Welcome to the Noah Holdings Limited Fourth Quarter and Full Year 2016 Financial Results Conference Call. [Operator Instructions]. After the close of the U.S. market on Monday Noah issued a press release announcing its fourth quarter and full year 2016 financial results which is available on the Company's IR website at 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 businesses. Please refer to the risk factors inherent in the company's business that have been filed with the SEC [Technical Difficulty]. Noah Holdings Limited does not undertake any obligation to update any forward looking statement as a result of the new information future events or otherwise except under required under the applicable law. The results announced today are unaudited and subject to adjustments and in connection with the completion of the company's audit. Additionally certain non-GAAP measures will be used for 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 Kenny Lam, Noah's Group President.

Thank you, Operator. Thanks all for participating in our earnings conference call today. Joining me today are Ms. Jingbo Wang, Noah’s Chairlady and Mr. Shang Chuang, Noah’s CFO. As for today’s agenda, I will start by providing an brief overview of our financial highlights for the full year 2016 and then discuss our core wealth and asset management businesses. I will then touch upon the development of Noah’s mid- and back-office. After that Chairlady, Wang will provide an update on the product strategy and share her views on the macro and regulatory environment. And then Shang will provide further insights into our financial performance for the fourth quarter and full year 2016. He will discuss our 2017 profit guidance. Lastly, we will be happy to take any questions you may have. Looking back on 2016 despite a volatile in certain environment we continue to differentiate our products and upgrade our services. We have been strengthening our global presence, diversifying our product portfolio and improving product collection and with control capabilities. Thanks to these ongoing effort we have achieved solid operational and financial performance. In 2016 new product transaction value and assets under management both broke above the RMB100 billion mark. Specifically total transaction value reached RMB101.4, total AUM grew to RMB120.9 billion at the end of 2016 up 39.6% year-on-year. For the full year 2016 Noah's total net revenue is increased 18.6% year-over-year to RMB2.5 billion through effective cost control our profitability has improved. Non-GAAP net income attributable to Noah's shareholders was RMB723 million an increase of 19.8% from the previous year and above our profit guidance. Again we are very pleased with what we achieved in 2016 and we remain committed to further consolidating a leading position in China as wealth management and asset management industry. Our wealth management…

Thank you, operator, and thank you all for joining us today. With me today is Tom Wu, our Chief Financial Officer. I will start by reviewing our business in 2016, then discussing our strategy for 2016. After that Tom will discuss the details of our financial and operating results. We will be happy to take your questions after that. We concluded 2016 with a strong fourth quarter where we achieved transaction value of RMB6.3 billion, a 47% increase year-over-year, and non-GAAP net income of $7.6 million, a 78% increase year-over-year. For the year we distributed RMB25 billion or $4 billion worth of products, an 11% growth to 4,152 active clients. And the number of registered clients reached 40,305. As of the end of 2016 our asset management business, Gopher, has over $1.2 billion of AUM, almost five times the amount compared to the end of 2015. We achieved net revenues of $86.7 million, a 20% growth compared to the previous year, and non-GAAP net income of $26.8 million, exceeding our full-year forecast. Despite a challenging 2016, global uncertainty and the weakness in China's economy to name a few, we made meaningful strategic progress which we believe have laid foundation for sustainable growth in the future. I would like to briefly review for you some of the key initiatives we made in 2016. First, we broadened our business platform as well as regulatory recognition. Noah Upright obtained an independent mutual fund distribution license from China Securities Regulatory Commission, CSRC. We established a subsidiary in Hong Kong to start sourcing offshore products to service our clients, gaining further client wallet share. Noah Hong Kong also received comprehensive regulatory approvals from Hong Kong Securities and Futures Commission, setting the stage for internationalization. Second, we successfully expanded our asset management business, Gopher. We believe…

[Operator Instructions]. Your first question comes from the line of Ella Ji [ph] of Oppenheimer. Please go ahead.

I have two questions today. The first one is since we have seen this strong property market during the past months I was just wondering can you comment on the recent trends of your real estate funds? Are they also coming back with the market? That's my first question.

