SoftBank Group Corp. (9984) Earnings Call Transcript & Summary

[Interpreted] Thank you very much for watching. Good afternoon, everyone. Now we'd like to start the SoftBank Group Corp. investors briefing for the 3-month period ended June 30, 2021. First of all, I'd like to introduce the representatives from SoftBank. Mr. Goto, Board Director, CEO -- CFO; Kimiwada, Corporate Officer, Senior Vice President and Head of Accounting Unit; and Navneet Govil, Managing Partner and CFO of SoftBank Investment Advisor from U.S. This session starts with the overview of our consolidated results by Ms. Kimiwada and financial update by Mr. Goto, followed by SoftBank Vision Fund update by Mr. Navneet Govil. You can choose either English or Japanese for this meeting, and we can take both English and Japanese questions within Zoom after the presentation. Material for today is available at our corporate website. Now I'd like to invite Ms. Kimiwada to talk about the consolidated results. Ms. Kimiwada, please.

[Interpreted] Thank you very much. Let me walk you through the consolidated results on Page 2. We made announcement yesterday on this consolidated results. Summary is here. For the first quarter FY '21, income before income tax, JPY 1 trillion; net income, JPY 761 billion. Last year, we had a onetime gain, about JPY 730 billion related to T-Mobile business. And the bottom half of this slide shows a gain on investments. About investments, which is our core business, JPY 741 billion of investment business of holding companies. From SoftBank Vision Fund 1 and 2, JPY 287 billion; and LatAm Fund, which is independent segment here, JPY 219 billion; and other investments, JPY 14 billion. That's the summary of consolidated results. Next page, Page 3. With regards to Latin America Fund, like I said earlier, from this quarter on, we show as an independent segment because income exceeded 10% of the total net income. And from P/L perspective, as you can see in the red line, gain or loss on investment at Latin America Fund is shown like this. In Page 4, please. About this Latin America Fund or segment in total, before, the LatAm Fund business was included in other business. So now we took it out and made it independent segment. Just so you know, PayPay is included in other segment, which stayed the same. Next page, Page 5, segment income from investment business of holding company's perspective. If you take a look at blue box, this shows gain or loss related to listed stocks transactions. And the red box indicates something related to T-Mobile. So starting from blue box, which is related to SB Northstar investment. In the first quarter last year, SBG itself invested in listed stocks and it was followed by SB Northstar. So that's why we were not able to compare quarter 1 to quarter 1 last year because of that difference. And about the T-Mobile, there are some items I'd like to touch upon later in detail. And income on equity method investments and derivative loss are included in the investment business of holding company segment income. Talking about T-Mobile, which is shown on Page 6. In the first quarter of last year, we sold T-Mobile shares, but we still hold some of T-Mobile shares. And based upon T-Mobile share price, earnout is something that we consider. Number one, derivative gain due to an increase in the fair value of the contingent consideration. For the 8 million share of T-Mobile, we can gain subject to satisfying certain conditions. As the T-Mobile share price goes up, we can recognize gain. That's in principle. This time, for the first quarter in FY '21, we recognized JPY 997 billion. And talking about derivative loss due to an increase in the fair value of call option held by Deutsche Telkom, 2 types of options: number one is a call option exercisable when the stock price is $101 per share; and another option is exercisable depending on weighted average of T-Mobile share price. From our perspective, we recognized negative numbers. So these call options-related transactions are recognized in negative numbers for SoftBank. In Page 7, investment in listed stocks and other instruments, main impact on B/S and P/L. As we announced yesterday, the size is getting smaller. On Page 8, derivative gain or loss on Alibaba prepaid forward contracts. As Alibaba share price goes up, we should expect a derivative loss. For the first quarter this fiscal year, as you can see, the stock price, stock price almost remained the same. But deferred tax expenses were recognized. That's the major factor behind the negative number for the first quarter of FY '21. Next slide, Page 9, entry into agreement for sale of all shares in Arm. For our group, SoftBank Group, those numbers should be big. In September 2020, we agreed to sell all Arm shares to NVIDIA. After sale of the share is completed, we are expecting to hold about 6.7% to 8.1% of NVIDIA shares. But note that this transaction is in exchange for cash and shares. It depends on how much NVIDIA share price is at the time of closing. But referring to the stock price at the time when we signed an agreement, you can see green boxes on the page. At the time of agreement, the share price we referred to was $484.60 per share. That was NVIDIA share price back then. And NVIDIA stock was split into 4. So if you multiply the share price by 4 at the closing price of August 6, 2021, the NVIDIA stock price was $814 per share. So up to 300 -- excuse me, 38.5 billion consideration can be expected. Of course, it depends on NVIDIA share price. Moving on to Slide 10. Again, talking about Arm share sales. Arm remains our subsidiary, and Arm remains continued operations from SoftBank Group's perspective. Going forward, however, once Arm becomes discontinued operation, which means closing of this transaction is highly likely, practically, when we get approval from regulators, that's when Arm becomes discontinued operations. And at the time of closing, Arm will not be our subsidiary anymore. That's indicated at the top right of this slide. So for the time being, Arm remains continued operation and a subsidiary of SoftBank Group. SoftBank Vision Fund owns 24.99% of Arm and change of fair value of Arm, which is about 25%. In the segment, change is incorporated but as a consolidated basis. The changes is eliminated in P/L, consolidated P/L. We recognized a huge amount of goodwill when we acquired Arm, and we continue impairment test on that goodwill. Just checking whether carrying value goes down or up. So until closing comes, we will not recognize upside. Page 11, consolidated P/L summary. The format stays the same. Just one thing I'd like to highlight here at the bottom. Net income attributable to owner of the parent was JPY 761 billion, as you can see at the bottom. For gain or loss on investment, that's indicated in the green box. Holding company, Vision Fund and Latin America Fund, gain or loss on investments are described at the top right corner of the slide in green box. And income on equity method investments and derivative loss on investments are shown in blue box. And income taxes, which is JPY 360 billion, is indicated in pink box. Page 12, consolidated B/S summary. Please take a look at highlights when you have time later. To put it in one word, our numbers go up in SoftBank Vision Fund-related activities. And Page 13, investment securities on consolidated B/S. Vision Fund is separated. And this shows our investment securities, including T-Mobile and Latin America Fund. SoFi, WeWork, Lemonade and others, those are major invested securities. On Page 14, consolidated B/S summary in terms of liabilities. I'm sure Goto-san will talk about liabilities more in detail later. So I won't touch upon that myself. Moving on to Page 15, equity. Treasury stock was canceled, which is shown in red box 2. Next slide, cash flow, Page 16. A little bit complex, but major items are shown here on this slide. So please have a look when you have time later. And Page 17, segment income in terms of SoftBank Vision Fund. And I'm sure Navneet will talk more about Vision Fund later. So I won't talk about Vision Fund segment income here now. So let me move on to next slide, Page 18, co-investment to SoftBank Vision Fund 2, which we announced yesterday. We already explained this in our financial reports. But just let me say here, since the transaction falls under the category of related party transaction, a series of related transaction volume and outstanding balance will be disclosed in the quarterly and annual securities report from FY '21 second quarter. So this is one thing I'd like to highlight here. That's all from myself. Thank you very much.

