Noah Holdings Limited

Welcome to the NOAA Holdings Limited Second Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need 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. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Chair Lady Wang. Please go ahead.

China's financial management industry is experiencing a profound change. The COVID-19 pandemic has accelerated this change. In 2020, I define it as the year of reformation of Luo Ya's wealth. We start from the organization's ability to build, customer mobilization, and process reconstruction, three aspects, to promote Luo Ya's change, to allow our organization to adapt to the new environment of Chinese wealth management and asset management. Following the 2018 Qu Gang Geng and 2019 Li Cai Ruanxiang's major rectification, the promotion of supervision of qiyan and the epidemic, and the promotion of the new rules of governance, have quickly become the mainstream products of the Chinese financial management industry. The new needs of customers have exceeded the expectations of the industry. We believe that continuous investor education and changing customer awareness is the key to democratizing financial management. At the financial management end, NOEA has greatly trained financial experts that drive products as investment advisors, and launched a self-developed public-private investment platform. At the management end, we have strengthened investment and direct investment capabilities,

Regarding the teleconference agenda today, I will start with my viewpoint on macro level, then summarize NOAA's overall performance in the second quarter of 2020, the developments of major business segments, as well as the settlement we hope to reach with our clients on the Kempson incident. Then Grant will present financial results of the second quarter. This call will be concluded after a 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 NOAA. Through organizational capacity building, client insight, and process restructuring, NOAA is changing to be more adaptable to the new environment of wealth management and asset management in China. With the deleveraging in 2018, and the rectification of chaos in financial industry in China in 2019, the tightening of supervision and the impact of the epidemic. NAV-based products promoted by the new guidance on standardizing asset management business of financial institutions have quickly developed into the mainstream products in China's wealth management industry. The renewed demands from clients soar beyond industry expectations. We believe that further investor education and updated client perspectives are the keys to NAV-based wealth management. For the segment of wealth management, we have made much effort to train product-driven relationship managers as investment consultants. We launched our self-developed mutual fund investment consultancy platform. For the segment of asset management, we have strengthened our investment research and direct investment capabilities. and promoted direct sales and multi-channel institutional sales, all of which have made progress to some extent.

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二季度的情况。 Zhe Yan从2019年第三季度开始,放弃了非标类固收产品的投放,向标准化产品全面转型。 在2020年二季度,我们的标准化产品募集量达到179.7亿元人民币,同比上升198.5%。 In 2020, the average sales of standardized products reached 3.7 billion yuan, which is three times the same as last year. After deducting non-standardized goods, the average sales increased by 45.2%. This data basically shows that the transformation has achieved initial success. Before the transformation, the share of non-standardized goods in the average has been completely replaced by standardized products. In the field of standardized assets, our new ability is being built. I believe there will be more room for growth in the future. In the second quarter of 2020, Noya achieved a sales net income of 7.5 billion yuan, and a return increase of 0.2 billion yuan. It belongs to the shareholder's non-GAAP net profit of 3.1 billion yuan, and a return increase of 20.1%. Under the pandemic, the impact of the overseas insurance industry on the income level has been offset by the performance of the strong A-currency market and more first-class market products. It reflects our long-term selection and head-to-head ability. Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi At the same time, at the end of June 2020, Black Card customers lost 900, and the same growth was 5.4. In the second quarter, the financial team implemented a new basic law. As of June 30, the net financial team's loss rate remained at the lowest level of 1.4% in the industry. The financial public fund workstation on the line provided more tools for its industry. Under the influence of global pandemic and travel restrictions, the insurance planning business dropped 17.8% in the second quarter, and fell 25.2% in the second quarter.

