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spk08: Good day, and welcome to the NOAA Holdings Fourth Quarter 2021 Earnings Conference Call. All participants will be in a 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 a touchtone phone. 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 Wong. Please go ahead.
spk09: Thank you. Today, I would like to talk about Hongguan's view on the phone conference. I would like to report on the overall performance of Luoya in 2021 and the development of several branches. Next, I would like to introduce you to the annual financial information. Finally, I would like to interact with you. Looking back at the past year, we have once again experienced the complexity and cycle of the financial market. In China, the wealth management and management industry have been transformed. The industry is changing, and the management ecosystem and characteristics are different from the past. The industry has come to a turning point in the business model. The relaxed monitoring cycle has fallen, and the sales direction has become the past. The bottom-up assets provided by domestic private banks to customers have been taken over by real estate banks, embracing the era of full-fledged products. We believe that we must replace customer thinking with sales thinking in order to be able to compete. Investors and entrepreneurs are gradually maturing. The increase in population aging and residential wealth continues to grow in the industry. This shows that China's wealth management industry is developing steadily. At the same time, the long-term quantitative easing policy and the abundance of liquidity around the world have caused a huge inflation of risk assets. Inflation has penetrated into every corner. The reverse of quantitative easing policy is coming. Many industry monitoring models and market valuation have begun to change. In the past 10 years, China's economy has undergone a significant growth, but there are also four major structural problems that make the market worried. Capital banks, real estate, local financing platforms, and so on. After long-term but firm adjustments, we see that in 2020, the capital banks and real estate that the central bank was worried about in the past, the hidden debt of the local government, etc., should be said to have been corrected. China's steady growth and the macro-structural strategy achieved better results. In 2022, China's economy has returned to its original state, and the manufacturing industry has been upgraded. Industrial competitiveness has been significantly improved. Small and medium-sized enterprises continue to remain active and have low tax rates, etc. Both in the manufacturing industry, exports, and key supply chains, they have shown stronger resilience and vitality. Chinese private enterprises are more focused on high-quality development and begin to seek benefits in management. These discoveries have made us full of confidence in China's economy and the market. The Russian-Ukrainian war that is taking place is worrying. In this process, we can be sure that the market will continue to fluctuate. From the perspective of understanding the financial needs and wealth sources of the market, we recommend that financial management customers take the strategy of first protecting and then growing in the 2022 ROYA CIO Office Strategy Report. The first is to actively check the asset configuration of yourself and your family, do asset protection and asset protection, and further balance the global asset configuration. Considering that it is still a currency superinflation and inflation for the long term, On today's conference call, first, I'd like to talk about my observation of the microenvironment, then report on NOAA's overall results in 2021 and performances of major business segments.
spk07: Our CFO, Mr. Panqing, will then introduce detailed annual financial results of the company, followed by a Q&A session. Looking back on the past year, we once again experienced the complexity and periodicity of the financial markets. In China, the wealth management and asset management industries have undergone paradigm transformation. The industrial changes, business ecology, and characteristic positioning are different from those in the past. The industry has ushered in an inflection point in the evolution of business models. The loose supervision cycle ended, and the sales orientation became the past. The underlying assets provided by domestic private banks to clients migrated from realistic bonds to NAV-based funds, embracing the era of equity products. We believe that we must replace the sales mindset with a client-centric one in order to survive the competition. Investors and practitioners have been gradually maturing. The aging population and the increase of residents' wealth is helping the continuous growth of the industry. All these developments show that China's wealth management industry is developing steadily and healthily. At the same time, the inflation of risky assets is prevalent across the globe due to the quantitative easing policy and surplus of liquidity that have persisted for a long time. The reversal of quantitative easing will change regulatory models and market valuations of many industries. Over the past 10 years, China's economy has achieved remarkable growth, but there are also certain major structural issues that concerns the market. Shadow banking, realistic imbalance, financing platform, industry with overcapacity, as well as resource industries with high pollution and high energy consumptions. after a long-term but firm adjustment. We can see that in 2022, the shadow banking, real estate, and government invisible liabilities that the central bank worried about in the past have been corrected. China's micro-strategy of steady growth and structural adjustment has achieved good results. In 2022, China's economy will further return to real economy. The manufacturing industry will be upgraded every two weeks. Oh, sorry. Iteratively, the industrial competitiveness will be significantly improved. Small and medium-sized enterprises will continue to be active and enjoy a low tax rate. Manufacturing, export, and key supply chains have shown strong resilience and vitality. China's private enterprises pay more attention to high-quality development and begin to seek benefits in management. These findings allow us to have full confidence in China's economy and the market. While the ongoing Russian-Ukraine war is worrying, we can be sure that in this process, the market will continue to fluctuate from the perspective of understanding the financial needs and wealth sources of the market. In the first strategy report of NOAA CIO Office in 2022, we plan to suggest our wealth management clients to adopt the strategy of protection before growth. First of all, actively check the asset allocation of themselves and their family and make sure of asset protection and asset safeguard. Secondly, further balance their global asset allocation and consider the long-term situation of excessive currency issuance and inflation. In the secondary market, primarily utilize this multi-strategy portfolio allocation strategy. In the primary market, adopts the strategy to pay more attention to the cross-cycle early investment in hard technology.