I'm sorry. Your question is on the performance of the real estate fund?

Yes, just for maybe 1Q '17, just the recent trend you have seen.

So I would characterize our business growth in the past two quarters are, specifically the second half, to come from a couple of areas. One obviously is management infrastructure and operating efficiencies that we have gained. To a certain extent, we're seeing economy of scale. Your question about real estate, I think we have made a good foundation for growth in this area going forward. Specifically, in 2016 we successfully launched top 50 of China real estate funds. And with this product we successfully established strategic relationships with the best-in-class product development companies in China, some with very large scales above 100 billion and some in the 10 billion categories. And with these partnerships we have secured good projects. I think this all lays a very good base for our asset management in this category. And also we think that we have entered the real estate asset management in a very good time. It is now the trough of China's real estate or the low part of China real estate cycle. So the projects we have completed I think clients should expect a pretty good yield. So I think we have planted a good seed, and so we expect good growth going forward. On a macro level, in China's real estate industry, I think timing will still continue. It'll be a norm, but we have found our positioning to really tap the securitization of China's real estate industry.

And my second question is, have you seen any improvements in your clients' risk appetite in recent months? And also, could you let us know the average duration of your fixed income products during 4Q? Thanks.

Yes. From client risk appetite I think compared to the fourth quarter in 2015, we saw some improvement with China's economy getting stronger. We're seeing recovery in client confidence. So I think last year in the fourth quarter I think we didn't make changes to our product mix, especially in the terms that clients were also looking for shorter-duration products. So this year we spent a lot of time developing a wider range of duration products, some long, some short.

Fiona, I would just like to back up what Madam was talking about. The average duration for our fixed income portfolio for the fourth quarter is fairly consistent with that of the third quarter, 1.6, 1.7 years. So obviously it's not a huge improvement yet compared to, say, a year and a half ago, but if you were to rewind back to the beginning of the year that particular metric was in the low 1's, 1.1, 1.2 or so. So as we commented earlier, certainly there's continued risk aversion on the part of clients. If you look at our portfolio attribution, a lot of that is coming from fixed income, but environment seems to be stabilizing and improving somewhat. So we're hopeful that as the economy continues to stabilize, if not improve, we'll see improvements on that front. Hopefully that will answer your question as well.

Yes. That's it. So I'm sorry, is there any changes during this quarter in 1Q '13 have you seen, or it's just sustainable, it's just consistent?

It's obviously too early to comment on the first quarter, especially that there was a long holiday for the last two weeks or so for Chinese New Year, but we have not seen any meaningful changes in a qualitative way either direction.

Your next question comes from the line of [indiscernible] of Merrill Lynch. Please go ahead.

So first, congrats on good results. The first question is, compared to when Noah IPO-ed back in the end of 2010, it was Noah was primarily a distributor, but now, as you mentioned, Noah had two engines of growth, distribution and asset management. If you look forward two to three years, how do you see your asset management business? What will be the AUM? What will be the profit contribution? If you can, can you provide us some color what it is now? My second question is on Sequoia's stake in Noah. Is there any plans that they have in terms of monetization?

Okay. So our positioning is to be a leading wealth management company with asset management capabilities. And we believe they -- these two areas are complementary. And I will ask Tom to provide some more color on our asset management business development plans.

Sure. Thanks, Michael, for your question. I'd just like to quantify that and give you some more color. If you look at our AUM for the asset management business, at the end of 2015 the total AUM was roughly about $200 million, and obviously that has grown by about $1 billion. Most of the revenues for the asset management business, well, depending on internal transfer pricing of course, is captured in our recurring management fees. So as I commented in my portion of the script, management fee was for the first time more than 50% of total revenues. So what we make from asset management primarily is embedded in the -- that 50% management fees. That's number one. And second is going forward, if you look at our business plan that Madam Wang and I talked about for 2016, both distribution and asset management business will be driving the growth of our business, but we do see recurring management fees to be very important and we do think that most likely management fees will be probably more than 50% of our total revenues, but again, like I said earlier, it depends on how we execute our business plans in the macro environment for 2016. So it's hard to give you an exact number, but it's in that 50%, a portion of that 50% right now.

