Softbank Group Corp

Now we would like to start SoftBank Group Corp Earnings Results Announcement for the six-month period ended September 30th, 2023. First, I would like to introduce today's participants. From left, we have Yoshimi Tsugoto, Board Director, NCFO. Kazuko Kimiwada, Corporate Officer, Senior Vice President and Head of Accounting Unit. Navneet Govel, CFO, SB Investment Advisors and SB Global Advisors. And Jason Child, Executive Vice President and CFO, ARM. Jason is attending through Zoom. Today's announcement is live broadcast over Internet. Now I would like to invite Yoshimitsu Goto to present you the earnings results and business overview. Thank you very much for joining today. Good afternoon, everyone. As usual, we have Miski Miwada, Head of Accounting, Navneet Dasie for Vision Fund. And also, in addition, we have Mr. Jason Child from Arm, CFO Arm. But actually, Arm just announced earnings this morning, Japan time. Of course, we wanted to have him in person, but because of that reason, we have him on Zoom today. So for this quarter, as an event for this six-month period, IPO of Arm was the biggest event for our group. was one of the biggest IPO in the market for this year, and September 14th, 2023, went public. This is the summary of the IPO. $52 billion for the market cap upon listing, of which 10% was offered to the market. So it's about... close to 700 billion yen equivalent and also the market cap about 7.5 trillion yen level. After then, share price actually has been moving in a robust way as of yesterday, also exceeding the price upon listing, so I believe that they made a good launch as a public company. And this is the investment return on ARM. Of course, it's just a few months after the IPO, but also like to share with you the MOIC. This is the metric used to describe the value of performance of the investment relative to its initial cost and the 3.2 times back then was an acquisition. It was 3.3 trillion yen. This was quite a large amount, of course, for SoftBank Group and as a CFO, I was a bit nervous for this amount when it comes to the acquisition. But still, we did have a very strong belief in this company as a dominant player in this market. Therefore, all the senior management actually was in sync in terms of making progress in the acquisition process in the short-term period. In the past, we made a relatively large acquisition, which is Alibaba and Sprint, and even compared with those, actually, the ARMA IPO also gave us a good investment return as of today already. Alibaba cost was very small, and as an investment project, it was a great investment, and the growth-wise, actually that Arm has already grown to 8.5 trillion yen level. So it is making great progress. Of course, IPO is just one of the milestones of the company's history and company's future. So we would like to keep a good expectation on Arm, especially Arm is the core of the core of the SoftBank Group and one of the most important strategic company for us. So that We believe AI can be the good leading position or the core position of the group which we are driving this AI revolution and also the AI-related services. So very much expecting and also supporting and also utilizing capability as well. In the past 10 years, actually, There are IPO ranking which you may not be very familiar. In the past 10 years, this is the top 15 IPO market cap of which six of them are SVG involved as a matter of fact. So these are the good track record which we would like to share with you. And because Masa, our CEO, has a great eyes to see to the future of the company which is one of the advantage and also strength of the company so we would like to take an advantage of such a good eyes that we have in the company and here on is the consolidated results. So as for net income, negative 1.4 trillion so since the last At the same time last year, we have negative figures here. And at the same time, actually, we have – in terms of the transaction of arms sales, actually, some of them are reflected to consolidate the P&L, and some of them are not. sorry, reflected P&L but not reflected balance sheet. So here that I can share the accounting treatment of acquisition of shares from Vision Fund 1. 25% equivalent shares were acquired from Vision Fund 1 in August and along with this acquisition, realized gain was recorded at Vision Fund. But this was intra-group transaction, therefore, it has been eliminated in consolidation so that that's not shown on P&L. But actually, in the other hand, increase in third-party interest is shown on P&L as an increase in costs. From the balance sheet point of view, the same amount, third-party interest, this is also shown in increase in liabilities. Therefore, this transaction, from the consolidated point of view, P&L and the balance sheet, both has a record in costs and liabilities. At the time of IPO, however, as you can see, about ¥745 billion of the offering was made, and we received the gain from there. But that's again after the offering remains as our subsidiary. So no impact on P&L point of view. And you may ask where that goes to. And this goes to cash on balance sheet as a positive ¥745 billion. And it goes to also the capital surplus and the non-controlling interest. So the cash itself, of course, has been recognized as an enhancement of the balance sheet, which is in this accounting segment. And also, to see the enterprise value of ours, you see the KPI in the following pages, which is net asset value. So there, we believe that we are reflecting this increase in our value. The biggest KPI for the metrics for the company is something that we believe is in the net asset value. Therefore, that together with net asset value and other KPIs, I want you to refer to those to see and measure our company's value and also our safetiness of the company. And here on is the gain and loss on investment. If you only see the amount year on year, last year, half year, half year, First half seems about the same, but the content itself has been changed a lot. So as you can see, blue portion, this is vision fund comparison. So this term, this quarter, this first half minus a negative 583 billion yen, but the last first half was a negative 4.3 trillion yen. So bid on fund improvement has also been seen in this first half of fiscal 2023. Last year, about the same timing, we also recorded the gain related to settlement of Adibaba prepaid forward contract, which was a relatively large number. So that was net to the... the last year's number, but this year we didn't have a similar type of one-off gain and ended with 963 negative billion. But also I'd like to highlight that the reduction in losses at visual funds. And here is the income before income talk. you see the number is quite different compared to the last first half. So that first half was 292 billion, and this first half is the minus 907. So it looks like 1.2 trillion yen equivalent of deterioration that you may ask what that is coming from. So number-wise, under the consolidated accounting, there are many factors there, but the majority, main part is from a movement of the third-party interest in Vision Fund. So last year, there was about 1 trillion yen level of the positive impact to the third-party interest in Vision Fund. But this year, as mentioned earlier for the slides, 226 billion negative impact. So this was actually the biggest impact to this time income before income tax. So this quarter has a bit different factor from the other quarters for the results. In KPIs, there are three important KPIs, net asset value and second of all, loan-to-value from the credit point of view. So net debt and the assets ratio. And the last but not least is cash position. Compared to end of June, net asset value has increased by ¥1 trillion. Loan-to-value also remained in safety level cash position, ended with ¥5.1 trillion. From the safetiness of KPI, we believe that these are all in very healthy positions. And this shows the change in net asset value by breaking down. So this time, close to one trillion increase for September end. And we have about share price increase of 0.5 trillion yen. And also, Forex was positive for this time, net asset value point of view. And some others, that comes to 16.4 in net asset value.

