Sun Hung Kai & Co Stock

Ladies and gentlemen, and welcome to Sun Hung Kai & Co. 2026 Interim Results Presentation. This presentation will be conducted in English. I am Christian Arnell from Christensen Advisory.

The senior executives here with me on the call today are Mr. Tony Edwards, Deputy Chief Executive Officer; and Mr. Brendan McGraw, Group Chief Financial Officer. In today's call, we will talk you through the company's business performance in the first half of 2026, outlook and future plans. Following the call, we'll open the floor to questions.

Before we start, I would like to take the opportunity to remind you that today's discussion will contain forward-looking statements, which are based on assumptions and factors that are beyond the control of the group and are not necessarily indicative or guarantees of the group's future performance.

Now I'd like to pass the call to Tony to begin the presentation. Tony, please go ahead.

Thank you very much, and good afternoon, everyone, and thank you for joining us today.

Let me begin with the key figures. Despite the challenging operating environment in the first half of 2026, the group continues to create value, staying focused on downside protection and risk-adjusted returns. Total income decreased 10.9% year-on-year to HKD 2.5 billion, while EBIT declined 9.3% to HKD 1.3 billion. Attributable profit was HKD 688 million, down 22.4% year-on-year, primarily driven by lower net investment income against the high baseline in the first half of 2025 from a major position's IPO valuation markup, partially offset by an improved contribution from our credit business.

On the growth side, our Alternative Solutions business, SHK Capital Partners, continued to expand with total AUM rising 17.7% since the end of 2025 to USD 3.7 billion. Investment assets increased 7.4% since the end of 2025 to HKD 16.9 billion, while the consumer finance loan book grew steadily with gross loan balance up 4.6% since the end of 2025 to HKD 12.3 billion. The Board declared an interim dividend of HKD 0.13 per share, an increase of 8.3% year-on-year.

Turning to our key messages. The group's profitability remained resilient and aligned with our alternative investment platform strategy, although reported profit was lower this period, reflecting the absence of a sizable liquidity event compared with the preceding period. Total AUM reached USD 3.7 billion with 17.7% growth in the first half, demonstrating the flywheel effect of our expansion in strategic partnerships, enabling Sun Hung Kai Capital Partners to build long-term recurring revenues and enduring relationships.

Our proven track -- investment track record supported by a resilient balance sheet, continues to drive external capital growth, strategic partnership expansion, consumer finance scaling and asset growth in mortgage servicing. We maintained a low cost-to-income ratio and an EBIT margin of around 50%, reflecting disciplined and well-managed operating model. Importantly, our investments in technology infrastructure, AI implementation and top-tier talent are actively driving business traction. As the uncertain market environment is likely to persist, the secular investment case for alternatives remains compelling.

Now I'll pass to Brendan to talk about the Investment Management business.

Thank you, Tony. In the first half of 2026, our Investment Management business delivered a profit before tax of HKD 403 million, contributed evenly across private equity, special situations and structured credit and hedge funds. Overall, our return on assets remained solid at 3.8% for the 6-month period. Total investment assets reached HKD 16.9 billion, an increase of 7.4%, with private equity, external funds and direct or co-investments representing approximately 57% of the portfolio.

We also increased our exposure to special situations and structured credit, now accounting for 11.2% of assets, providing downside protection while preserving upside optionality. Investment income of private equity was propelled by liquidity events, including IPO and M&A, portfolio markups from new financing rounds and technology investments and ongoing distributions. The decrease in direct and co-investment returns was largely a high base effect because the first half of 2025 included a one-off IPO gain.

Our fund of -- hedge funds strategy delivered strong returns outperforming market benchmarks. Gains from special situations and structured credit were driven by value appreciation in a U.S. payments co-investment and some special situation funds alongside steady income from the private credit portfolio, such as the Wentworth Private Credit platform that we invested in last year. The public portfolio recorded a small loss amid broader market volatility and sector rotation in the second quarter.

Our portfolio remains well diversified, both by geography and sector. We monitor it using a total portfolio approach. Geographically, Asia, North America, Europe and Australia accounted for approximately 33%, 34%, 15% and 8% of investments, respectively. By sector, exposure is well balanced across financials, TMT, diversified, consumer, real estate, supporting resilience across market cycles.

Private equity remained the largest contributor to investment income in the first half of 2026, generating HKD 128 million of profit before tax. Total assets increased 2.9% from the end of 2025 to HKD 9.7 billion, while return on assets was 2.1% for the 6-month period. Net IRR since inception was 15.8% and DPI improved to 0.87x, reflecting ongoing realizations and liquidity events. The successful public listing of HKD 1.7 billion of the private equity portfolio provides us with strong liquidity flexibility.

I will now hand back to Tony to discuss alternative solutions.

Thank you, Brendan. Our Alternative Solutions business, SHK Capital Partners, delivered strong growth momentum during the period. Despite a challenging fundraising backdrop, our total AUM increased by 17.7% from the end of 2025 to USD 3.7 billion, while fee income rose 24.7% year-on-year to HKD 21 million. Pretax loss -- pretax loss narrowed significantly by 82% year-on-year to a nominal HKD 1 million. This improvement was primarily driven by accelerating AUM and fee income growth, partially offset by planned operating expenses.

During the period, we leveraged strategic partnerships with leading global alternative and private market GPs, and this has allowed us to access privileged risk return through co-investments and tailored solutions for our institutional and family office clients. New developments include partnering with Janus Henderson to co-develop and distribute alternative investment solutions, partnering with Aquilius to unlock unique access to Asia Pacific secondaries, and expanding our alliance with Pinegrove Credit Partners, broadening Asian investor access to venture debt in a high-growth sector.

Over the past few years, SHK Capital Partners has delivered strong and consistent growth with both AUM and fee income expanding at a high CAGR, demonstrating the scalability of our platform and solutions-driven business model. Our AUM growth was attributable to net capital inflows, satisfactory performance across various strategies and new strategic partnerships. Both the AUM and fee income growth reflects our success in accessing unique alternative opportunities with differentiated risk-adjusted returns, which further transforms into solutions for our clients and GP partners.

With the completion of our investment in Aquilius in the second quarter and with most other alliances only commencing last year or this year, this collaborative model will continue to generate a flywheel effect that unlocks proprietary deal flow, expands the network effects and enables Sun Hung Kai Capital Partners to build long-term recurring revenue. Importantly, these expanding partnerships benefit not only SHK Capital Partners, but also the wider group, driving investment returns and creating compelling co-investment opportunities for our Investment Management segment.

This next slide shows you how we activate our strategic partnerships to unlock the flywheel effects. At its heart, strategic partnerships and disciplined origination compound into investment returns and recurring income growth, a self-reinforcing flywheel that powers everything we do. On the supply side, we back the best GPs and funds with capital, better governance and distribution, helping strong managers build and scale, while we institutionalize and amplify what they do. These GPs and funds, in turn, produce differentiated privileged risk-adjusted returns, which we transform into solutions for our clients.

On the demand side, the family offices and institutional investors who gain access to investment opportunities they could not reach on their own with better access, better alignment with SHK Capital and better outcomes. As capital inflows -- as capital flows through, we grow our LPs' AUM and franchise value and the whole wheel turns again, each rotation strengthening the next.

Ultimately, this compounding cycle drives the platform monetization and relationship development in 2 forms: investment returns captured in the Investment Management segment, of which approximately HKD 681 million of gains have been associated with AUM from our partners within the alternative solutions platform since 2021 and recurring income captured in SHK Capital Partners. The more partnerships we add, the more powerful these flywheel effects become, and it is exactly what we are seeing in our AUM, fee income growth and investment returns.

Now I'll hand back to Brendan to walk you through the credit business model.

Thank you, Tony. Our Consumer Finance business conducted by UA Finance delivered a strong performance, recording a pretax profit of HKD 565 million in the first half of 2026, up 50.7% year-over-year. Excluding the exchange loss of HKD 42 million relating to the liquidation of certain Chinese Mainland subsidiaries, the adjusted pretax contribution was HKD 607 million or a 43.8% year-on-year increase.

The total gross loan balance of UAF increased by 4.6% from the end of 2025 to HKD 12.3 billion. Supported by disciplined underwriting and portfolio management, the return on loan of UAF reached 28.1% in the first half of 2026, while the loan charge-off ratio improved to 6.6%, down 30 basis points from the end of 2025.

In the first half of 2026, UAF Hong Kong delivered satisfactory growth in both profitability and transaction volume, maintaining a disciplined credit underwriting policy and robust credit scoring system while bringing down the loan charge-off rate. Total gross loans of UAF Hong Kong increased 3.4% from the end of 2025 to HKD 10.1 billion. Our SIM Credit Card business has begun generating profit with growth in card receivables, interest and fee-based income. With rising revenue yields and acquisition among younger demographics, overall performance remains satisfactory.

