Hello and Welcome to Noah Holdings Limited announces Unaudited Financial Results for the Fourth Quarter of 2019 Conference Call. All participants will be in listen-only mode. [Operator instructions] After today's presentation there will be opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I'd now like to turn the conference over to your host today Jingbo Wang, Please go ahead ma'am.

[Foreign Language] For today's agenda, I will first share my views on the microeconomy and then briefly summarize Noah's overall performance for the full year 2019. The developments of our business segments and the gains and challenges during our transformation. Our CFO, Grant Pan will follow with a detailed discussion of Noah's full year and quarterly financial performance. We will conclude the call with question-and-answer session. The past 2019 was a tough year for Noah where the Camsing incident has tested the bottom line of our business ethics and operations. We didn’t expect that 2020 poses an even bigger challenge or more ultimate challenge, which tests our attitude as humanity when facing a crises that's threatening our lives. At this point I am very grateful for having experienced the Camsing incident in 2019, which has become a gift with the profound influence on Noah's strategic decisions. Because of the Camsing incident our management team reflected on how we started to listening to the voices of our employees and clients to understand their real demand. We're thinking more about company's vision and business plan for the next 5 to 10 years. Therefore we're able to reach a clearer consensus on what we should persist in our core strategy for the long run and will show what we should abandon immediately. Starting from the second half of 2019 we determined to terminate single counterparty non-standardized private credit assets and fully entered the field of standardized products. Concurrently, we shifted our operations from off-line to online. Such initiatives and efforts have fully prepared us to confront the difficult situation in 2020 when containment measures such as mandate travel restrictions and longtime deployed to combat the sudden breakout of the global COVID-19 epidemic. Next, I will go over Noah's 2019 performance. In 2019, ad…

Thank you, Chairlady for sharing her thoughts and ground. The investors and analysts good morning. Today we're certainly witnessing lots of turbulences in recent world economy as well as the coronavirus pandemic but when we do look back the year of 2019 already showed signs of changing and challenging business environment. They are ranged from the friction, the Hong Kong situation and other geopolitical issues. On top of external tailwind we underwent a major transformation in our product and service strategy. This last quarter which is quarter three we received offering of a major product category the single counterparty nonstandardized private credit. It's a really long name so I am going to refer that as SD credit going forward products. That once accounted for as high as over two thirds of the transaction value in last year. Our Chairlady Wang has already mentioned, we managed to deliver solid financial results for the full year and achieved our guidance for 2019 reporting a non-GAAP net income of RMB1.04 billion up 2.7% and net revenues reached RMB3.4 billion up 3.1% year-over-year. When this growth may appear modest comparing to our previous years, but considering the obstacles and changes we have to go through and overcome to get here, management is very happy with the firm's resilience and determination. Now let me take you through quickly further details of financial results as well performances for the fourth quarter. Revenue management fees and performance-based income, which reflects our asset management and investment capabilities reached nearly RMB2 billion for the year up 2.1%., Specifically management fees increased by 3.9%. While on the other hand we experienced pressure on the one-time commission revenue due to the discontinuation of the offering of SD products, transaction value decreased by 28% year-over-year to RMB78.5 billion which led to RMB924…

[Operator instructions] And the first question comes from Ethan Wang with CLSA.

Hi management. May be I will ask the questions in Chinese first and I will translate into English. [Foreign Language] Okay. So I have three questions. The first one is on wealth management segment. So on a Q-on-Q basis we're seeing that the transaction volume per active client has been under declining trend. So there may be two reasons, the first maybe because of the increasing SaaS increase of active clients and the second reason maybe from our strategy refocus on the standardized products. I want to hear more from the management on these issues that would help the investors. My second question is on the Gopher asset management side. On Q-on-Q basis in the fourth quarter, the total AUM has declined. So with one of their degrees behind so except for the credit products the other also declined. So is there any special reason behind this? And my third question is on the COVID-19 impact, the management had shared that you already spoke but I want to understand more about wealth management side because Noah has been focusing on their standardized products and we understand that in the first quarter this year, the domestication market has been very strong. So have you seen any strong growth in Noah standard product sales in the first quarter? Thank you.

Thank you, Ethan and thanks for translating on own questions as well. I'm going to take the first two questions and Chairlady Wang will be adding a little bit more thoughts on the COVID-19 part. So I think you actually pointed out pretty accurately in terms of average transaction value change in the fourth quarter. Yeah we do have more active orders if you will on standardized products in this quarter. So you're right it can actually see that our active clients for the quarter reached 15,000, but as the feature of the standardized product the average purchases probably not as high as the conventional for example the PE orders or some of the credit products. So that was one of the reasons, but the active, the level of activeness that we would like to see is definitely showing the sign. So that's a very encouraging sign as well. In terms of the shift in Gopher's AUM, you're right, the majority of the shift actually contributes to our voluntary and actually accelerated repayments of the credit products and the two decreases in actually very slight decrease in PE and IE products are normal aspirations. As we have recorded carry our performance-based income for this quarter. So one for the real estate piece and the other one is for the private equity piece. So I don't if I answered that your first two persons. If it does I can probably start on the third question in terms of the pandemic situation.

