is the thinking that large trends come into view
through the accumulation of rigorous company research. Because the Group performs detailed research on
many companies, it is able to form appropriate hypotheses, and it can be said that based on these hypotheses,
it is able to find companies needed by society, that is to say, companies with high growth potential. In addition,from the perspective of establishing new funds and developing new investment trusts, it is able to find areas withinvestment value that have been overlooked by investors themselves. At investment companies, it is often the casethat work is split between analysts who research companies and fund managers who manage the investments,
but the Group emphasizes bottom-up corporate research, so fund managers also research companies basedon their own hypotheses.
(2) Outstanding ability to ask questions
Thorough corporate research is tied to an outstanding ability to ask questions, which is also a strength. Throughthis rigorous research, the Company is able to ask more essential questions to investee companies and engage
in deeper discussions, which go beyond the surface level of short-term stock price changes and the next term’s
results. Asking essential questions allows the Company to acquire more important information, and this in turnallows it to conduct appropriate discussions for improving the performance of investee companies, which is thenconnected to an engagement strategy that is outstanding, in FISCO’s view.
(3) High earnings rate
The Group high earnings rate, which is one of its strengths, is expressed in its management fee rates andpercentage of AUM eligible to earn performance fees. Management fee rates and whether or not performancefees can be attached to funds are determined through negotiations with clients, but in the case of investment
trusts, these are negotiated with the companies that sell the trusts, which include securities companies and banks.
With the Group’s funds, thanks to rigorous company research, investee companies generate outstanding returns,
which allows high management fee rates to be set (0.75% in FY3/20, 0.69% in FY3/21, 0.69% in FY3/22, 0.73%
in FY3/23, and 0.71% in FY3/24). With regard to the percentage of AUM eligible to earn performance fees as well,investments generate excellent returns, which allows funds to be set with performance fees. The rate in FY3/24
was high at 35.3%. As a result, the operating profit from the same period was also high at 45.3%.
(4) Human resources development through an open corporate culture
In the Group’s investment research division for Japanese Equity, meetings are held every morning to share
progress made on company research. Weekly meetings are held apart from this as well to share and discuss
hypotheses and investment behavior. FISCO believes that this is extremely significant for human resources
development. Through sharp feedback from experienced fund managers, personnel are able to learn about areas
in need of improvement and effective points of entry when performing research. Making manuals for researchmethods and how to hypothesize is difficult, and these abilities tend to be internalized, but the Company shares
them through discussion and debate. This serves to raise the level of fund managers and makes it possible toaccumulate highly talented human resources. The Group puts a great deal of emphasis on human resource
development, and taking time to develop its human resources is a company credo, so long service length isanother characteristic. In the asset management industry, in which fund manager ability determines a company’s
earnings, human resources development through an open corporate culture and information sharing is a strengthand generates positive results, in FISCO’s view.

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10 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview(5) Investment from a long-term standpoint
The Group makes investments from a long-term perspective, so it is able to build trust with investee companies
and raise corporate value. Even when impacted by temporary events like stock market declines, the impact is
mitigated by investing long-term, which allows, as a result, returns to be provided to investors. In addition, withlong-term funds with an investment period of 20 years, AUM and management fees increase in a stable manner,which lends stability to earnings.
4. The Group’s position in the market
In addition to the above-described strengths, among the listed, independent, active investment companies, theCompany’s characteristics include its wide range of investment targets, from Japanese domestic stocks to real
assets such as solar power generation facilities, and also private equity. Within a single corporate group, it israre to find companies advancing a wide range of strategies, from traditional investment strategies like selective
investment in equities and long-term holdings, through to alternative investments, including in renewable energy andan engagement strategy. In addition to its traditional strategies, at FISCO we think the Company is able to steadily
increase AUM through conducting alternative investments at the same time as realizing high levels of profitability.
This is because in the Real Assets’ investment strategy, which targets large-scale infrastructure like renewableenergy power generation businesses, the investment amounts are large, which contribute corresponding amounts
to the increase in AUM. In fact, its AUM of ¥38.2bn (12-month average) in FY3/14 had grown rapidly, by 7.2 times,to ¥277.4bn by FY3/24, and its percentage of total AUM had also grown to as high as 16.6%. A basic principle ofasset management is risk diversification through diversifying investments. On this point, the Company minimizes
the risk of excessive AUM fluctuations by investing in various assets within the Group, from listed and non-listed
shares that are highly volatile relatively speaking, through to real assets that are highly stable. Looking at the trends
in the Company’s AUM and AUM increase rate, we see that they are both trending stably.