[Interpreted] Yes. Next, Mr. Goto will give you the financial update. Mr. Goto, please.

[Interpreted] Yes, this is Goto speaking. Thank you very much for your time today. So recently, Olympics Games has concluded pretty much safely. There was some discussion that we should have this Olympics Game now, but set aside this discussion, I believe there are great performance by many athletes, and Japan won 27 gold medals. United States, China and Japan, so those are the countries of the winning of gold medals. And looking at the GDP worldwide, United States, Japan and -- excuse me, United States, China and Japan, that's the order again. So as Mr. Son answered the question at yesterday's earnings announcement, whenever we make an investment, what are we concerned about most is that we are making such a great investment in -- via Vision Fund, but there is no any case that we've invested in Japan. U.S. the most, second is China, but the third is not Japan, unfortunately. And why, which Masa mentioned yesterday as well, and I myself been asked by the several government officials why SoftBank is not investing in Japan. Looking at athletes, great athletes. They do not always receive the best education, but they've been able to achieve the great level and show the great performance. So I believe that we do still have a good capability, even we are -- not thoroughly get the great educations. So that hopefully, we'll be able to have a great entrepreneurs and business person, creating a good business, good company so that we will be able to consider Japanese company as investee of Vision Fund going forward. Every quarter, whenever we announce our investment status, status in U.S., status in China, especially this time because of -- some concern in China is there by the market as well in the future. What about Japan? What about companies in Japan? We would like to become that we will be able to discuss the companies in Japan for the investment discussion in the future, sometime near the future. So that's -- just I wanted to highlight in the beginning of my presentation. And now I'd like to go into my presentation slides. As a summary for first quarter 2021, gaining a greater gain on investments versus first -- same quarter last year, maintained a stable financial condition also while accelerating the pace of new investments. Investment business, we made JPY 1.2 trillion of the gain on investments. And also, we've been divesting so that such divestment proceeds are recycled for the new investments. So this kind of ecosystem starts working -- functioning pretty well these days. At the same time, financial activities, we have issued JPY 1.2 trillion of bond issuance. And we have a lot of redemption also scheduled this fiscal year. But before maturity comes that we would like to -- we wanted to refinance or raise money beforehand. So as a result, loan-to-value, managing this at 25%, which has been also achieved, currently 16.2%. And also cash position, our commitment is to maintain the cash position for 2-year equivalents of the redemption. And currently, we have JPY 2.1 trillion. And also, if we add assets from Northstar, which is effectively our liquidity, that will give us about JPY 3 trillion of the cash position. And I'd like to go into some details of investment activities, Page 4. This is -- this shows the focus fields by the group companies. On your left-hand side, this is our own balance sheet. As a large exposure, we have Alibaba and also domestic telecom SoftBank Corp. and T-Mobile in United States. Those are major investments on -- from our balance sheet. And at the same time, we've been making investments around the world through Vision Fund. So Vision Fund 1 on top, on your right. We -- this is about JPY 100 billion fund. And the fund period has already been closed, so that the follow-on or divestments is going to be the stage for Vision Fund going forward. And a new additional investment is done by Vision Fund 2. Target for the investment or investment thesis is still the same as Vision Fund 1. AI is the target for Vision Fund 2 as well. 91 companies has been invested by Vision Fund 2, about JPY 4 trillion. And at this moment, we don't receive any third-party money. So the 100% capital raised by Vision -- excuse me, SoftBank Group. And on top of that, SB Northstar, which launched last year, mainly focusing on public securities. In this quarter, we have seen a good result from the investment activities. Latin America Fund, target is the same as Vision Fund. And I would say we could have a same vehicle for this investment activity. But actually, we have Marcelo Claure, who is the professional for Latin America investments, and he has his own team as well. So that is why that we set it up dedicated for Latin America. And they have already invested [ in ] 48 companies and also quite a good performance being shown for this quarter. And this is by numbers, gain on investments. JPY 982 billion was last year's same quarter, and this quarter was JPY 1.2 trillion. And the net income from this gain on investments, JPY 761 billion. So last year, same quarter, JPY 1.2 trillion. However, that also includes a gain relating to loss of control of Sprint. JPY 734 billion was included. So if we exclude this onetime gain, it was JPY 521 million, and this fiscal -- this quarter was JPY 761 billion. And this shows the status of portfolio and also the trend of the gains. JPY 1.2 trillion of gain on investments was recognized first quarter. But when you look at the gray bar and the blue, gray is the Vision Fund, and the blue is outside of Vision Fund. So if you look at the right-hand side, pie chart shows the breakdown of such. So T-Mobile related, which Kimiwada-san mentioned earlier, JPY 370 billion. Also Latin America Fund, we start seeing a good and steady performance, JPY 219 billion; and also Northstar, JPY 210 billion. So Vision Fund is doing great. But at the same time, other investment vehicle also showing a good performance so far this quarter. Adding all that, at the SoftBank Group holding company level, this is the equity value of holdings. By the end of June, JPY 31.6 trillion for the equity value of holdings. Alibaba ratio still remains high. But as you can see the trend, little by little, you see the declines of the concentration in Alibaba. Often said, SoftBank is completely relying on the value of Alibaba. But actually, you have 2 factors here. One, recently, Alibaba share price or enterprise value is declining. That's one factor. And second of all, Vision Fund and other investment amount is increasing. So combining those 2 facts and factors, we start seeing more diversified holdings of equity right now. Net asset value on Page 8. So if you look at per share basis, net asset value total amount on your left-hand side, JPY 26 trillion. And if you compare between end of March and end of June, we have JPY 15,000 per share. In the share price, unfortunately, JPY 9,330 in -- back in March. And right now, in June, JPY 7,775. So that right now, we are seeing close to 50% of discount right now. So that's something we need to minimize and also do every effort to minimize such discount right now. And this is the distribution. Left-hand side is the March end pie chart and on your right-hand side is the June pie chart. So 43% was Alibaba share in March, and right now 39%, June. So that we are less than 40% right now. 40% from the rating agency's point of view, this 40% is one symbolic event from their understanding. So by having more diversified balance, we will be able to enhance our steadiness. And what's increasing instead, Vision Fund 1 has already finished its investment period. And also, they are proceeding with the monetization. So