Welcome to Noah Holdings' Limited Second Quarter 2020 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. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chairlady, Wang. Please go ahead.

Thank you, operator. [Foreign Language] Regarding the teleconference agenda today, I will start with my viewpoint on macrolevels, then summarize Noah’s overall performance in the second quarter of 2020, the developments of major business segments as well as the settlement we hope to reach without the client on the Camsing incident. Then Grant will present financial results of the second quarter. This call will be concluded after Q&A in the end. The wealth management industry has been experiencing underlying transformation in China, which has been accelerated by the COVID-19 epidemic. In my view, 2020 is the critical year for the transformation of Noah, through organisational capacity building, growing insights and process restructuring, Noah is changing to be more effectible to the new environment of wealth management and asset management team in China, with a de-leveraging in 2018 and the rectification of chaos [ph] in financial industry in China in 2019 the tackling observation and the impact of the epidemic, NAV based product promoted by the new guidance on standardizing asset management business of financial institutions have quickly developed into the mainstream product in China’s wealth management industry. The remaining demand from clients soar beyond industry expectations we believe that further investor education and updated client inspection [ph] are the keys to NAV based wealth management. For the segment of wealth management, we have made much effort’s to train product driven relationship managers as investment consultants. We launched our self-developed mutual fund investment consultancy platform. For the second -- of asset management we have strengthened our investment research and direct investment capabilities and promoted direct sales and multi-channel institution of sales all of which have made progress to some extent. [Foreign Language] Next, I will report the second quarter results on the asset management and operational efficiency. Starting from the third…

Thank you, Nora [ph]. Dear shareholders, analysts and investors, they might recall we had anticipated very difficult second quarter as COVID-19 prolonged the recovery of economy, travel restrictions continued to worsen and the real impact on domestic economy, especially in global export import situation continued to put pressure of small and mid-businesses. But today, this is why we're especially happy and very encouraged by the delivery of strong financial results for the second quarter of 2020. On the backdrop that COVID-19 has been ravaging the world's major economies. First of all, we're not only ahead of schedule to meet the full year guidance of RMB800 million to RMB900 million non-GAAP net income target, as we ended up with a non-GAAP net income of RMB307 million for this quarter, And actually RMB563.1 million for the first half of 2020, well above 60% of the range, but also reported a record high income from operations of second quarter of RMB300, almost RMB320 million. Our operating profit margin improved to 42.7% attributed to high performance based income and continuously improved operating efficiency. First, let me walk you through the revenue and transaction revenues of the second quarter. Although we're happy with the overall income and margins, we have to admit that the COVID-19 cost travel restrictions continued to impact the overseas businesses, especially new insurance transactions, which led to a decline in one time commission of RMB127 million for the quarter, even when we managed to achieve second consecutive RMB20 billion mark in transaction value this quarter, following our transformation products in 2019. However, we have accumulated over 1000 oversea insurance pre orders; they're readily converted upon the lift of travel ban. Although our transformation of product offerings continuing to put structural pressure on one time commission fee, standardised product transaction value remains…

[Operator Instructions] Our first question is from Stephanie Poon at Citi.

Hi, Grant.

Hi, Stef.

Thanks for taking my -- hi, hi Grant. Thanks for taking my question. So I think maybe two questions for me. First is regarding your operating margins. We have seen very meaningful improvement in your operating margin in the second quarter. So just wondering in terms of the outlook, do you think it can sustain at this relatively high level. I recall previously your guidance for the full year margins about 30%. So do you think actually like you can exceed this guidance and what is your outlook for the full year? And the second question is regarding just want to get some color on your transaction volumes in July and August. So we have seen previously [ph] on Asia markets performance and the demand for the whole mutual fund market has also been picking up quite strongly. So yes, so you if possible, can you share, like, what is your product sales run rate like in the past two months? Thank you.

Sure. Just give me a second. So thank you Stephanie, yes. The second quarter actually is a little bit higher than expected, as the government obviously is supporting, entrepreneurs through the difficult period and we have received about 50 million in government subsidies. It's about 40 million higher than average subsidy we normally see in the past quarters, so without then number on the second quarter operating margin will be around 35%. We're still maintaining the 30% operating margin guidance for the rest of the year, as you would imagine that some of the investments, especially in IT, and strategic investment actually tend to show their impact towards the second half of the year. Some of the hiring actually is taking place slowly. So I believe, it will be a little bit over 32% but probably around 32% for the full year’s margin. And in terms of transaction volumes, in July we actually from the numbers we have seen from our sales team in August as well, it continued the momentum. I think without too much surprise, it will be at least close to the first quarter’s level. And also the mix of the transactions will be mixed with more private equity items as the actual arrangement for the launch especially, they have moving their focus on to go for its own product in the product, as I just mentioned, the secondary market, as well as some of the US dollar PE funds. So I'm pretty happy with what we have seen for the first two months in third quarter. And I'm hoping the momentum will continue, especially in light of some of the news that Hong Kong might, lift the travel ban before the national holiday, which will be a strong boost in transaction values as well.

