Good day and welcome to Noah Holdings Third Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Melo Xi, Investor Relations Director, please go ahead.

Thank you, operator, and good morning, and welcome to Noah's 2023 third quarters earnings call. Joining me on this call today are Ms. Wang Jingbo, our Co-Founder, Chairlady and CEO; and Mr. Grant Pan, our CFO. Ms. Wang will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. They will both be available to take your questions in the Q&A session that follows. I would like to generally remind you that we just held our annual Investor Day on November 14 in Hong Kong, where Noah's executive management team provided an in-depth review of the business and laid out our strategic priorities for the future. The presentations and the panel discussions focus on our resilient standardized product offering, overseas expansion plans, solution driven advisory services, global product leadership, as well as the client service strategies. A full replay of the event and presentation materials can be found on our Investor Relations website, which I encourage all of you to watch. Before we begin, please note that the discussion today will contain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from those in our forward-looking statements. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC and the Hong Kong Stock Exchange. Noah does not undertake any obligation to update any forward-looking statements, except as required under applicable law. In addition, today's call will include discussions of certain non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. Lastly, this call should not be interpreted as a solicitation to sell or purchase the interest in any Noah or Noah affiliated products. Please also be aware that the link to a live webcast with presentation materials is available on our Investor Relations website. With that, I would like to pass the call to Ms. Wang. Please go ahead.

Thank you all for joining us. I would like to begin today's call by sharing some recent insights gleaned from the face to face interactions I had with Noah Clients and my thoughts on the state of the wealth management industry. After that, I'll cover the recent progress in our overseas business, provide a comprehensive overview of our third quarter performance and go over some updates from our business segments. Over the past two months, we have held numerous annual meetings with over 1200 domestic clients at our new headquarters in Shanghai, where we offer each of them an asset allocation assessment paired with strategic advice tailored to their unique circumstances. Subsequently, in Singapore and Hong Kong, we held meetings with over 150 and over 800 international black card clients, respectively, allowing us to gain valuable insights into their needs while promoting Noah International's product and service offerings. Our close discussions revealed an encouraging evolution in the wealth management needs of Noah's high network clients. In particular, there has been a noticeable shift and focus from specific products and returns to a broader array of considerations encompassing asset security, enterprise and family succession plans, and global strategic asset allocation. This transition is particularly pronounced among Noah's international clients reflecting their journey from product-centric to asset allocation driven wealth management needs. Over the past two to three years, Noah has overhauled its offering transitioning from a product driven to a solution driven approach. In our international wealth management segment, we rollout the CCI model comprising of the Chief Investment Office, Client Strategy Office, and Investment and Product Solution Office, through the CCI model, which directly align our macro health views with the client demand to build product and solutions and improve relationship manager service standards and client satisfaction, Noah international wealth…

Thank you, Melo. And thank you, Chairlady, for walking us through the quarter three operations, and good morning, investors, analysts, and good evening. For today's presentation, I'd like to start by sharing the latest insight of our client's profile and how Noah's strategy has been adapting to meet their needs in order to drive the growth of the business. According to a recent survey, more than half the clients were engaged in the past, in export oriented manufacturing, trade or internet industries with very deep, foreign currency assets already, including cash, equity and stock options. Age wise, most of black card and diamond cart clients are in their mid-50s or even 60s. They predominantly reside in China's major metropolitan centers, echoing our recent strategy of consolidating operations in key cities. In terms of their wealth management objectives, we're seeing two key shifts in investments, appetite taken place from our expanse base. China's first generation entrepreneurs continue to be the primary decision makers within their families and are seeking more balanced and security driven allocation strategies for their wealth. This is marked by distinct shifts along we are aggressively seeking high returns on investment in the past to a focus on wealth protection. Definitely, many of our clients are now entering a new phase of globalization in business and also capital. Not only is there personal demand for global asset allocation service increasing, but the enterprise side need to enter global markets as entrepreneurs is also growing. This will lead to an accelerated wealth accumulation effect for our high net worth of clients in the coming years. According to a survey, 70% of the clients demand global asset allocation. And as a result, the ability to provide global solutions is a key requirement for wealth management firms. With years of in-depth…

Thank you. We'll now begin the question and answer session. [Operator Instructions]. First question will be from Helen Lee of UBS. Please go ahead.

Thanks, management. This is Helen from UBS. I have two questions if I may. First, the gross increase in Gopher AUM was RMB4.7 billion in the third quarter, almost double that of the second quarter, but why did one time commissions from Gopher managed funds decline sharply to RMB32,000? That's my first question. And second question, in terms of the transaction value mix, I noticed that a proportion of Gopher products increased to 21% in the third quarter. I'm just wondering whether you have any longer term target for the transaction value mix from Gopher products and what are Gopher's product pipelines for the fourth quarter and into next year? Thank you.

So, Helen, I'll explain your first question. So basically, a good chunk of the AUM increase, go for product actually came from US dollar cash management products and some of the discretionary portfolio investments for deposits. So basically, majority of the revenue structure will come from management fees going forward. The same quarter revenue actually doesn't reflect as we actually don't charge very high, so called, subscription fee for this type of products.

Thank you, Helen. So, in terms of Gopher international front, we are committed to increase our capabilities in actively managed product space, including primary, secondary public securities, as well as cash management. So, that is kind of more of a long term process. Now, in terms of the third party distributed products versus our actively managed products, we don't have quite a clear picture in terms of the split yet, but then, going forward, it will be depending on what the client really needs. And also, our investment in increasing our research and investment capabilities in Gopher's overseas market.