UAF China continued to focus on its secured loan business with tight cost control. Total gross loans in China increased by 9.7% from the end of 2025 to HKD 2.3 billion. Overall, total income of the consumer finance business increased by 6% year-over-year to HKD 1.7 billion in the first half of 2026.

The cost-to-income ratio stood at 31% in the first half of '26, broadly stable versus 30.6% in the first half of 2025 and around 90 basis points lower than the 31.9% recorded in the first half of 2024. This demonstrates the continued strength of our consumer finance platform and the effectiveness of our prudent credit approach.

In the first half of 2026, our mortgage loan business conducted by Sun Hung Kai Credit, recorded a pretax profit of HKD 26 million, up 140.7% year-over-year. Growth was primarily driven by a significant reduction in impairment charges with the net impairment losses ratio down by 160 basis points year-over-year, reflecting improved asset quality and prudent risk management. As such, the return on loans improved by 50 basis points year-over-year to 10.4% in the first half of 2026, demonstrating enhanced profitability and portfolio performance.

The mortgage servicing business continued its momentum. Total mortgage loans serviced by Sun Hung Kai Credit reached HKD 1.5 billion at the end of the first half of 2026, up 40.7% from the end of 2025, while loan servicing income increased 81.3% year-over-year to HKD 3 million. This growth was driven by new mandates, underscoring the market's recognition and trust in Sun Hung Kai Credit amongst institutional investors and reflecting growing demand across developers. Expanding the mortgage servicing business advances our strategy to broaden the revenue base through capital-light recurring income while solidifying our position as an institutionalized mortgage solutions platform.

Now let me go through our key financial performance in the first half of '26. Attributable profit was HKD 688 million, down 22.4% year-on-year. Total income reached HKD 2.5 billion, down 10.9% year-on-year. Both declines were mainly due to the absence of a sizable liquidity event compared to the preceding periods.

Looking at the broader 2-year trend, performance has strengthened since the 2024 interim. Attributable profit has grown from HKD 75 million to HKD 688 million, while total income is up 29.4% from HKD 1.93 billion to HKD 2.5 billion, underscoring the group's improved earnings base over the period even against a strong 2025 comparative. The cost-to-income ratio of our fees and interest-based business stood at 31.8%. Interest cover remained strong at 3.9x.

Net debt decreased by 5.1% year-over-year to HKD 6.2 billion, while shareholders' equity increased 3.4% year-over-year to HKD 22.8 billion. Consequently, our net gearing ratio reduced from 29.6% in the first half of '25 to 27.1% in the first half of '26, reinforcing the strength of our balance sheet.

Charts highlight our long-standing commitment to disciplined asset growth and value creation, which has consistently translated into strong EBIT and attractive shareholder returns. Our capital has been deployed with a clear focus on quality and sustainability, underpinned by a long-term proven track record of stable capital return across market cycles.

Operationally, our EBIT margin stood at 50%, demonstrating our continued focus on profitability. The Board declared an interim dividend of HKD 0.13 per share for the first half of '26, an increase of 8.3% year-on-year. The group also repurchased 2.8 million shares in the first half of 2026. Since 1997, we have returned a total of HKD 16.2 billion to shareholders through dividends and buybacks while maintaining a strong and flexible balance sheet. Together, these elements underscore our focus on disciplined capital management, sustainable earnings and long-term shareholder value.

Now I'll pass you back to Tony to talk about the outlook.

Thank you, Brendan. Let me close with our outlook. We expect the macro backdrop to remain dynamic, shaped by geopolitical shifts, interest rate trends and ongoing AI disruption. Rather than trying to predict the cycle, we are positioning the group to stay resilient across market conditions guided by 4 pillars: Firstly, capital discipline. Disciplined capital allocation and proactive risk management remains central to maintaining resilience across -- through market cycles. That discipline is reinforced by cross-segment synergies. Deeper collaboration across our credit, investment management and alternative solutions businesses is where we believe much of our differentiated value can be created.

We're extending that value further through strategic partnerships. New GP investments and co-developed solutions will unlock further flywheel and network effects across our ecosystem, supporting investment returns, recurring income and proprietary opportunities. And underpinning all of this is agile execution. Our nimble operating model and group-wide AI integration enable SHK to capitalize decisively on high conviction asymmetric market opportunities while progressively diversifying and expanding our revenue base. Together, these pillars are aimed at one clear outcome, sustainable earnings growth and long-term value creation for our shareholders. Thank you.

Thank you, Tony. That concludes management's prepared remarks, and we will now proceed to the Q&A session. [Operator Instructions] The first question comes from Kate Luang at UOB Hong Kong. Could you provide more color on our -- on the latest partnership with Clipway and Aquilius? What are the opportunities that we expect to see from these partnerships?

I think maybe, Tony, you could answer that one.

Thanks, Brendan. Yes, the -- both with Aquilius and Clipway, who are both secondaries managers, Clipway in Global, Aquilius more in Asia. Their job is really to provide liquidity to other LPs or investors that are looking to sell some of their private equity or real estate fund positions. And with that, it gives us significant insight into the market for secondaries and provides us with a lot of information in terms of the pricing of secondaries and also the valuations of the holdings within those secondaries funds.

And that makes us a lot smarter when it comes to determining our own and other investment opportunities as we can bring all that information and insight together within our organization. And -- but those investment opportunities are also very scarce and unique. And those that have a significant discount have a significant edge, and that's really what our clients are also interested in access to those exclusive investments with an edge. That's what we call privileged risk return. Thank you.

We have a follow-up question from Kate. How do we see the Investment Management segment performing in the second half of the year? And what strategies and priorities do you have amid the current market volatility?

Okay. Maybe I'll take that one. Yes, I think the answer -- short answer to that is that we will maintain our strategy for investment management, which is really embedded in deep research, selective investments and not just chasing return, but looking for downside protection as well. So this is why we've been able to maintain a strong net IRR of 15.8%, and that's the same strategy that we will maintain in the second half of the year. Obviously, I don't have a crystal ball. I can't tell you exactly how that will turn out in terms of performance, but you can see yourself over the cycle that, that strategy does work.

Thank you, Brendan. The next question comes from [ Robert Lam at TPG Investment ]. The period's lower profit largely reflected the absence of a sizable liquidity event compared with last year. As the platform scales towards more recurring fee-based income, how quickly do you expect the earnings mix to become less dependent on episodic realizations? And what proportion of income do you ultimately see coming from recurring sources?

Okay. Maybe I'll take that one first, Tony, and then you can add on if there's anything to add there.

Yes.

I mean I think this has been obviously a very conscious effort by the company to change the earnings mix over the last few years where we've been seeking to have this fee and interest-based income more prominent even within our financial reporting and within how we structure our business.

We do see that it is growing. It grew by almost 4% over the year. But obviously, it will take time to scale as the AUM builds within the platform. So I don't think it will change extremely quickly, but it will change over time, and that is the direction of travel for the group.

Yes. And if I could add to that question, though, it's -- the realizations might be cyclical, but the actual process is very systematic in the investment team. And that's borne out with our IRR that we published. So 15.8% over the last 15 or so years, which really -- which is a proof statement that the processes, the people, and the culture within the organization is -- has the capability to invest in a systematic way.

And what we've done more recently is enhance that by actively investing and engaging with GPs to allow us to build on that access to better opportunities and share those opportunities with third parties and bring their capital to bear and allow us, therefore, to create better risk return for ourselves and our third-party capital. And that's really the flywheel effect or the network effect that we're trying to take advantage of. And I think you'll see that come through over the results over the next few years.

[Operator Instructions] The next question comes from Eudora from DealStreetAsia. Could you share more details into your new GP investment plans? Amid the current AI-centric market boom, what is your view on the 2026 vintage of primary fund investment opportunities?

Should I talk to that first, Brendan?

Yes, you go ahead.

I think on the -- we are continuing to look to expand our GP partnerships. We have a number of JV partners in the pipeline. We don't -- we have an opportunistic view on that as we're trying to find the right people in the right asset classes that we believe have the right qualities and the business is set up in a way that we'll be able to scale with our capital and with our assistance.

And that assistance can be in various forms. We have been invested in that, specifically in the credit space. I think that's where we see the greatest opportunity over the course of the next few years, maybe in Europe, maybe elsewhere. And I think that's where our client capital is also looking to diversify into those sorts of opportunities where the outcomes are much more known rather than variable.

And that's really what we're seeking is consistency and clarity and transparency in an investment world, which has become more volatile. So hence, we don't typically chase the latest investment theme, but create investment opportunities where we see that downside protection where we have limited downside and the asymmetric exposure where things go very well, we can participate in that growth as well.

Maybe I'll just add to that as well. What we tend to do when we're looking at GPs, we do look at the track record in quite a lot of depth, and we do re-up with good GPs that have given us good returns over multiple vintages. So that also provides some protection against just chasing the latest trend or the latest GP.

We have a follow-up question from you, Eudora. Are you concerned at all about the tech AI-focused funds launching this year becoming another high-priced vintage where exits in 5 to 6 years down the road could be challenging?

