CERES INC. | 3696 (TSE Prime)
1.

Company Report

Strategy Advisors, Inc.
Takao Kanai

March 29, 2024

Stock Price and Volumes

Aiming for High Growth ThroughInnovation in the Token (Points andCrypto Assets) Economy

Trading Volume (RHS)
Stock Price (LHS)

(¥)

2,000

(thou shares)

1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0

1,800

1,600
1,400
1,200

1,000

CERES is engaged in the mobile services business centered on ‘point sites’ and also
has a financial services business centered on the ‘blockchain’. Based on the belief
that both "Moppy" and crypto assets are tokens, the company has positioned bothas their core businesses.
We believe that CERES' corporate DNA is a combination of "bold challenging andmeticulous implementation". President Satoshi Takagi's ‘spirit of challenge’ hasgiven the company a strong willingness to take on new challenges. On the other
hand, “Moppy”; a loyalty point site, has adopted detailed measures such as point
design with excellent tactics and this is the source of its competitiveness. It should
therefore be difficult for other companies to imitate.
"Moppy" has 5.21 million active users at the end of 2023, far exceeding the numberof other sites. The company's competitive edge is its ability to design optimal points
for consumers, advertisers and itself, by owning its own ASP (Affiliate Service
Provider) which is a contingency fee-based advertising agency. In the D2C (Direct
to Consumer) business, utilizing the know-how cultivated in the point and ASP
businesses, "Pitsole" performs exceedingly well, having become a rapidly growing
hit product.
Blockchain has an equity method affiliate (23.6% stake) in bitbank, a majordomestic exchange, as well as Mercury, a wholly owned subsidiary in the crypto
asset sales market. Mercury is building a stable revenue source in the form ofstaking. Although earnings volatility is high due to fluctuations in crypto asset
prices, blockchain has potential as an innovative technology, including NFT.
The stock price has risen significantly since December, largely due to the rise incrypto asset prices. In the short term, the price trend of Bitcoin and other crypto
assets will influence the company's share price. In the medium to long term, the
key will be whether the company can demonstrate a growth trajectory toward its
medium-term management plan of \40 billion in sales and \10 billion in recurring
profit. The high growth of D2C and the monetization of online factoring will also beof interest.

800
600

Source: Strategy Advisors

Key Indicators
Stock Price (2024/3/28)

1,743Year-to-Date High (2024/3/22)

1,799Year-to-Date Low (2024/1/26)

1,128

52-Week High (2024/3/22)

1,799

52-Week Low (2023/11/28)

891

Number of Shares Issued (mn)

11.4

Market Capitalization (\bn)

19.9

EV (\bn)

19.1

Equity Ratio (12/2023, %)35.4

ROE (FY12/2023 Actual, %)5.0

PER (FY12/2024 CoE, Times)

24.9

PBR (FY12/2023 Actual,Times)

2.2

Yield (FY12/2024 CoE, %)1.2

Source: Strategy Advisors

Japanese GAAP - Consolidated
FY EndSales(\ mn)YoY(%)

OP(\ mn)YoY(%)

RP(\ mn)YoY(%)

NP(\ mn)

YoY
(%)

EPS
(\)

DPS
(\)

FY12/2020

20,213

22.4

1,496

70.0

1,816

129.3

744

893.9

67.3

18.0

FY12/2021

23,402

15.8

2,305

54.0

3,499

92.7

2,775

272.7

251.8

40.0

FY12/2022

20,536

NA

1,246

-45.9

679

-80.6

46

-98.3

4.1

20.0

FY12/2023

24,070

17.2

1,118

-10.3

1,217

79.1

451

868.0

39.6

20.0

FY12/2024CoE

27,000

12.2

1,600

43.1

1,600

31.4

800

77.3

70.1

20.0

Note: Due to the adoption of the new revenue recognition standard in FY12/2022, the year-on-year change in net sales is NA
Source: Strategy Advisors- Based on Company Data.

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CERES INC. | 3696 (TSE Prime)

Table of Contents
1. Platformer to Create a Token Economy ....................................................................................... 4
2. "My Resume" of President Satoshi Takagi and Corporate DNA ......................................................... 5
3. Point Business ......................................................................................................................... 81) Point Site "Moppy"................................................................................................................ 82) ASP's "AD.TRACK" and Advertorial media ................................................................................ 113) Market Trends of Point Sites .................................................................................................. 134) Difficulty in Imitating CERES as Seen in "MOPPY" ...................................................................... 14
4. 5-Force Analysis from Management Strategy Theory .................................................................... 15
5. D2C Business ......................................................................................................................... 16
6. DX Business........................................................................................................................... 18
7. Blockchain ............................................................................................................................. 20
1) Both Points and Crypto Assets are Tokens ............................................................................... 202) bitbank .............................................................................................................................. 21
3) Mercury's "CoinTrade" .......................................................................................................... 24
4) Trends in the Crypto Asset Market.......................................................................................... 27
8. Other Financial Services ........................................................................................................... 31
1) Online Factoring .................................................................................................................. 31
2) Investment Development Business (CVC) ................................................................................ 33
9. Earnings Trends ..................................................................................................................... 34
1) Actual Results for FY12/2023 ................................................................................................ 34
2) Forecast for FY12/2024 ........................................................................................................ 34
3) Financial Strength ............................................................................................................... 37
4) Shareholder Returns ............................................................................................................ 37
10. Medium to Long-Term Outlook ................................................................................................ 38
11. Comparison with Other Companies in the Industry ..................................................................... 41
12. Stock Trends and Valuations ................................................................................................... 42
13. Risk Factor........................................................................................................................... 45
14. ESG .................................................................................................................................... 46
1) Governance Structure to Promote Diversity.............................................................................. 46
2) SDGs Initiatives in the Medium-Term Management Plan ............................................................. 47
3) CERES Sustainability Management ......................................................................................... 48
4) CERES' Climate Change Measures .......................................................................................... 49
5) CERES' Human Capital Strategy ............................................................................................. 49

2

CERES INC. | 3696 (TSE Prime)
Executive Summary
Engaged in Mobile &Financial Service

We Believe that the
Corporate DNA is "Bold
Challenging & Meticulous
Implementation"“Moppy" has a Big
Advantage in Point Design
Capability

D2C, Which Handles
Everything from ProductDevelopment to Sales, is
Growing Rapidly

Blockchain has a Distinctive
Strategy for bitbank andMercury

CERES is engaged in two businesses: Mobile and Financial Services. Mobile
Service consists of the loyalty point business centered around "Moppy," thelargest loyalty point site in Japan; D2C (Direct to Consumer), which handles
everything from product development to sales and consists of Sier’s DX.
Financial Service includes Blockchain, which operates a crypto asset exchange
and sales office, online factoring and investment development business (CVC).
President Satoshi Takagi began envisioning his future as an entrepreneur
when he was a university student, and after working for Nomura Securities(now Nomura Holdings (8604 TSE Prime)) and CyberAgent (4751 TSE Prime),
he started his own business, founding CERESs in 2005. Looking at President
Takagi's thoughts on founding CERES and the company's subsequent businessdevelopment, one can see that the company's corporate DNA is "boldchallenging and meticulous implementation". The company's strong ambition
for growth and the formulation and implementation of meticulous tactics
provides for a good management balance for the company.
“Moppy" started out as a point site for feature phones, and when thetransition to smartphones was made, it overcame competition from PC-based
point sites to achieve the position it holds today as the largest player. This
was largely due to its superiority in providing information on small screen
devices such as mobile phones and its design capabilities. Later, the company
conducted its own affiliate service provider (ASP) business, a contingency feebased advertising agency and increased the number of transactions in which it
received orders directly from advertisers. As a result, the company was able
to award higher points to users who are consumers; and the number ofmembers has increased, growing such that the site has become used more byadvertisers. The company's point design is carefully crafted to benefit all threeparties - consumers, advertisers and the company itself-which makes it
difficult for other companies to imitate.
D2C is currently growing rapidly in the mobile market. Through its
involvement in point sites and ASP, the company has accumulated expertisein product concepts and sales methods, and has begun to handle productdevelopment, manufacturing (outsourcing) and sales on its own. The
company's high-function insoles, "Pitsole," have been a big hit and earnings
have been growing rapidly.
Blockchain currently holds a 23.6% stake in bitbank, one of the three largest
crypto asset exchanges in Japan, making it an equity method affiliate. It also
has Mercury, which operates the crypto asset sales exchange “CoinTrade”, asa wholly owned subsidiary. bitbank is unique in that it can trade a number ofstocks in addition to its mainstay Bitcoin. It has also established a preparatorycompany with Sumitomo Mitsui Trust Holdings for the establishment of Japan
Digital Asset Trust, with plans to create a platform for institutional investors.
Mercury is a latecomer to the market, but it is distinctive in that it is steeringa policy of expanding stable revenue sources such as bond yields through‘staking’. However, these are subject to the market trend of crypto assets andas such earnings volatility is high.

3

CERES INC. | 3696 (TSE Prime)
Mobile Service to Recover in
FY12/2024. Rising Crypto
Asset Prices Could Provide
Upside Potential

In FY12/2023, sales grew 17.2% YoY, but operating profit declined 10.3%
YoY, largely due to sluggish ASP and other services, despite significant growthin D2C. For FY12/2024, the company forecasts higher sales and profits due tofurther expansion of D2C and steady growth of "Moppy”. Due to theunreadable price trend of crypto assets, the equity in earnings of bitbank isprovisionally set at zero. In fact, crypto asset prices are currently rising,
especially Bitcoin and so there is a good chance that the company will benefit
from this.

Medium-Term Management
Plan 2026

The Medium-Term Management Plan 2026 calls for sales of \40 billion andrecurring profit of \10 billion (\5 billion each in Mobile and Financial Service)in FY12/2026. Mobile Service are generally on that line in terms of profit,
although there are fluctuations in each business. Financial Service, on theother hand, is steadily making the necessary investments, but the hurdles are
high, as they depend on the crypto asset market.

The Stock Price has Risen
Significantly in the Recent
Past and Will be Affected by
Crypto Asset Prices in the
Short-Term. In the Medium
to Long-Term, Realization of
the Company's Growth
Strategy Will be Key

The stock price has risen significantly since last December. The rise in crypto
asset prices impacted the share price significantly. For the time being, theshare price will depend on the price trends of Bitcoin and other stocks. In themedium to long term, growth is expected to come from D2C and othersectors, in addition to the steady expansion of point sites. Blockchain
innovation is expected to include crypto assets and NFTs. If these growth
factors are reflected more clearly in the company's performance, thecompany's stock price will likely be influenced by crypto asset prices, but
expectations will be high for an upward trend.

1. Platformer to Create a Token Economy
Mobile Services are Point,
D2C & DX Businesses

CERES ("the company") has two divisions: Mobile Service and Financial
Service. Mobile Service consists of three businesses: Point, D2C and DX. Point
operates Moppy, one of the largest point sites in Japan and “AD.TRACK”, anaffiliate service provider (ASP) that connects advertisers and affiliate media.
DX's subsidiary Yumemi (49.8% stake) develops software, mainly smartphone
applications and websites.

Financial Service has 3
Businesses: Blockchain,
Online Factoring & CVC

Financial Service consists of Blockchain, Online Factoring and the Investment
Development Business ("Corporate Venture Capital (CVC)"). In Blockchain,
the crypto asset sales exchange “CoinTrade” is operated by wholly owned
subsidiary Mercury and bitbank, a leading crypto asset exchange in Japan, is
an equity method affiliate, holding a 23.6% stake. Online factoring helps
freelancers and sole proprietors raise funds, while CVC mainly targets areas
with potential synergies with the company's core businesses, with the aim ofgenerating investment returns through exits, while also looking to enhancethe value of existing businesses and explore new businesses.

4CERES INC. | 3696 (TSE Prime)
Figure 1 . CERES Earnings Trends by Segment (FY12/2023)(\ mn)
Segment
Mobile Service Business

23,458

97%

3,187

139%

Equity in Earningsof Affiliates
-

Point

13,817

57%

2,480

108%

-

D2C

5,053

21%

730

32%

-

DX

4,776

20%

106

5%

-

Financial Service Business

611

3%

-897

-39%

78

Total (Before Adjustment)

24,070100%.

Adjustment
Total Amount

Sales

Composition

24,070100%.

OPComposition

2,290

100%

-1,172

-

-

1,118

-

78

Note: Operating income composition ratios are to unadjusted totals.
Source: Company Data

2. "My Resume" of President Satoshi Takagi and
Corporate DNA
Conceived the Idea ofStarting a Business While inCollege

The founder, President Satoshi Takagi, was born in 1971 and is 52 years old.
He says that a visit to New York when he was a student at Sophia University's
Faculty of Economics had a great influence on his later life. He was impressedby the fact that many businessmen had personally provided financial support
or donated their works to museums and concert halls and that there weremany facilities bearing their names. Individuals were making significant
contributions to society and at the same time leaving their names forposterity. Growing up in a typical salaryman family, Mr. Takagi thought thatthe only way for him to make such a contribution to society was to start his
own business and become successful and he conceived a plan in his mind to
start his own business at the age of 30 and go public at 40.

