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Noah Holdings Limited Announces Financial Results For The Second Quarter Of 2011

Mr. Tom Wu, Chief Financial Officer, said, “We achieved a very strong quarter with over US$1.2 billion transaction value, revenue growth of around 199.1% year over year and non-GAAP net income of US$9.3 million. This reflects the strength of our increasing platform and brand with our clients and product providers.”

SECOND QUARTER 2011 FINANCIAL RESULTS

Net Revenues

Net revenues for the second quarter of 2011 were US$23.3 million, a 199.1% increase from the corresponding period in 2010. The year-over-year increase was attributable to an increase of US$12.1 million in one-time commissions and an increase of US$3.4 million in recurring service fees.

Net revenues from one-time commissions for the second quarter of 2011 were US$18.0 million, a 204.6% increase from the corresponding period in 2010. The year-over-year increase was primarily driven by a significant increase in the number of active clients.

Net revenues from recurring service fees for the second quarter of 2011 were US$5.3 million, a 178.4% increase from the corresponding period in 2010. The year-over-year increase was mainly due to the cumulative effect of private equity fund and securities investment fund products distributed previously.

Operating Margin

Operating margin for the second quarter of 2011 was 45.3%, as compared to 30.4% for the corresponding period in 2010. Operating margin increased year-over-year primarily reflecting the Company’s robust revenue growth and, to a certain extent, improving economies of scale.

Operating cost and expenses for the second quarter of 2011, including cost of revenues, selling expenses, G&A expenses and other operating income, were US$12.7 million, a 134.8% increase from the corresponding period in 2010.

Cost of revenues for the second quarter of 2011 totaled US$4.4 million, a 224.0% increase from the corresponding period in 2010. The year-over-year increase was primarily due to increases in product-specific marketing costs and compensation expenses paid to relationship managers mainly as a result of the expansion of the Company’s relationship managers and the increase of the aggregate value of wealth management products distributed in the quarter.

Selling expenses for the second quarter of 2011 were US$4.8 million, a 193.6% increase from the corresponding period in 2010. The year-over-year increase was primarily due to increases in personnel expenses, general marketing expenses and rental expenses as a result of the Company’s network expansions. Selling expenses as a percentage of net revenues for the quarter was 20.4%, as compared to 20.8% for the corresponding period in 2010.

G&A expenses for the second quarter of 2011 were US$3.6 million, a 43.2% increase from the corresponding period in 2010. The year-over-year increase was primarily due to increases in employee compensation expenses attributable to G&A expenses, and to a lesser extent, due to increases in audit fees and investor relations expenditures, partially offset by a decrease in share-based compensation expenses. G&A expenses as a percentage of net revenues for the quarter was 15.6%, as compared to 32.6% for the corresponding period in 2010. The decrease of G&A expenses as a percentage of net revenues was mainly due to the Company’s robust revenue growth and, to a certain extent, improving economies of scale.

Gain (Loss) on Change in Fair Value of Derivative Liabilities

In the second quarter of 2011, the Company did not record any charge on change in fair value of derivative liabilities as it did for the corresponding period in 2010. The series A preferred shares that had triggered the accounting treatment of derivative liabilities were converted into ordinary share upon the Company’s initial public offering, so there is no such charge after the Company’s initial public offering in November 2010. In the second quarter of 2010, a gain of US$0.2 million was recorded.

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