Noah Holdings Limited

Good day and welcome to the NOAA Holdings Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then 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 touch-tone 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 Melo Xi, Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning and welcome to NOAA's 2023 Second Quarter Earnings Call. I'm Melo Xi, Director of Investor Relations and NOAA Group. The presenters joining us today are Ms. Wang Jingbo, our co-founder, chairlady, and CEO, and Mr. Glenn Pan, our CFO. Before we start, we'd like to kindly remind you that during today's call, we may make forward-looking statements based on our current expectations of the business. Please keep in mind that these statements are subjected to risks and uncertainties that may cause no actual results to differ from these statements. We do not undertake any duty to update these statements. For discussion of some of the key risks that could affect results, please see the Safe Harbor Statement section of our 6-K filing. will also refer to certain non-GAAP measures and you will find recommendations in our 6K report made available on the financial report section of NOAA's investor relations website. Also, please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in any NOAA or NOAA affiliated products. This call is copyrighted material of NOAA and may not be duplicated without consent. Please also be aware that the link to a live webcast with presentation materials is available on our investor relations website. With that, I would like to welcome our chairlady and CEO, Ms. Wang Jingbo. Chairlady, hand it to you now. Thanks.

Thank you, Lino. Today's phone call, I would like to talk about the thinking of the macroeconomic economy and the financial management industry, the internationalization of Norway, and report on the overall performance of the first half of the year and the development of major business units. Next, I would like to ask Pan Qing to introduce the financial information of this quarter to you. Finally, we will have a Q&A session. In the second quarter of 2023, we observed that China's high-end customers' concerns about geopolitical conflicts and global economic recession have surpassed inflation, which has become the core problem that high-end customers in Asia are most concerned about, and has become a key factor in their consideration of strategic asset allocation. At the same time, due to the innovation and breakthrough of AI technology driven by CHAT-GBG, and other high-end asset managers who are familiar with VC and other first-class market investments. For the new technical cycle and investment opportunities that it may bring, we are looking forward to it and hope that it will be set up. The high uncertainty of Hongguan has given space for multi-discipline and multi-agency configuration strategies to play. We recommend that high-end and family customers in Luoya conduct strategic asset configuration analysis and adjustment at this critical point. First of all, it is the basic safety analysis of all aspects. for the agenda of today's conference call.

Thank you, Chair and AD. For the agenda of today's conference call, I'd like to start with my thoughts on the macroeconomy and the wealth management industry. NOAA's progress in our global expansion plan and then report on the overall performance of the first half of the year and the development of our business units. Then Mr. Graham Pan, our group CFO, will present the financial information, followed by a Q&A session. In the second quarter of 2023, we observed that the geopolitical conflict and global economic slowdown has replaced inflation as the top concerns for Chinese handover investors. And they are taking account of these considerations when actively adjusting their asset allocation strategies. At the same time, due to the innovations and breakthroughs in AI technology driven by Chad GPT, Hannaworth clients who are familiar with primary market investment, such as venture capital, are also hoping to take part in this new round of technology advancement cycle and the investment opportunities that comes along the way. A diversified asset allocation strategy in terms of geography and asset classes become increasingly important amid heightened level of macroeconomic uncertainties. We recommend the NOAA's high net worth clients to review their portfolios, starting with running through a checklist across all aspects of their network, ensuring sufficient allocation in the 15-net portion, coupled with multi-strategy investment to capture cross-cycle growth opportunities, achieving an anti-fragile strategic and tactical asset allocation.

In China, we have also noticed that some financial management companies and some trust-based non-targeted products have been facing a crisis. I would like to specifically explain that NOYA has been working on its business since 2003. For the past 20 years, it has always been at the bottom line of regular work and respects the common sense of the financial industry. Since the first day of the business, it has never set up a capital pool, does not provide customers with high-end financing, does not have products with wrong deadlines, does not insist on not doing the right thing, does not expect any form of customer capital cross-border operation, etc. We insist on the research and product quality as the priority, continue to deepen the investment education, and satisfy the customer's financial management needs with professional asset allocation capabilities. Based on the construction and investment of headland and soil, as well as the preemptive judgment of the management system on the red line, since 2016, we have gradually withdrawn the asset category of housing and real estate. The category of fund products has reached 98.7% of the overall profit of rural customers, and has been completely withdrawn to date. Mano?