that's why that if you look, there's a little bit decrease in price. And also Vision Fund 2 at the end of March, 5% in total with Latin America, but now it's 11% together with Latin American Fund for Vision Fund 2. So we would like to manage a well-balanced and diversified portfolio status. And from the rating agencies' point of view, steadiness or robustness of the asset requires the liquidity. So public securities is one liquidity that you can think of. And about 80% at the end of March, it was 79%. At the end of June, 78% was the proportion of listed securities or listed shares out of our assets. Arm is now unlisted. But NVIDIA, which is listed company, and they are currently going for discussion to foreclosure of the merger, then I believe that we will be able to exchange their shares, and that will give us more increase in proportion of listed shares amongst our total asset. And this shows the cumulative investment performance. Vision Fund 1 invested amount cost -- this is almost a cost. $87 billion was the investment cost and the cumulative investment return. So IPO or liquidity events like exit, if you add all that, that gives you the cumulative investment return, and that is now $146 billion. So as a fund performance, this is a great achievement, I believe. On your right, Vision Fund 2. This is just the beginning. We just started a Vision Fund recently. But still, actually, the $20 billion investment has already been made. And already, we've seen the IPO event and also liquidity event by divesting. So that gives us $25 billion as a cumulative investment return. So we are making a rocket start in Vision Fund 2 as well. And this shows the gain and loss on investments. On a consolidated basis for SoftBank Group in quarterly base, first quarter, JPY 0.3 trillion. Fourth quarter last year recorded quite a high gain, thanks to Coupang IPO. Compared to that, it looks like a very small number here, but still JPY 300 billion, which is not too small. So this is our actual performance for the quarterly basis on gain. This is the individual investment activities for the first quarter. New listing on your left-hand side from Vision Fund 1 and 2. In total, 8 companies went public for the first quarter period. So there are big one and small one as well. And also, if we -- including those that has already went public and we divested and monetized, on your right-hand side, you can see DoorDash, Uber, Guardant, Beike, those -- after they went public, we've been monetizing partially and being used -- proceeds being used for the new investment. Here is the new investment. So this first quarter in total, 37 companies being -- excuse me, 47 companies being invested newly. And these are the especially well-known or relatively big-sized company. Number of investment-wise, I believe we had quite a few -- many numbers of investments we have done for this quarter. And this is the capital commitment as of June 30, 2021. Vision Fund 1, as mentioned, we have already completed the investment period. So $98 billion, of which SBG commitment is $33 billion. So $65.5 billion is from third-party LP. On your right-hand side, Vision Fund 2, as a commitment, we have $40 billion. And this $40 billion are all contributed by SBG, SoftBank Group, and invested was $21.5 billion out of $40 billion. And here shows the core investment program, which Masa mentioned yesterday. So management, including Masa himself, as an investment partner for the program, and this will be launched. On your left-hand side is the Vision Fund 2, the current structure, SoftBank Group investing 100% in Vision Fund 2. And for this Vision Fund 2 vehicle, Masa and also management will be holding 17%, which is equivalent to $2.6 billion. At fair value, this number was calculated and received from SBG, transferred from SBG at the current value. Ratio-wise, as an equity, 83% versus 17% [ EBITDA ] ratio for Vision Fund 2. There are things missing or excluded from this picture, which is the target companies for this co-investment program, which is the private equity portion for Vision Fund, meaning those who already went public or we are already so certain that the company will go public. Those companies are excluded from the target of this co-investment program. That remains as an investee of 100% from SBG. So because we exclude those, that's why that the number of the preferred equity for SBG is $12.4 billion. And also fair market value, $24 billion is the current fair market value, of which $2.6 billion will be transferred to Masa and the management. And also the gap are the one for the -- those public securities who already went public or the one to be going public quite soon. The reason that we're excluding those companies is because we are quite sure that this company will go up in value quite soon and the possibility of such is quite certain. That's why we should be excluding these companies if Masa and the management is participating from now because we know that status. So that's being discussed at the Board of Directors meeting, and we believe that it is fair to keep it under SBG. And the reason or the meaning for this program, from Masa and the management's point of view, they will be taking enough risk, and pacing to such risk gives -- makes him even more serious to make a decision on investment activities, will give us the best result for the company. And through such program, we would like to consider the next-generation management or success of Masa. Such program should be also succeeded to the next generation. So that's another view on long term for this program. And for SoftBank Group's company sales point of view-wise, by having this co-investment program, we will be able to improve the risk/return profile, which will give us about 20% of downside protection. So it'd be better compared to the no-hedge fund vehicle, and I believe that 20% of the protection is quite reasonable for the company to expect the risk/return. And also, Masa and other management will bear the losses up to their equity ownership amount. And third, as for the distribution, it's limited. So once the fair value becomes double, then the distribution will be released. So not the short term but the long term that this will be seriously addressed to make sure that Masa and management will make an effort to make a great return. And that will also become the good incentive for the company to show -- see the long-term future. And the future capital contribution from SBG will be made through preferred equity in principle going forward. So SBG with collection of the investment of principal, we will be senior to those co-investment programs' participants, which will be helping us to improve the P&L, and also no change in equity so that for the upside, 83% versus 17% and 83% upside can be steadily recognized over time. With this program, Masa himself, being as a CEO of the group, and as a CEO of the group, he is responsible for the activities of all those -- of the group. But at the same time, fund performance, we would like to maximize the fund performance, and I believe this is very effective to have such programs. So through this co-investment program, some people may say that we could receive the 100% gain, but some part may go to management. So that may be one opinion. And I believe that we should see from the various angle from managers and Masa, as a result of their great effort, by the time that they can receive the distribution, the fund itself is becoming a great success. So once that we see such a distribution made to Masa and management, the company or the fund is making a great success so that performance of the fund should be maximized through their effort. And how can we realize