Good day, and welcome to the Noah Holdings Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chairlady Wang. Please go ahead.

[Foreign Language] On today’s conference call, first I’d like to talk about my observation of the micro environment, then report on Noah’s overall results in 2021 and performances of major business segments. Our CFO, Mr. Pan Qin 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 interaction point in the evolution of business model. The loose supervision cycle ended and the sales orientation became the past. The underlying assets provided by domestic private banks to clients migrated from real estate bonds to NAV based bonds, 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 ageing population and increase residence wealth is helping continuous growth of 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 easingwill 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 -- over capacity, as well as resource industries with high pollution and high energy consumption. After a long-term the firm adjustments, 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 irritably -- sorry, iteratively. The industrial competitiveness will be significantly improved. Small and medium sized enterprises will continue to be active and enjoy a low tax rates, manufacturing, exports 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 NOAH 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 utilizes multi-strategy portfolio allocation strategy in the primary market, adopts the strategy to pay more attention to the cross-cycle early investments in hard technology. In 2021, Noah made a great step forward to successfully transformed from non-standardized products to NAV-based products and further optimized the asset location for clients. We also internally and structurally promoted the transformation from product-driven to client-centric. Despite the impact of the epidemic, Noah 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, Noah achieved net revenues of RMB4.3 billion, an increase of 30% year-on-year and achieved a non-GAAP net income attributable to shareholders RMB1.4 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 all success of business is inseparable from the trust of our clients. Currently, Noah's asset under advisory is approximately RMB280 billion, over 85% of which are private equity and private secondary products with local periods. With respect to the overseas market, in 2021, we reported a net revenue of RMB1 billion, a 38.6% growth year-on-year and a 7% growth compared to the 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 valuation reached RMB14.3 billion, a big increase of 61% year-on-year. The overseas AUM was RMB28.4 billion, accounting for 18.2% of the total AUM of the group, representing an increase of 14% from the end of 2020. I thank Noah's overseas colleagues for their outstanding achievements under the influence of the epidemic. In terms of core business data, the net revenue of wealth management segment reached a RMB3.2 billion up 35% of year-over-year, the transaction value of financial products was RMB97.2 billion, a slight increase of 2.6% year-over-year, among which private equity was RMB18.1 billion up 1.1% year-over-year. Private secondary funding standardized products was RMB37.8 billion up 7.6% -- 7.4% year-over-year. Mutual funds was RMB37.2 billion, a slight decrease of 2.1% year-over-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 reach RMB4.2 billion a year-over-year increase of 35% In 2021, the high net worth clients of Noah continued to grow and remained active. The number of total active clients including mutual fund-only clients exceeded 42,000 people up 25% year-over-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 card clients increased by 14%, a growth that exceeded our expectations. The fact that the three main categories of client’s number reached record high again, indicates our client ventures and transform has been well received by other clients. The transformation of our marketing strategy gives birth to the Noah Triangle service model, which focuses on coordinated business development and professional specialization, it’s proved to be effective in upgrading our service quality and enhancing client stickiness. In 2021, we also launched the 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 aim to help improve the investment and operating efficiency of corporate cash and to satisfy their needs for working capital management. By the end of 2021, small 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. The asset management business reported a net revenue of RMB1.04 billion, an increase of 19% year-on-year, Gopher’s AUM increases slightly by 2%, reaching RMB156 billion, with continued optimize asset mix. To be specific, the AUM of private equity was RMB131 billion, up 11% year-on-year. Public securities was RMB11 billion, up 13.4% year-on-year, while real estate assets decreased by 48% year-on-year to 6.6 billion, including US 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 has delivered steady investment performance. Among them, the annual return of Gopher Megatrend MOM manager’s found was 14.2%, exceeding the benchmark return rate by 9% during the same period. Gopher’s top 30 front [ph] hedge funds posted an annual return of 13%, beating