Good day ladies and gentlemen. Welcome to Noah Holdings Limited Second Quarter of 2017 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 call will be recorded. After the close of the U.S. market on Monday Noah issued a press release announcing its second quarter of 2017 financial results, which is available on the Company's IR Web site at http/ir.noahwm.com. This call is also being webcast live and will be available for replay purposes on the Company's Web site. I'd 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 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 the new information, future events or otherwise except as required under the applicable law. The results announced today are unaudited and subject to adjustments in connection with the completion of the Company's audit. In addition, certain non-GAAP measures will be used in our financial discussion. A reconciliation of GAAP and non-GAAP financial results could be found in the earnings press release posted on the Company's Web site. I'd now like to turn the call over to Kenny Lam, Noah's Group President.

Thank you, Operator. Thank you everyone for participating in today’s earnings conference call. Joining me today are Ms. Jingbo Wang, Noah’s Chairlady and CEO; and Mr. Shang Chuang, Noah’s CFO. For today’s agenda, I will begin by providing a brief overview of the financial highlights for the first half of 2017 as well as discussing our core wealth management and asset management businesses. I will share the recent development of our overseas business and mid and back-office initiatives. Then Chairlady, Wang will provide an update on the business and product strategy and share her views on the macro environment and regulatory development. After that, Shang will wrap-up our prepared remarks by providing further insights into our second quarter financial performance before we take any questions you may have. Since early 2017, volatility in the global macro environment has decreased, and by midyear global capital markets in general appeared to have reached a more stabilized state. In China, macroeconomic conditions have largely stabilized, despite persistent structural imbalance issues and unabated debt default fears. Across the financial industry, there are still challenges, especially for the asset management sector that continues to face rising regulatory cost and constrained product supply among other issues. Against this constantly evolving macro backdrop of EBIT flow, Noah remains resilient and confident. As a leading wealth and asset management service provider in China with over a decade of operating experience, we continue to provide outstanding comprehensive financial services to our high net worth clients, while at the same time constantly optimizing and enhancing our risk and asset management procedures to strengthen our core competitiveness. In the first half of 2017, Noah's wealth management business distributed a total of RMB65.6 billion financial products, up 24.9% year-over-year. As of June 30, 2017, a total of AUM of our asset management…

Thank you, Kenny. China's wealth management industry attend a new chapter in the first half of 2017 to investors, practitioners, and regulators. We saw positive development in the industry with tighter regulation in an increasing number of sophisticated investors. The unprecedented growth patterns, constant regulatory changes, and market volatility have eliminated many players out from the market. We believe the current market condition present challenges, but also opportunities to Noah. With China leading the world in national and individual wealth creation, we believe wealth management and asset management in China is a growing industry with enormous market potential. We also believe that after a decade of long development, China's wealth management industry enter into its third development phase beginning at the end of 2016. The tightening regulatory landscape has advanced the industry from guaranteed repayment and top-notch players have started focusing on growth with quality rather than sale. Being the market leader, Noah is also getting more mature by consistently predicting and solving problems and focusing on several key values, including understanding the market drivers to deliver services and products that serve as our clients expectation, insisting on compliance to enhance risk control and grow active management capability, establishing outstanding process in operational management capability, maintaining growth in both revenue and cash flow. After experiencing market adjustments in four economic cycles since our inception 12 years ago, we have gained a greater appreciation for the risk inherent in the financial market, learning from our inadequacies and mistakes has been crucial to the gains and efficiency and innovation to inspire our team. Whoever never makes a mistake will never make anything. In fact, the faster we recognize our own inadequacies and mistakes, the faster we can diagnose and analyze them and the sooner we can implement improvements. The combination of endurance…

Thank you, Chairlady Wang, and hello, everyone. [Technical difficulty] which include our strong second quarter that I will further discuss here. For the second quarter of 2017, net revenues were RMB707.3 million, an increase of 8.5% year-over-year. And non-GAAP attributable net income was RMB226.5 million, up 14.4% year-over-year. One-time commission received in the second quarter remains strong at RMB300.6 million. Since its a combined result of one-time commission from RMB33 billion of wealth management product distributed during the period, which increased 18.8% year-over-year, partially offset by a decrease in effective commission rate due to the decrease of insurance products distributed. We also realized recurring service fees of RMB340.1 million in the second quarter, up 9.7% from the same period last year, with accumulation of products we’ve previously distributed and the consistent growth of Gopher's asset under management, the proportion of recurring service fees contributed to total revenue at the group level has been relatively stable at 45% to 50% in recent years. Performance based income, another important part of our revenue amounted to RMB22.8 million in the second quarter. Thanks to our long-term commitment to alternative investments in our multi asset strategy approach, we’ve realized performance based income for 12 consecutive quarters, and we expect this trend will continue. By segment, net revenues from our core wealth management business amounted to RMB550.6 million, up 9% year-over-year and represented 77.8% of total revenues. The asset management and internet financial services businesses contributed net revenues of RMB130.3 million and RMB26.4 million, respectively. Total operating expenses in the second quarter were RMB483.1 million, an increase of 5.6% from a year-ago. Excluding the impact of government subsidies, total operating expenses decreased 0.2% year-over-year, reflecting successful cost control initiative. As a result, operating income of the second quarter increased 15.5% year-over-year to RMB224.3 million and…