Yes. Maybe I'll take that one. Yes, I mean, there's always that risk. There's always that challenge when looking at private equity and these types of investments. I think the honest answer to that is that you need to have very deep research. You have to have discipline in the investment strategy and make sure that you are investing in different sectors, different geographies, different GPs and to have a more of a portfolio approach, not just to focus on the latest theme or the latest trend.

Yes. If I could add to that because I think that's the key is not chasing the latest trend. Our heritage is as a credit investor. And so philosophically, price is really important to us. And that's really a big component in determining our investment appetite and the opportunity and also our risk control.

So if you look at the recent investments in, say, Janus, for example, where we're very attracted to Janus Henderson's strategy of implementing an AI solution across its business. And we invested in Janus in the high single-digits multiples. based on an AI thesis rather than investing in a lot of AI names with a very extremely high and extended multiple. So we're a lot more comfortable philosophically using price and valuation to justify investment opportunities rather than expectations of what might happen in the future.

The next question comes from Alex Chan at Singtel. How is Beijing's tightening on cross-border capital flows impacting your credit business, specifically borrower repayment capacity, loan demand and collateral recovery? Given these headwinds, do you anticipate higher bad debt provisions and tighter lending standards in the second half of the year?

Okay. I'll take this one. Yes, we are aware of tightening on the cross-border capital flows. So far, the impact in -- for our business in Hong Kong has -- we haven't seen any large impact from this. In fact, I think if you look at the financials, you can see that our impairment has dropped by about 20% over the period.

So we're not experiencing any repayment issues because of this particular issue. And whether we anticipate any headwinds or higher tightening of lending standards, we already have tight lending standards, and we will continue to apply that model, which I think is why we've been able to control the charge-off ratios in the past.

We have a follow-up question from Alex. As borrowing costs stay elevated and price competition in unsecured lending heats up, how do you plan to defend your net interest margins without taking on riskier subprime borrowers? Looking into the next 6 to 12 months, where do you see the ceiling for your loan book growth if risk-weighted assets must be kept in check?

Okay. Maybe I'll take that one as well. Yes. I mean, our -- obviously, our net interest margin has been maintained, as we mentioned in the presentation. I think the way in which we do that is not just by chasing after more clients. We also develop our products.

So we've seen quite a good initiative within our UA Finance to develop new products, in particular, the credit card, which gives us new forms of income as well. So that helps us to maintain our net interest margin as well. I don't see any particular limit in terms of a hard limit for the size of our loan book. Obviously, we need to make sure that we keep it within levels that we are comfortable with from an overall balance sheet perspective, but we wouldn't be setting any set limits.

The next question is, you've spoken about the flywheel effect underpinning your platform. Could you give some concrete examples of how this dynamic translates into platform monetization and tangible revenue?

Okay. I think, Tony, you'll be well placed to that one.

Yes. No. Thanks, Brendan. If we use an example, I think -- well, if you look at the flywheel effect in general, it is looking at activating the GPs that create a privileged risk return, so investment opportunities with an edge that are exclusive that we can wrap into solutions for our family office and insurance clients who provide us more capital and that cycle allows us to activate more GP opportunities. That's the flywheel effect.

And I think that we would -- there are many different ways where we can work together in partnership with GPs. A good example of that would have been recently with our credit platform and equity -- property equity platform or real estate equity platform in Australia called Wentworth. They -- and we were looking to invest in some hotels in Darling Harbour in a couple of hotels in Sydney, which we sourced from a Middle Eastern sovereign fund.

And together, through our expertise and structuring and investment capabilities, purchased those hotels at a very good valuation, particularly relative to the opportunity as we see it in Sydney with the new airports opening. And that has allowed our clients also to participate in that hotel acquisition, and they've provided more capital to Wentworth to invest in future investment ideas.

And that's the cycle, the flywheel effect that I'm talking about, and it's driven by essentially good investment ideas, good underwriting capabilities, access, expertise and ultimately, the proof statement of good investment risk returns. And I think as we're achieving that, that improves relationships with GPs that we activate with, and therefore, we get better opportunities and improves relationships with the LPs. And ultimately, those relationships will provide our success in the future.

[Operator Instructions] There appear to be no further questions. This now concludes the Q&A session. Thank you, everyone, for participating in today's earnings conference call. If you have any further questions, please feel free to reach out to the Christensen or Sun Hung Kai & Co. Investor Relations team. Thank you very much.

Thank you.

Thank you.

Good afternoon, everyone. And welcome to the Sun Hung Kai & Co. 2025 annual results conference call. I am Christian Arnell and here with me today from the senior management team are Mr. Tony Edwards, Deputy Chief Executive Office; and Mr. Brendan McGraw, group Chief Financial Officer. Today's presentation will be conducted in English and will consist of prepared remarks reviewing the group's financial and operational performance in 2025 and outlook for 2026. Following management's prepared remarks, we'll open the call to questions from the audience.

[Operator Instructions]

Before we start, I'd like to remind you that today's discussion will contain forward-looking statements. These forward-looking statements are based upon management's current expectations and current market and operating conditions, which are difficult to predict and may cause the group's actual results, performance or achievements to differ materially from those in the forward-looking statements.

With that, I'd now like to pass the call over to Tony. Please go ahead.

Thank you, Christian. Good afternoon, everyone. 2025 was a strong year for the group, delivering resilient performance despite a challenging external environment. Our total income increased by 28.4% year-on-year to HKD 5.5 billion, while EBIT rose 50.1% to HKD 2.7 billion, reflecting a better operating performance and platform realizations. The attributable profit reached HKD 1.6 billion, representing more than a threefold increase year-on-year, primarily driven by robust investment gains from our investment management business.

The Alternative Solutions business, Sun Hung Kai Capital Partners, continue to scale rapidly with total AUM rising 56.7% to HKD 24.6 billion. And finally, our investment assets increased to 18.9% to HKD 15.7 billion, while the Consumer Finance loan book grew steadily with gross loan balance of 6% to HKD 11.8 billion.

Turning to our key strategic messages. The group's profitability remains strong, driven by strong investment returns, which have benefited from good network effects of the alternative investment platform. Total AUM reached USD 3.2 billion with 57% growth, demonstrating the scalability and resilience of our solution-orientated business model. and its ability to generate enduring cash flows. Our long-term investment track record of 16.3% IRR and flexible balance sheet continue to support the growth across external capital inflow, investment partnerships, consumer finance and mortgage servicing.

We maintained a low cost-to-income ratio and an EBIT margin of around 50%, reflecting a disciplined and well-managed operating model. Recent investments in technology infrastructure, including AI enablement and talent are gaining traction and supporting future growth and resilience. As the uncertain macro environment is likely to be persistent, the secular investment case for alternatives remains compelling. As you can see, our solution-orientated business model is designed to leverage the benefits of a holistic ecosystem for alternative investment stakeholders. At the core is our alignment strategy, with the aim to align the interest of third-party capital, the group and investment partners, whilst benefiting from mutual platform benefits.

This is underpinned by our deep expertise, built up over 20 years of alternative investment experience, supported by a systematic data-driven investment processes and rigorous due diligence. We also provide access to proprietary deal flow and GP networks leveraging the group's investment capabilities to deliver privileged opportunities. Strong governance supported by transparent processes, proprietary research and a principles perspective, further enhances risk management and provides better long-term outcomes.

With that, I'll hand over to Brendan to walk you through the investment management performance.

Thank you, Tony. In 2025, our Investment Management business delivered a profit before tax of HKD 1.8 billion, driven by higher net investment income across nearly all asset classes. Return on assets improved significantly, increasing 11.9 percentage points year-on-year to 15.1%. If you look at the charts on the right, the improvement in return on assets was broad-based across the portfolio. Private equity saw the most meaningful uplift, reflecting strong realizations and valuation gains while hedge funds and public investments also delivered solid returns.

Special Situations and Structured Credit continued to perform defensively, contributing stable returns with improved capital efficiency supporting the overall increase in group return on assets. Total investment assets reached HKD 15.7 billion, with private equity, external funds and direct or co-investments representing approximately 60% of the portfolio. We also increased exposure to Special Situations and Structured Credit, now accounting for 11.8% of assets, enhancing downside protection while preserving upside optionality.

Our portfolio remains well diversified by both geography and sector, reflecting an overall portfolio management approach. Geographically, North America, China, Asia and Europe accounted for 33.6%, 19.9%, 14.6% and 14.3% of investments, respectively. By sector, exposure is well balanced across financials, TMT, diversified consumer and real estate, supporting resilience across market cycles.

Private equity was the largest contributor to investment income in 2025, generating HKD 1.3 billion profit before tax. Total assets increased 18.6% to HKD 9.4 billion, while return on assets rose 15.3 percentage points to 16.5%. Net IRR since inception improved to 16.3% and DPI increased to 0.86x, reflecting ongoing realizations and liquidity events. The successful public listing of HKD 2 billion of the private equity portfolio further enhanced liquidity flexibility.