Gained Experience at
Nomura Securities &CyberAgent

However, at that point, the Internet had not yet been created and he had notyet drawn a concrete picture of what field he would start a business in. In
order to gain experience for starting his own business, he thought it would begood to work as a generalist and be involved in the economy as a whole, so
he joined Nomura Securities (now Nomura Holdings (8604 TSE Prime)). At
Nomura, he worked in branch sales and had numerous opportunities to comeinto contact with Internet companies, which were in their infancy, as clients.
At that time, he had been paying attention to this field as one that seemed
likely to grow in the future.
In 2000, he moved to CyberAgent (4751 TSE Prime), which had just been
established and had not yet gone public. He says his motivation was to gain
various experiences at a venture company rather than a large corporation like
Nomura Securities. At CyberAgent, he experienced going public as the general

5CERES INC. | 3696 (TSE Prime)
manager of the president's office and the general manager of the corporate
planning office and was responsible for various tasks such as budget planning,launching new businesses, IR and public relations. These experiences are seen
as having been very useful in his subsequent entrepreneurship andmanagement.
CERES was Established in
2005.

Having left CyberAgent with the goal of starting his own business at the ageof 30, and after managing a cell phone content provider company, President
Takagi founded CERES in 2005.
As mentioned above, President Takagi was born and raised in a typicalbusinessman's family and had no particular connection to becoming anentrepreneur prior to his visit to New York during his college years. However,his maternal grandmother had established and managed a bridal costumerental company. It was very rare for a woman to start and manage acompany at that time and President Takagi said that he may have inherited
such a spirit through her bloodline.

Listed on Tokyo Stock
Exchange Mothers in 2014

In October 2014, the company was listed on the ‘Mothers’ market of theTokyo Stock Exchange. In February 2016, the company moved to the First
Section of the Tokyo Stock Exchange. Then in April 2022, the company moved
to the TSE Prime Market due to a change in the TSE's market classifications.
From an early stage, President Takagi saw an affinity between point sites andblockchain technology, based on the idea that both "Moppy" points and"Bitcoin" are virtual currencies (tokens). For this reason, it invested in bitbank
in 2015 and made it an equity method affiliate in 2017. In the same year, itestablished Mercury; which operates a crypto asset sales office, as a wholly
owned subsidiary, laying the foundation for its crypto asset-related business.
In FY12/2018, the company adopted a consolidated accounting structure,
consisting of a Mobile Service Business and a Financial Service Business.

Our Management
Philosophy is to "Enriching
the World Through Internet
Marketing"Corporate DNA isConsidered to be "Bold
Challenging & Meticulous
Implementation"

The name "CERES" in the company name means the “Goddess of Abundant
Harvest” in Greek mythology and represents President Takagi's desire toenrich real society through the Internet. In addition, the company's
management philosophy, "Enriching the World Through Internet Marketing,"
defines the scope of its business broadly, without being too conventional,
while at the same time defining the Internet so that the company's businesses
are not overly dispersed.
We believe that CERES' corporate DNA is "Bold Challenging and Meticulous
Implementation". President Takagi's motivation for starting the company, washis desire to make an impact by contributing to society and to become acompany that will leave its mark on future generations, which is clearlyreflected in the company's growth strategy. The point site "Moppy" was alatecomer to the market, launching a website for feature phones at a time
when most sites were for PCs and it was a winner when the switch tosmartphones was made, establishing its current solid position in point sites.

6

CERES INC. | 3696 (TSE Prime)
The company also embarked on the crypto asset business, whose future
prospects were uncertain, as early as 2015.
President Takagi Effectively
Owns 16.3% of theCompany.

On the other hand, the company is not just moving blindly into growth areas
but has adopted measures to differentiate itself backed by detailed tactics. In
the case of "Moppy," a well-thought-out point-of-sale design has been
implemented and the company has built up the know-how to secure
appropriate profits. In crypto assets, although affected by large fluctuations inmarket prices, the company is steadily developing its business with the aim ofearning stable profits through staking, as described below. According to
President Takagi, while the Mobile Service Business centered on "Moppy" issteadily increasing earnings, whilst the Financial Service Business centered on
crypto assets is significantly in the red: but as a venture aiming for growth,
the president's thinking is shared by others within the company.
As for the shareholder composition (as of December 31, 2023), President
Takagi and his co-owner Juno & Co., Ltd. hold a total of 16.3%. In addition,
CyberAgent holds 4.4%.
Figure 2: Major Shareholders (as of December 31, 2023)
Major Shareholders

Shareholding
Ratio (%)

Juno & Co., Inc

10.33

Satoshi Takagi

5.98

CyberAgent, Inc.

4.38

Toru Akaura

2.89

Tetsuya Nozaki

1.91

Nozomu Yachidate

1.86

Hideaki Takahashi

1.75

Yasuhiro Kobayashi

1.74

Source: Strategy Advisors, based on Company Data.

According to the company's February 29, 2024 press release entitled"Progress of the Plan for Compliance with Listing Maintenance Criteria," theratio of tradable shares as of December 2023 was 66.4%. Since the total
holdings by major shareholders in Chart 2 is 30.8%, a significant portion of
the other shares are tradable shares. The holdings by foreign corporations,were at 4.5% at the end of December 2023.

7

CERES INC. | 3696 (TSE Prime)
3. Point Business
1) Point Site "Moppy"
Point Sites are
Performance-Based Affiliate
Advertisements

Point sites are media in which points are awarded for purchasing products andservices or accessing advertisements through smartphone applications or PC
websites. As shown in Figure 3, point sites post advertisements through anintermediary called an ASP, which acts as a go-between advertisers andmedia or affiliates. Consumers who use these point sites can register as
members via websites or mobile applications and earn points when theypurchase products or services and clicking on advertisements. Affiliate
advertisements are paid on a pay-for-performance basis, meaning thatadvertisers pay advertising fees only after the event. Point sites then receive
the advertising fees and subsequently award points to their consumer
members. ASPs also receive a certain amount of commission. “AD.TRACK”,
which is operated by the company itself, is developing the ASP business.

Launched "Moppy Pay"

Once users accumulate points, they can exchange them for cash, gift
certificates, e-money, other points or even crypto assets. However, it is a
hassle for users to exchange their points for these items. To address thisissue, "Moppy" launched "Moppy Pay" last November in partnership with
APLUS, a member of the SBI Shinsei Bank Group. This allows users to use thecard for payment at merchants that accept Visa touch payments and QUICPaymerchants, thereby increasing convenience.
Figure 3: Figure 3: "Moppy" Business Model

Source: Company Data

8

CERES INC. | 3696 (TSE Prime)“Moppy” Started for Feature
Phones“Moppy" was launched in 2005 as a web service for feature phones.
Subsequently, a smartphone version of the web service was launched in 2011
and the service has steadily expanded since. The number of active members
has steadily increased each year, reaching 5.21 million by the end of
FY12/2023. Sales of "Moppy" have grown at a 23.2% annual rate over thefive years through FY12/2023, while the number of active members hasgrown at a 22.0% annual rate over the same period. Products and services
handled by "Moppy" are likely to include financial institutions (e.g., card
applications and account openings), e-commerce, real estate and digitalcontent; with financial institutions accounting for about half of the business.
Recently, e-commerce and tax payments (aka Furusato Nozei) have been
increasing and the number of members appears to be spreading to a wide
range of people.

Largest Point Site in Termsof Members and Sales

Point sites include "Point Town" by GMO Media (6180 TSE Growth), "EC Navi"by CARTA HOLDINGS (3688 TSE Prime), "Hapitas" by OZVISION, "Point
Income" by FIVEGATE, and "Chobirich" by Chobirich. “Moppy" is believed tobe the largest in Japan in terms of both number of active members and sales.
“Moppy's” sales of \11.6 billion (FY12/2023) are much higher than \5.4 billion
in sales of GMO Media's media business (including Point Town) and \7.1
billion in sales of CARTA HOLDONGs' Internet-related services (including ECNavi).
Figure 4: Sales and Gross Profit Margin of "Moppy”(¥ mn)
14,000

28.0%

26.8%

12,00011,509
23.1%

25.0%

10,000

8,952

30.0%
11,603
25.0%

23.4%

22.5% 20.0%

8,000
6,000

5,448

15.0%

5,764

4,094

10.0%

4,000
2,000

1,362

1,097

1,614

2,068

2,693

5.0%

0
12/2018

12/2019

Sales(LHS)

12/2020

12/2021

Gross Profit (LHS)

2,611

12/20220.0%
12/2023 (FY)

Gross Margin (RHS)

Note: Gross profit is calculated based on sales and gross profit margin as disclosed by
the company.
Source: Strategy Advisors, based on Company Data.

9

CERES INC. | 3696 (TSE Prime)
Figure 5: Number of Active Members of "Moppy"('000)

(¥)

6,000

3,500

5,000
2,287

2,717

2,511

2,859

3,000

2,171

4,000

2,500
2,425

3,000
2,000
1,000

1,930

2,410

2,900

3,690

4,360

5,210

2,000

1,500
1,000
500

0

0
12/2018

12/2019

12/2020

12/2021

No. of Active Members (LHS)

12/2022

12/2023(FY)

ARPU(RHS)

Note: ARPU is Average Revenue per User
Source: Strategy Advisors, based on Company Data.

“Moppy," Which Was
Accustomed to Handling
Small Screens on Feature
Phones, Gained an
Advantage Over PC’s

“Moppy’s” dominance was established during the switch from feature phones
to smartphones. When “Moppy” was launched in 2005 as a latecomer with afeature phone version, PC versions were the mainstream for point sites, andthe only feature phone version was "OSAIFU.com," which the company later
acquired. “Point Town" and "EC Navi" were the first to offer PC versions of
their web services. Later, as the switch from feature phones to smartphones
began, the feature phone version of "Moppy" and the PC version of point sites
began to launch their smartphone versions simultaneously. At that time,"Moppy," which had created its web design for the small screens of featurephones, was able to migrate to smartphones without difficulty. However, it isbelieved that many PC-version sites with larger screens had difficulty inmaking this transition. Nevertheless, the PC version of the site was still by far
the larger market than the smartphone application at first, but the shift from
PCs to smartphones and tablets for general consumer use has progressed,
and as a result, "Moppy," which became dominant in smartphones, has
become the largest player in the industry.
The following are some of the factors that have allowed "Moppy" to maintainits superiority since then.

Have Our Own ASPFirst, by having “AD.TRACK”, an ASP, in-house, CERES will have more room
to offer higher points to users because the commissions charged by the ASP
for advertisements placed through “AD.TRACK” will not flow out to outside
parties. This will naturally lead users to prefer sites with higher points whenpurchasing the same product, which in turn will increase activity on “Moppy”.
Advertisers will also use "Moppy" more as a site to increase their sales.

10

CERES INC. | 3696 (TSE Prime)
Point Design Know-How

Second, CERES has a high level of expertise in point-of-sale design. For
advertisers, sites that are used more by consumers with high LTV (Life Time
Value), who continuously purchase products and services, are highly valuable.
For example, for users who subscribe to a credit card, if only the initial points
are designed to be high, it will have the effect of increasing the number ofsubscribers, but there is a high possibility that the use of that card will notincrease afterwards. On the other hand, if the site is designed so that points
are awarded when the card is used after subscription, it will be possible toincrease LTV. In addition, since there is competition with other loyalty sites inawarding points, the company appears to have expertise in designing points
for each product or service in a detailed manner that is both beneficial to theuser and profitable for the company.

CERES' Creditworthiness

Third, CERES' credibility: Aside from the big players such as GMO Media and
CARTA HOLDINGS, there are many sites and operators of point sites that lackcredibility. There have been sites that set points too high in order to attract
users to make purchases and then went out of business. Since points have amonetary value, sites operated by companies that lack credibility tend to be
weeded out.

2) ASP's "AD.TRACK" and Advertorial media
Have Our Own ASP"AD.TRACK".

“AD.TRACK" is an in-house service of ASP that connects advertisers with themedia and affiliates such as "Moppy" and serves as a contingency fee-based
advertising agency. Affiliates are individuals or corporations that register with
ASP and write introductions of advertisers' products and services on their own
sites or blogs. When a consumer reads the article and makes a purchase, theaffiliate is compensated. “AD.TRACK" also publishes advertisements foradvertisers in media other than "Moppy". Since "AD.TRACK" is a business of
CERES, which has the largest point site "Moppy" in Japan, it is an ASP thatadvertisers need to associate with.
“A8.net” of FAN Communications (2461 TSE Prime), Value Commerce (2491
TSE Prime), a subsidiary of LY Corporation (4689 TSE Prime), Rakuten
LinkShare are major ASPs, and “AD.TRACK is not as large as thesecompanies. However, it plays an important role in maintaining thecompetitiveness of "Moppy" and in expanding the group's earnings.