We are also aware of the recent deep payment defaults by certain wealth management companies and trust product platforms on their non-standardized private credit products. I would like to point out that NOAA, since its establishment in 2003, has been sticking to our founding principles and the common practices of the financial services industry for 20 years. From the inception of our company, we have insisted on the segregation of clients' capital maintaining separate custodian accounts for our asset management products, no leverage funding for clients, no products with maturity mismatches, and no cross-border fund movement transactions. Together with our continued devotion to investing in research capabilities, such principles not only established us as a pioneer in terms of compliance and vision, but also bolster our capacity to navigate economic headwinds and shield our clients' hard-earned capital through professional asset allocation advisories. Thanks to our continued devotion to strengthen our investment research capabilities, coupled with our management's forward-looking macroeconomic judgments, in 2016, we started to wind down our exposure in residential property assets. We have fully exited this asset class, and among the clients who invested in this type of products, 98.7% were profitable. After the Kamsing incident in 2019, We also started to wind down as fully exited, non-standardized private credit exposure, or so-called trust products. During this exit process, although we experienced short-term hardships and lost some of our clients and employees along the way, we have successfully completed the standardization transformation in 2021, nonetheless, which was proven to have effectively safeguarded our clients' wealth amidst recent challenges faced by this asset class.

In terms of Taiwan's data, in the first half of 2023, the total revenue of the company was 17.5 billion yuan, which increased by 13.8%. Among them, domestic business contributed 10.04 billion yuan, which accounted for 59.2%, which fell by 13.4%. With the continuous investment of Luo Ya International in channel products and comprehensive services, overseas business contributed 7.1 billion yuan, which increased by 104.1%. The total gross profit ratio has increased from 22.6% last year to 40.8%. In terms of units, the wealth management unit contributed 13.3 billion yuan, which is a 22.5% increase. Among them, domestic business contributed 7.7 billion yuan, which is a 4.3% decrease. Overseas business contributed 5.7 billion yuan, which is a increase in the size of overseas products and comprehensive service revenue, which increased by 96.4%. A total of 3.9 billion yuan for asset management, a return of 5.4 percent. A total of 2.4 billion yuan for domestic business, a return of 31.2 percent. A total of 1.5 billion yuan for overseas business, a growth of 140.3 percent. This is mainly due to the growth in the size of overseas asset management. In terms of comprehensive services, the protection and productivity of wealth is still the most concerned financial management needs of high-quality customers and families. In the first half of this year, the total growth of domestic insurance economic business was 10.6 percent. 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 We will effectively integrate the client's program report with the CCI configuration tools. Based on the flow management, growth configuration, guarantee transfer, and the four-layer account configuration of the four-layer account of the four-layer account of the four-layer account of the four-layer account of the four-layer account of the four-layer account of the four-layer account of the four-layer account In terms of financial performance, the company recorded overall net revenues of RMB 1.7 billion in the first half of 2023, up 13.8% year-on-year.

Domestic business contributed RMB 1.0 billion, accounted for 59.2%, down 13.4% year-on-year. With our continued investment in distribution, product selection, and comprehensive services, overseas business contributed RMB 714.9 million, up 104.1% year-on-year, and increased its share of the group revenue to 40.8%, from 22.6% last year. By segment, wealth management segment contributed RMB 1.3 billion, up 22.5% year-on-year. The domestic portion contributed RMB 769.9 million, down slightly by 4.3 year-on-year, while due to the expansion of overseas product offerings and comprehensive services income, overseas portion contributed RMB 566.8 million, up 96.4% year-on-year. Asset management segment contributed RMB 389.9 million, down 5.4% year-on-year. Domestic portion contributed RMB 241.9 million, down 31.2% year-on-year, while overseas portion contributed RMB 148.1 million, up 140.3% year-on-year. mainly due to the increase in overseas AUM. In terms of comprehensive services, wealth preservation and inheritance remain the most concerned wealth management needs among high net worth clients and families. In the first half of this year, revenues contributed by domestic insurance brokerage business grew 54.6% year-on-year. Overseas insurance, family trusts, and other comprehensive services grew by 380.8% year on year, with the number of active clients in this segment increasing over six times, thanks to the growth of operations in Hong Kong and Singapore offices. For the first half, we achieved operating profits of the group of RMB 628.3 million, with an operating margin of 36.0%. For our domestic wealth management business, With the migration of domestic high-network clients to Tier 1 and central hub cities, as well as more supply of talent, we continue our strategy to focus on and expand our presence in China's Tier 1 and central hub cities by increasing the recruitment of top-tier talent, enhancing the asset allocation capabilities and service qualities of our relationship managers, strengthening investment and research capabilities, and providing customized asset allocation solutions to our clients with the help of our CCI model. By the end of the quarter, the number of domestic RMs stood at 1,319, up 5.1% year-on-year and 1.5% quarter-on-quarter. In terms of domestic online wealth management, through continuous investments in technology infrastructure, we have effectively integrated our client's portfolio report with CAC, CCI Allocation Tools, which provides recommendations for clients' four types of wallets, namely liquidity management, growth investments, protection inheritance, and safety net portfolio. During the first half, transaction value of mutual funds exceeded RMB 22 billion, up 14% year-on-year, while the transaction value of private secondary products exceeded RMB 8.5 billion, up 33.6% year-on-year. In terms of corporate and institutional clients, the Smile Treasury platform, which was launched in 2022, has successfully attracted nearly 6,000 clients on board. During the first half, active clients increased by 73.7% year-on-year, with an average client AUA of nearly RMB 600,000. Chairlady? Dear Lady, turning to you now.