This slide shows NAV for share and share price. What we'd like you to look at is what they say, sub-bank discount. So actual stock price goes how close to the value. And with the ARM IPO, which was successful, the gap widened accordingly. As of end of September, net asset value per share was $11,000. Whereas share price was 6,335. So going forward, we have to figure out how we can narrow the gap from technical perspective and from fundamental perspectives, and we will continue dialogue with investors. And if you go deeper into equity value of holdings, as you can see, since Q4 last year, you can see it upward trend. And if you look further, you will realize that Alibaba, that equity value of holding, was almost sold out by us. But then ARM is now a new driver of the value of holdings. Of course, Sotbank KK is contributing a lot, thankfully, to their stock price. And distribution of portfolio is shown here. As you can see, Alibaba obviously is a Chinese stock. And from a geopolitical risk perspective, we have to be very careful about the Chinese market. We have been managing portfolio for the last few years and now from geopolitical risk management perspective, we are now in better position. And talking about net asset value again, since three quarter earlier, you can see upward trend of course market will move and we cannot be complacent but as far as our asset is concerned you can see the positive trend recently and loan to value 25% is our policy from safe operation perspective, and currently we are at the level of 10%. As an investment company, maybe some people may say you have to be more aggressive, you have to be more active. And the cash position, which is higher than $5 trillion, This is another promise related to another promise, which is make sure that we have a two-year worth redemption of the money. From that perspective, it's five-year equivalent as opposed to two-year for a debt redemption. And impact of Forex. How is it affected on our finances? And from consolidated perspective, consolidated net income or net loss was 0.6 trillion yen. But as an investment company, we want to have you look at net asset value to measure our value. And weaker yen is positive for net asset value, which is plus 1.9 trillion yen. And almost similar 1.8 trillion yen equity is posted for the accounting. Now let me talk about ARM. We are ready to talk more about ARM. For the last year, we kept saying that, sorry, we couldn't say a lot about ARM because ARM was in preparation for IPO. But now, we are happy to talk about ARM openly. ARM-based chip shipment is shown here. Actually, this curve is exactly what we expected when we acquired ARM in 2016. Since then, I believe that the number of shipments has been growing exponentially. And actually that was what we expected and illustrative image was, I believe, shown to you. And this is actual result and I'm sure that our expectation and actual result is really overlapped. So as the society move from IT to AI, everybody will need And I'm sure that ARM will meet people and society's expectation. And cumulative number of shipment to June 2023 was 270 billion. There are four major markets where ARM can grow further. As for mobile, they already have 99% share. And for cloud and automotive, IoT embedded. For those areas, for cloud, for example, market share was 7% in 2020. And likewise, in 2020, they had 33% of automotive market. And the share has been growing to, for example, 10% for cloud compute, 41% for automotive, and 65% for IoT and embedded. And 65% is almost close to a dominant position. And TAM is really big, actually, for each sector. And as you can see, there are a lot of opportunities out there. And as you can see on the far right, for cloud and automotive, over 10% of potential growth is expected. And that's really attractive. and talking about arms target markets in terms of mobile or for client mobile devices for consumers like smartphones and tablets and also other electronics and when it comes to automotive Incredible amount of chips are used in this market and infrastructure obviously and IoT like manufacturing and services. Chips are necessary components and an unimaginable number of chips are used in those sectors. In the past, AI, machine learning were running in computers, but AI and machine learning are getting closer and closer to you, to the edge. And AI will advance even further. As you can see, a lot of industrial leaders announced to adopt ARM's design in ARM's chip. For example, Google's latest smartphone, Pixel 8, was based on ARM's latest generation of CPUs, ARMv9. Also, Nvidia announced a second generation of ARM-based GH200 Grace Hopper superchip. Runesys Electronics announced adoption of Arm technology for next generation of chips for autonomous driving. So like you see, Arm is enjoying great business growth. And in terms of numbers, which was already announced by Arm, for quarterly revenue, the record revenue for the first quarter as a listed company. And multiple high value licenses contributed to this great performance. As for the revenue, by the way, it's partially different from what we disclosed before. because of the reflection of the latest number to the numbers used for F1 filing for IPO. Non-GAAP operating profit, 92% year-on-year. So they are growing strongly. And

