Noah Holdings Limited

Good evening and welcome to the NOAA Holdings 1Q20 Earnings Conference Call. All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would 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 NOAA for the first quarter in 2020.

Thank you, Blan. Regarding the agenda of today's phone conference, I will first talk about Hongguan's view. In summary, the first quarter of 2020 in Asia, Thank you for joining us today. The COVID-19 pandemic has also made the world of wealth management restart with new rules. No-contact, live broadcast, online, and self-employment have become key elements that every institution must be prepared for. The technological content and innovation capabilities of wealth management businesses, such as big data, artificial intelligence, and other digital technologies, have continued to grow in the areas of customer and channel opening, product service, investment services, and risk management. After the fall of the non-standard standard, let all of this become realistic and possible.

For today's agenda, I will first share my views on the microeconomy and then briefly summarize NOAA's overall performance in the first quarter of 2020, the development of our business segments, and the achievements and challenges during our transformation. Our CFO, Mr. Grant Penn, will follow with a detailed discussion of NOAA'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 COVID-19 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 COVID-19 pandemic also restarted wealth management industry with new methods and rules. Contactless services, live streaming, online solutions, intelligent processing have become critical elements for every institution. As NOAA has shifted our focus from providing private credit funds to more standardized products, we are able to enhance technology and innovation in our wealth management business and empower different operational aspects, including new clients and channels development, product services, investment research services, and risk management with digital technologies such as big data and artificial intelligence. During the COVID-19 pandemic, Over 99.5% of NOAA's clients have been completing their transactions entirely online.

接下来我从财富端、资管端以及经营效率几个方面向大家汇报一季度的情况。 欧亚从2019年第三季度开始放弃了非标类股收的产品投放,向标准化产品转型。 我今天非常高兴地向大家汇报,我们的募集量在2020年第一季度达到了231.9亿人民币,环比上升76.1%, and other standardized products such as public stock, bonds, stock funds, etc. increased by 496.3% in the same ratio and increased by 96.9% in the same ratio. After deducting non-public stock products, the total volume increased by 287.5% in the same ratio and increased by 88.3% in the same ratio. It should be said that the acceptance rate of customers for standardized products has exceeded our expectations because customers continue to trust Luo Ya. Especially in the case of serious Chinese epidemic, we are very satisfied to achieve such a result. In the first quarter of 2020, Luo Ya's actual sales net income was 7.5 billion yuan, down 5.4% in return. The shareholder's non-GAAP net income was 2.6 billion yuan, up 119.6% in return. The reason for the decline in net income is mainly due to the decrease in other business income during the pandemic. In the first quarter, overseas shares net income was 2.1 billion yuan, down 16.1% in return, down 12.7% in return, and the total net income of the group was 27.8%. In the first quarter of 2020, our active customers reached 16,831 people, with a return of 4%. Among them, the active customers of the public fund were 12,756 people, with a return of 9.2%. At the same time, at the end of March 2020, the number of customers with black cards was 880, with a return of 16.1%. In the first quarter, the number of new customers with black cards was 42.5 billion, with a total AOM of 788.5 billion. accounted for 48.8% of the total AUM of the group. The customer base in Europe is relatively high. They have high income or high income potential. They also study investment finance for a long time. Looking at the development in the past few months, customers' adaptability to the industry is far beyond our expectations. They understand the market cycle, accept asset allocation, and increase standardized products in assets. The changes in the industry and customer demand also drive the development of the financial team. In the first quarter, the company introduced a new basic law, Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi have been supported by the system in various sectors of the industry. Due to the global pandemic and the influence of travel restrictions, the insurance planning business dropped by 51.8% in the first quarter, and by 22.5% in the second quarter. We are actively preparing for the development of the next quarter, which will be four years in a row. One is to start a service contract, and the other is to start a comprehensive service online work mode. Since the Chinese New Year, we have opened more than 100 online courses and product tours.