I will now hand back to Tony to discuss Alternative Solutions.

Thank you, Brendan. Our Alternative Solutions business, Sun Hung Kai Capital Partners, delivered HKD 63 million of pretax profit, up 28.8% year-on-year. This was driven by the strong growth in AUM and fee income, partly offset by higher operating and reorganizational costs associated with platform optimization. During the year, we deepened existing partnerships and formed a new strategic alliances, expanding platform capabilities and revenue streams. Key developments included collaboration with Wentworth, continued partnership with GAM, co-investments in the take-private of Janus Henderson with Trian Investment Partners and a strategic alignment with Mubadala Capital for co-investment flow and other privileged risk return.

Despite a challenging fundraising backdrop for asset markets, our total AUM increased by 57% year-on-year to USD 3.2 billion. Growth was driven by good risk return outcomes for our customers, which drove strong net inflows and activated new investment and third-party capital partnerships.

Fee income rose 83% to HKD 104 million. This significant growth serves as clear validation of our strategic initiatives as they are activating platform effects that we have created. We anticipate more market volatility and therefore, more demand for alpha generated by our investment alternative investment capabilities. Looking ahead, we will continue to invest in this platform as we expect additional monetization opportunities from these flywheel effects.

I'll now pass back to Brendan to cover off on our credit business.

Our consumer finance business conducted by UA Finance delivered stable performance, recording a pretax profit of HKD 794 million in 2025. Excluding the exchange loss of HKD 97.4 million from the liquidation of Mainland China subsidiaries, the adjusted pretax contribution was HKD 890.9 million, representing a 4.4% year-on-year increase. Total gross loan balance of UAF increased 6% year-on-year to HKD 11.8 billion. Supported by disciplined underwriting and portfolio management, the return on loans for UAF reached 28.4% in 2025, up 30 basis points, while the loan charge-off ratio stood at 6.9% up 20 basis points.

In 2025, UAF Hong Kong generated growth in profitability and transaction volume as well as tightening its measures to mitigate credit risks and manage loan charge-offs. Total gross loans of UAF Hong Kong increased by 5.6% year-over-year to HKD 9.7 billion. UAF China continued to reduce operating costs and focused on its shift from unsecured to secured lending. Total gross loans in China increased by 7.9% year-over-year to HKD 2.1 billion.

The sim credit card delivered solid results, supported by a substantial expansion in customer base with increased transaction volume. Total credit card usage amount reached HKD 1.7 billion in 2025, up 54.6% year-on-year. Overall, with rising loan volume, new revenue streams from credit card business, higher return on loan and disciplined cost control, total income of Consumer Finance business increased by 4.2% year-over-year to HKD 3.3 billion in 2025. The cost-to-income ratio improved slightly by 10 basis points year-over-year to 31.1% in 2025.

In 2025, our mortgage loan business conducted by Sun Hung Kai Credit recorded a pretax profit of HKD 7 million. The year-on-year reduction was due to our active management of the existing loan portfolio, cautious new loan originations and prudent provisioning policy. However, the return on loans improved by 30 basis points year-over-year to 10% in 2025, indicating enhanced profitability despite prevailing market pressures.

Meanwhile, SHK Credit extended into mortgage services business in late 2024. During 2025, it was appointed servicer for 2 portfolios totaling USD 170 million owned by developers and institutional investors. As at the end of 2025, total mortgage loans serviced by SHK credit amounted to HKD 1.1 billion, up 34.3% year-over-year, whilst loan servicing income reached HKD 4 million in 2025.

Now let me go through our key financial performance in 2025. Attributable profit increased by more than threefold to HKD 1.6 billion. Total income reached HKD 5.5 billion, up 28.4% year-over-year. The cost-to-income ratio of our fees and interest-based business, which include Credit and Alternative Solutions, stood at 31.2%. Our interest cover improved to 4x. Our net debt decreased by 12.8% year-over-year to HKD 5.8 billion, while our shareholders' equity increased by 5.6% year-over-year to HKD 22.3 billion.

Consequently, our net gearing ratio reduced from 31.2% in 2024 to 25.8% in 2025, reinforcing our balance sheet strength.

The charts on this slide highlight our long-standing commitment to disciplined asset growth and value creation, which has consistently translated into long-term strong EBIT and attractive shareholder returns. As illustrated, our capital has been deployed with a clear focus on quality and sustainability, underpinned by a long-term proven track record of stable capital return across market cycles. Operationally, our EBIT margins are around 50%, demonstrating our continued focus on profitability.

The charts also reinforced our consistent dividend policy. The Board declared a second interim dividend of HKD 0.15 per share for the year ended the 31st of December 2025. Together with the interim dividend of HKD 0.12 per share, total dividends for 2025 are HKD 0.27 per share, increased by 3.8% year-on-year. Since 1997, we have returned a total of HKD 15.9 billion to shareholders through dividend payments and share buybacks while maintaining a strong and flexible balance sheet. Together, these elements underscore our focus on disciplined capital allocation, sustainable earnings growth and long-term shareholder value creation.

Now I'll pass to Tony to talk about our cross-sector synergies and outlook.

Thank you, Brendan. As a principal led alternatives investment platform, we are dedicated to delivering aligned investment solutions for our investment partners, third-party investors and ourselves. Below are key collaboration achievements from this year. Our adaptable capital enabled Wentworth to establish a new business vertical resulting in the creation of distinctive investment solutions for clients seeking diversified exposure to Australian credit opportunities. In Hong Kong, through close collaboration with our investment partners, our Special Situations and Sun Hung Kai Credit teams successfully acquired several residential mortgage portfolios. This initiative assisted deleveraging in developers balance sheet and expanding our mortgage servicing operations.

On a global scale, we have strengthened our partnerships with Mubadala Capital and GAM. Most recently, our private equity team together with third-party clients participated in a take-private transaction of Janus Henderson, offering Sun Hung Kai Capital Partners clients exclusive access to a compelling co-investment opportunity. We are now strategically positioned to capitalize on the ongoing expansion of alternative investments, reinforced by our commitment to grow global strategic partnerships. By prioritizing capital efficiency and prudent risk management and leveraging our integrated platform and experienced team, we strive to continue to deliver sustainable growth and enduring value to our shareholders.

Thank you very much.

Thank you, Tony. [Operator Instructions]

We have our first question. This is a 2-part. Profit before tax from the investment management business increased significantly in 2025. What drove this performance? And is it sustainable? Second, what does the exit pipeline look like for 2026?

Okay. Maybe I'll take that one. Yes, I think the main driver in 2025 has been in North America, where we have seen some significant listings and some companies been able to come back to the market as interest rates have decreased and share valuations have increased. So that has been a good contributor to the pipeline in 2025, but we do also expect that notwithstanding current events, obviously, in the Middle East if things can normalize we do expect that to continue into 2026 as well.

And if I could add, I think I'd just point out that for the first time, we've disclosed the performance of the investment portfolio, which is a 16.3% annualized IRR since 2010. What's important about the repeatability is the systematic nature of our investment teams and their capabilities, which is based on their experience and competence, our processes, our governance and the culture, which has driven significant value for shareholders over many years, and we expect that to continue in an environment when it's difficult and also in more mundane environments as well. So I think that repeatability and consistency of our investment returns is very strong, and we're very capable to do that.

Thank you, Tony. The second question is also a 2-part. What were the key growth drivers for the Alternative Solutions business in 2025? And is there any AUM target for 2026? Second, where do you expect fee income to come from and are there new partnerships or seeding projects in the pipeline?

Thank you. In terms of the growth of nearly 60% of AUM or just over HKD 1 billion, that essentially has come from the fact that we've continued to deliver a good risk return to third-party capital, whether that's directly through our co-investment deals or through our investment partnerships. The mission of our Sun Hung Kai Capital Partners is to allow third-party capital access to our investment capabilities and enduring risk return opportunities. And I think we've managed to do that. And I think we'll continue to invest in our capabilities to continue to provide those returns, both for our principal and also for our external shareholders.

We are very excited about the future. We have a number of opportunities that we are working on as we had last year. We're very pleased with and continue to invest in the partnerships with our investment partners such as ActusRay Partners and Wentworth Capital, Cornell and E15. And we will -- we continue to committed to invest in future partnerships with other general partners and invest in our partnerships with other funds and other LPs in the region, including Mubadala Capital, GAM and in the future, following the closure of the privatization with Janus Henderson.

The next question comes from Kate Luang at UOB. I believe the investment management question has already been answered, but what are the longer-term strategies for the investment management business? And then second, is there any update for the dividend payout policy?

Okay. Maybe I'll take those. So for the investment management strategy, I mean, longer term, yes, is to generate strong risk-adjusted returns, as Tony has referred to. And as we started to publish some of those returns within this particular report, our aim is to maintain them, and we maintain them through discipline and good execution.