and annual revenue is providing guidance for the future annual revenue. 2023, according to the guidance, it's providing the range of $2.96 trillion to $3.08 trillion. As you know, the semiconductor is relatively weak, however, including the second half is expecting very robust growth there. And guidance for the revenue, not only revenue, but also provided the guidance on non-GAAP operating expense as well as non-GAAP diluted earnings per share. Analysts forecast that the semiconductor industry will continue to recover although trajectory is unclear so we agree with such expectations. And here on SoftBank Vision Fund status that I would like to share with you including status. Here is the gain and loss on investments for the second quarter fiscal 2023, 232 million combined. So it was a positive after the last quarter. That also includes the gain on sales of Vision Fund 1. It's a large contribution to the total, mainly because of BAM. And this is the gain and loss on investments quarterly basis from the past. Well, environment is still tough, but still, if you see, the quarterly is recording positive numbers from the previous term. So we believe that we have hit the button and also making a good move towards the positive figures. And also, this is the cumulative gain-loss on investments. Again, starting from the three-quarter before, it is making a robust recovery. Going on, we are hoping that this numbers also turn in positive and make a further growth, and that's something that we also need to see. This is the cumulative investment return on Vision Fund 1. In summary, the left-hand side is investment cost, so it's about $90 billion invested, and so far $104 billion made as a return. Exited, orange portion, has making a good contribution to investment return. That also includes arm share transfer. The Bitcoin fund is private equity fund. However, now that the private company's portion becomes about one-fourth of the total, of course, and this includes that aiming for the IPO, which we expect. And at the same time, when you see the public companies The growth is something that we would like to expect further in the future. So we would like to bring numbers here to outperform further in the future from here. Vision Fund 2, on the other hand, $52 billion of the investment cost, and as of September 30th, cumulative investment return was about $31.5 billion, so that it's not yet a good performance. As I mentioned before, It is only about a few years, couple of years since the launch of Vision Fund 2. So we would like to take a little bit more time to see how that goes. Compared to Vision Fund 1, number of portfolio companies are larger and we hope that each individual portfolio companies in Vision Fund 2 can find a good growth driver so that we will be able to see the good growth in their value by supporting them in various ways. And the results so far from the Vision Fund, I believe they're easy. to understand is the number of IPO and actually since the inception, it has achieved already 50 listings. So even if you have IPO, because IPO is only the one milestone of the growth trajectory, but the company that can make an IPO means that the company itself has recognized well by the market and investors so that we can also expect the good future. But at the same time, looking at the market status, the environment may not always have the same movement as we expect. And in the past few years, we've been having a difficult environment so that even they have an IPO, but still the value has not been fully recognized in the market. So there are some portfolio companies that are not being able to show the good results yet. So out of these 50 companies, there are quite many that have not been able to fully recognized by the market yet. And also on your right-hand side, this is the robust late-stage portfolio companies. as we can select portfolio companies here on this slide, and also there are companies that we cannot show on this slide as well. There are quite many, and we are preparing that they will be able to see on this slide sometime near future. So the total fair value of late-stage portfolio accounts for $29 billion or above, and we hope we will be able to see the good growth on the way to IPO or upon IPO. And this is the portfolio company driving AI revolution. We are shifting to the investing mode as a result. What are we aiming for? What is the objectives? So before we go into that, let me explain to you What kind of portfolio company are there who can drive our AI revolution? So I give you two examples. First, ByteDance. I believe you are quite familiar with this company that they are the provider of TikTok. deploying AI algorithm to power the delivery of personalized content. And I believe they have a very good strategy and because 2L, so that's why many of you are enjoying TikTok service. So this AI algorithm providing the fresh and also something like content is provided to the customers. As you see on the below, share of social media users using TikTok actually increasing almost double the numbers in the past few years. I don't believe that we can find many of such content in the world right now. On your right-hand side, this is the portfolio from India, a company called Swiggy. So this is providing the online grocery ordering experience in Indian market, and they provide a kind of intuitive food and grocery ordering so that the AI is utilized for the recommendation for the users, and I believe that's a good way of using AI to build their business strategy. So AI investment for the second quarter. So there are a combined of the investments from SoftBank Balance Sheet and Vision Fund. In total, 1.5 billion. So last quarter was $1.8 billion of the investment of combining Vision Fund 1 to Latin Fund and SPGs. And further, if you compare with the previous quarter, the number is growing almost double or triple. So about two years ago, three years ago, we actually investing like one trillion per quarter. So compared to that, this looks quite modest. However, compared to last year, we are increasing a number of the invested amounts. So we are becoming more active. And you may see some increase in investment by SPG. From the strategic point of view, it is important from which entity that we're investing. So basically, in principle, our investment activity is done by vision fund. That's our basic understanding, basic principle. But invested by vision fund also requires the good financial return. How can you receive a financial return? But before then, we may want to think more harder or deeper to certain companies. If that's a company, probably rather not from the Vision Fund, but from our SoftBank Group balance sheet and see how the company grows. So we're having a lot of discussions where the entity to invest in these companies. So we are investing in AI, and that's the main strategy for our company. And for Vision Fund, it has a term. Also, basically, it's a minority investment. So there are some differences in between the investment by SPG. But the investment by SPG, actually, as Masa – almost more than a year ago that he's not showing up on this stage for the earnings, but he's been very much... devoting himself and involved in the discussion, how and what is going to be the changes in life cycles or life, people's life from the AI revolution. And we would like to be the first runner for such changes or the revolution. For the first quarter, second quarter, from the sense we have a little bit more investments from the SBG compared to from Vision Fund. And what are those investments? So I pick up two, three examples for you. First is the Sakevi. So they have a very high-quality autonomous driving technology. and so that that can optimize supply chain, delivery route, and energy efficiency. By having these developed, because truck industry does carry quite a huge issues, problems for a long time, but because this industry is also essential for the market and people, So that hasn't been able to fully resolve the situation. So for example, driver shortage, efficiency of uptime, and if you have a longer time of working, risk increase. That leads to safety issues, safety concerns, and also that leads to the CO2 emission of transportation costs. So this company, this business, may be able to find a dramatic solution for such an issue. And second is the company called Vario. This is the company convert pallet handling to autonomy with driverless forklift. So how efficient can you handle the pallet is important. So Pallet itself is controlled autonomously from AI and robotics solution utilizing a driverless forklift and not human driver so that it can change the speed. in an efficient way and also can move even wider. It has already gone public back in 2017, but this October through the takeover bid that we have acquired 71.4% of shares so far. So this has already been utilized. in many use cases in global basis. And also, we are very much excited for this company of the future.