Yes. And I also want to add some more color on this question. And so when we IPO-ed we had mentioned and discussed our fund of fund business and that it had already some scale. In 2015 I thought it was a strong growth year where we grew by 100%. And our asset management didn't develop as fast as we had hoped. So in 2016 we made some significant strategic changes in this regard, and so we're seeing very good results in the expansion of our asset management business.

And your question on the Sequoia and their ownership in the Company, I guess I'll just make two points. Number one, Sequoia is a good investor, but obviously Sequoia is a financial investor, so that's the first point, and they will inevitably exit in the next two, three years or so. And second is we'll be very active exploring an orderly exit on the part of Sequoia. Obviously, it's not going to be overwhelming the market. So rest assured the Company, and I'm sure the shareholders will continue to explore a value-added orderly exit for Sequoia stake over the next two, three years.

The next question comes from [indiscernible]. Please go ahead.

Now I'd like to ask your views on the competitive landscape. We're seeing two trends. One is that trust companies are heavily developing their own sales force. Second, we're seeing growth of some other independent financial distributors such as Henjiu. We're seeing very good growth from them. So what is your view on the competitive landscape and how will Noah react?

So I have commented and discussed my views on the competitive landscape several times previously. To me, I think our development is not a race; rather it's a high jump. How do we continuously improve upon ourselves? So I'm not so much distracted by what the competitors are doing. I'm more focused on our own pace and where we want to go in the next five to 10 years. So the keys for the success of our business development is to continue to select the right products, select the product which revolve around the clients' need. So I think the reason why Noah has survived and developed so quickly over the last 10 years is that our culture is to not just simply sell products to clients, but to really find right products that will add value to the clients of wealth management portfolio. So my view is that this is why we are putting asset management on a very high priority, because with our asset management business it will be complementary to our traditional distribution business, and that with the asset management capability we're able to provide customized wealth management solutions to clients, which hopefully will have more and better stable yields. Now it reminds me back in 2008 when I look at what happened with financial crisis, I think if you're only driven by commission I think there will be a high risk that you'll be simply just selling products to clients disregarding their risk appetite. So I think China's asset management area will be very important, is what type of product you're really offering to your clients.

So I think our goal is to seek quality growth.

The second question is about your long-term strategy. So you have mentioned before that you want to be the -- a Ctrip in the wealth management industry. So I want to ask, what is the portion of your wealth management, and how actively managed business and distribution business in your mind is the best ratio?

I think it's hard to say exactly will be the percentage mix between distribution and asset management in the future, but with financial market reform and the greater liberalization I think we are definitely entering into an era of asset management for the broader industry. So I think distribution obviously will face some challenges going forward. With the development of the Internet there certainly will be more of this intermediation. And so the key is how to provide customized wealth management solution to clients to really increase their satisfaction and loyalty. So I think asset management will play a very, very important role where we have done a lot of research and work seeing the development of P2P lending, Taobao's entrance into the wealth management industry. All this will be challenges for the distribution business. Though for high-end clients certainly they still have a very strong need for face-to-face interaction. So we see it will be important for us to develop both our distribution business and asset management business. Now, regarding our asset management business, I want to be clear. We're not becoming competitors to our product providers. Our asset management business will focus primarily on fund of funds. Through the fund of funds we will continue to extend our competitive advantage of selecting the funds that will bring value to clients. So we will maintain an open architecture platform. Our fund of fund will search from entire market the best funds. So the ultimate end-goal is how do we continue to add value to clients' wealth management needs.

I think we should also clarify that, as we said in our prepared remarks, these are two complementary businesses and we see them both as growth engines. So in no shape or form are we trying to de-emphasize any of the existing businesses. We see distribution as critical, continue to be a growth driver, but at the same time asset management will be a complementary growth driver because it provides customized solutions for our clients.

Yes. So the question is whether the development of asset management will sacrifice development of distribution business. As we mentioned several times, we see that the distribution business and asset management business are complementary, and I would like to note that our asset management business has its own independent team that will the main focus is to grow that business.