Yes, thank you. [Operator Instructions] And the first question comes from Yuan Xue with CICC.

[Foreign Language]

For the benefit of our audience, I will translate the questions from Yuan Xue of CICC. So Yuan has two questions. The first question is I know that for asset management business, revenue was down year-over-year, because performance fee was decreased. Can the management provide guidance on Gopher's asset management performance going forward? My second question is regarding the latest development on [technical difficulty]? Yes, so I will handle the first question and Chairlady Wang will handle the second question. So you’re right, asset management's revenue were down year-over-year because we did not recognized that much performance fees for the second quarter of 2017. If you look at our management fees, that’s in line and have grown year-over-year. As for alternative assets, I think the exit and maturity of our investments are not -- it is more periodical, so we expect performance to be matured over the next few years. In terms of the performances, as Gopher's fund, they actually are doing quite well. And just lastly, I’d like to remind everybody on the call that in terms of the recognition of performance fees, we are quite conservative, so we only recognize performance fee when it’s realized and distributed.

[Foreign Language]

Yes. So Madam will like to supplement for the first question. So if you look at Gopher's performance over the last two years, 2015 was a more recent peak that was attributable to performance-based fee income that was realized for Asia related products or public markets related product. Last year, a lot of performance fees was real estate related. This year, we did not recognize as much performance fees. In terms of our asset management strategy going forward, our strategy is to increase overall net management fees that we are able to pick up in terms of the revenue side. We will do that by evolving our business model, previously more fund of fund based to now manager on management -- manager on manager as well as core investment in direct investment that will improve the quality of our asset management and also increase the fees that we are able to realize on our AUM.

[Foreign Language]

Yes. In terms of the latest development in LeTV, I’d like to provide some background on this particular product. This is actually a private equity venture capital style equity investment fund. It raised around 1 billion in capital from LeTV. It raised about 600 million from city government and our investors invested at a preferred level. So actually that provides a very strong safety question. If there is any losses to the fund, LeTV and the city government capital suffers a loss -- bear the loss first. Now this private equity venture capital sell fund invests in non-LeTV assets. In addition to the structural capital safety that we created, the LeTV listco also has a guarantee to buy back the assets of the fund, and this guarantee was publicly disclosed by listco. Now in terms of what we are doing, we are working with the fund general partner to sell the portfolio company, some of the portfolio companies are doing well, some are not doing as well, but we are working proactively with the general partner in selling the assets and distributing the capital back to our investors. Now for this particular fund, most of the investors that we service or distributed to are institutional investors. So they’re quite -- they’re very sophisticated and they understand the current situation, so not so much of negative impact to our business. Thank you.

Just to reiterate, this is Kenny here. There is lot of media coverage on this. The fund itself has not invested in anything related to LeTV. So it's actually the separate fund that is invested by LeTV not investing into LeTV's companies.

[Foreign Language]

Great. Thanks.

Thank you. [Operator Instructions] And the next question comes from Anurag Rajat of JPMorgan.

Hey, good morning. Thanks for taking my question. I’ve two quick ones. First, I think you touched upon this a little bit, but the fee rate for the wealth management seem to have little bit under pressure, especially the upfront rates. Can you just discuss a little more what’s causing that? And second longer term or little bit big picture, how are you seeing the competitive landscape evolving, especially at the wealth management? Thanks.

So the first question is fee rate on which business?

Wealth management.

Wealth management, right? Let me translate for Madam Wang and then we will answer both questions. Thank you. [Foreign Language] So I will answer the first question regarding the effective one-time commission rate for our wealth management business. Now for the wealth management business, you’re right. The effective one-time commission rate declined from 1.08% to about 0.91% year-over-year. This is primarily due to the product mix change. We distributed less insurance product in the second quarter of 2017 compared to that a year-ago. And overall we feel quite comfortable in terms of the effective commission rate being in line with our long-term range of 0.8% to 1.2%. As previously mentioned to the investors, the effective commission rate will vary depending on the specific product mix that we distribute quarter-to-quarter.