the benchmark rate by 4.5% during the same period. Gopher’s overseas selected ESL [ph] funds annual return rate was 16%, exceeding the benchmark by 10.5% during the same period. It is worth mentioning that Gopher’s wealth stabilizer 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 control the pullbacks amid market volatilities for clients. In terms of private equity, Gopher continued to promote the establishment and investments of funds of funds as secondary funds and co-investment funds. Funds of 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 FOF 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 venture capital funds and Gopher New York's Real Estate Fund have achieved large scale successful exits from certain projects in 2021 with excellent investment returns. Gopher has constructed an effective investment research system and team composed of fund research team, MicroStrategy research team and industry research team. A process and integrated product development process has been implemented for all funds managed by Gopher around the world. In 2021, in accordance with our plan with strategic progression, we finished as a reform of qualification systems for relationship managers, and greatly increased the base salary for them. The company continuously makes a strategic investment in three areas; including client interface, technology system and investment research. In 2021, the number of backhaul 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 in key cities, the improvement of technology and investment research capabilities, so as to pave the ground for long-term healthy and unsustainable growth of Noah, while maintaining profit growth at a reasonable level. Since 2014, Noah has been publishing the Noah 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, and honor for the first time to be awarded to a private financial company in China. In 2021, we launched the special ESG functions on our domestic fund and overseas Noah platforms. Among the Gopher 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, Noah has organized to plant forests and consists of approximately 360,000 trees in the Tengger desert and identified 23 rate theses through Noah's Ark Biodiversity Conservation project. In 2021, verified by the international certification body SGS, Noah obtained the company's wide greenhouse gas emission information certification of international standards, certification systems latest carbon verification qualification and reporting standard ISO 4140641-2018, becoming the first enterprise in China to practice version of the standard. In addition to focusing on sustainable development and fulfilling corporate social responsibility, Noah 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 Noah, female executives accounted for 37% and there is no significant gender base income gap. They're also one-third of female members of the company's Board of Directors. Noah also won the UN Women Asia-Pacific WEPs award for transparency and reporting China this year, marking the only enterprise to win the award in the country. I’d also like to give you an update on our status on the Holding Foreign Companies Accountable Act. The SEC estimated that 273 registrations might be identified as Commission-Identified Issuer under the Act. We anticipate that, a large number of US-listed companies with operations in Hong Kong and other parts of China, will be added once we file our annual report with SEC around April this year. The Act is part of a continued regulatory focus in the United States on access to audit 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 US securities exchanges, if the auditor of the covered issuer’s financial statements is not subject to infection by the US Public Company Accounting Oversight Board for three consecutive years, beginning in 2021. Noah Holdings maybe provisionally named as a Commission-Identified Issuer, following our filing of Annual Report on Form 20-F at the end of this month with SEC. Thus, our company's American depositary shares may face the risk of being de-listed from the New York Stock Exchange in early 2024. In addition, legislation is being considered in the US 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. In 2021, we repositioned Noah to focus on serving global high net worth clients as a one in 100 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, Noah 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 interests of most clients and created long-term value for them. In 2022, Noah will continue to understand and reflect on the wealth management industry, understand the changes and variants in the market and client means in variance in the market and client needs. Respect common sense, respect markets, 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 our 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. Noah will continue to work in the direction of being committed, specialized and in depth to achieve 1 meter wide and a 1.000 meters deep, fix 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, Noah's positioning is clearer and more focused. The brand vision of Noah is wisdom beyond wealth, devote ourselves to creating a legacy for generations to come. Now, please welcome our Group CFO, Pan Qin to report on detailed financial performance in 2021. Thank you.

