Good evening and welcome to Noah Holdings' 1Q '20 Earnings Conference Call. All participants will be in a listen-only mode. [Operator instructions] After today's presentation there will be opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Mr. Grant Pan, CFO. Please go ahead.

Thank you, operator and good morning and good evening to all the investors and analysts on the call. Chairlady, Wang and I are very happy to report to you about our first quarter performance. First let me hand it over to Chairlady, Wang, to share with you the performances of Noah for the first quarter in 2020.

For today's agenda, I will first share my views on the micro economy and briefly summarize Noah's overall performance in the first quarter of 2020, the developments of our business segments and the achievements and challenges during our transformation. Our CFO. Mr. Grant Pan will follow with a detailed discussion of Noah's financial performance in the first quarter. We will conclude the call with a question-and-answer session. It is fair to say that the COVID19 pandemic since 2020 has pushed wealth management institutions in China to accelerate the transition to provide more proactive and customized asset management services and expedite the supply of net value-based products. Our industry is constantly transitioning from product-driven and product sales oriented to investment advisory oriented, providing clients with effective asset allocation services. The COVID19 pandemic started wealth management industry with new methods and brews, contactless services, live streaming, online solutions, intelligence processing have become critical elements for every institution. As Noah has shifted our focus from providing private credit funds to more standardized products, we're able to enhance technology and innovation in our wealth management business and empower different operational aspects including new clients in China development, product services, investment research services and in risk management with digital technologies such as big data and artificial intelligence during the COVID19 pandemic over 99.5% of Noah's clients have been completing their transaction entirely online. Next, I will go over our wealth management segment, asset management segment and operational efficiency in the first quarter. Starting from the first quarter of 2019 Noah seized the distribution of single counterparty non-standardized the private credit products and fully entered the field of standardized products. Now I'm delighted to report that our transaction value has reached RMB23.19 billion in the first quarter of 20 up 76.1% quarter-over-quarter. The transaction value of…

Thank you, Noah for sharing and let me walk you through the more detailed financial performances for the first quarter. We entered the year 2020 with a strong start despite the COVID19 situation that has literally shut down the nation for an extended period of time. Especially as part of the transformation strategy, we see very positive signs and the strong growth in the distributions of standardized products. First of all we are on track of or as a matter of fact stronger-than-expected trends to meet the guidance of $8900 million profit target for the year. As we ended up with a non-GAAP profit of $256 million reaching the milestone one-third of the way. Operating profit margin improved to 34.3% as a result of scrutinized management of total costs and expenses. Against all the odds the transformation, the pandemic situation that have made the first quarter seemingly very difficult quarter for sales. I’m most proud of - which is also the biggest highlight of this quarter that comes from the total transactions value distributed in this quarter that went up strongly to $23.2 billion or 76% growth from the last quarter. Driven by group of resilient Noah team of relation managers and management members on the back stronger performance of Chinese stock market in the first quarter. And showed signs of resilience of our investors even during a very difficult quarter. Let me caveat here that our first quarter is usually strong. And we’ll continue to face challenges that caused by mainly the travel bans and economic pressures that gradually effects as the year goes on. Revenue vise considering the major disruptions to the overall economy by the unprecedented, the pandemic situation, we're also delighted to see that recovery in one-time commission from last quarter that went from $160 million…

Thank you. [Operator Instructions] Your first question comes from Stephanie Poon [ph] from City. Please go ahead.