Maybe I will ask to what Shang said first before, Chairlady Wang talk about the market. I think it's important to note, if you look through our financials for the last two, three years, the effective rate tend to fluctuate between 0.8% to 1.2% quarter-to-quarter given the mix of products. That’s point one. Point two is we do believe that last year was a unique year in terms of insurance product volume. What we’ve seen in the last quarter -- two quarter is a stabilization of insurance volume. Early '15 was a bit of a unsustainable volume. I think what we see now in '17 is actually much more sustainable. So that’s where we are now in terms of upfront fee.

[Foreign Language]

Yes. So in terms of the wealth management landscape, I think the key going forward obviously will be compliance and regulation. The last 10 years obviously was an emerging industry. Everybody was just starting to get into the wealth management industry and there were a lot of players, some were more compliant, some were not, but everybody was trying to grow their revenue, grab market share. Now in the recent year or so, there has been a increased regulation. Some players are like its limiting their business growth, but we actually view it more positively. We think that the increased focus on compliance and regulation will help the industry grow in a more healthy manner. And so, compliance obviously we feel is the biggest risk in the industry and so we are quite prepared to grow in a long-term. Now if you look at the industry ahead itself, I think we still maintain the view that, obviously, it's a very huge industry and its growing very quickly and more than 10%, 15% on an annualized long-term basis. This is driven by the ongoing wealth creation in China as well as the strong demand for investments by individuals. I think if you ask any Chinese investors, I think they all very now accepted of the belief that investments for the long-term asset allocation are very, very important. Now in the last two, three years, we saw an emergence of, I guess, not so compliant players or peers, P2P, Ponzi schemes etcetera. Now the regulation has cleaned up some of these unhealthy competition, a lot of the players were eliminated, so I think we are now at a point where the industry can really grow on a more sustainable healthy level going forward.

Thanks.

Thank you for the question.

Thank you. [Operator Instructions] And the next question comes from Shao Ziqin with CITIC.

[Foreign Language]

Yes. For the benefit of the audience, I will translate the question from CITIC. You mentioned or the management mentioned that the amount of insurance distributed in the second quarter of 2017 decreased year-over-year and that affected the -- blended effective commission rates. Can you comment if this is a ongoing trend and what would be the likely development in terms of insurance going forward? Now I know that investment linked insurance in China has been increasing in the last few quarter. So can you help us bridge the development at the company and the observation I’m seeing from the domestic market? Thank you. Yes. So I will just provide some color in terms of our insurance business. Now last -- in the last year and a half, I think we’ve installed base, strong robust growth in terms of our insurance business, specifically in Hong Kong. I think there is more than normal demand for the last year and half, and so we’ve really capitalized on that opportunity. Now in terms of our insurance volume now, our insurance revenue is -- makes up roughly about 10% of our total revenue for the second quarter. That is down from around 15% last year. We feel that for high net worth individuals insurance is obviously a very important part of its overall asset allocation, Chinese investor continues to be under invested insurance, so we feel like insurance is a business that will continue to grow and develop and use as a very efficient tool for our client. But I think we’re seeing the demand normalizing, but going forward I think we expect insurance activities or business to be around similar levels that we’re seeing in the second quarter. So I think that’s both offshore as well as onshore. So the insurance industry as a whole is growing. I think they were just a very outsize demand specifically last year.

I want to add to what Shang just said. I think the important word is we are now normalizing to a sustainable level. If you compare our insurance proportion of the revenue to the last '16 second quarter, I don’t think especially a useful benchmark, because if you look back to early last year, it was quite a bit of a unhealthy surge in terms of insurance sales. What we see now in the second quarter of this year is much more sustainable. That’s point one. Point two is we have basically successfully transformed our front line team to be real asset allocation team. Meaning that they not only talk about investments, but also insurance as -- and after allocation asset class. So that’s proved in the last six quarters where we’ve quite strong insurance volume. So short, simply put, having the second quarter proportion is much more sustainable.

Thank you.

Thank you. [Operator Instructions] And the next question comes from Katherine Lei with J.P. Morgan.

[Foreign Language]

Yes. For the benefit of the audience, I will translate the question from Katherine of J.P. Morgan. If the management team can give us the latest update on Huishan Dairy. We note that the company or the fund manager was taking legal proceedings to freeze assets, what is the latest development in terms of just particular products? Thank you.

