Good day. And welcome to the Noah Holdings Second Quarter and Half Year 2024 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. This event is being recorded. I would now like to turn the conference over to Mr. Melo Xi, Investor Relations Director. Please go ahead, sir.

Thank you, operator. Good morning, and welcome to Noah's 2024 second quarter earnings call. Joining me on the call today are Ms. Wang, Jingbo, our Co-Founder and Chair Lady; Mr. Zander Yin, our Co-Founder, Director and CEO; and Mr. Grant Pan, our CFO. Mr. Yin will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. They will all be available to take your questions in the Q&A session that follows. 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 ICC and the Hong Kong Stock Exchange. Noah does not undertake any obligation to update any forward-looking statements, except as required under applicable law. With that, I would like to pass the call over to Mr. Yin. Please go ahead.

[Foreign Language] Thank you. Good morning or evening to everyone. Our domestic business model has undergone significant restructuring lately, including the clear separation between our domestic and international business, optimization of our operating model and adjustments to our organization structure and relationship manager team. As a result, we're adjusting our financial reporting disclosures. Starting this quarter, we will begin reporting financial data based on this new organizational structure, which we believe will provide a more accurate reflection of the progress we are making during this transition. Therefore, on today's conference call, I will go over our second quarter results, separating them into domestic and international segments, followed by an overview of our growth strategies for both. Domestically, we have been adjusting our client service model and deepening the organizational restructuring in recent years to comply with the evolving regulatory requirements, including dividing and deploying sales personnel to specific independent and licensed business units, namely Noah Upfront Fund Distribution, Glory Insurance Brokerage, and Gopher Asset Management. Each sales personnel is able to only recommend products and service clients of that specific independent business unit. At a group level, our branding and business development departments are responsible for branding and business development departments are responsible for branding, marketing activities, client acquisition, investor education, and other tasks, but will not directly recommend financial products. In the global market, we launched a new wealth management brand called ARK Wealth Management and continue to expand its overseas RM team, with 113 currently on board. Through its offices in Hong Kong, Singapore, and the US, Ark provides comprehensive wealth management and value-added services targeting the local Mandarin-speaking population. Likewise, we launched a new overseas asset management brand, Olive Asset Management, which is focused on building a more comprehensive product matrix covering different asset classes globally. We…

Thanks, Melo. And thank you, Zander. And greetings to everyone joining us today. During the first half of 2024, our total revenues were RMB 1.3 billion, a decrease of 27.5% year-over-year. The short-term pressure on the performance is mainly due to the challenges brought about with the transformation, as just described by our CEO, Zander. As he noted, we're undergoing a profound transformation on the RM service model and are actively adjusting the business directions of several business units. This decision-making process has been thoughtful, but it has taken some time to ensure that we're making strategic choices that align with our long-term vision and client interests. While the path forward is clear now, it also takes some time to optimize the processes involved and ensure that they could smoothly integrate it into our sales and service activities. In the short term, the integration of the new sales processes are indeed more intricate and time-consuming. It's crucial for our sales team to have the time needed to adapt to these changes and their new roles. This transition, however, will lead to greater success in terms of serving the client's interests, but with a temporary dip in sales efficiency and short-term pressure. Now let's get into the details of financials. Starting this quarter, we have included additional disclosures of revenues by product category and global metrics in the supplemental information section of our release. This enhanced disclosure will provide a more precise picture of our strategic direction, enabling investors to track our business development efforts on a global basis, assess the development stages and financial contributions of our various businesses, and see how they align with our resource allocation. The encouraging sign is that our US dollar investment products performed well, generating stronger transaction values and increasingly contributing to revenues. As…

[Operator Instructions]. And your first question will come from Peter Zhang with J.P. Morgan.