Hong Kong and Singapore's financial management team has 56 customer managers, with a return of 100%. We also plan to open a customer service station in Los Angeles and Dubai in the second half of 2023 to better serve and cover the financial management needs of Chinese people around the world. By the end of the second quarter of 2023, the number of open customers in Hong Kong and Singapore reached 12.8% and 185.2% respectively. The number of international customers exceeded 13,600. Customers with full-time levy reached 2.6 billion U.S. dollars in the amount of AOM deposits managed by Loia, which is 20.4% in return. The total number of customers reached 471 people, which is 44% in return. 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 In the capital management section, Gefei's total asset management is 1,568.5 billion RMB, which is 0.9% of the total growth. At the same time, Gefei has formed three strategic customer departments in Shanghai, Hong Kong, and Singapore. All members come from investment, consulting, buying and selling, or working background. Not only can we collaborate with domestic and international financial institutions to provide strategic customers with exclusive diversified customized asset configuration services, and Gefei. In the first half of 2023, Gefei's targeted product management team, under the guidance of long-term revenue maximization and feedback fluctuation control and long-term revenue maximization, increased revenue in dynamic configuration and high fluctuation strategy. In the first half of the year, the targeted strategy actively increased annual revenue by 4.04% and annual fluctuation by 6.31%. The balance-type annual revenue is 8.01%, the annual fluctuation rate is 5.56%, and the downfall rate is 1.17%. The stable-type annual revenue is 8.98%, the annual fluctuation rate is 2.06%, and the downfall rate is 3.63%. The overseas AUM of Gefei International Autonomous Management Products has reached $47.2 billion, accounting for RMB 342.5 billion. On the international wealth management side,

We continue to implement our private banker recruitment program in Hong Kong and Singapore. By the end of the quarter, we have 66 relationship managers in Hong Kong and Singapore, up 100% quarter on quarter. We're also in the process of setting up client service stations in Los Angeles and Dubai, which should be completed in the second half of 2023 to better serve the global wealth management needs of Chinese clients around the world. As of second quarter of 2023, NOAA International had more than 13,600 international clients, with the number of clients in Hong Kong and Singapore grew by 12.8% and 185.2% year-on-year, respectively. Clients AUM with NOAA on a discretionary investment basis reached US$262 million, up 20.4% quarter-on-quarter. And the cumulative number of clients for these products reached 471, up 44% quote-unquote. In terms of international online wealth management, we successfully launched our InoaOne account platform, an integrated account solution that provides multi-domain and multi-asset class allocation for NOAA's overseas clients. We also successfully connected nine systematically important banks globally through our nominee accounts, effectively reducing the time and cost of opening and managing separate bank accounts for global clients. Active clients for overseas mutual funds reached 1,956 people, a significant increase of 465.3% year-on-year. Transaction value reached US$609 million, an increase of more than 700% year-on-year. International small treasury business also began to show significant progress and so far have successfully attracted more than 170 overseas corporate and institutional clients. The transaction value of the first half reached over US dollar 73 million, an increase of 193.5%. On the asset management side, Gopher's total AUM was RMB 156.9 billion, up 0.9% year on year. Meanwhile, Gopher has established three strategic client groups based in Shanghai, Hong Kong, and Singapore, with team members coming from diverse backgrounds, including investment banking, consulting, buy-side and sell-side investment research, and family offices. This not only enables Gopher to cooperate with domestic and international wealth management teams to provide exclusive, diversified, and customized asset allocation services for strategic level clients, but also to actively explore opportunities in expanding overseas institutional and family offices' clients by leveraging Gopher's diversified, actively managed products at home and abroad. In the first half of 2023, Gopher's actively managed target strategy product team dynamically deployed high volatility strategies to enhance portfolio returns while balancing pullback and volatilities to maximize long-term returns. During the first half, its active investment product achieved 4% annualized return, annualized volatility of 6.3%, and Sharpe ratio of 0.4. Its balanced investment product achieved an 8% annualized return, 5.6% annualized volatility, and Sharpe ratio of 1.2. Lastly, its stable investment product achieved a 9% annualized return, 2.1% annualized volatility, and a Sharpe ratio of 3.6. Overseas AUM of Gopher International's active managed products reached US dollar 4.7 billion, equivalent to RMB 34.3 billion, up 15.8% year on year. And its proportion of the group's total AUM also increased to 21.8%. In 2023, We strengthened the screening, coverage, and launching of top-tier global hedge fund managers, as well as the introduction of U.S. dollar structure products. We effectively completed our overseas product matrix. Chairlady.

