Good day, ladies and gentlemen, and welcome to the Noah Holdings Limited First Quarter 2016 Financial Results Conference Call. At this time, all participants are in listen-only mode. Following, management’s prepared remarks, there will be a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded. After the close of the US market on Monday, Noah issued a press release announcing its first quarter 2016 financial results, which is available on the company’s IR website at http://ir.noahwm.com. This call is also being webcast live and will be available for replay purposes on the company's website. I would like to call your attention to the Safe Harbor statements in connection with today's call. The company will make forward-looking statements, including those with respect to expected future operating results and expansion of its business. Please refer to the risk factors inherent in the company's business and that have been filed with the SEC. Actual results may be materially different from any forward-looking statements the company makes today. Noah Holdings Limited does not undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under the applicable law. The results announced today are unaudited and subjected to adjustments in connection with the completion of the company's audit. Additionally, certain non-GAAP measures will be used in our financial discussion. A reconciliation of the GAAP and non-GAAP financial results can be found in the earnings press release posted on the company's website. I would now like to hand the call over to Kenny Lam, Noah’s Group President. Please go ahead.

Thank you, operator. Hello everyone. Joining me today are Ms. Jingbo Wang; Chairman and CEO and Ms. Ching Tao, Noah's CFO. I will start by providing an overview of our financial highlights for the first quarter of 2016 and walk you through the performance of our core wealth and asset management businesses. I will also talk about the development of Noah’s mid and back office capacities. After that Chairman Wang will provide an update on the Group’s strategic positioning, product strategy and new business development. Lastly Ching will provide further insights into our financial performance in the first quarter of 2016. We will be happy to take any questions at the end of our prepared remarks. First of all, I am pleased to report that both the operational and financial results in the first quarter of 2016 were in line with our expectations. Net revenues in the first quarter of 2016 were RMB607 million, a 35.6% increase from the corresponding period in 2015, and non-GAAP net income was RMB214 million, up 52.6% year-on-year. Operating margin in the first quarter of 2016 improved most notably to 37.4% from 8.2% in the fourth quarter of 2015 and from 31.7% in the first quarter of 2015. These results demonstrated we have effectively managed the growth of operating cost and expenses. We distributed RMB24.8 billion of wealth management products in the first quarter, 0.9% increase from the same period a year ago or 23.8% increase from the previous quarter. Total assets under management as of March 31, 2016 reached RMB94.6 billion, 60.7% increase from March 31, 2015 and 9.2% increase from December 31, 2015. For our wealth management business, as of March 31, 2016, our registered clients totaled 105,557, representing a 6.6% increase from the end of 2015 or 40.9% increase since March 31,…

[Interpreted] Thank you, Kenny. In the first quarter of 2016, both market conditions and the regulatory environment have undergone significant changes. But as Kenny just summarized, we are pleased with the business and financial results we achieved in the first quarter. The good performance was attributable to our deep understanding of the industry and our efforts to develop a global open product platform to focus on continuous client education and to expand our product and service offerings with our product differentiation and innovation. [Interpreted] Growing and maturing these services will enable us to continuously acquire high quality assets and clients. Our insurance brokerage service helps our clients screen cost effective and suitable insurance products to meet their needs. Our offshore trust and insurance brokerage services provide overseas trust planning and insurance services to our family office clients. [Interpreted] Six months ago, we were foreseeing the changing type in the marketplace, so we adopted a conservative product strategy and proactively adjusted the product mix, allowing us to feel more comfortable with today’s challenging market. The extreme volatility in the markets in the first quarter has led to changes in our high net worth clients demand for wealth management products. Instead of focusing on high absolute returns, clients are more risk averse and becoming more aware of the importance of prudent risk management, preferring wealth managers with a strong brand in replication. [Interpreted] In a dynamic market environment, we believe that we must increase our client communications and relationship manger skills training in addition to optimizing the product mix and quality. As our client mixture from new money to old money and smart money from short-term to long term investments, our core principles remain value investment and portfolio diversification for long-term benefits. In the first quarter alone we conducted training and investment…

