XNET Corporation

Medium-term Management Plan
2022-2025
The company aims to be an excellent Company
that can continue to grow while collaborating with its clients

Copyright ⓒ 2022 XNET Corporation

INDEXXNET Corporation｜Medium-term Management Plan｜June 2022
1 About XNET

1Asset Management Market Size2

Trends in Asset Management
Outsourcing

1

Service development for the medium tolong term

Corporate Philosophy

2Application Service Expansion

Mission & Vision

3

Growth Strategy for the medium-term

1

Business Overview

2

Overview of service offerings

3

Value proposition

4

Corporate Profile and History

5
6
2 Review of Prior 1
Fiscal Years
2
3

Financial Highlights

3 External
Environment

4 Growth
Strategy

5 Management
Goal

Management Goal

Growth drivers and past business strategy
Sales Mix

6 Investment
Strategy

4 -1 Service Format - Subscription model-2 Evolving service capability

1

Human Resource Strategy

2

Development of new application services

3

System Investment-3 Customer-focused approach-4 Intangible Asset - Software Application -7 Dividend
PolicyDividend Policy

5 -1 Evolving into a one-stop solutions company-2 Value proposition (Reprint)

Copyright ⓒ 2022 XNET Corporation2

１
About XNET

Copyright ⓒ 2022 XNET Corporation3

1-1. Business Overview
XNET provides comprehensive support through a set of asset management operations that serve as an
infrastructure. The services fall into three categories which are (1) Front, (2) Middle, and (3) Back operations.
XNET’s Service (a single business segment)
Investor
Entrust money

Institutional Investors
Buy and Sell Securities(Front)⚫ Ordering and receiving
securities

Check status of operations(Middle)⚫ Performance Analysis⚫ Reporting

Maintain books and recordsof transactions (Back)⚫ Accounting (including IFRS.)⚫ Deposit / withdrawals⚫ Asset physical custody⚫ Exercise of voting rights

serves as an infrastructure

Copyright ⓒ 2022 XNET Corporation4

1-2. Overview of service offerings
XNET’s customers, most of which are institutional investors, use dedicated system to handle theirfront/middle/back-office operations. XNET provides not only (1) applications software,
but also (2) AMO, system operations outsourcing and (3) SO, business process outsourcing services.
① Application
Software tailored to thecustomer’s needs②AMO：Application Management Outsourcing
The system operation is outsourced to
XNET, where our experts handle theapplication, implementation, operation,
maintenance and updating for the customer.

③SO：Smart Outsourcing
Business processing is outsourced to XNET,
where our professionals handle accounting andreporting for the customer.

ClientApplication

Application

Front office operation

Front office operation

Front office operation

Middle office operation

Middle office operation

Middle office operation

Middle office operation

Back-office operation

Back-office operation

Back-office operation

Back-office operation

Product development

Product development

XNET’sApplication

XNET’sProfessionals

ClientClientApplication

Application
Entrusted

ClientFront office operation

Product development
・・・

XNET’s support for the front/middle/back-office operation allows
customers to focus their resources on other important matters.
Copyright ⓒ 2022 XNET Corporation5

1-3. Value proposition
XNET creates high added value by providing high quality “applications”, “know-how” and “support” as anintegrated service.
Our value-added offerings
Application◆ No initial investment required◆ Fixed monthly fee

Application◆ No maintenance fee required◆ Freely combined from over 4000 applications(object-oriented)

Know-how◆ Attentive support system by customers andour customer representatives (CE)
◆ Accumulated know-how to keep yourapplication up-to-date with latest features

Know-how

SupportSupport◆ Attentive support by our customer
representatives (CE)
◆ Knowledge of professionals in the asset
management industry

Copyright ⓒ 2022 XNET Corporation

6

1-4. Corporate Profile and History
XNET has been a specialist in securities management systems and support since its inception more than
30 years ago. Its customer base consists of more than 180 institutional investors, including life/non-life
insurance companies, investment advisors, trust banks and banks.
Corporate Profile

HistoryName

XNET Corporation

1991

Address

Sumitomo Fudosan Yotsuya Bldg. 4th Floor.
13-4 Araki-cho, Shinjuku-ku, Tokyo

1997
1998
2000

Representative Takehiko Motani, President
Established

June 3, 1991

Capital

783 million yen

Number ofpeople197 (As of March 2022)

