intertrade co., ltd. (3747)

2014/1/9 BRIDGE REPORT | BRIDGE SALON

http://www.bridge-salon.jp/report_bridge/archives/eng/3747/20140109.html 1/17

INTERTRADE Co., Ltd. (3747)

Takahiro Ozaki,President

Company INTERTRADE Co., Ltd.

Code No. 3747

Exchange Mothers Section, TSE

Industry Information, Communications

President Takahiro Ozaki

HQ Address Tokyo, Chuo-ku, Shinkawa 1-17-21, Kayabacho First Building

Business

Specializing in development of securities trading and dealing systems, alsoproviding foreign exchange trading system development and maintenanceservices. New endeavors including group management system developmentand others in the health care industry are being undertaken.

Year-end September

URL http://www.itrade.co.jp/

Share Price Shares Outstanding (ex. Treasury Shares) Market Cap. ROE (actual) Trading Unit

¥278 7,185,600 shares ¥1.998 billion - 100 shares

DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (actual) PBR (actual)

¥3.00 1.1% ¥25.05 11.1x ¥313.67 0.9x

* Share price as of closing on November 22, 2013. Number of shares outstanding as of

most recent quarter end, excluding treasury shares.

ROE and BPS are based on actual results of the previous term end.

Fiscal Year SalesOperatingProfit

CurrentProfit

NetProfit

EPS (¥) Dividend (¥)

http://www.itrade.co.jp/



September 2010 3,856 -258 -277 -920 - 0.00

September 2011 3,335 47 66 172 2,472.38 0.00

September 2012 2,811 -129 -104 7 106.66 300.00

September 2013 2,725 -98 -95 -128 - 0.00

September 2014 Est. 3,000 205 200 180 25.05 3.00

* Estimates are those of the Company. A 100 for 1 stock split was performed in April

2013.

This Bridge Report provides details of the fiscal year September 2013 earnings

results, fiscal year September 2014 earnings estimates and other details of

INTERTRADE Co., Ltd.

Contents

1. Key Points

2. Company Overview

3. Growth Strategy

4. Fiscal Year September 2013 Earnings Results

5. Fiscal Year September 2014 Earnings Estimates

6. Conclusions

Key Points



Company Overview

INTERTRADE provides development and maintenance services for securities

dealing, foreign exchange margin trading and other systems in its main "financial

solutions business" (The name of this business segment has been changed from

securities solutions business from fiscal year September 2013), development and

maintenance services for group management systems for general companies in its

"IT solutions business", manufacture and sales of health supplements and cosmetic

products based upon sparassis crispa in the "health care business", and the

"proprietary fund management business."

The INTERTRADE Group is comprised of five consolidated subsidiaries. The Group

includes BSJ Co., Ltd. (66.7% ownership) which provides management solutions

primarily through its package called "GROUP CATS." Laboag Co., Ltd., (100%

ownership) manufactures and processes sparassis crispa and Kenko Plaza Pal Co.

Ltd. (100% ownership) conducts sales of sparassis crispa related products over

television shop channels and catalog sales. Z-Collection Co., Ltd. provides

operations for websites targeting 20 year old cosmetic product customers, and

TRADEX Co., Ltd. (100% ownership) conducts operations for proprietary fund

management.

<Corporate History>

INTERTRADE was established in January 1999 by the first President Kazuya

Nishomoto, the current President Takahiro Ozaki and the former President Yukio

Araki, all of whom worked at Nihon Kangyo Kakumaru Securities (Currently Mizuho

Investors Securities Co., Ltd.). The three founding members, Kazuya Nishimoto,

Takahiro Ozaki and Yukio Araki, leveraged experiences gained at Nihon Kangyou

Kakumaru Securities working in systems, dealing, and sales to provide consulting

services and to later expand into the development of packaged software for dealing

and trading operations.