Hi good morning management, thanks for taking my questions. So a couple of questions for me, the first is regarding your transaction volume of the public securities, clearly it’s a very strong rebound to your Q. So just want to understand what are the key drivers here? Will you be able to provide us a breakdown by the catalogues products for something like mutual funds and hybrid funds, how are they doing, respectively in Q1. Maybe compared to the previous quarter. And also want to check on the trend in Q2 so far, so as you also mentioned earlier Italy depending on the Asian market performance. So we do see that the Asian market is recording battle normalizing – in terms of the level of GDP. So, how is the trend in Q2 so far, and how sustainable do you think this strength in Q1 would be? And the second question is – I see on your on registered high end growth. So we see a very strong number of new registered clients in the first quarter was strong by four times Q-on-Q So can you provide more colors on the underlying risk that represents IPO that some organic growth. And also like how sustainable you think that is? And lastly you want to check on the lending business, so we see there’s the provision for recorded loss in first quarter. So first can I check on what was the number in the fourth quarter last year? But just apparently it’s a big increase on the year-over-year basis. So want to understand that what are the drivers and maybe what are the underlying NPL trend of the lending business that you're having here, that’s all my questions, thank you.

Thank you Stephanie give me a second to translate question and share with management.

Okay, thanks, Stephanie. For the first quarter. Yes, we actually had put out quite a bit of the online conferences and especially during the shutdown period, we actually do have very live sessions for the clients get online and we're actually able to experience a pretty higher level of activities or interaction with clients compared to the conventional way, even during those several weeks we probably had about close to 600,000 of hits and visits during that session. And we’re able actually to launch quite a bit of standardized products on the back of obviously good performance, also from strong fund managers that were actually able to package a product that has a longer duration actually about RMB10 billion out of the total RMB23 billion with duration of longer than three years. So in terms of Q2 trend so far, I think you brought up a very fair point. The standardized products do have a little bit of correlation with the Asia stock market. But at the same time, we're also offering more balanced funds and type of products for our clients. So we're not just pushing the clients to the equity market, but also a more balanced allocation of the product. So we'll be mixed between probably equity and bond and standardized products. So we'll see how the Q2 went but we do have a good alternative for our clients other than just equity security products that ties to the stock market performance.

[Foreign Language]

Yes, just a few more comments from our Chairlady, first of all not just because of the performance for the stock market, we did do a quite a bit of preparation ahead of time. So we're actually able to put together a good roster of outstanding fund managers. So we're actually able to launch good products in a relatively short period of time. And two is that, we're moving quite a bit of offline conferences to online including our traditionally held offline Diamond Conference in hotels, we actually moved them online, able to actually get in a lot new clients through the sessions. And third is really the change in the demand of our clients that lot of them have experienced risks or some non-ideal experiences from so called non-standardized credit products in the entire industry. So, their demand and appetite is switching to a more balanced allocation of assets instead of concentrating their asset allocation in one class, especially the volatile class. And we also want to stress that other than in addition to the standardized products, we're still maintaining pretty good level of distribution for the BCP products, and even from the standardized products about RMB10 billion is with longer duration which obviously the assets that we help our clients to allocate or put together has better quality and actually allow them longer period to process. And obviously we'll see a slight depression on one-time commission as for the standardized products do have a lower feed rate than the oversee insurance products, as I've mentioned. But we do believe that having the longer-duration pipeline assets for clients will generate more recurring fees for us. So that's the first question, and second question in terms of the growth in registered in the number of registered clients, yes we do…

Thanks for the very detailed answer. So maybe just want to follow a bit on the last question. So in terms of provisioning level, is that like stable versus the previous quarter like do you see any increase in the underlying risk, I guess also because of more challenging macro environment here. And as you mentioned about the shift in the business model to the company like what would the revenue model looks like going forward? And how would the future revenue model differs from the previous model? And also want to go back to the first question that you mentioned just now you have over RMB10 billion of transaction value that is coming from the three years over three year duration process. So can I assume that that is all from the hybrid funds that you're -- I think you’re stepping up efforts on selling more hybrid funds this quarter, which has a more favorable fee rate. Just want to confirm on that?

