Acom Co Stock

I'd like to extend my heartfelt appreciation to all of you for your kind support to and understanding of our company and attending the presentation on our financial results out of your busy schedules.

Now please go to Page 3 of the presentation on financial results for fiscal year ended March 2026. I will go over item #1 and give you a summary of financial results. Later, Mr. Tanaka, Chief PR and IR Officer, will go over item #2 and give you supplementary information on interest repayment and financial expenses.

Please go to Page 4. Firstly, consolidated receivables, as the bar on the very right shows, grew 7.3%, or around JPY 200 billion year-on-year, to JPY 2,911.4 billion, overshooting the target by JPY 37.2 billion. I will go over receivables by business line later in my presentation.

Please move on to Page 5. Consolidated operating revenue shown on the left grew 6.3% year-on-year to JPY 337.7 billion, thanks mainly to receivables growth. Operating profit shown on the right increased 71.4% to JPY 100.3 billion. A huge drop in interest repayment expenses is largely responsible for the increase. Profit attributable to the owners of the parent shown on the bottom right grew 147.9% to JPY 79.6 billion. This is mainly because in the first quarter, we were upgraded from Group 3 to Group 2 among corporate groups in tax effect accounting. With this upgrade, deferred income taxes decreased temporarily, which in turn boosted profit. I will go over receivables, revenue and profit by business segment in the next page and beyond.

Please go to Page 6. Firstly, I'm going to talk about receivables outstanding in the loan and credit card business compared to the personal card loan market. Turning to the left-hand side of the slide, please find the evolution of the nonbank market. It is 12.1% larger than where it was pre-pandemic back in fiscal year ended March 2020. Turning to the right-hand side of the page for Acom, we issue cards which have both loan and credit card functions to suit customer needs. The receivables on this page are loan and credit card balances combined with its receivables 25.7% greater than where they were in fiscal year ended March 2020, our loan and credit card business has outgrown the market by more than 10 percentage points. Receivables outstanding grew 7.3% year-on-year to JPY 1,151.7 billion, thanks largely to strong demand among existing customers and good credit extension with the acquisition of income certificates through various campaigns.

Please move on to Page 7. Operating revenue shown on the left grew 7.3% to JPY 181.8 billion, thanks largely to receivables growth. Operating profit shown on the right increased by 281.9% to JPY 53.5 billion due mainly to a decrease in provision for loss on interest repayments.

Please turn to Page 8 for the guarantee business. Here again, I'm going to talk about how our guarantee business has performed compared to the market. With receivables 6.1% smaller compared to where they were back in fiscal year ended March 2020, the bank market shown on the left has yet to recover to its pre-pandemic level. In contrast, with its guaranteed receivables 19.1% greater than where they were in fiscal year ended March 2020, our guaranteed business, as shown on the right, recovered to a higher than its pre-pandemic level, outgrowing the market by more than 20 percentage points. Guaranteed receivables grew 7.7% to JPY 1,469 billion, thanks to strong loan demand among new customers and additional borrowing among existing borrowers and enhanced collaboration with our existing partners through close communication.

Please go to Page 9. Operating revenue shown on the left grew 6.2% to JPY 81 billion, thanks mainly to receivables growth. In contrast, operating profit shown on the right dropped 5.9% to JPY 22.2 billion. What is behind this is an increase in the proportion of newer customers. With a recovery of new customer acquisition, it takes some time before the credit situation stabilizes, which in turn results in a temporary increase in provision for bad debt.

Please turn to Page 10. Last but not least, let's turn to international operations. Here, I will touch on EASY BUY, our Thai business. The nonbank market in Thailand, shown on the left, contracted by 3.1% year-on-year. This is largely because the government relief program during the pandemic ended and the proportion of the loan book subject to lending regulations increased. Turning to the right-hand side of the page, you can find EASY BUY's receivables outstanding and the evolution of its market share, which is illustrated by the solid line. Receivables outstanding was THB 55.1 billion. While growing loan book is challenging in the current environment, EASY BUY's market share is recovering as it gains new customers by leveraging its #1 position.