spk09: In 2021, Luo Ya successfully completed the product transformation of non-traditional trademarks, optimized the large-scale asset configuration of the client's end, and promoted the change from product drive to customer-centered transformation within the organization. Although affected by the epidemic, the annual net income, non-commercial accounting standards, net profits, diamond and black cards, and new customer numbers The number of active customers has created a new high in history. In 2021 and the year before, Russia's total sales income was 42.9 billion RMB, which increased by 29.9% in the same ratio. The shareholder's non-GAAP profit was 13.7 billion RMB, which increased by 21.5% in the same ratio, exceeding 14.4% of the annual profit and loss. The epidemic is continuing and the market is fluctuating, but our income and profits have created a new high in history. We believe that All business successes are beyond the trust of our clients. Noya's asset size, AUA, is around 280 billion RMB. More than 85% of it is listed in private equity and private credit products. According to the region, overseas, the net income of 10.1 billion RMB has increased by 38.6% compared to 6.9% at the end of 2019, and has recovered to the level before the epidemic. 42.9% of the total revenue growth, 4.4% of the total management growth, and 242.9% of the total revenue growth. The overseas asset allocation has reached 14.3 billion yuan, which is 60% of the total growth. The asset management is 283.8 billion yuan, which is 13.8% of the total growth at the end of 2020, and 18.2% of the total AOM of the group.
spk07: In 2021, NOAA made a great step forward to successfully transform from non-standardized products to NAV-based products and further optimize the asset allocation for clients. We also internally and structurally promoted the transformation from product-driven to client-centric. Despite the impact of the epidemic, NOAA still achieved unprecedented growth in terms of net revenues, non-GAAP net income, the number of black card and diamond card clients, and the number of active clients in 2021. Throughout the year 2021, NOAA achieved net revenues of RMB 4.3 billion, an increase of 30% year-on-year, and achieved a non-GAAP net income attributable to shareholders of RMB 1.4 billion, an increase of 22% year-on-year. which is also 14.4% higher than the annual guidance. Despite the effects of the epidemic and volatilities in the market, our net revenues and net income both hit record highs. We believe that our success of business is inseparable from the trust of our clients. Currently, NOAA's asset under advisory is approximately zimming the $280 billion, over 85% of which are private equity and private secondary products with lock-up period. With respect to the overseas market, in 2021, we reported a net revenue of RMB 1 billion, a 38.6% growth year-on-year and a 7% growth compared with 2019, indicating the performance of the overseas market has rebounded to the pre-epidemic level. One-time commissions, management fees and performance-based income increased by 43%, 4.4% and 243% year-on-year. Overseas transaction value reached RMB 14.3 billion, a big increase of 61% per year. The overseas AOM was RMB 28.4 billion, accounting for 18.2% of the total AOM of the group, representing an increase of 14% from the end of 2020. Thank NOAA's overseas colleagues for their outstanding achievements under the influence of the epidemic.
spk09: In terms of core business data, The net income of the financial management sector reached 319 million yuan, which increased by 35%. The net income of financial products was 97.2 billion yuan, which increased by 2.6%. The net income of private equity was 180.7 billion yuan, which increased by 1.1%. The net income of private securities in standardized products reached 37.8 billion yuan, which increased by 7.4%. The total revenue of the public fund has reached 371.7 billion yuan last year, which fell by 2.1%. In the second half of the year, the market fluctuated, and the impact of customer avoidance, insurance, and other comprehensive services has reached 41.9 billion yuan last year, which is a big increase of 35.1%. In 2021, Luoya's high-profile customer group continued to expand and maintain high activity. The annual active number of customers exceeded 4.2 million, which increased by 25% in total, The number of customers with black cards grew 37.9% all year round. The number of customers with black cards grew 13.9% all year round. The number of customers with black cards grew 18.2% all year round. This exceeded our expectations. These three main customer data have once again refreshed the history and reflected the transformation from customer to center and received response from customers. The transformation from sales to joint industry, the iron triangle service model of professional division has improved service quality and increased customer year-on-year. In 2021, we also launched a platform product for public fund institutions and small and medium-sized private banks. This is a SaaS platform that connects small and medium-sized enterprises to create convenient online cash management private bank services for them, improve investment and operating efficiency of corporate funds, and meet the needs of corporate mobile fund management. As of the end of 2021, 95% of public fund products and 90% of public fund managers have been launched in the market. The service comes from real estate, financial technology,
spk07: In terms of core business data, the net revenue of wealth management segment reached 3.2 billion RMB, up 35% a year. The transaction value of financial products was RMB 97.2 billion, a slight increase of 2.6% a year, among which private equity was 18.1 billion, up 1.1% a year. Private secondary funding standardized products was $37.8 billion, up 7.4% a year. Mutual funds was $37.2 billion, a slight decrease of 2.1% a year. Affected by the risk aversion of clients on the market fluctuations in the second half of the year, the transaction value of other comprehensive services such as insurance products reached $4.2 billion, a year-on-year increase of 35%. In 2021, the high net worth clients of NOAA continued to grow and remained active. The number of total after clients, including mutual fund-only clients, exceeded 42,000 people, up 25% a year-on-year. The aggregate number of black card and diamond card clients increased by 18.2% in the year, of which the number of black card clients increased by 38%. and Diamond Car clients increased by 14%, a growth that exceeded our expectations. The fact that the three main categories of client number reached record high again indicated our client-centric transform has been well received by our clients. The transformation of our marketing strategy gives birth to the NOAA Triangle Service Model, which focuses on coordinated business development and professional specialization, is proved to be effective in upgrading our service quality and enhancing clients' stickiness. In 2021, we also launched Smile Treasury, a SaaS platform to connect small and medium-sized enterprises and allow them to buy mutual funds with tailored treasury services for convenient online cash management with the aim to help improve the investment and operating efficiency of corporate cash and to satisfy their needs for working capture management. By the end of 2021, Smile Treasury covers 95% of the mutual funds and 90% of the mutual fund managers in the market, serving institutional clients from 14 industries, including real estate, finance, and technology.