Thanks, Sonia. Thank you, Chairlady, and hello investors and analysts. Looking back at 2021, it's been a very challenging year, as supply chain inflationary pressure for this hit globally amid new variances and outbreaks of COVID-19, coupled with stricter regulatory policies in many industries, and at bumpy equity markets. And it's also what makes us so special that the young but vibrant Noah has accomplished a record setting year with unprecedented achievements across revenue and profits, benefiting from a well executed client-focused strategy and our investment 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 were RMB1.3 billion, up 30% year-over-year and also the highest since listing. That's just not 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 RMB1.3 billion, recurring service fees were RMB2.1 billion, up 9% year-over-year, as a result of a larger asset based we managed for our clients. Performance based income achieved another milestone, amounting to RMB780 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 with RMB1.2 billion, down 5% year-over-year, due to increased talent retention and acquisition efforts, continuous strategic investments in client experience to better meet the evolving needs of our high networking clients, as well as expenses incurred related to our new headquarters renovation. For instance, we increase our investment in technology investment research talents by RMB120 million as part of talent acquisition strategy. In 2021, we continue to set aside a strategic budget totaling RMB1.3 -- RMB133 million, which accounted for about 3% of annual net revenue, covering key initiatives, including client acquisition, client interfaces, digitalization, development of new products, compliance transformation, as well as operational enhancements in key city and regions. I'm happy to note that these investments have harvested excellent results, as we have accomplished prominent in improvements in technology infrastructure and investment research capabilities, as well as record breaking growth, card client group and overall client activity. Investment income was RMB65 million compared to a loss of RMB86 million from 2020. Equity in earnings affiliates more than tripled to RMB302 million from previous year. These were mainly attributable to fair value adjustments made to the group's direct investments and the underlying assets of Gopher’s funds. We recorded a non-GAAP net income of RMB1.4 billion for the year, a 22% increase year-over-year with a profit margin of 32% and 6% over the upper end of annual guidance. We plan to continue our strategic investments in areas where we can 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 RMB3.2 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 core clients. Total active clients, including mutual fund clients during the year was 42,764 at 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 a 18% increase overall, by deepening our wallet share of existing clients and effective new client acquisition strategy. That includes more targeted marketing spending, more high quality offline client activities, refined client centric progress empowered by our Noah Triangle service model, as well as digitalized time management, and analyst tools essentially indicating effective client centric reform. Total Transaction Value for 2021 was RMB97.2 billion, up 3% year-over-year. We noticed and respect the client's flight to safety sentiment in interest and market volatilities and successfully allocated more insurance products, while maintaining slight increases in private equity and private secondary funds product. Net revenues from the asset management business were RMB around 1 billion, up 19% year over year. We continue to exit private credit product assets and real estate assets in 2021 and successfully maintained a marginal growth 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 RMP 7 billion. Despite the COVID-19 pandemic, our overseas business post exceptionally strong growth which 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 1300 standardized products, our offshore online platform at Noah 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 industry one time Commission RMB 479 million, up 76% year over year and 123% quarter of quarter recurring income, with RMB 558 million, up 28% year over year and down 2% quarter of a 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 activities include a series of Black Card and diamond events as well as increased iron commissions in relation to higher insurance sales in the quarter. As a result, operating profits want to be 132 million down 61% year over year, 42% quarter to quarter. Non GAAP net income, on the other hand was RMB 290 million, up 10% year over year and 2% quarter of a quarter as equity earnings of affiliates increased by 300% year over year and 150% quarter of a quarter to RMB 161 million due to favorable fair value adjustments made to the underlying assets of Gopher. The bumpy equity market throughout the quarter led to swift shift in investment preference from our clients resulted in a 13% 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 the 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 RMB10.9 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 cash when facing uncertainties, but also considering to, install long-term shareholder return mechanisms when the timing is right. Looking forward, we're likely see another year mixed with uncertainties and market volatility and perhaps escalated frequency of disruptions that travel and commuting when China adjust to post-COVID-19 times. The chair lady has mentioned, our clients have demonstrated high risk averse preferences and we're committed to refining our Client Services and product offering, 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, hedge funds, and insurance products. I'm confident they'll continue to deliver growth in 2022, by enlarging core client base, increasing market share, and getting 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 are personally improvements in key cities, incubating innovative products and services, as well as key operational and digital transformations, in an effort to set structural foundation for long-term growth. With that in mind, I would like to announce that the non-GAAP net income guidance for 2022 will be in the range of RMB1.45 billion to RMB1.55 billion, reflecting management's current business outlook. Thank you everyone for listening. I will now open the floor for questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Ethan Wang with CLSA. Please go ahead.