Please go to Page 11. Operating revenue shown on the left came down by 3.3% to THB 14.2 billion because of decrease in receivables. Operating profit, on the other hand, grew 10.7% to THB 5.2 billion, as shown on the right, thanks mainly to a decrease in provisions for bad debts. Reversal of reserve for bad debt, thanks to a lower delinquency rate with improved loan recovery, is mainly responsible for the decrease in provisions for bad debt.

Please turn to Page 12. Our basic capital policy, as is mentioned at the top, is to maintain good financial health and expand profitability for sustainable growth of corporate value and pay stable and sustainable dividends. As shown in the center, we target equity to asset of around 23% with guaranteed receivables included in the total consolidated asset, return on equity of about 10% and a dividend payout ratio of around 50% in fiscal year ending March 2028.

Turning to the right-hand side of the page, please find where those numbers were at the end of March 2026. Equity to asset was 23.3%. Return on equity, which is a metric for profitability, stood at 11.6%. As for shareholder return, we have looked at our financial results, among other things, and decided to pay JPY 12 per share for the second half, which is JPY 2 higher than our previous plan. JPY 22 per share for the full year works out to a dividend payout ratio of 43.3%. I will talk about dividends for fiscal year ending March 2027 later in my presentation.

Please skip the next page and go to Page 14. Now I'd like to touch on some of the topics from the fiscal year under review. First, new customer acquisition. The gray arrow shows the evolution new account growth. As I mentioned earlier, when I was on the topic of the personal car loan market, the nonbank market remains on a steady growth path. Hit by COVID-19, new customer acquisition was weak temporarily in fiscal year ended March 2021 and the following few years. The number of new accounts, however, has been greater than expected since fiscal year ended March 2024, thanks to market growth and pent-up demand. 362,000 as of the end of March 2026 was basically in line with our plan.

Please find the target for new customers for the current fiscal year on the very right. While we are targeting 360,000, flattish year-on-year due to the absence of pent-up demand, we expect new customer acquisition to remain strong. The solid line illustrates cost per acquisition. It is currently around JPY 48,000, which is slightly higher than last fiscal year. We understand it is going back up to its pre-pandemic level and believe that we continue to drive new customer traffic with good efficiency.

Please move on to Page 15 for bad debt expense ratio. With strong new customer acquisition driven by pent-up demand, the proportion of newer borrowers who are more likely to default increased. This in turn resulted in a temporary rise in a bad debt expense ratio. It, however, has come down to an assumed range more recently, both in the loan and credit card business and the guarantee business.

Please go to Page 16. Next, I'm going to touch on some of the initiatives in our midterm focus areas. As shown on the left, we started a tie-up service with PayPay accounts in February. You can now top up your PayPay money with our loan and repay the loan from your PayPay money. Turning to the right-hand side of the slide, we started a BPR, business process re-engineering, program in Yokohama and Osaka in the loan and credit card business in April. With a drastic review of operations, we aim to offer even better customer experience by separating work which requires human intervention from work which can be handled by digital technologies.

Please move on to Page 17. Please turn to the left-hand side of the page for our initiative to rebuild the perception. We launched a new commercial, which features Ken Matsudaira to further enhance the sense of security and trust for our brand. Please turn to the right-hand side of the slide. I would like to talk about adding new business partners for GeNiE.

GeNiE, our consolidated subsidiary which provides embedded finance service, initially had a target of 16 partners as of March 2026. The total number of partners actually reached 29, which is almost twice as high as the original plan. While it initially planned to expand partnerships to 30 or more in the current midterm plan, it upgraded its target to around 60, again, twice as high as the original plan. It plans to grow its partnerships to about 50 this fiscal year. We are confident that embedded finance, which leverages Acom's credit screening and collection expertise, is a valuable service. We continue to look for new partners.

