2Q 2017 Investor Presentation Noah Holdings Limited (NYSE: NOAH)
September 2017 Disclaimers
This presentation contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the outlook for 2017 and quotations from management in this presentation, as well as Noah's strategic and operational plans, contain forward-looking statements. Noah may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Noah's beliefs and expectations, are forward-looking statements. Forward- looking statements involve inherent risks and uncertainties. All information provided in this presentation is as of the date of this presentation. Noah undertakes no duty to update any information in this presentation or any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
The presentation contains non-GAAP financial measures that exclude the effects of all forms of share-based compensation and loss or gain on change in fair value of derivative liabilities. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for financial measures prepared in accordance with U.S. GAAP. The non-GAAP financial measure used by the Company may be prepared differently from and, therefore, may not be comparable to similarly titled measures used by other companies. The information contained in this document has not been independently verified. No representation or warranty express or implied is made as to, and no reliance should be placed on the fairness, accuracy, completeness, reasonableness or correctness of such information or opinions contained herein. The information contained in this document should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation. None of the Company or any of their respective affiliates, advisers or representatives shall be in any way responsible for the contents hereof, or shall be liable (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document.
2 Table of Contents
Who We Are
Industry Overview
Overview of Noah
Financial Performance
Appendices
3 WE HAVE BEEN GROWING AT A RAPID RATE
Net Revenues Non-GAAP Net Income(1)
(RMB mm) (RMB mm)
723.0 2,513.6 2,119.9 603.5 479.2 1,528.5 348.2 1,006.0 546.8 169.3
FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16
Transaction Value Gopher AUM
(RMB bn) (RMB bn)
99.0 101.4 120.9 86.7 63.4 44.5 49.7 23.1 31.3 7.9
FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16
Source: Company Filings (1) Representing non-GAAP net income attributable to Noah Shareholders, based on non-GAAP financial measures that exclude the effects of all forms of share-based compensation
4 WE ARE MORE THAN A WEALTH MANAGER
Comprehensive Financial Platform
Wealth Asset Global Internet Financial Management Management Platform Services
• 1H17 Transaction • 1H17 Total AUM at • Noah Hong Kong • 1H17 Transaction Value of USD9.7bn USD20.5bn Value of USD1.9bn • Noah US • Transaction Value • AUM 5-Year CAGR • 2Q17 Average • Ark Trust (HK & 5-Year CAGR 44.7% 97.8% Transaction Value of Jersey) USD40k • 164,728 Registered • 55% AUM in PE • 1H17 Overseas AUM Clients Investment • 438,981 Caifupai* at USD2.7bn Clients
Open Architecture Product & Service Platform
* Caifupai is Noah’s brand for internet wealth management services
5 OUR HISTORY AND KEY MILESTONES
Management NYSE IPO; Launch of Internet Expansion of buyout Establishment of Wealth Management overseas distribution Gopher Asset Business channels; Investment-grade Rating by S&P
