This content is transcribed from the audio of Sparks Group ＜8739＞'s financial results briefing for the fiscal year ending 2024/3. Please see the company's website for the materials used in the actual briefing session.

The theme of the financial results is “Future Strategy to 3 trillion yen”

Q: The Four Pillars (Japanese Equities, OneAsia, Real Assets, Private Equity) What are the intentions behind launching these strategies? (How did Sparks develop the Four Pillars?)

＜President Abe＞

I've been talking to you all this time, but Sparks was founded in 1989/7 with the strategy of investing in small-cap Japanese stocks.

Thirty-five years have passed since then, and time has passed so quickly in July of this year, and as of the end of April, we have managed 1,893.3 billion yen. Of these, 70% are Japanese stocks, and there are several strategies for Japanese stocks, such as large stocks, mid-cap stocks, then long shorts, and then engagements.

Under such circumstances, each portfolio manager in charge is working every day to create stronger management while sharing research.

As you all know, we are very proud of the performance we have achieved over the past 35 years. Every research organization has appreciated the fact that we have achieved an overwhelming performance.

I am proud that everyone has cooperated to this point to create the number one management company in Japan in terms of Japanese stocks.

Of the remaining 30%, approximately 15% is in the renewable energy sector. This is a strategy that began 11 years ago, but after the Fukushima accident and unfortunate accident, a fixed price purchase system was adopted, and the spread of renewable energy to Japan began in earnest. Based on that, it is a strategy that I started as a financial company because I wanted to change Japan's electricity to clean electricity with renewable energy, such as solar power, wind power, biomass, etc., under a fixed price purchase system.

After about 11 years, we were able to grow into the 4th fund in Japan in terms of current asset size.

Then, next was venture capital, which investors around the world said in common about 9 years ago, and then they decided to invest in a new next-generation area such as AI and then robotics. I thought the most important industry leading the AI and robotics era in Japan was the automobile industry, so I asked Toyota Motor Corporation for seed money. As a result of having Toyota Motor Corporation's seed money invested, business companies, etc. have invested, including financial institutions and other financial institutions representing Japan, and it has now grown to become the third largest venture capital investment fund in Japan.

Then the fourth one is Asian investment. Asian investment also began with the establishment of offices in Hong Kong and South Korea in 2005, and although the fact that assets have grown quite a bit has not progressed compared to other asset classes, I think we have definitely been able to deepen our knowledge about Asia.

As I mentioned, Japan, then real assets centered on renewable energy, then venture capital with AI and robots at the center, and the fourth venture capital centered on Asian investments, are currently managing approximately 1.89 trillion yen.

Aiming for 2026, the goal of making these deposit assets 3 trillion yen is a goal I've talked about with everyone, and then with my friends at Sparks. In order to achieve this, I would like to make it a company that thinks and practices better investments.

Q: Specifically, how will you work on each strategy?

＜President Abe＞

Japanese stocks have now grown to over 70% of the total, or about 1 trillion yen. The core of this is a long-term carefully selected investment strategy. The long-term carefully selected investment strategy is a world-leading Japanese stock investment fund representing Japan representing Japan, which has achieved long-term and overwhelming performance. As for this fund, I think there is room for significant growth from here on, and I think it also has a track record, so I would definitely like to introduce this fund to investors around the world as Japanese stocks recover and revive in earnest from here on out, as a representative fund of Sparks

Also, small and medium stocks, which are the parent business of Sparks, have left extremely high investment results that are not inferior to careful selection strategies. We have left long-term investment results. Small and medium-sized stocks are also coming here, and we are considering whether to introduce our strengths to investors around the world and grow them, or increase or grow by more than half of the 3 trillion yen path with Japanese stocks, based on the short-term situation where large stocks are ahead.

From here on, I would like to introduce alternatives as a new strategy in Japanese stocks, alternative engagements as new strategies, and long and short, which is no exaggeration to say that we created the industry in the field of alternatives, to even more investors around the world.