Please move on to Page 18. Now I would like to touch on expansion partnerships in the guaranteed business. Steady negotiations paid off. We forged partnerships with 1 company and 5 banks last year, the Mortgage Corporation of Japan, 3 banks in Resona Group, AEON Bank and PayPay Bank. We have been adding new partners with Tomato Bank becoming our latest partner this April. We also plan to forge an alliance with ORIX Bank in October. We target JPY 331.5 billion of consolidated guaranteed receivables growth in the 3-year midterm plan, 20% of which will come from new partnerships, and we are on target. We'll continue to negotiate for more new partners.

Please go to Page 19. Turning to the left-hand side of the slide for ACF in the Philippines. Its receivables are steadily growing. In our effort to turn the business profitable in the final year of the current midterm plan, we're trying to maintain and improve the quality of its loan asset and further grow its receivables.

Turning to the right-hand side of the slide for ACF, our Malaysian business. While we used to operate only in Kuala Lumpur, we have started to expand our reach to some other areas, as is highlighted in red. As a result, loan applications increased 3.7x as of March 2026. With gradual expansion of operating areas, we plan to cover the entire Malay Peninsula during the 3-year midterm plan. With this geographical expansion, we can broaden target population for our services from around 2 million people in Kuala Lumpur to about 20 million people on the Malay Peninsula. With the expansion of operating areas, we will leverage accumulated data to upgrade our credit screening model. We're trying to turn the business profitable in the final year of the current midterm plan.

Please turn to Page 20. Now I'm going to share with you our targets for fiscal year ending March 2027. Firstly, turning to the left-hand side of the slide for consolidated receivables. We're targeting 6.5% growth to JPY 3,099.8 billion. By business line, we target 7.5% growth to JPY 1,237.8 billion for the loan and credit card business and 7.8% growth to JPY 1,583.1 billion for the guaranteed business. Given that growing loan book is challenging in Thailand due to regulations and other factors, we forecast 4.3% negative growth to JPY 267.9 billion for the international financial business.

Turning to the right-hand side of the page for new customers. We forecast 360,000, which is flattish year-on-year for the loan and credit card business. Since we will keep investing efficiently and effectively for new customer acquisition, we forecast advertisement and promotional expenses to go up by 1.9% to JPY 17.8 billion.

Please go to Page 21. Next, turning to the left-hand side of the slide for consolidated revenue. We target 5.4% growth to JPY 356 billion, driven mainly by receivables growth. By business segment, we forecast 5.3% growth to JPY 191.6 billion for the loan and credit card business, 6.1% growth to JPY 86 billion for the guaranteed business and 4.3% growth to JPY 70.4 billion for the offshore financial business.

As for operating profit, we forecast 2.4% negative growth to JPY 98 billion. Main factors behind this include an increase in financial expenses due to receivables growth and higher interest rates and an increase in bad debt expenses with new partnerships in the guaranteed business. We forecast 19.9% negative growth to JPY 63.8 billion for profit attributable to shareholders of the parent. Last but not least, as for dividends, shown on the right, we plan to pay JPY 11 per share for each half or JPY 22 annually, which works to a dividend payout ratio of 54%. Our shares closed at JPY 489 on May 11, which works out to a dividend yield of 4.5%. Please consider Acom as a potential investment.

Please move on to Page 22. Lastly, I would like to talk about how much progress we have made in our initiatives for future business. Please turn to the left-hand side of the page. I earlier said that growing loan book is challenging in the current environment for our Thai business, EASY BUY. To build a new revenue base, we are looking at new businesses which have good compatibility with our lending business.

Turning to the right-hand side for further international expansion. We plan to expand into at least one more country during the current midterm plan. We're currently focusing our research on Cambodia. Once we decide, we will get back to you with a press release.

We'll keep doing our utmost to achieve stable growth of the 3 core businesses. I would like to conclude my presentation by asking for your continued support and guidance to our group. Thank you very much.

