Good day, ladies and gentlemen. Welcome to Noah Holding Limited's Third Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, there will be a Q&A session. During the Q&A session, we ask that you please limit yourselves to two questions and one follow-up. If you would like to ask additional questions, you may reenter the queue to do so. As a reminder, this conference is being recorded. After the close of the U.S. market on Monday, Noah issued a press release announcing its third quarter 2015 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 business. 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 to 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. Additionally, non-GAAP measures will be used in 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 over to Ms. Jingbo Wang, Chairman and CEO of Noah. She will be speaking in Chinese and her remarks translated into English. Please go ahead.

[Interpreted] Thank you, operator, and thank you all for joining. With me today are Mr. Kenny Lam, Noah's Group President, and Ms. Ching Tao, Noah's CFO. Mr. Lam will start by providing a brief overview of our financial highlights for the third quarter of 2015 and will walk through the performance of our core wealth and asset management businesses. After that, I will provide an update on the progress we are making to develop a global open architecture product platform as well as progress with our new internet finance business. I will also review our strategic initiatives to establish an integrated financial services platform to support the sustainable growth of the Company. Lastly, Ching will provide further insights into our financials and reiterate our 2015 guidance. We will be happy to take any questions at the end of our prepared remarks. Now I'll turn the call to Mr. Lam.

Thank you, Chairman Wang. In the context of the structural transition into the broader economy and extreme volatility in the capital markets, we're pleased to have continued our steady growth in the third quarter with both the top and bottom lines in line with our expectations. Net revenues in the third quarter of 2015 were $82.6 million, a 31.4% increase from the corresponding period in 2014. Non-GAAP net income was $26.3 million, a 34.8% increase from the corresponding period in 2014. In terms of our core businesses, we distributed RMB26.1 billion or $4.1 billion of wealth management products during the third quarter, representing a 41.8% increase year over year. Our total registered client base also increased at an encouraging rate to 88,663 clients as of the end of quarter three, up 34.2% year over year. Noah has always been focused on improving our core competitiveness in the wealth management industry. We're committed to maintaining our stringent risk management, selecting the best-quality products in the market, continuously enhancing the professional service skills of our relationship managers, constructing correct wealth views with our customers, enhancing our asset allocation capabilities, and strengthening our asset management team and actively investing in the development of internet finance business. In the past three quarters of 2015, Chinese equity markets have experienced a significant increase in volatility. Despite the government's attempts to shore up confidence, the market and the investor confidence were badly damaged, which leads to a cautious and wait-and-see attitude. However, in the long run, we believe this will lead to a healthier and more mature wealth management and asset management market. Thanks to our consistent focus on cultivation of relationship managers, adherence to the principles of asset allocation, ongoing investor education, promotion of cross-cyclical [ph] products, and commitment to long-term investing with diversified asset…

[Interpreted] Thank you, Kenny. November 10th was the 10-year anniversary of Noah's founding and the five-year anniversary of our IPO in the New York Stock Exchange. To us it was also the beginning of the second phase of innovation and development of our Company. The wealth and asset management industry in China is massive in scale and has huge potential. And with our deep experience and understanding, Noah is an important player in the industry. In the next 10 years we are confident that we will have even more stable growth. Noah is positioned as a wealth management firm with outstanding asset management capabilities that serves Chinese people all over the world. Over the past 10 years we have maintained our focus on building our core competitive advantages in wealth and asset management. We have continuously improved our capabilities in research, product selection, risk control and asset management capabilities. We have also enhanced the professional service of our relationship managers and continuously strive to understand our customers' needs. By starting from customers' long-term goals, we have worked with our customers to protect and build their assets. By maintaining our commitment to Noah's core values and our focus on long-term goals, we may give up some short-term profit and even lose some customers, but this approach has enabled us to build the high quality base of long-term customers that recognize Noah's value. Protecting client assets through appropriate asset allocation and staying true to our principles of long-term investing and value investing have helped us maintain strong, high-quality relationships with our clients, and also have contributed to the healthy development of Chinese wealth management market. In the first three quarters of 2015, we saw irrational activity and panic in the domestic capital markets. In the third quarter, investors in the market started…