INTERTRADE became a pioneer in the dealing system packaged software business

with the start of sales of "TradeOffice-SX" packaged software system for securities

company dealing operations in September 2000. The Company has recorded rapid

earnings growth due to the popularity of its packaged software, which are sought

after by various securities companies seeking to bolster the deterioration in their

earnings resulting from the deregulation of commissions accompanying the

elimination of the trading floor operations and floor traders at the Tokyo Stock

Exchange (TSE) in end April 1999. In March 2003, INTERTRADE leveraged its

network technologies to widen its service menu and began providing an "information

distribution service" (Distribution of market information for the TSE and other major

exchanges), and in September 2004 INTERTRADE listed on the Mothers Section of

the TSE. Thereafter, the Company has achieved strong business results in the

realm of back office systems for securities companies (Client information and

account reserves management systems) and middle office systems (Risk

management systems to measure risks of contract positions) as securities

companies have grown to increasingly favor total comprehensive solutions.

INTERTRADE fortified its packaged software lineup with the sales launch of the

proprietary trading system "ITMonster" in January 2005, and the release of a foreign

exchange margin trading system in August 2007. In April 2007, INTERTRADE

acquired Bradea Co. Ltd., originally one of its competitors and the creator of a high

performance and highly reliable trading system called "TIGER," as a consolidated

subsidiary (Merged into INTERTADE in October 2008) to expand its share of the



front office systems market. In August of 2008, a next generation securities dealing

and trading system fusing the strengths of both INTERTRADE and Bradea called

"TIGER Trading System" was released.

From 2012 onwards, efforts to diversify the Company's overall business have been

implemented with the management solutions development company BSJ Co., Ltd.

being turned into a subsidiary in October 2012, and the change of the subsidiary

INTERTRADE Asset Management Co., Ltd. into Laboag Co., Ltd. for the

development of the healthcare business (Previously known as the food service

business). With the goal of securing sales channels for the healthcare business in

2013, Pal Co., Ltd. (Currently known as Kenko Plaza Pal Co., Ltd.) was turned into a

subsidiary to provide catalog sales in February, and Z-Collection Co., Ltd. was

established in August to provide Internet sales.

Growth Strategy

With regards to the main financial solutions business, INTERTRADE seeks to raise

the underlying growth potential of this business a step further through improvements

in the appeal of its products and services to new categories of customers and

expansion in the breadth of services provided. In addition, attempts to fortify the

earnings foundation are also being implemented in the IT solutions business by

targeting general companies and in the healthcare business by promoting

diversification. The specific measures being implemented in each business realm

are described below.

(1) Financial Solutions Business

Improvements in investor mentality and earnings of the securities firms are being

seen on the back of the rise in the stock markets and increases in trading volumes.

Therefore, an improvement in the difficult business conditions resulting from the

securities companies' restraint in investments and withdrawal from dealing activities

is anticipated. INTERTRADE will endeavor to cultivate new categories of customers

by leveraging its strengths in high speed processing technologies while at the same

time capturing business in the recovery in demand for existing service realms.

While the image of the Company's strengths lying in "equities" dealing systems is

strong, it also has a bountiful track record of providing various market side services

including trading systems for the Doujima Rice Trading Exchange, exchange

simulation systems leveraging ATS technologies (Alternative Trading System, an

acronym used for proprietary trading system PTS), automated governance systems

for foreign exchange margin trading operation companies, and the reporting

systems for the Japan Securities Dealers Association (JSDA). Needless to say,

these system applications require high speed processing capabilities and

Investment Bridge believes that the delivery of the above systems are proof of

INTERTRADE's ability to provide stable and high performance systems.

Boundless Need for High Speed Processing

In 2010, the Tokyo Stock Exchange introduced the high speed trading system

"Arrowhead", and implemented improvements that increased the processing speed

by double in July 2013. The introduction of the "Arrowhead" system allows for order

receipt reporting in less time than is required to blink an eye of 1 millisecond and

distribution of share price and pricing indication information reporting in 2.5

milliseconds. The high processing speed of this new system allows for ultra-high

speed automated trading known as high frequency trading (HFT) to take advantage



of even small spreads in pricing using automated ordering function of computers

which has become the main form of trading operations. Furthermore, the Tokyo

Stock Exchange will begin offering "more detailed price quotes" on roughly 100

stocks from January 2014, and the implementation of this system is expected to lead

to a rapid shift from "appropriate pricing" to "superior pricing" (Allows for quicker

discovery of superior pricing) in the price discovery process.