In terms of ESG, we continue to promote the combination of investment products and ESG concepts. Since the end of 2022, Kefei and Relian Real Estate Management Co., Ltd. have cooperated to launch ESG second-tier products. In the existing basic have integrated the ESG assessment mechanism in the quantitative strategy, maximizing the country's momentum for investors, such as carbon neutralization and other key ESG issues. The long-term investment benefits brought about by the development of the ESG issue. ESG stocks have added a fundamental quantitative advantage, which is driven by two directions, which is to help investors reduce the risk of recalling at the same time as bringing higher returns in the long term. As of July 2023, it should be seen that the total net profit of nearly 100 million, which is more than 14% of the total revenue, and Hu Sen 300. As an independent financial management institution, LOIA can survive for a long time. It is fundamental to stick to the core strategy of customer-centered survival, stick to the common sense and bottom line thinking of the financial industry. Financial management, asset management, and comprehensive service are three types of business. For LOIA, they are complementary, so that we can fully meet the needs of different customers, individuals, institutions, families,

In terms of ESG, we continue to promote the integration of investment products with the ESG concept. Since the end of 2022, Gopher has launched an ESG public market product in cooperation with Brilliant Asset Management, which integrates ESG evaluation framework. into fundamental quantitative strategy. Maximizing long-term investment returns amid the state's efforts to promote the development of various segments of key ESG initiatives, such as carbon neutrality. As of July, we have cumulatively raised nearly RMB 100 million for this product, with a cumulative return of over 14%, outperforming the CSI 300 benchmark index over the same period. In summary, NOAA's long-term success as an independent wealth management firm lies in its adherence to our core strategy of client-centric survival at the bottom line, as well as respecting the common senses of the financial services industry. Our three complementary business segments, including wealth management, asset management, and comprehensive services, not only enable us to fully meet the needs of a diverse range of clients, including individuals, institutions, and family offices, but also brings a greater degree of inherent stability and balance to our business. Next, I would like to ask CFO Grant Pan to present the financial performance in detail. Thank you all.