Your next question comes from the line [indiscernible]. Please go ahead.

Looking at the aggregate value of distribution last year, it was roughly 80% fixed income products, 20% PE. When you're looking at this year and doing your forecast, what do you guess the -- that the balance will be?

So in terms of the tightening of conversion [indiscernible] the impact on our business should be manageable the last few years in terms of our business out of China and Hong Kong that primarily focused on clients who already have assets offshore and I think that’s a very large market in itself. Only for a brief period in time in late one in late 2015 and 2016 we leveraged to capitalize on the various ODI programs that was available but the bulk of our offer of business still primarily clients with offshore assets are ready. Now I think we have done a fairly good job for the last few years in terms of getting our clients be familiar with the products and services that we're able to offer globally and I think we expect the gross rate or as the gross projector for our global business to continue as we continue to put in more resources not only Hong Kong but opening up U.S. office around August and September of last year.

Just at add one point I think the slower growth of capital from China and global actually has led to an emotional reaction whereby clients are actually getting more active in global investment. In our Hong Kong office I think on a per month basis we're fund raising around 100 million to a 130 million and that’s all U.S. dollar investments of our clients that are already outside of China. So I think that we continue to see a trend that was our clients [indiscernible] we expected.

So in the prepared remarks that management team highlighted for Gopher Asset Management business we expect more institutional investor participation, can you give us some color in terms of expectation or goals or benchmarks. For our wealth management you highlighted that the strategy is enhancing client segmentation for the ultra-high net worth of high end high client, the black [indiscernible] what do you think will be the financial impact in terms of ruling this out. Thank you.

So for the first question I want to highlight that high net worth individual it’s a still a very important in the base of our client segmentation and with that said we have been observing in terms of market especially the last year institutional investor in China happened a lot [Technical Difficulty] of investment and the participation in the investments. Now just to give you some color for the recent fund raising for our flagship private equity fund [indiscernible] investments currently about half of LPE are institutional investors right now whereas previously it was mostly individuals. Now I have also mentioned for our real estate investments we have shifted from residential to more of a commercial buy, fix and sell strategy now in terms of the real estate commercial investment opportunities we're seeing a lot more institutional interest as well. I think at the height of our real estate business we had around about 100 billion of residential and they were attracting most of the individual clients but now as we shift into commercial building I think that interest from investors are mostly institutional investors. I think it's still early days to quantify the financial impact in terms of our new client segmentation strategic for [indiscernible] but I think objective is quite clear. I think the objective is to deepen wallet share for the most wealthy families in China. I would improve client retention in terms of this segment of clients and so we will be offering bespoke wealth management and services and product allowing them to have more customized tailored product, providing more value added services both in terms of a state planning, family trust and in terms of tax planning and I think with a bit more time I think we will be able to quantify and share with the investor community the financial impact. But I think we're quite optimistic that this will be a very important strategy for us not only in 2017 but going forward as well.

The next question today is from [indiscernible] Credit Suisse. Please go ahead.

My question is more of a macro question, during an [indiscernible] interest rate to increase in China what will be the impact for our wealth management business, how about clients, returns expectation, can management can provide some comments on this. Thank you.

I think in terms of the changes in the interest rate environment in China I think the impact will primarily be more pronounced in terms of standardized bond funds in China. I think we have been focusing more all on alternative investments and specifically the equity investments in China. So I don't think an impact will be so significant. In terms of client return execution. I think in China if we look several years back, five years, six years back client's return expectation was much higher than their counterparts in developed markets and I think the return expectation has become more rationalized or have been coming down because of the excess liquidity in market there's more risk at surface and so the last few years we have seen client return expectation come down. So in China I think the clients return expectation has not been so co-related to the interest rate environment or the interest rate movements in China. Thank you.

I think that’s ended our session. I think if you have more questions please write to us, call us we also have individual conversations as we go through our discussions in the next two weeks. Thanks so much everyone.

The conference is now concluded. Thank you all for attending today's presentation. You may now disconnect your lines.