Management Policy

We are guided by our corporate philosophy of “Information Revolution—Happiness for everyone.” We aim to maximize corporate value while being a corporate group that provides essential technologies and services to people around the world.

Under our management system, SoftBank Group Corp. (“SBG”), a strategic investment holding company, exercises overall control over its subsidiaries and associates (“Group companies;” together with SBG, the “Group”) and investees as its investment portfolio. Based on this system, we aim to maximize NAV (net asset value, calculated as equity value of holdings – adjusted net interest-bearing debt^*1) by increasing the equity value of holdings over the medium to long term. As a financial policy to support this goal, from the perspective of ensuring financial stability, we attach great importance to SBG’s LTV (loan-to-value, calculated as adjusted net interest-bearing debt ÷ equity value of holdings,^*1 the ratio of liabilities to holding assets) and strives to manage it below 25% in normal times in financial markets, with an upper threshold of 35% even in times of emergency. In addition, SBG endeavors to maintain safety by securing funds sufficient to redeem bonds for at least the next two years.

We seek to seize the Information Revolution, where IT will transform societies and lifestyles, as a major growth opportunity, and thereby contribute to the wellbeing of all people over the long term. To this end, it is imperative for us to identify changes in social needs quickly and to continuously transform ourselves while optimizing the structure of the Group to maximize the benefits from the technologies and business models that will be the driving forces in the future. At present, artificial intelligence (AI) is being incorporated into a variety of business models, and this trend is starting to reshape value creation and will fundamentally redefine most industries. To ensure that we capture the huge opportunities arising from the market expansion and the creation of new industries driven by AI utilization, we are implementing the Cluster of No. 1 Strategy, a unique strategy for orchestrating the organization. Based on this strategy, we are engaged in a wide range of investment activities, particularly investments through SoftBank Vision Fund 1, SoftBank Vision Fund 2 and SoftBank Latin America Funds and direct investments by SBG or investments through its subsidiaries.

In our investment activities, based on the investment theme of AI, we invest in companies expected to contribute to advances in the Information Revolution. After investment, we strive to increase the corporate value of our investees by enabling those companies to evolve their business models as they interact positively with each other within the Group’s ecosystem. In addition, we strive to carry out investment activities that generate sustained returns by combining (1) analytical capabilities in areas including technology and business models, (2) specialization systems and organizations such as expert teams for each field, and (3) funds recovered from investment exits, while leveraging economies of scale derived from developing investment businesses globally on a Group-wide basis.

Our management recognizes investment funds (SoftBank Vision Fund 1, SoftBank Vision Fund 2 and SoftBank Latin America Funds), Arm, and SoftBank Corp. as our most important businesses in terms of the extremely large investments made therein and the impact each has on SBG’s consolidated earnings. The priority management issues to address in each business are as follows.

SoftBank Vision Fund 1 (SVF1), SoftBank Vision Fund 2 (SVF2), and SoftBank Latin America Funds aim to maximize returns from a medium- to long-term perspective by making investments in high-growth-potential technology companies that are leveraging data and AI. SVF1 began its operation in 2017 and SVF2 and SoftBank Latin America Funds began their operations in 2019.

SBG participates in each fund as a limited partner and its wholly owned subsidiaries that manage each fund (SBIA, which manages SVF1, and SBGA, which manages SVF2 and SoftBank Latin America Funds; collectively, the "Fund Management Subsidiaries") are entitled to receive management and performance fees from SVF1 and SoftBank Latin America Funds and management and performance-linked management fees from SVF2, measured in reference to the investment activities of the funds.

The success of these investment funds is crucial to the implementation of SBG’s business model as a strategic investment holding company. The Fund Management Subsidiaries seek to maximize returns of the funds over time through the following efforts.

SVF1, SVF2 and SoftBank Latin America Funds have the characteristics of being long-term private funds with a duration of over a decade, in addition to their large amount of committed capital. As of March 31, 2022, the total committed capital for each fund is USD 98.6 billion for SVF1, USD 56.0 billion for SVF2, and USD 7.3 billion for SoftBank Latin America Funds. Leveraging such distinctive features, the funds have developed unique investment portfolios mainly comprising private companies valued at more than USD 1 billion at the time of investment, colloquially known as “unicorns,” or companies that are considered to have potential to become such. Moreover, by conducting medium- to long-term investment in companies that have established a presence across industries and types of technology and maintaining a level of geographic and strategic diversity across their portfolios, the Fund Management Subsidiaries curb the effect of short-term market fluctuations while pursuing medium- to long-term returns.

The Fund Management Subsidiaries seek to maximize the equity value of the holdings of the funds by carefully selecting investments and promoting the growth of portfolio companies through a wide range of support and network connections. For example, they seek to identify and execute opportunities to accelerate profitability and growth of their portfolio companies by establishing partnerships and collaboration across the greater ecosystem of the Group and its partners. They also provide portfolio company leaders with access to a global team of operating specialists, as well as counsel from in-market resources as they seek to navigate growth. Moreover, they encourage sustained growth by monitoring the profitability and governance structures of portfolio companies, in addition to supporting their business activities.