Establishment of Noah Establishment of Wealth management Hong Kong; Fund Noah US; division of Xiangcai Sequoia invested Distribution License Establishment of Securities in Noah (No.1) in China Ark Trust (Jersey)
6 Table of Contents
Who We Are
Industry Overview
Overview of Noah
Financial Performance
Appendices
7 STRONG WEALTH CREATION IN CHINA
Number of HNWI(1) in China Total Household Assets in China from 2013 to 2021F HNWI (mm) (RMB tn)
1.9 0.2 1.6 0.1 110 0.1 102 0.1 93 1.0 86 0.1 79 0.1 72 0.7 1.6 64 0.1 1.4 55 0.5 111 49 97 0.1 0.9 85 0.3 73 0.2 0.6 54 63 0.4 46 0.3 28 36 0.2
2006 2008 2010 2012 2014 2016 2017F 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F
RMB 10-50 mm RMB 50-100 mm > RMB 100 mm HNWF Ordinary Families
Source: Bain & Company & CMB report, 2017 Source: Industrial Bank & BCG report, 2017
(1) HNWI stands for High Net Worth Individuals, whose investable assets exceed RMB 10 million
8 INDEPENDENT WEALTH MANAGEMENT COMPANIES GAINING MORE MARKET SHARE
100% Independent wealth managers
80% Foreign private banks
Four state-owned banks
60%
40% Joint-stock commercial banks
20%
0% 2009 2011 2013 2015 2017
Source: Bain & Company & CMB report, 2017
9 HNWIs HAVE STRONG PREFERENCE FOR ALTERNATIVE INVESTMENTS
Global HNWI & Ultra HNWI Asset Allocation Chinese HNWIs’ Plans for Asset Allocation
20% PE/VC -1.4% 70.1% 28%
9% Overseas Assets -2.8% 68.7%
15% 15% Fixed Income -8.6% 53.3%
33% Stocks & Mutual Funds -8.7% 46.1% 46% Gold -10.5% 28.0%
22% Real Estate & RE Funds -20.1% 22.7% 10% 2% HNWI Ultra HNWI Cash Alternatives Increase Decrease Fixed Income International Equities Domestic Equities
Data Source: The Ultra High Net Worth Investor White Paper by KKR (May 2017) Data Source: 2016 Noah Wealth Management White Book
10 WM & AM INDUSTRY FACING UNIFIED SUPERVISION
The asset management industry in China should return to the Beneficiary- Trustee principle -- the investors should bear both investment risk and return, whereas the asset managers should only be remunerated for the management “ services provided. The asset managers shall never guarantee either the principal or the yield but reinforce the client suitability management and investor education. As part of their fiduciary duty, the asset management institutions should put in place a firewall between their asset management business and the proprietary business. Products with expected yields should be gradually phased out and substituted by NAV-based products, with their fair value reflecting the inherent risks of the underlying assets.
— China Financial Stability Report ” PBOC, July 4, 2017 11 Table of Contents
Who We Are
Industry Overview
Overview of Noah
Financial Performance
Appendices
12 OVERVIEW OF WEALTH MANAGEMENT BUSINESS
Transaction Value of Wealth Management Products
(RMB bn)
Fixed income products Private equity fund products 99.0 101.4 Secondary market equity fund products 7.8 Other products 28.1 27.5
63.4 65.6 2.2 8.9 52.6 31.9 17.3 44.5 5.1 12.0 6.4 13.6 64.5 22.6 23.1 45.6 14.4 7.6 35.7 40.2 36.6 10.8 33.1 8.3 14.4 5.9 9.6 2010 2011 2012 2013 2014 2015 2016 1H16 1H17
* Secondary market equity products were included in “other products” before 2013 ** Mutual fund products were not included in “other products” since 2016
13 NATIONWIDE NETWORK COVERAGE & STABLE SALES TEAM
Distribution of Chinese High-Net-Worth 1,259 1.9% 76 205 Families