Next, I will report the second quarter results from the aspects of wealth management, asset management, and operational efficiency. Starting from the third quarter of 2019, NOAA has seized the offering of non-standardized single counterparty private credit products and made thorough transformation to standardized products, for which Renminbi 17.97 billion was distributed in the second quarter of 2020, up 198.5% year-on-year. The transaction value of standardized products in the first half of 2020, which would be 37.08 billion, increased more than three times over the same corresponding period last year. Excluding non-standardized single counterparty private credit products, transaction value rose by 45.2% year-on-year, This data indicated a preliminary success of the transformation and the share of non-standardized single counterparty private credit products in transaction value before the transformation has been completely replaced by that of standardized products. In the field of standardized products, our new capabilities are being developed and we expect more potential for growth in the future. In the second quarter of 2020, NOAA achieved net revenues of RMB 750 million up 0.2% quarter-on-quarter, and Nungat Net Income attributable to shareholders of RMB 307 million, up 20.1% quarter-on-quarter. The impact of COVID-19 epidemic on the revenue of the overseas insurance sales has been offset by the prominent rally of the Asia market and more successful exits of primary market products. revealing our long-term product screening and direct investment capabilities and once again illustrating the counter-cyclical feature of our business. In the second quarter, the net revenue of overseas sector was RMB 180 million, down 21% year-on-year and down 11% quarter-on-quarter, accounting for 24.7% of the group's total net revenues. In the second quarter of 2020, including mutual funds, there were 14,703 active clients, up 48.7% year on year, of which 12,343 were active clients of mutual funds, up 140.3% year on year, while the number of black card clients was 900 as of the end of June 2020, up 5.4% year on year. A new compensation scheme was implemented for the team of relationship managers in the second quarter. As of June 30th, the turnover rate of elite relationship managers remained at the industry's lowest level of 1.4%. The online mutual fund workstation for relationship managers was launched, providing more tools for their business development. In the second quarter, revenue from our insurance business fell by 68.6% year-on-year and 47.1% quarter-on-quarter Due to the global academic and travel restrictions, however, more pre-orders have been arranged in response to client demands, and we expect once the travel restrictions is lifted, overseas revenues will surge significantly.

在资产管理端,截止2020年6月30号,哥飞的AUM为1594亿,环比下降1.4,同比下降11%, We will continue to actively launch other types of credit funds. The scale has dropped by 5.8 billion yuan. Due to the impact of the continuous launch of credit funds, AUM in other asset categories has increased by 35.2 billion yuan. Among them, private equity, public market, each has increased by 2.1 billion yuan and 2.6 billion yuan. The overseas asset management scale is 257.7 billion yuan, accounting for 16.2% of the total AUM of the group and the above level. Gefei is a global asset management company in the multi-asset category. 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 For the segment of asset management,

As of June 30, 2020, the asset on the management of Gopher was RMB 169.4 billion, down 1.4% quarter-on-quarter and down 11.8% year-on-year, mainly due to our voluntary early redemption of single counterparty private credit funds, resulting in a net decline of RMB 5.8 billion in size, excluding the impact of early redemption of those credit funds. The asset under management of other asset classes increased by RMB 3.52 billion quarter on quarter of which private equities and public securities increased by RMB 2 billion and RMB 2.6 billion respectively Overseas asset under management was RMB 25.77 billion accounting for 16.2% of the group's total asset under management remaining at the same level of the previous quarter Gopher is a global multi-asset class asset management company. We have been continuously improving its asset allocation capability. An independent fixed income division has been established to meet high net worth clients' demand for stable returns. As of June 30, 2020, this specific asset category had AUM of RMB 4.66 billion, up 42.5% year-on-year and up 10.4% quarter-on-quarter. Meanwhile, Gopher has been strengthening its credit rating and investment research capabilities. The focus of primary market is still on funder funds and secondary fund and co-investment funds, which AOM reached RMB 107.71 billion at the end of the second quarter, up 3.2% year-on-year and up 1.9% quarter-on-quarter. For real estate investment, the strategy is to focus on preferred equities of residential projects, which AOM reached RMB 17.24 billion at the end of the second quarter, down 10% year-over-year and down 5.4% quarter-on-quarter. For public securities, the focus is on funds of target returns, with a total of RMB 11.83 billion under management at the end of the second quarter, up 45.1% year-on-year, and up 28.4% quarter on quarter. In 2020, Noah and Gopher's key recommended configuration products for high net worth clients are equity and equity debt hybrid products with three-year lock-up term. It is not an illusory rhetoric to believe in the value of the best portfolio managers and long-term value. Noah's research has found that through a three-year average holding period, While partially sacrificing some liquidity, the level of positive returns is adequate to meet and serve the needs of wealth management clients.

