Core Viewpoint - The Jinan Municipal State-owned Assets Supervision and Administration Commission has issued the revised "Management Measures for the Rental of Physical Assets of Municipal State-owned Enterprises (2026)" to enhance the management of physical asset rentals, aiming to maximize rental efficiency and prevent the loss of state-owned assets [1]. Group 1: Asset Management - The term "physical assets" includes real estate (including underground structures), land and its attachments, and machinery and equipment [1]. - The rental contracts for physical assets should generally not exceed five years, with annual rent adjusted according to the annual CPI index [1]. - Enterprises are encouraged to utilize idle standardized factories or building parks as pilot projects to provide innovative entrepreneurial spaces [1]. Group 2: Rental Regulations - Enterprises are generally prohibited from allowing tenants to sublet physical assets, with clear stipulations in rental contracts [1]. - If subletting is necessary due to enterprise development needs or asset characteristics, a written application must be submitted by the tenant and approved by the original decision-making body [1]. - The Jinan Municipal State-owned Assets Supervision and Administration Commission will enhance digital supervision of rentals and explore real-time monitoring through the municipal state-owned assets regulatory platform [1]. Group 3: Public Tendering - The rental of physical assets should be conducted through public tendering, especially for assets with an average annual rental base of 1 million yuan or more, or for properties with an area of 1,000 square meters or more [2]. - For other physical asset rentals, enterprises may organize public tenders independently, with a minimum announcement period of five working days [2]. - Special asset rentals related to national interests, public welfare, or cultural heritage may be conducted through non-public agreements, providing greater flexibility for state-owned enterprises [2].

Financial Data and Key Metrics Changes - The company raised its net profit forecast from JPY 380 billion to JPY 440 billion, reflecting strong performance across all business categories [4] - Net income for the first half reached JPY 271.1 billion, a record high and an increase of 48% year-on-year [13] - ROE for the first half was 12.7%, up from 8.8% in the previous fiscal year [20] Business Line Data and Key Metrics Changes - Finance segment profit increased by 8% year-on-year to JPY 99.6 billion, driven by strong gross investment income [18] - Operation segment profit rose by 9% year-on-year to JPY 114.9 billion, benefiting from inbound tourism demand [18] - Investment segment profit surged by 117% year-on-year to JPY 194.9 billion, largely due to the sale of Green Corps Energy and other assets [19] Market Data and Key Metrics Changes - Total group AUM reached JPY 88 trillion at the end of the first half, moving closer to the medium-term target of JPY 100 trillion [10] - The company aims to achieve 11% ROE and JPY 100 trillion in AUM by the fiscal year ending March 2028 [5] Company Strategy and Development Direction - The company is focusing on alternative investments and business solutions, with a long-term vision to achieve JPY 1 trillion in net profit by March 2035 [3] - A joint PE fund with the Qatar Investment Authority was established to enhance asset management capabilities [5] - The Osaka Integrated Resort project is set to open around fall 2030, with construction costs revised upwards due to inflation [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving midterm business plans and long-term vision through disciplined portfolio management and capital recycling [11] - The company is closely monitoring the impact of rising interest rates and inflation on its operations and asset management strategies [58] Other Important Information - The share buyback program was expanded from JPY 100 billion to JPY 150 billion, reflecting the company's commitment to shareholder returns [15] - The company has begun utilizing a dashboard for detailed visualization of its business portfolio status [9] Q&A Session Summary Question: Inquiry about joint investment with QIA - Management explained that the joint PE fund with QIA was established after two years of negotiation, aiming to leverage third-party funds for larger projects without significantly bloating the balance sheet [42][44] Question: ROE target and initiatives to achieve it - Management acknowledged the need for initiatives to achieve the 11% ROE target, emphasizing the importance of monitoring interest rates and their impact on profitability [50][52] Question: Outlook for next year's profit forecast - Management indicated that while the current year has seen significant one-off gains, they aim for sustainable profit growth and will begin discussions on next year's plans early next year [60][75] Question: Capital recycling forecast and segment profit balance - Management clarified that the capital gain forecast of JPY 200 billion is on track, with expectations for solid performance in the real estate market and private equity portfolio [66] Question: Concerns about significant impairment losses - Management reassured that while the second half's pre-tax profit forecast is lower, it is not due to expected significant losses but rather a return to regular profit levels [72][74]