spk09: The management of real estate is 1309.1 billion yuan, which is 11.2% growth. The management of public market is 111.7 billion yuan, which is 13.4% growth. The management of real estate is 66.4 billion yuan, which is 47.5% growth. The asset structure continues to optimize and is more healthy than expected. As of the end of 2021, Gefei's standardized products have delivered steady investment performance, of which Gefei's large-scale MoM annual revenue is 14.2%, exceeding 9% of the same period's standard revenue. Top30's annual revenue is 12.5%, exceeding 4.5% of the same period's standard revenue. The overseas gold and blood dollar fund's annual revenue is 16.2%, exceeding 10.5% of the same period's standard revenue. It is worth mentioning that Gefei's Taifu Di Chang product target strategy established in August, and established in April. The three strategies of balance and positivity reached 1.1%, 4.9%, and 5.4% in 2021 respectively. In the shock of the market, it played a role in controlling fluctuation and feedback for customer assets. In terms of private equity, Gefei continues to promote Forf, S Fund, and Kento Fund. The 5-fund combination of advanced technology and medical subsidiaries has invested more than 7,000 companies through more than 230 subsidiaries. S-基金2021年蝉联世界母基金协会全球前20%最佳S基金的奖项,直投和跟投重点配置早期金融科技,消费,科技和医疗项目,戈飞硅谷的VC基金和戈飞纽约的地产基金,在2021年都有大规模的退出,并取得了优异的投资回报。戈飞投研体系的建设也出现成效,完成了团队组建,包含了基金研究,宏观策略和行业组, The asset management business reported a net revenue of RMB 1.04 billion, an increase of 19% a year. Goldfish AOM increased slightly by 2%, reaching RMB 156 billion, with continued optimized asset mix.
spk07: To be specific, the AOM of private equity was limited to $131 billion of 11% a year. Public securities was limited to $11 billion of 13.4% a year, while real estate assets decreased by 48% a year to $6.6 billion, including U.S. rental apartment funds. Gopher's asset structure has been continuously optimized, now healthier and in line with expectations. For public securities, by the end of 2021, Gopher's standardized products have delivered steady investment performance. Among them, the annual return of Gopher Megatrend Manager of Managers Fund was 14.2%, exceeding the benchmark return rate by 9% during the same period. Gopher's top 30 fund of hedge funds posted an annual return of 13%, beating the benchmark rate by 4.5% during the same period. Gophers overseas selected US dollar funds and the return rate was 16%, exceeding the benchmark by 10.5% during the same period. It is worth mentioning that Gophers well stabilized the product target strategy. With its stable strategy launched in August, balanced and positive strategies launched in April 2021 achieved cumulative returns of 1.1%. 4.9% and 5.4% respectively by the end of 2021. Effectively limited fluctuations and controlled pullbacks amid market volatility for clients. In terms of private equity, GoFundMe continued to promote the establishment and investments of funder funds as secondary funds and co-investment funds. Funder funds lays out capital in cutting-edge technology and healthcare sub-funds. with more than 7,000 underlying companies through more than 230 sub-funds. Secondary funds have been ranked as one of the top 20 best secondary funds in the world by Global Forth Association for the second consecutive year in 2021. Gopher's direct and co-investment funds mainly focus on areas such as early-stage fintech, consumer, technology, and pharmaceutical projects. Gopher Silicon Valley's venture capital funds and Gopher New York's real estate funds have achieved a large scale successful exit from certain projects in 2021 with excellent investment returns. Gopher has constructed an effective investment research system and team composed of fund research team, micro strategy research team, and industry research team. A progress and integrated product development process has been implemented for all funds managed by Gopher around the world.
spk09: In 2021, we completed the transformation of the entire corporation, including the position of financial advisor, according to the planned strategy direction, and greatly improved the fixed salary of the first-tier financial advisor. The company continues to invest strategically in customer interface, technology system, investment research in three aspects. In 2021, the investment in core customer groups has led to a growth in turnover of customers, which makes us very encouraged. Customer program and service experience have also been improved. In 2022, we will continue to invest in the development of core customer groups, key cities, technology capabilities, and investment research capabilities. In order to maintain a reasonable growth of profits, we have laid the groundwork for Loya's long-term health and sustainable development. Since 2014, Loya has issued a report on sustainable development for seven consecutive years. It is the only private financial enterprise that has been awarded the highest AAA rating on the list of the highest social responsibility reports of the Ministry of National Welfare in the world. In 2021, we have listed ESG Fund's exclusive area on the ILOYA platform in China and abroad. In Gefei's back-to-back business, there was an excellent investment case that complies with the principles of sustainable development. Luoya and its partners planted nearly 600,000 pine trees in the Tenggeri Desert. Through Luoya Fangzhou Biomass Protection Project, 23 rare species have been identified. In 2021, the SGS certification certified by international institutions, Luoya obtained the international standard certification system, ISO, the latest carbon detection, quantification and reporting standard. ISO 14064-1-2018's whole company, Winsor & Co. Winsor & Co. Winsor & Co. Winsor & Co. Winsor & Co. Winsor & Co. Winsor & Co. Winsor & Co. The number of female employees in Loya is 62%, and the number of female executives is 37%, and there is no obvious gender gap. There are one-third of female members in the company's board of directors. At the same time, Loya has won the United Nations Women's, Asia-Pacific Region WEPS Award for China's transparency and report. It is the only company in the region to win the award.