I'm going to go over requests for interest repayment and financial expenses for supplementary information. First, please go to Page 38 for claims for interest repayment. The number of requests for interest repayment for the full year decreased by 27.1% year-on-year to 7,000. The rate of decline was sharper than our original assumption of around 20%. What should be noted here is that the rate of decline accelerated in the third quarter and beyond. As is mentioned in the second bullet point at the top, we expect the number of claims to come down by about 25% for fiscal year ending March 2027.

Please turn to Page 39 for loss on interest repayment. The total drawdown of reserve for loss on interest repayment dropped 41.6% year-on-year to JPY 13 billion. Here again, the rate of decline was greater than our original assumption of around 25%. The number of customers who are eligible to make claims keeps coming down due to statute of limitations and other factors. As is mentioned in the third bullet point at the top, we expect the total drawdown reserve to decrease by about 25% in fiscal year ending March 2027. We will closely monitor future trends as some law firms continue with their active ad activities.

Next, please go to Page 42 for financial expenses. Consolidated financial expenses shown on the left increased 27.4% year-on-year to JPY 7.3 billion, with nonconsolidated financial expenses at Acom, shown on the right, increasing 53.9% to JPY 5.9 billion. Two factors are responsible for this increase. Firstly, with higher market rates, borrowing costs went up. Secondly, with receivables growth, outstanding debt increased. We expect financial expenses on a consolidated basis to increase by 58.4% to JPY 11.6 billion in fiscal year ending March 2027, as we assume nonconsolidated financial expenses at Acom will increase 83.7% to JPY 10.9 billion.

Please turn to the next page for factors behind the increase. As is shown by the bar graph on the left, with receivables growth, outstanding debt increased by JPY 60.5 billion to JPY 685.5 billion in fiscal year ended March 2026. We expect outstanding debt to increase JPY 61.5 billion to JPY 747.1 billion in fiscal year ending March 2027, as we assume further receivables growth. The solid line illustrates an average borrowing cost. With higher market rates, it went up by 29 basis points to 0.92% in the fiscal year under review. We assume BOJ's rate hike in the first quarter and the third quarter and expect the average borrowing cost to go up by 61 basis points to 1.53% in fiscal year ending March 2027.

The pie chart on the right shows funding sources and their proportions. The split between direct and indirect funding is 35.7% and 64.3%, with funding from MUFG Bank representing 31.2%. While 75.4% of our debt is at fixed rates, 87.6% is long term. While we keep focusing on long-term debt at fixed rates in our future funding, we will try to strike an optimal balance between short and long term and floating and fixed rates in our effort to control financial expenses.

For your reference, Page 44 and the following pages in the appendix carry various data, including the size of the personal loan and card loan market. This will do for supplementary information on our financial results.

I would like to conclude my presentation by asking for your continued support and guidance to our group.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

I would like to extend my heartfelt appreciation to all of you for your kind support to and understanding our company and attending the presentation of financial results out of your busy schedules.

Now please go to Page 3 of the presentation on financial results for the first half of fiscal year ending March 2026. I will go over item #1 and give you a summary of our financial results. Later, Mr. Tanaka, Chief PR and IR Officer, will go over item #2 and give you supplementary information on interest repayment, provision for bad debt and financial expenses.

Please go to Page 4. Consolidated receivables as the bar on the very right shows grew 2.8% or around JPY 76 billion compared to where they were at the end of last fiscal year to JPY 2.7903 trillion. It might seem slightly lower than our full year target of 5.9% year-on-year growth as the third bar from the left shows. This, however, is due to the impact of stronger yen on our international operations. Given that the yen has weakened more recently, however, we should be able to slightly overshoot the full year guidance. I will give you a breakdown of receivables by business line later in the presentation.