Next, I will go over our wealth management segment, asset management segment, and operational efficiency in the first quarter. Starting from the third quarter of 2019, NOAA seized the distribution of single counterparty non-standardized private credit products and fully entered the field of standardized products. Now, I'm delighted to report that our transaction value has reached the remaining B23.19 billion in the first quarter of 2020, up 76.1% quarter over quarter. The transaction value of standardized products, including mutual funds, equity and bond funds, achieved an increase of 496.3% year over year and was up 96.9% quarter over quarter, excluding single counterparty non-standardized private credit products The transaction value has increased by 287.5% year-over-year and was up 88.3% quarter-over-quarter. We are pleased to see that standardized products are well received by our clients. Thanks to their continuous trust, the growth of the AUM of standardized products at NOAA has exceeded our expectations, especially in consideration of the severe impact of the COVID-19 pandemic in China were quite satisfied with our achievements so far. In the first quarter of 2020, NOAA's net revenues reached Renminbi 746 million, down 5.4% quarter over quarter. Non-GAAP net income attributable to shareholders reached Renminbi 256 million, up 119.6% quarter over quarter. The reason for the slight decrease in our net revenues was due to the decline of revenues from other businesses under the impact of the COVID-19. In the first quarter, net revenues from our overseas segment reached Renminbi 208 million, down 16.1% year over year, and down 12.7% quarter over quarter, accounting for 27.8% of the group's total revenues. In the first quarter of 2020, the number of our active clients reached 16,831, up 4% quarter over quarter. Among the active clients, 12,756 were mutual fund clients, up 9.2% quarter over quarter. In the meantime, by the end of March this year, the number of black card clients reached 880, up 16.1% year over year. In the first quarter, the transaction value from black card clients increased by RMB 4.25 billion, with AUM reaching RMB 78.85 billion. accounting for 48.8% of the group's total AOM. NOAA's clients generally have high incomes or have the potential to earn high incomes with excellent educational background and a dedication to long-term study of investment and wealth management. Their reception to our transformation to standardised products has far exceeded our expectations in the past several months. They understand the micro-cycle, accept the concept of asset allocation, and are willing to increase the proportion of standardized products in their portfolios. Changes in the industry and client demands are also driving the development of our relationship manager team. Starting from the first quarter, we have been applying a new relationship manager compensation scheme, comprehensively relating relationship managers' bonuses to clients' interests. This policy demonstrates the shift from the sales-driven towards focusing on the maintenance of outstanding AOM and highlights the consultancy value provided by relationship managers. In the first quarter of 2020, the turnover rate of our elite relationship managers dropped to 1% from 4.1% in the fourth quarter of 2019. Faced with new market conditions, relationship managers need support from a professional one-stop service platform We have formed a skilled triangle effort allocation team consisting of product experts, fund managers, and experts for integrated services to provide our relationship managers with strong middle office support in various key aspects in their business activities. Affected by the global pandemic and mandate travel restrictions overseas, in the first quarter of 2020, revenue from our insurance business decreased by 51.8% year-over-year and down 22.5% quarter over quarter. We are currently actively planning for the upcoming quarters. On one hand, we have launched the service reservation system and on the other hand, we have initiated the mode of providing integrated services online. Since the last Chinese New Year, we have conducted over 100 online courses and roadshows as well as a considerable number of high-quality live streaming sessions online. For example, the NOAA at Home Initiative has helped to acquire nearly 1,600 new high net worth clients for our mobile app, Micro NOAA.

资产管理的截至2020年3月31日,戈飞的AM为1617亿,环比下降5.0,同比下降5.5。 主要由于另类信贷基金是主动退出,规模近下降了97.1亿。 After the impact of other modern assets, AOM has increased by 7.1% compared to 0.8% compared to AOM 6.5% compared to AOM 6.9% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.9% compared to AOM 6.5% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.9% compared to AOM 6.5% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared to AOM 6.3% compared Zhe Yin, Jingbo Wu, Hong Li, Wing Shan Ng, Melo Xi In terms of asset management, as of March 31, 2020, Gophers AOM stood at RMB $161.7 billion, down 5% quarter over quarter, and down 5.5% year over year.