2020年第二季度在管理方面我们启动了新的组织架构设计进行了高管团队建设就新的高管评价标准做了共创初步达成共识同时把科技能力从支持业务到驱动业务提到了前所未有的高度我们相信财富管理和资产管理的投资理念不能只停留在空中需要一些工具化的抓手 Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi When financial products enter the market, the biggest difference is not only the result, but also the investment strategy and process. In June 2020, we submitted the application for public investment in China. In the same month, IROYA, a foreign public fund platform, was launched. We are gradually building an open public fund sales platform in IROYA. At the same time, the public work desk of IROYA Financial Services has also been launched. The work desk that is open to the public is also in the process of launching. The pandemic has accelerated the company's digitalization and onlineization process. From January 16, 2020, Loya launched the Online Investment Strategy Summit. From February 3, 2020, Loya launched the Loya Cariton. From April 1, 2020, Loya launched the Loya Cariton. From April 1, 2020, Loya launched the Loya Cariton. From April 1, 2020, Loya launched the Loya Cariton. From April 1, 2020, Loya launched the Loya Cariton. The transformation of the new market environment and Luo Ya requires us to have and build a new market management method. First of all, we need to further clarify the dual-wheel drive of global open products and sales channels. In the product section, we are to open up the company's eyes, establish a selection standard,量化数据平台. In the customer section, we need to understand the customer needs more and build a complete database of customer needs. The future of Luo Ya depends on the improvement of organizational capabilities. We will stick to the customer needs orientation under strategic planning. Weiguo Wu, Hong Li, Wing Shan Ng In the second quarter of 2020, for the business management, we initiated the design of a new organizational structure, conducted senior management team building, co-created new evaluation criteria of senior management, and reached a preliminary

The importance of technology in driving business has been upgraded to an unprecedented level compared with its previous supporting function. We believe that the investment philosophy of wealth management and asset managers cannot just stay as theory and some instrumental measures should be provided by which relationship managers and clients can gradually reach a consensus. All of these can be achieved through technological means. Supported by technology tools, clients can identify exactly whether the product drawdown is beyond the originally set risk preference. A candid communication is formed among the answer manager, the relationship manager, and the client. The previous requirement for wealth management was focused only on duration and expected returns, and the client wealth management was only focused on whether the distribution institution has the ability to provide implicit guarantee were the implicit guarantee is promised, and investment return was the only criterion for measuring client satisfaction. Transforming into NAV-based wealth management products, the biggest difference for relationship managers is that not only are investment results important, but so are strategy and process. In June 2020, we submitted an application for the license on mutual fund investment advisory in China, and in the same month, Our overseas mutual fund platform, iNOA, was launched on schedule. We're gradually building NOA's global open mutual fund platform. The epidemic has accelerated the company's digitalization and online transformation. From January 16, 2020, NOA hosted the Virtual Investment Strategy Summit. NOA's Staying at Home online daily conference in February and March, and from April 1, 2020, five other online marketing programs were launched. including Fortune Life, Top Investor, NOAA Lifetime, NOAA International Zero Distance, covering all asset classes. We invited 65 fund managers to share industry dynamics, market trends, and investment strategies with clients. By the end of June, eight series of investor education sessions generated a total of 152,500 page views, covering 30,300 clients. Driven by new market environment and NOAA's paradigm transformation, we are bound to initiate and develop management styles that can adapt to the new market. First of all, we will further clarify that global open products and distribution channels should act as two wheel drives. Product-wise, we will establish screening criteria and quantitative data platforms for mutual funds and private equity. Client-wise, we will better understand client needs and build a complete database of client requirements. Noa's future depends on the improvement of organizational capabilities. We will be guided by client needs led by strategic planning to create a platform-based and mission-oriented organization with two wheel drives of qualifications and performance management. Noa aims to achieve the evolution from individual leadership to organizational leadership. Recently, we have also learned that the regulators might introduce new management measures for independent fund distribution companies. We are firming the focus on the sale of mutual funds by distribution institutions, for which we have also prepared, and the operation platform for mutual fund sales has been launched. There will be no direct impact on our business after the new measures come into effect, and we will still focus on cooperating with leading private equity funds through GoFundMe. Our clients will continue to have access to investment opportunities in outstanding private equity products.