Services• “XNET” service: Outsourcing service of asset
management application• Portfolio data distribution service• STP service(electronical instructions sent to a managing trustbank)Customers

2001
2003

2004
2007
2009
2015

Founded (by three former employees of Nomura Securities and Nomura
Research Institute)
Started “Back office” service
Started “Front office” service
Listed on NASDAQ JAPAN as its first stock issueStarted the center-type “STP” service
Added “Contract basis accounting” in Back-office operation service
Listed on the Second Section of the Tokyo Stock Exchange
Started “Accounting service for investment trust management” service
Started shareholder voting rights management (Stewardship Solutions)
Listed on the First Section of the Tokyo Stock Exchange
Added “Back office” operation to “Accounting service for investment trust
management” service
Became a consolidated subsidiary of NTT DATA Corporation
Started “Trust management service for individuals” (for regional banks)

2017

Started Japan’s first “Japan-domiciled foreign-currency investment trusts
management” service
Opened Sapporo office as SO service base2021

Expanded the head office to strengthen SO service

2022

Listing market changed to the Standard Section of Tokyo Stock Exchange

Institutional investors broadly defined, including
banks

Copyright ⓒ 2022 XNET Corporation

7

1-5. Corporate Philosophy
What XNET aims for

The company aims to be an

eXcellent Company
that can continue to grow while collaborating with its clientsAs an eXcellent Company, XNET will strive to

1. become a “One-Stop Solution Company” in asset management.
2. continue to make efforts to bring smiles to customers’ faces by transforming “Impossible” into
“Possible.”
3. create a better society by developing “new frameworks” and “new value.”
4. implement management practices while being mindful of the well-being of employees and theirfamilies and the profit returns to shareholders.

Copyright ⓒ 2022 XNET Corporation

8

1-6. Mission & Vision
XNET aims to become an "ecosystem orchestrator" in the asset management industry, providing solutions
that customers need.
In addition, XNET will contribute to helping Japanese people accumulate wealth by adopting the "Four-Way
Satisfaction" mindset.
MissionVisionFrom “Sampo-yoshi” to “Shiho-yoshi”

becoming amaster of asset
management industry
operations

Further reduce asset
management costs✓ Focus on core business✓ Reduce operational cost

1
Good for Buyer

As an “ecosystem orchestrator* in the asset management industry”,
XNET aims to create a symbiotic environment by connecting it with any *service orsystem that the customer requires without owning all the solutions.

✓ Earn revenue✓ Enhance intellectual/ human capital✓ revitalize market/economy✓ Create national assets

In assetmanagement
industry

2
Good for Seller

3Good for Society
Economy/peopleof Japan✓ Human resource
shifting to earn
investment income✓ Asset building suitablein the so-called"100-year life period".

Client (institutional investor)

4✓ Becoming theplatform in the asset
management industry

Good for the future*Includes those provided by third-party companies

Copyright ⓒ 2022 XNET Corporation9

２
Review of Prior Fiscal Years

Copyright ⓒ 2022 XNET Corporation10

2-1. Financial Highlights
XNET has generated stable revenues in recent years, and in the fiscal year ended March 2022, it achieved
its highest sales ever, mainly due to the large transaction related to highly profitable AMO, thereby
significantly improved operating profit.
Trends of Sales, Operating Income, EBITDA（%）(in million yen)

6,000

5,000

20.1%

25.0%

Full-scale SO
launched

Full-scale AMO
launched

5,419
5,039

19.4%

4,670

19.1%
17.5%

15.5%

4,000

4,041

16.1%

20.0%

4,435
4,204
16.1%

17.9%

15.7%

3,586

15.2%

15.0%

13.8%

3,370
3,157

Operating
Income Ratio

3,161

3,005

3,000

Sales

10.0%
2,000
1,549

1,000

880

808

956
670

1,049

1,128

1,212

1,279

1,288
5.0%

737
EBITDA

0

0.0%
12/3期
FY3/12

13/3期
FY3/13Copyright ⓒ 2022 XNET Corporation

14/3期
FY3/14

15/3期
FY3/15

16/3期
FY3/16

17/3期
FY3/17

18/3期
FY3/18

19/3期
FY3/1920/3期
FY3/20

21/3期
FY3/21

22/3期
FY3/22112-2. Growth drivers and past business strategy
XNET has increased its market share by specializing in the asset management industry (institutional
investors) and by attracting the largest corporations as customers, with continued delivery of customized
services as a growth driver.
Market share focus on asset management industry

Service offerings aligned with industry needs
1.