that? And to realize that, what will be the best structure? So those are the kind of a discussion point. And we came to a conclusion to come up with this co-investment program, maximizing the value in a short-term period. Hope that you all understand this program. And I'd like to go to the next slide. This is the cycle of investment and recovery. So this is totally different agenda. So 4 years has passed since the inception of the fund. And we have our own money and also third-party money, but the Vision Fund 2 is only from us as SoftBank Group. On your right-hand side, the blue portion on the top, there are 3 blue boxes. We have about JPY 164 billion distribution from Vision Fund 1, JPY 230 billion from SVF 2 and JPY 330 billion return from Northstar. So we have already received as a distribution, JPY 725 billion from those vehicles, and that has been used for the recycling. Purple, the bottom box, is its others. This is the financing and cash reserve. Whenever we do this, we always keep in mind our financial policy, financial discipline within. To maintain our financial discipline, we would like to be flexible enough so that we'll be able to make a good financing project. And also, we would like to fully utilize our assets for the asset-backed financing so that we'll be able to steadily raise money for our activities. Cash position or our own financing was everything to finance these money, and we've been spending quite a long time with that activities. However, now that -- thanks to Vision Fund vehicles, now that we've been receiving a good distribution that can be used for the recycling for the new investments, and I believe this eco cycle, we will be able to see more proportion of distribution. So once we start receiving a good distribution, meaning our balance sheet is improving in SoftBank Group, meaning that even if we increase the leverage, we still may be able to maintain our financial indexes so that we hope we will be able to increase the size of the cash while we are not seeing any worsening of our financial indices. This is the regions and sectors allocation. 34% in United States and 23% in China. But Asia, excluding China, is 25%, which includes Southeast Asia, India and so on. Europe, we start seeing some increase right now, 13%. 5% in Latin America, this is also planning to increase. When it comes to sector on your right-hand side, it is very much diversified. However, all these sectors are targeting to redefine their sectors using AI. So how far -- how much are they using AI, utilizing AI so that they will be able to disrupt their sectors is a key for our investment thesis. Going forward, this sector pie chart, I assume that we'll be distributing diversification even higher. And as Masa mentioned yesterday, China -- investment in China, because of some regulatory movements by Chinese government, we would like to kind of wait and see a while. Of course, we will keep our investment activities. However, the pace of the investment may slow down and try to see the situation so that we will be able to be ready for the next opportunity. This is the SB Northstar cumulative investment gain. Stocks, derivatives, credit transactions that -- and also, there are Masa's holdings as well. Then the loss is actually a positive effect for the company. So if we all net-net, that gives you JPY 75.7 billion that is attributable to SBG. Northstar investment, as a big direction-wise, we are to reduce the size of Northstar for this year. So the asset that we are managing under Northstar -- because originally speaking, that we've been using only the excess cash for this management. And because we see quite attractive pipelines lined up in Vision Fund, we rather like to prioritize our capital allocation for Vision Fund for this fiscal year. And this is -- this shows a trend of decline in the investments in Northstar, JPY 2.3 trillion asset under management. And now that we are working on some liquidities and numbers, it's JPY 1,741 billion options, which have been covered by media several times. But again, this is also in reductions. That's the investment business and now is the financial condition. For bond issuance, domestic retail hybrid in June, JPY 400 billion issuance was completed. In the past, issued in 2016, hybrid -- domestic hybrid, this is optional redemption. And if we call, this is the fifth year that we will be calling. And every time at the earnings that we've been asked, are you really [ sure call ]. And this year, we are to call this option, the optional redemption. And also actually that we issued the foreign currency bond, about JPY 800 billion. I think that we were able to find a good timing -- time frame, we had a quite good demand from many investors, and I'm happy that we are able to close this foreign bond issuance. Other than bond issuance, we have been using Alibaba share for the financing. So this is a termination and execution of prepaid forward contracts, mainly collar transactions, about JPY 300 billion termination and executed JPY 331 billion. So we maintain this transaction. In margin loan, this is simply put share collateral loan, and we have some increase there in JPY 200 billion. This is the actual for this 3-month period. Loan-to-value. This is something that we've been speaking as a very important financial policy or financial discipline, to manage our loan-to-value less than 25% in June period, 16.2%, which is very steady level that we've been managing our loan-to-value. About in 18 months trend-wise, JPY 4.5 trillion program announced in March last year, and we raised about JPY 5.6 trillion. So with that, we've been improving. And after then, we had a return to shareholders and so on. And now that we are seeing 16.2%, I am very comfortable with this number right now. So utilizing the leverage within this 25%, we may see some ups and downs around 16%, but we always like to keep some cushion there and manage our loan-to-value numbers. And the cash position. So our financial policy is to maintain our cash position for next 2 years' bond redemption amount, so JPY 2.1 trillion. As I mentioned earlier, we have Northstar asset. They are big names, public securities. So if we add those, we actually have even more cushion. But if we only limit to a cash and cash equivalent, it's JPY 2.1 trillion. And the redemption scheduled for coming 2 years, JPY 1.8 billion, so we are exceeding this number. So for the management of our liquidity, so 2-year equivalent -- covering 2 years redemption is, of course, mostly important for cash positions, financial policy. But in addition to that, as an investment company, what is around revenues, which is the distribution and dividend. We have a dividend from SoftBank Corp, our domestic telecom operator, 85% of payout ratio, which is a very high payout ratio, and about JPY 160 billion of dividend we are receiving every year from SoftBank Corp. For this fiscal year, as mentioned earlier, we have quite a good distribution, almost close to JPY 400 billion of the distribution from Vision Fund 1 and 2. So if we calculate interest coverage with our interest expense, that gives you 2.6x. I think this is a very safe level. And this is our bond redemption schedule. This year, refinance of domestic hybrid bond has already been completed, and also subordinated bond redemption is coming. And that -- because we can use the proceeds from the foreign bond issuance recently, JPY 760 billion bondholders for the subordinated bond, we would like to provide a similar type of products for such investor bondholders. So similar type of bond is also studied right now. What size, timing is still not decided, but I am assuming we are expecting quite a good demand. So that's