最后就诚心618事件我们今天公布已经获批的一个和解方案 诺亚创业15年感恩客户对我们的信任 我们敬畏市场尊重常识也吸引了一批投资理念成熟的客户 早于2019年诚心618事件以后又连续经历了2020年的新冠 It is indeed a huge challenge for Luo Ya. But on the basis of the customer's continued trust, in a difficult environment, Luo Ya still achieved the initial success of the transformation. Customer's continued trust, employees maintain unity and use a stronger attitude to promote the company's transformation. At the most difficult moment, in the case of full-fledged reduction, we maintained the lowest level of departure rate in the industry. The full-fledged adhered to Luo Ya's mission and values. Customers still trust us, making the management very touched and deeply encouraged. As of August 20, 2020, Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi Thank you for your patience. Thank you for the team's sacrifice and service.

Finally, we announced a settlement plan that has been approved regarding the cancelling incident. NOAA has been in business for 15 years and we are grateful for the trust our clients placed in us. We respect the market, respect common sense, and have attracted a group of clients with mature investment concepts. Encountering the cancelling incident in 2019 and experiencing the COVID-19 pandemic in 2020 are indeed huge challenges for NOAA. However, On the basis of continuous trust of clients, NOAA still achieved the initial success of paradigm transformation under the difficult environment. Clients continued to trust us. Employees remained united to push NOAA's transformation forward with a stronger posture. In the most difficult moment, when the salary of all employees was cut, we still maintained the lowest turnover rate in the industry. Every one of us has adhered to NOAA's mission and values, and clients have continued to give us trust, which have really moved and inspired the management team. As of August 2020, more than 54% of Kensington clients have continued to place orders with a total amount of nearly $5.1 billion. This is a difficult choice, but it is an active settlement plan. Although we are confident in the victory of this case, were also very clear that this will be a protracted battle. The management team, upon receiving the approval from the board of directors, proposes a settlement plan with clients. This plan will last for 10 years. In the future, clients will be on the same side as our shareholders and work with us to promote NOAA's progress and long-term sustainable development. After experiencing the cancer incident and the COVID-19 crisis, the spirit of all NOAA's employees has been refreshed. Never waste a good crisis is our belief. There are still difficult times ahead, but all NOAA's employees will do their best and work harder than before. Thank clients for their patience, and thank the team for their dedications and services. Next, our CFO, Mr. Pan Qing, will present the financial report. Thank you, Nora.