The value of PTS has already exceeded 7% of the total value of trading of all stock

exchanges within Japan, and has reached nearly 20% when dark pool (Trade

orders that are not submitted to the stock exchange and are processed within

securities companies) is included. This represents a favorable trend for the

formation of superior pricing on trades, and this trend of "more detailed price

quotation" is expected to continue to grow stronger given the trends observed in

overseas markets.

Of course, this is not only true for the high speed needs of dealing systems. High

speed processing is crucial for the selection of markets where optimum pricing is

available to process trading orders in "smart order routing" (SOR), and competition

over "pricing superiority" has already begun to appear in the realm of OTC trading

of foreign exchange where there are no specific markets. Because there are no

specific markets in OTC foreign exchange, SOR technologies allow for multiple

counterparties (Banks and other financial institutions dealing in foreign exchange) to

connect to form multiple pricing and are critical in the selection of the optimum

pricing (rates).

INTERTRADE's foreign exchange related systems are introduced in situations that

require processing of large volumes of transactions that occur outside of markets

(OTC) as mentioned above, and have received high regards from customers.

Efforts to Capture Customer Needs for Top Class High Speed Processing

Technologies

INTERTRADE boasts of strong familiarity with securities operations and has

received high regard for its operational support from the start of the Company.

Furthermore, Bradea Co. Ltd., which boasts of top class technologies in high speed

processing, was turned into a subsidiary in April 2007 (Absorbed in October 2008)

and its high speed processing technologies were further improved. Based on this

"high speed processing capability", the Company will cultivate demand in a wide

range of various customers, asset classes and currencies.

As part of this strategy, the first (Securities systems) and second (Trading, foreign

exchange margin trading systems) business divisions were merged in October 2013

to become the new financial solutions business. The knowhow and technologies

cultivated in both of these divisions have been consolidated to strengthen

relationships with existing customers and to cultivate new customers. BtoC front and

middle office operating system development is being conducted as an "effort to

broaden the breadth of the customer base" with an eye to cultivating new

customers, including buy side business applications. INTERTRADE is also

conducting efforts to develop new consolidated platforms that include the functions

of PTS connectivity, SOR, automated execution, algorithm, and system trade

functions. The consolidation of system architecture and operations not only leads to

improvements in usability and functionality, but also offers merits to customers in

terms of system costs.

(2) IT Solutions Business



The IT solutions business of INTERTRADE provides the group management system

for medium sized companies called "GroupMAN@IT" (GMAN) and IT operation

management system called "GadicsMAN`IT" (Gadics), which will be used to cultivate

new customers. The consolidated subsidiary BSJ Co., Ltd. will continue to cultivate

development demand from large corporations and strengthening relationships with

existing clients by focusing upon the group management system "GROUP CATS."

Group Management Solution Using "GMAN"

"GMAN" is a group management system that targets medium sized corporations with

multiple consolidated subsidiaries and sales of less than ¥50.0 billion, and is sold as

an add on product (Product with system expansion functionality) for the

consolidated ERP packaged system called "Dream21" sold by BSJ (Tokyo Stock

Exchange Second Section, 9629), which boasts of a customer base of

approximately 1,000 companies. "GROUP CATS" group management system is also

sold by the consolidated subsidiary BSJ and targets large sized companies with

sales of about ¥100.0 billion. This is a large scale system that enables a short

implementation time for "GMAN" for negotiations and development. The system can

be implemented within one day if no customization work required. In addition,

because various management benchmarks can be presented visually, this system is

a very effective management tool.

The partnership with PCA Corporation formed for the sales of "Dream21" will be

strengthened. In addition to creation of responses for the impending hike in

consumption tax, replacement demand for Windows XP equipped personal

computers along with the termination of support by Microsoft from spring 2014 and

other factors are expected to contribute to favorable trends for not only existing

users of "Dream21" but also for new users considering "Dream21" as a replacement

for their existing system. INTERTRADE will target implementations at 20 companies

in fiscal year September 2014.