Rapidly changing industry environment
Product trends and regulatory requirements change quickly and requiresignificant investment to keep up.
XNET offers subscription-type services (detailed later).
▶ Our services eliminate large capital investments for our customers.

2.

Industry-specific situation (1) Mainstream: Insurance
Many insurance companies tend to outsource their asset management
operation to focus more on their core business.
XNET provides an integrated asset management services that serve as an
infrastructure.
▶ Our services allow customers to focus their resources on their key
services.

3.

Industry-specific situation (2) Increasing burden of system investment on
small businesses.
Many investment advisors and mutual funds are small businesses, and it isdifficult for them to afford large system investment.
▶ Our subscription business model eliminates the need for large investments(detailed later)

4.

High barriers to system deployment and outsourcing
Asset management operations require a high level of stability and reliability,
so regardless of in-house or outsource, decision making is very challenging.
We have a solid track record and the trust of the largest companies.
▶ Our track record lowers the barriers for customers to deploy or outsource.

Focusing on the asset management
sector (institutional investors)

Market share in the asset management sector(institutional investors)
Life
Insurance

Non-Life
Insurance

Investment
advisor82% *¹96% *¹

50% *²

Investment
Trust

Regional
Banks

8% *²

8% *²

*¹ The share is calculated based on total assets under management. (as of 2022)*² The share is calculated based on our simplified estimates. (as of 2022)

Copyright ⓒ 2022 XNET Corporation12

2-3. Sales Mix
Revenue source can be divided into two categories, Core and Spot, of which Core accounts forapproximately 80%. By focusing on Core, XNET can further strengthen its management foundation, withstable revenue coming from the subscription model of applications, AMO, and SO.
Trends of core and spot sales (in million yen)【Core】

6,000

5,419

Segment with stable sales throughsubscription model

5,039
5,000

4,435
601

4,000

3,000

4,670

1,036
Spot sales

856
637

▶ Our stable revenue baseTarget services Applications,
AMO (monthly)・SO

3,161
-

Core Sales
2,000

3,834

4,033

4,183

4,383

3,161

Core sales
account for 80% of
the total sales

・・・

1,000

15/3期
FY3/15・・・. . .

Copyright ⓒ 2022 XNET Corporation【Spot】

19/3期
FY3/1920/3期
FY3/20

21/3期
FY3/21

22/3期
FY3/22

Revenues from one-time transactions,although necessary to maintain core sales
Service Line ：AMO (spot) * New installation, infrastructure
renewal13

2-4-1. Service Format– Subscription model –XNET’s business model pioneered the subscription-based model and is an advanced service format that helps
us differentiate ourselves.
Our “service-type” system is an application service with a fixed monthly fee and no additional costs.
Pioneer of subscription-based business model
Since its inception (1991), XNET has developed asubscription model with a fixed monthly fee.

XNET “Service-type” systems
Advantage of XNET service-type system

1. No initial investment required
2. Available at a fixed monthly fee
3. No maintenance fee required

Recurring subscription fee

4. No additional cost for functional changes andupdatesCompared to our competitors’ system＜ In-house type＞
ClientUp-to-date application• Because it is custom made, all costs and risks
are borne by the customer.
＜Package type＞• Package-type is less expensive, but additionalcosts can be high if the system needs to change
functionality.

Copyright ⓒ 2022 XNET Corporation14

2-4-2. Evolving Service Capability
XNET delivers the latest and best applications through continuous improvement efforts.

We always have the latest needs and know-how, reflecting the voice of our customers and CEs (employees)

ClientResponsive to various
customer requirements

XNET’s application
Improvement

Additional
function

System change
resulting fromoperational changes

System change
due to regulatorychanges

Reflect the latest customer
needs obtained directly from
our CE in the actual workplace

The ownership of application
copyrights allows XNET toaccumulate a variety of know-how.
(knowledge sharing)

！
CE

CE

XNET’s commitment to the "latest and best" allows us
to deliver applications that will never be obsolete.
Copyright ⓒ 2022 XNET Corporation15

2-4-3. Customer-Focused Approach
XNET assigns expert CEs (Client Executive) to each customer to provide attentive, knowledgeable support.

