A1. We were able to achieve more than we had promised.

I would say that in FYE 2017, the second year of “Brandnew Deal 2017,” our financial and capital strategies enabled us to deliver beyond the promises made in our “four commitments” at the beginning of the fiscal year.
Core operating cash flows reached a record high of ¥420.0 billion, and core free cash flows amounted to ¥300.0 billion, substantially outpacing our target of “over ¥100.0 billion.” I believe we have firmly instilled the idea of cash flow management even on the front lines by thoroughly managing the net investment amount within operating cash flows earned and through awareness of raising cash efficiency. Generating nearly ¥400.0 billion in operating cash flows for four consecutive fiscal years is the result of our strong cash flow management.
We accumulated consolidated shareholders’ equity of ¥2,401.9 billion, close to our record high, and our ratio of shareholders’ equity to total assets was the highest ever, at 29.6%. NET DER consequently fell to the lowest level in our history, at 0.97 times, so we met our commitment of reaching “NET DER of 1.0 time.” We had committed to “ROE of 13% or higher.” We overshot this number substantially, with ROE of 15.3%. This ROE figure is significantly better than that of other general trading companies. We believe we have sufficiently met the implied cost of shareholders’ equity. Regarding one of our basic policies, of “strengthening our financial position,” we successfully brought the goal into view in the second year of our three-year plan.
We have guaranteed a minimum dividend and set a performance-linked dividend payout ratio, which was implemented ahead of competitors. For the fiscal year under review, in addition to fulfilling our commitment to a dividend of ¥55 per share, we conducted a share buyback to generate further shareholder returns. (→Shareholder Value)

A2. Operating a diversified portfolio is our greatest strength.

We strictly applied the investment exit rules such as lower returns than originally planned at the time of investment, although profitable, and profit that does not cover the capital cost. (→Enhance Investment Management) Operating companies have also adopted our “earn, cut, prevent” principles. In FYE 2017, the share of Group companies reporting profits hit 86.4%, which was a new record. Furthermore, 73 operating companies reached their highest earnings levels ever. I believe that our consistent approach has contributed to the development of a strong earnings base.
It is worthy of note that out of our 268 operating companies, only five have earnings of more than ¥10.0 billion; 200 of them, just under 75%, generated less than ¥2.0 billion. Operating companies of this nature that are relatively small in scale lend themselves to careful, hands-on management improvement. Furthermore, these companies operate across a broad range of domains, so if something happens in one specific field, any ill effects can be covered by companies in other fields. Our risk is diversified, in other words. Operating in diversified fields is our greatest strength.

A3. We will continue aiming to generate ample cash flows.

FYE 2018 is the final year for “Brand-new Deal 2017.” Focusing on reaching our target of consolidated net profit level of ¥400.0 billion, our financial and capital strategies remain firmly committed to what we promise. Our policy for FYE 2018, the final year of our medium-term management plan, is to surpass FYE 2017 levels for the four commitments outlined below.

We invested ¥600.0 billion in CITIC in 2015. In the two years since, we have generated core free cash flows totaling ¥710.0 billion, outpacing that investment amount. I think this is a good example of our thorough efforts to control investments. In the final fiscal year, we will continue with our strict selection of investments. By applying the “cut, prevent” principles, we will control cash and aim to generate ample core free cash flows. The “+ α”
describes this strong intention.

A4. We strive to achieve an optimal balance.

Along with steady growth in consolidated net profit, I believe “continuity” is an all-important keyword for generating trust with shareholders. As in the past, we will continue aiming for an optimal balance among total returns to shareholders, NET DER and ROE levels, and the making of promising and selective investments. We recognize that there are many expectations for share buybacks. We made a clear policy shift in that direction in FYE 2017, and we will continue to consider share buybacks as an option. In these ways, we will not dissapoint you; we will maintain “continuity” in our policies as we move toward the next medium-term management plan.