spk07: In 2021, in accordance with our planned strategic direction, we finished the reform of qualification systems for relationship managers and greatly increased the base salary for them. The company continuously makes strategic investments in three areas, including client interface, technology system, and investment research. In 2021, the number of BlackRock clients grew significantly thanks to the strategic investment in the core client base. Client service experience has also been enhanced. In 2022, we will continue to invest in the development of core client bases and key cities, the improvement of technology and investment research capabilities, so as to pave the ground for long-term healthy and sustainable growth of NOAA while maintaining profit growth at a reasonable level. Since 2014, NOAA has been publishing the NOAA Corporate Sustainability Report for seven consecutive years. The report was awarded the AAA high-risk rating for excellent corporate social responsibility report by the Ministry of Industry and Information Technology at the Fourth China International Import Expo, an honor for the first time to be awarded to a private financial company in China. In 2021, we launched a special ESG fund section on our domestic Fundsmile and overseas Inowa platforms. Among the growth Investment portfolio, a number of excellent investment cases in line with the principle of sustainable development have been identified. Together with our partners and clients, NOAA has organized to plant a subsoil forest that consists of approximately 360,000 trees in the Tanger Desert and identified 23 rare species through NOAA's ARC biodiversity conservation project. In 2021, verified by the International Certification Body, SCS, NOAA obtained the Company-wide Greenhouse Gas Emission Information Certification of the International Standard Certification System's Latest Carbon Verification Qualification and Reporting Standard, ISO 140641-2018, becoming the first enterprise in China to pass this version of the standard. In addition to focusing on sustainable development and fulfilling corporate social responsibility, NOAA also actively promotes women's equal rights. In 2021, I signed my support statement on the principle of empowering women at UN Women. I'm very pleased that by the end of the year, female employees accounted for 62% of all employees of NOAA, female executives accounted for 37%, and there is no significant gender-based income gap. There are also one-third of female members of the company's board of directors. NOAA also won the UN Women Asia-Pacific WEPS Award for Transparency and Reporting in China this year, marking the only enterprise to win the award in the country.
spk09: I would like to inform everyone about the relevant situation of the foreign company's question and answer law. The U.S. Securities and Exchange Commission estimates that the law may determine the issuers of 273 listed companies. We expect a large number of US listed companies in Hong Kong and other regions of China and Chinese companies will be added to this list before and after April this year when the committee submits annual reports. This bill is a part of the U.S. continued supervision, which is to obtain the audit and other information currently under the law of other countries, especially the law of China. The bill requires that if from 2021 on, these auditors who are under the protection of the issuers of financial statements will not be under the accounting supervision of the US listed companies for three consecutive years, PCAOB inspection, SEC will ban these companies' securities from trading in any US securities trading market. Lora Control may be initially identified as the issuer when the annual report is submitted to the committee at the end of this month. Our company's U.S. stock may face the risk of withdrawing from U.S. securities trading in early 2024. In addition, the U.S. is considering legislation 不检查年数从三年缩短为两年,对此我们将继续监控美国市场的发展,评估所有的战略选择。 I'd also like to give you an update on our status on the Holding Foreign Companies Accountable Act.
spk07: The SEC estimated that 273 registrants might be identified as Commission-identified issuers under the Act. We anticipate that a large number of U.S.-listed companies with operations in Hong Kong and other parts of China will be added once we file our annual report with the SEC around April this year. The Act is part of a continued regulatory focus in the United States on access to audits and other information currently protected by national laws, in particular China's. The Act requires the SEC to prohibit the securities of any covered issuer from being traded on any of the U.S. securities exchanges if the auditor of the covered issuer's financial statements is not subject to inspection by the U.S. Public Company Accounting Oversight Board for three consecutive years, beginning in 2021. NOAA holdings may be provisionally named as a Commission-identified issuer following our filing of any report on Form 20-S at the end of this month with the SEC. Our company's American depository shares may face the risk of being delisted from the New York Stock Exchange in early 2024. In addition, legislation is being considered in the U.S. to shorten the number of non-inspection years from three years to two years. We will continue to monitor market developments and evaluate all strategic options. 2021年我们重新思考了洛亚的新定位。
spk09: Sponsored and served by the world's highest-quality Chinese clients, Baili Taoyi's financial management company. Connected with the world's top asset management companies. For high-quality families with children and children. And financial management services with high-quality institutions with social responsibility. In 2021, Luoya can be said to be clean and upright. A mature and excellent team. Healthy income. High profit innovation. No risk threshold for real estate high debt. We are in a growing industry. Persistence and respect for the market. Deep reflection and confusion after facing risks. The team's excellent execution makes us protect the interests of most customers in this complex market in 2021, and brings long-term value creation to customers. In 2022, Luoyan people will continue to understand and think about the financial management industry, understand the convenience and inconvenience of the market and customer needs, respect the common sense and elite market, continue to deepen the transformation of the organization, and really move from product drive to customer-centered, living as the bottom line, and fighting for the value created by professionals. China's wealth management and management industry is at a turning point. The future market will further test our asset allocation, professional capabilities, customer service capabilities, and technological capabilities. Loya will continue to work towards the direction of specializing in money. We will work to the point of 1.5 meters and 1,000 meters. In management, we will seek efficiency and become a wealth management company with a high-end customer base in China. We still have a lot of room for growth and a long way to go. Today, Loya's positioning is clearer and more focused. Loya's brand slogan is, wealth is more than life wisdom.
spk07: In 2021, we repositioned NOAA to focus on serving global high net worth clients as a one in a hundred wealth management company by connecting leading asset managers around the world to provide high quality wealth management services for high net worth and socially responsible families and institutions. In 2021, With the united efforts of a seasoned team, NOAA moved forward without burdens, achieved sustained net revenues growth, and drove our net income to a new level without any exposure to real estate high-yield bonds. We're in a rapidly growing industry. We respected common sense and market rules, reflected and corrected ourselves after the encounter of risks. So even under the complex market conditions in 2021, we still successfully protected the interests of most clients and created long-term value for them. In 2022, NOAA will continue to understand and reflect on the wealth management industry, understand the changes and invariance in the market and client needs, respect common sense, respect market, continue to deepen organizational change, and truly practice from product-driven to client-centric, survival as the bottom line, and professional people-oriented to create value for other clients. China's wealth management and asset management industry is at an inflection point. The future market will further test our professional capacities of asset allocation, client service, and technology. NOAA will continue to work in the direction of being committed, specialized, and in-depth to achieve one meter wide and a thousand meters deep, seek benefits in management, and become a one in a hundred wealth management company for global high net worth clients. I'm certain that we still have a lot of growth space and we will go a long way. Today, NOAA's positioning is clearer and more focused. The brand vision of NOAA is wisdom beyond wealth. Devote ourselves to creating a legacy for generations to come. Now, please welcome our group, CFO Panqing, to report on detailed financial performance in 2021. Thank you.