Thank you Chairman Wang and hello everyone. Today, I will give you an overview of our first quarter 2016 results and then open up the call for questions. As Kenny and Chairman Wang have noted we are pleased to have delivered solid results for the first quarter of 2016. First quarter net revenues increased 35.6% year-over-year or 5.8% quarter-over-quarter to RMB607.2 million. On the bottom-line, non-GAAP net income grew to 52.6% year over year or 101.4% quarter over quarter to RMB214 million in the first quarter. Looking more closely at our first quarter performance, we distributed approximately RMB24.8 billion of wealth management products in the first quarter, 0.9% increase from the same period a year ago or 23.8% increase from the previous quarter. You can find a breakdown of operating metrics in our wealth management business at the back of the earnings release. Net revenues from one-time commissions for the first quarter of 2016 were RMB275.9 million, accounting for 45.4% of total net revenues and representing a 43.3% year over year increase from the corresponding period of 2015. The increase was primarily due to a change in the product mix in the first quarter. Net revenues from recurring service fees for the first quarter of 2016 were RMB295.6 million accounting for 48.7% of total net revenues in the first quarter and representing a 36.7% year-over-year increase from the corresponding period in 2015. The increase was mainly due to the cumulative effect of wealth management products with recurring service fee previously distributed by Noah and the increase in outstanding assets under management by Noah. Going forward, we expect recurring revenues to account for around 50% of net revenues in the long-term. Net revenues from our Internet Wealth Management business in the first quarter were RMB5.8 million, a 36.2% decrease from the…

[Operator Instructions] Our first question comes from [indiscernible] of CICC. Please go ahead.

Good morning. [indiscernible] Congratulations on the solid sets of results. Two questions from me, the first question is from the one-time commission right, actually in 1Q ‘16 your commission rate reached 1.29% which is almost the highest level since 2011. Could explain - could you please explain as the reasons behind. My second question is around the RMB68.9 million government subsidies, could you please give us some color on the ground in terms of the subsidies, so basically the amount of subsidies equate to about 30% of your 1Q net profit. Just want to understand the rationale behind the subsidies, what's the deadline for subsidies from the local government, is it sustainable or one-off? Thank you.

Hi, I'd be happy to answer those two questions. First of all regarding the commission rate increase the reason for the commission rate increase is a shift in the product mix which continues to shift quarter over quarter, in particular we distributed more insurance products. Regarding your second question on the government subsidies these are akin to investment bonuses related to economic development in the particular regions and cities where we may open new businesses or new branch offices. They relate to economic activity and business activity that happened several periods ago. So for example the RMB68 million in government subsidies project does not specifically relate to increased economic activity from the past year specifically. So these sorts of economic investment bonuses are sustainable, we typically have long-term eight to ten year arrangements with the local government authorities and tax bureaus and we expect to continue to receive them going forward.

Just to add to that point, the word subsidy may not be the best word to reflect all that is represented. Potentially what we've created in that region before is completely related to the amount of activities we’ve created in that particular region. So, it’s not exactly subsidy in a full sense of that word. And as also, if you look at our previous years, the year-over-year amount that we get from this quarter with subsidy is relatively stable, but the quarter-to-quarter [Technical Difficulty] the timing of that subsidy is not within our control, but over year-over-year, the amount and the volume tends to be quite stable.

Okay. Thank you so much.

Our next question comes from Sam Dubinsky of Carlson Capital. Please go ahead.

Hey, guys. Thanks for taking my questions. Just a follow-up on the subsidy income, how should we think about as a percentage of your net income guidance for the year?

Hi, Sam. I’ll take that question. Government subsidies year-over-year do have some fluctuation. Quarter-over-quarter, there is much more fluctuation. I think if you look at our historical disclosures, you can see that there is some general relationship to net revenues, because as Kenny explained, in general, it’s related to the economic activity that we help create and enhance in the areas. We are a new economy business, not an old economy business, so the local governments are typically very welcoming and willing to work with us as we continue to build out our businesses. So I’d encourage you to look at that metric instead.

Okay. But you can provide just a basic, I guess, a percentage of revenue or you gave net income guidance, just moves out the quarterly fluctuations, just trying to understand the base level to use as a percent of your annual guide, is there any way to kind of provide that type of transparency.

I think in the past, we’ve never really mentioned that. I think conservatively, for this year however, I would say we expect to receive somewhere from RMB80 million to RMB100 million in government subsidies.