another plan that we have ahead of this year. Retail hybrid bonds in domestic market. Hybrid actually gives you a certain level of credit -- equity credit by rating agency. So in this case, 50% of equity credit. So from the issuer's point of view, this also gives us an improvement in our financial improvements. JPY 405 billion hybrid been issued for retail market, which is a very hot transaction, and we were able to sold out. This is only for the retail. And actually, for institutional investors, back in February this year, we have issued JPY 177 billion already. On your right-hand side, 2016, when we issued, total JPY 471 billion hybrid was issued. Back then, institutional investors' appetite was JPY 71 billion. But at this time, JPY 177 billion demand from institutional investors. So the actual demand was much, much higher. And actual purchase by investors was -- become doubled. So I hope -- I believe that compared to 5 years ago, the institutional investors' view on us has been changed and improved. Retail was about the same size, JPY 405 billion. I believe we have good demand or even higher demands from here. But we maintained about the same level as last time because we would like to keep our energy for the coming subordinated bond issuance later on. And this shows the summary of foreign currency bonds that we issued in July, about JPY 800 billion, both in dollar and euro in several tranches. And cost wise, this is both euro and dollar. So if you calculate it in dollar-based, then 4.5% weighted average. If you swap to Japanese yen, it's about 2.8%. So average term is 7 years. So as an investment company, IRR that we are pursuing, this interest rate and the cost is something that very much satisfiable. The timing on your right-hand side, in the past 10 years, U.S. dollar bond index yields -- and there are some ups and downs, but as a result, recently, it's the lowest in cost right now. So with such a timing, we were able to access to the global investors. So I believe that this is quite a good transaction we were able to achieve. And from here on, I talked about the debt and cash. At SoftBank Group stand-alone basis, we have issuance for refinance; and the interest-bearing debt for the short-term borrowings, it's increasing. But if you exclude nonrecourse to SBG, about JPY 14 trillion debt is the -- in total, but if you exclude nonrecourse to SBG, that will give you JPY 7-point-some trillion. And here is the cash position. JPY 2.1 trillion, I mentioned earlier. In addition to that, about JPY 1 trillion is from the Northstar asset under management utilizing public securities and that was excess cash of ours. So to see the kind of a real picture, we have -- I can say that our liquidity, we have about close to JPY 3 trillion. And here is the net interest-bearing debt or so-called net debt. Adjusted adjustments related -- excluding adjustments relating to finance, it's about JPY 5 trillion. And hereon is the financial strategy. These are -- no change from the previous earnings. Financial policy, we keep it the same; and at the same time, we would like to maximize recycling ecosystem. And just for the recap, managing loan-to-value less -- below 25% in normal times. And this is our principle, so even if in terms of emergency, we have upper threshold, 35%. And the second of all, maintain cash position covering bond redemptions for at least for next 2 years. And also secure recurring distribution and dividend income from Vision Fund and other subsidiaries. So especially #3 here, the number for #3 is actually becoming quite positive for -- or a good highlight for this time. This slide also says the same, portfolio company finances to be self-financing, mainly Vision Fund investees. And we will not providing risky package to such portfolio. So at the time of [ turbulent ] situation, we made such a message and also we're keeping our words. In the recycling cycle, which I've been repeating several times, so divesting and investing such cycle is very much keep in mind. And at the same time, in the way of increasing the value, we would like to utilize our leverage in a good manner so that we will be able to enhance our total value. On your right-hand side, loan to value is important financial index for us as an investment company to see the safetyness of the company. I believe that in KPI should be simple so that we can -- you can see us easily. So loan to value and cash position, those are the 2 clear message for our financial index. And for long term that the loan to value, you can see our safetyness the cash position is short-term safetyness that you can check on us. And here, up until last year, source for new investment activities was mainly coming from our own financing activities. But going forward, we're expecting good distributions from Vision Fund 1 and 2, and that can be a bigger and hopefully, we can see this bigger engine going forward. And here, the illustrative cycle of investment and recovery. So once that collected monetized cash will be used for the new investment and with that, we will be able to enhance the size of the Fund B. And with that, we will be able to enhance the diversification and that will give us the higher possibility of success. And that will give us a bigger distribution from such portfolio. And there that even we levered but still loan to value could even improve while we are putting some leverage so that we would like to utilize leverage in an appropriate manner and at the same time, aim to improve our financial indexes. So that's the kind of the synchronization between the financial and the investment activities. And recap once again, financial improvement, shareholder return, growth investments, those best mix is always the key for our discussion in the Board meeting. Last but not least, talking about ESG initiatives. Page 41, please. Environment, Arm, SoftBank KK, Yahoo! Japan, they are doing pretty well. And at the level of holding company, we achieved carbon neutral in FY '20; and moving forward, we actively promote information disclosure according to TCFD. And we work closely with accounting team for this disclosure, and we continue to set group goals to address climate change. Page 42, please. In terms of society, this is something that we can do, which is to help people -- help those who in need. For example, vaccination earlier than others. We started operating vaccination up places, 8 locations across nation. And also we continue to have a good communication with the government, and I believe that we can increase the number of vaccinated people. And also, we enhanced our capabilities of virus inspection center. So vaccination and PCR test, those are continuously needed hand in hand. And also, we work on genome analysis. Next, governance. We introduced a -- new directors at the General Shareholders Meeting earlier this year. We want to promote diversity and inclusion in the Board of Directors; and also 5 out of 9, which is majority, is outside directors. I don't think there are many big companies in Japan who have majority of outside directors of the Board. Next slide as an -- strategic holding company that are only managing subsidiaries but also investment activities by fund. We want to incorporate our ES factors in investment process. Currently, we are building framework of operating process; and hopefully, we want to start annual assessment next year. Information disclosure, which is Page 45. We were selected in ESG index composite. Being selected is not the end. We want to make sure that we communicate well that we are needed by the society, and we will continue making efforts to be continuously selected by those ESG indexes. That's all for myself. Thank you very much.