As for investment in Asia, I am convinced that Asia will lead global growth from here on out. Based on that conviction, I took the lead in creating an Asian research team and a research management investment team in Tokyo about 2 years ago, and now we are creating two separate funds in Asia. One is a fund that invests intensively in India, and the other is a fund that invests throughout Asia. With these two funds as the axis, teams from Tokyo, Hong Kong, and South Korea have gathered in Tokyo to conduct research on Asia. Over the past year, we have visited about 1,000 companies with about 10 members. By investing based on thorough research like we did with Japanese stocks, we have already begun to achieve high investment results. I would definitely like to introduce this to the world

Renewable energy has now grown to about the 4th largest investment fund in Japan. Pursuing asset returns based on the fixed price purchase system, we have also been raising extremely high returns for the past 11 years. From here on, based on those assets, one is power storage plants, and instability affected by weather and the like is one disadvantage of renewable energy, but preparations have begun because we would like to create a fund that supplies funds as investors in order to create a system that supplies stable and clean electricity by installing power storage stations. Specifically, I don't think it's that far before the fund starts.

Then, last year, we began construction of a plant to make hydrogen in Tomakomai, Hokkaido. I think it will start operation next year. Right now, we are working hard to build an organization. In the case of hydrogen, it is necessary to respond to and consider extremely detailed regulations in various processes such as making, then storing, and transporting, and then a professional team to actually implement them. A few professionals who are very good at that field have already joined Sparks, and preparations have begun targeting the day when hydrogen production in Tomakomai will begin. I think this initiative in Tomakomai will be one of the largest hydrogen plants in Japan.

I would like to add that in January of this year, I made a buyout investment, an investment that had not been made until now in the Sparks fund. It is a company called JJTT that makes cast and forged engine parts for Isuzu. Amid the rise of extremely erroneous pessimism about engines that make extremely high quality products, I think engines will remain in the future. Under such circumstances, extremely analog technology, such as casting and forging, has remained in Japan until now, and with the feeling that it must be left behind in the future, they will acquire shares of IJTT, borrow power from Isuzu along with current management in a form that once again creates new value, and even borrow power from the entire automobile industry, starting with Toyota Motor Corporation, to make it a stronger company and re-listed as a form of investment. We were also able to realize our first investment at Sparks. I would like to further advance this kind of investment in the future. With the buyout of IJTT, I would like to be a company that actively finds investment opportunities and can find and invest in the area called so-called private equity from now on. It may be private equity investment in a broad sense, such as venture capital, then investment in power plants, etc., but I would like to boldly work on more aggressive private equity investments, such as privatizing so-called private equity that we think about on a daily basis, that is, making public companies private.

Q: What do you think about changes in key management indicators?

＜President Abe＞

At Sparks, these are so-called KPIs, so I have set goals and have been managing until now. The KPI called basic profit is a very simple profit and loss statement in which basic costs are subtracted from management rewards, but if you look at this constantly, in terms of basic profit that has now been monitored since establishment, it has reached a record high level.

Then, since it was returned to shareholders, the amount of dividends was also the highest ever. Depositary assets and AUM are now up to 1.89 trillion yen, but since the peak was around 2 trillion yen or 210 trillion yen, it is time to take another break to update the peak. I would definitely like to update this again in a short period of time.

As for profit, we made a profit of 16.4 billion yen in operating income for the fiscal year ending March 31, 2006. Operating profit for the current fiscal year was 7.4 billion yen, and there is still a difference from the record high in comparison with the profit level reported to everyone, but for now, I have a strong feeling in my heart that I aim for 10 billion yen and aim for operating income of 10 billion yen as a first step, and I want to manage it from now on. I would like to achieve this as soon as possible and push the profit level to a level where the record high level is in view.

What is even more challenging is the total market value. The peak of total market value reached the level of 400 billion yen in the first half of the 2000s. Compared to now, it's still far inferior from that peak level. First, with the aim of improving corporate value of 100 billion or 200 billion, I would like to focus all my energy on producing results that will please all of our shareholders, step by step. To that end, I think it is a prerequisite that we always complete the 3 trillion yen deposit assets until 2026, which I always talk about. If AUM of 3 trillion yen can be achieved, it is difficult to predict the total market value, but I think we can hit record highs for other KPIs and indicator figures.

Q: Lastly, would you like to give a message to our shareholders.

＜President Abe＞

Over the past 35 years, I've worked hard to create an organization, and while everyone has responded to various situations, what I'm still proud of now is that Sparks is an organization run by really great human resources. Looking back a bit over history, I think the organization became stronger in multiple layers from the first generation, then the next generation, and now to the third generation. More specifically, I believe that a school-like organization has been created where such generations encourage and teach each other and create new professionals.

Even around the world, I would like to make it an organization that employees can be proud of by all means, and make it an organization that employees are proud of, based on a strong organization that we can be proud of. I believe that by achieving this, we will be able to reward our shareholders for their long-term support, so thank you for your cooperation.