Please move on to Page 5. Consolidated operating revenue shown on the left grew to JPY 165.6 billion, exceeding the first half target by 1%, thanks mainly to receivables growth. Having achieved 49.9% of the full year target, we are on track. Operating profit shown on the right was JPY 54 billion or 13.8% greater than the first half target. Having achieved 61% of the full year target, we have done better than originally planned. This is largely thanks to less provision for bad debt than assumed with a lower reserve ratio resulting from improved quality of asset portfolio.

Profit attributable to the owners of the parent shown at the bottom right was JPY 50.9 billion, 14.6% greater than first half target and 70.6% of the full year guidance. This is mainly because in the first quarter, we were upgraded from Group 3 to Group 2 among corporate groups in tax effect accounting. With this upgrade, deferred income taxes decreased temporarily, which in turn boosted profits. I will go over receivables, revenue and profit by business segment in the next page and beyond.

Please go to Page 6. First, I'm going to talk about receivables outstanding in the loan and credit card business compared to the personal car loan market. Turning to the left-hand side of the slide, please find the evolution of the nonbank market. It is 9% larger than where it was back in fiscal year ended March 2020.

Turning to ACOM to offer greater convenience to our customers, we issue cards, which have both loan and credit card functions. The receivables you find on this page are loan and credit card balances combined with its receivables 21.4% greater than where they were in fiscal year ended March 2020, our loan and credit card business outperformed the market by more than 10 percentage points as of September.

Receivables outstanding grew 6.9% year-on-year to JPY 1.1119 trillion as of September, thanks largely to strong demand among existing customers and a continuing review of credit extension with the acquisition of income certificates through various campaigns.

Please move on to Page 7. Operating revenue shown on the left grew 7.5% to JPY 89.9 billion, thanks largely to receivables growth. Operating profit shown on the right, increased by 16.7% to JPY 30.5 billion due mainly to lower provision for bad debt.

Please turn to Page 8 for the guarantee business. Again, I'm going to talk about how our guarantee business has performed compared to the market. With receivables 7.3% smaller compared to where they were back in fiscal year ended March 2020, the bank market, shown on the left, has yet to recover to its pre-pandemic level.

In contrast with its guaranteed receivables 14.9% greater than where they were in fiscal year ended March 2020, our guaranteed business, as shown on the right, recovered to a higher than its pre-pandemic level, outgrowing the market by more than 20 percentage points as of September. Guaranteed receivables grew 7.3% to JPY 1.4165 trillion as of September, thanks to strong loan demand among new customers and additional borrowing among existing borrowers and enhanced collaboration with our existing partners through close communication.

Please go to Page 9. Operating revenue shown on the left increased 6.5% to JPY 39.8 billion, thanks mainly to receivables growth. Operating profit shown on the right grew 6.8% to JPY 11.7 billion.

Please turn to Page 10. Last but not least, let's turn to international operations. Here, I will touch on EasyBuy, our Thai business. Receivables outstanding shown on the left, dropped by 3.6% to THB 55.6 billion due to lending regulations by the Thai Central Bank. Operating revenue shown in the center came down by 4.4% to THB 7.1 billion because of decrease in receivables. Operating profit, on the other hand, grew 0.7% to THB 2.5 billion, as shown on the right, thanks mainly to a decrease in provision for bad debts. Later, Mr. Tanaka will explain factors behind the drop in provision for bad debt.

Please go to Page 11. Our basic capital policy, as is mentioned at the top, is to maintain good financial health and expand profitability for sustainable growth of corporate value and pay stable and sustainable dividends. As shown in the center, we target equity to asset of around 23% with guaranteed receivables included in the total consolidated asset, return on equity of about 10% and a dividend payout ratio of around 50% in fiscal year ending March 2028.

Turning to the right-hand side of the page, please find where those numbers were at the end of September 2025. Equity to asset was 23.4%, reaching the target of 23%. Return on equity, which is a metric for profitability stood at 15.2%. As for shareholder return, in our effort to pay stable and sustainable dividends, we have kept a JPY 10 per share dividend for the first half and another JPY 10 for the second half intact, which works out to a dividend payout ratio of 43.4% for the full year.