And next, Mapbox. I think the Mapbox is getting attention gradually on the media. So they provide customer navigation and a map application for flexible use by leveraging AI location information and navigation information. They provide such information. and currently over 700 million users are using mapbox maps and obviously car manufacturing companies like toyota gm bmw and livium adopted this map service and not only providing maps, but also they maximize delivery efficiency by optimizing delivery routes and by real-time visibility of fleet operation. So transportation management company is what you may want to call them in a way. So let me show you a short video clip here.

When you check the weather before leaving the house, track a package you're expecting, or make a complex business decision based on data, you realize that the online world and the physical world are not two separate places. They are linked in infinite, essential ways. Mapbox makes that link work. We are the technology behind hundreds of your favorite apps, powering many of the experiences, that have come to define modern life. Our maps and location services help the world's most transformative companies drive innovation across logistics, automotive, autonomous transportation, business intelligence, and augmented reality, inventing the experiences that will shape our future. Today, our network of customers includes over 2.7 million registered developers, more than 200 members from the Fortune 500, and some of the world's largest, fastest growing companies, such as Amazon, Strava, and BMW. And with hundreds of millions of connected vehicles shipping in the next four years and the massive growth in at-home delivery, the need for live location services is only growing. These massive new markets are changing the way we do business and improving the quality of life for everyone. And this is just the beginning. Wherever you are, wherever you're headed, Mapbox can help you get further, faster.