[Foreign Language] I have two questions. The first one is based on the fourth quarter last year and year-to-date market environment, have we seen any change in the product preference in terms of mutual fund and employee segment products? That's the first question. Second question is related -- has been kind of, fast back in first quarter, we mentioned that it's mainly due to talent acquisition. So, just wondering if management can explain more details our strategic consideration behind our cost growth, it doesn't fit in the context of this year's market environment and the COVID situation in China? Thank you.

[Foreign Language] First of all, to your question Ethan -- on your first question is that it seemed pretty apparent that our clients have turned quite conservative in terms of investment preference. 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 checked of their overall asset allocation strategy. So, obviously, we have noticed the 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 bigger question, when there probably will get different cities and towns that have continuous, but obviously, occasional shutdowns towards the 20th Annual Conference -- Annual National Conference. But we’re also actually looking at that as an opportunity when actually people get shut off from the offline activity. They probably intend to trade and allocate a little bit more online, and also is more willing to engaging interactions with us in terms of the knowledge sharing tips, okay. So that's the first question. And second question in terms of the cost in 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 long as the separate diamond card client conferences across our cities. So that actually accounted for quite a bit of increase in marketing expenses. And two is also part of the result of transformation, when we actually upgraded the compensation scheme of relationship managers, as you probably are familiar with that, that we have increased the fixed pay of RM 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 hikes in terms of in the transformation in the compensation mechanism will not as tricky as in the fourth quarter, and obviously, looking at the margin will continue to actually maintain pretty prudent attitude towards the uncertainties in the year of 2022.

[Foreign Language] That's all for your time, Qin.

Thank you, Ethan.

[Operator Instructions] The next question comes from Emma Liu with Bank of America. Please go ahead

[Foreign Language] So I will briefly translate my question. So the first question is that recently received a China API as well as Hong Kong stock poor than significantly, so how will it impact the performance of Gopher’s AUM, as well as these products of third-party managers, and how will it impact the investment behaviors of your clients? Second question is related to your cost. I think that the books are large, correct, because for your lending business, so how is the progress of restructuring of your lending business and do you continued -- were you continued to book more credit costs for the business going forward. And we see that your net margin declined 21% to 22% -- 21% to 22%, in fourth quarter, previously you guided that you wanted to spend net margin between 32% to 35%, do you continue to expect that and we see that your -- the number of your RM declined in the fourth quarter. What's the reason behind it and what's your plans for RM build in this year? Thank you First of all, I think, in Chinese 2019, we actually started transformation, you know, was pretty lucky that they gave us actually room and time to adjust the product mix. And as of the end of 2021, we have pretty much completed -- the first of all private credit products, as well as any credit exposure, that relates to real estate, which actually made our portfolio pretty stable for our clients. And two, was actually noticed probably will be emergence of a new group of clients that also have experienced, some of the losses that they may have experienced from other institutions, where they actually have investments in so called non-standard private credit products. And this will be a new group clients who actually help to probably with their allocation of assets this year. In terms of portfolio of Gopher and NOAH, as you know, that majority of the asset, the AUM that we have is within the primary market, the P-products, but also in the year of 2021 we have exited some of the products actually, for clients to materialize the gain on the products that they have. So I think overall for the clients of NOAH they're in the okay position, comparing to the volatility we have seen on the public markets, especially recently. But one of other 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 probably very much risk averse, and also have demonstrated high interest in terms of, protection and allocation type of product. And one of the main key transformation initiative 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 moderate returns, but at the same time probably give them a better stability in terms of the assets. And we did notice that some of the products that would help distribute, 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 them to beat various 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, actually has a three-year lockup period, probably at this time of uncertainty and volatile period and probably also provides another layer of protection for clients assets. So overall for the clients that no one has, we believe they're probably in okay and better position than the rest. So moving on to your second question, Emma, in terms of the credit loss on the loan product 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 relative products. And we have decided moving on to your second question, we have decided to actually seize the offering overall of similar products. So in terms of restructuring, we're probably going to continue to exit this type of products. And we have pretty much based on the validation 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 continue to expand our business. What was your third question, Emma?