Okay. Thank you very much. Okay. And then, you had a 44% sequential increase in the value of fixed income products you sold through your distribution business, you mentioned greater supply chain and consumer financing mix within that. Can you just give some color on the underlying industries that these types of financing relationships are tied to, I guess at retail, steel, solar, just trying to get a view and maybe historical default rates for this type of business?

So basically I would just translate for Jingbo Wang. We are extremely careful in selecting partners and the partners that we work with are the number 1 and number 2 in the industry, and most of these are actually supply chain and consumer finance assets related to the consumer industry in China, which is then exposed to the retail end of China. Just to give you a sense, right, for example, in consumer finance, we’re now working quite extensively with the number one player in China in consumer finance and we’re one of the leading provider of funding.

Okay.

Hi, Sam. Is that helpful?

Yeah. That was helpful. And then just the last one, I noticed that your relationship managers, the number of relationship managers slowed a little bit quarter-over-quarter, I think you added 39 people and that’s been kind of being termed down, how do we think about that? Are you being more selective or you, is there attrition or how should we think about that number and how does that impact OpEx going forward?

I think 2016, as I mentioned, is a year of consolidation. We’ve grown literally non-stop at 20%, 30% in terms of employees and relationship managers. The management is quite conscious to have that kind of intake. We need to make sure that these new intake subscribe to our values, aligned with interest and then all of that. So it takes time. But that’s why we were a lot more cautious in terms of growing our RMBs, at the same time, we’re also a lot more cautious in growing our employee cost. So you should continue to see that this is much less about the growth in the actual number of relationship managers and much more focused on the quality of the clients, much more focused on the productivity of these elements.

Okay, great. Thank you very much.

In terms of operating expense, I would just note that we now break out relationship manager compensation as a line item under compensation and benefits. For the first quarter, it was running at 22% of net revenues, which is similar to same period last year, about 22% of net revenues. We feel that is a reasonable amount and we are continuing to look at the expense base.

[Operator Instructions] And this does conclude our question-and-answer session. I would like to turn the conference back over to Kenny Lam for any closing remarks.

Why don’t we just wait for another 2 or 3 minutes to see if there are other questions? Yeah.

Absolutely. Not a problem. [Operator Instructions] And it looks like we do have a follow-up question from Sam Dubinsky of Carlson Capital. Please go ahead.

Hey, guys. One last question. On your working capital, you had some benefit this quarter from better working capital management, how does the cash flows trend in like Q2?

I think we had an increase in cash flow, in part due to some other payables and current liabilities. Q2 will be more normalized to historic trend.

Okay. What exactly were those other liabilities if you can disclose?

They’re just other current liabilities related to our Cai Fu Pai Internet wealth management business.

Okay. Thanks again.

Our next question comes from Damian Adele of EF&S [ph]. Please go ahead.

Hi. Yes. And the Internet finance business continues to act as a drag on earnings. I was wondering if you could comment just on the outlook for that business and if you say, it turning around in the near future?

Well, let me take the question. I am just translating for Jingbo Wang. We think this is actually not a voluntary investment. It’s going to be a 3 to 5-year investment first of all. The Internet finance market in China has actually undergone quite substantial changes in the last 12 months, both in terms of regulation and in terms of competition. And so if you look at the numbers, first quarter this year, we have been more cautious in terms of investments. Our quarter-over-quarter expenses actually have declined slightly. Two is, we’re now a lot clearer on our business model. We focus a lot more on white collar set of nice products and so what we see is, one is a more stable business model that allows for a more steady growth and more sustainable growth for the business and two is a lot more control in terms of expenses that we have put in to the business. In terms of specifics, I think we still expect this to be an investment we want to make in the near future. We can’t give a specific number, but we expect this to be at least a 3 to 5-year investment. We think that the only way to stop these yourself is to create something that would allow us to look at the future and the traditional models. So that’s what we’re trying to do.

Thank you.

[Operator Instructions] And currently, at this time, Mr. Lam, I’m no showing no further questions.

Let’s give another two to three minutes and see if there are others.

Not a problem. [Operator Instructions]

Okay. If there are no further questions, then we will wrap the call. If after this call there are questions, of course please reach out to our IR and we could answer your questions as soon as we can.

And I’m no showing no further questions. So I’ll turn the call back over to Kenny Lam for any closing remarks.

No more. Thank you all for taking the time to listen to our remarks and again, any questions, please direct to IR. Thanks very much.