1,259 1.9% 76 cities 205 # of HNWFs dedicated turnover covering branches <10k relationship rate for top top tier across 10-30k managers relationship cities and China 30-50k 50-100k managers in key >100k 2Q17 provincial capitals Source: Industrial Bank & BCG HNWFs = families with at least RMB 6mn investable assets
Distribution of Noah Branches Noah’s Average Transaction Value per Client (RMB mm) 8.43 7.87 7.49 7.03 7.35
# of Noah branches 1~4 5~9 10~19 2014 2015 2016 1Q17 2Q17 20 or more
14 WEALTH MANAGEMENT FROM PRODUCT DRIVEN TO COMPREHENSIVE SERVICES DRIVEN
Philan- thropic Planning
Immigration Trust & Education Mgmt
Business Estate & Succession Wealth Consulting Transfer
Tax Planning
15 OVERVIEW OF ASSET MANAGEMENT BUSINESS
AUM*
(RMB bn) 138.7 Segment strategy 3.5 • More diversified credit products, 120.9 less real estate exposure • More portfolios, less single 40.7 asset-backed products 27.8 101.2 3.6 • Fund of hedge funds 86.7 • MOM 8.3 18.5 6.9 6.3 15.4 • More commercial, less 10.7 23.2 10.6 residential • More value-added, less project development 21.6 49.7 31.8 • PE/VC FOF 5.7 2.6 • PE/VC secondary funds 31.3 72.2 • Co-investments 3.4 61.7 • Direct investments 31.0 46.8 4.0 7.9 23.9 7.2 10.4 0.7 4.0 2012 2013 2014 2015 2016 2Q16 2Q17
PE RE Public markets Credit Other
* Assets under management figures shown is on historical cost basis, not NAV, except for public market products ** Credit investments were included in “other ” investments before 2Q17, and AUM balance is restated for comparison purpose
16 WE PARTNER WITH LEADING GPs
TOP 20 RMB VC Funds TOP 20 RMB PE Funds 2. Sequoia China (红杉中国)* 2. CDH Investments (鼎晖投资)* 4. Qiming Venture (启明创投)* 3. Hillhouse Capital (高瓴资本)* 6. IDG Capital* 6. IDG Capital* 7. GGV Capital (纪源资本)* 8. Legend Capital (君联资本)* 8. Northern Light VC (北极光创投)* 11. Carlyle Group* 9. Shenzhen Capital (深创投)* 13. JD Capital (九鼎投资)* 10. Legend Capital (君联资本)* 15. Warburg Pincus* 11. Banyan Capital(高榕资本)* 18. CITIC Capital (中信资本)* 12. GSR Ventures (金沙江创投)* Source: China FOF Association 13. SAIF Partners (赛富投资基金)* 15. Fortune Capital (达晨创投)* Source: China FOF Association
TOP 10 USD PE Funds TOP 10 RMB Hedge Funds 1. Blackstone Group* 1. Dapu Fund (大朴资产)* 2. Goldman Sachs 2. Springs Capital (淡水泉投资)* 3. Carlyle Group* 3. Chongyang Inv’t (重阳投资)* 4. KKR* 4. Daoyi Fund (道谊资产) 5. TPG* 5. DF Asset (鼎锋资产)* 6. Oaktree Capital* 6. F&D Assets (富恩德资产) 7. Apollo Global Mgmt* 7. Heju Fund (和聚投资)* 8. Bain Capital* 8. Huizheng Inv’t (惠正投资) 9. Lone Star Funds 9. Elitimes Capital (菁英时代) 10. Warburg Pincus* 10. Greenwoods Asset (景林资产)* Source: Preqin Source: ChinaFund
* Asterisk and bolding indicate the partners Noah and (or) Gopher have cooperated with
17 OUR PE/VC PRODUCTS FOCUS ON NEW ECONOMY SECTORS
Culture & Consumption TMT
Health Light-asset care Real Estate
* Companies shown here are invested by GPs for which Noah helps with fund raisings or indirectly invested by Gopher FoFs
18 NEW REAL ESTATE INVESTMENT STRATEGIES
Gopher Center is the office building acquired and operated by Gopher Asset • Core RE fund • Value-add fund Opportunistic • Property Acquisition: December 2014 • Mezzanine RE strategy • Construction Completion : June 2016 fund • Covered Area: 32 stories, 75,000 square meters • Rent securitization • PERE fund • Cost Base: RMB 42k/square meters Value- creation • RE M&A fund • Comparable Sales Price: RMB 75-80k/square meters • RE opportunistic • Current Rent: RMB 7-9/sqm/day fund • Current Rental Occupancy Rate: 80%+ Acquisition
Key Focus: Acquisition & Management of Existing Properties