Now... Of course, Masayoshi Son is leading those investment activities. The other day, we had a function called SoftBank World, and Mr. Son showed himself for the first time in a while to make a keynote speech. And if I may summarize what he said, Sopan Group, I believe as far back as 2016 at General Shareholder's meeting, it was the first time when he touched upon singularity. And he said that singularity will arrive within 10 years. And the term similarity back then was something that we've never heard of before. And it's been seven, eight years since. And now AI, especially Gen AI, is exponentially transforming the world and So he committed himself again to leading such world. GPT-4 can pass the medical exam as they claim. Anyway, within 10 years, 10 times more intelligence of the total human being shall be delivered it said so that's agi or artificial general intelligence well intel ceo said something similar according to a nikki article this morning and then next comes asi which is artificial super intelligence and we assume that within 20 years 10 000 more intelligent uh artificial intelligence will be delivered 10 times more than the total sum of the people's intelligence. So ASI shall come in 20 years, we think. So first, within 10 years, AGI will come, and within 20 years, ASI should come. So we have to come backwards and think what kind of solutions we can deliver. And when you think about that, you have to first identify challenges and issues to be solved. And big data, private data, And based upon the training on those data, AGI will do inference and then the AGI will start thinking what's happening in the world. And all industries can be completely revolutionized by this engine. So AGI gets trained real time, AGI makes inference real time and they repeat the cycle and as they learn more, they get smarter. Seven, eight years ago, we started saying that AI will redefine all industries. And that was AI. When it comes to AGI, revolutionize. AGI will revolutionize all industries. What specifically AGI can do? Well, in 360 degrees world, like all industries, Maybe if I may pick up some industries or services that you feel are relevant, mobility, healthcare, services, finance, logistics, manufacturing. In those areas, there are things that you wish to have in the future, for example, in terms of mobility, accident-free autonomous driving. Driverless driving can be dangerous, people say. Of course, they may cause accident but far less than what a human makes accident. And for logistics, data-driven supply matching can be delivered and just in time by the second AGI will make them possible. So this goes on and on with AGI. Industries will be completely revolutionized. That's why as a SoftBank Group, we want to make us the most AI-empowered company in the world. and by doing so we can generate a lot of services and products and also we can help a lot of businesses get connected each other. So we want you to associate AI with us. Now, Last but not the least, let me talk about financial strategy. It's been six months since the fiscal year starts, and we remain the same in terms of financial strategy, adhering to financial policy, financial management, to address both offensive and defensive. For the financial policy, again, stay the same. We want to share with you what those numbers mean to us. LTV 25%, even though it exceeds, we are not going to be in trouble. What we mean is if we have LTV 25%, we are operating in a very safe way. So it's not like close to 25% or far away from 25%. And for bond redemption in cash, we have a five-year worth now. And you may say it's inefficient way of spending money. But if you want to compete in a very competitive market, You have to learn from textbook and also you have to put your activities in practice, your policy in practice. And this financial operation is organically connected to the financial policy. Of course, we will invest. while we are protecting ourselves. In order to grow a net asset value, existing portfolio is not enough. Monetizing existing portfolio and then the gain we get should be redistributed to new investment. And of course, we have to think about capital allocation, shareholders' return, and financial stability. For example, in terms of return, share buyback, and more dividend, those can be returned to shareholders. So for the credit investors, keeping credit safety is a return to credit investors. So we need to make sure that we have a good balance in investing new investment for company's growth. We have 5 trillion yen in cash, and why don't you start buying your shares, and why don't you increase dividend, you may say. Yes, I understand your opinion, but we... Always think about that. But when and how? We will keep watching how the market grows, how our business grows, and figure out the best timing and best way for returning to investors. We want to run our business so that our investors will appreciate our performance and return. And no company has done 4.5 trillion yen worth of share buyback in the last few years. And again, we remain serious and figure out when is the best timing to return to you. To summarize, our IPO successfully completed. and they reached one of their milestones, and they are ready for next round of the growth. And next, net asset value, which is one of the most important key indicator, increased from 15.5 trillion yen to 16.4 trillion yen. Third, we carefully resumed investment. Last but not the least, Vision Fund looks to increase MITU long-term value. SoftBank Group and SoftBank Vision Fund will keep working to maximize the value of the portfolio. Thank you very much.