Due to differences in the timing of the start of operations, each fund is in a different phase of its investment cycle. SVF2 and SoftBank Latin America Funds are actively pursuing new investments, while SVF1 is primarily focused on realizing value creation on invested capital as its investment period ended in September 2019. In the realization of investments, it is crucial to selectively exit assets in a timely and appropriate manner in order to maximize return and ultimately make distributions to limited partners including SBG. While the funds may exit through sale to a third party by mergers and acquisitions, the principal exit strategy is via the public listing of a portfolio company. For a public portfolio company, the Fund Management Subsidiaries have a mechanism in place to systematically sell funds’ shareholdings while prudently assessing the competitive landscape and share price trends. Moreover, the funds may selectively utilize financing structures, collateralizing listed assets in order to precede distributions to limited partners while determining the optimal timing of the sales.

In fiscal 2021, a total of 24 portfolio companies went public, the majority of which took place in the first half of the period. In the recent past, stock market volatility has increased due to heightened geopolitical risks and concerns about the monetary policies of the U.S. and other major central banks. Each fund aims to maximize returns from a medium- to long-term perspective while minimizing the impact of short-term market fluctuations. As long-term investment vehicles, these funds have a life cycle of over a decade to determine the optimal means and timing of exits.

Creating a strong organization, especially attracting and retaining top talent, is critical to the reproducibility of investment successes and sustained growth of the funds. The Fund Management Subsidiaries are overseen by CEO Rajeev Misra, who is Corporate Officer, Executive Vice President of SBG, and run by senior leadership from a variety of backgrounds including investment banking, venture capital, and technology. To date, they have built and continue to improve an organizational structure with investment, operating, capital, functional and management teams that match the needs and scale of their managing assets and global operations. By taking a team approach with a group of experts, the Fund Management Subsidiaries aim to accumulate and share institutional knowledge to achieve sustained growth for each fund. They are also focused on attracting and developing their diverse, quality talent to further strengthen the organization.

Arm is a global leader in the development of semiconductor technology, which is central to pervasive computing, a trend that is shaping today’s connected world. Arm’s processor technology is the world’s most widely licensed and deployed semiconductor design of its kind and is used in virtually all smartphones, the majority of tablets and digital TVs, and a significant proportion of all chips with embedded processors. Since being acquired by SBG in 2016, Arm has increased investment in R&D and expanding its product portfolio and addressable markets. Arm is now preparing for a potential public listing. To achieve sustainable long-term growth, Arm focuses on maintaining or gaining share in markets such as mobile computing, AI, IoT, cloud, autonomous driving, and the Metaverse, increasing the royalty revenue it receives per chip, and introducing new business models to help more companies gain access to Arm’s technology.

Semiconductor industry trends can have a significant impact on Arm’s financial results, both positively and negatively. The semiconductor industry has grown very strongly due to long-term trends such as more products and services depending on increasing amounts of embedded intelligence, such as cars providing more driver information and assistance, and smartphones improving camera technology generation after generation for better photography. Some markets have shown particularly strong growth in fiscal 2021 including 5G smartphones and networking equipment as well as embedded and automotive applications, where Arm has good exposure. This growth has benefited Arm’s technology royalty revenue to increase by 20.1% year on year, as it grows with industry sales. In addition, industry growth also accelerated Arm’s customers’ design activity, creating new opportunities for Arm to license its latest technologies and thus driving non-royalty revenue (technology licensing revenue and software and services revenue) to increase by 61.0% year on year.

In response to the spread of COVID-19, which has continued since 2020, the digitalization of every facet of human life and business has been progressing in Japan. Cutting-edge technologies including 5G, for which commercial services were launched in March 2020, as well as AI, IoT, big data, and blockchain, have further supported this progress in digitalization. Going forward, the digitalization of society will likely continue to progress even more, and a digital transformation that is changing the structure of industry itself looks set to accelerate even further. In this environment, under its Beyond Carrier growth strategy, the SoftBank Corp. group, which is responsible for the Group’s domestic operations, will strive to spur sustainable growth of its core telecommunications business, as it goes beyond the confines of telecommunications carriers to proactively develop business in various fields of the information and technology sector, with the aim of maximizing its corporate value. Specifically, the group is working to (1) drive further growth in the telecommunications business, (2) drive growth of the Yahoo! JAPAN/LINE business, (3) develop and expand new business fields, and (4) streamline costs.

In terms of its financial strategy, the SoftBank Corp. group believes that adjusted free cash flow^*4 is a key performance indicator. The group will continue aiming to steadily generate adjusted free cash flow so that it can make investments in growth while maintaining high shareholder returns. Furthermore, the group positions medium- to long-term corporate value increase and the return of profits to shareholders as an important management issue; based on the concept of total returns, which encompasses dividends and share repurchases, the group’s policy is to provide continuous and stable shareholder returns while also giving comprehensive consideration to factors such as performance trends and financial position.