Dear shareholders, analysts, and investors, as you might recall, we had anticipated a very difficult second quarter. As COVID-19 prolonged, the recovery of economies, travel restrictions continued to worsen, and the real impact on domestic economy, especially in global export-import situations, continued to put pressure on small and mid-businesses. But today, this is why we're especially happy and very encouraged by the delivery rate. Thank you for joining us today. well above 60% of the range, but also reported a record high income from operations of second quarter of RMB almost 320 million. Our operating profit margin also improved to 42.7%, attributed to high performance-based income and continuously improved operating efficiency. But first, let me walk you through the revenue and transaction values of the second quarter. Although we're happy with overall income and margins, we have to admit that the COVID-19-caused travel restrictions continue to impact the overseas businesses, especially new insurance transactions, which led to a decline in one-time commission of RMB $127 million for the quarter, even when we managed to achieve second consecutive $20 billion mark in transaction value this quarter following our transformation products in 2019. However, we have accumulated over 1,000 overseas insurance pre-orders that are readily converted upon the lift of travel bans. Although our transformation of product offerings continuing to put structural pressure on one-time commission fees, standardized product transaction value remains strong, which was close to $18 billion for the quarter, bringing total transaction value this quarter to $21.4 billion. For the second quarter, recurring service revenue reached RMB 474.3 million, up almost 10% year-over-year and 5.5% quarter-over-quarter driven by increased AUM in public securities and PEVC products. We also booked in performance-based income of RMB 91 million, which was the second highest record for us since the listing of the company, arising from private equity products, as well as standardized funds we place for our clients, demonstrating increasing capabilities of our product selection and investments. Operating margin also set a historical record for the company since the listing, a combination of attributing factors from increased operation efficiency and also a $50 million government subsidy this quarter. But even without the government subsidies, the operating margin is still 35.2%. which is at a pretty high level we expect to maintain in the coming quarters. By segment, net revenues from the wealth management business contributed 72.6% of the total net revenues with RMB $543 million down by 13% year-over-year and flat from last quarter showing impact by the weak performance in overseas insurance sales. Net revenues from the asset management business amounted to RMB 181.6 million, up 6.2% year-over-year and almost 10% quarter-over-quarter, which made up 24.3% of total net revenues. Our lending business is still under strategy shift from direct lending to loan facilitation. The new business model bears minimum credit risks as we only provide facilitation services to other financial institutions. accounted for 3.1% of total revenues, will continue to restructure and upgrade this business segment. As Chair Lady Wang has mentioned, we're delighted to see the clear switching in product mix that's in line with the transformation to standardized products. Comparing to the same period last year, 9.75 billion out of 24 transaction values in the quarter with the single counterparty private credit products, while standardized products only took up 25% of the pie in the second quarter in 2019. But after one year of persistent efforts and transformation, standardized products now accounted for 83.1% of the total financial product distributed. We're determined to put clients' needs first and to source and supply safer products and committed to diversification and asset allocation. But also on the traditional spend side, in the meantime, we're also happy to report we have recently successfully closed the $2 billion fundraising for Gopher's S5 Secondary PE Fund. With the launch of our overseas mutual funds mobile app, I Know What, together with the parallel onshore mutual funds version, FundSmile, the company has built up a global mutual funds platform offering carefully selected products for our clients around the world. And in the second quarter, we have reached the RMB 10 billion AUM mark in mutual funds. For the first half of 2020, we have incurred approximately RMB 100 million in IT-related expenses, as we have mentioned in last quarter that we are putting strategic resources in IT and technology-related fronts. And moving to our balance sheet, we continue to maintain a healthy financial position, and recently Standard & Poor's reaffirmed our investment rating. The debt-asset ratio has been lowered to a historical lower than 16%, 15.9%, with no interest bearing debt on our book. We believe it's a blessing to maintain a strong balance sheet which can take us through the cycle of economy of uncertainties that's still filled with unknown challenges. With that said, we're also closely monitoring the market for strategic opportunities that may help us with the growth of our business and also the strengthening of our capabilities in the next stage of development. Moreover, NOAA has been increasingly paying attention to responsible investment. As a practitioner of long-term value investment and sustainable development, NOAA Holdings Limited and Gopher Asset Management both become signatories of the UN-supported Principles for Responsible Investment, or PRI, investor initiative in April this year. Noah is the first independent wealth management firm from China to participate in this initiative in line with international standards. Meanwhile, Noah's MSCI ESG rating was upgraded shortly after. We also just released the 6th Annual Noah Sustainability Report which is available on our newly launched ESG website. We also feel very blessed that our employees remain safe since the breakout of the virus Thanks to the effective management by our local governments, paired with more online interactions with our clients, which ensured our continuously and orderly operations for the past two quarters, the well-being of our employees, clients, as well as the community has been our top priority, and we also had emergency procedures in place if any infected cases in the company caused workplace unexpected shutdowns. When it comes to the canceling settlement plan, we believe it's the second shoe dropping that's associated with this matter and that will allow us to move forward with lighter luggage. It's also planned that reserved cash flow for the company also comes with relatively manageable dilution to the stock price. In the meantime, it's also critical for us to be able to secure a group of important clients to continue to invest with us. As Chair Lady Wang has mentioned previously, The group of clients' new investments have already reached over RMB 5 billion that passed the principle in that particular investment, and we're confident this number will only grow once the plan is accepted by our investors. Overall, we're pleased with our first half of results in a year full of uncertainties and challenges. Despite challenging headwinds, considering we have achieved 70% of the floor of the initial 2020 profit guidance, and have the confidence on business development for the coming quarters, I'm happy to report that we'll revise our 2020 non-GAAP net income guidance upward by $100 million. And the new range is RMB $900 million to RMB $1 billion. This revision reflects our stronger transaction values and performance-based income expectations as well as overall outlook of the business for the remaining year. I will now open the floor for questions. Thank you.