as a result of our voluntary early redemption of private credit funds resulted in a net decrease of RMB 9.71 billion in AUM. If we exclude the impact of private credit assets, the AUM of private equity, public securities, real estate and multi-strategy funds increased slightly, up 0.8% quarter over quarter and up 7.1% year over year, The AUM of our overseas segment reached RMB 26.4 billion, up 6.9% year-over-year, and up 6.5% quarter-over-quarter, accounting for 16.3% of the group's total AUM. We understand that our high net worth clients are paying increasing attention to asset allocation capacity. We have officially taken into consideration the diversified growth of Gophers AUM when implementing the strategic targets of the group. In the era of standardized assets, the wealth management industry has embraced a new paradigm driven by asset allocation. Under such circumstances, Gopher positions itself as an asset management company that focuses on multi-class asset allocation and pursues absolute returns. On the public securities front, its flagship MomFund reported an excess return of 30.31% by the end of the first quarter since its launch. The absolute return of Gopher's flagship inheritance private equity fund was 17.16% by the end of the first quarter, which was 5.72% higher than its market benchmark. In terms of VCPE and real estate funds, our focus for 2020 will be on secondary PE fund series 5, co-investment PE fund, U.S. funds invest in data industry, real estate flagship fund, and U.S. rental property fund. We will continuously improve our management and the capability of direct investment.

We will continuously improve our management and the capability of direct investment. Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi In the era of standardized products, we need to fully enhance the experience of customers' online and offline functions. We believe that in the next few years, technology will take full advantage of the financial management of the rich and the rich and the rich. We will use more data to study the open product platform of smart investment and open more channels to carry out comprehensive management and reduce the cost-effectiveness. For this reason, Loya is actively upgrading the experience of customers of Jinglei Public Platform Weixiao Fund to build a smart investment system. Loya's overseas standardized product platform is also planning to launch a new version of iLoya in the second quarter. Our online marketing system will start a new business division on the basis of the model of providing consulting services to the current financial team. Through the drug center and the investment model, we serve ultra-high-end customers, and through online marketing, we connect more customers. Through the optimization of payment efficiency, we provide more quality content and open, rich product supply, etc. to improve customer experience. Because of the special nature of the financial management industry, there will inevitably be unexpected products and investment performance. Although we account for less than 1% of the total value of more than 700 billion RMB, for each customer, it is 100%. Therefore, we are deeply moved by the customers' complaints and dissatisfaction. Regulation and control are vital for wealth management institutions. We want to control more regularly and risk-free transactions. For some risky assets that have happened in the past, we have established a specialized bad asset team to resolve and deal with them using organizational forms of insurance and continuous process of marketization, regularization, and legalization. In the process, we continue to communicate with customers and share progress. The wealth management industry is gradually shifting from product-driven towards AUM and asset allocation-driven to adapt to this market change.

We have more detailed requirements for the services our relationship managers provide. We administered responsive mechanisms and organizational policies to ensure the quality in each step of our operations. When serving clients, we have always been adhering to the principle of being kind, responsible, and reasonable, helping them retain and increase their asset value more scientifically, basing on our understanding of their needs. The way we understand our clients is to put ourselves in our clients' shoes and place their interests in the first place, following the market rules and acting in accordance with rules, laws, and regulations. In 2020, NOAA has established a Client Interest Committee to evaluate any new project before its launch from the client's perspective, based on the client's needs and long-term interests. In the case of client complaints and disputes, the committee will make impartial judgments. For the asset allocation of high net worth clients at NOAA, there will be also a professional team to review the portfolios and remind relevant relationship managers and clients of any issues. As we enter the era of standardized products to better serve our clients, we must improve their online and offline experience. I believe that technology will fully empower and support the wealth management industry in the coming years. As such, we will conduct more data research and utilize AI-based investment advisory and open product platforms to unlock more channels for portfolio management, cost reduction, and efficiency improvement. Therefore, NOAA has been actively improving the user experience on our mutual funds app, FundSmile, and establishing AI-based investment advisory system. In the second quarter of 2020, we also plan to launch the new version of iNova, which will be our standardized product platform overseas. Based on the existing model of relationship managers providing consultation services, we will further develop our business layers. This means serving ultra-high net worth clients via the VIP center and investment advisory while reaching more potential clients online. by optimizing payment efficiency, offering more high-quality content, and supplying diversified products, we're dedicated to constantly improving our client experience with us. The wealth management industry is quite special. When the returns of our products or investment don't meet clients' expectations, even if the investment accounts for less than 1% of our RMB 700 billion accumulated transaction value, For those clients who are affected, it's 100%. Therefore, we fully understand when clients complain and voice their dissatisfaction. Compliance and risk management are the lifeline of wealth management institutions. NOAA will always keep this in mind and behave more prudently to ensure the compliance of transactions and diligent risk management. For some risky assets occurred in the past, We have established a special non-performing asset team to deal with them through market forces and by normative and legal means. In this process, we have been constantly communicating with our clients and providing updates on the progress. This process turns out to be quite effective and now a majority of the risky projects have been successfully managed. At the same time, we are continuously working on investor education and promoting the formation of a more mature market Letting clients understand that investments are not deposits, it has risks. While we don't offer implicit guarantees, it does not mean that we are irresponsible. We adhere to the principle of being kind, responsible, and reasonable, and are committed to creating value for our clients. We are grateful for the trust of our clients.