11

CERES INC. | 3696 (TSE Prime)
Figure 6: Net Sales of Point Businesses Other than "Moppy”(¥ mn)
4,000

3,444

3,500

2,927

3,000
2,500

3,411
2,532

2,296

2,213

2,000
1,500
1,000
500
0
12/2018

12/2019

12/2020

12/2021

12/2022

12/2023 (FY)

Source: Strategy Advisors, based on Company Data.

Headwinds Such as
Advertising Restrictions
Under the Pharmaceuticaland Medical Device Act andthe Act Against Unjustifiable
Premiums and Misleading
Representations &Restrictions on Third-Party
Cookies

These days, there is a headwind facing ASPs and advertorial media. In August
2021, a surcharge system was introduced in the Pharmaceutical and Medical
Device Act covering pharmaceuticals and cosmetics, which orders thepayment of a surcharge if a person benefits from false or exaggerated
advertising. Act against Unjustifiable Premiums and Misleading
Representations also introduced a surcharge system in 2016. This is believed
to have made advertisers more cautious about the content of theiradvertisements.

The Point Service Market is
Growing Steadily. Growth
Potential for Point Sites Has
Been Large for Some Time

Although the effects of stricter regulations on advertising under the
Pharmaceutical and Medical Device Act and the Act against Unjustifiable
Premiums and Misleading Representations are expected to run their course,
the business of ASP’s and article ad-based media is expected to remain
somewhat uncertain for the time being due to the effects of the abolition of
third-party cookies.

Also, there is the added problem of third-party cookie regulations. Third-party
cookies are cookies issued by a domain different from the website accessed,and because of this, remarketing (displaying ads from a previously visited sitewhen the user is browsing a different site) is possible. However, there is amove by Apple to block third-party cookies in its browser Safari in 2020 and
by Google Chrome to discontinue them in 2024. This has made the businessenvironment for affiliate advertising more difficult. Figure 6 shows the sales of
CERES' point business, excluding "Moppy," which declined in FY12/2022 andFY12/2023. This is because "AD TRACK" and advertorial media sales declined
for the reasons mentioned above.

12

CERES INC. | 3696 (TSE Prime)3) Market Trends of Point Sites
According to the Japan Internet Point Council (JIPC), the total points issued by
the 10 companies that responded to the survey of participating companies is\17.5 billion in FY2021 and \18.6 billion in FY2022. Since CERES, the largest
company, is not included, adding the \11.6 billion in sales of "Moppy" in
FY2022 would bring the total to just under \30 billion. The market size ofpoint sites is probably larger than this, as some of the participating companies
do not participate in the JIPC survey. Figure 7 shows the overall market sizeof point services, as announced in a release by the Yano Research InstituteLtd. This includes points issued by individual companies, frequent flyer points,
points awarded to credit cards and electronic money and point sites ingeneral. The market size is estimated to be approximately \2.5 trillion in
FY2022 and it is still growing steadily every year. The size of the market for
the above mentioned point sites is estimated to be less than 2% of thisamount.
The expansion of the EC market has expanded commercial opportunities forpoint sites, and corporate points are also shifting from conventional cards tosmartphone applications; and this trend toward DX is expected to have apositive effect on point sites, which have traditionally focused on
smartphones. CERES believes that there is still much room for point sites to
grow.
In a report compiled by Mitsubishi UFJ Research and Consulting in March
2021, a survey asked point site users about their reasons for choosing aparticular point site and the most common reasons given were that it is easy
to exchange or redeem points, the point redemption rate is high, good
reputation through word of mouth and it comes at the top of Internet
searches. “Moppy" is seen as highly user-friendly and satisfying in all theserespects.

13

CERES INC. | 3696 (TSE Prime)

Figure 7: Domestic Market Size of Point Services(¥ bn)
3,500
2,794
2,633

3,000
2,100 2,482

2,500
2,000

1,500

2,959 20.0%

1,373

1,444

1,711

2,069
1,797
1,893 2,007

1,000
500
0

18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%

(FY)

Domestic Market (LHS)

YoY change (RHS)

Note: Domestic market size is the amount of points issued.
Source: Prepared by Strategy Advisors based on a press release by Yano ResearchInstitute Ltd.

4) Difficulty in Imitating CERES as Seen in "Moppy"“Moppy's” Know-How in
Point Design is Unrivaled

The company's main battlegrounds in mobile are generally highly competitive
areas such as point sites, affiliate advertising and D2C, but the company has
been able to differentiate itself from its competitors. “Moppy” launched its
own "AD.TRACK" and has increased the ratio of media advertising it
undertakes directly from advertisers. This has naturally displeased the ASP’s(affiliate service providers) that serve as the link between advertisers and“Moppy” and has made it difficult to do business with them.
This created price competitiveness and, as mentioned above, made it possible
to attach points in a way that was attractive to the user, the consumer. In
addition, “Moppy’s” unshakable position in the point site market was built on
its expertise in point design. The point design that satisfies the contradictoryneeds of users for attractive points, advertisers for large LTV users to makepurchases, and the company for reasonable profits, can be said to be a massof know-how. In fact, the company is generating stable and relatively highprofits, while many point sites are indulging in thin profit margins by settinghigh point incentives for users in order to attract registrations.

14

CERES INC. | 3696 (TSE Prime)
The strategy of utilizing its own ASP has been successful due to the "boldchallenge" considered to be in the company's DNA mentioned above, and thebuilding of point-of-sale design know-how is considered to be "meticulous
implementation". In crypto assets as well, as discussed below, Mercury hasboldly stepped into its own stock-type business of increasing assets undercustody through a service called staking and has continued to invest steadily
in building wallets one by one for each crypto asset. While it remains to be
seen how this will pay off, it is a noteworthy example of the company's
strategic thinking.

4. 5-Force Analysis from Management Strategy
TheoryMichael Porter's 5 Forces
Analysis of Point Sites

From a management strategy perspective, we would like to consider thebusiness environment of the company's mainstay point site based on MichaelPorter's 5 Forces analysis. The point site is a highly competitive business andit would be helpful to examine positioning theory. According to Porter, the fivecompetitive factors are: (1) threat of new entrants, (2) bargaining power ofsuppliers, (3) bargaining power of buyers, (4) threat of substitutes(alternative services) and (5) competition among existing companies.
1) Threat of New Entrants
A great many companies are involved in the Internet advertising industry andan extremely large number of them operate point sites. It is quite possiblethat companies that wish to continue to engage in Internet advertising on
multiple fronts will enter the point site market as part of this effort. In
addition, there are no particular need for economies of scale or financial
strength. However, building a brand, fostering credibility and spreading namerecognition will not be easy for new entrants. “Moppy’s” name recognition andcredibility, such as the ability to convert accumulated points into cash and theassurance that this will be done, are major advantages.
2) Negotiating Power of Suppliers
Point sites are considered to be suppliers by their users, who are general
consumers (supplying actions such as purchases or site visits by being
awarded points). Since consumers are free to choose from many point sites topurchase goods and services, the bargaining power of suppliers is strong. On
the other hand, it would be possible to attract consumers to their own sites by
providing them with point incentives, a sense of security, reliability and otherattractions.
3) Negotiating Power of the Buyer
The fact that "Moppy" has the largest number of active users leads to the factthat it is a media that advertisers and ASPs as agents are forced to deal with.

15

CERES INC. | 3696 (TSE Prime)
This makes it possible for the company to operate "AD.TRACK" on its own, abusiness strategy that competes with ASPs.
4) Threat of Substitutes
Potential threats include consumer goods manufacturers, cosmetics
manufacturers, and retailers that sell directly to consumers via their websites
or apps and award points that can be redeemed for that manufacturer's
products. However, the number of visits to a particular company's site islimited compared to point sites, which offer a wide variety of products andservices. In the end, it is likely that advertisements will often be placed on
point sites as well. From the consumer's perspective, there is an advantage inbeing able to obtain points from both the manufacturer or retailer and theloyalty point site.
5) Competition Among Existing Companies
Competition is Fierce, But"Moppy" will Remain
Dominant

There is constant competition among point sites to award points, and setting
the points too high will put pressure on profits. The key to success is to createa virtuous cycle in which the number of members increases by offering points
that are attractive to consumers, which in turn leads to orders fromadvertisers and ASPs, which in turn increases the company's profits. “Moppy"
is certainly one site that is doing this well.
From the above perspective, it can be said that although the point sitebusiness is a field with low barriers to entry and intense competition, themarket has achieved relatively stable growth and the background to thecompany's continued dominance of "Moppy" can be clearly seen.

5. D2C Business
Accumulated Know-How
Through "Moppy" &"AD.TRACK"D2C is a type of business that plans and develops its own products,
manufactures them on an OEM basis and then sells them to consumers. In
addition to manufacturing, logistics, warehousing and settlement areoutsourced, allowing the company to focus on marketing. Currently, thecompany focuses on health foods and cosmetics, but its high-function insole"Pitsole" is growing rapidly and is driving rapid growth in D2C revenues.
CERES has been profitable since FY12/2022 by applying its marketing knowhow accumulated through over 5 million users' purchase data on "Moppy","AD.TRACK" and article ad-based media to its product development andmarketing strategies.

Rapid Growth with the Big
Hit of "Pitsole""Pitsole" was launched in April 2022 and has proved to be a big hit. It focuseson improving concerns related to body shape by making walking more
comfortable, leading to improved gait movement and increased physicalactivity. It uses a patented technology that supports the cubital and calcaneal
bones. "Pitsole" is a stand-alone sales model. The company sold a cumulative
total of 500,000 pairs in October 2023, a year and a half after its launch andthis past February it surpassed 1 million pairs. Other products include "Oigurt"

16

CERES INC. | 3696 (TSE Prime)and "Off Re:kake," which are subscription-type products sold on a regularbasis. The model is one in which advertising costs are high at the beginning,
but after a certain number of sales, profits rise rapidly. These subscriptionbased products are also expected to perform well. As a result, the D2C
business posted sales of \5.05 billion and operating profit of \730 million in
FY12/2023. Sales have been increasing steadily every quarter and are
expected to grow further in FY12/2024.
Figure 8: D2C Revenue Trends (Annual Basis)(¥ mn)
6,000

5,053

5,000
4,000
2,912

3,000

2,246

2,000

1,083

1,000
0
-1,000

10 12
-18
2019

1,199

833

135 257

730

-196
2020

Sales

175

-177
2021

2022

2023

Advertising Investment

(FY)

OP

Source: Strategy Advisors, based on Company Data.

Figure 9: D2C Revenue Trends (Quarterly Basis)(¥ mn)
2,000

1,800
1,433

1,500

1,174
899

1,000
500
0

429
207
37
22Q1

540
358

654

621
351

645
282

399

1,101

511
349

93
59
58
-14
22Q2
22Q3
22Q4
23Q1
23Q2

152
23Q3

169
23Q4

-500
Sales

Advertising Investment

OP

(FY)

17

CERES INC. | 3696 (TSE Prime)
Source: Strategy Advisors, based on Company Data.

6. DX Business
Managed by Subsidiary
Yumemi

The DX business began in 2016 with a capital participation in Yumemi
Corporation, making it an equity method affiliate and in 2018, it became asubsidiary (currently 49.8% owned). By industry, 32.9% of DX businessclients are manufacturers, 23.3% are retail and food services, 17.3% are
information and communications, 5.1% are financial Services 13.6% andOthers account for 7.8%. In its financial results presentation, CERES cited COOP, Takashimaya (8233 TSE Prime), AU (a subsidiary of KDDI (9433 TSE
Prime)), Kanebo Cosmetics (a subsidiary of Kao (4543 TSE Prime)), andMynavi as specific client examples.
This business is characterized by the twin facts that it is basically a prime
project in which orders are received directly from customers without
intermediary vendors and that it is developed by in-house engineers. Because
there are no intermediary vendors or outsourcing vendors, the business ishighly cost-competitive and customer satisfaction is high. While these factors
are predicated on past performance, sales capabilities and the availability ofinternal resources, Yumemi has created a virtuous cycle. The percentage ofsales from outsourced contracting, where sales fluctuate, is only 16.5%(FY12/2023) and 83.5% is recurring business such as semi-contracting,operation and maintenance, which enables the company to secure continuous
earnings.

Sales Grew Steadily, But
Profits Stalled Due toIncreased Hiring ofEngineers

As seen in Figure 10, sales have been growing continuously every year, withan average annual sales growth rate of 19.9% from FY12/2016 to FY12/2023.
On the other hand, for the DX business, recruiting engineers is a key
management issue and since there is a growing shortage of engineers inJapan these days, the company is hiring more new graduates. 67 new
employees were hired in 2023, resulting in an increase in training and otherexpenses, which also put pressure on profits. Especially in Q2, when new
graduates joined the company, the overall utilization rate of engineers fell to
68.0% from 73.5% in Q1. In addition to the initially low utilization rate of new
graduates, another factor is the time taken by existing employees for training;
while the number of new graduates to be hired in 2024 will be limited to 30,
new graduates from 2023 will become more competitive, which should lead toan increase in the utilization rate of engineers. As a result, operating profit isexpected to bottom out in FY12/2023 and begin a gradual recovery.