Thank you, Melo. Thank you, Chair Lady, and hello, investors and analysts. With the lifting of travel restrictions the second quarter, So steady recovery on track. And the contribution of contract-related activities, contact-related activities to economic growth also expanded, as evidenced by a 5.5% year-over-year increase in GDP in the first half of the year. Despite more active domestic economic activities, the recovery is still at an early stage and being confronted with uncertainties due to a slowing global economy and rising geopolitical concerns. The investment sentiment behind it with individuals still remains at the conservative side as they continue to seek out safe havens and wealth preservation. Our dedicated focus on client focus strategy has paid off. In strong financial numbers showing that we're aligning client best interests with the wealth management vices provided by us for the six months ended June 30, 2023, our net revenues increased by 13.8% year-over-year to RMB $1.7 billion, of which 30.2% came from insurance income, as we have executed our CIO House view on wealth preservation and bottom-line focused asset allocation strategy. Together with our continued investment in talent capital, Global research capabilities and broadened coverage network of top tier global asset managers. Net revenues from overseas business experience rise by 104.1% year over year, accounting for 41% of the group's total net revenue. In the meantime, we're committed to demonstrating the progress in building client channels, resulting in a 13.1% increase in the number of core diamond and black card clients. within active clients, oversee active clients, reached almost 2,000, an increase of 140% year-over-year. Top line-wise, it's encouraging to witness a rather solid recovery in their revenues, mainly driven by expanding distribution of protection-oriented products and the growth in international business. We increased the distribution share of insurance products both onshore and offshore, as evidenced by the quarterly one-time commission fees increased by 95% year over year and 130% quarter over quarter to RMB 400 million, the highest single quarter since 2022. In the first half of the year, one-time commission fees amounted to RMB 580 million, up 87.8% year over year. We expect a gradual recovery investment sentiment in the second half of the year, which may lead to a rebound in growth-oriented investment products. In addition, we have a robust pipeline of client events in overseas markets, which will lead to increased opportunities to the distribution of offshore investment and insurance products to overseas Chinese high-net-worth individual clients. The stabilizing income stream, recurring service fees, was RMB 921 million in the first half of the year, largely stable compared to the first half of last year. Performance-based income was RMB 111 million, down 44% year-over-year due to the relatively muted exit environment. Other service fee income in the first half of the year was RMB 133 million, up 62.8% year-over-year, resulting from more value-added services provided to our clients. Benefiting from our effective cost efficiency strategy implemented in G&A and selling expenses, the first half of 2023 achieved an operating profit of RMB $628 million and a healthy operating margin of 36%, down 1.4% and 5.5% respectively from the corresponding period of last year. This was mainly due to the low phase of 2022 under strict restrictions on traveling and client activities, as well as higher government subsidies during COVID. Our strategy is to be cautious on our overhead expenses while still able to invest our resources into client interfaces and international talent acquisitions and operations. The transaction value in the second quarter was RMB $18.4 billion, of almost 10% year-over-year, an aggregate transaction value of RMB $35.2 billion as of the six months ended. In tandem with the expansion of global footprint, overseas transaction value reached US dollar $1.5 billion for the six months ended, equivalent to RMB $10.5 billion, up 162% year-over-year, primarily owing to the introduction of discretionary investment and cash management products that have successfully significantly increased 764.5% year-over-year to nearly US$4.8 billion, equivalent to RMB 3.5 billion. In terms of transaction value in RMB products, our continuous efforts to expand our client base, including both individual and institutional clients, resulted in a 32.2% quarter-over-quarter increase in the transaction value, including both individual and institutional clients, resulted in a 32.2% quarter-over-quarter increase in the transaction value of mutual funds. will maintain a cautious approach of fundraising and investment allocation in other investment products, especially in private equity. That being said, we'll continue to closely monitor the space for attractive opportunities, especially in the technology sector. China's economic recovery continues. From the perspective of segmented results in the first half of 2023, net revenues from wealth management were RMB 1.3 billion, accounting for 76.3% of total net revenues. Asset management net revenues were RMB 0.4 billion accounting for 22.3% of total net revenues. Internationally, we're able to effectively assist our clients in safeguarding their wealth in volatile capital markets thanks to our forward-looking assessment of RMB macroeconomy and advice to clients on wealth preservation in this environment. Dedication to global expansion helped fuel growth in overseas AUM with a 15.8% year-over-year increase to U.S. dollar 4.7 billion as of June 30, 2023. Primarily attributable to our expanded array of offerings including structured products, mutual fund distribution, and private secondary products. Turning to the balance sheet, we have maintained a healthy liquidity position with our current ratio at 3.2 times. The gearing ratio is 19.8% and we have RMB 4.7 billion in cash to further execute our globalization plan. At the end of June, we voluntarily request S&P Global to withdraw its credit rating coverage. which stood at BVB minus with a stable outlook according to S&P given our current capital structure need and no need to raise debt financing in the foreseeable future. In addition, the board has approved a 1 to 10 share split proposal for Hong Kong traded shares in order to lower the investment barrier and increase the trading liquidity of the subdivided Hong Kong shares. Our ADS price traded on the New York Stock Exchange will not be affected, and the conversion rate between Hong Kong shares and ADS will be 5 to 1 after the subdivision takes effect. This plan will be subject to shareholder approval through an extraordinary general meeting, which is expected to take place on October 26, 2023, Hong Kong time. In conclusion, Our performance in the first half of the year has delivered steady growth in revenues and positive progress for our international expansion strategy. Looking ahead to the second half of 2023, we're optimistic that China will continue to produce growth opportunities and are confident that investor sentiment, consumer confidence, and consumption will gradually but steadily improve. Against this backdrop, we're confident that we can better assist our domestic clients optimize their asset allocation strategy and provide more advanced client experiences. On the overseas side, as geopolitical conflicts and financial environment become more unstable, tightening conditions are still seen as top concerns for high net worth individuals across the globe. Not only is their demand for global asset allocation service increasing, for their need to enter global markets as some entrepreneurs is also on the rise, resulting in a faster wealth accumulation effect for our clients in the coming years. We have always evolved our strategy structure and footprint to adapt to changing trends. With more offices and international talent recruitment, we believe this innovation will enable us to attract high net worth and support and will remain committed to creating diversified offerings and long-term value for clients and shareholders. Thank you for your time and we'll now open the floor for questions.