Competitors’ call center

XNET’s support structure

Telephone support
customer

Call centercustomer

multiple CEs*
respond directly• Customer makes inquiry by phone only

• CEs in charge are available• Not sure if support is available in case of
emergency• CEs are also available in case of emergencies• Cannot provide prompt professional
support• CEs provide attentive response appropriate toeach customer's unique situation• CEs provide prompt professional support(Request may be handled by outsourced resource)• Policy manual based, inflexible handling*CE (Client Executive) is a full-time employee of XNET who hasa wealth of expertise in asset management.
Multiple CEs are assigned to each customer to ensure complete
support.

Copyright ⓒ 2022 XNET Corporation16

2-4-4. Intangible Asset– Software Application –XNET generates significant value (cash flow) from its 4,000 latest and best applications.

Applications owned by XNET
Usually costs several million yen
in development costs per application.

〇〇Management
SystemWe develop single-function applications
and constantly update themto the latest and best state.

Over 4,000
We can freely combine applications
to suit our clients’ business needs.

Applications△△ Management
SystemApplication

Copyright ⓒ 2022 XNET Corporation

Our applications are used continuously ona daily basis under a subscription model.
creating significant and stable value (cash flow)

System combining applications(image)17

2-5-1. Evolving into a one-stop solution company
In addition to XNET’s mainstream service (software), it provides additional value to our customers byproviding AMO (undertaking application management) and SO (undertaking business operations) services
which stem from customers' limited resources and strategy to focus on their core business.

Our Solution Transition
FY3/92
92/3期

FY3/01
01/3期

FY3/16
16/3期

FY3/1818/3期

Application
Mainly accounting operations

Application
peripheral operations

AMO
System Operations Outsourcing

Evolving into a one-stop
solution company,
not just an application provider

Copyright ⓒ 2022 XNET Corporation

SO
Business Process
Outsourcing

Developing applications to streamline
accounting operations by leveraging
our advanced expertise in asset
management.

We also developed non-accounting
applications in response to client requests.
Responding to the needs of clients whowish to outsource system operations,
including the most appropriate
applications for their business andsystem infrastructure renewal.
Meet the needs of clients who wish to
outsource their securities management
operations in order to focus on theircore business.

18

2-5-2. Value proposition (Reprint)
XNET creates high added value by providing high quality "applications", "know-how" and "support" as anintegrated service.
Reprint

Our value-added offerings
Application◆ No initial investment required◆ Fixed monthly fee

Application◆ No maintenance fee required◆ Freely combined from over 4000 applications(object-oriented)

Know-how◆ Attentive support system by customers andour customer representatives (CE)
◆ Accumulated know-how to keep yourapplication up-to-date with latest features

Know-how

SupportSupport◆ Attentive support by our customer
representatives (CE)
◆ Knowledge of professionals in the asset
management industry

Copyright ⓒ 2022 XNET Corporation19

３
External Environment

Copyright ⓒ 2022 XNET Corporation20

3-1. External Environment– Asset Management Market Size –Japanese asset management companies are on the rise in terms of assets under management. The
customer market of XNET is in a state of constant growth.
Amount under management by asset management companies (in trillion yen)
800
16
109

13
600

12

8
8

400

200

9
40
4
49
27

6
62
11
67

7
47
8
57

33

30

74
16

7

86
20

66

63

44

34

90
31

34

67

60

46

105

55

43

70

67

40

10

99

111

62

88
53

不動産投信
real
estate investment trust
privateplacement investment trust
私募投信
ETF
ETF
Publicly
offered equity investment trusts
公募株式投信（ETFを除く）

40(excluding ETFs)

投資一任契約（助言）
Investment
in a lease(aide-memoire)34

投資一任契約（一任）Investment
One Term Deed (One Term)

448
385
322

214

142

189

203

240

168

2012

2013

2014

2015

2016

2017

268

0
2018

2019

2020

2021

Compiled from the Financial Services Agency’s “Asset Management Upgrading Progress Report 2021" and statistical data fromThe Investment Trusts Association, Japan and the Investment Advisers Association, Japan.
Copyright ⓒ 2022 XNET Corporation21

3-2. External Environment – Trends in Asset Management Outsourcing –Our customers are faced with the need to focus on their core business while experiencing a lack ofresources in a rapidly changing business climate. This trend is accelerating the need for outsourcing
services and market expansion.
Asset Management Trends by Industry

Life/non-life insurance

Investment trust advisor

Regional bank

■ Business Climate■ Business Climate■ Business Climate

As information technology continues
to evolve, advanced insurance
products need to be developed.

