Good day, and welcome to the Noah Holdings Limited Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Jingbo Wang, CEO. Please go ahead.

For today's teleconference agenda, I will first report on Noah's overall performance in the second quarter of 2021, the development of major business segments and the progress of our key strategic projects. Next, I will walk you through Noah's changes and strategies from product-driven to client-oriented. Then we will invite our CFO, Mr. Qing Pan to introduce the quarterly financial information followed by a Q&A. With a continuous adjustment of regulations, the compliance cost of the financial industry has increased. While compliance has become a matter of life and death for financial institutions after an eight quarter transformation, Noah has not only distributed zero new non-standardized private credit products, but also a 100% completed the early or unscheduled redemption of private credit assets in our AUM in this quarter since the transformation. Noah has exited RMB32 billion of private credit products and completed distribution to clients. In the first half of 2021 with a promotion of the Noah Triangle Service Model, we achieved the fastest growth in our Diamond and Black Card clients since the transformation. With a strong support of our clients and the efforts of all Noah employees, we have completed the transformation and maintained a year-on-year steady growth in the second quarter. In the second quarter of 2021, Noah reported net revenues of RMB900 million, a year-on-year increase of 20.3%, while the non-GAAP net income attributable to the shareholders reached RMB340 million, a year-on-year increase of 7.5%. As of June 30, Noah has realized a total non-GAAP net income of RMB800 million, representing 66.7% of the full-year guidance ahead of planned progress. In terms of core business data, transaction value in the second quarter was RMB25 billion, up 16.6% year-on-year specifically. The transaction value of private secondary market funds was RMB7.7 billion, up 7.6% year-on-year, mutual funds…

Thanks, Sonia, and thank you, Chairlady. Dear investors, analysts, good morning. Very happy to share with you another solid quarter with the strong growth achieved across revenues, profits and transaction values over the comparable period from last year. We are also very excited to see the robust growth in our client activities, especially a record high growth in Black Card client benefiting from the continuous implementation of our upgraded client service model and digitalization strategy. As of the first half of 2021, we also recorded non-GAAP net income of RMB800 million, which was ahead of schedule to meet the full-year guidance of RMB1.2 billion to RMB1.3 billion. Another notable milestone in this quarter is that we have successfully exited and made full distributions to our clients all of the non-standardized single counter-party private credit products within our AUM aside from unsettled portion of Camsing and Huishan products. That distribution totaled over RMB32 billion since the transformation started in second quarter of 2019. We have also successfully settled with over 70% of clients affected by Camsing incidents. With this overhand removed, we are pleased to see that our AUM has stabilized and entered into a stage with steady growth. Our efforts were also recognized by S&P Global Ratings as S&P has recently lifted our rating outlook to stable for the next 24 months and affirmed our long-term investment grade credit rating BBB-. Like the Chairlady has pointed out, after eight quarters of challenging yet effective transformations, we have successfully turned the corner and are now heading towards a new stage of growth. Now please let me walk you through more detailed results of this quarter. Net revenues in the second quarter were RMB899 million, down 26.6% quarter-over-quarter comparing to the last quarter, but up 20% year-over-year. One-time commissions were RMB246 million,…

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Ethan Wang with CLSA. Please go ahead.

Okay. So thank you, management. I'll have two questions. The first one is about mutual fund. Since you disclosed the transaction volume of mutual funds, we want to understand more on the retention rate side. So have you seen any material changes in the retention rates or have you seen any large redemption from the second quarter? And if it’s possible, can we get some color on the latest transaction volume on mutual funds in July and August so far? The second question is on real estate because recently, regulators have temporarily halted the registration of residential real estate private funds, so is that going to affect our real estate product sales in the future? Thank you.

Okay. Thank you, Ethan. For the first question, I think we didn’t notice for a sort of slightly slowing down on the mutual fund distribution probably about 13%. But as to the question of the retention of such mutual funds, we only noticed about a four days slower or shorter in terms of the retention period as of June 30 for the total AUM mutual funds, it's still keeping a pretty stable balance. The reason being that I think how the clients purchased or allocated funds into mutual funds with Noah is actually not so much to the volatility of the markets, but rather the product-to-product sort of interval where they need to park their funds. So I guess the behavior is a little bit different from the retail markets. But as you have pointed out, we believe the entire market on Asia has at least cooled down a little bit compared to the prior periods.

[Foreign Language]

So the impact on the residential type of property funds to us was very minimal. We did have a peak – probably in 2016, we had about RMB100 billion in real estate-related funds, but we have exited fully from that maximum funds starting in 2017. And currently we don't have anything that in the residential property type of fund investments. The only thing was still holding is in some of the equity type of real estate funds as well as the holding of several office buildings in Shanghai.

Got it. Thank you.

Okay. Thank you, Ethan.

Our next question will come from Emma Xu with Bank of America. Please go ahead.