We will begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a paper phone, 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. Our first question comes from Yoyo San with CICC. Please go ahead.

Thank you for giving me this opportunity to ask questions. I am Fan You, a researcher at Zhongjing Company. I have two questions to ask the management. First, the management mentioned that there may be a lot of talk about the collapse of the financial management agency in the mid-term. I would also like to ask the management how we see this event, including the entire industry and how it will affect us. I will translate my class rings. Thanks management for taking my class rings. This is Youyou Fan from CICC. I have two questions here. The first one is regarding the recent risk events faced by the wealth management companies of Zhongxi. So what's the impact on the whole industry and also on our NOIA? The second question is about our coverage network. As we can see, the cities we've covered decreased this culture. So what's our future plan for the domestic cities layout? That's my question.

Okay, thank you, Youyou.

Okay, I'll answer the first question first.

I think the ZHB is very normal. It's a matter of time. Because their model is, one is to make the most profit through real estate, and the other is to gain profits after the stock market comes up through some ST stocks. The rest are basically capital words. So in the past 20 years, you can see that we, have never cooperated with them. And we think this is a matter of leadership. Although during this process, they robbed our financiers, robbed our customers, we just didn't expect them to be so busy for such a long time. So I don't think it has any impact on us. It can even be said that it is a profound investment education. Basically, it belongs to the outside world. During this process, there may be some customers who have overlapping customers, and their assets are also damaged. I think it's a little translation and also supplement from me. It's actually an expected matter. It's probably a matter of time in terms of how the asset is

consist of mostly real property exposure as well as some of the ST or low-price stocks, very heavy investments, and also some probably we think sort of pseudo capital pool. That's in the history. We never had any cooperation with our companies. And I believe it's also a very, I guess, historical moment in terms of investor education. As Warren Buffett has once said, you know, things that are not going to last, it's going to disappear. It's just a matter of time.

There you go. The second question is...

The second question is...

We can see that these high-quality Chinese customers are also setting strong lines Because of the development of Chinese exports and the development of the manufacturing industry So many of our customers in Luoyang First of all, most of our customers are private entrepreneurs So many of them are some invisible rich people For example, the one who pulls chains, the one who makes cups, the one who makes watches Then we also see these customer groups now They are also in the process of urbanization More and more are concentrated in Guangzhou and some big cities and provincial cities in the north After 20 years of transportation, we think that we should follow the customer's footsteps back to the big city, and then focus more on the big city. One is talent, good talent. Our strategy has always been evolving around the whereabouts of our clients. So as we first started,

In this industry, obviously, many of them are entrepreneurs in probably 450 tier cities 20 years ago. But I guess as of now, you know, 2023, most of them already moved into first tier cities. And I believe actually have better talent supplies and probably closer in terms of physical distance to our clients. That's why we're focusing are resources in the top cities in China. And that way, we'll be able to be more efficient and also consolidate our resources in these top cities.

Thank you. Thank you very much. Thank you.

Okay, thank you. Thank you.

Our next question comes from Ji Wang with Morgan Stanley. Please go ahead.