Gopher Center
RE Investment Office Building Commercial Property Team Operation Team Mgmt Team
19 DIVERSIFICATION OF FIXED INCOME PRODUCTS
FY2015 Fixed Income FY2016 Fixed Income 1H2017 Fixed Income Product Mix Product Mix Product Mix
Other Other Real Estate Auto Related Non-RE Financing Auto Related Real Estate Financing Mezzanine Related Financing Consumer Supply Financing Chain Real Estate Financing Related Mezzanine Consumer Supply Financing Financing Chain Financing
Supply Chain Auto Financing Financing
Consumer Mezzanine Financing Financing
20 STRINGENT RISK MANAGEMENT PROCESS
Risk Assessment Process at Noah Structuring and Execution Methods
Rating of counterparties
Fund-level Credit Enhancement • Creditworthy counterparties Product issuance External Internal • Structuring to create safety cushion rating rating External Credit Enhancement Assessing & tracking • Collaterals and covenants required outstanding • Guaranteed by listcos & controlling products shareholders
Post-investment Risk Control Risk Mitigation • Internal alerting system and proactive monitoring • Historical “red light products” <1%
Whole process risk management system
21 SECONDARY MARKET PRODUCT HIGHLIGHTS
Gopher Long/Short FOF & MOM NAV vs CSI 300 Hedge Funds Distributed by Noah 80% (May 2015 – May 2017) 60% • 94% outperformed benchmark (CSI Free Float +47% 40% Index -34.7%) +28% 20% • 81% outperformed Chinese hedge funds +5% median (-18.8%) 0%
• 41% outperformed Chinese hedge funds top -20% quartile (-0.7%) Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 • Top 5 products average yield: +34.7% CSI300 Index Top30 FOF MOM
* All the performance results are dated between Jan. 1 2015 and July 28 2017 Mutual Funds Distributed by Caifupai
(June 2016 – June 2017) Gopher Offshore Select Hedge Fund of Funds
• 100% outperformed respective benchmarks & • Past 12 months compound annual return: 19.46% median of peers (June 2016 – May 2017)
• 80% outperformed top quartile of peers • Past 36 months compound annual return: 16.60% • Top 5 products average yield: +19.7% (June 2014 – May 2017) • Top Performing Hedge Funds – Emerging * Source: www.simuwang.com, WIND, Noah CBS Markets Fund of Fund (ranked by Barclay Hedge)
22 NOAH / GOPHER GLOBALIZATION 2.0
About Noah Hong Kong Overseas AUM
Global Family (USD bn) 2.69 Noah WM HK Office 2.43 • Private credit • Family governance 1.98 • Public market solutions • Real estate • Customized insurance • Private equity • Exclusive investor 0.60 • Cash mgmt events
2014 2015 2016 1H17 Noah HK Noah’s Global Platforms Recent Updates
• Global Family Office launched to provide financial services for ultra-wealthy Chinese families HK Gopher HK Ark Trust • Obtained RIA License and Insurance Brokerage • PE/VC Fund-of-funds • Family trust solutions License (HK & Jersey Island) • Based in Silicon Valley to cover USD PE/VC funds • Public Market MOM U.S.A. • Corporate services
• Immigration consulting • Canadian office CEO appointed • Aimed to provide WM services to overseas Chinese Canada
23 CHINESE HNWIs EXPECTED TO MAKE MORE OUTBOUND INVESTMENTS
% 50 Cross-border investments*
42.4 Offshore investments* 2.9 39.8 40 5.6 33.1 2.5 29.5 30 27.8
8.6 22.6 22.1 Representing 20.1 RMB 13 trillion 3.0 18.9 new overseas 20 18.6 39.6 16.0 investments 7.7 1.0 1.0 34.2 7.3 30.5 +4.6 9.4 10 20.9 19.6 17.9 17.5 14.4 4.8 11.8 12.8 6.0 4.3 3.4 0 0.5 Switzerland UK Australia Germany Taiwan Korea India France Japan US China China 2020 2015 Forecast