IT Operation Management Solution Using "Gadics"

At the same time, "Gadics" is a support service for IT operation management that

offers not only "functionality" but also provides "virtual engineering" at a low cost.

This system utilizes IT automation technologies to provide "cloud service" support in

the four realms of IT operation management of "gathering," "decision,"

"implementation," and "confirmation." In examples of operating systems and security

software, this system allows for surveillance of updates and responds by gaining the

permission of administrators to automatically perform updates. In addition, the

introduction of "Gadics" allows for automatic responses to the issue of data and

setting information transfer arising from the replacement of personal computers

accompanying the termination of support for Windows XP applications from spring

2014. Because IT service companies are providing similar services manually, the

introduction of "Gadics" can lead to a large reduction in costs. INTERTRADE

successfully recorded orders for 600 units during the first year in fiscal year

September 2013, and it has targeted orders of between 2,000 to 3,000 units in

fiscal year September 2014.



INTERTRADE provides "Gadics" to a wide range of companies of various sizes

operating various businesses in differing industries to establish its position as a

managed service provider (MSP), and as a stock type business to provide stable

earnings and to fortify its operating foundation (The earnings contribution from

"Gadics" at the time of implementation is small, but contributes to earnings on a

continued basis). Moreover, MSP is a solution that offers clients reductions in

system administration costs, system maintenance burdens, security risks, and

operating costs, in addition to optimizing corporate operations and supporting the

effective leveraging of various business resources.

BSJ Seeks to Establish Specialized Knowhow and Technology in "GROUP

CATS"

As explained previously, the consolidated subsidiary BSJ is expected to cultivate

additional demand for development work from existing large customers for its group

management system "GROUP CATS". On the back of lessons learned from the

unprofitable projects booked during fiscal year September 2013, the system

engineering services (SES) structure will be fortified to reduce risks while

accumulating knowhow and technologies related to customization.

(3) Healthcare Business

Efforts of the healthcare business will be focused upon sparassis crispa related

products (Supplements and cosmetic products) that offer high profitability and for

which there is strong demand. Currently, catalog sales of a wide range of products

including health foods and cosmetic products, and preparations for web based sales

channels are being promoted. The Doctors' Supplement brand is being promoted

along with preparations for exports of raw materials for cosmetic products.

What is Sparassis Crispa?

Sparassis crispa belongs to the family of large white edible mushrooms. This

mushroom has attracted widespread attention in Europe and North America

because it contains large amounts of β1.3D beta glucans. The consolidated

subsidiary Laboag Co., Ltd. manufactures high quality sparassis crispa in

Minobucho, Komagun in Yamanashi Prefecture, and has successfully extracted high

purity β1.3D glucans.

Glucan is a type of polysaccharide, with different molecular chains being

represented in α and β formats, with the main chains, molecular structure and

combinations being the main differentiating factors. However, the 1.3D combination

of β1.3D glucan has been confirmed to be the variant with the highest functionality



The flavor and nutritional value of sparassis crispa

declines in the event it is over abundant at the time when

spores begin forming. Therefore, the growth conditions

must be constantly monitored in order to find the

appropriate time for cultivation, and the timing and

conditions of the cultivation become the knowhow of the

Company.

(Source: INTERTRADE Website)

Kenko Iimono Online:

Z-collectioN:

http://kenko-iimono.com

http://z-colle.jp/

and boast of the most research and dissertations. β1.3D glucan is found in various

types of mushrooms, and bread and black yeasts. In mushroom forms, sparassis

crispa has been found to contain the largest quantities of β1.3D glucans equal to

triple the amount found in agaricus.

Doctors Studying the Effectiveness of β1.3D Glucan

With regards to the effect of β1.3D glucan, clinical trials (In compliance with Ministry

regulations governing clinical trials of medical products) for type 2 diabetes and type

1 allergies (Atopy and others) treatments are being conducted, with completion of

clinical tests upon patients in finished in September 2013. During December, results

of the clinical trials are expected to be announced, with an announcement also

expected to be made at an academic conference to be held in March 2014. If the

effectiveness can be confirmed in clinical tests, doctors can provide the product as

prescribed supplements in addition to providing advice on nutrition and foods, and

will give it a much stronger product appeal than the certified health foods. Health

related industries have been identified as a key part of the new Abe Administration's

growth strategy, and the Administration is expected to take aggressive steps toward

deregulation of the health food industry (Product effectiveness labeling is expected

to be relaxed to similar levels as the United States). Because clinical trials being

conducted by INTERTRADE are expected to become the subject of potential

deregulation, realization of deregulation will act as a tailwind for the Company.