T r e nd s i n t h e t e r m - end AU M a n d c h a nge r a t e
Term-end AUM (left)(¥bn)

Change rate (right)
1,889.3

2,000.01,600.0
1,200.0

1,124.0 1,185.6 1,124.1
959.9

1,535.6 1,555.7 1,501.2
36.6%

40.0%
25.9%

961.9
16.9%

800.0
400.0

50.0%

30.0%
20.0%
10.0%

5.5%
1.3%

0.2%
0.0

0.0%
-0.2%

-5.2%

-3.5%

-400.0-10.0%
FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20 FY3/21 FY3/22 FY3/23

Source: Prepared by FISCO from the Company’s results briefing materials

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11 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Company overview

Private Equity, which targets investments in startup companies, sets a high management fee rate compared to
the Company’s other investment strategies, and so can be said to be correspondingly highly profitable. Although
it is difficult to make a general comparison due to differences in business models and main customers, at FISCO,
we think that in addition to the high profitability of the Company’s traditional investment strategies, its inclusion ofalternative assets in its investment target portfolio is also a factor behind its performance. Profits are the basis forcalculating the share price and are the source of dividends, so in this sense, they are very important for investors,
so the Company’s investment strategy portfolio business model, which can create profits efficiently and stably, canbe said to be very appealing to them.

Trend in the operating profit ratio
60.0%
50.0%

44.4%

46.0%
42.7%

45.3%

40.0%
30.0%
20.0%
10.0%
0.0%
FY3/21

FY3/22

FY3/23

FY3/24

Source: Prepared by FISCO from the Company’s financial results

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12 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.

21-Aug.-2024

8739 Tokyo Stock Exchange Prime Market

https://www.sparxgroup.com/ir/■ Results trends
Revenue and profits increased significantly, and management fees
and term-end AUM set new record highs. In addition to the increasein management fees, the rapid growth of performance fees also
contributed.
1. FY3/24 results overview
In the FY3/24 consolidated results, operating revenue increased 23.5% YoY to ¥16,498mn, operating profit rose
31.1% to ¥7,476mn, ordinary profit grew 28.6% to ¥8,090mn, and profit attributable to owners of parent increased
44.2% to ¥6,519mn, so revenue and profits grew significantly. The market environment as a whole is trending
favorably, and among the four pillars, which are the Company’s focus areas, AUM increased steadily in all of them
except in Private Equity. Term-end AUM increased 25.9% to ¥1,889.3bn to set a new record high, and in thissituation, management fees also rose 12.0% to ¥14,258mn. In addition, as the market environment as a whole isperforming well, performance fees grew significantly, up 463.8% to ¥2,054mn, which contributed to the increasein operating revenue. Much of the Company’s investment portfolio has accompanying performance fees. When themarket environment is favorable, performance fees increase rapidly, which can be expected to have the effect ofpushing-up results on a consolidated basis, and at FISCO we think this is also an appealing aspect of the Company’sbusiness model. While management fees and performance fees are increasing steadily, the Company is appropriately
controlling the increases in human resources costs and other costs, so operating profit increased 31.1%, which is ahigher growth rate than that of the top line. As a result, the operating profit rate rose 2.6 percentage points to 45.3%
and profitability further increased. Base earnings, which is an indicator of profitability that the Company prioritizes
as showing a sustainable and stable business foundation, increased 5.7% to ¥6,348mn to set a new record high.
Profit attributable to owners of parent also increased significantly, up 44.2%, due to the recording of a gain on thesale of investment securities of ¥1,335mn. This was the sale of investment shares, including medical- and quantum
computer-related. It would seem that the Company’s efforts to develop new business areas are contributing to thesteady increase in profits.
FY3/24 consolidated results(¥mn)
FY3/23