Hello, everyone. I'm Huang Chi Yao, a lawyer in New Zealand. I have two questions for you. One is about the decision of the domestic TVC's entry and exit. I see that the overseas ITO continues to compete with the domestic ITO. There have been some discussions in the past few years. But it seems that the mobility is not as good as it used to be. There may be some difficulties in the exit. Recently, TVC has also started to mention that it will close the IPOs and restrictions. and so on. So, I would like to ask Mr. Wang, what are your initial expectations for the future of PBC? This is the first question. The second question is about some of the cash arrangements on the account. We see that the cash on the account is also relatively large and continues to increase relatively healthily. So, I would like to ask Mr. Wang, what are some of the bigger investments in the future? Or what are some opportunities that may be improved in the future? Thank you. My first question is regarding the management outlook on the PBC investment and exit condition in China, as well as the outlook for the PBC fundraising and product sales in the future, considering the IP environment domestically and offshore. And second question is on the plan for the cash funds that NOAA has. which is quite sizable. And if there's any investment plan or any plan to further enhance shareholder returns.

Thank you. Okay, thanks. I'll have Chair Lillie to answer the first question. I'll take the second question in terms of balance sheet capital.

I think first of all, Luo Ya, we have entered the VCPE industry very early on. In fact, our highest VCPE level should also be 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 The VC industry can promote the country's progress and economic development, including the promotion of technology and cardboard engineering, which is still full of confidence. So at this point, we are still very active in looking at it. Maybe we will invest earlier and use technology as the core, and then use this technology as the core of some of the business. It's not that there's no confidence at all.

So, as you know that, if you're familiar with NOAA, obviously, we have been in this industry, PEVC, actually rather early stage. And the peak, actually, distribution and placement of PEVC came in the year 2017. So, I guess we're still pretty confident in terms of how the portfolio companies are performing. Obviously, people need a better are longer patients in terms of exiting. But as long as you're holding on to the good companies, I would believe things will get on the brighter side in terms of exiting conditions. Another thing is we actually have did a batch of exiting in the year span between 2020 and 2021, where the marking patients were performing relatively well. and Realize Carry Income for both the company as well as the clients. We did a quick survey, historical statistics, if you will, for the past historical investments for our clients. As we mentioned on the call, that the products relating to real properties, actually 98% of investors' clients have benefited, have made a profit on the exits. In terms of VCP existing clients, probably also over 90% are at least profitable in terms of their investment costs. So we're optimistic, although prudently optimistic, about the future of the VCP industry. We'll continue to probably move a little earlier stage in terms of VCP and focusing on technology-based companies. So that's for the BCP question, Zhe Yan. And in terms of the cash on the balance sheet, obviously we plan and consciously maintain a very strong liquidity position. Although the balance sheet under accounting principle shows 4.7 billion, we actually do have another around 300 to 400 million in short-term investments. So the total capital and liquidity position is around 5 billion cash. I think one plan, one part of the plan is obviously to continue to support our international expansion, which obviously have a pretty high demand on capital. And the second time we're also debating to continue to increase probably dividend distributions in the future as we want to make sure that we bring better returns to our clients. So yeah.

Thank you very much. Thank you.

Thank you.

Many shareholders have also proposed to let them go public, because they have a lot of cash on their accounts. It's like how you can use the money you have left behind. A few years ago, maybe these investors were not very willing. Now they are actually very willing to let the shareholders have a return when they are not listed by the way of going public. I think this is also gradually becoming a more restrictive situation.

I think another interesting fact to supplement is that we do put together a dedicated team to work on the exiting of our portfolio companies and we're noticing an interesting trend where probably in the past the founders of these portfolio companies are a little bit reluctant to give cash back to their shareholders as they continue growing. But we believe we're noticing a trend that more and more of them are willing to actually distributing cash and capital back to the shareholders. If the IPO is, you know, the timing of their ITOs are uncertain, they're willing to, you know, giving a little bit more capital back to the shareholders, just like what NOAA is doing. Okay, next question.

Okay, thank you.

Again, if you have a question, please press star, then one to be joining the queue. The next question comes from Peter Zhang with JP Morgan. Please go ahead.

Thank you for the opportunity to ask me a question. I'm Peter Zhang from Morgan Datong. First of all, congratulations to the management team. First of all, congratulations to Noya for achieving very good results. My first question is about the cost of public funds. Since July, Most of the public funds in China have started to pay for the management fee and the payment of the deposit fee. I would like to ask about the influence of the management fund on Noya. The second question is about the future prospects. In the second quarter, we saw that the insurance company contributed a lot of income. In the third quarter, the domestic insurance company stopped the 3.5% guarantee. Let me do the translation. Thanks for giving me the opportunity to ask question. My first question is regarding the mutual fund member fee cut. We noticed that major mutual fund in China has been cutting their member fee since July. We wish to understand what's the potential impact to NOAA. My second question is regarding the second half outlook. We noticed that in second quarter, insurance business contribute a large proportion of the revenue and we noticed that major insurer in China has been stopped selling the 3.5% guaranteed insurance product. We wish to understand what will be the trends in second half for insurance-related business or your revenue trend. Thank you.