转型的过程对瑞拉来说是回归常识,因为市场减少盲点的心态回归过程。 Weiguo has been in business for 15 years and has experienced many economic cycles, especially the COVID-19 pandemic, which made us more aware that we are in an era of uncertainty, and how to find the certainty in uncertainty requires more wisdom. For Weiguo, it is to continue to focus and surround high-end customers, provide them with wealth management, asset management, and other comprehensive services such as insurance and credit. In 2020, Weiguo launched a new governance structure and flow system, created a new organizational culture and talent incentive system, We have invested more time and energy in the process of market research, strategic consensus, and code execution. We have given up the past management meeting and management methods, and have fully implemented the committee decision-making mechanism. We have set up a committee such as strategic technology talent, customer interest, and discipline inspection. In addition to the Standing Committee, we also invited Chen Xingcheng to participate in reducing blind spots and improving decision-making quality, driving the management to implement cognitive qualifications and technical management, and at the same time forming a multi-layer basic law based on the customer behavior model. Noah's transformation means we're returning to the mindset of respecting common sense and the market.

as well as raising our awareness of potential risks. Looking back, we have experienced several economic cycles in the past 15 years. Especially the COVID-19 pandemic makes us realize more than before that we're now in an era with a combination of volatility, uncertainty, complexity, and ambiguity. It requires more wisdom to secure certainties among so many uncertainties. For NOAA, it means we must pivot around our high net worth clients and provide them with integrated services, including wealth management, asset management, and other services such as insurance and lending. In 2020, NOAA has launched a new governance structure and process system aiming to create a new corporate culture and incentive plan. In addition, we will focus more on monitoring the market, developing insights, reaching strategic consensus, and implementing strategies. We give up the previous management meeting decision-making mechanism and fully adopted the mechanism of decision-making by committees. We have set up committees of strategy, technology, human resources, client interests, auditing and discipline, et cetera. And employees at execution level who are not standing members of a committee are also invited to join so as to ensure a more comprehensive review of our operations and to improve the quality of decision making. The appointment of management is subject to their qualification and KPI performance. We have also formed a multi-layer relationship manager compensation scheme based on clients' different behavior patterns to promote the development of the VIP center and self-service investment platform. 2020 marks the 10th anniversary of Noah Holdings' listing on the New York Stock Exchange and the 15th anniversary since NOAA's establishment. I'm really grateful for the trust and support our clients and shareholders have placed with us, allowing us to come such a long way with all of you. In the future, the team and I will continue to do our best to honor the trust given to us and to create value for our clients, shareholders, employees and the society.