[Foreign Language] This is Peter Zhang from J.P. Morgan. I have two questions. The first question is, I wish to understand what's the driver behind the RMB 50 million loss from equity affiliates recorded in our second quarter result? My second question is, management mentions that overseas AUA will increase from US$8 billion in this quarter to US$20 billion in next three to five years. But in the meantime, we also expect our business to remain relative slow in next few quarter due to the external and internal environment. I wish to understand how long management expects this transition period will be. And in medium to longer term, what will be the driver behind the strong increase in this overseas AUA. How Noah will achieve the growth?

The decrease on the [indiscernible], it's is more or less related to – as the general partner of many, many fund of funds, Gopher actually has co-investments in these funds. And sometimes when the valuation of the underlying funds adjusted down, it will be reflected proportionately on to our balance sheet as equity pickups. So this quarter reflects that equity pickup. Some of the underperformance following underlying funds. Then on the second question, and we obviously have very high confidence in terms of the ample growth, the depth actually, the market of high net worth individuals in the future, and especially how we'll be able to maintain the growth on both the quality of service as well as the accumulation of AUM and AUA, especially on the US dollar side. [Foreign Language]

[Foreign Language] Regarding the second question, first of all, I guess the near-term challenges, a few aspects that were previously mentioned during the call as well that's causing the near-term financial performance slowdown. First of all is, I guess, on the domestic market, driven from our – I guess fundamental is to protect our client's assets. So we'd rather lose a client than losing our client's assets. During the first half of the year, we suspended the distribution of domestic insurance products due to aforementioned reasonings. And secondly, in the overseas market, as mentioned before, the competition for Hong Kong insurance markets has become quite, I guess, competitive. But we're glad to see that the regulatory authorities have implemented various adjustments to limit the malicious competition aspect. And also, internally, we're also implementing the transformation of our sales functions. So, the sales personnel are being adjusted or have been adjusted into different independent business units. So I guess the sales network or the sales model has been significantly changed. So these are the near-term challenges. I guess looking forward to the future, first of all, in terms of domestic insurance, the strategic direction has been very clear now. We are positioning ourselves to our clients' healthcare as well as retirement wellness position products. And we have already started the marketing process and we see very high interest among our clients. So basically we take a lot of our clients to these offline senior care facilities and we are seeing that the transition or the clients' subscription rate is about 10%. So we expect this business to slowly pick up starting from the third quarter. And we think that the product is well suited for our clientele. In terms of overseas, we have very high client stickiness and we understand our client's demand. A lot of our clients are going outbound for their businesses as well as their investment allocation needs. And also, in the overseas market, there are a lot of local Mandarin-speaking high-net-worth clients as potential clients for Noah who are, I guess, underserved in their asset allocation demand and need. So we have done some early stage attempts, including acquiring new clients and servicing clients online, acquiring clients offline. And we realized that this is a very, I guess, a blue ocean market for us to further capture. In terms of the product competitiveness, as mentioned, we established our US product center. I guess in the overseas market, our strategy is to increase our product competitiveness and also increase the – expand the coverage of global top tier GPs, including VCs, TEs, hedge fund managers, and so forth. [Foreign Language]

[Foreign Language] Overall, we are very confident in our overseas business growth or global business growth. Aside from the local overseas – local Mandarin-speaking clients and their high demand for wealth management services, especially from Chinese background wealth managers like us. On the supply of product side, we're also seeing that basically all of the top tier global GPs are putting more resources in their private wealth channel. Whereas before, their fundraising efforts were mainly driven by institutional LPs. But before, I guess the private wealth channel only account for less than 10% of their overall new fundraising amount. But they're aiming to increase this percentage to over 30%. So I guess, Noah, due to our product specialty, we are known as an alternative wealth asset manager and wealth manager. So comparing with a lot of, I guess, global private banks or competitors, who are less familiar with private equity, venture capital, and just alternative products overall, we do have an edge when we compare to those local peers.

Operator, turning back to you.

[Operator Instructions]. And this will conclude our conference call as well as our question-and-answer session. I wanted to thank everyone for your participation today. You may now disconnect.