To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. Once again, that's star then 1 if you'd like to ask a question at this time. We'll pause momentarily to assemble our roster. Our first question is from Stephanie Poon at Citi.

Hi, good morning. Thanks for taking my question. So I think mainly two questions for me. First is regarding your operating margin. We have seen very meaningful improvement in your operating margin in the second quarter. I'm 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 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 volume trend in July and August. So we have seen pretty strong Asian market performance and the demand for the whole mutual fund market has also been picking up quite strongly. So if possible, can you share what is your product sales run rate in the past two months? Thank you.

Sure. Just give me a second. So thank you, Daphne. 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. It's about 40 million higher than average subsidy we normally see in the past quarter. So without that number, 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, 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 whole 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 onto go for its own product in the product, as I just mentioned, the secondary market, as well as some of the U.S. 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. Thank you.

The next question is from Shu Yang at CICC.

Hello, Mr. Guan, can you hear me?

Yes, I can hear you. Mr. Xue, hello.

Hello, Mr. Guan. I have three questions. The first question is, I saw that the performance fee of our second-level wealth management business has increased significantly. And then we also explained that it is mainly due to the growth of public securities. I would like to ask how is the structure of public securities' performance fee collection? This is the first question. The second question is that as our fees change, the impact of the whole wave of the market may gradually increase. For example, when the market is better, our revenue may be better. Thank you Mr. Xue.

I will speak, and then please translate it clearly. First of all, our profit and loss should be half of the private equity fund. We think that in the long term, we will be the biggest beneficiary in the market. Recently, there will be a 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 There are comprehensive services such as insurance trust, overseas trust, and private equity fund. At the same time, we make up for our past short-term public market fund. I think it has a very obvious impact on our cycle smoothness. Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi As for the impact of the Internet platform, I think our customer base is different. We are not planning to do customer downfall. We are doing private equity fund and public market fund. We maintain a high-end customer base and a super high-end customer base. We will continue to focus on this. So our model and Internet platform are different. You see our public fund customers, in fact, their order volume is also very large. The holding time is more than a year. So I'll try to translate for Nora and also throwing some of my insights here.