Thank you, Nora, for your sharing and Let me walk you through the more detailed financial performances for the first quarter. We entered the year of 2020 with a strong start despite the COVID-19 situation that had literally shut down the nation for an extended period of time. Especially as part of the transformation strategy, we see very positive signs in the strong growth in the distributions of standardized products. First of all, we're on track of, or as a matter of fact, stronger than expected trends. to meet the guidance of $800 million to $900 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 a very difficult quarter for sales. I'm most proud of, which is also the biggest highlight of this quarter that comes from the total transaction values distributed in this quarter that went up strongly to 23.2 billion, or a 76% growth from the last quarter. Driven by a group of resilient NOAA team of relationship managers and management members, on the back of a stronger performance of Chinese stock market in the first quarter and showed signs of resilience of our investors even during a very difficult quarter. But let me caveat here that our first quarter is usually strong and will continue to face challenges that caused by mainly the travel bans and economic pressures that gradually effect as the year goes on. Revenue-wise, considering the major disruptions to the overall economy by the unprecedented pandemic situation, we are also delighted to see that recovery in one-time commissions from last quarter that went from $160 million from the fourth quarter of 2019 to $211 million in this quarter, increasing by 33.1%. The growth can be attributed to largely the increase in total transaction values as mentioned previously. Comparing to the first quarter 19 one-time commission, we're down by 34.7% as the traveling restriction hinders the sales of higher margin oversea insurance products, which in turn affected the total take rate of the revenue. But at the same time, 46% of the total standardized products, about 10 billion, had a duration longer than three years. which provides our clients a healthier allocation of the assets that would offset short-term fluctuation from the volatile stock market. And at the same time, provides us with assets that would generate more recurring fees for a longer period. But then again, like everybody else, the COVID-19 situation, especially restrictions on traveling and offline gathering did have and will continue to impact part of businesses especially the oversea business where some of the services of products would require clients' fiscal presence. For example, the oversea insurance products as we have mentioned earlier. More important than mere quantity in distributed transaction values, we're excited to see a clear switching in product mix that's in line with our transformation to standardized products. In the first quarter last year, 22.1 billion out of the total transaction value, which is 28 billion, about 79% was the single counterparty credit products. And standardized products at that time only took about 11%. Now after two quarters, three quarters transformation, the mix has clearly switched. The standardized public products now takes up about 82% of the total financial products distributed this quarter. Obviously, we cannot yet claim final victory in terms of strategic transformation, as distributions of public securities had a lot to do with the stock market performance, and happened to be very strong Asia stock market this quarter, which may not sustain for the rest of the year. But apparently, we're very encouraged to see that initial sign of success that indicated our clients' confidence in us, as well as the increased level of activity from our clients. We will continue to feel the pressure in the following quarters depending on the timing of the relaxation on the traveling ban. For example, the originally scheduled May 8 lifting of mandatory quarantine upon arrival in Hong Kong area have been extended for another month, now scheduled for June 8. Obviously, we didn't just sit around, obviously, to wait for miracles to happen. Our team are actively helping our clients to plan ahead and have logged several hundreds are three orders that will be readily converted once the traveling is allowed for the oversea insurance products. Management fee increases slightly year over year based on the growth of AUM comparing to a year ago went from 419 million to 450 million, a 7.3 growth year over year. Although it had a 3.4 decrease sequentially from the last quarter, in 2019, mainly because the generation of some back-end loaded management fee from the exiting of single counterparty credit products in the last quarter. We had also, again, recorded another $20 million of performance fee or carry in this quarter, mostly arising from public security funds. This is the 23rd consecutive quarter that we had recorded carry, and we anticipate more to come in the following quarters. Another area that sees a more direct impact by the COVID-19 situation is revenues arising from lending and other services that have decreased by 71.5% year over year and 50% quarter over quarter. The operations of which typically requires interactions with governmental branches such as notarization services and administrative services, which was not back in full function during the quarter. Revenues from offline classes offered by Enoch Education have also seen greater challenges during this quarter. Our OPEX operating expenses and costs in the first quarter is witnessing a significant improvement, both from year-over-year and quarter-over-quarter perspective. For the year-over-year, it went down about 28.1% and quarter-over-quarter down by 52.1%. that resulted from two reasons mainly. First one is both internal and client-oriented conferences have been moved online through web-based platform that led to less traveling and lodging expenses. Although we anticipate that these expenses will increase in the future once the restrictions on traveling and offline gathering is relaxed, we'll continue to explore and invest in our IT infrastructure to host more client events online. And second reason, in anticipating a challenging year ahead of us, we had also carried out several cost-cutting measures on non-essential areas proactively. For example, implemented temporary two-week non-pay leave in the first quarter, and it resulted in nearly 10% drop in comp and benefits in the first quarter. Although the NPL was a temporary measure and has been restored to normal level by now, we continue to closely monitor expenses and costs to prepare to prepare for rainy days ahead of us. In addition, we had also asked our regional heads to apply for relief on rental expenses throughout the nation that had cut our overall rental expenses for office space for several million. When it comes to balance sheet, we continue to strive for linear balance sheet and have further improved our asset debt ratio to record low of 18.3% while maintaining a 4.8 multiple account ratio. We believe that maintaining a healthy level of liquidity is key to fuel rather strong recovery during this difficult time, which also allows us the capabilities to further invest in longer and strategic initiatives, such as technology and online platforms, and explore for new business opportunities. When it comes to segments, the wealth management segment realized a good recovery in this quarter in its operating profit that was impacted Last quarter was impacted by significant and one-off expenses, and this quarter it recorded $166 million and contributed to almost 65% of the total operating profit this quarter. Stronger driver in this quarter's profit also comes from our asset management segment that recorded $93.5 million, that is a 37.8% growth year-over-year and a 3% quarter-over-quarter growth. The increased level of profit margin for that segment is also demonstrating a very disappointing operation of the segment and is also showing the effect of the scale of economy. Speaking of the asset management segment, we do see a decrease in terms of absolute amount of the total AUM in Gopher of about $8.5 billion. But if we do take into consideration of the massive acceleration of single counterparty credit products, of about $9.7 billion. The rest of the asset classes recorded a total increase of nearly $1 billion. That's mostly driven by PE and RE real estate products that NOAA is conventionally strong with. However, the growth in the standardized products manufactured by Gopher was disappointing in the first quarter as a few of the standardized and balanced fund products did not launch as scheduled. We expect that situation to improve Quickly, in the following quarters, these products have already been manufactured, packaged, and scheduled to distribute in the second and the following quarters. As mentioned earlier, the lending and other business segments experienced more direct hit by the COVID-19 situation and recorded an operating loss for the first time since it went profitable in the third quarter in 2018. We'll continue to seek ways to improve this sector. It most likely will be conducting a more fee type of business as assistant to the banks and trust companies using the technology, experiences, and know-how that we have developed in this sector. All in all, we are pleasantly surprised by the strong start in this quarter that we should really thank our clients for their confidence in us as evidenced by the growth in number of active clients, also in the number of black card clients AUM, and also in the macro transformation to standardize and diversify asset management. And thank our team for the resilience and courage they have shown in this global pandemic. We're obviously fully aware of the challenges ahead of us due to the delayed effect on our economy as the rising of unemployment rates on exports that may affect many of our clients who are owners in the export manufacturing businesses. but we're also confident that we'll continue to spear forward our transformation to a modern financial service institution that's equipped with technology as well as great products and services to our clients. Operator, we're ready to take questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Your first question comes from Daphne Poon from Citi. Please go ahead.