The third question is about your net margin, if we decided to keep it as 30% to 35% as to 21% in first quarter, and why there is a decline in your number of relationship managers in both quarters? Thank you.

Yes. For the net margin as I have actually explaining Ethan's question. First of all, it's actually pretty concentrated marketing season. So basically a series of marketing conferences, including the offline black card clients, and also the cards in separate cities, so that's one thing. And two is that the increase in fixed pays so obviously, the last bench [ph], which is also half of the population of volume that joined the reform also actually add a little bit pressure on the cost in the single quarter. But while we are talking about the net margin, we usually take a look at the margin from the annual budget process, which still actually aims to maintain around 30% or to 35% operating margin for the year but I guess fourth quarter is a low quarter. But overall, we're probably -- I think close to 28% 29% of overall operating margin. So from that standpoint, that's still the goal that we're maintaining. And two is that in terms of our 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 plan [ph] book, we are actually only appointing I guess, the high performing register managers into the direct client interface or AR account representative. So there's -- there has been quite a bit of regrouping activities, especially when absorbing the last half of the RM group into the reform. So there's becoming a little bit of volatility in terms of a mix between when you're adjusting to the new reform and also the proactive, adjusting on the low performing -- relatively low performing RM. But at the same time, we've continued to put in pretty reasonable amount of budget for recording 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 RM. 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.

Thank you.

No problem, Emma

[Operator Instructions] The next question comes from Andrew Clareon with MF Value [ph]. Please go ahead.

Hi, thank you for taking my question. I was hoping to ask a question on capital allocation. You all have a exceptionally strong and clean balance sheet, which I think is a testament to really the quality of the business with over US$500 million in 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 but if it goes towards share repurchases and I know at the end of 2020, I think you all spend about US$100 million on share repurchases at prices that were a 30% to 40% premium to where the stock price close 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.

Thank you, Andrew. [Foreign Language] So thanks, Andrew. I guess to put in a simple way that's definitely one of the considerations that we have and also one of the tops that 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 am actually not at the convenience of comment too much on this, but I just wanted to share the shareholders and analysts, we're definitely keeping that in mind on the timing as well we are planning to install some shareholder return mechanism that will be probably including 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 our management style that will find to keep 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.

Okay. That’s helpful to understand. Thank you.

Thanks, Andrew.

[Foreign Language] Okay. So, Chairlady Wang supplemented some color on this question. First of all, I think especially, on the side of the stock price, I think for the Chinese FPIs overall at low point that's probably majority of the value is not correctly reflected. But for management and virtuality, 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 to have formation, probably two years earlier. And we have no burden, no matter from balance sheet side or portfolio of AUM, and lastly managed to protect, the majority of the client's assets through this wave of uncertainty is probably some of the volatility. And, as you can see evidence by the returning, especially the core group of clients, which is probably the competitive, where the competitors putting all the resources trying to gain when was still made about 18%, increasing close to client group in the year 2021. So I guess we're in a pretty good position. And also Chairlady Wang mentioned that, she is also the biggest shareholder of the company, obviously, very much conscious of the value creation for and return power shareholders.

Thank you for the additional color very helpful. And yes, I think it's undoubted that 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 shareholders perspective, seeing some of those positive signs on a capital allocation front, would be the cherry on top and even I think even more pointing towards the optimism. So we'll look forward to the future with much you must realize. So thank you very much for answering the questions.

Great, thanks, Andrew.

This concludes our question-and-answer session. I would like to turn the conference back over to Grant Pan for any closing remarks.

Great, I don't have any more remarks. And thank you, everyone for your time. And we have several conferences scheduled. And we'll talk to you soon, on those calls. Thank you.

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