18

CERES INC. | 3696 (TSE Prime)

Figure 10: DX Earnings Trends(¥ mn)

4,776
4,358

4,500
3,714
3,500
2,254

2,500
1,500

1,596

1,342

500
-500

3,119

3,026

2016

329

-45

84

2017

2018

438

195
2019

2020

Sales

528

2021

227
2022

106

2023

(FY)

OP

Source: Strategy Advisors, based on Company Data.

Figure 11: DX Business Sales and Number of Employees(¥ mn)
1,400

450

1,200

400
350

1,000

300

800

250

600

200
150

400

100

No. of Employee (RHS)

23Q4

23Q3

23Q2

23Q1

22Q4

22Q3

22Q2

22Q1

21Q4

21Q3

21Q2

21Q1

20Q4

20Q3

20Q2

20Q1

19Q4

0

19Q3

0

19Q2

50

19Q1

200

Sales (LHS)

Source: Strategy Advisors, based on Company Data.

19

CERES INC. | 3696 (TSE Prime)

7. Blockchain
1) Both Points and Crypto Assets are Tokens
Affinity of Points &Crypto Assets

CERES' other segment, Financial Service, consists of Blockchain, Online
Factoring and Investment Development (CVC). Of these, the blockchain
business is the one with the highest revenue volatility and the largest impact
on operating income and equity in earnings of affiliates.
CERES' Mid-term Business Plan 2026 states that its management policy is tocreate a "token economy (substitute currency economic sphere)" consisting of
the point economy sphere and blockchain. It aims to become a platform foractivating social economic activities. The reason why the company, whose
main business is pointing sites, has embarked on the blockchain business isbased on the idea that both points and crypto assets issued by "Moppy" arevirtual currencies and have a high affinity with each other.
President Takagi was quick to note the potential of crypto assets and had
been considering entering the business. He formed a capital and businessalliance with bitbank, a leading crypto asset exchange, in 2015: and bitbank
became an equity method affiliate in July 2017. The company effectively
entered the blockchain business. Initially, it was believed that the company
wanted to make bitbank a subsidiary, which did not happen, but it did gain amajor foothold in the market. Mercury was then established as a wholly
owned subsidiary and the crypto asset sales office “CoinTrade” was opened in
March 2021.
Figure 12: Revenue Trends in the Financial Service Business(¥ mn)
2,000
1,500

1,484

1,000
500

963

531
181

310

4

238

226

287

611
78

0
-500

12/18

-267

12/19

12/20

-367

-343

-49

12/21

-1,000

12/22

12/23

-489
-897

-940

-1,500OP

Equity in Earnings of Affiliates

Sales

(FY)

20

CERES INC. | 3696 (TSE Prime)
Source: Strategy Advisors, based on Company Data.

2) bitbank
One of the 3 Major
Exchanges for Crypto Assets
in Japan

While many crypto asset exchanges have been established in Japan, bitbank
is one of the three largest exchanges, along with bitFlyer and CoinCheck (asubsidiary of Monex Group (8698 TSE Prime). bitbank was founded in 2014 by
its president, Noriyuki Hirosue and launched its crypto asset exchange inMarch 2017; in addition to capital participation by CERES in 2015, it formed acapital and business alliance with MIXI (2121 TSE Prime) in 2021. Currently,
CERES owns 23.6% and MIXI 27.6% of the company, making it an equity
method affiliate of the two companies.

Emphasis on Safety &Security

As President Hirosue has commented in interviews and other articles that"safety and security" is of utmost importance, bitbank has focused on security
and has never had an accident such as hacking and is believed to haveestablished a reputation among users as a highly reliable exchange. bitbank
has only handled cash transactions but plans to launch margin trading during
2024.

Function as an Exchange &Distributor of Crypto Assets

Crypto asset exchanges can be in the form of exchanges or sales offices andexchanges such as bitbank generally combine the functionality of a sales
office. Mercury, a subsidiary of CERES, is a sales office only. Exchanges
generally receive a commission for closing a transaction between a buyer andseller, similar to a stock exchange. Currently, bitbank charges a commission of
0.1% of the transaction amount. Some other exchanges charge zerocommission for major issues such as Bitcoin. A sales office is a company thatsells its own crypto assets to prospective buyers. In this case, they charge acommission in the form of a spread. The price is higher than the market priceto prospective buyers and lower than the market price to prospective sellers.
According to data from the Japan Virtual and Crypto assets Exchange
Association, exchange commissions range from zero to 0.15%, while thespread for sales offices ranges from 0.1% to 21.63%.

Commissions andValuation/Trading
Gains/Losses are
Components of Revenue

The exchange's revenue consists of two components: (1) commission revenueand (2) valuation and trading gains/losses. Commission revenue is -0.02% formakers and 0.12% for takers in the case of bitbank. Makers are defined astransactions that are concluded by offering a price that is not on the tradingboard at the time. Makers have a negative commission because they make iteasier to execute a trade by providing liquidity. Takers, on the other hand, aretransactions that are executed with existing orders lined up on the tradingboard. Since takers reduce liquidity, they pay a 0.12% fee to the exchange.
From the exchange's perspective, it earns a 0.1% commission for eachtransaction executed by a taker and a maker. The commission is based on thecrypto assets traded. The level of commission varies from exchange toexchange. bitFlyer does not differentiate between makers and takers and thecommission depends on the volume of transactions in the last 30 days. Other

21

CERES INC. | 3696 (TSE Prime)
fees include withdrawal and transfer fees, which again vary from exchange toexchange.
Figure 13: Breakdown of bitbank's Sales Revenue(¥ mn）
12,00010,000
8,000
6,000
4,000
2,000

0
-2,000

12/18

12/19

12/20

12/21

12/22

-4,000Commision(FY)

Gains / Losses on Trading or Valuation of Crypto Assets
Total Sales Revenue
Source: Prepared by Strategy Advisors from bitbank's Website.

On exchanges, market participants buy and sell on the board, but theexchanges themselves also hold crypto assets in their own possession tofacilitate transactions. Exchanges must manage customer-owned crypto
assets in cold wallets, but it takes time to release crypto assets from cold
wallets when customer trades are executed, so exchanges respond to release
requests with self-owned crypto assets stored in hot wallets. Cold wallets aretools for physical storage on paper or devices disconnected from the Internet,
and while robust against hacking, they require time and effort to conduct dailytransactions. Hot wallets are stored in an environment connected to theInternet, such as a smartphone or PC, and while they are convenient fortransactions, they are at risk for hacking. Exchanges are required to store
customer-held crypto assets in cold wallets for safety.
Net Unrealized
Gains/Losses at the End of
the Period Vary Widely
Depending on the Market
Price

For self-owned crypto assets, valuation gains and losses calculated at themarket value at the end of the fiscal year are recorded as sales revenue,
which further increases the volatility of sales revenue. Since bitbank also has asales office function, it also incurs valuation and trading gains/losses on its
own crypto assets. bitbank's sales revenue declined significantly from \10.12
billion in FY12/2021 to 0.09 billion yen in FY12/2022. The breakdown of thisrevenue shows that while commissions received amounted to \7.51 billion in
FY12/2021 and gains on the sale and purchase of crypto assets amounted to\2.61 billion, they were \1.42 billion and \-1.34 billion, respectively, in

22

CERES INC. | 3696 (TSE Prime)
FY12/2022. The volatility of commissions received is also significant, but
valuation and trading gains/losses add to it.
Largest Number ofStocks Handled

Strategies to Increase
Trading Volume by
Increasing the Number ofStocks and Margin Trading
Strategies to Attract
Institutional Investors

bitbank is characterized by its large number of crypto assets (38), which,according to CERES, is the largest number of yen pair transactions in Japan(according to the company's research as of the end of 2023). Importantly,
they also appear to be substantially tradable. For example, bitFlyer is Japan's
leader in bitcoin trading, but the trading volume for other issues is expected
to be limited. Coincheck is also estimated to have a significant concentrationof transactions in major crypto assets. bitbank, on the other hand, is believed
to be providing an environment that facilitates customer transactions in a
wider range of crypto assets. As a result, according to CERES' financial
results, the company is Japan's leader in altcoins (crypto assets other thanbitcoin) in terms of transaction volume.
bitbank's strategy for the future is to further increase the number of crypto
assets it handles, start margin trading and thereby increase the volume oftransactions on its own exchange and the number of users. The company
aims to become the top company in Japan in terms of the number of crypto
assets it handles.
The other is to attract institutional investors. bitbank has established Japan
Digital Asset Trust Preparatory Company (JADAT) to provide asset
management services for digital assets and in May 2022, agreed tocollaborate with Sumitomo Mitsui Trust Holdings, including through capital
participation. The company aims to obtain a trust license. If this enables
custody operations, it is expected that trading of crypto assets by institutional
investors, which has been hampered by the lack of custody, will begin in
Japan. The company also aims to handle stable coins (crypto assets whose
prices are linked to legal tender such as yen or dollar) and NFT’s (nonsubstitutional tokens). If the company is able to generate fee income from
custody assets, it is expected to contribute to the stabilization of earnings
as a stock-type business.

23

CERES INC. | 3696 (TSE Prime)
Figure 14: Overview of the Three Major Exchanges for Crypto Assets(\ mn)

bitbank

Coin Check

bitFlyer

Establishment

May 2014

August 2012

January 2014

38

29

22

Makers -0.02%, takers 0.12%

Bitcoin: 0%; Ethereum: makers

Approximate constant amount x

0.05%, takers 0.1%

0.01% - 0.15% (bitcoin)\ 407\ 220-770

Number of Stocks
HandledTransaction fees
Cash on Delivery Fee\ 550 or 770 (over \30,000)

Performance Trends(\ mn)
FY

12/20

12/21

12/22

3/21

3/22

3/23

12/20

12/21

12/22

Operating Revenue

2,790

10,12094

20,82528,508

7,484

7,555

27,503

7,378

Operating Profit (Loss)

1,175

5,187

-2,56913,772

13,820

-835

1,614

17,798-2,505965

3,683-1,967

10,305

9,796

-485

427

12,504-2,194

Net Assets

1,514

12,701

10,754

13,15016,144

10,658

14,96827,22425,030Total Assets

109,395

248,088

136,644

485,777

539,381358,956

310,042

639,111

296,543

Net Profit (Loss)

Source: Prepared by Strategy Advisors based on Company Data.

3) Mercury's "CoinTrade"
Wholly Owned Subsidiary
Mercury Operates“CoinTrade” a Sales
Exchange

CERES has bitbank as an affiliate but failed to take control of its management,
so it established a wholly owned subsidiary, Mercury, and obtained a license
to operate a crypto asset exchange. The company operates "CoinTrade," acrypto asset sales office. Since "CoinTrade" was a latecomer to the market,
Mercury is focusing on staking to differentiate itself from otherexchanges/sellers. In the following, we will discuss the structure of crypto
assets and staking with reference to the description on the “CoinTrade”
website.

What is Staking?

There are two main mechanisms for recording transaction data, such astransactions and transfers of crypto assets, on the blockchain: PoW (Proof ofWork) and PoS (Proof of Stake). PoW is the mining method used by Bitcoin.
The person who successfully calculates the values of parameters suitable forconnecting data to the blockchain becomes the approver of transaction data
and receives crypto assets as a reward for mining. Because of the investment
required in computers and the large amount of electricity costs involved,
companies are the main players and the hurdle for ordinary individuals toparticipate is high.
A PoS implies approval of a transaction by holding it. The right to approvetransactions is given randomly to holders of crypto assets. The randomly
selected person records the transaction data in the blockchain. Althoughrandom, the probability of being selected increases the more a crypto asset isheld. Exchanges and sales offices will take custody of crypto assets for acertain period of time from holders of crypto assets to make it easier for them24

CERES INC. | 3696 (TSE Prime)
to be selected as approvers and share the rewards they receive with those
who deposited the assets. This is staking. For the holders of crypto assets,
although they will not be able to withdraw them for a certain period of time,they will receive a stable income that is comparable to income gains such as
bond yields or stock dividends. However, there is a risk that the asset cannot
be sold even if its price fluctuates significantly while it is on deposit.
Presence as a Staking Firm

“CoinTrade” handles 14 crypto assets, of which 10 can be staked. By offeringstaking services, Mercury is proposing crypto assets as a means of asset
management and is believed to be increasing its presence as a staking firm.
Going forward, Mercury plans to increase its stock revenue by adding more
stocks to its staking service, expanding the number of users and increasing
the balance of assets under custody.
Figure 15: Crypto Assets Handled by "CoinTrade" and Proprietary
Balances

Source: Company Data

Deficits Continue Due toContinued Upfront
Investments

On the other hand, since the consensus algorithm for staking differs from
crypto to crypto, a system must be built for each asset in order to provide
staking services. For this reason, Mercury continues to invest a certain
amount of money, which is a burden on profits. The company has posted an
operating loss in every quarter since its inception. According to the segment
information, tangible and intangible fixed assets of the Financial Service
segment increased by \300 million in FY12/2022 and \200 million in
FY12/2023 compared to the previous year, of which investment in software at
Mercury appears to have been significant.