The second question on dividend policy, obviously, you'll have seen with yesterday's announcement, we have increased the dividend in light of these good results. And what I would say is the Board will continue to monitor the results of the business to see how we will continue with that in the future.

Thank you, Brendan. [Operator Instructions] The next question is a 3-part. Fitch ratings indicated that the default rate of its monitored U.S. private credit portfolio reached 9.2% in 2025. Major private credit lenders like Blue Owl and BlackRock are facing liquidity concerns for their private credit funds. Question one, what is the asset quality of your legacy private credit loans; two, do you have any new loans made by your special situations in Structured Credit and real estate segment? And if yes, what is their asset quality? And lastly, what is the outlook of these 2 business segments in terms of funding sources, asset quality and risk management.

Okay. I'll take that one first, Tony, and then maybe you can contribute as well. So yes, I mean, overall, clearly, it's in the news, what's happening with private credit lenders, particularly some of the larger ones. What I would say is that we're a bit more boutique in this area in the sense that we are not broker-driven. We are not largely involved in retail driven evergreen funds. We tend to do more targeted and bespoke private credit deals. We don't do deals where we just accept covenant-light packages. They are done deal by deal. The underwriting is very thorough. And so therefore, I do not have any concerns on the asset quality part of the question.

The second part is, has there been any new loans in 2025? Yes. As you can see, we have deployed more assets in this area during 2025. We do believe that we've done that judiciously in areas where the asset strength is good, and we're not just relying on the borrower. We're actually relying on the underlying assets and cash flows as well. And our outlook for this area is that we think it will continue to be a stable part of our business. And if there are dislocations in credit markets or equity markets in terms of Special Situations, we remain balanced and flexible and we can take some of those opportunities.

I can't add much to that, Brendan. But I'd say that we have a 55-year heritage in the credit business. I think we apply that every day to all our underwriting. We do not look to underwrite on cash flow or business growth, but very much focused on those loans and those credit opportunities that have significant real asset backing and can provide us the comfort and the downside protection that we strive for.

The next question is, do you have any AI-related PE public market investments in your portfolio? And if so, what percentage do they make up in Sun Hung Kai & Co.?

We do have AI-related investments. I wouldn't disclose the absolute percentage, but this is an area that we do invest in and follow very closely. We do like to -- we don't just look at it from the software angle. We do also look at it for some of the other subsidiary angles as well like energy demand as well because we think there are also subsidiary effects from this AI take-up.

The next question is a follow-up. How have you been deploying AI across your business?

Okay. I'll take that one. Yes, this has been very interesting for us. We've gone for an enterprise AI approach, where we have deployed a large-scale platform across the business, which all staff have access to. All staff have had training on how to use that platform as well and are now capable of creating and publishing their own agents. We did it this way specifically so that we could also maintain cybersecurity, so we wanted to make sure that any confidential documents would stay within our wrapper, but our AI tools could go out and gather intelligence from the web and bring it back in to be processed. We're quite advanced in this, and we've invested a lot in 2025. We will continue to do so because we are already seeing productivity benefits.

Thank you, Brendan. There appear to be no further questions in the queue. This concludes the Q&A session. Thank you, everyone, for participating in today's call. If you have any further questions, please feel free to reach out to the Sun Hung Kai & Co. Investor Relations team or Christensen Advisory. Thank you, and have a good evening.

Welcome to Sun Hung Kai & Co 2025 Interim Results Presentation. The presentation today will be conducted in English and in a hybrid format. For off-line participants, Chinese interpretation is available through the provided devices. For online attendees, you may switch to the Chinese channel and mute the original audio if translation is needed. I'm Rene Vangasten from Christensen, handling Investor Relations support for the company.

The senior executives here with me today are Mr. Tony Edwards, Executive Director and Deputy Chief Executive Officer; Mr. Brendan McGraw, Executive Director and Group Chief Financial Officer. In today's meeting, we will review the company's business performance in the first half of 2025, provide an outlook for the remainder of the year and share our future plans. Following the presentation, we will open the floor to questions.

Before we start, I would like to take the opportunity to remind you that today's discussion will contain forward-looking statements which are based on assumptions and factors that are be under control of the group and are not necessarily indicative or guarantees of the group's future performance. Now I'd like to pass to Tony to start the presentation. Tony, please go ahead.

Thank you, Rene. Good morning, everyone. As an alternative investment platform, our business is built around 3 pillars: credit, investment management and funds management. The credit business mainly conducted through UAF and Sun Hung Kai Credit provides us with recurring resilient cash flow. Our investment business leverages the group's access to differentiated investment opportunities, strong expertise and institutional grade governance to seek attractive risk-adjusted returns.

Our portfolio is diversified across different asset classes, investment horizons and geographies. Our Funds Management business is fully licensed to manage external capital through fund partnerships, SHK Capital Partners funds, Family Office Solutions or FOS and strategic alliances. The Funds Management business further diversifies our business lines and adds new streams of reoccurring cash flow to the group.

Our core strengths and differentiators lie in a robust business model, privileged access and alignment of interests, strong corporate governance, good transparency and a solid risk culture. Our business model with complementary business lines plays a key role in supporting the group's profitability and long-term success. With privileged access to high-quality investment opportunities, we're able to deliver strong risk-adjusted returns. With our balance sheet commitments, our interest is aligned with investors and with managers. We have a well-established risk culture, which is essential to help us navigate uncertainties and preserve staying power. We operate with integrity, accountability and transparency, building trust with all our stakeholders.

Next, I'd like to share how our platform synergies drive growth and enhance shareholder value. In our consumer finance business, we continue to generate steady returns that are largely uncorrelated to capital markets. We have maintained a cautious approach to loan underwriting in response to the economic slowdown both at UAF and at Sun Hung Kai Credit. At the same time, our SIM credit card business has broadened our customer base, diversifying credit profiles and also revenue streams. Our Sun Hung Kai credit remains focused on actively managing its portfolio while growing mortgage servicing business.

Turning to Investment Management. Our diversified portfolio and global mandate enable us to deliver positive returns and consistent performance improvement despite market volatility. We capitalize on opportunities from market dislocations to generate privileged returns. In addition, synergies across the investment management, funds management and credit businesses have positioned us well to develop the alternative investment platform and provide the opportunity to grow our recurring income.

Our Funds Management business, we continue to build out this platform, achieving robust AUM growth. Our existing funds partnerships and SHK Capital Partners funds maintained resilient performance, FOS gained momentum by expanding both the client base and the AUM, offering unique access to alternative investments with strong alignment of interest. We established new alliances with partners such as GAM, Wentworth Capital and Mobile dollar Capital, broadening our product offerings and expanding our global outreach.

Finally, regarding sustained growth and long-term shareholder value, we maintain a strong balance sheet and ample liquidity to navigate market turbulence and seize opportunities arising from the market dislocations. We continue to deliver consistent dividend payouts and share buybacks. For example, since 1997, we have returned a total of $15.7 billion to shareholders through dividends and buybacks.

Next, I'll pass over to Brendan to take you through our 2025 interim results.

Thank you, Tony, and good morning, everybody. Before I go through our 2025 interim results, let me briefly highlight the key changes in our financial statements and MD&A starting this year.

First, for our financial statements, starting from the reporting period beginning 1st of January 2025, we have reclassified net gain or loss on financial assets and liabilities at fair value through profit and loss as well as dividends from listed and unlisted investments as net investment income. We have also discontinued the internal cost of capital charged by GMS to Investment Management. Finance costs are now allocated between investment management and GMS based on their respective average balances. This adjustment has no impact on the group's financial results and ensures consistent treatment of shareholders' equity across all business segments.

Second, in our management discussion and analysis, to better reflect each segment's business model, we grouped our business segments into one, fees and interest based, which is related to our credit and fund management business; two, investment base, which is related to our investment management business; and three, corporate related to our group management and support segment.

We now provide a breakdown of operating costs for each business segment and also present the cost-to-income ratio for the fees and interest-based segment to better assess operational efficiency. To better reflect our operating results, we also added adjusted pretax profit and adjusted profit attributable to the owners of the company by excluding nonrecurring items, such as DTA written-off and exchange loss from PRC subsidiary liquidation and capital repatriation.

Moving on to the results at a glance. Total income for the first half of 2025 was HKD 2.8 billion, up 43.5% year-on-year. Fees and interest based business collectively contributed HKD 1.7 billion. Investment business contributed HKD 1 billion and corporate delivered HKD 39 million. Pretax contribution rebounded to HKD 1.1 billion for the first half of 2025 from HKD 307 million for the first half of '24, mainly attributed to improved performance of our investment management business. We will share more details on this later.

After taxation and noncontrolling interest, the attributable profit was HKD 887 million and over 10x increase year-on-year. Excluding nonrecurring items, the adjusted profit was HKD 928.2 million. Other key metrics also showed improvement. Net gearing ratio decreased by 160 basis points to 29.6% from a year ago, reflecting our focus on capital efficiency. Interest coverage ratio rose 109% to 4.1x as a result of the improved profitability and ROE also improved to 8.2%. We remain committed to delivering value to our shareholders. The Board declared a first interim dividend of HKD 0.12 per share, consistent with prior year's payout.