Okay. for the lending piece of provision that was quite stable, obviously the shutdown of the nation actually delayed a little bit. Some of the loan refunding as some of administrative branches of government was actually literally shutdown for a few weeks actually, but we don’t see massive worsening of provisions from the particular assets. In terms of transitioning, the fee is more or less like 1% to 2% on service fee that will be charged on the back of the loans that the trust companies or banks when they do issue loans to the investors. So basically our service will be helping them screening these investors as well as especially the assessment of the world. So I will Noah to supplement your question on the hybrid funds or the longer duration funds.

Yeah so the majority of the first quarter is still equity type of funds in the first quarter and the hybrid fund like I mentioned before are mostly manufactured by Golfers will be launched in the second quarter and the following quarters.

Thank you. The next question comes from Ethan Wang from CLSA. Please go ahead.

Hi management. Thank you for taking up my question and congratulations on the first quarter results. I have two questions. The first is on the competition landscape of mutual funds specifically. So we know that Noah did very well in the first quarter but actually this space was quite crowded with all the financial institutions and payers like money and added pay. So when on stay at home during COVID19 and they opened their app, they have lot of choices. So just want to understand why they need to turn to Noah rather than Other Pay where they can just select hundreds of funds with simple tab on the phone. They just want to understand our position, strategy position in the space. And my second question is one-time commission rate of the wealth management segment. So Chairlady just mentioned and was suggesting that the first quarter the one-time commission rates went down because of what standardized product the rate was lower but I remember from the last call that when we're shifting to bond or hybrid I mean for hybrid standardized products may be the one-time commission rate was low but for equity types it was higher and we saw that in the third and fourth quarter last year, actually the blended one-time commission rate was quite good. So the first quarter was lower. I just want to understand the specific reasons behind that and our returning to more maybe lower commission rates kinds of mutual fund product. So just wanted to get more details on that. And my third question is on the general and admin expense for wealth management segment. So we understand that last year, especially in the third and fourth quarter we booked some legal fees may be related to the Camsing incident in this segment in the general and admin and other operating expenses, but we saw that this level of expense came back to the normal level in the fourth quarter. So shall we assume that the legal expense on scene of the past or is a seasonal thing where we should expect them to come back in the fourth quarter every year maybe. So that's my question. Thank you.

Thank you, Ethan. Give me few seconds. So in the past, obviously, our firm specializes in alternative products if you will, so on VCMP, some of even the single counterparty credit products but still credit alternative products. In the future we believe positioning will be about 80%, 20% allocation between standardized products also as alternative investments. So we are actually, like I mentioned entering into a bigger playing field, probably with more competitions. But still we're at a very different competitive position as compared to Ali or Tencent, some of the retail type of fun platforms. For example still the starting point for the investment, a threshold for clients mostly it's around RMB1 million and the average AUM for our clients in the mutual funds is about 310,000 for clients, which compare it to probably a few thousands on the retail mutual fund app you have mentioned. So even for the mutual fund purchasers that we have been serving mostly professionals and also have a pretty discipline investing in mutual funds as part of the allocation strategy where even seeing some management or professional set, they might purchase mutual funds from other platforms still come back to Noah to get more comprehensive and complicated type of products like fund to funds or even alternative investment VCMP type of products. And you can let me take you through the next two questions. The first one is for the take rate. You're right. For the standardized products we have mentioned, that actually does come with a pretty good fee rate as comparing to standardized bond funds that we have mentioned before. So basically the standardized products that have been distributed this quarter is usually between 100 basis points in terms of commission revenue, but blended commission rates was higher in the last…

Yes, okay.

Thank you. [Operator Instructions] Your next question comes from Yuan Xue from CICC. Please go ahead.

[Foreign Language]

[Foreign Language]

Okay, operator. Is there any more questions?

Thank you. There are no further questions at this time. I will now turn the conference back over to you Mr. Grant Pan for any closing remarks.

Okay, thank you, operator. And thank you our investors and analysts. If you do have further questions, we also have scheduled one-on-one conferences, feel free to contact us, if you want to speak more. Thank you very much for your time.

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