25

CERES INC. | 3696 (TSE Prime)
Mercury's revenues fluctuate based on the following factors. (1) spread
income from trading crypto assets, (2) income from staking and (3) valuationand trading gains/losses on proprietary assets.
(1) Spread is equivalent to a trading commission, and as in forex trading, it
earns a profit by buying from sellers at a lower price than the market value
and selling to buyers at a higher price. (2) In staking, the company receives
physical assets from holders of crypto assets and is compensated through
PoS. (3) Mercury needs to own crypto assets for business operations. This is
to ensure the liquidity of transactions, to secure a minimum staking amount,and to receive compensation for staking in crypto assets. For proprietary
holdings, valuation gains and losses and sales gains and losses will berecorded as sales revenue, so sales revenue will also fluctuate significantly
depending on the market price of crypto assets. However, the balance of
crypto assets held by Mercury at the end of 2023 is approximately \150
million (Figure 15), so this should not be a major risk.
Mercury plans to continue expanding its crypto assets business and theinvestment burden for this purpose is expected to continue for the foreseeable
future. Therefore, in order for Mercury to become profitable in terms ofoperating income in the short term, crypto asset prices will need to rise, andvaluation and sales gains and losses will need to make a certain level of profit
contribution. In the medium term, Mercury is expected to become a stocktype business as the number of users and the amount of assets under custodyincrease and it is expected to become a relatively stable revenue source in thecrypto asset business, where prices fluctuate widely.
Figure 16: Mercury's Quarterly Operating Revenues and Operating
Profit(¥ mn)
150

50

84

82

100
5

0

10

6

7

-79

17

-20

2

5

0
-50
-100
-150
-200

21Q1 21Q2 21Q3 21Q4 22Q1 22Q2 22Q3 22Q4 23Q1 23Q2 23Q3 23Q4

-88-142 -136

-214

-250
-300

-138

-151

-168 -162-266

Operating Revenue-249-223 -215

OP

Source: Strategy Advisors, based on Company Data.

26

CERES INC. | 3696 (TSE Prime)4) Trends in the Crypto Asset Market
Many Crypto Assets but
Large Size of Mainstay
Stocks Such as Bitcoin,
Ethereum et.

In the global market for crypto assets, market capitalization reached $2.6
trillion as of March 28, 2024, of which Bitcoin is by far the largest at $1.4
trillion, with Ethereum in second place at approximately $420 billion. The
presence of these two crypto assets is significant. According to the Japan
Virtual and Crypto assets Exchange Association, Bitcoin will account for 70%
of physical transactions in Japan in FY2022, followed by Ethereum at 16% and
Ripple at 7%, however Bitcoin still dominates. Furthermore, when it comes tomargin trading, Bitcoin accounts for 86%, an even higher percentage.

Bitcoin Price Volatility is
High & Has Spiked Recently

Price movements also vary from crypto asset to crypto asset, with Bitcoin
experiencing the most volatility, followed by Ethereum. Bitcoin's price began
to rise in late 2023 and has been spurred since the beginning of 2024, except
for Ethereum, which has moved somewhat closer to it, but the dollardenominated prices have not risen much. After all, Bitcoin, with its
overwhelmingly large liquidity, is also an easy target for speculative moves
and tends to be more volatile.
Figure 17: Percentage of Japanese Transaction Value by Crypto Asset(Cash)(¥ bn)
30,00010.5％
25,00012.1％
20,00017.4％

15,00010,000

57.9％

16.1％
5,000

7.0%
6.9％

70.1％

0
FY2021
Bitcoin

FY2022Ethereum

RippleOthers

Source: Prepared by Strategy Advisors based on data from Japan Virtual and Crypto
assets Exchange Association

The price of Bitcoin reached an all-time high of over $73,000 in mid-March. It
then adjusted for a time, but as of March 28, it remained at a high level ofaround $70,000. In January of this year, the U.S. SEC approved 11 Bitcoin
exchange traded funds (ETFs), which is believed to have spurred a rise incrypto asset prices. The price of crypto assets fluctuates with the inflow and27

CERES INC. | 3696 (TSE Prime)
outflow of risk money and in this respect it is linked to the stock market,
especially the NASDAQ Composite Index, which contains many growth stocks.
The NASDAQ Composite Index is heavily influenced by the performance of theunderlying companies, i.e., U.S. and global economic trends, as well asinterest rate trends and financial market liquidity. Crypto assets are
considered to have a particularly strong relationship with market liquidity.
Bitcoin is Nearing its
Reward Halving

Bitcoin has an individual factor that affects its price independent of the stock
market and other external circumstances. This is the halving of mining
rewards. The total number of Bitcoins issued is capped at 21 million and thereward is halved after 210,000 blocks are issued in order to limit the amountof mining activity. The halving occurs approximately once every four years,
and the next half-life is said to be in April or May 2024, which could be thereason for the current price increase.
Since Bitcoin mining rewards are received in Bitcoin, if rewards are halved,
the amount of Bitcoin issued will also be halved. This will suppress supply andsupply and demand will tighten. Market sentiment also suggests that demand
may increase due to increased scarcity. However, the effect on prices has notbeen clear in past halving periods.
Crypto assets that use PoS, such as Ethereum, are not subject to halving like
Bitcoin, but are susceptible to the price fluctuations of Bitcoin, which has
greater liquidity. Ethereum's price fluctuations are linked to Bitcoin. Other
crypto assets can also be said to be affected by Bitcoin to varying degrees,
however all crypto assets are affected by Bitcoin. It remains to be seen what
will happen to the currently rising Bitcoin price and whether other crypto
assets will follow suit.
Figure 18. Market Trends of Major Crypto Assets (Index)(Beginning of 2018 = 100)
800
700
600

500
400
300
200
100
0
2018

2019
Bitcoin

2020

2021

2022

2023

Ethereum

RippleLitecoin

2024

Source: Strategy Advisors from Investing.com

28

CERES INC. | 3696 (TSE Prime)
Figure 19: Bitcoin Market Conditions and the NASDAQ Composite Index(US$)(Points)

80,00018,00070,00016,00060,00014,00050,00012,00040,00010,00030,0008,000

20,00010,000

6,000

0

4,000

Bitcoin (LHS)

NASDAQ Composite (RHS)

Source: Prepared by Strategy Advisors from Investing.com and other Sources.

Rising Crypto Asset Prices
Lead to Increased Trading
Volumes

The transaction value of crypto assets naturally tends to increase as market
fluctuations increase. In particular, buy orders increase sharply at the start ofa rising market. Many participants are then expected to sell at a profit when
prices have risen considerably. In the past, we have seen significant increases
in trading volume during price spikes in 2019 and 2021. However, trading
volume did not increase much during the upswing in 2023 and has remained
at a low level. Finally, in 2024, trading volume appears to have increasedslightly.
As mentioned above, bitbank, an equity-method affiliate and Mercury, awholly owned subsidiary, have their sales and profits affected by market
trends, along with trading commissions and spreads. Both companies' profits
are affected by market trends, as rising market conditions increase trading
volume and have a positive effect on year-end valuation and trading gains
and losses. Therefore, as shown in Figure 21, the profits of both companies
are linked to market trends. Mercury intends to expand its staking businessand is currently investing heavily in this business, which is putting pressure on
earnings.

29

CERES INC. | 3696 (TSE Prime)
Figure 20: Transaction Value by Crypto Asset(¥ bn)

25,00020,00015,00010,000
5,000
0
2019

2020

2021

spot transaction

2022

2023

2024

deposit money transaction

Source: Prepared by Strategy Advisors based on data from Japan Virtual and Crypto
assets Exchange Association

Figure 21: Bitcoin Price and Financial Service Business Revenue(US $)(¥ mn)

70,0001,500

60,0001,000

50,00040,000500

30,0000

20,000-500

10,0000-1,000

Bitcoin Price (LHS)

Equity in Earnings of Affiliates (RHS)

OP (RHS)

Source: Strategy Advisors, based on Company Data and Investing.com

30

CERES INC. | 3696 (TSE Prime)
8. Other Financial Services
1) Online Factoring
Fundraising Support
Services for Freelancers

The factoring business is conducted by subsidiary labol. 2018 saw theacquisition from YOUVISION of the "Shikin-Chotatsu Pro (Funding
Professional) " business, a financial information website, which is a portal sitethat provides funding information for businesses. 2020 saw the launch of afreelance funding support service called " nugget" (now "labol") service waslaunched. Currently, labol operates "Shikin-Chotatsu Pro (Funding
Professional) " and "labol" and "labol card payment", a card payment service
for freelancers.

Purchase Trade Receivablesfrom Users

The "labol" service is a business that purchases trade receivables fromfreelance users to support their cash flow. There are two types of factoring:
three-party factoring, in which the factoring company notifies the user'sclients that it will purchase the trade receivables and receives funds from theclients; and two-party factoring, in which the user's clients are not notified.
"labol" is the latter. In the case of bilateral factoring, the factoring company
bears the risk of default, so the key is how accurately the credit screening of
the user and the client can be conducted. The key to success in this regard isto provide a quick and easy way for users to make decisions online, which will
improve user-friendliness and expand business. With "labol," the company
claims to be able to make a deposit in as little as 60 minutes.

Postpone User Payments
Through Cards

In 2022, the company entered into a business alliance with Orient Corporation(8585 TSE Prime) to launch the "labol card payment" service. This connects
users who wish to make card payments with business partners who do notoffer card payment. When a user receives an invoice from a business partner
and applies to use the service, labol will pay the funds to the business partner
in a short period of time. The user pays labol at a later date by credit card,
plus a fee. This allows users to delay payment for up to 60 days, benefiting
their cash flow.

31

CERES INC. | 3696 (TSE Prime)
Figure 22: "labol" financial assistance for freelancers

Source: Company Data

labol is currently making upfront investments and while sales are increasing,
they have not yet contributed to profits. While the business is able to earncommissions through factoring and card payments, the cash management
side of the business is burdened with debt purchase funds, which will increase
further as the scale of the business grows. For this reason, the company isplanning an IPO of labol.

32

CERES INC. | 3696 (TSE Prime)
Figure 23: Revenue Trends for Financial Service Businesses Excluding
Mercury(¥ mn）
2,000
1,500

1,000
500
0

12/18

12/19

12/20

12/21

OP

Sales

12/22

-500

12/23
(FY)

Source: Strategy Advisors, based on Company Data.

2) Investment Development Business (CVC)
Targeting Business
Synergies & Capital Gains

CVC is an investment operation that invests primarily in venture companies
that have an affinity with the company's business. The business has threemain objectives.
First, investing in companies that can add some value to the company's
existing business has the potential to generate business synergies; second, it
can be a means for the company to explore new business opportunities; andthird, it can generate capital gains as a pure investment. To date, thecompany has invested a total of ¥3.8 billion in 52 companies; and as of theend of FY12/2023, it had 40 companies with ¥2.97 billion in investment
securities on its balance sheet. Four of these companies, amounting to ¥510
million, are listed companies.
At the end of 2023, the company established a wholly owned subsidiary,
Apollo Capital, which will set up the Apollo Capital 1 fund, in which CERES will
invest. The company has transferred 17 companies in the mobile sector with abook value of approximately \1 billion. Until now, investments have been
made using funds on CERES' balance sheet, but the company has switched toa policy of raising funds and conducting operations as a fund. Since thecompany remains a consolidated subsidiary, this will affect earnings.
However, as a whole, CVCs have a small amount of investment perinvestment and so profit fluctuations due to stock transactions will be limited.

33

CERES INC. | 3696 (TSE Prime)
9. Earnings Trends
1) Actual Results for FY12/2023
Landed on the Line of the
Revised Forecast at theTime of the Q3 Earnings
Announcement

For FY12/2023 (announced on February 9, 2024), net sales increased 17.2%
YoY to \24.07 billion and operating income decreased 10.3% YoY to \1.11
billion. Although sales exceeded the company's initial forecast of \23.0 billion,
operating income fell short of initial forecast of \1.6 billion. The both sales andoperating income, however, slightly exceeded the revised forecast of \24.0
billion in sales and \1.0 billion in operating income that was announced at thetime of the Q3 results announcement.