* Cross-border investments refer to investments conducted via pilot capital account programs such as QDII, QDLP, SH-HK Connect programs; direct overseas investments are classified as offshore investments Source: Industrial Bank & BCG report, 2016
24 OVERVIEW OF INTERNET FINANCIAL SERVICE (IFS) BUSINESS
Transaction data processing Online WM platform and related services Offers mutual fund products and related services Facilitates transaction data processing by transferring targeting mass affluent individuals in China customer data to licensed third-party payment companies
Small short-term loans Online IFA services Provides small short-term loan services as the loan Provide registered independent financial advisors with originator to create synergies with other services online tools to attract and maintain client relationships
Caifupai Operational Metrics IFS Segment Revenues
402,815 425,708 438,981 (RMB mm) 324,918 277,372 51.8 332 269 28,985 240 20.1 180 25.1 26.7 150 147 11.6 18.2 11.6 5.8 7.0 5.5 1.4
2014 2015 2016 2Q16 1Q17 2Q17 2Q16 1Q17 2Q17 1H16 1H17
Transaction value (RMB bn) Average transaction value (RMB '000) Registered clients 25 Table of Contents
Who We Are
Industry Overview
Overview of Noah
Financial Performance
Appendices
26 SOLID 1Q17 PERFORMANCE
Revenues Income from Operations(1)
(RMB mm) (RMB mm) 1,430.3 1,299.3 481.1 421.4 667.0 619.3 664.0 717.1 713.2 256.8 194.1 224.3 310.0 326.9 340.1 588.1 644.9 299.5 344.3 300.6
2Q16 1Q17 2Q17 1H16 1H17 2Q16 1Q17 2Q17 1H16 1H17 One time Recurring Performance-based Other
Net Income Non-GAAP Net Income
(RMB mm) (RMB mm) 463.7 421.6 411.9 368.6
237.2 215.7 205.9 226.5 176.0 197.9
2Q16 1Q17 2Q17 1H16 1H17 2Q16 1Q17 2Q17 1H16 1H17
Source: Company Filings (1) Company received RMB 68.9mm, RMB 14.1mm, RMB 33.9mm in government subsidies in 2Q16, 1Q17 and 2Q17 respectively
27 1Q17 FINANCIAL BREAKDOWN BY SEGMENT
Revenues Income from Operations
(RMB mm) (RMB mm)
1,120.8 999.6 394.4 412.2 374.7 300.6 565.2 555.6 514.9 209.2 167.4 185.2 198.5 200.9 211.3 584.8 644.5 297.5 344.2 300.3
2Q16 1Q17 2Q17 1H16 1H17 2Q16 1Q17 2Q17 1H16 1H17 Wealth Management Wealth One time Recurring Performance-based Other
(1) Wealth management business received RMB 34.2mm, RMB 15.4mm and RMB 9.7mm government subsidies in 2Q16, 1Q17 and 2Q17 respectively
(RMB mm) (RMB mm)
281.5 215.4 257.8 33.6 2.3 148.5 137.5 126.9 130.9 78.7 24.0 244.6 254.9 68.8 69.8 111.5 126.0 128.9
2Q16 1Q17 2Q17 1H16 1H17 2Q16 1Q17 2Q17 1H16 1H17 Asset Management Asset Recurring Performance-based Other
(1) For asset management, one-time commissions are included in other revenues (2) Asset management business received RMB 2.0mm, RMB 18.5mm and RMB 0.0mm government subsidies in 2Q16, 1Q17 and 2Q17 respectively
28 A CASH-GENERATIVE ASSET-LIGHT BUSINESS
Total Assets vs Total Cash Total Assets / Total Equity
(RMB mm) (Ratio) 6,169 6,071 1.72 1.65 4,857 1.59 3,560 4,067 3,458
2,609 1,399 2,004
06/30/2016 03/31/2017 06/30/2017 06/30/2016 03/31/2017 06/30/2017
Cash and cash equivalents Other assets
Return on Asset (Annualized) Return on Equity (Annualized)
(Ratio) (Ratio) 16.5% 27.0% 14.4% 24.8% 24.7% 14.2% 13.5% 14.0% 22.2% 23.4%
2Q16 1Q17 2Q17 1H16 1H17 2Q16 1Q17 2Q17 1H16 1H17
Source: Company data
29 NOAH’S LONG TERM GROWTH DRIVERS
Gaining Market Share
Expanding FY2017 Guidance: Client Segments RMB 825mn to RMB 860mn