Now we would like to take questions. First, we would like to take questions from the floor. please wait for the microphone and start with your name and affiliation. For those who are on Zoom, please access to the Zoom as we informed you in advance and please refrain from connecting to other live stream to avoid any echoing. You can start pressing raise hand button if you wish to make any question. If you'd like to withdraw your question, please press lower hand button. We would like to ask for those who are on Japanese Zoom, please make your question in Japanese. We would like to take up to two questions per person so that we can take questions from as many people as possible. Now we would like to take questions from the floor. Please raise your hand if you have any. The person with the grey jacket in the front row, please. Thank you. My name is Goto from Mainichi Newspaper. WeWork had filed a bankruptcy and what is your impression and also any impact to SoftBank Group business itself? So filing Chapter 11 has happened. First of all, I'm very sorry to hear that. As a company, we need to accept this reality and also need to learn the lesson from this for our future investment activity. What went wrong from our investment decision and that needs to be improved going forward. So that became a very big hallmark for us. At the same time, from the accounting perspective, because value has been decreasing, and that being recognized every quarter basis in the past, and we've been evaluating in very conservative way, so that as of now, there is no any big surprise or anything for the accounting perspective as of today. Kimiota-san, do you have any comment? I have another question. How do you see the management responsibility of Masa? As CEO, he's taking responsibility for everything. Of course, that's the one idea. As for WeWork, he was, of course, involved in the decision-making, but I believe this is something that we need to accept as an enterprise, as a company, So we all need to learn lessons from here so that we can make a full effort for the success of the Vision Fund. And right now, Dr. Masa is involved in devoting himself for the new chapter or the new projects for the SoftBank Group, and I believe that it's even more important for us him to make such a good involvement in the business planning for the SoftBank Group.

Any other question from the floor? And the person in the black jacket, please. Thank you for taking my question. MJ from . I have a question. The piece of investment, if you could elaborate on that, $1.8 million for the first quarter and for the second quarter, $1.2 million. So I don't feel it's very speedy investment, if I may. So how fast or how slow you are going to invest going forward and an investment by group, investment by vision fund, what's the ratio that you have in your mind? Thank you. Thank you for the question. As you can see on the slide, last year, Q2, Q3, Q4, there was 0.5, 0.5, 0.5. Now this year, 1.8 and 1.5 for Q1 and Q2 respectively. So it's triple amount. Some people say, wow, that's big. And from SoftBank perspective, it's too small. So it depends on whom you ask. And we are not just making money. When new investment opportunity comes up, maybe the ticket size may be bigger. So the absolute amount of investment may be bigger. bigger for the rest of the year but again we are very selective when it comes to investment opportunities so the pace might be slowing down so it depends so investment it depends on investment opportunities but as you know we have plenty of cash position so we are ready for whatever big investment opportunities you think we think it's good And talking about investment by fund, investment by soft bank group, the ratio or percentage, we don't have any rule or anything like that. rather than thinking about whether we can get a good economic performance soon or not, I think we want to think together with SoftBank Vision Fund. Or like I mentioned earlier, if there are investment opportunities, which we think we should work with them and help them, then SoftBank Group may invest in those businesses. And in other cases, if SoftBank Vision Fund, we think it's better for them to invest, then let them invest. So there is no specific rule, but it depends on what expectation we have from those investment opportunities.

Thank you. Any other questions? Person in the front row. My name is Yamaguchi from Mainichi Newspaper. So as for the WeWork bankruptcy, so Martha's Eyes or the judgment Some investor may have a doubt on his eyes or his judgment. Maybe he has intuitively fell in love with the CEO or the founder, but would you change or improve the way of judging the investment target? After the WeWork investments, there were times that we... to commit the investments, following investments for the WeWork. But at the same time, we also mentioned and committed to the market that we are not going to do the rescue investments for the portfolio companies. And after then, we've been clarified our disciplines and also changed and updated the investment criteria so that not only from the one-none-go decisions or one-none-go criteria for the decisions for the investment, but we are brushing up those criteria every quarter basis. Nafni, do you have additional comment?

Thank you, Gautam-san. I agree with what you said. Our focus right now is to preserve our preferred capital in WeWork. And as Gautam-san said, there are no incremental investments. And also, as Gautam-san mentioned, most of the exposure has already been written down. So there's no residual exposure, only the equity exposure based on the stock price that was trading at September 30th.

I have another question. 25% of arms share that you bought back from Vision Fund and I believe that you had bought in quite high price. What was the reason? Is it because Saudi LP is in the Vision Fund and there were those? I think there must be some reason that you bought with that price. First of all, we, SoftBank Group, is very much expecting the great future of Pigeon Fund. Of course, like you said, we have outside LP, so this is an independent fund. Of course, we invest in this fund, but we are about 50% and remaining 50% are the external LP. and based on the good discussion and agreed upon. The price and both are convinced and the fund side is satisfied is the price. We, SoftBank Group, also are happy and agreed with the price considering the future. I don't discuss any detail agreements or the detailed discussion we had. That's the private discussion. But how is that going to be looked from outside, from analysts or others? How they look at the share after this transaction? How are these recent analysts seeing the price for SHARM? Even with the experts of those pricing or the analysts, I think that they have quite convinced. And my last question on WeWork once again. So what was your final investment ratio to WeWork? Equity debt in combined, about $14 billion. Ratio, please. Ratio. What was the investment ratio in WeWork? How much percent ownership? Economically, 70 percent, yes. And cumulative loss, $14.3 billion. As disclosed, please look at the disclosure. Thank you.