So I have two questions. The first one is regarding the distribution of private equity and private – and hedge fund products, because we have seen the tightening of [IDL of ADR] [indiscernible] impacts the transaction value of your key product as well as the exit of your existing key projects. And recently we see a fixed markets volatility, so it also impacts the distribution value of your hedge fund products. And the second question is about what is the settlement expense in second quarter? As we know most of the Camsing related client has been settled in the fourth quarter of last year. So what’s the additional one in the second quarter this year? Thank you.

Thank you, Emma. Let me get the first simple question out of the way. In terms of the settlement in second quarter, well basically when clients came to us and asked for a little bit more time and negotiated for the settlement plan or usually – obviously, we'll cope with that. So there will be – here there are some settlements done during the second quarter. We had about additional 30 to 40 people that came to settle with us in the first half of the year. But obviously, we're not going to go ahead and do any broad offering or any new type of settlement plans. So they came and take in a relatively similar settlement process to what we had offered in last year. So I’ll hand the question to Wang?

[Foreign Language]

So Emma, obviously, the funds that you could also have exiting path through overseas listing as well as domestic listings, but doubtless to say that the pressure recently on retention obviously increased the uncertainty on the short-term outlook on the capital market. But we hold a view that it's the transformation from new economy – or from old economy to new economy that cannot be reversed in terms of how the clients are allocating as well as placing their funds in the future, especially that a good portion of our clients actually, probably came from the so-called traditional type of industry. So they have the urge as well as the demand to actually transform their own enterprise as well as through investing into new economy to increase their exposure into the new economy. So there maybe short-term volatilities in such investments, but I guess the long-term outlook of how they would place and allocate their assets into the new economy that will not be reversed. Especially, looking at how today's China market for people to invest. Obviously, the real estate is not an ideal target anymore also as well as some of the so-called non-standardized products have been pretty much cleaned out by the regulators. So there isn't much option for people to make investments that’s why although there is short-term volatility, the equity markets continue to stand very active in the recent period. And also in addition, our U.S. products, especially the products that's being operated by our New York and Silicon Valley team are still delivering pretty strong performances by investments in companies in the states as well as some of the real estate projects that generating pretty strong cash flows for our clients. So their products actually being very popular for the first half of year as we have mentioned that the need – the income and also operations for the overseas portion of Noah this year have actually seen a pretty strong recovery. Thank you, Emma. Does that answer your question?

[Foreign Language]

[Foreign Language]

[Operator Instructions] Our next question will come from [Yoyo Sung] with CICC. Please go ahead.

Okay. I will translate my questions. So my first question is regarding the number of the clients. Would you please give more detailed explanations on the reason of the exciting growth of the Black Card and Diamond Card clients? And the second question is regarding the relationship managers. I wonder what the numbers – or I say the percentage of our elite relationship managers, and we also see that the turnover rate of elite relationship managers was 1.7% slightly higher than that of the previous year. And I wonder what’s the reason behind that. Yes, that's my questions.

Thank you. So let me first try to break down the portion of the elite RM. It actually takes partly about 30% of the total RM team for the second quarter. That actually been pretty stable for the past quarters also. In terms of the growth in [Foreign Language]. Okay. I will continue to also provide some insight from my perspective. Actually, I'm one of the project leaders in terms of the Black Card and Diamond Card program that's being established this year. And we have done a few things aside from the Noah Triangle Service Model as well as the digitalization, we actually made additional investments and continue – we will make additional investments in the second half of the year to greatly enhance that benefit system and loyalty program in the Black Card and Diamond Card program. As you may have noticed in the past few quarters that we have had some very unique activities and also pretty exclusive activities for the Diamond, Black Card clients including the snowboarding with the world champion now who is actually a full-time employee of Noah as well as a sort of closed door scenario that to host a group of Black Card clients in the Summer Palace, things like that. I think it’s actually part of systematic effort to make sure that they not only receive the most suitable products in financial products, but as well as they will have a very unique client service experience with Noah. So obviously that type of investments helped our relation managers to be able to actually connect or reconnect with our core client group very effectively. And I think that's one of the strongest reasons that we see a pretty big push in terms of the growth in the core client group, which is the market share that everybody in the industry has targeted to increase. So we're very happy to see that the strategy is working and we will continue to invest in that particular sector.

[Foreign Language]

Yes. And Chairlady made a very good clarification, and this is probably the last time we have this name so-called reference to elite relation managers as that our service model to our clients have transformed to a team of service providers to our clients in terms of Noah Triangle Service Model. So in the past that we completely rely on one person to make the service, the product recommendation to our clients, that era probably has passed. We'll continue to push forward the modal of servicing our clients with a full-team, with a product specialist, with a service specialist as well as the Chief Relations Manager who actually to look at clients complete set of need in terms of asset allocation and other service needs. So I think that's a very good clarification that we're probably moving towards a more complete service type with a team to our clients. [Foreign Language]

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Grant Pan, CEO for any closing remarks.

Okay. I'm the CFO, by the way. Thanks a lot for the promotion. And thank you, everybody, on behalf of the company, also Chairlady, Wang. Thanks for your time, and very happy and encouraged to see that after eight quarters transformation, we are actually heading towards a new stage of growth and hope to continue to deliver strong results for our investors. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.