[Foreign Language]

Yeah because we actually -- because the impact of the traveling so we didn't hold the Diamond Conference that was originally scheduled but I guess we got lucky that the real strong performance in share market as well as the equity market really stimulates the passion of client's investment needs or demand during that period. So we actually prepared to move lots of the conferences as well as knowledge sharing online that maintains the level of activity especially interactions with our clients during that period. So it doesn't seem that the virus situation that impacted the level of activities between especially arms interactions with the clients so much and we're actually very happy to see the distribution or transaction value enrolment exceeding our expectations originally.

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

[Foreign Language]

Let me translate your question first. The first question from CICC Mr. Shre [ph] is that for the wealth management segment, which you have probably higher received operating profit than the deterioration on the net total revenue. So the reason is really because of the one-off expenses that really was mainly attributed to the wealth management segment. So based to the Camsing related legal fees as well as some of the accounts receivables allowance was recorded in that particular segment. If we do exclude those amounts the actual operating profit margin was slightly higher than the same period in 2018. So there was basically to be concise there was a one-off expense recorded in the particular segment. And in terms of the investments in IT infrastructure, so we have a pretty long stretch of discussions amongst the management. I guess also thanks to the pandemic situation, that people cannot travel. So were able to log everybody the board room to have extensive discussions on the strategic transformation and lots of time actually attributed to the strategy on how to enhance our client's experience, user experience as well as the RM's user experience on the online platforms and our main platform for the standardized products is called Smiling Fund app as well as the continuing investments to enhance that as well as once you deal with the standardized products, the transaction volume probably goes from 200, 300 orders a day to now 20,000, 15,000 a day. So we actually wanted to make sure that infrastructure from the capacity standpoint as well as the security standpoint can handle that kind of transaction volume. We're also actually being investing in the global version if you will Smiling Fund app in Hong Kong and we've already started a team of 30 people and started the initial launch of that particular product.

And the next question comes from Katherine Lei with JPMorgan.

So I have two questions. The first question is due on products, on your standardized products can you give us more details on say for example how is it different from the standardized products offered by like say China merchant bank or other like product manufacturers like the banks. Then you expect in terms of like the subscription fee and then the management fee of the standardized product, how is it like can you give us more details on that and how does it differentiate from like say the no such product that you offered before. So this is the first question. Second question is still on the Camsing case. Can you give us some update on like say what is the progress with the legal procedure and then what should we expect that there will be like some kind of verdict from the court and also that on client activities like can you give us some color on say for capital what's the percentage of clients affected by the Camsing case it has already placed new others their sentiment and then also the RM reactions to this case so far, thank you.

Thank you, Katherine. Give me a couple of minutes to translate that question for everyone. Sorry for this just the ones that. So for your first question Catherine, let me correct, the first one is in terms of subscription fee rate the revenue structure from the standardized bond we have mentioned before I guess to give everybody on the back one is when we first started the transformation to standardized products in the third quarter of 2019. The main product referred to a standardized bond funds and for the standardized bond funds typically you would only charge management fee without subscription fees. So I guess the total revenue side was slightly lower than the SD credit product, but right now we're actually developing quite a few products that will provide people with more a little bit more balanced portfolio. So basically we have 50-50 or 20-28 you have a little bit of stock saver flavor in that particular product. So we're able to charge a distribution fee up to classic 1% distribution fee and depending on the manager we actually are typically able to share about 50 basis points to 80 basis points with the managers. So basically entire product will have increased sort of fee rate from 60 basis points to actually 150 basis points or 170 basis points. So I guess from that standpoint the transformation in products will provide more growth profit to us on that particular category. So in terms of the difference how it competes with our counterparty, PMBs market, standard products I invite Chairlady to give us a little more insight on that.

[Foreign Language]

So the main difference between our standardized products offered to clients and also the CMB also some the band standardized products, one of the biggest difference in holding period or holding duration. So average holding period for the bank's product is probably between 54 days. So basically less than two months and for Noah's products that we offer to the clients usually have a three-year lock in period, three year lock down period. So for one year's hard lock and two year soft lock. So with that longer holding period the clients actually are able to benefit from most people that most of the investors having difficulty making money even with the acumen fund is the wrong timing of entering that exit. Because of ability to actually provide that kind of longer holding period the good managers, the top managers in the market are willing to work with us and because of that they are also willing to have a pretty good sharing portion of the management fee with us. And if you look at the Gopher's AUM breakdown about pretty good majority of that is actually assets with longer durations for them the PE has a 10-year holding period as well as the multiple strategy assets that actually doesn't have a defined period of holding. So usually between 5 to 7 years on average. Also we're changing the relation managers compensation scheme to be from one-time commission transaction-based to have more flavor on the AUM based compensation scheme. So from the RM standpoint they're more incentivized to sell longer period of private so that we actually have a cumulative effect on the AUM that they actually serve their clients with.