spk04: Thank you, Sonia. Thank you, Chairlady. And hello, investors and analysts. Looking back at 2021, I'd say it's been a very challenging year as supply chain and inflationary pressure persisted globally amid new variances and outbreaks of COVID-19, coupled with stricter regulatory policies on many industries and a bumpy equity market. And it's also what makes this so special that a young but vibrant NOAA has accomplished a record-setting year with unprecedented achievements across revenue and profit, benefiting from a well-executed client-focused strategy and our investments in client relationships that paid off. Now, please let me walk you through the detailed financial results of the fourth quarter and full year 2021. Net revenues for 2021, ORMD formed $3 billion, up 30% year-over-year, and also the highest since listing, thanks to strong increases in performance-based income and revenue arising from the distribution of insurance products. Benefiting from the successful execution of core client strategy, one-time commissions grew 57% to RMB 1.3 billion. Recurring service fees were RMB 2.1 billion, up 9% year-over-year. as a result of a larger asset base we manage for our clients. Performance-based income achieved another milestone, amounting to RMB 780 million, more than doubled from the previous year. Specifically, long-duration private equity products and private secondary products accounted for 46% and 48% performance-based income, respectively. Again, demonstrating our excellent investment and product selection capabilities that in turn translated into value creation for our clients. Income from operations was RMB $1.2 billion, down 5% year-over-year. Due to increased talent retention and acquisition efforts, continued strategic investments in client experiences to better meet the evolving needs of our high-net-worth clients. as well as expenses incurred related to our new headquarter renovation. For instance, we increased our investments in technology investment research talents by RMB $120 million as part of talent acquisition strategy. In 2021, we continued to set aside a strategic budget totaling RMB $133 million, which accounted for about 3% of our annual net revenues. covering key initiatives including client acquisition, client interfaces, digitalization, development of new products, compliance transformation, as well as operational enhancements in key cities and regions. I'm happy to note that these investments have harvested excellent results as we have accomplished prominent improvements in technology infrastructure, and investment research capabilities, as well as record-breaking growth in our core client groups and overall client activities. Investment income was RMB 65 million compared to a loss of RMB 86 million from 2020. Equity earnings affiliates more than tripled to RMB 302 million from previous year. These were mainly attributable to fair value adjustments made to the group's direct investments and the underlying assets of GoPERS funds. We recorded a non-GAAP net income of RMB 1.4 billion for the year, a 22% increase year over year with a profit margin of 32% and 6% over the upper end of our annual guidance. We plan to continue our strategic investment in areas where we could strengthen our unique positioning, a competitive advantage to achieve continued growth over the long term while maintaining efficient and disciplined expense management. In terms of segmented results, net revenues from the wealth management business were RMB 3.2 billion for the year, up 35% year-over-year, accounting for 74% of the total net revenues of the group. The growth in our wealth management business was supported by robust client activities and strong growth of core clients. Total active clients including mutual fund clients during the year was 42,764, a 25% jump from previous year. As I have mentioned previously, expanding our diamond and black card client group was one of the key strategic initiatives for the year and we have made great accomplishments on this front with 14% and 38% increases in diamond and black card clients respectively. and an 18% increase overall by deepening our wallet share of existing clients and effective new client acquisition strategies. That includes more targeted marketing spending, more high-quality offline client activities, refined client servicing process empowered by our NOAA Triangle Service Model, as well as digitalized client management and analytic tools, essentially indicating effective client-centric reforms Total transaction value for 2021 was RMB 97.2 billion, up 3% year-over-year. We noticed and respected clients' flight to safety sentiment in face of market volatilities and successfully allocated more insurance products while maintaining slight increases in private equity and private secondary funds products. Net revenues from the asset management business were RMB around $1 billion, of 19% year over year. We continued to exit private credit assets and real estate assets in 2021, and successfully maintained a marginal growth in AUM, with a net increase of 2.1% to RMB 156 billion. Since the start of the standardization transformation, Gopher has exited and distributed over RMB 32 billion of private credit assets to our clients. The mix of our AUM has been optimized as our PE and public securities AUM grew by 11% and 13% to RMB 131 billion and RMB 11 billion, respectively, while real estate AUM decreased by almost 50% to RMB 7 billion. Despite the COVID-19 pandemic, our overseas business posed exceptionally strong growth with net revenues increased by 39% year-over-year to RMB $1 billion, driven by larger AUM and a 243% increase in performance-based income. We're proud to have a resilient and diligent team who strive to create values for our clients. By end of 2021, we offer more than 1,300 standardized products on our offshore online platform, INOA. and we will continue to strengthen our capabilities in providing global asset allocation services for clients. When it comes to our fourth quarter results, net revenues were RMB 1.3 billion, up 32% year-over-year, and 39% quarter-over-quarter, also the highest single quarter in history. One-time commissions were RMB 479 million, up 76% year-over-year, and 123% quarter-over-quarter, Recurring income was RMB 558 million, up 28% year-over-year, and down 2% quarter-over-quarter. Performance-based income was RMB 173 million, down 16% year-over-year, but up 111% quarter-over-quarter. Total operating costs and expenses were RMB 1.1 billion, up 83% year-over-year, and 66% quarter-over-quarter. mainly due to increased expenses related to offline client activities, including a series of black card gala events, as well as increased RM commissions in relation to higher insurance sales in the quarter. As a result, operating profits were RMB $132 million, down 61% year-over-year, 42% quarter-of-quarter. Non-GAAP net income, on the other hand, was RMB $290 million, of 10% year-over-year and 2% quarter-over-quarter, as equity earnings of affiliates increased by 300% year-over-year and 150% quarter-over-quarter to RMB $161 million due to favorable fair value adjustments made to the underlying assets of Gopher's Funds. The bumpy equity market