[Foreign Language]

Yes. So, a couple of updates. So in terms of the legal proceedings we have taken as of fund manager for the particular fund of Huishan Dairy. We have froze assets for the Chairman in PRC that includes company equity as real estate he personally owned. In terms of our insurance in Hong Kong, unfortunately that was canceled, but we are proceeding to liquidate his assets in the PRC. Now in terms of Huishan Dairy, the listco [ph] it is still ongoing discussion on the restructuring. I think there has been some progress. In terms of our particular fund, it is categorized as special debt., i.e. it that cover within the listco scope and is the debt that will not be converted into equity. So now the proposal that we’ve received suggest for us to convert the debt into what extended debt into a five-year debt that will with principal and interest being paid back over that five-year period. Obviously we feel like there are room for better terms, and so we are negotiating with Huishan as well as other debt holders. And so we are working very hard on the situation and we’ve kept our investors updated on the progress. Thank you.

Thank you. [Operator Instructions] And the next question comes from [indiscernible].

[Foreign Language]

For the benefit of the audience, I will translate the question from [indiscernible]. So first question is regarding two metrics. The first one is active clients and I note that it declined year-over-year and at the same time I note that average transaction value per client increased in the second quarter of 2017 year-over-year. Can you comment on what is a strategy that the company is adopting in terms of these two metrics and is there a strategy to move up in terms of the client segmentation? The second question is regarding problematic products over the years and more recently LeTV and Huishan. I note that it's -- from time-to-time there will be problematic products, but I would like to get some color on what is the impact to client demand on our business? I will answer the first question and Madam Wang will answer the second question. Now you are right, active client for the second quarter was down around 9% year-over-year. Our active clients are roughly about 4,500. Now a decrease from a year-ago was because in the second quarter of 2016, our secondary market equity product was much stronger. We distributed about 28 billion of secondary market equity product in the second quarter of 2016 representing about 10% of overall transaction of product mix. Now the secondary market equity product often tend to attract a lot more client participation. So the decrease in active client for the second quarter of 2017 was because we do not do as much secondary market equity product. We ended about a billion representing about 3.4% of overall product mix, so that’s the reason. Now in terms of average transaction value per client, I think our strategy on a going forward basis or long-term basis obviously is to increase that. That reflect…

Okay. [Foreign Language]

Yes. So coming to the second question, for problematic product such as LeTV and Huishan, what is the impact on our clients? Generally I think I view it quite positively. I mean, it helps our client better understand a risk in the market, and for them to understand that guaranteed returns or guaranteed repayment are not sustainable. I mean, it helps us in terms of our investor education efforts. I think has he pointed out, I think as you get larger in the industry, I think it's normal to meet problematic product from time to time. Over the last 12, 13 years, we have cumulatively distributed nearly RMB500 billion of product. Now problem product -- problematic product represent less than 1% of that RMB500 billion. So I think generally clients note that our risk management and our product selection are quite strong compared to peers in the market. I feel this year the LeTV and Huishan is almost like a stress testing on our business from our result in the first quarter and second quarter, you can see that it hasn’t negatively impacted our business. So I think generally we have passed this stress testing. Now going forward, a couple of things that we will continue to do. One, obviously we will continue to focus on compliance. We are one in the few players in a market that have not -- do not operate or has ever operated of a capital pool. Second, we will continue to insist on the investor education, and three, obviously, we will not make any of our product whole. I think when a client -- a Huishan client asked me whether I will make the product whole, I said we will handle it using market processes, such as restructuring and obviously we will fulfill our…

I think I will add a bit more from the industry experience I’ve gained from serving clients in the previous line both domestically and globally. The issue with Chinese wealth management so far has been really to: one is, implied guarantees. Two, is in many players being not compliant with the regulation, particularly what Chairlady Wang mentioned, about capital pooled assets. And so the two products, the so-called problematic products has really helped us and helped the industry understand that, one, there is really no implied guarantee and we are not going to provide any implied guarantee. And two is actually allowing us to really look at the industry in a healthy way in using market methods to restructure. I think I want to emphasize one more point, which is if you look at the products we’ve issued so far, Chairlady Wang mentioned RMB500 billion under 1% being problematic. We are actually reviewing our products on a weekly basis with a red, yellow, green light, and so far off the close to a thousand products we’ve issued so far in the last 13 years, under 10 products are rated in the red and yellow column. And so we are still extremely stringent in our risk practices in the whole environment.

[Foreign Language]

Thank you. [Operator Instructions] All right. As there are no more questions at the present time, I would like to turn the call to Kenny Lam for any closing comments.

Well, thank you all. And if you have questions, please direct all questions to IR, we will respond promptly. Thanks very much.

Thank you.

Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.