Thank you, Chairman Wang, and hello everyone. Today I'll give you a high-level overview of our Q3 results and then open up the call for questions. As Kenny and Chairman Wang have noted, Q3 was another solid quarter for us. We had a year-over-year increase in net revenues of 31.4% to $82.6 million. Non-GAAP net income grew 34.8% year over year to $26.2 million, both of which are largely in line with our expectations. We distributed approximately $4.1 billion worth of wealth management products in the third quarter, a 41.8% increase from the same period a year ago. You can find the breakdown of operating metrics of our wealth management business at the back of the earnings release. The weighted average one-time commission rate for the third quarter was 0.72%, compared to 0.91% in the same period last year and 0.78% in the second quarter of 2015. The minor fluctuations in the commission rate are primarily due to shifts in our product mix. Recurring revenues were $41 million, accounting for 50% of net revenues in the third quarter of 2015, compared to $34.8 million in Q3 of 2014, or 55% of net revenues. The decline in recurring revenues as a percentage of net revenues was primarily due to a change in product mix of our wealth management business and a change in the composition of asset types in our asset management business. Going forward, we still expect recurring revenues to account for around 50% of net revenues in the long term. We had impressive revenue growth in internet finance of 304.6% year over year, though from a lower base, reaching $2.5 million. We're pleased with the way this segment is growing and will continue to invest in what will be an important part of the Noah offering in the long…

[Operator Instructions] The first question comes from Sam Dubinsky from Carlson Capital. Please go ahead.

Thanks for taking my question. Hey, how are you? I saw you had a very big uptick in government subsidies this quarter. What exactly is that? How much is repeatable going forward?

Government subsidies are a form of rebate from business tax, which is taken off of gross revenue to get to net revenue. We typically receive these every year, but they're negotiated with the local tax authorities and they can be lumpy in terms of payment, so I would suggest you look at them on a year-over-year and annualized basis. So, generally speaking, we've received them over the past several years. These are typically long-term arrangements, eight to ten years that we have with local tax bureaus. For example, when we open up new branch or regional offices in new areas, that's where they're happy to give us a little bit of a tax break because we're helping with economic development, but because it's related to business tax, they're booked above the operating income line in the form of a government subsidy as opposed to below the operating income line as a tax rebate.

Okay. In terms of magnitude going forward, I know it's lumpy, but Q4 or next year, like -- this was a pretty big quarter, how much do you think is a good number to think of going forward?

I can't really say. We receive them every year. They typically are lumpy in payments quarter over quarter, but on an annualized basis, I'd suggest you take a look at the relationship to perhaps net revenue. It's not something where, as you can imagine, the local tax bureau will sign a contract with us and commit to paying a certain amount at a certain time, but these are longstanding relationships we have and they're supportive of building out our branch network and hiring relationship managers and adding to the economic development of the local area.

Okay. And then in terms of active clients, you saw a sequential decline this quarter. What's the trend looking like for Q4 and how do we think about that?

Generally as is typical for previous years as well, Q4 is quite strong. We are about to do a significant client event that we always do around the end of the year. It's basically for our top-tier diamond-level clients. So, about 3,000 of them are going to be attending the event over a series of five sessions. So we expect Q4 to be solid, consistent with previous guidance, so we're not changing our non-GAAP net income guidance.

Sam, I'll add to that. This is Kenny here. The third quarter you see the market, there's indeed a structural change in terms of the economy, and therefore the clients are sitting a bit on the sideline. We do see on average, in terms of transaction value, there's an increase. And so, we're actually quite comfortable that this is actually something that is not a long-term trend.

Okay. And then what about OpEx? How should we think about that in 2016?

In terms of operating expenses for 2016, we continue to believe they will trend the way they've been going accordingly. So as you know, we've been investing heavily in sales in our platform businesses, so we're going to continue to invest in the internet finance business, which is still currently loss-making. We're also heavily investing in IT infrastructure and talent, because you'll see that employee-related expenses compensate [inaudible] growing a little bit faster than revenues historically, but I can't comment more specifically on 2016. We expect 2016 guidance to come out in first quarter of 2016, it would be March, about the same time as we do our fourth quarter earnings. That's when we put out guidance for the following year.

Okay.

And then I'll let -- Chairman Wang would also answer that question as well on OpEx.