Preparations for Web Based Sales Channel

The two subsidiaries Kenko Plaza Pal Co. Ltd., which sells over 1,000 products

including health foods to approximately 20,000 individual customers over the course

of one year, and Z-Collection Co., Ltd., which operates the beauty product sales site

"Z-collectioN" catering to younger consumers, will be responsible for sales. Kenko

Plaza Pal Co. Ltd. has received high regard for its specialization in health foods that

use natural ingredients and its sales website "Kenko Iimono Online" (Previously

known as "Maido Net"), which caters to consumers ranging from the 30s to senior

citizens, was launched in June 2013. In addition, INTERTRADE is also promoting

efforts to develop B2B2C sales channels.

http://kenko-iimono.com/

http://z-colle.jp/



Location:

Ono 952-1, Minobucho,

Minami Komagun,

Yamanashi Prefecture

Size:

Roughly 1,700 square

meters

(Source: INTERTRADE)

Cosmetic Products, Raw Materials for Cosmetic Products Provided

Externally

The cosmetics business is being promoted by leveraging essences extracted from

sparassis crispa (Containing high levels ofβ1.3D glucans) for sales as cosmetic

products within Japan and raw materials used in cosmetic products outside of

Japan. The high molecular structure of β glucans has been found to have similar

moisture retaining properties as hyaluronic acid, but it boasts of even better texture

qualities of being less sticky. INTERTRADE will conduct efforts to launch sales within

fiscal year September 2014, and safety and efficacy testing are currently being

conducted. Because there are no other cosmetic products that use essences

extracted from sparassis crispa, the Company must promote the superior moisture

retaining functionality of the product to increase its recognition amongst consumers.

Therefore, INTERTRADE is expected to promote aggressive advertising activities

during fiscal year September 2014. At the same time, research and development is

being conducted at three facilities in the Asia region where trading firms are

expected to begin selling products after the start of 2014. The beauty effect of

sparassis crispa has been confirmed, and the function process is expected to be

jointly researched by specialized institutions.

Promote Improvements in Productivity

Reviews of the production process for sparassis crispa are being conducted to

reduce materials costs. Stability of sparassis crispa at the start of production was

prioritized, at the expense of costs. But given that production has been stabilized,

the Company is now focused upon reducing production costs. Cost reductions will

be promoted along with efforts to develop and sell unique and high value added

products.

Roles of Group Companies in the Healthcare Business



Fiscal Year September 2013 Earnings Results

Sales Decline 3.0% Year-Over-Year, Operating Loss of ¥98 Million (Loss of

¥129 Million in Previous Term)

Sales declined by 3.0% year-over-year to ¥2.725 billion. While sales of the financial

solutions business segment fell due to the conclusion of contracts at the end of the

previous term, the contribution from new businesses of IT solutions and healthcare

started during the previous term allowed overall sales to remain basically in line with

the previous term.

Looking at the three divisions of the introduction of new systems and restructuring

accompanying development related work, delivered system maintenance booked

every month (Flow based sales), and healthcare related business sales, sales of

initial portions of foreign exchange related products rose by 24.0% year-over-year

in to ¥645 million (23.7% of overall sales), with flow based sales declining by 13.3%

year-over-year to ¥1.983 billion (72.8% of total sales) due to the completion of

contracts. At the same time, the contribution from M&A contributed to an increase in

healthcare related sales to ¥97 million (3.6% of total sales) from ¥2 million in the

previous term.

With regards to profits, IT solutions business and the healthcare business saw

operating losses of over ¥300 million (Compared with operating loss of ¥71 million

during FY9/12). At the same time, declines in amortization of goodwill (Amortization

completed in first half of FY9/12) and improvements in profitability of the financial



solutions business due to optimization of management resources contributed to a

contraction in the loss to ¥129 million in the previous term to ¥98 million in the

current term.