“AD.TRACK" & Advertorial
media Slumped While D2C
Performed Well

By segment, sales in the Mobile Service business increased 15.8% YoY, while
operating profit declined 3.2% YoY. Looking at sub-segments, revenue frompoint services stagnated. Net sales declined 1.6% YoY, while operating
income fell 17.2% YoY. Although revenue from "Moppy" was firm,“AD.TRACK”, an affiliate advertising service, and article advertising-type
media were affected by the industry-wide weakness in Internet advertisingand the ongoing impact of restrictions on advertising expressions under the
Pharmaceutical and Medical Device Act covering pharmaceuticals andcosmetics and the Act Against Unjustifiable Premiums and Misleading
Representations Act. In addition, sales of "Moppy" are recorded when users
act, but the granting of points, which is a cost of sales, is recorded after theapproval of advertisers, which causes a time lag. In FY12/2023, the negative
impact of this was seen in Q1, but the company was unable to recover thatamount. On the other hand, in the D2C sub-segment, sales grew 2.2 times
YoY to \5.1 billion and operating profit 4.2 times YoY to \730 million, both ofwhich were significantly higher than initial forecasts. The strong growth of"Pitsol" is considered to be the main reason for this increase.

bitbank Turns Slightly
Profitable

Net sales of the Financial Service Business were \610 million in FY12/2023,
compared with \280 million in FY12/2022, and operating income was \-890
million, compared with \-940 million in FY12/2022. Mercury's operating
income slightly improved from \-0.89 billion to \-0.72 billion. Equity inearnings of affiliates turned to a profit of \0.07 billion from \-0.48 billion due
to the recovery of bitbank's earnings. In addition, an impairment loss of \360
million on software at Mercury was recorded as an extraordinary loss.

2) Forecast for FY12/2024
Company Expects Overall
Sales and Profits toIncrease in FY12/2024

The company's forecasts for FY12/2024 are net sales of \27 billion, up 12.2%
YoY and operating income of \1.6 billion, up 43.1% YoY. In Mobile Service,
the company expects a gradual recovery in Point business. D2C is expected tocontinue to perform well, especially for "Pitsole." Given that D2C had been
growing strongly every quarter until Q4 FY12/2023, the forecast is somewhat
conservative. However, the company is expected to be cautious in its
forecasts due to uncertainty over the trend of hit products, while DX isexpected to see a moderate recovery in profits in FY12/2024 as the burden of34

CERES INC. | 3696 (TSE Prime)
hiring engineers, which was large in FY12/2023, eases amid forecasts forsteady sales growth.
Operating losses in Financial Service is expected to narrow slightly. Mercury
continues to invest and has a heavy fixed cost burden but given the recent
surge in Bitcoin and Ethereum prices, there is room for upside, although it will
depend on future market conditions. The company is not expected to factor
the impact of rising crypto asset prices into its earnings forecast.
bitbank's Equity in Earnings(Loss) of Zero Factored In

Equity in earnings of affiliated companies is tentatively set at zero due to thedifficulty of forecasting bitbank's earnings, which are highly sensitive tomarket fluctuations. bitbank's equity in earnings for the year ended December
31, 2021 was \960 million. The number of issues handled by bitbank has
increased significantly compared to 2021 and if crypto assets as a whole see
rising market prices and trading volume, the earnings impact is expected tobe significant.

35

CERES INC. | 3696 (TSE Prime)
Figure 24: CERES Segment Revenue Trends(￥ mn)

FY12/21

FY12/22

FY12/23

FY12/24CoE

Sales
YoY

16,467NA

20,44724.2%

23,47614.8%

25,720
9.6%

Point
YoY

12,364NA

14,041
13.6%

13,817-1.6%.

14,000
1.3%

D2C
YoY

1,083
NA

2,246
107.4%

5,053
125.0%

6,400
26.7%

DX
YoY

3,714
19.1%

4,358
17.3%

4,776
9.6%

5,500
15.2%

Transaction Value Within
Segments

-694

-198

-170

-180

Operating Profit
OPM

3,020
13.8

3,291
16.3%

3,187
13.6%

3,760
14.6%

Mobile Service

Point

NA

2,995

2,480

2,830

OPM

NA

21.3%

17.9%

20.2%

D2C

NA

175

730

785

OPM

NA

7.8

14.4%

12.3%

DX

528

227

106

275

14.2%

5.2%

2.2%

5.0%

NA

-106

-129

-130

Sales
YoY

1,484
NM

287
-80.7

611
112.9%

1,300
112.8

Operating Profit
OPM
Equity in Earnings (losses)of Affiliates

226
15.2%
963

-940
-327.5%.
-489-897-146.8%78-780-60.0%
0

-105
-941

-198
-1,105-17-1,172-20-1,38017,846
2,305
3,499
2,775
251.8

20,536
1,246
679
46
4.1

24,070
1,118
1,217
451
39.6

27,000
1,600
1,600
800
70.1

OPM
Transaction Value Within
Segments

Financial Service

Inter-Segment Transaction
Value/Adjustment
Sales
Operating Profit
Whole Company
Sales
Operating Profit
Recurring Profit
Net Profit
EPS (\)

Source: Strategy Advisors, based on Company Data.

36

CERES INC. | 3696 (TSE Prime)3) Financial Strength
Financial Strength is SoundThe company's balance sheet can be said to be sound: shareholders' equity atthe end of FY12/2023 was \9.88 billion, the equity ratio was 38.1%, andinterest-bearing debt was \7.36 billion. The company has \8.11 billion in cash
and deposits, leaving it in a net cash position. \2.97 billion in operating
investment securities held by CVC should not pose a problem on the balance
sheet, even if a certain amount of impairment loss is incurred. Goodwill is also
limited at \1.53 billion. The investment in bitbank, an equity-method affiliate,is \3.12 billion, but this should not pose a significant problem for CERES'
balance sheet for the time being. In terms of cash flow, investments inproperty, plant, and equipment and intangible assets have been limited, andthe company has the capacity for future mergers and acquisitions. Although
the company is involved in the crypto asset business, which carries a high riskof earnings volatility, it can be said that the company is developing its
business within its risk tolerance.

4) Shareholder Returns
Stable Dividend Likely
for the Time Being

Although CERES has relatively high earnings volatility, its dividend per sharewill be 20 yen for three consecutive fiscal years, including the forecast for
FY12/2024, excluding 40 yen in FY12/2021, when the company posted a highlevel of profit. As a result, the dividend payout ratio has also fluctuatedwidely: 15.9% in FY12/2021, 484.9% in FY12/2022, 50.5% in FY12/2023,
and 28.5% in the FY12/2024 forecast. Although the company has notindicated a clear dividend payout ratio policy, it is expected to make decisions
while keeping in mind earnings trends, future growth investments, DoE andother indicators. For the time being, the company will likely continue to pay astable dividend.

37

CERES INC. | 3696 (TSE Prime)
Figure 25: CERES Segment Revenue Trends (Quarterly Basis)(\ mn)

FY12/22
Q1

Q2

Q3

Q4

FY12/23
Q1

Q2

Q3

Q4

Sales
Point
D2C
DX
Intra-Segment
Transactions

4,674
3,324
429
960
-39

4,961
3,422
541
1,082
-84

5,358
3,576
622
1,167
-7

5,454
3,719
654
1,149
-68

5,314
3,525
645
1,210
-66

5,613
3,359
1,174
1,105
-25

5,975
3,325
1,433
1,250
-33

6,574
3,608
1,801
1,211
-46

Operating Profit
Point

1,007
885

588
597

878
798

818
715

686
506

762
609

813
612

926
753

37

-15

59

94

59

349

153

169

Mobile Service

D2C
DX

93

39

53

42

152

-162

80

36

Intra-Segment
Transactions

-10

-32

-32

-32

-32

-33

-32

-32

66
-176
2

-2
-284
-312

106
-231
-11

117
-249
-168

218
-137
109

89
-257
-36

99
-263
-99

205
-240
104

Adjustment
Sales
Operating Profit

-31
-237

-70
-301

-50
-277

-47
-290

-7
-296

-7
-292

-1
-280

-2
-304

Whole Company
Sales
Operating Profit

4,709
594

4,889
3

5,414
370

5,524
279

5,525
253

5,695
213

6,073
270

6,777
382

Financial Service
Sales
Operating Profit
Equity in Earnings(Losses) of Affiliates

Source: Strategy Advisors, based on Company Data.

10. Medium to Long-Term Outlook
Target Recurring Profit of\10 billion under Mid-Term
Management Plan 2026

In the Mid-term Business Plan 2026 announced in 2021, the company's
management policy states, "We aim to build a token economy platform
consisting of a points economy and a blockchain to stimulate social andeconomic activities”. The company's Mobile Service include "Moppy" as themain service. In Mobile Service, the company will establish a point economy
through ASP and D2C, with "Moppy" as its mainstay. In Financial Service, in
addition to exchanges and sales outlets for crypto assets, the company
assumes that the arrival of the Web 3.0 era will lead to the penetration of its
technology into NFT (non-substitutional tokens) and DAO (autonomous
decentralized organizations) and aims to become the No. 1 company in theblockchain domain.

Point Sales Lagged, D2C
Ahead of Schedule

The numerical targets for FY12/2026 are sales of \40 billion compared to\17.8 billion in FY12/2021 (new revenue recognition basis) and recurring
profit of \10 billion compared to \3.49 billion in FY12/2021.

38

CERES INC. | 3696 (TSE Prime)
By segment, the company is targeting sales of \35.0 billion and recurring
profit of \5.0 billion for Mobile Service in FY12/2026. The company forecasts
call for sales of \25.7 billion in FY12/2024 for this segment, which is behindthe company's progress rate. Although the number of "Moppy" members is
steadily increasing and sales are strong, the affiliate advertising "AD.TRACK"
and advertorial media have been affected by adjustments in the Internet
advertising market. On the other hand, sales of D2C, which was initiallyconsidered an ambitious target, are expanding at a faster pace than planned.
Sales have expanded substantially thanks to the blockbuster success of"Pitsole”. DX is also expected to remain in line with the plan.
Figure 26: CERES Segment Revenue Trends(¥ bn)
45.0
40.0

40.0

5.0

35.0
30.0
25.0
20.0
15.0
10.0
5.0

20.5

17.8
1.5

1.3

0.6

5.5

0.3

4.8

2.2

5.0

6.4

13.8

14.0

12/23

12/24CoE

4.4

3.7
1.1

7.0

27.0

24.0

8.0

20.0

12.3

14.0

12/21

12/22

0.0

Point

D2C

DX

Financial

12/26
Medium-Term Plan

Source: Strategy Advisors, based on Company Data.

Mobile Service are Within
Attainable Range in Termsof Profit

When considering profit by segment, it is assumed that corporate expenses
will cost \1.5 to 2.0 billion per year, so in order to achieve the recurring profit
target of the medium-term management plan, recurring profit of \6.0 billion
or more would be required for Mobile Service. Although the recurring profit
target for each sub-segment is not indicated, if sales of \20 billion can beachieved in Points, an operating profit margin of around 20% can be
expected, which would result in an operating profit of around \4 billion. DX
has also been achieving an operating profit margin of more than 10%, so an
operating profit of about \1 billion is also expected. If so, operating profit
before intersegment adjustments would be \6 billion.

Achieving in Financial
Services a Hurdle

The Financial Service segment's highest recurring profit to date was \1.40
billion in FY12/2021, and the hurdle to reach \5 billion is expected to be high.
It is expected that conditions in the external environment, such as rising
crypto asset market conditions and increased investment returns in CVC, will

39

CERES INC. | 3696 (TSE Prime)need to be met. bitbank, an equity-method affiliate, currently handles 38
stocks, a significant increase from 2021, and is expected to increase further;so, if conditions are as favorable as they were in FY12/2021, higher profits
can be expected. Mercury will likely continue to face a heavy fixed costburden, but the company aims to improve earnings by increasing the numberof staking currencies, the number of accounts and assets under custody. CVC
is aiming for an aggregate exit amount of at least \5 billion from FY2024 toFY2026.
The company sees its business portfolio as being divided into three different
growth models: (A) Point and DX, which are stable and continuous growthbusinesses; (B) Blockchain, which is an innovative growth business; and (C)D2C and factoring, which are new and accumulative growth businesses. The
company is aiming for stable growth in points and DX and discontinuous rapid
growth in blockchain and D2C. The company's appetite for growth is verystrong and it continues to invest aggressively. There is also a risk of earnings
volatility, as the company deals in crypto assets, which are subject to highprice volatility. On the other hand, the company is investing mainly in areas
peripheral to existing businesses and areas with synergies, and risk
management is considered, such as doing so while maintaining a soundfinancial position.
Figure 27: Growth Image for Medium-Term Management Plan 2026

Source: Company Data

40

CERES INC. | 3696 (TSE Prime)
11. Comparison with Other Companies in the
Industry
Mobile Service Peers

CERES' business portfolio is unique in that it invests a considerable amount ofmanagement resources in the Point business, mainly "Moppy"; and the crypto
asset business, mainly bitbank and Mercury. In the mobile business, GMO
Media (6180 TSE Growth), which operates "Point Town," and CARTAHOLDINGS (3688 TSE Prime), which operates "EC Navi," are competitors
among the listed competitor companies.
GMO Media is a subsidiary 66.0% owned by GMO Internet Group. In addition
to "Point Town," GMO Media operates media in the education, beauty, andgaming fields. In FY12/2023, 87% of sales came from the media division, of
which Point Town is estimated to be the mainstay. The remainder is in the
Solutions division. The Media division's operating profit margin was 7.0%.
CERES' point business had a 13.7% operating profit margin in FY12/2023,
which is estimated to be higher than GMO Media's media division's profit
margin, even taking into account inter-segment adjustments.
CARTA HOLDINGS is a subsidiary of the Dentsu Group (53.4% stake), and
DIGITALICO, a wholly owned subsidiary of CARTA HOLDINGS, operates EC
Navi. Internet-related services, to which EC Navi and other services belong,account for 30% of total sales, with an operating profit margin of 5.6%.
Although it is difficult to make a general comparison since many businesses
other than "EC Navi" are included, we estimate that the profit margin of
CERES's point business is high, even considering CERES's inter-segment
adjustments.
“A8.net”, operated by FAN Communications (2461 TSE Prime), is the leading
ASP. The CPA Solution business, which includes this business, had sales of\6.01 billion and operating profit of \3.48 billion in FY12/2023. Even taking
into account the -0.82 billion yen in inter-segment adjustments, FAN
Communications' profitability is high. On the other hand, CERES' ASP is
estimated to be marginally profitable at present.