throughout the quarter led to a swift shift in investment preference from our clients. resulted in a 13% dip quarter over quarter in our transaction value during the quarter. However, we're able to cater our diverse product offerings to meet with our clients' changing risk appetite, which in turn led to more allocation of insurance products and solid financial results for the quarter. In terms of balance sheet, our cash has increased to RMB 3.4 billion and total assets stood at RMB 10.9 billion as of December 2021. Our current ratio was 2.4 multiple, and debt to asset ratio was 25.2%, again, with no interest-bearing debt. We're mindful about the usage of our cash when facing uncertainties, but we're also considering to install long-term shareholder return mechanisms when the timing is right. Looking forward, we'll likely see another year mixed with uncertainties and market volatilities and perhaps escalated frequency of disruptions of travels and commuting when China adjusts to post-COVID-19 times. As Chair Lady has mentioned, our clients have demonstrated high risk of burst preferences and we're committed to refining our client services and product offerings, essentially creating values for clients and shareholders by enhancing our product selection, research, and technology capabilities. In 2021, we successfully converted difficult market environment into record high net revenues and net income. And we believe the contribution to clients and tenants are, if not the only reason. In 2022, we plan to provide more varieties of market risk neutral alternatives, such as Gopher's target strategy products fixed income enhanced funds, and insurance products. I'm confident that we'll continue to deliver growth in 2022 by enlarging core client base, increasing market share, and gaining more wallet share of the existing clients. At the same time, we'll continue to implement a strategic spending budget in 2022 to focus on core client acquisitions, operational improvements in key cities, incubating innovative products and services, as well as key operational and digital transformations in our effort to set structural foundations for long-term growth. With that in mind, I would like to announce that the NUMGAP Net Income Guidance for 2022 will be in the range of RMB $1.45 billion to RMB $1.55 billion, reflecting management's current business outlook. Thank you, everyone, for listening. I will now open the floor for questions.
spk08: We will now begin the question and answer session. To ask your question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ethan Wong with CLSA. Please go ahead.
spk02: Hello, Mr. Wang. I have two questions. The first question is, in terms of the market situation from last year's quarter to this year's beginning of the year, have we seen any customers in the process of business, especially in the field of public goods and credit card products, um um I have two questions. The first one is based on the fourth quarter last year and the year today market environment. Have we seen any change in the product preference in terms of mutual fund and private segment products? That's the first question. The second question is that we noticed the increase of calls has been kind of fast, very fast in the first quarter. We mentioned that it's mainly due to the talent acquisition. So just wondering if management can explain in more details our strategic consideration behind our cost growth especially in the context of this year's market environment and the COVID situation in China. Thank you.
spk09: Okay, I'll answer first, and then Panqing will add. Okay. I think, in general, our customers are more prepared. So you can see in the four seasons, many of our customers have switched to some relatively conservative products. In 2021, we also withdrew a lot of products that had better performance in the past. In this way, we have left our customers behind. So we can see that the market's mood is still very obvious. Some customers are basically willing to take cash, and some are actively doing insurance, asset isolation, and configuration. China China China China The key is that we are pushing for a change. Our change is divided into two parts and divided into four parts, which is to give the financial sector the right to sign, but not simply to drive with cash. In June, we did 50% of the financial market, and then in the fourth quarter, we did the remaining 50% of the financial market. I think this may have a great impact on the cost. Then, if you look at the cost, please come in and share. I think the epidemic First of all, to your question, Ethan, your first question is that it seems pretty apparent that our clients have turned quite conservative in terms of investment preferences.
spk04: But we have tried our best to exit some of the products that are already earning profits and distribute that back to our clients. But it seemed our clients are more conscious this year in terms of the health check of their overall asset allocation strategy. So obviously, we have noticed a shift to holding cash or allocating more assets towards insurance products, as well as some of the trust structural design to have segregation of assets from more risky returns. So that shift is actually pretty obvious, I would say. And in terms of outlook of the COVID-19 situation, it seems that it's probably not too big a question when there probably would be different cities and towns that have, you know, continuous but, you know, obviously occasional shutdowns towards the 20th annual conference, annual national conference. But we also actually looking at that as opportunity where actually people get shut off from the, you know, offline activity. They probably intend to trade and allocate a little bit more online and also is more willing to engage in interactions with us in terms of the knowledge sharing. Okay, so that's the first question. And second question, in terms of the cost of the fourth quarter, it's actually a little bit of, I guess, a mix of seasonality and also the result of transformation. First of all, the fourth quarter is actually typically the conventional season where we have a pretty high number of annual client activities, including a series of Black Card Gala events in Guilin in December, as well as the separate Diamond Card client conferences across our city. So that actually accounted for quite a bit of increase in marketing expenses. And two, it's also part of the result of transformation when we actually upgraded the compensation scheme of Redition Managers. As you probably are familiar with that, that we have increased the fixed pay of RIM by close to 30%. We did the first batch in the upper half of the year, and also the rest of the 11 regions and cities actually also came into program in fourth quarter. So obviously that also increased expenses of the fourth quarter. And looking forward at 2022, we'll continue to actually monitor the expenses, but it seems the heights in terms of in the transformation in the composition mechanism will not, you know, peaky as in the fourth quarter. And obviously, looking at the margin, we'll continue to actually maintain a pretty prudent attitude towards the uncertainties in the year of 2022. Okay.