Thank you. Next question on the venue. Shikata from Nippon Keizai Shimbun or Nikkei newspaper. Two questions. First, AI strategy. I don't think that you're going to make AGI, but from manufacturing and financing and manufacturing and AGI will have an impact. So services and products, Sopeng Group may want to develop them. Thank you for your question. We are not ready. to share with you the progress of our discussion internally and it may take time before talking to you about what we want to do. Anything can possible at the moment to be honest. Obvious ones, of course, and businesses, industry that we don't have as our parts, if you will, in our portfolio. And if there are partners, potential partners that we can work with to drive AI, Of course, we will think about that, whether it's service or product. Sometimes we may take a lead in developing those services and products, but we're still struggling and figuring out and give us some more time before talk openly about our specific AI strategy. Thank you. The next question, different color. SoftBank and Mizuho, which is one of your friendly partners, and Rakuten, that is kind of your competitor. Mizuho Financial Group and Mizuho Securities announced to make additional investment to get closer to Rakuten. And SoftBank, Rangyafu, and Peipei Shoken are also Mizuho working with. So Mizuho, from capital perspective and from business perspective, they are getting closer to mobile operators like Rakuten and SoftBank and other mobile related service companies. What do you think? Well, to us, Mizuho Group is a main bank group and we have very strong relationship. and we have 100% trust each other. In the meantime, Mizuho, of course, is one of the prominent financial institutions in Japan, and they have a lot of customers, a lot of businesses, so it's up to them to make their best decision. and the relationship between Mizuho and us after their announcement of additional investment in Rakuten, I don't think it will change anything about our relationship.

Thank you. Any other questions, please? The very front row person, please. Morita from Toyo Keizai. Thank you. I have two questions. First, EPS and also the discount for the NAV. So you mentioned, and it doesn't really narrow down. So earlier you said, impression-wise, you don't really answer for narrowing the gap of the discounts. So for this SoftBank discount, Do you have a good understanding on the factors or reason for these discounts? And are you preparing for the solutions? Or you have done any of the methods or anything but haven't been able to narrow down? I believe there are issues in two ways. One is a real issue and the other is technical issue. So for example, short-term period buyback can be one technical solution. Many of the companies who have done the buyback and looking at their trajectory of share price, it is just the one time. And I can understand that's why. So important thing is the real solution. So we need to have a good understanding by the market on our strategy. And strategy, from the investor's point of view, may not be enough. That's one angle for that. we do need to improve our strategy itself. And second angle is that we have a long-term vision and try to do that in advance. And maybe we are too early or too fast so that it may not be fully clearly understood by the market or investors. So I think there are two things. And maybe both angles exist there. And to solve the two issues, I believe we need a kind of disclosure approach from the management point of view. And also, even more important is to show you the results as soon as possible. So ARM IPO, this is one good milestone. And even after the IPO, we've been seeing a robust move and now that we're seeing a further development in our business and then I believe that you're seeing the results so that we'll be able to narrow the discount so we need to show you the results that's one thing and also me as a leading investor relations probably we need to have a deeper communication with investors so that investor can understand our strategy and we need to take more time on that. That's another solution and an issue that we have to think about. So how we solve this discount, I think that the thing that I have said earlier is something that we need to do in total. I have a second question. view on the group management, how they prioritize, how they position. So because recently, Masa is actually making a message, the company which does or provides the generative AI, then it's not really the investment business anymore, but rather like to do because you have a contest in the companies for the generative AI and the Yahoo AI so that he is rather focusing more on the operating business rather than investment business. That's how I feel. But at the same time, you have an investment business as well. So what is his mind? What is his focus? Has his focus been changed or the weight has changed? I don't believe he has changed his focus. Being an investment company here, but as a business person, Masa is one business person and company, also we are creating the business. As you can see from this slide, the first, our company has to utilize AI. Are we really using AI? That's the kind of a question back to the companies, back to the employees. That's why that we have an internal contest or competitions amongst employees to come up with the ideas for the AI use case. So for this agenda, request structure systems, probably that that can be penetrated in our company and that can be a good power to compete against our competitors that's the kind of a first step that's the one that we first need to focus and that's the agenda that we are investing in and the group companies are growing along with the utilizing of ai so i think that ably leads up to this his comments here and that's how he sees the ai right now thank you any more questions

from Asahi newspaper. In your presentation, you mentioned geopolitical risk. So I have a question around that. I think you are increasing investment in Israel backed by investment by Saudi Arabia partially. So at the moment, how do you position yourself in this current geopolitical environment? Navneet, would you like to comment on that?