While operating losses were incurred, a net cash inflow of ¥42 million was recorded

in operating activities. A net cash inflow of ¥210 was recorded in free cash flow due

to the repayment of time deposits.

Financial Solutions Business (Changed from the Securities Solutions

Business in FY9/13)

Sales declined by 13.2% year-over-year to ¥2,419 million and operating profit rose

by 66.5% year-over-year to ¥564 million. The increase in sales arising from repeat

orders for system integration (SI) for foreign exchange margin trading systems could

not offset declines in sales of securities dealing systems (Customized support sales)

and transactions systems (Packaged sales). In addition to the completion of

securities dealing system contracts, declines in pricing arising from a switch to ASP

services was a major factor in the lower sales (Costs also decline along with the

switch to ASP service model). At the same time, exchange related systems have

been sold to a number of strong clients and are operating stably, but the rebound

from the introduction of a new system at the Osaka Dojima Commodities Exchange

contributed to a decline in sales.

With regards to profits, operating expenses declined by 21.3% year-over-year to

¥2.163 billion and contributed to the large increase in profits. In particular, declines

in maintenance, personnel costs due to optimization of management resources,

outsourcing costs due to internalization, and amortization of goodwill that has



continued from fiscal year September 2007 arising from M&A were particularly large.

IT Solutions Business

Sales rose by ¥209 million from ¥16 million in the previous term and operating loss

expanded to ¥131 million from ¥31 million over the same period. The business

performance of the consolidated subsidiary BSJ suffered from problems in the

customization work for the group management system "GROUP CATS". Subsequent

increases in costs above expectations and thinly stretched management resources

negatively affected orders and development work. At the same time, development

work for the medium sized company management system "GroupMAN@IT" and IT

operation management service "GadicsMAN@IT" were completed and sales were

launched. However, anticipatory costs of these services booked in fiscal year

September 2013 were left uncovered because full scale contribution from sales of

these systems is expected to begin being seen from fiscal year September 2014.

Healthcare Business

Sales rose from ¥2 million in the previous term to ¥97 million in the current term, and

operating losses expanded from ¥40 million to ¥186 million over the same period.

Sales rose by a large margin due to the securing of a sales channel through the

acquisition of Pal Co., Ltd. to become the subsidiary Kenko Plaza Pal Co. Ltd. in

February 2013. However, research and development expenses for clinical trials

conducted by Laboag Co., Ltd. and expenses associated with sales promotion by

Pal led to increases in anticipatory investments and contributed to an expansion in

the loss. Kenko Plaza Pal Co. Ltd. sold over 1,000 products including primarily

health foods though catalog sales to approximately 20,000 individual customers

during fiscal year march 2012.

In addition, the sales website "Z-collectioN" was purchased from S-Line Co., Ltd.

(Chiba City, Chiba Prefecture) in September 2013, and the sales function was

transferred from Laboag Co., Ltd. to Kenko Plaza Pal Co. Ltd. allowing Laboag to

concentrate its efforts upon manufacturing and processing. Z-Collection Co., Ltd.

was established as a 100% owned subsidiary for the operation of the "Z-collectioN"

website.

Other Business

The retreat from the asset management business, which was booked as asset

management and proprietary fund management earnings, in the previous term led

to a large decline in the proprietary fund management business. Currently the

proprietary fund management business is undertaken primarily to validate

development of trading systems in the securities solutions business, and no sales

were booked during fiscal year September 2013.



Total consolidated assets at the end of the fiscal year September 2013 remained in

line with the previous year's levels at ¥3.131 billion. M&A and anticipatory

investments for the IT solutions and healthcare businesses contributed to an

increase in fixed assets. Long term debt was increased due to M&A activities.

Current assets accounted for nearly 80% of total assets, and contributed to a strong

financial position with high levels of liquidity and no net debt. The equity ratio stood

at 72.0% in reflection of the strong financial foundation of INTERTRADE.