Conventional investment methods are not as
profitable as they used to be, while the needfor alternative investments and compliancewith new financial regulations is urgent.

As ultra-low interest rates continue, it has
become difficult to generate profits fromlending, the core business of regionalbanks. To compensate for this, revenue
from securities investment has become a
top priority.

Want to focus resources ondeveloping products rather
than asset management

The difficulty in finding the humanresources prevents from doing
what needs to be done.

There is a lack of staff and theadministrative burden isincreasing.

The needs for outsourcing services (AMO & SO) in on the rise
Copyright ⓒ 2022 XNET Corporation

22

４
Growth Strategy

Copyright ⓒ 2022 XNET Corporation23

4-1. Growth Strategy– Service development for the medium to long term –In the medium to long term, XNET aims to become a true one-stop solution company by developing AMO(undertaking application management) & SO (undertaking business operation) businesses, thereby offering
a diversified product mix that meets the needs of Asset Management.

Medium- to long-term service development
Before FY3/14

What we are aiming forSO
SingleService
Application
アプリ

One-stop
solution
service

Appliアプリ
cation

AMO• Expand AMO and SO• Application only

Copyright ⓒ 2022 XNET Corporation• Provide all kinds of solutions for
asset management by building product mix

24

4-2. Growth Strategy– Application Service Expansion –XNET aims to improve profitability by expanding and enhancing application service delivery for asset
management and financial peripherals.
Development of new application services
Institutional Investor
Life/non-life Investment
Insurance Trust/Advisor

Banks

Other
Finance

Other
Business
Companies

Our Service Areas (Current)

Support Service

Service Areas with Roomfor Expansion

Securities
Corporate Loans
Personal Trusts
Loans & Deposit

AssetsManagement Reporting
Securities - new assets class
Personal loans
Real estate(other areas)
Voting Rights Exercise
Compensation Calculation

Peripherals
Business

IFRS Management

Actively develop new solutions in“Asset Management” and“Peripheral Business”
Specifically, we will expand ourapplication services and customer
base in areas where we are not yet
able to provide our applications as
described on the left.

Company Foundation Support(other areas)

Data Provision Market Data and Others

Copyright ⓒ 2022 XNET Corporation25

4-3. Growth Strategy– Growth Strategy for the medium-term –In the medium term, XNET will continue to strengthen its core businesses to maintain a high rate of return,thereby strengthening its business foundation and further enhancing shareholder value.
Core Net sales in the Medium-Term Management Plan Period (in million yen)

Medium-Term

Reprint 【Core】

5,000

Segment with stable sales through subscription model▶ Our stable revenue baseTarget services Applications, AMO (monthly)・SO

4,383
4,183
4,033
3,834
Core Net sales

3,161

・・・

FY3/15
15/3期

. . .
・・・

Copyright ⓒ 2022 XNET Corporation

FY3/1919/3期

FY3/20
20/3期

FY3/21
21/3期

FY3/22
22/3期

FY3/23
23/3期

FY3/24
24/3期

FY3/25
25/3期

FY3/26
26/3期

26

５
Management Goal

Copyright ⓒ 2022 XNET Corporation27

5. Management Goal
XNET aims to achieve 5 billion yen in core sales in FY3/26 and a return rate of 15% or higher, resulting in an
ROE of 8.0% or higher.

Management Goal

Core Sales
FY3/26

5 Billion Yen

Copyright ⓒ 2022 XNET Corporation

Operating Income Margin

ROE

15.0％

8.0％

28

６
Investment Strategy

Copyright ⓒ 2022 XNET Corporation29

6-1. Investment Strategy– Human Resource Strategy –XNET will actively invest in human resources development as its most important asset and will continue tofocus on hiring people with industry experience while training younger employees with no experience tobecome professionals.
In addition, we will continue to improve our work environment to increase productivity.
Recruiting Strategy
Continue to focus on recruiting highly specialized and ready towork talent, particularly asset management industry veterans.