Now let me go through the key financials based on our new classification of business segments. Total income of the fees and interest-based segment increased by 0.7% year-on-year to HKD 1.7 billion for the first half of mainly reflecting the impact of local economic slowdown on our credit business. Total income for the Investment segment increased by 897% year-on-year to HKD 1 billion, driven by the enhanced performance across nearly all asset classes.

Total income for the Corporate segment decreased by 71% year-on-year to $39 million mainly due to the decrease in interest income as a result of fewer time deposits at lower interest rates. Operating costs of the fees and interest-based segment decreased by 1.2% year-on-year to $535 billion primarily attributable to the cost optimization initiatives undertaken by our consumer finance business, particularly in Mainland China. The cost-to-income ratio of the fees and interest-based business were 31% in the first half of 2025 down by 0.6 percentage points year-on-year. Operating costs of the Investment segment were $110 million, increased by 93.5% year-on-year due to the higher performance-related expenses. We have maintained disciplined expense management in response to challenging market conditions.

Finally, total pretax profit of the fees and interest-based segment and the Investment segment reached HKD 379 million and HKD 786 million, respectively, while the corporate segment recorded a mild pretax loss of $77 million. Moving on to our balance sheet. Our balance sheet remains solid, with total assets at HKD 37.7 billion as of the 30th of June 2025. Our cash position remained strong at $4.5 billion, and investment assets amounted to $15.5 billion. Total loans were $12.6 billion, primarily funded by our external borrowings. 26% of our borrowings were notes in paper at fixed rates, while 74% were bank and other borrowings at floating rates.

During the first half of 2025, we repurchased our MTNs totaling USD 12.4 million. Since 2022, the MPN exposure has been reduced by USD 446.5 million. As a result, our net debt decreased to $6.5 billion at the end of 2025 from HKD 6.6 billion at the end of 2024, driving a further decline in net gearing ratio to 29.6%. Now let's take a look at the performance of each business segment, starting with Investment Management. The Investment Management's total assets increased by 4.2% year-on-year to $16.2 billion at the end of June 2025.

Alternatives, real estate and public markets accounted for 75%, 14% and and 11%, respectively. The year-on-year increase in segment assets was mainly driven by investment gains across all the different asset classes. Total investment gain amounted to nearly $1 billion with contribution from nearly all asset classes. Private equity delivered the largest gain of the shares totaling HKD 583 million, mainly due to valuation increases in conjunction with successful liquidity events during the period. After deducting finance costs of HKD 103 million and operating cost of HKD 110 million, the Investment Management segment recorded a pretax contribution of HKD 786 million versus a loss of HKD 148 million for the first half of 2024.

We continue to strengthen our technological backbone and integrate AI tools into improved operational efficiency. Investments were made in upgrading the investment team and further reinforcing our risk management frameworks. The overall return of the investment management improved significantly from 0.4% for the first half of 2024 to 6.4% for the first half of 2025. Nearly all subsegments contributed positively. Corporate Holdings delivered a solid gain of 22.3%, alternatives gained 6.6% and PE and hedge funds both gained 6.8%. Special Situations and structured credit recorded a gain of 4.5%.

The Real estate recorded a loss of 2.9%, primarily due to revaluation adjustments on our legacy real estate holdings in Hong Kong and a net loss on partial sale of a European real estate platform. We will now look further into the performance of each asset class in the next few slides.

Firstly, on Public Markets and Corporate Holdings. The Corporate Holdings portfolio recorded a gain of $22.3 million primarily driven by our strategic positioning in China-related assets, particularly in fintech, large-cap Internet platforms and new consumption companies, which benefited from improving investor sentiment. Our U.S. positions, which are mainly thematic investments in AI infrastructure build-out and energy opportunities arising from geopolitical tensions, closed the period with positive returns. We remain cautiously optimistic for the rest of 2025 and will remain focused on curating a diversified, high-quality portfolio and strengthening risk management to mitigate market fluctuations.

Moving on to private equity. The private equity portfolio gained 6.8% in the period, 2 of our direct co-investments, Jefferson Capital and Saint Bella successfully listed in the U.S. and Hong Kong, respectively, enabling us to capitalize on enhanced valuations and facilitating future realizations. We also executed strategic secondary sales as part of our active portfolio management and continue to receive programmatic distributions from fund investments. In terms of capital deployment, we remain disciplined. We selectively invested in high potential new GPs across diverse sectors and strategies and re-upped commitments to top-performing GPs who consistently outperform.

The PE team continued to collaborate with [indiscernible] Capital Partners to provide third-party investors with access to select alternative opportunities, enabling them to achieve superior risk-adjusted returns. Moving on to hedge funds. The hedge fund portfolio recorded a gain of 6.8% in the first half of '25, with key contributions from equity market neutral arbitrage and long equity long short and event-driven strategies. The portfolio ended the year with a conservative risk profile, which enabled the program to generate steady returns even under a highly volatile environment.

Manager selection and size allocation have been essential to the success of the portfolio, with the largest allocations, each delivering solid and steady returns for the first half of 2025. Now turning to Special Situations and structured credit. The Special Situations and structured credit portfolio predominantly invested in distressed or mispriced assets and has further expanded its footprint in Western Europe, North America and Asia, aiming at yielding favorable returns with defensive characteristics. Debt investments represented the largest share of the portfolio at 49.7%, followed by direct and co-investments at 28.3% and fund investments at 22%.

The Gains were primarily driven by the strong performance of our [indiscernible] investment in the travel sector, which benefited from the ongoing normalization of international travel. Robust interest income from debt investments also contributed to the gain. In the first half of '25, the group attained a rigorous underwriting approach, executing transactions only when strict downside protection requirements were met.

Now finally, on real estate. In the real estate portfolio, direct and co-investments accounted for 88.5% of our holdings with debt investments and funds comprising 9.9% and 1.6%, respectively. The portfolio recorded a loss of 2.1% in the first half of '25, mainly due to revaluation adjustments on our legacy real estate holdings in Hong Kong and a net loss on the partial sale of our European real estate platform as we continue to rebalance the portfolio and recycle capital. Our other European hospitality investments delivered strong performance benefiting from robust tourism demand across key markets.

In the current environment, we have maintained a disciplined approach and selectively added a bespoke debt investment secured by equity in an international hotel platform during the period. We will continue to realign away from lower-yielding stabilized equity positions towards more opportunistic downside protected structures. Next, I will hand over to Tony, who will guide you through the development of our fund management business.

SP1 Thank you, Brendan. Our fund management business model is robust, serving as a platform by creating synergies between GPs, LPs and ourselves. For emerging managers, we provide them with seed or growth capital to help launch or scale their funds. We also provide working capital loans and strategic value-added support whilst managers have full operational autonomy. For established GPs, they gain greater access to capital, expand their investment opportunity and investor base by leveraging our strong presence in Asia and deep experience in alternatives.

By working with us, LPs or investors, can access our proprietary deal flow based on a strong alignment of interests. These deals are supported by SHK's balance sheet commitment. Within FLS, we work as an extension of our clients' investment team sharing our expertise, investment capabilities and governance with them.

Ultimately, the SHK Capital Partners platform role is to connect LPs and GPs in a way that creates mutual benefits, driving growth for managers, driving value for investors and improving the strength of our business. As of the end of June 2025, our total AUM reached USD 2.6 billion. Fund partnerships grew their AUM to USD 1.9 billion, FOS and Sun Hung Kai Capital Partners funds contributed USD 262 million. The AUM we service for external funds was USD 248 million, while ownership adjusted AUM amounted to USD 154 million.

To ensure a clear and comparable understanding, the analysis of our AUM movement and AUM composition focuses solely on our fund partnerships and FOS and Sun Hung Kai Capital Partners funds, providing a consistent base for evaluation. During the first half of 2025, we recorded net cash inflows of USD 434 million and saw favorable market performances of USD 155 million. To further look into the composition of Sun Hung Kai capital and external capital contribution from external capital increased to 85% at the end of 2025, reflecting the market's recognition of our strategy and ability to build a robust alternative investment platform.

Turning to the segment's financial results. fee income decreased slightly by 0.6% year-on-year to $17 million. We are in the process of -- as we are in the process of winding down MCIP, our Australian real estate credit strategy and redeploying capital of the same strategy through partnering with Wentworth Capital. Performance fees were not reflected for the period as they are normally recognized once crystallized at year-end. Operating expenses increased by 47% year-on-year to $23 million, reflecting the expansion of our team to scale the platform. As a result, a pretax loss of HKD 5 million for the first half of '25.

Our family office solutions business serves as a bespoke alternative investment perform for like-minded family offices and ultra high net worth individuals, offering them curated investment opportunities ranging from private equity, special situations, structured credit, hedge funds and co-investment opportunities. Key differentiations of our service are access, alignment, our capability and our governance.