FY3/24

ResultsVs. operating
revenue

ResultsVs. operating
revenue

Operating revenue

13,360100.0%

16,498100.0%

23.5%

Operating expenses and SG&A expenses

7,656

57.3%

9,022

54.7%

17.8%

Operating profit

5,704

42.7%

7,476

45.3%

31.1%

Ordinary profit

6,289

47.1%

8,090

49.0%

28.6%

Profit attributable to owners of parent

4,521

33.8%

6,519

39.5%

44.2%

FY3/23

FY3/24

YoY

15,126

16,743

10.7%

Management fee rate (net of commissions)

0.73%

0.70%

-0.03pt

Source: Prepared by FISCO from the Company’s financial results

Base earnings
AUM (average balance) (¥100mn)
Management fees (net of commissions) (¥mn)

11,077

11,727

5.9%

Ordinary expenses (¥mn)

5,071

5,378

6.1%

Base earnings (¥mn)

6,005

6,348

5.7%

Source: Prepared by FISCO from the Company’s financial results

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13 21

YoY

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Results trends(1) Japanese Equity
At the end of FY3/24, AUM had increased 37.8% YoY to ¥1,313.1bn. The stock markets trended strongly,
including the launch of new NISA, and the AUM of every investment strategy, except the market neutral investment
strategy, steadily increased. In particular, in focus all cap investment strategy, which has a large AUM of ¥784.4bn,
the market value of investment assets increased in the strong market environment, and also there were additional
funds established from large overseas institutional investors in the second half of the fiscal year. Amid the risinginterest among overseas institutional investors in Japanese equities, the additional funds were entrusted to theCompany based on the strong performance of its Japanese Equity strategy. Also, with the establishment of the
SPARX Corporate Value Creation Japan Equity Fund in May 2023, the AUM of the value creation investment
strategy grew rapidly from ¥2.5bn at the end of the previous period to ¥107.8bn. The decrease in the AUM of themarket neutral investment strategy was mainly due to the relative decline in needs for this strategy in the context
of the markets’ upward trend, and at FISCO, we don’t think there has been any change to the effectiveness of
this investment strategy itself.
(2) OneAsia
At the end of FY3/24, AUM had increased 40.2% YoY to ¥126.2bn. In South Korea and the Asia region, themarket environment is a whole trended favorably. In addition, the Company’s investment philosophy was further
disseminated to fund managers in overseas offices, which also contributed to the increase in AUM.
(3) Real Assets
At the end of FY3/24, AUM had increased 7.9% on the end of the previous period to ¥285.5bn. The Company
progressed investments in solar power generation facilities and other renewable energy power generation businesses at 347 locations throughout Japan. Its various investments, including in a biomass power generation
project in October 2023 and in solar power plants that are operating stably, contributed to the increase in AUM.
In terms of topics, the SPARX Green Battery Storage Fund was newly established in February 2024 as an initiative
to contribute to the realization of a carbon-neutral society. This fund is also expected to contribute to the increasein AUM in the future.
(4) Private Equity
At the end of FY3/24, AUM had decreased 15.0% on the end of the previous period to ¥164.3bn. AUM decreased
due to the completion of the investment period for the Mirai Creation No.2 Fund and the resulting change of theamount used as the basis for calculating management fees. In the Space Frontiers Fund, Fund I became fully
invested, so Fund II was established in April 2024. Fund II is expected to contribute to AUM in FY3/25. In Japanalso, the Company successfully completed its first TOB for the Japan Monozukuri Mirai Fund in January 2024.
After delisting it and increasing its corporate value, it intends to relist it, and going forward, its policy is to increase
AUM through a TOB via this fund, and to actively consider accumulating profits through sales of shares at thetime of relisting.
2. Past results trends(1) Assets under management
OneAsia’s term-end AUM had temporarily decreased significantly, but it has been recovering in the last few years,
and in particular it benefitted from favorable market conditions in FY3/24, increasing significantly by 40.2% YoY.
Japanese Equity has also grown steadily as a whole, although there have been periods of decline due to a weakmarket environment. The AUM of Real Assets and Private Equity are growing steadily overall. Total AUM is being
maintained at a high level, showing the excellence of the Company’s investment philosophy and investment
management method of “Macro is the Aggregate of the Micro,” and at FISCO we think that it will continue toreceive the support of investors.