[Interpreted] Thank you. So last but not least, Mr. Navneet Govil, CFO of SoftBank Investment Advisers, will give you an update on SoftBank Vision Fund. Navneet, please unmute and start your presentation. Thank you for waiting.

Hello, everyone. Before we begin, please read SBIA legal disclaimers on Slides 2 and 3. You may refer to the online presentation for more details. For anybody seeking more information on our firm and investments, please visit visionfund.com and the SoftBank Investment Advisers LinkedIn page. Today, as you'll see on Slide 4, I'll summarize our key performance highlights for the June quarter. I will then discuss the financial impact of Fund 1 and 2 on SoftBank. In my in-focus section, I'll discuss how we are investing in AI-enabled businesses that are perfectly positioned to benefit from disruption and change. Over the last 12 months, we've seen the pandemic accelerate the digital shifts already underway. This acceleration has led to a tipping point in the AI revolution. In every single sector, disruptive technology-enabled businesses are using AI to solve business challenges and drive growth. Let's start with a summary of our progress and key highlights from last quarter. Slide 6 shows several key developments across both fronts. During the last 3 months, we made 47 new investments, along with several follow-ons deploying a total of $14.2 billion. We are realizing significant value for our limited partners and continue to make distributions, $6.7 billion this quarter. 7 of our portfolio companies made public from both funds, and we look forward to their continued success. On Slide 7, you can see our cumulative new listings and the momentum building in both funds. Since inception of both Vision Fund 1 and 2 through to June 30, 24 portfolio companies have listed publicly with 11 new listings since the beginning of the year. Our successful IPOs demonstrate the steady progress our portfolio companies are making. A public listing is a significant milestone for any growing company, and we are excited by our ongoing partnership with these companies. In the June quarter, we continue to see more of our portfolio companies go public. New listings unlocked $22.3 billion in value, representing an unrealized gain of $5.8 billion across both funds. The total value of public assets held across both funds now exceed $70 billion. We anticipate that our growing member of public positions may lead to some volatility from quarter-to-quarter. We believe, however, there is considerable value to be unlocked in the future as more companies list publicly. To maximize value, we have developed a balanced and disciplined approach to monetization. As a company matures and experiences a liquidity event, such as an IPO or acquisition, we're able to begin monetizing our holdings with the goal of maximizing IRR and distributions to limited partners. From Fund 1 inception to date, we have realized $24.2 billion in gross realized proceeds. Just 4 years into Fund 1, we believe these early returns are meaningful and a measure of impressive progress. Indeed, more than 30% of what we'd originally called from LPs has already been returned today. So far, we've returned $15.4 billion in preferred equity capital in Fund 1, reducing our outstanding preferred equity capital to $20.2 billion. This means our ongoing 7% annual coupon payment continues to decline. Going forward, this activity will increase the portion of returns flowing through to equity holders. As you can see on Slide 11, last year, 27% of our portfolio was comprised of exited and public investments. That figure rose to 69% in the last quarter. This is important for 3 reasons: first, it shows that our companies are positioned to access the broader investment base; second, it provides valuation transparency as most of the portfolio is now public; third, it gives comfort to our limited partners to know we can continue making distributions to them. Given the liquidity events in Fund 1, we believe we are well positioned to maintain a similar cadence of public listings, exits and distributions to investors. On Slide 12, you'll see that our companies continue to attract new capital from institutional investors. In each case, these companies raised capital at a valuation above our original cost basis. In the June quarter, 11 of our companies raised an additional $2 billion. The combined increase in valuation for these companies was $10.5 billion. Cumulative Investment gains of $65.8 billion have been achieved on an acquisition cost base of $105.7 billion, representing a 1.6x multiple on invested capital. This brings the total fair value of both funds to $171.5 billion. In the last 4 years, Vision Fund 1 has created significant value for our limited partners, who have now received $29.1 billion in distributions. We're also making distributions from Fund 2. As we ramp up these distributions, we believe it will enable funding future investments in the AI revolution. Moreover, since our last investor briefing in May, SoftBank has committed another $10 billion to Vision Fund 2, which brings the total to $40 billion. This additional capital further paves the way for new investments. Let's now discuss the impact of the fund's financial performance on SoftBank. For the 3 months ended June 30, SoftBank's share of the fund's net profit was $1.03 billion. Including management and performance fees totaling $530 million, the total contribution to SoftBank from the fund less third-party interest is $1.56 billion. Cumulatively, from Vision Fund 1 inception through June 30, SoftBank's share of the fund's net profit was $21.71 billion as an investor. Factoring in an additional $10.71 billion in accrued and paid management and performance fees, the total contribution from inception to date for SoftBank is $32.42 billion. On Slide 17, you'll see that as of June 30, SoftBank contributed $27.3 billion in capital to the fund. This amount is up in total value to $59.2 billion, driven by the increase in the unrealized value of the fund, $3.1 billion in distributions and $10.1 billion in accrued and paid performance fees. Looking at similar metrics for Vision Fund 2, on Slide 18. We show that SoftBank contributed $22.5 billion in capital to the fund. This amount has increased significantly in total value to $27.9 billion inclusive of accrued performance fees and distributions. This quarter's in-focus section explores our investment thesis across several sectors. I'll discuss the fundamental trends disrupting each market and explain how our portfolio companies are well positioned to benefit. Previous periods of technology-driven change like the late 1990s and early 2000s created many new businesses but digital transformation was limited to a small number of sectors. The AI revolution, however, will be different from previous periods of tech adoption. AI is a universal horizontal technology being applied today to every single sector and industry. We believe that we have reached a tipping point where the term AI revolution has moved from concept to reality. Many of the