Hi, good morning, management. Thanks for taking my questions. So a couple of questions from me. The first is regarding your translation volume of the public securities. Here is this very strong rebound QOQ. So just want to understand better what are the key drivers here? Will you be able to provide us a breakdown by the types of products, for example, 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, it is highly depending on the Asian market performance. So we do see that the Asian market is cooling down or normalizing a bit in terms of the level of activity. 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 actually on your registered tie-in growth. So we see a very strong number of new registered tie-ins in the first quarter, which jumped by four times QOQ. So can you provide more colors on the underlying drivers, whether that's due to some seasonality or some organic growth, and also how sustainable you think that is? And lastly, we want to check on the lending business. So we see there's a provision for the credit loss in first quarter. So first, can I check on what was the number in the fourth quarter last year? Because apparently it's a big increase on a year-over-year basis. So I want to understand what are the drivers and maybe what are the underlying factors Thank you, Daphne. Give me a second to translate question and share with management.

Thanks, Stephanie. For the first quarter, 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 to get online, and we're actually able to experienced 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, you know, good performance also from strong fund managers. that were actually able to package a product that has a longer duration, actually about $10 billion out of the total $23 billion with a duration of longer than three years. So in terms of Q2 trends 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 it will be a mix 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, you know, equity security product that ties to the stock market performance.