Promoting Non-GAAP net income Related attributable to Noah shareholders New Implying 14.1%-18.9% YoY growth Businesses
30 Table of Contents
Who We Are
Industry Overview
Overview of Noah
Financial Performance
Appendices
31 Appendix 1: Major Shareholders
Major Share Ownership As of June 30, 2017
Shareholder Ownership % Title Jingbo Wang* 24.6% Chairman, CEO, Co-Founder Sequoia China 10.6% Frances Chia-Yue Chang 7.6% Chief Marketing Officer Zhe Yin** 5.9% Co-Founder, CEO of Gopher AM Boquan He 5.8% Ward Ferry Management 5.3% Greenwoods Asset Management 4.6% Yiheng Capital 2.9% Tiger Pacific Capital 2.5% Davis Selected Advisors 2.5% Fidelity Worldwide 2.4% Wellington Management 2.3% Total 77.0%
* Under the Dual-Class Share Structure, Class B shareholder Ms. Jinbo Wang has 51% of total voting rights ** Under the Dual-Class Share Structure, Class B shareholder Mr. Zhe Yin has 12% of total voting rights Source: Company data, Nasdaq
32 Appendix 2: Noah’s Licenses and Certifications
Mainland China Hong Kong
● Fund Distribution ● Dealing in Securities (#1)
● Qualified Private Fund Manager ● Advising in Securities (#4)
● Insurance Brokerage ● Asset Management (#9)
● Micro Lending ● Insurance Brokerage
● Financial Leasing U.S.A
Factoring Business ● ● Registered Investment Advisor (RIA) (Supply Chain Financing)
● 3rd Party Payment Business ● Insurance Brokerage
Hong Kong Jersey Island
● Family Trust
33 Appendix 3-1: Management Profiles
Jingbo Wang Zhe Yin Kenny Lam Co-founder, Co-founder, and Group President Chairman, Group CEO CEO of Gopher AM
• Over 20 years of experience • Over 15 years of experience • Global Partner, McKinsey & in asset management and in asset management and Company wealth management services wealth management services • Co-leader , McKinsey Asia • Head of the private banking • Deputy general manager of Financial Services Practice department at Xiangcai the wealth management and Head of McKinsey Asia Securities department at Xiangcai Private Banking and Wealth • Deputy head of ABN AMRO Securities Management Practice Xiangcai Fund Management • Wealth and product manager • Over 17 years of experience Co., Ltd at Bank of Communications in strategic and operational • Head of the asset of China transformations for global and management department at • Executive MBA degree from regional leading financial Xiangcai Securities China Europe International institutions Business School • M.A. (Honors) in Law from Oxford University and B.S. in Finance Magna Cum Laude from the Wharton School of the University of Pennsylvania
34 Appendix 3-2: Management Profiles
Shang Chuang Frances Chang Harry Tsai Chief Financial Officer Chief Marketing Officer Chief Operating Officer
• CEO and Executive Director, • CEO for China, ABN AMRO • COO for North Asia, ABN Noah Hong Kong Asset Management Asia AMRO • Vice President, IBD & Asia • CEO for Greater China and • COO and Executive Vice Private Equity, Bank of South East Asia, Robeco President , Yuanta Securities
America Merrill Lynch • 25+ years of experience in of Taiwan • Over 13 years of experience asset management • 25+ years of experience in in financial services • MA in Library Science from securities, asset B.S. in Finance Magna Cum UCLA management and lending • Laude from the Stern School • M.S. in Chemical Engineering of Business, New York from University of Southern University California • MBA in Finance from University of Illinois, Urbana- Champaign
35