As described previously, the start of new businesses contributed to the operating

loss, but operating and free cash flows remained positive. This is an indication that

the Company was able to invest in future growth without significantly hurting its cash

position. Moreover, the margin of cash inflow in investing activities increased due to

the returns from time deposit accounts in response to M&A activities to grow the

business. At the same time, the margin of cash outflow in financing activities

declined due to a lack of financing needs and aggressive repayment of debt from

retained earnings during the previous term of fiscal year September 2012.

Fiscal Year September 2014 Earnings Estimates

INTERTRADE Expects Sales to Rise 10.1%, Operating Profit of ¥205 Million

INTERTRADE earnings estimates call for sales to rise by 10.1% year-over-year to

¥3.0 billion. Outstanding orders for initial sales work at the term start amounted to

¥1.939 billion (¥1.913 billion in financial solutions and ¥26 million in IT solutions),

and represent 64.7% of full year sales estimates. Initial sales (¥645 million in

FY9/13) and healthcare sales (¥97 million in FY9/13) are expected to grow to

account for the remaining amount of ¥1.061 billion.

By business segment, INTERTRADE has established targets of acquiring 10 new

customers by capturing the strong demand for high speed systems in the financial

solutions business, and in the IT solutions business 20 new customers have been

targeted to implement "GroupMAN@IT" and 3,000 units of operation of

"GadicsMAN@IT." In addition, efforts will be promoted to facilitate sales channels

over the Internet to double the number of active customers, and to launch sales of

cosmetic products using β glucan both within and outside of Japan.

With regards to profits, development of an integrated platform will begin in the

financial solutions business, but the disappearance of unprofitable projects in the IT

solutions business and improvements in profitability of the healthcare business are

expected to allow INTERTRADE to see a recovery to profits at the operating level.

On the back of the anticipated recovery in earnings, INTETRADE is expected to

reinstate dividend payments, with expectations of a ¥3 per share payment term end

dividend..

(2) Business Segment Strategies

Financial Solutions Business

The realm of services provided is being expanded from primarily "equities" to

include "bonds", "interest rates", "foreign exchange" and "commodities" on the back

of efforts to capture widespread demand for high speed systems. In addition to

providing a wide range of business opportunities ranging from multi asset, multi

currency, individual investor users, and interfaces, measures will be taken to

develop integrated platforms that contribute to fortification of the Company's

competitive strength (Architecture system operation integration that realizes high



levels of cost effectiveness).

In the realm of trading technologies, INTERTRADE has formed a collaborative

agreement with TORA Trading Services (United States), a globally recognized

system vendor that develops and provides electronic transaction systems. TORA

electronic transaction systems are designed for a wide range of other products

including cash equities, equity futures, options, convertible bonds, warrant bonds,

swaps and other products. The first point of the collaboration with TORA will be

measures to expand the volume of information of the "TIGER Trading System" and

the second point will be integration of both companies' technological expertise in

SOR and algorithms to realize reductions in execution costs and the ability to handle

large transaction volumes. In addition to increasing the volume of information, a

transaction system that is able to process this information at high speeds will be

developed to capture the growing needs of PTS and dark pool applications within

the Japanese financial markets.

Dark pool refers to orders collected that allow securities companies to avoid having

to go through the Tokyo Stock Exchange and to form transaction contracts via PTS

internally. SOR is a system where information is gathered from multiple markets

allowing for the execution of orders in markets that provide the optimal conditions

(Contract price, lot, and other factors). Algorithms are programs that allow

computers to automatically calculate and execute orders matching the optimized

conditions to maximize profits.

In addition, "TIGER Trading System", which boasts of a strong track record in

proprietary trading divisions of securities companies, will begin being provided to

proprietary trading firms. "TIGER Trading System" can be customized for buy-side

applications to provide dealing terminals, and is expected to be a driving force

behind the Company's efforts to capture 10 new customers in fiscal year September

2014. Proprietary trading firms are investment companies that specialize in high

frequency trading using their own capital.

IT Solutions Business

The "GROUP CATS" group management system undertaken by the consolidated

subsidiary BSJ accounts for over half of sales of the IT solution business, but

problems in some projects contributed to issues with profitability. At the same time,

near term demand for additional development from users remains strong, and the

potential for continued growth is high. Therefore, INTERTRADE has implemented

changes in the contract format designed to ensure that their work is adequately

covered and that prices are strengthened to secure profitability.