[Chinese language spoken]

So what she said is that our focus on investment would still be in the new businesses. We've seen a lot of investments actually in the internet finance area. You also see that our relationship managers have actually grown substantially in the last year mostly to ensure that we have a set of relationship managers that we've been able to train for a period of time in order for us to capture the new market share coming in the new year, so the investment I think is for both our core businesses as well as new businesses.

Okay, great. And then in terms of your performance income, you're still recognizing some high-level performance income, I believe some was due to secondary market funds. How do we think about performance income going forward? Is that trending off in your guidance or is it repeatable?

Again I want to reiterate that our accounting policy is we recognize carry our performance-based income on a cash settled or close to cash settled basis. So we do not accrue for it.

Okay.

I do have a little bit built into the, you know, I have a conservative visible estimate of performance-based income built into the non-GAAP net income guidance, which is $90 million to $95 million, but otherwise I can't comment. So, for the longer-dated funds, in particular the real estate and PE funds, is only recognized upon the termination and cash settlement of the fund. For the secondary equity market products, it's typically -- there's a redemption window every quarter or every six months at the end of a quarter, and so literally we don't recognize it until the end of a quarter.

Okay. And my last question is, how much of your Gopher AUM, had an increase this quarter, how much was money raised versus performance?

In terms of the Gopher AUM increase, we do -- we show that on a net cash or historical cost basis, for two reasons. It's very difficult to get any of these, there's no direct mark-to-market reporting requirement onshore in China. So I want to note that the net increase in AUM is on a cash -- historical [ph] cost basis.

So it's all cash basis, not related to market.

[Interpreted] So the increase in AUM indeed was a result of our performance in the market. So, Gopher was actually able to attract a lot of new AUM as a result of our performance.

Okay. Thank you very much.

Great. Thanks, Sam.

Thank you. The next question comes from Anson Huang from Credit Suisse. Please go ahead.

Thank you management. This is Anson Huang from Credit Suisse. I actually have two questions for the management, like broader questions. First, about the low rating environment, second about the competitive landscape. As Chairwoman Wang has mentioned that the low rate environment may last for a long time in China. So what will be the opportunity or challenges for Noah? Previously, our clients made six [ph] high-yield assets and then go to Noah for some help. With the rate environment continue to be low, so what will be the opportunity and challenges for Noah? Second question is about the competitive landscape. If you look at domestic OTC board [inaudible] although not that comparable, but if you look at the total market cap, actually they're even larger than Noah. So [inaudible] they are not only competitors of Noah but also strong competitors of Noah. So what's the view of management, first, the competitive market cap? Do we think that we are undervalued compared to our competitors or not? Secondly, same question, is that, what will be the key initiative for us to compete with [inaudible] if we want a higher market cap? Thank you.

Okay, thank you. I could definitely take the questions one and one and give us a chance to translate for Chairman Wang. Thank you. [Chinese language spoken]

[Chinese language spoken]

Okay. So, Chairman Wang is saying that we've already seen that there's a lot of risk in the fixed income and the fixed income types of products, and so we are carefully managing that risk. And we'd rather, in the short to medium term, do less business in these riskier products and not have our clients lose money.

[Interpreted] So, regarding asset allocation, our products in particular, we do have some strategies where we're trying to actively help our clients diversify their risks and diversify their asset allocation to better preserve returns. But I'd rather not be specific as we also have some competitors here on the call with us. Thank you.

The second question --

[Chinese language spoken] So for the second part of your question, it sounds like, sir, you're able to speak Chinese, so, can you please repeat your question in Chinese for Chairman Wang to hear it directly? And then we will translate the answer back into English. Thank you. [Chinese language spoken]

[Chinese language spoken]

[Chinese language spoken]

[Chinese language spoken]

So, Chairman Wang said that JD Capital and [inaudible] are somewhat different than us. For instance, JD Capital is more of a [inaudible] equity, so their business model is different than ours. So, going forward, we'll just have to see where are the risks and challenges are, and then make the best decisions going forward.

But in terms of the PE market, we actually are already covering most [inaudible] so we think that in terms of competitive positioning, we're actually quite well-placed. So we're not actually quite -- we're not concerned with these competitors. We're actually focusing on our core competitive advantages. We of course think that our valuation is actually low compared to many of these competitors, but we're not focused on that. We're actually much more focused on building our businesses.