spk02: Thank you, Mr. Wang. Thank you, Mr. Wang. Thank you, Mr. Pan. That's all from me. Thank you, Ethan.
spk08: As a reminder, if you would like to ask a question, please press star then 1 on your touchtone phone. The next question comes from Emma Zhu with Bank of America. Please go ahead.
spk06: Thank you, Ms. Wang. I have two questions. The first question I would like to ask is, Recently, we have seen the stock market and the stock market fall. How will this affect the performance of the asset management and the performance of the three management people? How will this affect the customer configuration? How will this affect the customer's confidence and the customer's confidence in this investment? This is the first question. The second question is about the cost. RM's number has dropped. So I will briefly translate my question. So the first question is that recently we've seen China ABR as well as Hong Kong stock pool them significantly. So how will it impact the performance of Gophers AOM as well as the products of the third-party managers? And how will it impact the investment behavior of your client? Second question is related to your cost. I see that you booked a large credit cost for your lending business. So how is the progress of restructuring of your lending business? And will you continue to book more credit costs for this business going forward? And we see that your net margin declines to around 21% to 22% in the fourth quarter. Can you give us some guidance that you want to keep the net margin between 32% to 35%? Do you continue to expect that? And we see that the number of your IM declines in the fourth quarter. What's the reason behind this? And what's your plan for IM growth in this year? Thank you.
spk09: Okay. Let me answer the first question. I think first of all, we are quite lucky. We had a risk in 2019. We made a lot of adjustments earlier. So we are the luckiest because we don't have the whole amount of real estate. We don't have the real estate debt and the assets related to real estate. So it also protects the client's assets. I know some private banks have a very large share. Therefore, we have a large group of customers this year, which are non-traditional customers. Many customers trust us more through this cycle and see that our direction is more correct. In the process of the fall of the Chinese stock market and the Hong Kong stock market, because we have more assets in the first-class market, So you can also see that in 2021, we withdrew a large amount, a large scale, and also received carry. In fact, it is also to make the customer feel at ease. Then there are some that have not been withdrawn. In general, it is relatively early in the cross-season, and the holding cost itself is also relatively low. So I feel that market fluctuations will definitely affect the assets of customers, but in general, our customers are fine. But I think this thing will also make It's a turning point for the entire client's demand for wealth management. In the past, China's private bank high-tech clients were more interested in revenue, high revenue, or double. Now they're all protecting their assets. They're more inclined to be more conservative. So Gefei's transformation in the past few years has positioned itself as a client's wealth base. You see, no matter if we're doing special opportunities, secondary funds, or market-level funds, And then including these early technology fund cross-week And our secondary market target return target strategy In fact, it is all about controlling the return and the replacement of customer assets with non-target transfers So last year and this year Including our strategic products in 2020 are shareholding Last year, it was also positive revenue I think it's still very protective of customers' assets Then we have some third-party funds I don't think so. Without liquidity, this may also be a good thing. We believe that the market will also develop in a good direction. But indeed, there are some setbacks recently. So in general, I feel that the entire portfolio of Luoya, whether it is Luoya or Gefei, is relatively easy to respond to this market this year. Other questions, please contact Panqing.
spk04: First of all, I think, in 2019, when we actually started transformation, I, you know, was pretty lucky that they gave us actually room and time to adjust the product mix. And as of, you know, end of 2021, we have pretty much completed you know the first of all private credit products as well as any credit exposure that relates to real estate which actually made our portfolio pretty you know stable for our clients and two is that we also actually noticed probably there will be emergence of a new group of clients that also have experienced you know some of the losses that they may have experienced from other institutions where they actually have investments in the so-called non-standard private credit products. And this will be a new group plan to actually help to, you know, probably with their allocation of assets this year. In terms of portfolio of Gopher and NOAA, as you know, that majority of the assets are The AUM that we have is within the primary market, the PE products. But also in the year of 2021, we have exited some of the products actually for our clients to materialize the gains on the products that they have. So I think overall for the clients of NOAA, they're in an okay position comparing to the volatility we have seen on the public market, especially recently. But one of the things that we have noticed, obviously, is that the demand on the asset allocation have obviously taken a turn in face of such high level of volatility and uncertainties. They're probably very much risk-averse and also have demonstrated high interest in terms of protection and allocation type of products. And one of the main key transformation initiatives for Gopher is to become the fundamental layer of choice for a client's asset portfolio. For example, the secondary key products, which actually generates quicker cash returns for our clients, as well as the target return products and also some of the balanced portfolio products, that generates moderated returns but at the same time probably gives them a better stability in terms of the asset. And we did notice that some of the products that would help distribute, you know, some of the products actually still show a pretty resilient return, including the CPA type of products and also multi-strategy products. that actually still have maintained a small but positive return as of yesterday, recently. So obviously that strategy is working in the highly volatile market. But again, I think the fact is for some of the deep value blue chip type of products probably are experiencing a little bit difficulty. But again, some of the major hedge funds that we held for our clients are you know, actually has a three-year lockup period, probably at this time of uncertainty and volatile period, it probably also provides another layer of protection for clients' assets. So, overall, for the clients that NOAA has, we believe they're probably in an okay and better position than the rest. So, moving on to your second question, Emma. In terms of the credit loss on the loan products is that we actually proactively have retracted from the original loan products. If you recall in 2019 that we actually have issued products on the loan on the back of some of the real estate products and we have decided Moving on to your second slide, we have decided to actually seize the offering overall of similar products. In terms of restructuring, we're probably going to continue to exit this type of product. We have pretty much, based on the valuation model that we have worked with our audit, the majority of the credit loss have been computed. We don't foresee a large increase in that type of reserve going forward as we are now continuing to expand that business. What was your third question, Emma?