portfolio companies we have invested in are applying AI to large addressable markets, and we believe each has the opportunity to become a market leader. We are investing in companies with proven business models and strong economics that are ready to scale. As they do so, we believe they will deliver compelling returns for their investors. Since the inception of Vision Fund 1, our investment thesis is unchanged. We look for 3 key things before we invest: a massive global market with opportunity for a new leader to emerge, a business with a technology platform that leverages data and AI and is seeking to disrupt an inefficient industry or create a new category, and ambitious founder supported by an exceptional team with a clear vision and a deep understanding of their customers. We increased our investing pace during the period. As of June 30, we have made 91 total investments in Vision Fund 2. As with our first fund, Fund 2 is also diversified across multiple sectors. It is important to know, however, that a vast majority of our Fund 2 investments have been focused on the Americas and EMEA. Our exposure to China is limited. Within each of our target sectors, from FinTech to HealthTech, there are a number of fundamental trends that are creating new opportunities for technology and AI-enabled disruptors. We believe that the potential scale of many of these opportunities has been underestimated. In the last 2 decades, technology has connected billions of people where there is further opportunity in every sector. For example, A new generation of FinTech businesses are making finance more accessible to consumers. In HealthTech, maturing technologies are transforming drug discovery, genomic therapies and care provision. Logistics is paving the way for e-commerce growth around the world, and the creator economy is enabling anyone anywhere to build businesses around their skills. Let me begin by exploring our consumer investments in 3 companies enabling the creator economy. We're living in a time of unprecedented change in how media has created and experienced. The creator economy is democratizing creative tools, enabling individuals and businesses to build audiences, businesses and products. Interestingly, gaming is a much larger market than the film industry. We're witnessing a dramatic evolution in how video games are created and played. Manticore Games has built a powerful no-code game development platform, enabling more people to design and build high-quality games. Elsewhere, the definition of fame and celebrity is shifting with influencers building their own digital audiences and commanding an increasing share of global marketing spend. Our investments in Cameo and Jellysmack are benefiting from this shift. Cameo is connecting fans to pop culture icons, while Jellysmack is building a platform to creating -- to help creators monetize their audiences. Over the next decade, how goods move from where they are made to where they are consumed will change significantly. Logistics is one of the world's largest industries, but it is highly inefficient and unchanged by technology. Transformation of the sector is being driven by AI, automation and robotics. These technologies increase efficiency, lower costs and improve service quality for customers. Consumers want things faster, cheaper and more reliable. Enterprises need efficiency, visibility and compliance. From Vision Fund 2, we're investing in the technology that makes this possible across the logistics space. AutoStore and Berkshire Grey are transforming fulfillment centers and warehousing with automation and robotics. ShipBob is using data and AI to improve e-commerce fulfillment, warehouse space utilization and augment worker productivity. And JD Logistics is building highly efficient automated fulfillment site -- centers across Asia. In the financial services sector, legacy systems and fragmented software and services are being replaced with new integrated approaches and technology. To accelerate this change, we're investing in an interconnected web of companies that are transforming relationships between financial institutions, enterprises and consumers. Funding new home purchases has kept many out of the process. We believe by streamlining loan applications and approvals, it will open the home buying process for more people. Companies like Better are making this happen. In today's enterprises, the fundamental tasks of modern business moving and borrowing money, invoicing customers or receiving payments rely on slow and costly services. These cumbersome processes must be replaced with new technologies such as unifying APIs and automation. Companies such as Clearco, C2FO and OakNorth are enabling frictionless transactions, fast access to credit and efficient record keeping. In the consumer market, digital services are enabling the creation of a growing family of trusted FinTech businesses. Klarna, Paytm, Ethos and PolicyBazaar are building lower-cost personalized banking, insurance and payment products. eToro and M1 Finance are democratizing access to global markets to help retail investors diversify and grow their wealth. In HealthTech, where we've made 19 investments from Fund 2, we are investing in companies that represent many parts of the drug discovery and development process as well as how services are delivered to patients. Specifically, we are focused on 4 key subcategories. In genomics and proteomics, the cost to profile all aspects of human biology, DNA, RNA and protein, is declining rapidly and creating vast opportunities for companies to create significant value such as Karius and Seer. In therapeutics, companies are harnessing nature's own machinery to create cell and gene therapy, such as ElevateBio and Encoded, and leveraging advances in data and AI to discover new medicines such as in Insitro and Vividion. In medical technology and digital health, advances in technology are appending how doctors work and how patients receive health care such as Forward and Biofourmis by addressing established pain points in the doctor-patient relationship. Just 4 years since raising external capital, we're proud of our early track record and the platform we've built. Our work and the continued success of our portfolio companies has enabled us to grow our assets under management to more than $170 billion and deliver meaningful returns to our limited partners and shareholders. We have built a powerful platform to continue this work. With more than 145 investment professionals working from 10 global offices, we believe we are well staffed to source investment opportunities in the world's most disruptive technology-enabled businesses. As Son-san recently said, we aspire to represent a new approach to investing, which he calls vision capital. This involves backing founders and businesses using technology to transform industries. We're pleased with our progress. As the AI revolution accelerates, we're excited to partner with our founders as they build the economy of the future. Thank you for listening. I look forward to your questions.