First of all, in terms of carry income, it basically consists of two parts. One is from the private equity. The other is from the public security fund. 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 staff 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 fund raised for top general partners and NOAA 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 portfolio companies that's been either in the process or already listed on a starboard. For example, two recent samples, one is the Tangxinuo Company that actually we had original investment about at the cost of 50 million and on paper it has 100 multiple returns. as well as, you know, the Beike, you know, original Lianjia, the real estate agency will also have investments in there. And for the secondary market funds, you know, obviously work with the top GPs, for example, the Hill House, Gao Yi, and Jingling Greenwood. So we have a statistic that some of the clients actually been, you know, making money since the beginning of the investment. So we are Working with the top GPs also gives us pretty good advantage in terms of helping the client to gain and also for us to make performance fee. In terms of fee rate, obviously it's at the market level. It's actually quite different depending on the different products and different managers, so it's hard to put a number to it. In terms of smoothing out the volatilities, especially in transaction values, I think we still have a pretty good private equity launching distribution pipeline for the rest of the year, as I just mentioned before, as well as some of the insurance and overseas trust business that's being suspended temporarily because of travel ban. And I would expect that to actually pick up for the rest of the year once the travel ban is alleviated. Also, obviously, with the strengthening of the public security products, will help smooth out volatility. One of the main strategic products that we have is the balanced fund between bond and stock. Also, as you may be familiar with, we have been mentioning that this type of products actually have a three-year lockup for our clients to enable them to actually ride through the tough cycles. We had original target of $20 billion. and many more. You know, place order on our platform for mutual funds will get, at least in general, is around a million mark for mutual fund purchases. And that will be very, very rare for this type of retail internet platform, as you have mentioned. So we do have pretty different customer segments. We're not planning to actually, you know, go down to that level to service the real retail clients. I think we're still trying to... will provide more selections for our clients in the mutual fund product. Hi operator, do we have more questions online?

Currently, the next question comes from Ethan Wong at CLFA.

Hi, Ethan.

Thank you, Guan Ethan. Hello, Director Pan. Hello, Director Wang. Actually, most of my questions have been answered just now. I think I'll quickly ask two small questions. One is, I saw our online return product. I'd like to ask if this is a little different from our high-end financial positioning in Norway. I'd like to ask what your thoughts are on this. And the second question is, can you share with us some information about the growth of Innova, the new overseas platform? Do you have any data to share with us? Thank you. Let me share about the deposit products first.

Because we also did some statistics, customers who are over 65 years old in Luoyang may hold about 700 million assets. We have introduced a new rule for customers over the age of 70. We can no longer recommend long-term products or high-risk products. But we still hope that these customers can stay on our platform. So we launched this deposit product. These products are still very distinctive. It's a bit like a deposit box. After it's bought, it can also be placed on this platform. Weiguo Wu, Hong Li, Wing Shan Ng, Melo Xi and more than 5,000 customers.

Okay, so let me translate real quick. For the savings product, we actually have an internal data point that there's 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 internal policy that we would not recommend or actually help them to place their investment in riskier products. So it's almost like a fund of funds for savings products, which is safer, and actually it does have the guarantee by the bank up to a certain amount of principal. So we believe that's actually a safer choice and also an alternative for our senior clients that wish to continue to invest with us. In terms of growth of iNoa, it actually did only come online in June. We haven't really put in massive effort in terms of promoting that, 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 iNoa first version stays Okay, thank you. Hi, Amy, do we have any other questions in line?

We showed up with our questions. Oh, actually we do. We have a question from Tiki Zhao at JP Morgan.

Okay. Hello. My name is Tim. Hello. 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 the kind of things you have like the salary cuts and also like government We actually, you know, without the government subsidies, we still achieve 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 the offline seminars are good opportunities for our clients to see each other, to shake hands, and to be more personable. But that's part of the effort we have been leading in terms of cost reduction. And secondly is obviously we're continuing investing in IT technology and is increasing the efficiency in terms of our clients. as well as relation managers to operate in business. So we'll continue 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, Chi Chi.

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

So I think that would be a very, it was a challenging quarter and we're very happy to deliver the strong results for this quarter as well as we maintain a pretty optimistic outlook for the coming quarters. Thank you very much. For the time of investors and shareholders, we'll be holding some of the conferences afterwards. So feel free to reach out to us, and happy to talk to you guys. Thank you.

Thank you.

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