Thank you, Alan. Next question will be from Peter Chung of JPMorgan. Please go ahead.

I have two questions. First one is on the wealth management transaction volume. We noticed that the transaction volume increased sequentially in third quarter. We wish to understand what's the driver behind, is this mainly driven by the transaction of, say, in [Pingtan] (ph) from international client overseas client and management also mentioned that Noah engage with a client in third quarter, what's the latest client Investment sentiment you'll get back. This is the first question. Second question, we noticed that on the cost side for the quarter, there's large contribution from the government subsidiary, which helped you reduce the OpEx in third quarter. We wish to understand what does that represent or what's the driver behind it. And what's the, say, the trend going forward? Thank you.

So, Peter, the first question, the contribution actually mainly came from the US dollar side, which we managed to actually distribute around US$1 billion in the transaction value, which have seen a significant increase about 132% year-over-year. At the same time, we maintained a rather healthy distribution on RMB side, which is attributable to the corporate client transaction institution, client from smart treasury that account for about actually RMB12.9 billion of RMB mutual funds transactions. So both actually added and contributed to a rather healthy transaction values this year. And to your second question, in terms of I'll leave the client sentiment observation to Chairlady and also, I will share a little bit of my insights as well. The second question in terms of the government subsidy, the total year-to-date actually remained pretty stable, the first three quarters comparing to last year. But the timing of the grant of the actual cash, the timing usually is, I will say pretty spontaneous based on the government's fiscal situation. So this year, we happen to receive the subsidies in the Q3, but the total amount actually remained rather stable from the last period of the year.

So, we have held various conferences and annual gala events in the past couple of months, In Shanghai, Singapore and Hong Kong, we have interacted with over 1,000 clients lately. So, what we have witnessed was that, first, overall that the clients have remained rather rational and they are seeking kind of a more balanced solution and diversity in their global asset management or global asset allocation needs. And also, we have witnessed a very obvious shift from focusing on products and rates and returns from the past comparing to know that the clients are more focusing on the comprehensive solutions on their overall wealth management needs, including their family and enterprise inheritance and succession plans. We have seen that basically the maturity and sophistication of clients have increased, which is a good news for independent wealth managers like Noah. We have spent quite a lot of investor education and building our internal research capabilities. So, now that we kind of are it's easier for us to reach our consensus with our clients. And, I has also commented that in the past year or so basically, the general market or high network individuals in China in general, not just only Noah's client, have seen many risk related events in the past, and their demands and needs have become more clear, and more focusing on asset protection and security and more focusing on global macro views, including currency risks and such. So, we're spending more time to investor education on those front. Hope that answers your question, Peter.

So, I have a follow-up question on government subsidiary, because Mr. Pen just mentioned that the year-to-date amount has been stable from previous level. Can I say that going forward, the annual amount likely to be stable, while there can be a seasonality in quarter-by-quarter? Thank you.

Peter, I think for 2023, it's probably the right way to put it. Going forward, I think it's very hard to say in terms of the government subsidies, which is a form of refund of taxes or actually some of that is associated with the job creation. So depending on the structure going forward on the RMB revenue and income that we actually make domestically, I'm not sure whether or not safe to say that it will remain consistent, pretty hard to predict. So if we do have increased revenue going forward on the domestic side, we'll probably see a higher subsidy, but if not, we'll see a little bit volatility in that. But I guess from what we have seen, I believe at least this year, the government is still honoring other subsidies to us.

Thank you. Next question will be from Chiyao Huang of Morgan Stanley. Please go ahead.

The first question is follow-up on the black card data that took place in several cities recently just wondering what's the progress in terms of the transaction value generated and would you provide quite strong support to the 4Q revenue? And the second question is regarding the insurance commission rate. We saw some adjustment, actually quite notable adjustment on the [advanced insurance] (ph) commission rate, so the management expects the commission rates in new year would also based on potential changes going forward and that the potential impact the net revenue? Thank you.

I'll take the first question. We're actually seeing a very good turnout attendance for the past three stops and we have two more to go for the annual gala, but probably would take place in next year early next year. From what we have seen for our first three stops with the high attendance, I believe the total creation of revenue or placement of financial products, we're pretty optimistic about what's going to come. But in terms of transaction value, as much as we understand, it's a pretty key metric in terms of to measure how much of client's wallet share you're taking. We are not aggressively pushing for any specific type of products, but we are mainly focusing on as we mentioned earlier, the total solution for our clients. So basically, the client prefers to allocate more towards insurance products. You probably wouldn't see as high as transaction values as in traditional investment products, but we're okay with that. I think we're pretty comfortable with the strategy of as long as it caters to clients need as we believe that they are much more sophisticated than before. But with that said, we do have very ample supplies of investment products, especially on the overseas side, we believe our clients are still very globally minded comparing to the past. They are more, I think, more sophisticated and deeper understanding how the global investment products play as compared to years back. I believe there is a second question. Can you remind me what the second question is? No? That's the only one?

Yes. Commission rate change. Are there any risk --

So on the insurance commission side, in terms of the insurance brokerage commission declined, right now the regulation is mainly focused on bank insurance channel. So, the independent insurance brokers are not affected yet, but as the regulation should change in the future to include the independent brokerage, then we would have no choice, but to follow. But in terms of a global scale, we're not seeing any regulatory changes in the overseas insurance brokerage business or market. So that part should not be affected. And in fact, after COVID, the overseas insurance brokerage business has been generating more revenue share comparing to our domestic business at the moment.

Thank you. That concludes our question-and-answer session and also concludes our conference for today. Thank you for attending today's presentation. You may now disconnect.