I would like to add that I think that our standardized assets have a good scale, not only because of the market situation, but also because of the preparation we have made. Because last year we encountered the risk of non-standardized stocks, we made a big adjustment. First of all, we have prepared a lot of good asset managers. Before the Spring Festival, we have prepared the online preparation. Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi So, yeah, just a few more comments from Laura, our chair lady.

First of all, not just because of the performance for the stock market, we did do 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 and able to actually getting a lot of new clients through those sessions. And third is really the change in the demand of our clients that a 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 parts, we still maintain pretty good level of distribution for the BCPE products. And even from the standardized parts, about 10 billion, is with longer duration, which obviously the assets that we help our client to allocate or put together has better quality and actually allow them a longer period to profit. And obviously we'll see a slight depression on one-time commission as for the standardized products do have a lower fee rate than the oversea insurance products, as I've mentioned. But we do believe that, you know, having the longer duration pipeline assets for clients would generate more recurrent fees for us. So that's the first question, Daphne. And second question in terms of the growth in registered, in the number of registered clients. Yeah, we do have a pretty strong attraction as we have mentioned before when we do move the conferences and also the interactions online. We're actually able to see a very much higher level activities interacting with our clients. And we're actually able to, with the help of enhanced IT infrastructure, we're actually able to track and also retain some of the client traffic better than we did before. So that's mostly attributable to the number of new registered clients. And also, through the distribution of standardized products, it's actually easier to help the new clients to actually get to us. And for the third question, in terms of lending business, we do have a provision, but that is basically a statutory provision that is required by the auditors when you have the lending piece on your balance sheet. In terms of that particular business, We are seeing a transition, especially from industry and regulator standpoint, that we wanted to go light in terms of we do have mostly using technology, also databases in terms of helping the banks and trust companies to assess the quality of collateral, especially properties for their clients. and we have been experimenting and actually seeing some initial cooperations with a couple of trust companies that will actually be able to provide more or less a service type of fee type of services to these institutions instead of servicing the loans ourselves. So we'll be seeing a slight change in business model in that particular area.

Thanks for the very detailed answer. So maybe just want to follow up a bit on the last question. So in terms of the provisioning level, is that stable versus the previous quarter? Do you see any increase in the underlying risk? I guess also because of the more challenging macro environment here. and as you mentioned about the shift in the business model to work with the trust company, what would the revenue model looks like going forward and how would the fee rate or revenue model differs from the previous model? And also want to go back to the first question that you mentioned just now, you have like over 10 billion of transaction value that is coming from the over three-year duration products. So can I assume that that is all from the hybrid funds? I think you are stepping up efforts on selling more hybrid funds this quarter, which has a more favorable fee rate. Just want to confirm on that.

Okay, okay. For the lending piece, the provision level is quite stable. Obviously, the shutdown of the nation actually delayed a little bit. Some of the loan refunding as some of the administrative branches of government actually was literally shut down for a few weeks, actually. But we don't see a massive worsening of the provisions for the particular asset. In terms of transitioning, The fee is more or less like 1% to 2% of 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 on the quality of the collateral. So I'll let Nora and Charity to supplement your question on the hybrid funds, on the longer tuition funds.

股票基金占超过70%,因为股债混合的基金产品是二季度开始投放的,所以在一季度比例并不是很高。

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

Okay, that's very helpful. Thank you.

Yeah, no problem, Dan.

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

Hi, management. Thank you for taking up my question and congratulations on the first quarter result. I have three questions. The first is on the competition landscape of mutual funds specifically. So we know that NOAA did very well in the first quarter. but actually this space is quite crowded with all the financial institutions and online players like East Money and Alipay. So when clients stay at home during COVID-19 and they open their app, they have a lot of choices. So just want to understand why they need to turn to NOAA rather than Alipay where they can just I select hundreds of funds with a simple tap on the phone. I just want you to understand our position, strategic position in this space. My second question is on the one-time commission rate of the wealth management segment. Chair Lady just mentioned the answer to Daphne that in the first quarter, the One-time commission rates went down because for standardized product, the rate was lower. But I remember from the last call that when we are shifting to bond or hybrid, I mean, for bond or hybrid standardized products, maybe the one-time commission rate was low, but for equity types, it was higher, and we saw that in the 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 reason behind that. Are we turning to maybe lower commission rate kinds of mutual fund product? So I just want 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've booked some legal fees maybe related to Kensington Incident in this segment under general and admin and other operating expenses. But we saw that this level of expense came back to the normal level in the first quarter. So shall we assume that the legal expense is a thing of the past or is a seasonal thing where we should expect it to come back in the fourth quarter every year, maybe? Yes, so that's my question. Thank you.