Monex Group in Blockchain

In blockchain, Monex Group (8698 TSE Prime), which owns CoinCheck, is a
publicly traded company. Coincheck's crypto asset sales volume is significantly
larger than bitbank's, and the company tends to make large profits during
price spikes and the crypto asset business earned \13.8 billion of the \20.8
billion in pre-tax income of the Monex Group during the 2021 spike. In the
cumulative Q3 of FY3/2024, the division's pre-tax profit was at breakeven.

41CERES INC. | 3696 (TSE Prime)
Figure 28: Profitability Comparison with Peers
Company Name

Code

FY

Sales

OP

RP/Pretax
Profit

OPM

ROE

ROIC

CapitalAdequacy Ratio(\ mn)(\ mn)(\ mn)

(%)

(%)

(%)

(%)

CERES

3696

12/23

24,070

1,118

1,217

4.6

5.0

8.1

35.4

GMO Media

6180

12/23

6,266

533

540

8.5

16.2

37.8

43.5

CARTA HOLDINGS

3688

12/23

24,111

1,301

1,798

5.4

-9.3

58.9

47.2

FAN

2461

12/23

7,396

2,068

2,103

28.0

6.9

NM

76.2

8698

3/23

79,304

NA

4,669

NA

3.3

64.6

6.6

Communications
Monex Group

Note: FAN Communications is not shown because its EV is negative in the calculation.
Source: Prepared by Strategy Advisors based on Company Data.

12. Stock Trends and Valuations
Stock Prices Have Risen
Sharply Since December ‘23

CERES' stock price has been rising since the beginning of December 2023 andhas risen about 90% in the current period from \915 at the end of November.
Although the overall stock market has also risen significantly during thisperiod, with the Nikkei 225 reaching a new high; the rise in CERES' shareprice is likely due mainly to the rise in the price of crypto assets.

However, Lagging Against
Monex Group

Comparing the company's stock price trends with its peers such as GMO
Media and CARTA HOLDINGS (point sites), FAN Communications (APS), andMonex Group (crypto assets), the company is by far the most closely linked to
Monex Group. Comparing the company's stock price to the Bitcoin price showsa very high correlation. However, even though CERES' stock price has been
performing well recently, the price of Bitcoin has hit a record high and Monex
Group's stock price is still rising to near its peak, while CERES' stock price has
not recovered to that extent. Two factors may be responsible for this.
First, while CoinCheck, which is part of the Monex Group, is an exchange thatmainly handles Bitcoin, bitbank, an equity-method affiliate of CERES, is uniquein that it handles many stocks other than Bitcoin. As mentioned above, prices
of non-Bitcoin issues have not risen as much as those of Bitcoin and may belagging behind because of this. In addition, its subsidiary Mercury is mainly
engaged in staking, so it is unlikely to be directly affected by the Bitcoin price.
Second, demand for CERES' current revenue source, Mobile Service, especiallyin the area of Internet advertising such as ASP, has been weak, which may
have affected its stock price, just as the stock prices of other companies in its
industry have been weak.

42

CERES INC. | 3696 (TSE Prime)
Figure 29: Share Price Comparison with Peers(Beginning of 2016=100)
400
350
300
250
200
150
100
50
0
2016

2017

2018

2019

2020

2021

2022

Ceres

GMO Media

CARTA HOLDINGS

Monex Group

2023

2024

FAN Communications
Source: Strategy Advisors

Figure 30. bitcoin price and CERES stock price(US$)
80,000(¥)
5,000

70,0004,000

60,00050,0003,000

40,0002,000

30,00020,0001,000

10,000
0

0
2015

2016

2017

2018

2019

Price of Bitcoin (LHS)

2020

2021

2022

2023

2024

Share Price of Ceres (RHS)

Source: Investing.com, Strategy Advisors

43

CERES INC. | 3696 (TSE Prime)
Figure 31: Trends in PER(times)
100
80
60
40
20
0

Note: Excludes 2019 and 2022, when profit levels were very low.
Source: Strategy Advisors

Figure 32: Trends in P/B ratios(times)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0

Source: Strategy Advisors

Valuation

CERES' earnings tend to be volatile due to price fluctuations of crypto assets,
and in FY12/2019 and FY12/2022, net income fell to almost break-even levels
whilst PER was very high. Excluding those periods, PER has been in the rangeof 15-40x over the past five years. The current PER based on the FY12/2024
forecast is 23.4x, which means there is still upside in the above range; PBR isalso 2.0x, which is high for the past two years, but not high on the historical
range. In addition, the company's "Progress of the Plan for Compliance with
Listing Maintenance Criteria," released on February 9, 2024, shows that theminimum and median estimated P/E ratios on the business day following theannouncement of the earnings forecast for the past five years were 15.2x and
22.6x, respectively. This is similar to our estimated ranges above.

44

CERES INC. | 3696 (TSE Prime)
Although it is difficult to compare CERES with its peers, its PER is higher thanthose of Internet advertising-related companies such as GMO Media and FAN
Communications. Since last December, probably due to the rise in crypto
asset prices, CERES' share price has risen significantly.
Short-term stock prices will likely be influenced by trends in crypto asset
prices. The extent to which the prices of Bitcoin and Ethereum rise and theextent to which the prices of other stocks follow will be major variables. In themedium term, the focus will be on fundamentals such as CERES' steady
growth in the point business, the expansion of D2C and factoring and therecovery of prior investments in crypto assets. While crypto asset prices willcontinue to have an impact, the share price is expected to shift from a backand-forth range to an upward trajectory once the growth strategy becomesmanifest in the form of earnings.

Figure 33: Comparison of Valuations with Peers
Company Name

Code

LatestResults

Stock Prices(March 28)

Market Cap.

PER
CoE

PBR
ActualDividend Yield
CoE

ROE
Actual(\)(\ mn)(Times)(Times)

(%)

(%)

CERES

3696

23/12

1,743

19,893

24.9

2.2

1.1

5.0

GMO Media

6180

23/12

3,095

5,391

12.8

2.3

3.9

16.2

CARTA HOLDINGS

3688

23/12

1,565

39,388

49.2

1.7

3.5

-9.3

FAN Communications

2461

23/12

399

26,433

17.5

1.5

4.8

6.9

Monex Group

8698

23/3

894

230,262

NA

2.3

NA

3.3

Note: Monex Group does not disclose company forecasts
Source: Prepared by Strategy Advisors based on Company Data.

13. Risk Factors
Crypto Assets and CVC are
an Earnings Volatility Risk

Some of the company's businesses, such as crypto assets and CVC, are riskyby the nature of their business. In particular, the prices of crypto assets are
expected to continue to fluctuate, as they have in the past. Therefore, interms of the income statement, certain revenue fluctuations are expected tocontinue. However, as mentioned earlier, the company has a comfortablebalance sheet and management appears to have a solid risk management
program in place.
Mercury continues to invest in business expansion, posting a \380 million
impairment loss on the business's systems and other assets in FY12/2023. In
addition to the recurring profit level, the CVC and crypto asset businesses will
be a factor that causes profit volatility in the net income level as well.

45

CERES INC. | 3696 (TSE Prime)
14. ESG1) Governance Structure to Promote Diversity
CERES has eight consolidated subsidiaries and one equity method affiliate.
Satoshi Takagi, founder and president, owns 5.98%, and Juno & Company, of
which he is a director, owns 10.33% (as of December 31, 2023). The
company is organized as a company with an audit committee.
In 2020, the Company established the Nomination and Compensation
Advisory Committee as a voluntary advisory body to the Board of Directors,
with a majority of its members being independent outside directors. The
committee deliberates on the election and dismissal of directors, the election
and dismissal of representative directors (including succession planning), andexecutive compensation, and reports its findings to the Board of Directors.
Two out of three members of both the Nomination Committee and theCompensation Committee are outside directors.
Three out of eight directors, or 37.5%, are independent outside directors.
Two of the three Audit Committee members are outside directors. The
Corporate Governance Code (CG Code, Principle 4-8) requires at least onethird of directors to be independent outside directors, which meets the CG
Code standard. The company has one female director, Kana Chitose, who is
an in-house director (Audit and Supervisory Committee member) (the ratio of
female directors is 12.5%).
According to the Corporate Governance Report submitted in March 2024, thecompany has implemented all the principles of the CG Code.
Ahead in Diversity

According to its annual securities report for the fiscal year ended December
31, 2023, CERES has 13.8% female managers and 27.8% female employees(as of the end of 2023). According to a survey by Tokyo Shoko Research, ofthe 2,456 companies whose fiscal year ended March 31, 2023, the average
ratio of female managers was 9.4% (1,706 listed companies), making CERES'
ratio higher than the average for listed companies.
In response to the government's "Women's Policy," the TSE revised its Listing
Regulations to recommend that companies listed on the prime market (1)strive to appoint at least one female director, corporate auditor, or executive
officer by 2025, (2) aim to increase the percentage of female directors,
corporate auditors, or executive officers to 30% or more by 2030, and (3)formulate action plans to achieve these goals. (iii) encourage the formulationof an action plan to achieve these goals.

46

CERES INC. | 3696 (TSE Prime)
Figure 34. Diversity Promotion in CERES (as of the end of 2023)

Note: Management positions here are based on different criteria than in the Annual
Report.
Source: CERES, "Financial Results for the Year Ended December 31, 2023" (February2024)2) SDGs Initiatives in the Medium-Term Management Plan
CERES has a management philosophy of "Enriching the world throughInternet marketing," and in its medium-term management plan announced in
2021, the company stated its medium to long-term management policy wasto create a "token economy platform” consisting of a points economy and a
blockchain to stimulate social and economic activities.
In 2021, the company launched the SDG donation platform "Moppy x SDGs,"
which allows donations to 22 organizations (15 at the time of disclosure of the
mid-term plan) for each of the 17 SDG targets by the Moppy Committee. The
platform allows donations to 22 organizations (15 organizations at the time of
disclosure of the mid-term business plan) for each of the 17 SDGs goals. The
following table shows the SDGs and ESGs being promoted in the mid-term
management plan.

47

CERES INC. | 3696 (TSE Prime)

Figure 35: Promoting SDGs and ESG in CERES' Medium-Term Management Pla
Specific Initiatives

Contribution to the SDGs
Offset 100% of CO2 emissions related to electricity used by the

Carbon offset

Group

Participation in JCLP and
RE 100 Project Morippi no

Planted trees in Inner Mongolia to create sustainable woods andMori (tree planting)contribute to reducing CO2 emissions

Participation in JCLP andParticipated in JCLP and RE 100 Project to show our intention

RE 100 Project

and action to achieve 100％ renewable energy

Appointment of female

High percentages of female directors and mangers, 11.1% anddirectors and managers

36.4%, respectively

Cultivation of internal

To cultivate internal human resources, we provided education forhuman resources

leaders and held workshops for engineers

Support for higher
education

Offered a blockchain donation course at Keio University.

Promoting theemployment of people
with disabilities

Achieved the legal employment rate for private companies andpromoted diversity.
Set up the Audit and Supervisory Committee and the Nomination

Setting up committees

and Remuneration Committee to enhance corporate governanceNote: The ratios of female directors and female managers are as of December 31, 2021.
The ratio of female managers is based on a different standard than in the annual
securities report.
Source: CERES "Medium-Term Management Plan 2026 (Five-Year Plan)"(December 2021)

3) CERES Sustainability Management
In September 2022, CERES established a Sustainability Promotion Committee
chaired by the President and CEO to promote sustainability in a crosssectional and dynamic manner. In principle, the committee deliberates once a
year on the identification, evaluation, management of risks and opportunities
as well as materiality in overall sustainability, including climate change. The
chairperson of the committee reports the contents to the Board of Directors.
Seven Materialities

The Sustainability Promotion Committee has identified the following sevenmaterialities:◼

Enriching the world through our services◼

Resolving social issues and promoting economic development throughopen innovation◼

Proper digital advertising and sound development of the industry◼

Providing environmentally friendly products and services◼

Active empowerment of diverse human resources48

CERES INC. | 3696 (TSE Prime)◼

Information security and privacy◼

Strengthening of corporate governanceWith regard to the resolution of issues surrounding sustainability, focus is on
the above seven materialities in order to more effectively utilize management
resources. The company recognizes that addressing issues surrounding
sustainability, like global environmental issues such as climate change, andtaking into consideration the health and working environment of employees;
are important management issue that not only reduces risk but also leads toprofit opportunities.