Please skip the next page and go to Page 13. Now I would like to touch on some of the topics from the first half. First, new customer acquisition. The gray arrow shows the evolution of new account growth. As I mentioned earlier, when I was on the topic of the personal car loan market, the nonbank market remains on a steady growth path. Hit by COVID-19, new customer acquisition was weak temporarily in fiscal year ended March 2021 and the following few years. The number of new accounts, however, has been greater than expected since fiscal year ended March 2024, thanks to market growth and pent-up demand.

Please find the full year target for new customers on the very right. While it is fewer than last fiscal year due to the absence of pent-up demand, we expect new customer acquisition to remain strong. With 186,000 new accounts as of September, we are on track to achieve a full year target of 364,000. The solid line illustrates cost per acquisition. It is currently around JPY 45,000, which shows the very fact that we have driven new customer traffic with good efficiency.

Please move on to Page 14 for nonperforming loans or NPLs. NPLs, as shown on the very right, stood at JPY 67 billion as of September. That solid line shows the evolution of NPL ratio. It recently came down to 6.96%. This is due to improved quality of the asset portfolio as a proportion of newer borrowers who are more likely to default decreased. Moreover, we have partially switched to an automated voice message for customer contact. This has allowed us to reach a lot more customers with greater efficiency.

Please go to Page 15. Here, I would like to touch on the new services we are working on to achieve growth for the next phase. Please turn to the left side of the page. Firstly, I would like to talk about adding new business partners for Genie. Genie, our consolidated subsidiary, which provides embedded finance service has added new business partners since it launched its service in October of last year. The total number of partners reached 20 as of September of this year. It is on track to achieve the target of 30 or more in the current midterm plan. It forged a business alliance with Mitsubishi UFJ Nikos, a core member of MUFG in September. We are confident that embedded finance, which leverage ACOM's credit screening and collection expertise is a valuable service. We continue to look for new partners.

Please turn to Page 16. Since I went over the financial results of our Thai business earlier, I will talk about our operations elsewhere outside Japan. Turning to the left-hand side of the slide for ACF in the Philippines, its receivables are on a recovery trend. In our effort to turn the business profitable in the final year of the current midterm plan, we are trying to maintain and improve the quality of its loan book and grow its receivables.

Turning to the right-hand side of the slide for ACN our Malaysian business. While we operate only in Kuala Lumpur, we have started to expand our reach to some other areas as is highlighted in red. As a result, loan applications roughly tripled as of September 2025. With the gradual expansion of operating areas, we plan to cover the entire Male Peninsula during the 3-year midterm plan. With this geographical expansion, we can broaden target population for our services from around 22 million people in Kuala Lumpur to about 20 million people on the Male Peninsula. With the expansion of operating areas, we will leverage accumulated data to upgrade our credit screening model. We're trying to turn the business profitable in the final year of the current midterm plan.

Please move on to Page 17. It is our staff who run all the businesses I have talked about so far. For sustainable growth of our group, we need to respect abilities, ideas and values of our diverse talent. At the same time, we need to build a rewarding and worker-friendly environment. Turning to the left-hand side of the slide. As part of work style reform, we introduced a program where new mothers and fathers receive monthly benefits of JPY 70,000 and financial support for baby sitters for a fixed period if they come back within a year after child birth. The solid line shows the evolution of the ratio of male employees who took paternity leave. While it's not 100% due to a time lag between when data was aggregated and when they took the leave, every employee did take the leave.

Turning to the bottom left for remuneration. We raised a starting salary for new university graduates from JPY 270,000 to JPY 300,000. We, on the other hand, raised base salaries for the current staff. Combined with the regular wage increase, the most recent pay hike amounts to 4.1%. We, in fact, have raised salaries for 3 consecutive years since fiscal year ending March 2024 by 14.9% in total. Thanks to these initiatives, the engagement score reached a record of 62.2% in an employee perception survey as shown on the right, achieving the AA rating for the first time. We will do our utmost to achieve stable growth of the 3 core businesses.