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14 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.

21-Aug.-2024

8739 Tokyo Stock Exchange Prime Market

https://www.sparxgroup.com/ir/

Results trends

Trends in AUM for the four pillars
Private Equity

Real Assets

OneAsia

Japanese Equity(¥bn)
1,889.3

2,000.0
1,535.6 1,555.7 1,501.2

1,600.0
1,124.0

1,200.0

961.5

959.9

1,185.6

1,124.1

961.9

693.7

800.0

400.0

0.0
FY3/14 FY3/15 FY3/16 FY3/17 FY3/18 FY3/19 FY3/20 FY3/21 FY3/22 FY3/23 FY3/24(Period end)
Source: Prepared by FISCO from the Company’s results briefing materials(2) Operating revenue
For operating revenue, management fees have steadily increased by setting funds that realize high returns
through thorough company research and that have comparatively high fee rates. Funds managed in line with theinvestment philosophy of “Macro is the Aggregate of the Micro” will be able to maintain high returns going forward
as well, so FISCO believes that management fees will also continue to be high as a result. Also, in FY3/24, therapid increase in performance fees contributed to the increase in operating revenue. Many of the Company’sfund have accompanying performance fees, so when market conditions are favorable, operating revenue can be
expected to grow rapidly due to the increase in performance fees, which at FISCO we think is another appealing
point of its business model.
Quarterly trends in operating revenue
Management fees (left)
Other operating revenue (left)(¥mn)

Performance fees (left)
Management fee rate (right)

5,600

0.80%
0.69%

4,900
4,200

0.70%
4,746 0.60%

3,500

0.50%

2,800

0.40%

2,100

0.30%

1,400

0.20%

700

0.10%

0

0.00%
1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q
FY3/17

FY3/18

FY3/19FY3/20FY3/21

FY3/22

FY3/23

FY3/24

Source: Prepared by FISCO from the Company’s results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Results trends(3) Base earnings
Base earnings, an indicator of ongoing, stable profitability (management fees net of commissions paid – (minus)
fixed expenses and other ordinary expenses), had been negative temporarily in FY3/08 due to the global financial
crisis, but have been trending upward ever since. It is worth noting that the Company’s base earnings have steadily
increased amid an extremely high level of uncertainty in the financial market outlook due in particular to the impact
of COVID-19, the Ukraine situation, and central bank fiscal policies in various countries on corporate earnings.
When considering points such as the Company’s power of discernment created from its unique investment
philosophy has enabled it to increase AUM even when market conditions are soft, and that it is controlling costs
appropriately, we can expect base earnings to trend strongly in the future as well.

Trends of base earnings
(¥mn)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
-1,000

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24
（FY）

Source: Prepared by FISCO from the Company’s results briefing materials

3. Financial condition and management indicators
Total assets at the end of FY3/24 were ¥46,112mn, up ¥6,729mn on the end of the previous period. This was mainly
due to a ¥38mn increase in cash and deposits in current assets and a ¥5,852mn increase in investment securities
in fixed assets. Total liabilities increased ¥1,356mn to ¥14,692mn, mainly because of a ¥700mn increase in income
taxes payable in current liabilities and a ¥2,000mn increase in long-term borrowing in fixed liabilities. Total net assets
increased ¥5,372mn to ¥31,419mn, with the main factors being a ¥4,073mn increase in retained earnings and a¥1,489mn increase in the valuation difference on available-for-sale securities, while the capital surplus decreased¥404mn.
For the financial condition, the current ratio was 414.4%, the fixed ratio was 60.4%, and the equity ratio was
68.2%. Both the current ratio and fixed ratio are sound and we do not see any problem with the Company’s long- or
short-term liquidity. Its capital adequacy ratio is also high.