Firstly, we leverage our extensive networks to gain unique access to alternative investments and cherry pick high-quality opportunities for our clients and ourselves. Secondly, our balance sheet commitments enabled an alignment of interest between the FOS clients and our group. Thirdly, deep knowledge and experience accumulated in the alternative space positions us with strong investment capabilities -- and finally, our institutional grade investment governance and infrastructure helped to enhance performance, risk management and operational efficiency.

When it comes to our strategic alliances in the first half of 2025, we established a strategic alliance with Mubadala Capital, the asset management arm of Mubadala Investment Company, the partnership combines Mubadala's private -- global private markets expertise with our deep-rooted Greater China presence, creating a powerful platform for clients to access premium sovereign wealth fund and co-investment opportunities.

Our partnership with GAM went well and enables the joint development of tailored wealth solutions, combined with our strong expertise in alternatives. Additionally, we advanced the partnership to provide access to GAM's established European distribution network for our fund products, including developing synergies of our in-house GPs. Meanwhile, we partnered with Wentworth capital to redeploy capital of the real estate private credit strategy, we provided seed for vertical expansion growth capital for the business growth and working capital to activate the opportunity.

Wentworth benefits from the integration of our debt vertical, creating and creating synergies therefore, with access to our flexible capital, the businesses were agile and effective. Now I'll pass to Brendan to talk about our credit business.

Thank you, Tony. Our consumer finance business is conducted through UAF. Since 2017, UAF has consistently ranked first among all money lenders and maintained a top 5 ranking amongst all lenders in Hong Kong in terms of outstanding balance of unsecured lending. In the first half of 2025, we maintained a prudent approach to loan approvals in light of local economic challenges. Our total gross loan balance grew by 3.6% year-on-year to $11.3 billion.

Hong Kong and Mainland China accounted for 82% and 18%, respectively. Revenue for the period was $1.6 billion, an increase of 2% year-on-year. Return on loans remained stable at 28.4%. Through ongoing cost rationalization, operating cost decreased by 2.1% year-on-year to $489.7 million the cost-to-income ratio decreased by 130 basis points to 30.6%. Finance costs, predominantly benchmarking against HIBOR decreased by 15.6% year-on-year to $221.4 million. Net impairment losses were HKD 446.1 million, up 15.5% year-on-year.

This increase was mainly due to the combined effect of provision reversals being offset by additional provisions for some new unsecured loans in Mainland China. A slight increase in net impairment ratio in Hong Kong also led to the increase. Despite these challenges, pretax contribution to the group amounted to $375 million, excluding the exchange loss of $47.7 million from subsidiary liquidation. The adjusted pretax contribution was HKD 422 million, increasing 5.5% year-on-year. Our Hong Kong business demonstrated a strong resilience in the challenging environment.

Gross loan balance increased by 2.6% year-on-year to HKD 9.2 billion at the end of June '25. The amount and number of loans originated in the first half increased by 1% and 11%, respectively. Amid increasing individual bankruptcy petitions in Hong Kong, our charge-off ratio and net impairment loss ratio also increased slightly to 8.2% and 9.1%, respectively. Our SIM credit card business continued to gain momentum, generating cumulative transaction volumes of $2.4 billion.

Other key operating metrics such as the outstanding balance income generation, customer acquisition also delivered solid results. On the risk management front, we have effectively managed credit risk through our proprietary scoring system, which leverages data from the credit data, smart database, and dynamically adjust to evolving macroeconomic conditions. Our real-time collection system also ensures effective monitoring of payment status across all accounts. The financial services and Treasury Bureau published a consultation paper in June this year, proposing enhancement to the regulation of licensed money lenders.

The proposed measures focus on several key areas, including stricter oversight of [indiscernible] personal lending, enhanced protection for loan referees and improved borrower affordability assessments. We believe that the robust legal framework will ensure proper credit risk management for lenders and foster a more sustainable lending environment. As a market leader, we welcome these regulatory developments.

In the Mainland market, UAF maintained its conservative approach strategically limiting exposures amid market uncertainty. Gross loan balance increased by 8.2% to $2.1 billion at the end of June '25. Our conservative approach and strategic focus on secured loans helped generate stable returns while maintaining a lower charge-off ratio at 0.8% for the first half of '25. These, coupled with disciplined cost management have ensured our business in this market continues to contribute positively to the first half of '25.

Moving on to the mortgage business, which is operated by Sun Hung Kai Credit in Hong Kong since 2015. We remain cautious in loan underwriting amidst sustained price declines in the Hong Kong residential market but focused actively on managing the existing portfolio and developing our mortgage servicing business. Gross loan balance was $1.8 billion, representing a year-on-year decrease of 22%. First mortgage continued to account for over 90%. Total income for the year was $99 million, down by 21% as a result of the smaller loan book.

Return on loans was 9.9%. Meanwhile, SHK Credit was appointed as a servicer of another residential mortgage portfolio amounting to $70 million. Servicing fee income was HKD 1.6 million for the first half of '25. Operating costs decreased by 13% year-on-year to $22 million, primarily due to the centralization of our operations and streamlined marketing expenditure. Cost-to-income ratio remained within our targeted range at 22.4% for the first half of '25. Finance costs decreased by 58% year-on-year to $17 million as a result of the decline in borrowings and the HIBOR rate easing.

Net charge on impairment losses was $50 million, reflecting increased provisions for loan defaults associated with the economic slowdown and higher impairment allowances due to declining valuations in collateral properties. As a result, the pretax profit contributed to by SHK credit was $9.5 million.

Now moving on to risk management and ESG updates. In the first half of 2025, we made further progress in strengthening our risk management practices. We reviewed and reinforced existing controls which improved our ability to identify, assess and manage risks. These enhancements have helped lower our overall risk exposure. Regular risk committee meetings were held to monitor emerging and critical risks allowing us to proactively address challenges and refine our mitigation strategies.

The risk management system reporting process was continually enhanced, enabling more efficient information collection and reporting for better oversight. To further increase staff awareness, we conducted targeted risk trading sessions and distributed biannual enterprise risk management bulletins to keep employees informed about key developments.

Next, I will pass to Tony to talk about our ESG updates as well as our business outlook and future plans.

Thank you, Brendan. In the first half of 2025, we made strong progress on ESG. Our Bloomberg ESG rating improved from 2.08 to 4.21%. Our Sustainalytics ESG risk rating also improved, dropping to 23.6% and signaling significantly reduced risk. On the environmental side, we improved our resource efficiency, expanding recycling and waste reduction efforts and supported the community through donations and sustainability initiatives. Staff engagement remains high with volunteers joining the Hong Kong Race beach cleanup and supporting our Dragon Boat Festival community outreach. These actions demonstrate our ongoing commitment to ESG and continuous improvement across our operations.

Now for the business outlook and future plans. Looking into the second half of 2025, we anticipate that the operating environment will remain challenging amid global uncertainties, especially due to ongoing trade negotiations and heightened geopolitical tensions. High interest rates may continue to weigh on asset values and constrained borrowing in Hong Kong. Additionally, Mainland China's economic headwinds may spill up further over into Hong Kong, potentially moderating the recovery in retail sales.

Despite these challenges, we remain cautiously optimistic. We will remain prioritizing capital efficiency, disciplined risk management and operational excellence. For our credit business, we remain focused on expanding our service and product offerings to capture untapped opportunities. We will introduce hybrid loan products on the SIM credit card platform to generate revenue through effective cross-selling. We will increase our investment in digitalization to improve efficiency, enhance credit risk evaluations and efficiently adjust our loan underwriting appetite.

Sun Hung Kai Credit will continue to actively manage its existing portfolio while expanding the mortgage servicing business. In Investment Management, our priority is to increase liquidity and cautiously redeploy capital to new investments that further diversify our portfolio. We will selectively capitalize on mispriced assets globally, structuring deals with strong downside protection to pursue privileged risk-adjusted returns.

Additionally, Investment Management will deepen collaboration with Sun Hung Kai Capital Partners by leveraging our investment networks and proprietary deal sourcing, which enables Sun Hung Kai Capital Partners' clients to access exclusive investment opportunities and achieve attractive risk returns. Our fund management business is committed to building out our platform to further institutionalize our infrastructure and enhance scalability and wealth management.

We're also collaborating with strategic alliances, including GAM, Wandworth Capital, Mobilala Capital and others under further exploration to further diversify our products and expand our global reach. We will also grow FOS' client base and AUM by offering like-mind investors access to unique investment alternative investment opportunities, supported by a strong alignment of interest through the group's balance sheet commitments. By enhancing the synergies, our 3 key business segments, we strive to reinforce our position as a leading alternative investment platform and driving sustainable value creation for our shareholders. Thank you very much.

Thank you, Tony. We will now proceed to our Q&A session. [Operator Instructions] For all questions, please make sure to include your name and the name of your company. Go ahead.