I would like to conclude my presentation by asking for your continued support and guidance to our group. Thank you very much.

I'm going to spend the next 10 minutes or so to go over interest repayment, provision for bad debt and financial expenses for supplementary information. First, please go to Page 30 for claims for interest repayment. Turning to the right-hand side of the slide. The number of claims for interest repayment in the first half decreased by 21.2% year-on-year to 4,100. As the second bullet point at the top indicates, this is in line with our original assumption of a 20% decline for the full year.

Please turn to Page 31 for loss on interest repayments. As shown on the right, the total drawdown of reserve for loss on interest repayment in the first half dropped 45.2% year-on-year to JPY 6.5 billion. As the third bullet point at the top indicates it is a much sharper decline than our initial forecast of a decrease of around 25% for the full year. The number of customers who are eligible to make claims will keep coming down due to statute of limitations and other factors. We'll closely monitor ad activities of some law firms and other trends.

Please move on to Page 32 for provision for bad debt. Consolidated provision for bad debt shown on the left came down by 0.2% year-on-year to JPY 53.1 billion, largely because provision for bad debt at EASY BUY decreased 7.1% as shown on the right. The decrease is attributable to reversal of allowance for doubtful accounts with receivables contraction and better delinquency control, which resulted in a decrease in a year-on-year change in allowance for doubtful accounts.

Please go to Page 33. Provision for bad debt on a nonconsolidated basis at ACOM, shown on the left, increased by 0.5% to JPY 38.3 billion. While bad debt expenses increased JPY 1.6 billion, a change in allowance for doubtful accounts was a decrease of JPY 1.1 billion and a change in provision for loss on guarantees was a decrease of JPY 300 million. Now I'd like to explain what is behind the increase in bad debt expenses and a change in allowance for doubtful accounts. Bad debt expenses increased due to receivables growth. We expect the ratio of bad debt expenses, both in the loan and credit card business and the guaranteed business to come down as a proportion of newer customers who are more likely to default steadily decreases.

Next, turning to the right-hand side of the slide. I will touch on a change in allowance for doubtful accounts. The balance of allowance for doubtful accounts increased JPY 3.5 billion half-on-half in the first half of last year. This is due to receivables growth and an increase in receivables for claim, which in turn resulted in a higher reserve ratio.

While receivables and receivables for claim increased in the first half of this year, the balance of allowance for doubtful accounts increased only by JPY 2.4 billion, thanks to a lower reserve ratio with improved quality of our assets. For this reason, a change in allowance for doubtful accounts was a decrease of JPY 1.1 billion.

Lastly, I would like to touch on financial expenses. Please turn to Page 34. Consolidated financial expenses shown on the left increased 24% year-on-year to JPY 3.3 billion because nonconsolidated financial expenses at ACOM shown on the right, increased 42.1%. Two factors are responsible for this increase.

Please go to Page 35. Firstly, as is shown on the left, with receivables growth, outstanding debt increased by JPY 35.4 billion to JPY 643.6 billion. Secondly, with higher market rates and average borrowing cost went up by 21 basis points to 0.82% as is illustrated by the solid line. The pie chart on the right shows funding sources and their proportions.

The split between direct and indirect funding is 30.3% and 69.7% with the funding from MU Bank representing 34.8%. Uncertainty over future interest rates still remains, but I would like to tell you that 93% of our total debt is long term and 79.5% is at fixed rates. While we will keep focusing on long-term debt at fixed rates in our future funding, we'll try to strike an optimal balance between short and long term and floating at fixed rates in our effort to control financial expenses.

For your reference, Page 37 and the following pages show the trend of the size of the personal car loan market and the midterm management plan. This will do for supplementary information on financial results for the first half. I would like to conclude my presentation by asking for your continued support and guidance to our group. Thank you.