4) CERES’ Climate Change Measures

Endorsement of TCFD
Declaration

As mentioned above, since 2009, we have planted 1,000 seedlings in
Mongolia, China to prevent desertification, and from 2021, we will offset
100% of CO2 emissions from electricity use (carbon neutrality) to realize adecarbonized society. The company is a member of the “Japan Climate
Leaders’ Partnership” and the “100 Renewable Energy Declaration Re Action”.
In July 2023, the company expressed support for the TCFD (Task Force on
Climate-related Financial Disclosures) recommendations and joined the TCFD
consortium; the 2023 Sustainability Report includes disclosures based on the
TCFD.
The GHG (greenhouse gases) protocol measures and indexes emissions in
Scope 1 (the amount of GHG emitted directly by the company) and Scope 2(the amount of GHG emitted through the use of electricity supplied by thecompany). The company has achieved zero emissions for Scope 1 and Scope
2 since FY2021.

PoS has Less Power
Burden than PoWEmphasis on Diversity of
Human Resources

The power used for servers used for web services and the power used in
offices will be changed to 100% renewable energy-derived power fromFY2021 to reduce 100% of CO2 emissions. The company has achieved“carbon neutrality” ahead of the government target of 2050. Emissions,
including up to Scope 3 (GHG emissions from raw material purchases andafter-sales GHG emissions), have not been measured and targets have notbeen set.
“CoinTrade”, a crypto asset sales office operated by group company Mercury,allows staking only in crypto assets that use a consensus algorithm called PoS(Proof of Stake). This system has a low environmental impact because it does
not require large amounts of electricity and high-performance computers likethe PoW (Proof of Work) used for Bitcoin and other crypto assets.

5) CERES’ Human Capital Strategy
CERES’ medium to long-term growth strategy is to strengthen its own media,
launch new media and enter the O2O business. The company’s policy is toemphasize diversity in the human resources responsible for its growthstrategy. Since the company operates in the highly competitive Internet field,

49

CERES INC. | 3696 (TSE Prime)
it aims to diversify its human resources by actively investing in blockchain
technology, which has the potential to become a social infrastructure in the
future. They believe that new ideas never seen before will be created whentalented people with various backgrounds gather at Ceres and influence eachother.
To develop human resources, the firm has introduced a Management by
Objectives (MBO) system as an evaluation mechanism. They expect todevelop human resources who are committed to the goals they set forthemselves and work on their own initiative. To help employees improve theirskills, the company offers internal training programs as needed according to
job type, area of expertise, position, etc., and also provides support forexternal training programs. And they have established a system that allows
employees to choose a wide range of career paths.
CERES has a culture in which proposals to executives for businesses, systems,
and structures that will benefit the company are proactively made. The
company has introduced a program for new graduates to plan new businesses
using the company’s management resources as part of their training when
they join the company. Yumemi, a group company, has unique systems suchas the “C.xO System,” “Executive Officer System” and the “Challenge Director
System.
CERES Human Rights Policy

CERES has established the “CERES Human Rights Policy” to ensure thathuman rights are respected and not violated. And to promote informal inhouse communication, there is an in-house drinking assistance system(Komikatsu) and an in-house club activity system. To ensure diverse work
styles, the company provides support through a childcare support system, aflextime working system, with a combination of office and remote work thatmatches business characteristics, a welfare system that fully subsidizes thecost of low-dose pills and a housing allowance.
In 2019, the company also received approval from the Tokyo Metropolitan
Government as a “TOKYO Workplace Reform Declaration Company”. In orderto improve the way employees work and take time off, the company aims toachieve an average of less than 20 hours of overtime work per employee permonth and an annual paid leave utilization rate of more than 70%.

50

CERES INC. | 3696 (TSE Prime)
Figure 36. Income Statement(\ mn)Net Sales
Cost of Sales
Gross Profit
Gross Profit Margin
SG&A Expenses
Operating Profit
Operating Profit Margin
Non-Operating Income
Interest and Dividend Income
Equity in Earnings of Affiliates
Gain on Sale of Crypto Assets
Gain on Valuation of Crypto
AssetsOthers
Non-Operating Expenses
Interest Expense and DiscountEquity in Losses of Affiliates
Loss on Valuation of Crypto
AssetsOthersRecurring Profit
Recurring Profit Margin
Extraordinary Income
Extraordinary Loss
Pretax Profit
Corporate, Inhabitant andEnterprise Taxes
Income Taxes-Deferred
Total Income Taxes(Corporate Tax Rate)
Net Profit
Net Profit Margin
EPS (\)
Investment in Tangible andIntangible Fixed Assets
Depreciation and Amortizationof Goodwill
Cash Flow
CFPS (\)
ROE
ROIC
Dividend (\)
Average Number of Shares
During the Period (mn shares)
Number of Shares at End of
Period (mn shares)

12/18
10,706
6,398
4,308
40.2%
3,086
1,229
11.5%
1
0
0
0
0

12/19
16,51011,416
5,094
30.9%
4,213
880
5.3%
11
5
0
4
0

12/20
20,213
13,967
6,246
30.9%
4,749
1,496
7.4%
357
9
238
0
73

12/21
23,402
15,629
7,773
33.2%
5,467
2,305
9.8%
1,220
7
963
156
19

12/22
20,536
12,472
8,063
39.3%
6,816
1,246
6.1%
13
0
0
0
0

12/23
24,07013,483
10,587
44.0%
9,468
1,118
4.6%
147
0
78
0
0

1
1,225
5
690
520

2
100
10
49
4

37
37
12
0
0

75
26
14
0
0

13
580
20
489
0

69
48
25
0
0

10
-2
0.0%
244
178
64
399

37
792
4.8%
1
340
452
302

25
1,816
9.0%
8
327
1,496
704

12
3,499
15.0%
896
389
4,005
1,142

71
679
3.3%
43
1
721
910

23
1,217
5.1%
0
387
830
660

-102
221
345.3%-232-2.2%.
-28.7
55

6
309
68.4%
74
0.4%
6.8
320

-55
649
43.4%
744
3.7%
67.3
243

-80
1,062
26.5%
2,775
11.9%
251.8
352

-304
606
84.0%
46
0.2%
4.1
70

-328
332
40.0
451
1.9%
39.6
343

106

302

403

196

426

525

-126
-11
-6.4
NM
5
11.0

376
34.0
1.2%
3.1%
14
11.0

1,147
104.3
11.8
8.9%
18
11.0

2,971
269.5
35.6%
14.5%
40
11.0

472
41.8
0.5%
1.4%
20
11.3

976
85.6
5.0%
4.3%
20
11.4

10.9

11.1

11.1

11.2

11.4

11.4

12/24CoE
27,000

1,600
5.9%

1,600
5.9%

800
3.0%
70.1
0

20

Source: Strategy Advisors, based on Company Data.

51

CERES INC. | 3696 (TSE Prime)
Figure 37: Balance Sheet(\ mn)
Current Assets
Cash and Deposits
Notes and Accounts Receivable-Trade
Operating Investment Securities
Inventory Count
OthersAllowance for Doubtful Accounts
Fixed Assets
Property, Plant and Equipment
Intangible Fixed Assets
Goodwill
Other
Investments and Other
Investments in Securities
Shares of Subsidiaries and Affiliates
Deferred Tax Asset
OthersTotal Assets
Current Liabilities
Accounts Payable
Interest-Bearing Debt
Income Taxes Payable
Allowance for Point Card Certificates
Allowance for Bonuses
OthersFixed Liabilities
Interest-Bearing Debt
Asset Retirement Obligations
OthersNet Assets
Capital Stock
Capital & Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive
IncomeSubscription Warrant
Noncontrolling Interest
Total Assets
Interest-Bearing Debt
Capital Adequacy Ratio
D/E Ratio

12/18
7,668
4,367
1,769
868
448
216
0
4,248
229
1,791
1,623
168
2,227
274
801
726
461
11,917
4,161
479
1,736
256
1,021
31
638
1,317
1,251
58
8
6,437
5,979
4,134
1,852
-7
29

12/19
8,342
3,941
2,457
1,279
249
416
0
4,560
413
1,347
1,200
147
2,799
380
722
657
1,044
12,902
4,710
756
1,511
338
1,322
0
783
1,610
1,493
70
47
6,581
5,933
4,173
1,768
-7
166

12/20
11,517
6,087
2,778
1,804
259
589
0
4,709
296
1,395
938
0
3,017
562
872
667
925
16,227
7,471
1,024
2,276
1,657
1,693
30
791
1,663
1,546
70
47
7,091
6,250
4,236
2,321
-307
260

12/21
13,163
6,842
2,866
2,300
247
908
0
7,071
261
1,178
1,034
19
5,632
835
3,604
835
365
20,234
8,924
934
2,846
1,639
2,283
50
1,172
1,490
1,369
70
51
9,819
9,001
4,410
4,899
-307
70

12/22
14,413
6,547
3,545
2,744
460
1,133
-16
8,183
263
2,129
1,743
386
5,790
1,095
3,116
1,111
471
22,597
10,558
832
3,713
1,343
3,182
30
1,458
2,342
2,172
16
154
9,696
8,761
4,572
4,496
-307
120

12/23
17,586
8,112
3,643
2,976
554
2,339
-38
8,328
361
1,729
1,537
192
6,236
1,139
3,194
1,435
471
25,915
13,451
783
5,048
1,434
3,921
30
2,235
2,417
2,314
0
103
10,045
9,025
4,613
4,719
-307
158

8
420
11,917
2,987
50.4%
0.50

7
473
12,902
3,004
47.3%
0.49

4
576
16,227
3,822
40.1%
0.59

3
744
20,234
4,215
44.8%
0.46

1
813
22,597
5,885
39.3%
0.66

1
860
25,915
7,362
35.4%
0.80

Source: Strategy Advisors, based on Company Data.

52

CERES INC. | 3696 (TSE Prime)
Figure 38: Cash Flow Statement(\ mn)Cash Flows from Operating Activities
Income before Income Taxes
Depreciation and Amortization
Amortization of Goodwill
Increase/decrease in Allowance for Points
Equity in Earnings (Losses) of AffiliatedCompanies
Impairment Loss
Net Valuation Gains/Losses on Crypto Assets
Gain (Loss) on Sale of Crypto Assets
Increase/Decrease in Trade Receivables
Increase (Decrease) in Operating Investment
Securities
Increase (Decrease) in Notes and Accounts
Payable-Trade
Income Taxes Paid
OthersTotal Amount
Cash Flows from Investing Activities
Purchases of Property, Plant and Equipment
Payments for Acquisition of Intangible Assets
Payments for Purchase of Investment
Securities
OthersTotal Amount
Cash Flows from Financing Activities
Net Increase (Decrease) in Short-Term Loans
PayableNet Increase (Decrease) in Long-Term Debt
Increase/Decrease in Corporate Bonds
Payments for Purchase of Treasury Stock
Dividends Paid
OthersTotal Amount
Cash Increase/Decrease
Cash Beginning Balance
Increase/Decrease in Cash due to New
Consolidations, etc.
Cash Ending Balance

12/18

12/19

12/20

12/21

12/22

12/23

64
85
143
271
690

452
119
153
301
49

1,496
122
131
371
-238

4,006
184
111
589
-963

721
190
183
899
489

830
272
205
738
-78

89
520
0
-603
-411

320
4
0
-661
-228

0
-73
0
-297
-514

0
-19
-156
-72
-660

0
32
0
-666
-385

343
0
0
-148
-170

232

277

266

-96

-101

-48

-405
-180
495

-485
469
770

-174
1,168
2,258

-931
-831
1,162

-1,357
96
101

-811
-72
1,061

-25
-69
-175

-258
-70
-119

-40
-361
-64

-73
-105
-487

-123
-292
-290

-269
-234
-106

-1,193-1,462-670-1,117

-17
-482

-122
-787

-1,270-1,685

-235
-738

1,150

-350

500

550

600

963

606
-30
0
-130
101
1,697
730
3,596
0

165
265
0
-154
-9
-83
-430
4,327
49

425
-130
-299
-154
21
363
2,139
3,946
11

37
-110
0
-197
128
408
783
6,097
2

1,129
-190
0
-448
100
1,191
-391
6,883
0

569
-70
0
-227
-2
1,233
1,555
6,491
4

4,327

3,946

6,097

6,883

6,491

8,051

Source: Strategy Advisors, based on Company Data.

53

CERES INC. | 3696 (TSE Prime)
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