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16 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.

21-Aug.-2024

8739 Tokyo Stock Exchange Prime Market

https://www.sparxgroup.com/ir/

Results trends

Consolidated balance sheets and management indicators(¥mn)
Current assets
Cash and deposits
Fixed assets

FY3/23

FY3/24

Change26,594

27,130536

22,02822,06638

12,78818,981

6,192

10,437

16,2895,852

Total assets

39,382

46,112

6,729

Current liabilities

7,340

6,547

-793

2,000

2,000

0

5,995

8,145

2,149

Investment securities

Short-term loans payable
Fixed liabilities
Long-term loans payable
Total liabilities
Total net assets
Retained earnings

5,000

7,000

2,000

13,335

14,692

1,356

26,04731,4195,372

16,886

20,960

4,073

Source: Prepared by FISCO from the Company’s financial results

4. Outlook for FY3/25
The outlook for FY3/25 is as follows. In investment trust management, discretionary investment management andinvestment advisory services, the Company’s main business, results are substantially impacted by economic conditions and the market environment, so results forecasts are recognized as difficult and are therefore not disclosed.
However, it started at the end of April 2024 with record high AUM of ¥1.8933 trillion, and in addition, the outlook forthe market environment is excellent, so at FISCO we think that management fees are likely to continue to trend at
a high level. The newly established Space Frontiers Fund II and SPARX Green Battery Storage Fund are expected
to contribute to the increase in AUM.
Alongside the stock markets maintaining their bullish performance, at FISCO we expect performance fees to growand management fees to also trend strongly, driven by Private Equity.

■ Medium- to long-term growth strategy
Is focusing on further improving profitability and increasing market
capitalization, targeting AUM of ¥3 trillion by March 2026
As its medium- to long-term growth strategy, the Company has set the target of doubling the AUM of its four pillars
of Japanese Equity, OneAsia, Real Assets, and Private Equity, from ¥1.5356 trillion at the end of FY3/21 to ¥3 trillion
by March 2026. At the same time, it is focusing on developing the new business areas. It has designated energy(including hydrogen), healthcare, and fintech as growth areas as they are expected to have high growth potential,
and its policy is to increase the return on capital, while developing new business areas, through the efficient allocationof management resources. While increasing the four pillars’ AUM and pursuing improved ROE, in the medium- tolong-term it is targeting operating profit of ¥10.0bn and market capitalization of ¥100.0bn.