I'm a [indiscernible]. As I see from the presentation that it shows that investment management is the key driver of the results of this year. And do you see the key driver of investment management and still keep the pace and it can grow faster. And do you see that -- is there any special reason that can support the second half results and allow more growth in going future? And also about the [indiscernible] business because we see that you would like to have some acquisition of a mortgage portfolio, I wonder if you try to time in to have such acquisitions, do you see that you can yield more returns from this acquisition? And we will try to expand this business further?

Okay. Should I answer that? -- they're both related. I think your question is is the investment management business returns sustainable? And what are the opportunities for the mortgage business. And I think they're related. I think on the -- from an investment perspective, our investment capabilities are driven by systematic processes and strong governance and transparency and accountability, having the right people in the right place looking for good risk return, notwithstanding the opportunity to crystallize results, we are very comfortable sitting on and compounding investments in good companies, are in good opportunities.

And I think that's the key. And that's what's been behind our return of capital, as I mentioned, since 1997, where there's been a strong return of capital over time. I think it's very hard to second guess where you are in an investment cycle or in a business cycle. But if you are investing your money well in good opportunities, you will realize strong investments for your shareholders.

And on the -- similarly, on the mortgage side of the business, what we're trying to do, with our investment capability, is to monetize it through the development of synergies and collaboration to provide solutions, not just for ourselves but for our clients, and that's great alignment, but also provide solutions for our GPs as well. So as I mentioned, that we're helping finance new GPs, new hedge funds and new private equity funds and also helping those GPs grow as well as investing with them through co-investments and taking those good co-investment opportunities to our LPs, and that's the access that many people don't have. And we've been working with these GPs for many years, 20 years of experience in the in the markets, and we've been working with some GPs for that length of time, both as an investor with them in their funds and also investing in their respective deals.

So it's -- so from a balance sheet perspective, it's about improving and continuing to look at better ways of investing, using AI, for example, in our investment processes. And from a P&L perspective, it's monetizing that investment capability to provide solutions for LPs and provide solutions for GPs that create synergies and will drive further recurring income growth.

Yes. Maybe just maybe an extra couple of points you've summed up very well to Tony. We mentioned in the presentation as well for -- in terms of sustainability, we have been re-upping with GPs with good performance. So everything else being equal, that should help. And then the other question around the mortgage business. this is a positive contribution for us because you probably noticed from the presentation as well, we've not been increasing our costs, but we've been adding this new business, which is also a positive contributor to our profit, which is good.

Next question, please. Over here.

This is Howard from Kingsway. for the investment profit of almost $1 billion, how much will they be crystallized or recognized within this year? And what could be the proportion for returning to shareholders like in terms of dividend or share buyback?

Yes. Okay. So I think in terms of the crystallization, I think for a lot of it, we will see some exits towards the end of the year for these, as we mentioned, there's a couple of large IPOs, which have already happened. In terms of what that means for shareholder returns, it obviously is good. It continues to improve the shareholder returns. I don't think at this stage, it impacts dividend policy. I think we would see strong and steady dividend as we have been so far.

Yes. I mean, I'd add it's the opportunity is from an investment management perspective is the strong investment processes we have that deliver systematic returns such as we've had leveraging that -- those synergies to our third-party capital and developing synergies between the third-party capital and ourselves to continue to produce stronger returns and the opportunities between our book value and our current share price. I think, is very significant.

Would there be anything like caution like $400 a -- is that like would there be any portion of the percentage that will be under the shareholders is about 20% of the recognized profit will be distributed.

We don't have a dividend policy like that. What we try and do is smooth out our return of capital to shareholders over time through an investment cycle. So I think we have a very strong yield and a very strong return of capital currently and we did last year and the year before where our results weren't as good as they are now. And so we'll continue to maintain that as a philosophy to be more to be more consistent.

And maybe also to add, when we have had very good years like 2021, we have added special dividend as well. But obviously, we'll have to review the entire year, et cetera, to see how -- see where we end, et cetera, and that decision for the Board at that time.

Next question, please.

I read online question from Alex Line. So can you explain on the partnership of with Mubadala? And what part of the business will this capital come from? Is it from SHKCP Private Access fund?

Yes, our Mubadala Capital partnership is initially being centered around their co-investment fund, and ourselves alongside our third-party capital have invested in their co-investment fund, which has just closed, and we're very excited about that opportunity. But what that provides us is access to further co-investments over time for ourselves and also for those -- that third-party capital. So it's based on getting -- us getting access to their deal flow and providing that deal flow to our Hong Kong clients.

And also, we expect to be able to originate Hong Kong deals, which will be interesting for Mubadala as well. So as a recobrocity around that, and hence, that's a partnership where we're sharing ideas and sharing investment opportunities with arguably some of the -- some world-class very talented people. And that's really our mission so on kind of to find good global talent and good global investment lounges and bring that to ourselves to the benefit of ourselves and the Hong Kong families that invest with us.

Can we have the next question, please.

Another online question from Johnny, Deutsche Bank. How is the current low HBO rate affect lending in the investment business and any sensitivity guidance on how U.S. rate cut ahead impacts the company's earnings?

Yes. Maybe I'll take that one. Yes, I mean, obviously, the movement in HIBOR has been quite dramatic in the last couple of months, and we've seen in the last week as well. HIBOR has changed a lot. -- something we monitor very closely, obviously, in terms of NIM for our credit businesses, but also higher interest rates will impact markets so kind of more indirectly in terms of investment sentiment, if there are rate cuts in the second half of the year. We remain cautiously optimistic that the recovery that we've seen in PE from -- really from the end of last year through to the first half of this year will continue into the second half, notwithstanding -- nobody has a crystal ball, of course, of what will happen or could happen. But based on the consensus, we think things should remain reasonably positive.

One more quick follow-up, still on the question of mortgage acquisition business. I wonder will you try to -- if you try to expand this business, and we will try to collaborate with some developers or other parties -- and also because we see that product PowerPoint at both business because if we see that you have some impairment of and keep the trend going up? And do you see that as a stabilized at this moment or maybe going forward, you can see that maybe trend down.

Should I just answer the mortgages side.

You did the first part, I'll do the second.

Yes. On the mortgage business, I think you asked what is our sort of -- what are our plans in terms of the growth there. And we're optimistic with that growth as Hong Kong developers continue to seek ways to deleverage themselves. But I think that the environment is very complex at the moment. And it's very difficult to tell in terms of the timing around what would be driving that deleveraging -- we have a number of mortgage -- potential mortgage portfolios in the pipeline. And -- but if you step back at this, this is a part of our strategy. It's about a part of using our investment capabilities developing synergies with other investors and providing solutions.

So this is another -- it's a very similar in terms of our investment strategies to provide solutions for Hong Kong developers that want to deleverage and we'll be looking to continue to build on that and work with developers and work with other GPs to provide that and also add to our ability to service those mortgages within some kind of credit.

Yes. And maybe to pick up on the second point, which is around impairment, yes, I mean, there has been more impairment pressure in this business segment in the period, largely driven by a reduction in the property values. I think what we've all seen maybe in the last month or 2 is that the [indiscernible] Index has started to stabilize or looks like it's starting to stabilize in the last couple of months. That's not to say that this is the bottom. We don't know. But we're cautiously optimistic that some of the measures that the government has taken that the excess supply that was there over the last couple of years is starting to reduce and rents have started to rise also in the market. So some of the indicators are starting to turn positive. But at this stage, we're still cautious.

Next question, please.

Thanks for the presentation and congrats on the strong results. I'm Kate from UOB Kay Hian. I have a quick question on the outlook for our investment management business. So in view of improving market sentiment and valuations, what are our approaches to the segment in the second half of this year and also further into 2026.

You can go.

On the Investment Management business. the -- we have taken a view to remain and deploy our balance sheet capital in a manner that takes advantage of dislocations or opportunities as they happen. And I would expect in this complex environment we have, that we'll find those opportunities in the future, whether it's in mortgages or in private equity or in hedge funds, and lock those -- lock that potential in for ourselves and for our clients. I mean I think the most important thing that we have access to is liquidity at this time.

And we're going to increasingly reducing our net gearing over time, and that's -- the option value of that liquidity is really valuable for us to be able to be agile and effectively or efficiently invest in opportunities as they come up. I mean the whole thing about the investment business is it is very process driven. It's a lot of data, a lot of analytics. We look at over 1,000 deals a year, and we probably do 20 or 30. So it's a real funnel to focus on the sort of opportunities that we would like and our clients want and where we can work with and collaborate with other GPs to develop other synergies, is looking very positive for the next 6 to 12 months in that regard.

Yes, I would just concur with Tony. I think the reason why we're seeing these results is because we have had a systematic process in the past. And I think that will continue as long as markets are moving in a positive direction.

[Operator Instructions] We will now conclude the Q&A session. Thank you, everyone, for participating in today's earnings conference. If you have any further questions, please feel free to reach out to Christensen. We have prepared some refreshments outside the meeting room. Please enjoy. Thank you for coming.