Travis [ph], we can go to the next question please. Thanks.

Thank you. The next question comes from Alex Harvin [ph] from DM Capital [ph]. Please go ahead.

Hi guys. I had a couple of questions. One is about your cash position. You guys over the years have pretty much just seen continuously increasing cash position, and I'm wondering if you have any plans to deploy this into assets that [inaudible] build higher returns to you. And secondly, just how you guys position yourself beyond HK expansion for capital account liberalization, in really more and more about how Chinese wealthy individuals are fleeing Chinese asset classes and give the expected direction of the yuan and support that this trend is probably going to continue, so, how do you guys see that developing going forward and positioning yourselves? Thanks.

Great. Alex [ph], thanks for the questions. I think on the cash position, we are actually actively looking at the cash and ensuring that we're doing our best to get the best return on this. In terms of usage of that cash, every quarter the management would screen opportunities globally to see if there are things where we could actually deploy cash. We can't say too much right now, but we are actually actively looking to ensure that we get the best return. This potentially could include acquisitions or JV opportunities. So we are active in looking at that. We will deploy when we think it's actually at the right timing. We don't want to deploy cash for the sake of deploying cash. We need to be quite cautious in how we think about acquisitions and JV. So that's the question on cash. In terms of expansion, I think it's a similar thought, which is we are focused on building a solid base internationally. I think Hong Kong, you've seen that we've grown quite substantially in Hong Kong the last year. I think what we wanted to do is to make sure that we focus on building a great mid/back-office to service our client out of Hong Kong, before we considered expanding further global. We think Hong Kong, you see that this is -- actually has been tremendous. And so, just making sure that we have a solidified platform is quite time-consuming. So we think that's actually a good start. We don't have any immediate international expansion plans beyond Hong Kong at the moment.

Okay. Thanks.

Thanks, Alex.

Thank you. [Operator Instructions] The next question comes from Julie Chen [ph] from TICC [ph]. Please go ahead.

Hello. I have two questions here. The first is for Ching. We see the selling expenses in the third quarter increased like 36% quarter over quarter, while the transaction value saw a decrease of about 8%. We know that it's highly affected by bad performance in HR [ph] market, but could you give us prediction or guidance of what extent this will lead to the high marketing and related expenses. And I have --

Let's answer one question -- can we answer question by question, is that okay?

Okay. Okay.

Yes.

Hi, yes. So, take them question by question. In particular for third quarter, our selling expenses grew a little bit because in July and August we did a number of client communication events across our eight major regions to [inaudible] continue to educate our clients on asset allocation, portfolio diversification. So it was actually a really good time for us to be doing that. As Chairman Wang mentioned in the second quarter call, when the market's a little bit irrational, soft markets are going irrationally up, it's actually more challenging for us to communicate with clients. So, right after the stock market crash, we felt it was a really great time to be communicate with them. And we've seen that, even though transaction values quarter over quarter have been down, they're still significantly up year over year. And we continue to believe that, with these client communication events, we can over time continue to gain market share. So I expect to be continuing to doing that a little bit, but not in any way that's going to significantly impact our margins. The main impact to our margin is still investing in the new business areas, as Chairman Wang mentioned.

[Chinese language spoken]

And just to add to that, Chairman Wang is saying, the other reason over time our selling expenses are growing is we are adding to our branch network in the cities we cover. So we've added one more city and are continuing to hire relationship managers, in particular, as you've seen one of our competitors have just gotten listed. We feel that this is a good opportunity to continue to expand our nationwide coverage in China.

Okay. Then the second question, to Chairman Wang. We also noted that the Yanggungbao [ph] has updated to [inaudible] and as you mentioned in this conference call earlier [inaudible] is going to expand from the online to kind of leverage our offline advantage. I want to know this kind of online tool, offline expansion, how it will happen. And in next year, do you have any guidance of the budget you will invest in [inaudible] updates from closed cycle to a more open cycle, to like attract more investors from online. Will you give more advertise fees for this kind of investment?