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17 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Medium- to long-term growth strategy(1) Strategy toward increasing the four pillars’ AUM(a) Japanese Equity
The Company is strengthening its initiatives for its long-short strategy, which is growing again, and its long-term
selection investment strategy. Particularly for its focus all cap investment strategy, its policy is to actively increase
AUM by targeting the high levels of interest from overseas institutional investors. In addition, to increase AUM fromtraditional strategies, such as focus all cap investments, the Company is focusing on increasing the corporate
value of the companies it invests in through engagement strategies for which it has a competitive advantage,
including its value creation investment strategy. By utilizing both traditional strategies and alternative strategies,
the Company intends to further refine its own uniqueness.
(b) OneAsia
This is seen as a market that can be expected to grow significantly in the medium- to long-term, and the Company
is investing in it via funds in companies that can grow considerably with an eye to the societal changes occurringin Asia. Specifically, it is establishing new funds that mainly invest in the Indian and Indonesian markets and then
expanding the scale of these funds in order to realize their growth as foundation funds. It also continues to focus
on educating fund managers in each location and intends to disseminate the Company’s investment philosophy
on a global level to build a high-quality management structure.
(c) Real Assets
The Company is steadily accumulating a track record of investments in renewable energy, and in this situation,
it is also accumulating knowledge about the energy field. Utilizing this knowledge, its policy is to gradually shift
the focus of development from solar to biomass, geothermal, and other types of green energy from which highinvestment returns can be expected. At the same time, it is also actively developing investment strategies thatwill generate stable revenue, such as green hydrogen and corporate PPA, with a view to the period after the
feed-in tariff system.
(d) Private Equity
The Company continues to focus on investing in startup companies in Japan and overseas from entrance points
such as “intelligent technologies,” “robotics,” “technologies contributing to the realization of a hydrogen society,”“electrification,” “new materials,” “carbon neutrality,” and “SDGs.” It is accumulating performance fees and further
increasing the profitability of Private Equity by investing in carefully selected targets. Also, in FY3/24, the Company
completed its first TOB via a fund. Going forward, its plans to increase AUM through TOBs via funds and to actively
consider generating profits by selling shares at the time of relisting.
(e) New areas
The Group has designated energy (including hydrogen), healthcare, and fintech as new growth areas for a new
era premised on the use of AI and plans to make further investments in these areas within the scope of a certain
level of shareholder’s equity and internal Group resources. In “energy,” it is conducting various demonstration
experiments on how to use hydrogen energy and realizing them in the form of a concrete business. It is also
focusing on energy storage facilities as investment targets, as can be seen by the establishment of the SPARXGreen Energy Storage System Fund. It is expanding the new energy areas with a focus on hydrogen and battery
storage facilities. For healthcare as well, in FY3/24 it recorded profits in the form of a sale of equity interests. Goingforward, it will continue to invest in these types of new areas and strengthen the fund business.

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18 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/

Medium- to long-term growth strategy(f) Summary
Going forward, FISCO projects that Japanese Equity AUM will steadily increase and that it will also increase
particularly in Private Equity and Real Assets. As discussed above, this is because Private Equity is able to findappealing startups that have been overlooked by investors through thorough company research and outstanding
hypothesizing. Private Equity is expected to be highly profitable and it can discover appealing investment targets,
which is why we think it is able to steadily raise funds from investors. It has newly established the Space
Frontiers Fund II, so AUM can be expected to further increase. For Real Assets, systematically supported by thestrengthening of developments such as the SDGs and decarbonization, it is anticipated the societal needs willgrow more and more for renewable energy like solar power, wind power, geothermal power, and hydrogen energy.
In addition to increasing AUM, the Company also plans to actively invest in projects that will generate high revenue,
including geothermal and biomass projects, and this is expected to improve profitability.
(2) Responses to realize management that is conscious of capital costs and the share price
Following a request from the TSE, the Company has been conducting management that is conscious of capitalcosts and the share price, and it has stated that it will continue to work to further improve its corporate value.
After breaking down PBR into three elements of ROE, the cost of shareholders’ equity, and the expected growthrate, the Company is working to further improve ROE by expanding its existing strategies, reduce the cost ofshareholders’ equity, and improve the expected growth rate by introducing new investment strategies.
Breaking down PBR into three elements

Source: The Company’s results briefing materials

Looking at the Company’s ROE, PBR, and PER in the previous 5 periods, ROE has trended at a level above theearnings rate required by shareholders (the Company’s awareness of this is a cost of shareholders’ equity of 9% to12%), while PBR has trended stably at a level above 1x, and in FY3/24, ROE was 22.7% and PBR was 2.37x. The
ROE and P/B ratios are already at acceptable levels, and it is aiming to further improve them by progressing the basic
strategies mentioned above. Conversely, its PER of 11.48x (FY3/24) is below the average of the TSE Prime Market(18.3x). To improve its PER, the Company is strengthening efforts to take on challenges in new areas, so investors’
expectations for profit growth in the future are rising. Also, it is thought it will pursue a growth strategy and further
highlight its appeal to investors, including by further enhancing its information disclosure and holding briefings withinvestors. By further enhancing these IR activities, if it not only improves PER but also reduces investors’ awarenessof risk with regard to the Company, the cost of shareholders’ equity can also be expected to decrease. In addition
to these efforts to decrease the cost of shareholders’ equity, by carefully explaining to investors aspects such as
its high-level governance structure that utilizes the Company’s independence, which is one its strengths, and its
business model that generates both stable and high levels of revenue, it intends to remove any uncertainties thatinvestors feel about the Company.