Thank you, Ethan. Give me a few seconds.

I would like to share that in this way. In the past, Loya has been investing in other types of investment for more than 10 years, with VCPE and other types of credit as the core. The ratio can be said to be 100%. I think our big pattern in the future is that standardized products may account for 80% of the stock debt, and other types account for 20%. So we mentioned that we are entering the sea from this small river, which can be seen in the market and growth. Our positioning is completely different from Ali's and Weixin's. Because the positioning of our public fund customers is also a possible investment asset, which is more than 1 million yuan. We can see that the average of buying public funds in Roya is 310,000 yuan, which is more than a year. Basically, it can be positioned as relatively young and highly educated, and they have their own views on finance. They need to implement it on a professional platform, Weibo, and their e-commerce platform by chance. It's also a more complex product. Now it looks like the client is very sticky, including some core executives of Internet companies. He may have some zero money. He will also buy from these platforms. But his main financial, including public funds, configuration, and this fund, he still passes through our platform. And on our platform, when his asset size continues to increase, he can still buy some So in the past, obviously, our firm specializes in alternative products, if you will, so on VC, on PE, even the single counterparty credit products, but still credit alternative products.

In the future, we believe our positioning will be about 80-20% allocation between standardized products and also as alternative investments. So we are actually, like I've 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 and Tencent, some of the retail type of fund platforms. For example, still the starting point for the investment threshold for clients mostly is around a million RMB and the average AUM for our clients in the mutual funds is about 310,000 for our clients, which comparing 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 are professionals and also have a pretty disciplined investing in mutual funds as part of the allocation strategy. We're even seeing some management or professionals that they might purchase mutual funds from other platforms still come back to NOAA to get more comprehensive and complicated type of products like Fund of Funds, or even alternative investment in VCMP type of products. And Ethan, 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 feed rate as comparing to Standardized Bond Funds that we have mentioned before. So basically the standardized products that will 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 year that we have mentioned that the higher profit margin that's contributed by the oversea insurance products which also the revenue is accounted for within the commission revenue actually do have a lot to do with the overall blended take rate. As you would imagine, it actually doesn't count for a lot of the transaction volume, but the revenue actually comes in with a pretty higher margin. But as you would imagine, the first quarter, especially probably for a brief period in January, people weren't able to travel overseas for the last two months in that quarter. So that actually does have impact on the overall take rate, which is about 91 basis points as compared to close to 110 in the past. But we have always been telling our investors that the feed rates, especially the blended take rates, do fluctuate between 80 to 120 basis points range, depending on the mix of the products that we'll be distributing in the quarter. In terms of the general Q&A expenses for the wealth management segment, yes, this is actually the ideal level of expenses or profit margin that we're looking to maintain for the wealth management segment. The legal fee doesn't actually have a seasonality. In the last two quarters, especially right after the Kamsing incident, there was quite a bit of one-off initiating. Initiative legal expenses when you first engage your law firms and you first probably pursue your lawsuits for the first time. So you do have a little bit of a down payment, if you will, or initiation fees. So the legal fees, especially in the third and fourth quarter last year, was probably a little bit disproportionately higher. and in the future, I would believe that this level of expenses for wealth management is about normal. It will fluctuate, but it shouldn't fluctuate too much. I hope that answers the question. Yeah, okay.

Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Yuan Xu from CICC. Please go ahead.

Hello, Mr. Guan. I have only one question. We know that for mutual funds, we can receive a recurring service fee. What I want to know is, How much is the management fee of Mutual Fund Asset Manager for Recurring Services? Thank you. Mr. Xue, we can share 40-50% of the management fee with public funds.

It depends on the manager of the public fund. I would like to emphasize that our standard assets are not only public funds, but also a lot of public funds' stocks, stocks, and so on.

Thank you.

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 for the contacts if you want to speak more. Thank you very much for your time.

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