[Chinese language spoken]

[Chinese language spoken]

Great. So let me -- well, let me actually translate that into English first. So in terms of strategic partners and investors for our Taipopai [ph], we intend to continue to invite new strategic investors. We think that for this particular part of business, having strategic investors that would provide synergies to our business is actually key. In terms of our investment for the upcoming year on Taipopai [ph], we can't give a specific number just yet, but we will continue to invest in this part of the business. So that will continue to be in an investment mode for this part of the business. In terms of the first question about the online/offline approach of the Taipopai [ph], we think that for this particular business, it is indeed necessary for us to provide an online platform combined with an offline team partially as a way to build communities and leverage our client base. We built Taipopai [ph] as an adjacent business to our current client base, and therefore it's quite natural for us to basically leverage both online and offline to build this online business.

Next question please. Thanks.

Thank you. The next question comes from Hung Chen [ph] from KBG Capital [ph]. Please go ahead.

Hi. I just want to ask about the -- because right now I see the OpEx is growing much faster than both revenue and net income. I don't know how much is your investment -- you have the investment in the IT system contributed to that increase, but I just want to know, like, right now a lot of companies, they're moving to cloud computing to reduce the cost of internal IT system, and how important is cloud computing in your long-term IT strategy?

So -- hi, I'll take that question. Over the past year and certainly into potentially the first half of next year, we're going to continue to invest in our IT systems. We're currently upgrading a number of core systems such as the CRM and then by the end of the year also the finance system. Overall, I expect the investment to be around RMB100 million or roughly $15 million, or in that ballpark. About two-thirds of which will be capitalizable in hardware, software and one-third will be directly expensed. These are long-term system upgrades. As a financial services company, you have to upgrade your systems fairly frequently, at least every three to five years or so. So this is high time for us to be doing that. In terms of your question more specifically on cloud computing, that's definitely something we're looking into going forward, but we need to upgrade our overall ERP and enterprise software platform before we can then consider storage solutions. And so that's definitely part of the long-term strategy, but I have no immediate comment on cloud computing.

I think just to add to that. This year indeed we were quite conscious in ensuring that we have upgraded our IT system across different businesses, to build the next ten years basically. And so indeed there's a lot more investment in terms of mid and back-office than usual. But we're trying to make sure that we're running on an well-oiled machine than a broken machine.

Thanks. Operator, next question please.

Thank you. [Operator Instructions] The next question comes from Matt Fortune [ph] from Duke. Please go ahead.

Congratulations, Ms. Jingbo Wang on building a nearly $2 billion company, so, congratulations for you and your management. My question, I know that Noah is a rapidly growing company. When do you foresee that Noah will be paying its dividends? And if so, when do you anticipate long-term shareholders can expect to get dividends? Thank you.

Just as a note, for the past two years, 2014, 2013, we stopped paying the dividend. So we paid a dividend through 2012. The reason we stopped in the last two years is to take the operating cash and continue to invest significantly in our growth platform, consistent with what Chairman Wang was saying about completing the first 10 years of our operations. And now, in the second -- in the early part of the next 10 years, we want to continue to invest in new businesses and scalable parts of our platform to achieve significant growth. And through that, we hope to continue to deliver good returns to our shareholders. More specifically, we will not be making a decision on whether or not we will pay a dividend for 2015 until later this year when the Board meets later this year. There's nothing specific I can comment on that. And then I'd like to have Chairman Wang add her comments.

[Chinese language spoken]

So let me translate what Chairman Wang said. Basically we have continued to invest a lot beyond the obvious Taipopai [ph] business, actually there's a lot that we don't see as quite apparent. For example, the payment system that we've actually invested. You see that in Taipopai, our average transaction value is about RMB100,000, which is actually way more substantial than many competitors, which is usually about RMB2,000. The key reason for that is the payment experience that we've actually built in-house. And that's something that you'll see in our financial statements where we actually invested a lot in our own payment system, for example. That's one of a few areas that we are actually building behind the scenes. And we believe that we will continue to invest in these infrastructures that will continue to build our business. Overall we're very satisfied with the margin that we're able to maintain while investing heavily in the new growth pathways [ph].

Thank you. At this time I'm showing no further questions. I'll now hand back to Mr. Kenny Lam for closing remarks.

So if there are no further questions, I want to thank all of the participants and investors for participating in this call. Thank you.

Thank you. That does conclude the conference for today. Thank you for your participation. You may now disconnect your lines.