[Interpreted] Thank you very much. Now we'd like to take question and answer until 3 p.m. Tokyo Time. [Operator Instructions] As presenters are also joining this meeting remotely, please specify who you would like to ask your question to and refer to the page number of the slide if your question relates to the material. First, we take Japanese questions. For English questions, we will ask you to wait. We will take your questions after we finish Japanese questions. Any questions from a Japanese audience? First,, Masuno-san from Nomura Securities.

[Interpreted] I have 2 questions to Goto-san. First, on Page 16 about Vision Fund 2. In principle, preferred stock will be used as contribution to SVF. Going forward for new investment, how are you going to distribute capital gain? I understand preferred equity, 8% distribution is okay. But for new investment?

[Interpreted] Thank you very much for your question. For new investment, we contribute preferred equity when a new investment is executed. The first in priority is distribution on preferred equity and principle is returned -- repaid, and then our return will be paid out. So the distribution of equity, 83% of return comes back to SBG. Yes, the ratio is 83% and 17%. And SBG, there's no restriction with regards to distribution, but for new investment, Masayoshi Son and management need to satisfy restrictions to get our distributions. For Vision Fund 1, you have not gotten distribution to SBG, but for SVF2, you get distribution because you want to value protection.

[Interpreted] Second question on Page 14, Goto-san's presentation, commitment of SVF2 $40 billion and 19.5 is remaining capacity. At the current run rate or pace, the investment should be completed in the second quarter. So from financial flexibility perspective or financing flexibility perspective, of course, it depends on whether you get distribution from SoftBank Vision Fund 1 or not. So predictability is a different discussion. But again capability or flexibility around financing, what's your view?

[Interpreted] Thank you. What's preferred most is our financial policy. Loan to value is very obvious example. Like we keep saying, less than 25%, which is the highest priority in our financing policy. For example, on Vision Fund side, no matter how many attractive investment opportunities. Currently, we contribute 100%. If that continues, after we contribute to SoftBank Vision Fund, we still need to make sure that from SoftBank Group's perspective, financial soundness is kept. At the moment, we have plenty of capability and availability, so I think we can meet the pace of investment by Vision Fund for some time.

[Interpreted] Next question, Mr. Tsuruo from Citigroup. Please start your question.

[Interpreted] I have 2 questions as well. First, about Arm. And I thank you very much for the detailed explanations about the revenue recognitions, and I think this may be more important than Kimiwada-san mentioned. But originally, it's 1 year ahead, and we will be able to see the closure of the transaction. So as of today, regulatory progress, if you can -- if it allows, please share with us the status of regulatory reaction for the closure of the transaction.

[Interpreted] This is Goto speaking. I would like to answer your question. As for Arm, to the closure of the transaction, as you know that it requires quite a long time, and we as well as NVIDIA and Arm, 3 companies all together, are working to receive approval by the several regulatories. We don't -- especially, highlight is United Kingdom and China. And we have been having several discussions in various agenda with those regulatory concerned parties. At this moment, we are still expecting to be able to close as scheduled.

[Interpreted] Recently, I've been hearing that U.K. regulatory discussion is not making good progress. Do you have any comment?

[Interpreted] Well, they have several -- their own opinions and speculation, so I hesitate to make any question -- any explanation on speculation.

[Interpreted] So I have a second question, 17% contribution to Vision Fund 2. So after August, Masa has determined, but other Masa members are not decided. But who are the scope for the management to be included, the 17% contribution to the core investment? And as far as I understand, looking at the presentation yesterday and today, in the future, somebody who succeed Masa may be selected from such members only from my understanding. But how are you going to disclose such members who will be included in this management team for the co-investment program?

[Interpreted] Goto speaking. At this moment, other than Masa, nobody has decided. It will be discussed -- it has been and will be discussed at the Board of Directors' meeting. And we are expecting that the members will be somebody who will be involved in the management decisions. But that's the only level that we've been discussing. Going forward, we will be having further discussions to come to the 8 individuals. As Masa said yesterday, when you look at the long-term vision for the company, Masa's succession plan is important to be considered. And compared to the other companies, we are quite unique in many way. And we haven't disclosed any details about the succession plan, but Masa, his -- himself and his idea is that he would like to pass the torch to the person who will not only take the reward but also take the risk and at the same time, aim for the [ best ] company of the group. So including such risk taking, we believe this program will contribute to the gain for the fund businesses. This is only the beginning. We just started it so that we believe it is important for us to think about such future, and that will lead us to the succession plan discussion as well. So that's Masa's understanding as well as our understanding as well. Thank you.

[Interpreted] Thank you. Next question. [Operator Instructions] Again, we can take questions both in Japanese and English. Next question is Takahashi-san from UBS Securities.

[Interpreted] My name is Takahashi from UBS Securities. I have 2 questions to Navneet, please. First, about Vision Fund 2 and future investment by Vision Fund 2. Yesterday, Masa mentioned that there are a lot of attractive investment opportunities. Considering that, the pace of investment might be accelerated. Is my assumption correct? That's the first question, please.

Sorry, could you repeat the question?

[Interpreted] Yes. The pace -- yes, pace of investment by SoftBank Vision Fund 2 will be accelerated. Is that assumption correct?

It has already accelerated. In the June quarter, we made 47 investments, so that is quite a fast pace. We don't see further acceleration from that pace.

[Interpreted] Understood. Second question, investment in China. For Vision Fund 2, you mentioned that exposure to China is limited. But Vision Fund 1, especially investment in private companies in China, how much percentage-wise, amount-wise? And under the current regulatory challenges from the Chinese government, how much are impairment risk or right write-down -- write-off risk should we expect from investment in China by SoftBank Vision Fund 1?

In terms of the private companies in Vision Fund 2, we invested $1.7 billion, [ up ] to $16.6 billion, so it's approximately 10%. And with respect to the impairment risk, on the public companies, it's already reflected in the stock prices. On the private companies, we will evaluate as part of our September quarter valuation process. We will look at the fundamental performance of the companies. We will look at comps and then arrive at valuations at the end of September.

[Interpreted] I'm talking about Vision Fund I, not Vision Fund 2, investment in China.

As Son mentioned, for Vision Fund 1 and Vision Fund 2 and the LatAm Funds, it's combined at 23%.

[Interpreted] Of that, investment in unlisted companies, how much percentage of that, unlisted companies?

I don't have it handy, but we are happy to provide it to you separately afterwards.

[Interpreted] Next question. [Operator Instructions] And we will take a question from Mr. Kikuchi, SMBC Nikko Securities.

[Interpreted] I have 2 questions. So related to Masuno-san's question and I would like to confirm some points there. So management investment and preferred by SBG investment, so risk return profile is a bit different for the Vision Fund. In this case, I believe, at this time, you have a restriction on dividend until you see the double of the fair value. Other than that, is it all same between Vision Funds, for example, if a 30% threshold to IRR? So those -- can we assume that it's the same between the [ this time ] program and the Vision Fund?

[Interpreted] Goto-san speaking. We have some details there. For example, 30% fair value increase and then this dividend -- excuse me, restriction is going to be released or unlocked. Until then, it's not going to be unlocked, so that's the one restriction. And from there -- so until we see that 100% to 200%, we have [ ladders ] and unlocking the restriction partially. So we do have certain level of the rule.

[Interpreted] Then when it comes to 300% IRR, what is the return? Is that going to be the same?

[Interpreted] Yes, at that moment, all the restriction's going to be unlocked.