At the same time, INTERTRADE will leverage its Group's knowhow in group

management solutions acquired through the "GroupMAN@IT" group management

systems sold to medium sized companies in the IT solutions business and its

partnership with PCA Corporation to achieve new implementations at 20 companies

during fiscal year September 2014. In addition, the Company will seek to achieve

3,000 units of "GadicsMAN@IT" in operation during fiscal year September 2014

(Orders for 600 units booked during FY9/13), including the booking of orders for

between 2,000 to 3,000 units during fiscal year September 2014. Moreover,

engineer dispatch is also conducted in addition to the packaged systems mentioned

above and has become a key element in the foundation of the IT solutions earnings.

Healthcare Business

Strengthen Sales Channels



Efforts to conduct more effective marketing and renewal of the sales websites

(Renewed sites have been launched from November 22, 2013) designed to improve

usability targeting the some 150,000 registered members of Kenko Plaza Pal Co.

Ltd. and Z-Collection Co., Ltd. will be undertaken. Moreover, the frequency of

catalog mailings will be increased along with reviews of operating hours.

INTETRADE is considering forming partnerships with corporations that have large

numbers of members and has formed a collaborative arrangement with Nanoha

Senior Support on November 8. Nanoha Senior Support is a public interest

incorporated foundation that boasts of 125,331 members as of September 2013

and provides its members monthly informational services called "Smile Partner"

business service. INTERTRADE will begin providing its sparassis crispa related

products and other healthcare products to the registered members through the

"Smile Partner" service of Nanoha Senior Support.

Fortification of Promotions for Sparassis Crispa Products

INTERTRADE expects to conduct effective promotions based upon the pending

results of human clinical tests for its health products using the base iingredient "LB-

Scr" extracted from the essence of sparassis crispa by Laboag Co., Ltd. Moreover,

development and promotion of new products based upon β1.3D will be implemented

on the back of successful extraction of highly pure levels of β1.3D glucan from

sparassis crispa. The first product is expected to be raw materials for use in

cosmetics exported to overseas markets in Asia and cosmetic products within Japan.

Conclusions

While the second consecutive year of operating losses was recorded during fiscal

year September 2013, operating and free cash flows remained positive. Moreover,

INTERTRADE maintained high levels of liquidity with cash and equivalents of ¥2.015

billion compared with total assets of ¥3.131 billon at the end of fiscal year

September 2013, and a high equity ratio of 72.0%. Another key point is the

Company's outlook for the decline in sales to be terminated in fiscal year September

2014 with the first increase in five terms. Efforts will be made in the financial

solutions business to leverage INTERTRADE's high speed processing technologies

to sell products to a wider range of customers, and in the IT solutions business to

expand the range of product lineup and sales channels. At the same time, sales

channels and product development will be fortified in the healthcare business.

These efforts are designed to increase both sales and profits.

Another important factor will be INTERTRADE's ability to achieve its sales and profit

estimates during the second half of fiscal year September 2014. In addition,

anticipatory investments are expected to continue during the first half and may

contribute to volatility in earnings in both the first half and full year. However, the

achievement of second half earnings estimates can be viewed as a positive sign

that the Company's strategy is successful and as an indication that potential for

positive surprises in earnings during fiscal year September 2015 exists.

DisclaimerThis report is intended solely for information purposes, and is not intended as a solicitation toinvest in the shares of this company. The information and opinions contained within this reportare based on data made publicly available by the Company, and comes from sources that wejudge to be reliable. However we cannot guarantee the accuracy or completeness of the data.



This report is not a guarantee of the accuracy, completeness or validity of said information and oropinions, nor do we bear any responsibility for the same. All rights pertaining to this report belongto Investment Bridge Co., Ltd., which may change the contents thereof at any time without priornotice. All investment decisions are the responsibility of the individual and should be made onlyafter proper consideration.

Copyright(C) 2014 Investment Bridge Co., Ltd. All Rights Reserved.

intertrade co., ltd. (3747)

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