Okay, thank you, Peter. I'll take the first question. You know, mutual fund is actually a very important tool for us to attract new capital from the clients or maintain their water share between products. So although obviously we're seeing this trend of downward pressure on mutual fund fees, but the actual contribution of revenue from mutual funds to our group net revenue is actually at a pretty small percentage. The total distribution fee plus the management fee to the contribution of the net revenue actually is less than 5%. So the impact of our 2023 net revenue of the fee downgrading is now going to be more than 3 million RMB. Even when we annualize that, it will be less than 10 million. So I guess the direct financial impact of those net revenue is rather limited, but we'll continue to use mutual fund and continue to expand the distribution and placement as a good way to attract new capital and also I guess maintenance of the existing capital of clients.

我補充一下,我覺得公募基金降費的話, 對於高競資客戶的下單和交易還是有幫助的。 其實你可以看一下很多基金公司的數據, 包括一些大的獨立的基金銷售的平台, 像螞蟻,電電基金, 它可能在基金的交易上都是趨向於飽和了。 In the past, products were driven, for example, a very large fund of 811 billion yuan was on one platform or one or two platforms, which is a relatively large scale of customer losses, which also caused huge pressure on the platform. But in the high-quality customer end of Guo Mu Fund, the scale is relatively small. In the past, Luo Ya was also relatively small. With the reduction of the fee rate and some of the model of the target group, the target strategy investment model of public funds, or even the combination of all-in-one investment-type public funds, high-quality customers are willing to hold this asset. I think it has a great impact and drive. And now customers are also very concerned about the high and low fees. We are very optimistic about the development of the high-end customer side of Guomu Fund, especially after the cost has dropped, but I think the total amount will increase, and customers may move from private and non-professional customers to this direction, so we are even more optimistic at this point.

We also think it's probably going to be helpful for high net for the individuals to attract new orders because some of the mega internet platforms for mutual funds probably has reaching its peak in terms of distribution and maintenance of mutual funds. And many platforms actually, clients may have concentrated portfolio that probably will experience some significant or at least some major losses because of the concentration. But now with IC mode in terms of mutual fund placements and also we believe that high net worth individuals are getting more and more sensitive to the fees associated with mutual funds. So IC model as well as lower transaction costs and friction costs will help them to actually put more investments or transferring more investments from traditional private hedge funds of private equity into more standard and lower cost mutual funds. In terms of the future, I guess for the second half of the year, we know that insurance products from domestic contributed quite a bit of revenue, honestly, to the entire industry for the first half. but I guess for the second half of the year, we'll continue to advise our clients based on our CIO view probably still on a pretty conservative side and oversee insurance products. Influence also diversified. Investment product portfolios will continue to consist of a large part of transaction values of second half.

保险砖以前是我们的一个非主航道的产品吧。 我觉得我们在跟客户推荐保险产品的过程中, 还是有很多都是靠产品驱动的,就好像你谈到, Guobao, 3.5, and so on. But in the past year, we have done a lot of basic infrastructure work. The first is that we have built a product platform that allows us to select and assign different types of insurance products to our customers. The second is that we have increased the type of customers, from high-end customers to some institutional customers. Their property insurance is a multi-faceted configuration. So I think that in the insurance sector, we will make it a main channel very seriously. So also in the past, insurance distribution probably is very helpful

Supplement in total solution to our clients. But mostly in the past, it's either product-driven or campaign-driven like what you have mentioned, 3.5% domestic insurance. But we have been building or putting together a lot of infrastructure and platform around insurance as a total solution to our clients. and also diversify the client types from, you know, purely individual-based to probably more enterprise-based. And we'll continue to build that into one of our primary solutions to our clients. And I guess the way we actually conduct our insurance business is a little different from purely agency-based insurance type of institutions as we do put insurance product strategy as part of the total solution to our clients. Peter?

That's very clear. Thank you. Thank you, Peter.

As we have no further questions, this concludes the question and answer session. and the conference has also now concluded. Thank you for attending today's presentation. You may all now disconnect.