spk06: The third question is about your net margin. You previously guided to keep it at 22%, 35%, but it falls to 21% in first quarter. And why there is a decline in the number of relationship managers in first quarter? Thank you.
spk04: Sure. Yeah, for the net margin, as I have actually explained in Ethan's question, first of all, it's actually a pretty concentrated marketing season. So basically a series of marketing conferences, including the offline Black Card Gala and also the galas in separate cities. So that's one thing. And two is that the increase in RM's fixed pay, so that obviously the last batch, which is also half of the population of RM that joined the reform also actually added a little bit pressure on the cost in a single quarter. But when we are talking about the net margin, we usually take a look at the margin from the annual budget process. We still actually aim to maintain around 30% or to 35% operating margin for the year. So I guess fourth quarter is a low quarter, but overall we're probably, I think close to 28, 29% of overall operating margin. From that standpoint, that's still the goal that we're maintaining. And two is that in terms of RM, we did have some proactive adjustments in terms of the RM mix, as we have mentioned in the transformation when we're actually forming the triangles. We are actually only appointing, I guess, the high-performing risk managers into the direct client interface or AR account representative. So there has been quite a bit of regrouping activities, especially when absorbing the last half of the arm group into the reform. So there's becoming a little bit of volatility in terms of it's a mix between when they're adjusting to the new reform and also the proactive adjusting on the low-performing, you know, relatively low-performing R&D. But at the same time, we continue to put in, you know, pretty reasonable amount of budget for recruiting in 2022. And we believe, actually, the market is a good timing for us to probably heighten the investment in terms of talent acquisition in 2022. So we'll see a moderate increase in the total number of R&D But I guess at the same time, we're actually very being selective in terms of getting some of the talents they probably wouldn't have had the opportunity to acquire in a normal market condition.
spk06: Got it. Thank you.
spk04: No problem, Emma.
spk08: As a reminder, if you have a question, please press stars and one to be joined to the queue. The next question comes from Andrew Carrion with MS Value. Please go ahead.
spk01: Hi. Thank you for taking my question. I was hoping to ask a question on capital allocation. You all have an exceptionally strong and clean balance sheet, which I think is a testament to really the quality of the business with over $500 million in U.S. dollar cash. and your headquarters, which I think you purchased just this past year, against virtually no debt on the business. And even with the strategic investments and talent that you've made, it sounds like you're projecting still quite a healthily cash flow positive year next year. With the volatility that we've seen in the share price, you could spend just a bit of that cash and have that be quite accretive if it goes towards share repurchases. And I know at the end of 2020, I think you all spent about $100 million on share repurchases at prices that were a 30 to 40% premium to where the stock price closed today. So I was hoping to understand the willingness to maybe look at capital allocation in the terms of some return to shareholders in that form.
spk04: Thank you, Andrew. So thanks, Andrew. I guess to put it in a simple way, that's definitely one of the considerations that we have and also one of the topics we have discussed extensively. on internal meetings. So obviously I'm very conscious of the ROE of our stock, and at this time it seems it's at a very low point. And I guess I'm actually not at the convenience of comment too much on this, but I just wanted to assure the shareholders and analysts we're definitely keeping that in mind and the timing is right. we are planning to install some shareholder return mechanism that will be probably including, you know, all kinds of tools that we have, but we have to wait for the right timing and understand the, I guess it's also a reflection on management style that we're all trying to keep, you know, abundance of liquidity to cope with the uncertainty of the market, but at the same time, I'm also very conscious of creating value and also returns for our shareholders.
spk01: Okay, that's helpful to understand. Thank you. Thank you.
spk09: I am very optimistic about the company. I think it may be the best time for us. First of all, we set out in the morning. Secondly, we did not waste the crisis that we encountered in 2019. From the sales drive of the product to the transformation of the customer center, we protected the assets of the customers in the process of this big drop. I believe that the growth of our exclusive customer base and the customer's trust in us, Okay. So, you know, Chair Lady Wai actually supplemented some color on this question.
spk04: First of all, I think especially on the side of the stock price, I think for the Chinese SPIs overall, that's a low point. That's probably majority of the value is not correctly reflected. But for management and for charity, we're still very optimistic about our future and especially the industry and also the company's position in this particular situation. And I guess we're lucky that we started transformation probably two years earlier. And we have no burden, you know, no matter from, you know, balance sheet side or portfolio of AUM. And we actually managed to protect, you know, the majority of the client's assets through this wave of uncertainty. It's probably some of the volatility. And as you can see, evidenced by the returning of especially the core group of clients, which is probably the competitive, where the competitor is putting all the resources trying to gain, when we still made about 18% increase in core client group in the year of 2021. So I guess we're in a pretty good position. And also, Chair Lady Wang mentioned that she is also the biggest shareholder of the company, obviously, very much conscious of the value creation and return for our shareholders.
spk01: Thank you for the additional call. Very helpful. And yes, I think it's undoubted that, you know, operationally, you all have been exceptional in terms of execution. And as a shareholder, it's been fun to watch and congratulations on all the success. I think from a shareholder's perspective, seeing some of those positive signs on a capital allocation front would be the cherry on top and I think even more pointing towards the optimism. So we'll look forward to the future with much joy. So thank you very much for answering the question.
spk04: Great. Thanks, Andrew.
spk08: This concludes our question and answer session. I would like to turn the conference back over to Grant Pan for any closing remarks.
spk04: Great. I don't have any more remarks, and thank you, everyone, for your time. And, you know, we have separate conferences scheduled, and we'll talk to you soon on those calls. Thank you.
spk08: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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