First of all, I would like to express my deepest condolences to those who have lost their lives due to COVID-19, as well as my heartfelt sympathy to all those who have been affected and their families.

Even in the unprecedented wake of the COVID-19 pandemic, SPARX has maintained stable and high-quality investment performance. We have also worked harder than ever to cut costs and steadily increase our base earnings, which drives our stable returns.
In addition to our efforts to expand our AUM, we continue to implement various strategies to further growth and progress, including accelerating investment in sectors we believe to be on the rise. The following is a summary of last year's performance and our goals for the future.

*In this document, "this year," "last year," and "two years ago" refer to FY3/2022, FY3/2021, and FY3/2020, respectively.

Throughout last year, our revenue and profits outperformed the figures from two years ago. While we saw an increase in personnel related expenses, we significantly reduced travel and other expenses due to travel restrictions during the pandemic. Thus the costs was kept at the same level year over year. Furthermore, we realized approximately JPY 1.6 billion in performance fees from our listed equity investment strategy and another JPY 1.5 billion from renewable energy investment strategy. These outcomes led to significant earnings growth last year. Our stable management fee income has also fueled our base earnings growth. The hybrid model I have long promoted--featuring SPARX's unique combination of management and performance fees--appears to have significantly contributed to our earnings growth.

Last year, our general shareholders' meeting approved a dividend increase to JPY 11 per share, boosting the common dividend from two years ago by JPY 2. We will continue to do our utmost to achieve earnings growth and maintain reliable shareholder returns.

First, as of March 31, 2021, the Group's Asset under Management (AUM) increased by 37% to JPY 1.5 trillion year over year. Our five-year target is to double our AUM to JPY 3 trillion by 2026. The hybrid earnings model SPARX created should ensure that we achieve JPY 3 trillion in AUM, thanks to our outstanding professionals and investment capabilities.

Given our recent cost increase trajectory, doubling our AUM will not double our costs since the current earnings model is already well above the break-even point. I believe that our AUM growth from here on will directly increase profits, so we will see a phase of even higher profit margins in the future.

I believe that SPARX's strength is in its people, as well as the organization and the education process we have created to nurture our professionals' growth. The investment power generated by these people is the source of our strength. Over the next few years, my mission is to seek out the professionals who will lead SPARX into the next generation. I definitely intend to make that happen.

We must fulfill our current duties while maintaining a significant long-term vision. This fiscal year, I hope to further solidify our base for increased revenue and profits.

I also would like to set increasing our ROE as a vital goal we must achieve as a company. SPARX's business is exceedingly simple. In the process of increasing our AUM, our profitability and ROE will surely grow.

I think we have entered a self-reinforcing cycle, and again, we are aiming to double our current AUM to JPY 3 trillion by 2026. We are simultaneously sowing and nurturing seeds in sectors that will drive SPARX into the future--digital technology-enabled energy, medicine, and finance--as part of our goals this year.

With our desire to become the world's most trusted and respected investment company--the mission we have held since our founding--we will make every effort to maintain our position as a company that earns the support of its investors.

We strive to meet the expectations of our stakeholders by steadily increasing our corporate value so that they can fully experience how much SPARX has grown.

We humbly request your guidance and encouragement into the future.

Shuhei Abe
President, CEO
SPARX Group Co. Ltd.
June 2021

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