[Foreign Language]

So in terms of the Camsing update because of the coronavirus impact the pace of the investigation actually slows down a bit like I've mentioned before, it has basically completed the stage of police investigation and the impact to the district attorney, but I guess the processing time will be lengthened a little bit because of the recent pandemic impact, but Chairlady also wanted to share two very encouraging data point. One is for the Camsing clients about 30% of the client have made separate new orders with Noah and that total amount is about RMB3 billion. So close to the entire principal for the Camsing products. And one other one is [indiscernible] diary clients that the entire original principal for that investment is about RMB500 million and also 30% of that group of clients have made separate new orders with Noah and the amount actually is also close to RMB3 billion but if you look at that, that's like six times of what they had in [indiscernible] product. So that really provides us with pretty encouraged sign of client's continuous trust and satisfaction with Noah. Katherine, does that answer your question?

Yes. Can I start off with two more questions? On the [indiscernible] product, what is your ticket price of the standardized products because our concern is that would that be substantially, would that have a different like say the other standardized product ticket size that are available in the market. So this is one. Second one is that I'm not so sure if I have missed it in the announcement, what is probably guidance for 2020? Thank you.

Yes we do have the guidance in the 6K in the last paragraph forecast. That number is between RMB800 million to RMB900 million non-GAAP net income and in terms of the average transaction value in ticket size and your concerns on standardized products Chairlady will give you a little bit more insight on that.

[Foreign Language]

When our clients actually make purchases online they will go through the relationship managers and so some self service directive transaction on the standardized products. We're actually seeing that trend to continue in the future. In terms of average ticket size of standardized, obviously comparing to probably private equity or real estate in the past the one-off other will problem will appear lower but in terms of frequency as well as the actual transactions that will occur, the total amount we expect that to be higher. I think that's pretty evident -- will be pretty evident when we have to quarter one results come in.

Thank you and the next question comes from Stephanie Pun [ph] with City.

So the first question just want to understand what is the driver for your 2020 guidance. So wanted to see on the transaction value outlook for this year, so you expect that to actually drop year-over-year and in terms of the mix I guess standard products we have seen increased momentum but why don’t you also talk more about the other products for example the PD product. What are we seeing on the momentum here? I guess that over the past two years the PE has been gradually muted because of the whole industry slowdown, I was just wondering whether you expect any recovery or pick up in the volume for 2020 and also what would be the overall AUM growth for this year. So you still expect positive AUM growth? And also the next is about the operating margin outlook. as you mentioned you expect to spend more on the IT, does that mean that operating margin we should see a decline in this year or there is additional room for you to maybe cut the cost or for headcount reduction etcetera? And lastly want to check on the management fee that we'll see in the fourth quarter the management fee is still pretty high. Just wondering what the drivers here or rather that is also because of some early redemption of your private credit card?

So, in terms of the guidance, the total transaction value to not only referring to standardized products, but the entire transaction value and we actually are reasonably confident or expect a recovery or even moderate growth than the total transaction value 2019. So obviously the main drivers come from standardized products, but that's not to say that we're going to like we have mentioned before in the speech that we're going to give up or move away or disregards clients demand on private equity products as well as real estate products and other traditional popular product. So as a matter of fact we actually have already put out a schedule top private equity managers as well as continue with some efforts to find excellent projects real estates and other alternative investments if you will. So I guess transformation I want to clarify again is moving away only from the single counterparty credit product, but we're still continue to offer actually find good products for our clients to have especially private equities. We actually will have a pretty good distribution of a particular beginning in the first quarter of this year already and also in terms of total AUM for Gopher because of the continual redemption as we planned to basically to refuse the balance on SE credit products for the year, so it will continue to come down. It will partly offset the growth in the total AUM in Gopher in 2020. So we expect that the AUM for Gopher to be flat with 2019. In terms of operating margin like I mentioned before, we're actually quite did quite a little bit of work this year especially after the second quarter. We would have had operating profit margin of around 35% to 36% if we didn't have the one-off expenses…

Can I just quickly follow-up on the PE side. So we just say that actually in a post parenting month and the supply is improving 2020 and that will drive the recovery in the volume or AUM.

Right. Was that a question or a comment?

Question. Just wanted to confirm.

You wanted to confirm the PE will also grow. We have…

Is there still recovery on both the demand and the product supply side for PE? So just want to see we have some other constraint on the supply.

Yeah. I think we'll basically see the recovery on both supply and demand side. Where the sky never went away like I've mentioned or shared earlier that there's some seasonality in terms of PE's offering or doing their fundraising. So little bit of randomness in that timing if you will but this year the actual stronger performance in secondary market do quiet the need for good PE products but only associated with the top names. We see that actually very apparent. Our clients actually it's a probably general market condition the clients concentrate capital their investment in the top names but for the smaller and less known names they will have little bit challenge. So we do see a recovery in the PE fundraising in both supply and demand side if you will.

Thank you. And as there are no more questions at present time, I would like to return the floor to management for any closing comments.

Okay. If we don't have any further questions, that will be all. We also scheduled some conference calls after what you have questions that went unanswered, feel free to contact me or the IR team directly.

Thank you for attending today's presentation. You may now disconnect your lines.