Sorry, could you repeat the question?

Yes, about investment. through Vision Fund investment in Israel. I think you are increasing investment in Israel. And looking at the current situation, geopolitical risk is growing. So I wonder if SoftBank Vision Fund portfolio will be impacted or would you like to reconsider strategy or would you expect some short-time impact from geopolitical risks in the Middle East? Thank you.

So actually, it turns out in the September quarter, we made an investment in an Israeli company called Cato Networks in cybersecurity. And as Godosan said, we continue to look for AI disruptors all over the globe, regardless of where the location is. Of course, some of these geopolitical developments are, you know, there's a lot of human tragedy there. Our view is that our portfolio companies are – we have a long-term investment horizon, three to five years, and companies that are disruptive, that are scaling, will do well no matter where they are. So whether it's Israel or other areas, we continue to look at those.

Thank you very much. So let me see if I understood correctly. So you don't have any rule in terms of the place or location in terms of investment. So whoever or wherever it is, if it's AI disruptor, you will continue investing. So at this moment, you don't have any intention to change your strategy. If I may add some colors. let's say China. We are not actively investing in China but there are a lot of great portfolio companies that may have country risks. Sometimes If you think that one day it's okay, next day the business is bad, you cannot invest in such companies. So you have to control yourself, manage yourself in terms of where to invest in. Thank you.

Thank you. Any other questions? If not, then that's all for the questions from the floor. And we would like to move on to the question from online participants. Please refrain from connecting to other live stream to avoid any echoing. And once again, if you are on Japanese Zoom, please make your question in Japanese. Thank you. So first, Mr. Nakagawa from Newspix, please unmute and ask your question. Can you hear me okay? This is Nakagawa speaking, yes. I have two questions. First, SPG investments. So you mentioned the belt. So world is moving to AI and you like to invest from SPG for on those that can be an important part of the AI revolution. So important part. Can you elaborate a little bit? How do you decide when it comes to the investment from SBG itself? Good question and also a difficult question as well. We haven't been clearly defined that yet. But after the discussion, those companies that we are investing from SBG falls under such criteria So that may not be clearly answering to you, but I believe that more close to the reality, I believe. So I said how the world is going to change, and there are six segments that I had a page which is going to be changing. In each segment, we believe AI is going to be providing and leading The service and business, for example, just one example, autonomous driving, we're having a clear view in the parts that the needs to that change is something easier to understand. For example, map box is also the same. So from that sense, We are checking one by one and which entity we should be using as an investor. So we don't have a clear line between those two, but at the same time, we need to make an answer. So we are thinking hard and discussing. So since last time that you start investing from balance sheet of SVG, and also I bring this up, but mainly logistics, the one that you are looking at. So then I have a question that you go into the logistics business. So you saw the video, sorry, the slides on Sake B that we are investing from SVG. And also it's easy to understand sector compared to the others. So relatively easy to address. Agenda is easy to address. But that's not everything. Actually, we are trying to see bigger change or bigger shift in other sector too. And the last question from me. So investment from SVG. Project R has been covered by media. Is this the same thing with investment by SVG? And also Sam Altman, CEO, and Masa, we heard that they are trying to start a business together. I have nothing that I can answer to that question. Thank you. Thank you. Thank you very much.

In the interest of time, we will take the one last person to give us a question before closing. From Bloomberg, great sound, please. Thank you very much. Great sound from Bloomberg. I have just one question, if I may. You mentioned that you want to be ready for both defensive and offensive. From that perspective, priorities for SVF and SVG or relationship between SVF and SVG, I want to know more. Because for investors in SVF, In the future, if there are cases where bigger return can be expected from SPG's investment rather than SPF's investment. So again, for your stakeholder, for your investors, could you elaborate on the relationship between SPF and SPG and priorities? Vision Fund, obviously, we have one and two, and there are the third-party investors, like for Vision Fund 1, for example. For Vision Fund 1, no new investment at all. So only new investment is made by Vision Fund 2 as far as fund is concerned. So third party and some Masayoshi's are one of the investors. At the moment, there is no issue of conflict from SBG's perspective. So which party should invest in who? We will have a better discussion to address potential conflict. So going forward, Vision Fund 2, eventually you may shrink investment by Vision Fund 2 going forward. Depending on environment, depending on the market, at the moment there are no third-party LPs, but eventually maybe there might be LPs coming in to Vision Fund 2. So going forward, investment by the group, investment by the group, excuse me, fund, we will run concurrently going forward for the time being at least.

Thank you very much. That was the last question. So this concludes. SoftBank Group Corp earnings results announcement for six-month period ended September 30th, 2023.