In our financial management, SBG, as a strategic investment holding company, exercises control over its investment portfolio comprising subsidiaries and other Group companies. Given that this business model is susceptible to the impacts of fluctuations in the equity value of holdings, including stock market trends, SBG aims to ensure safety by conducting stable financial management that curbs such impacts as much as possible. Specifically, SBG aims to monitor its LTV as described in “(2) Key Management Indicators” while controlling liabilities appropriately in accordance with the status of investment activities, including new investments, divestments, and changes in the value of investment assets. Moreover, SBG strives to maintain safety by securing funds sufficient to redeem bonds for at least the next two years on hand through selling or monetizing its investment assets, in addition to receiving dividends from subsidiaries and other investees and distributions from investment funds within the Group, such as SVF1 and SVF2, in which SBG participates as a limited partner.

In fiscal 2021, SBG received distributions totaling USD 15.2 billion from SVF1 and SVF2 and reinvested these distributions, primarily to fund certain new investments in SVF2. In fiscal 2022 and beyond, SBG will continue striving to conduct business management as a sustainable investment holding company by “recycling” investment funds in the manner described above, while observing its financial policy of maintaining LTV and liquidity on hand.

To preserve and sustainably increase the equity value of holdings as a strategic investment holding company, it is essential for SBG to ensure the liquidity and diversity of its investment portfolio. Regarding liquidity, in the investment businesses of SBG and entities such as SVF1 and SVF2, intensive investments are being made in unlisted, late-stage companies in information and technology fields with rapid rates of business growth that have established business models and competitive advantages and are deemed highly likely to go public in the near future by the Group. As progress is made on the listing of these investees, SBG believes that it can ultimately expect to improve future liquidity.

Turning to diversity in the investment portfolio, the composition of shares of Alibaba Group Holding Limited in SBG’s equity value of holdings had decreased to just over 20% as of March 31, 2022, indicating that SBG is already making progress on diversifying the investment portfolio. It is crucial to further increase the diversity of the investment portfolio while continuing to hold Alibaba shares. To this end, SBG is working to improve the diversity of its investment portfolio by obtaining funds through fund procurement that utilizes its equity holdings (prepaid forward contracts and margin loans, etc.) and allocating these funds to make new investments, as well as increasing the value of each investment. In addition, the companies that SBG invests in through its investment funds have in common the fact that they utilize AI, while these investees are spread out across a wide range of industries, such as the consumer, transportation, healthcare, real estate and education sectors, as well as across geographies such as the U.S., Europe, China, Latin America and other countries and regions. Such portfolio construction thus mitigates the impact that a change in certain industries or regions can have on SBG’s overall portfolio.

We seek to realize the sustainable development of society and the Group’s own growth over the medium to long term. We therefore recognize the importance of considering sustainability in our corporate activities and are addressing risks related to the environment, society, and governance (ESG). At the same time, we view responding to ESG-related issues as an opportunity to create new corporate value.

In promoting sustainability, SBG has formulated the sustainability vision: “Help shape the next 300 years for our future generations and the planet.” Guided by the vision, SBG has identified six activity themes and high-priority Strategic Material Issues that it needs to focus on.

As a sustainability governance structure, Board has appointed Chief Sustainability Officer (CSusO) and has established the Sustainability Committee. The committee is chaired by CSusO (Head of Investor Relations Department & Head of Sustainability Department) and composed of three members including Board Director, Corporate Officer, Senior Vice President, CFO & CISO^*5 (Head of Finance Unit & Head of Administration Unit), Corporate Officer, Senior Vice President (Head of Accounting Unit), and Corporate Officer, CLO^*6 & GCO^*7 (Head of Legal Unit). The committee discusses material ESG issues surrounding the Group and its promotion policies, while taking into account the requests from our stakeholders, and report to the Board for instructions and supervision.

In fiscal 2021, Sustainability Committee meetings were held in October and December 2021 and March 2022. The committee recognized important issues, including integration of environmental and social factors into investee selection and monitoring processes after investment, proactive response to climate change, and implementation of human rights due diligence, and discussed its policy for responding to these issues going forward. The committee also discussed disclosure of climate change information in accordance with the framework of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and enhancing disclosure of ESG-related information, including human capital, tax matters, and information security.

Looking ahead, SBG aims to enhance its responses to the issues described above. For this, SBG will step up the implementation of Group-wide activities, such as further strengthening integration of environmental and social factors in investee selection and monitoring processes after investment, setting Group targets for climate change measures, enhancing human rights due diligence measures, and collecting and disclosing ESG-related information furthermore. Moreover, SBG believes that it is crucial to clearly establish its Group-wide approach to AI ethics as it conducts the Group’s businesses around the central theme of AI. Based on this belief, SBG will be working to formulate a Group policy on AI ethics.