Okay. Understood.

The next question is from Xue Yuan at CICC.

[Foreign Language]

[Foreign Language]

It's okay. Time to translate for Noah and I’ll draw out some of my insights here. First of all, in terms of parity income, it basically consists of two parts. One is from the private equity. The other is from the Public Security funds. We believe that with AUM that we have in the PE AUM that especially the government's policy as well as the activity on the star board, for example, the exiting of the existing AUM will actually become more and more apparent going forward. There will be a statistic on the market that there is about cumulatively 230 billion funds raised for top general partners and Noah actually accounted for about 80 billion of that. So, obviously, we are enjoying the position of the leader in this industry. And also we have about 50 or so companies that are either in the process already listed on the star board. For example, two recent examples one is the [Indiscernible] company that actually we had original investment about at the cost of 50 million and on paper it has 100 multiple return as well as you know, the take up originally in the real estate agency, we also had investments in there. And for the secondary market funds, obviously work with the top GPs, for example, the Hill [Indiscernible] and Greenwood. So we have a statistic that says some of the clients actually been making money since the beginning of the investment. So we are working with a top GP thought would give us pretty good advantage in terms of helping the client to, to gain and also for us to make performance fee. And in terms of the fee rates, obviously, at the market level, it's actually quite different depending on the different products and different manager so…

[Foreign Language]

Hi operator, do we have more questions online.

Certainly. The next question comes from Ethan Wang at CLSA

Hi, Ethan

[Foreign Language]

[Foreign Language]

Okay, so let me translate it real quick. It’s for the saving product we actually have a internal data point that is about 7 billion AUM for our clients who is older than 65 years older and for the senior clients, especially the ones with age over 70, we have an internal policy that will not recommend or actually help them to place their investments in risky reward riskier products. So this -- it's almost like a fund of funds for savings products, which you know is safer and actually it does have the guarantee by the bank, upto a certain amount of principle. So we believe that's actually a safer choice and also a alternative for our senior clients that will wish to continue to invest with us. And in terms of growth of iNoah, I actually did only come online in June, we haven't really put in massive effort in terms of promote that. We really just opening that up for internal clients for their oversea assets, especially their need of purchase and selection of mutual funds. In the next stage, once the iNoah first version stays stable, and we'll actually we'll be launching probably a more massive and concentrated effort in promoting that probably towards the end of this year or early next year. Currently, we have about 5000 users and most of them are existing clients of Noah.

Okay.

Hi, Amy, do we have any other questions in line?

I am showing no further questions. Oh, actually we do. We have a question from Tiki [Indiscernible] of JPMorgan.

Okay. Hello. Thank you. Thanks for taking my question. We have a question on the cost. I think we see a lot of cost reduction in the second quarter, but again, since you have like a salary chairs [Ph] and that was also like government subsidies if it's rising, but we want to get a sense of what's the portion that was some strategic changes as we start like, moving products online and making your costs going down in the future, like something like that.

Okay, yes. Actually, without the government subsidies, which is about 35% in terms of the operating margin, obviously, that showed our continuous effort in terms of especially moving some of the conferences online, with their clients actually did save quite a bit of traveling expenses. I mean, that's part of due to the restriction on travel, because of the epidemic situation, but at the same time, also find that sometimes actually, people stay more focused and it's actually more efficient for us to have some conferences online. Obviously, we're not moving online completely. We still believe offline seminars, are good opportunities for clients to see each other to shake hands and to be more personable, but that's part of the effort we have been eating in terms of cost reduction. And secondly is obviously we're continuing investing in IT technology is increasing the efficiency in terms of clients, as well as relation managers to operate in business. So, we're continuing to look for ways to increase the efficiency, and also actually effectiveness, some of the online seminars that we'll be able to use to deliver value and also good investment opportunities for our clients.

Thank you.

Thank you, Tiki.

This concludes the question and answer session. Would you like to make any closing remarks?

So I think that will be on --very -- it was a challenging quarter and we're happy to deliver the strong results for this quarter, as well as we maintain a pretty optimistic outlook for the coming first. Okay, well thank you very much for the time of investors and shareholders. They will be holding some of the conference calls afterwards. Feel free to reach out to us. And we're happy to talk to you guys. Thank you.

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