Assetmanagement
professionals

Develop future professional human resources by fully utilizing
the know-how of veteran employees and the expertise
accumulated in the application business.

✓ Experienced human resources withextensive experience (incl. retirees)▶ They play an important role in thecompany's growth. As a successful
employment case, we will continue tomake this a top priority.

The
inexperienced
in assetmanagement

Human Resource Strategy

Veteran withexperience andknow-how

The expertise gained fromapplication development &services

Apprenticeshiplearning fromveterans

Gain expertise bylearning how to respondto customer needs✓ Encourage the hiring of young talent,
including inexperienced workers andrecent high school graduates
Growth as a professional

Copyright ⓒ 2022 XNET Corporation30

6-2. Investment Strategy – Development of new application services –We will expand the application service business area, which is an important source of value for XNET,
through the development of new value-added solutions.
Reprint

Development of new application services
Institutional Investor
Life/non-life Investment
Insurance Trust/Advisor

Banks

Other
Finance

Other
Business
Companies

Our Service Areas (Current)

Support Service

Service Areas with Roomfor Expansion

Securities
Corporate Loans
Personal Trusts
Loans & Deposit

AssetsManagement Reporting
Securities - new assets class
Personal loans
Real estate(other areas)
Voting Rights Exercise
Compensation Calculation

Peripherals
Business

IFRS Management

Actively develop new solutions in“Asset Management” and“Peripheral Business”
Specifically, we will expand ourapplication services and customer
base in areas where we are not yet
able to provide our applications as
described on the left.

Company Foundation Support(other areas)
Data Provision Market Data and Others

Copyright ⓒ 2022 XNET Corporation31

6-3. Investment Strategy– System Investment –XNET will fully invest in the improvement and enhancement of existing applications for the benefit of ourcustomers. (Aggressive Investment)
At the same time, we must ensure system upgrades associated with OS refreshes to sustain our business.
(Defensive Investment)
System Investment〇〇Management
SystemAggressive Investment

Improve the existing applications✓

Develop new solution services✓

Improve convenience forcustomers

Over 4,000
Applications
Defensive Investment

System update to ensure quality service✓ System upgrading associatedwith OS* updating△△ ManagementSystem

Application
Copyright ⓒ 2022 XNET Corporation*OS：Operating System

System combining applications(image)32

７
Dividend Policy

Copyright ⓒ 2022 XNET Corporation

33

7. Dividend Policy
XNET’s policy is to return earnings to shareholders through stable, long-term dividends. Our dividend payout
has been maintained, including the fiscal year ended March, 2015, when an impairment charge was recorded.
For the fiscal year ending March 2024 (projected), we plan to increase the dividend to 30 yen per share.
Dividend *¹ - Actual / projected (in Japanese yen)
Dividend
Payout Ratio

59.3%

60.7%

78.4%

454.2%

50.8%

44.3%

49.7%

47.7%

44.8%

40.1%

32.2%

42.0%

100
Earnings per share
一株当たり利益

86

Dividend
per share (annual)
一株当たり配当金（年間）

80

71

69
63
60

56

55
47

62

58

46

40

30

35

28

28

28

28

28

28

28

28

28

28

28

FY3/15

FY3/16

FY3/17

FY3/18

FY3/19FY3/20FY3/21

FY3/2220
60
FY3/12

FY3/13

FY3/14

FY3/23(est.)*¹ As XNET has conducted stock splits, calculations and descriptions are based on the current number of shares
Copyright ⓒ 2022 XNET Corporation

34

(Disclaimer)• This material contains forward-looking statements regarding futureplans, projections, strategies, policies and outlooks.
• These forward-looking statements are based on judgments made inaccordance with information available at the time this material was
prepared and on certain assumptions and are subject to change inthe future as a result of economic trends and market conditions,trends in XNET’s related industries, and other internal and external
factors.
• Therefore, XNET does not guarantee the accuracy of the information
contained in this material.
• This information is subject to change without notice.
• XNET assumes no obligation to update the information in thismaterial.

The company aims to be an excellent Company
that can continue to grow while collaborating with its clients

Copyright ⓒ 2022 XNET Corporation