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19 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.

21-Aug.-2024

8739 Tokyo Stock Exchange Prime Market

https://www.sparxgroup.com/ir/

Medium- to long-term growth strategy

T r e nd s i n R O E, P B R , a n d P ER
ROE (left)

PBR (right)

PER (right)

25.0%

22.7%

17.17
20.0%

14.46
16.0%

(Times)

17.0%

20.0

16.0

18.0%
11.48

15.0%

13.45
11.0%

12.0

12.77

10.0%

5.0%

8.0

1.68

2.56

2.25

2.21

2.37

FY3/21

FY3/22

FY3/23

FY3/24

0.0%

4.0

0.0
FY3/20Source: Prepared by FISCO from the Company’s results briefing materials

Toward further improving corporate value, the Company has announced its Capital Allocation Plan (FY3/25 to
FY3/27). With regard to investment in new businesses and seed investment in its existing strategies, the plan is
to implement growth investment based on the amount of operating cash flow. Specifically, it anticipates investing¥8.0bn (net amount based on investment recovery; calculated based on previous results). Investments from within
the operating cash flow will maintain financial soundness while raising investors’ level of expectation for profit
growth. For shareholder returns, its policy is to continue to return profits to shareholders while considering financial
stability and sustainability. The dividend total amount includes acquisitions of treasury shares, and it allocates a totalof approximately ¥10.0bn to shareholder returns (calculated based on the recent shareholder returns’ results). It isalso further increasing ROE, PBR, and PER by actively conducting growth investment at the same time as aiming
to enhance shareholder returns.

We encourage readers to review our complete legal statement on “Disclaimer” page.

20 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

SPARX Group Co., Ltd.
8739 Tokyo Stock Exchange Prime Market

21-Aug.-2024
https://www.sparxgroup.com/ir/■ Shareholder returns policy
Has maintained a high payout ratio; expected to continue
shareholder return policy
The SPARX Group considers that returning profits, etc., to shareholders through an appropriate capital allocation,
while also aiming for sustainable growth and the medium- to long-term improvement of corporate value, to be
one of its important management issues. With regard to this, the Company has a basic policy of comprehensively
considering performance trends, financial position, payout ratios and the timing and method of returns. Based on
this policy, in FY3/23 it paid a dividend per share of ¥60.0 (dividend payout ratio, 52.9%). For FY3/24, based on theincrease in base earnings and other factors, it will increase the dividend by ¥6.0 YoY for a record high dividend pershare of ¥66.0 (dividend payout ratio, 40.3%). It is also actively acquiring treasury shares. Recently, in November
2023, it resolved to acquire treasury shares with an upper limit of 330,000 shares (¥500,000,000) and completed
the acquisition of treasury shares in February 2024. So in addition to dividends, it seems the Company’s approachis to enhance shareholder returns through actively acquiring treasury shares and other methods.
The FY3/25 dividend forecast has not yet been confirmed, as the Company has not disclosed results forecasts.
But at FISCO, we think it will continue to be at a stable level as it has maintained a high dividend payout ratio in thepast and also as results are forecast to trend strongly.

Dividend per share and dividend payout ratio
Dividend per share (left)

Dividend payout ratio (right)

(¥)
78.4%
80.0

80.0%
63.4%

62.0%

58.9%

60.0

60.0%

52.9%
40.3%

40.0

34.6%

40.0%

30.1%
50.0

20.0

55.0

60.0

60.0

66.0

45.0

20.0%

35.0
20.0

0.0

0.0%
FY3/17

FY3/18

FY3/19FY3/20FY3/21

FY3/22

FY3/23

FY3/24

Note: Due to the implementation of a share merger in October 2022, figures before this time have been adjusted to reflect theeffects of the share merger.
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

21 21

Disclaimer
FISCO Ltd. (“FISCO”) offers stock price and index information for use under the approval of
the Tokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
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may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiries, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp