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 Filed Pursuant to Rule 424(b)(5)​
 Registration No. 333-265732​
Prospectus Supplement
(To Prospectus dated June 21, 2022)
NOAH HOLDINGS LIMITED
1,100,000 Class A Ordinary Shares
We are offering 1,100,000 Class A ordinary shares, par value US$0.0005 per share, as part of a global offering, or the Global Offering, consisting of an international offering of 990,000 Class A ordinary shares offered hereby, and a Hong Kong public offering of 110,000 Class A ordinary shares. The public offering price for the international offering and the Hong Kong public offering is HK$292.00 per Class A ordinary share, or approximately US$37.20 per Class A ordinary share based on an exchange rate of HK$7.8498 to US$1.00.
Our American Depositary Shares, or ADSs, are listed on the New York Stock Exchange under the symbol “NOAH.” On July 5, 2022, the last reported trading price of the ADSs on the New York Stock Exchange was US$20.69 per ADS, or HK$324.82 per Class A ordinary share, based upon an exchange rate of HK$7.8498 to US$1.00. Two ADSs represent one Class A ordinary share.
The international offering contemplated herein consists of a U.S. offering and a non-U.S. offering made outside the United States in compliance with applicable law. We are paying a registration fee for Class A ordinary shares sold in the United States, as well as for Class A ordinary shares initially offered and sold outside the United States in the Global Offering that may be resold from time to time into the United States.
Approval-in-principle has been granted by The Stock Exchange of Hong Kong Limited, or the Hong Kong Stock Exchange, pursuant to Chapter 19C of the Hong Kong Stock Exchange Listing Rules for the listing of, and permission to deal in, our Class A ordinary shares under the stock code “6686.”
See “Risk Factors” beginning on page S-35 of this prospectus supplement and in any documents incorporated by reference into this prospectus supplement for a discussion of certain risks that should be considered in connection with an investment in our Class A ordinary shares.
Noah Holdings Limited is a Cayman Islands holding company. We operate our domestic asset management business under the contractual arrangements. In our domestic asset management business, we act as the general partner of relevant investment funds which investment portfolio includes, among others, investments in third-party managed funds and equity investments into private companies. The PRC government regulates certain businesses through strict business licensing requirements and laws and regulations, including restrictions on foreign investment. These third-party managed funds or investee companies may target or operate certain business that are subject to foreign investment restrictions, which may require that investors shall not be foreign-invested enterprises, or FIEs, or their foreign ownership percentage shall be limited to a specified ceiling to the extent permitted by relevant foreign investment regulations. We adopted the contractual arrangements because if we were to conduct our domestic asset management business through our PRC subsidiaries which are FIEs, we may lose the accessibility to the investments in certain businesses that are subject to foreign investment restrictions. Therefore, we rely on the contractual arrangements that we entered into with Noah Investment and its shareholders to carry out our domestic asset management business through Noah Investment and its subsidiaries (the “Consolidated Affiliated Entities”).
The contractual arrangements allow us to consolidate the financial results of Noah Investments and its operating subsidiaries. Our Consolidated Affiliated Entities, Noah Investment and its subsidiaries, generated RMB816.5 million, RMB935.5 million and RMB1,466.7 million in net revenues (after intra-group eliminations) in 2019, 2020 and 2021, respectively, which contributed 24.1%, 28.3% and 34.2% of our total net revenues in the respective years. In addition, we hold the required licenses and permits necessary to conduct our asset management business in China through our Consolidated Affiliated Entities. As used in this prospectus supplement, each of “we,” “us,” “our company,” “our group,” “our” and “Noah” refer to Noah Holdings Limited, its subsidiaries and Consolidated Affiliated Entities. Investors of our ADSs are not purchasing equity interest in our Consolidated Affiliated Entities in China but instead are purchasing equity interest in a Cayman Islands holding company with no direct equity ownership of our Consolidated Affiliated Entities.
Our corporate structure is subject to risks associated with the contractual arrangements with our Consolidated Affiliated Entities. The contractual arrangements may not be as effective as direct ownership in providing us with control over our Consolidated Affiliated Entities and we may incur substantial costs to enforce the terms of the arrangements. Additionally, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. It is uncertain whether any new PRC laws or regulations relating to the contractual arrangements will be adopted or if adopted, what they would provide. If the corporate structure and the contractual arrangements are deemed by relevant regulatory authority or court to be illegal or invalid, either in whole or in part, we may lose control of our Consolidated Affiliated Entities and have
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to modify such structure to comply with regulatory requirements. Further, if the corporate structure and the contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authority would have broad discretion to take action in dealing with the violation or failure, in which case, we could be subject to severe penalties, including being prohibited from continuing its operations or unwinding the contractual arrangements. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. Our Cayman Islands holding company, our subsidiaries and Consolidated Affiliated Entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with our Consolidated Affiliated Entities and, consequently, significantly affect the financial performance of our Consolidated Affiliated Entities and our company as a whole. For a detailed description of the risks associated with our corporate structure, see “Item 3. Key Information — D. Risk Factors — Risks Related to Corporate Structure” in our annual report on Form 20-F for the fiscal year ended December 31, 2021, or our 2021 Form 20-F, which is incorporated herein by reference.
We face various legal and operational risks and uncertainties associated with being based in and having our operations primarily in China and the complex and evolving PRC laws and regulations. The PRC government has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business, accept foreign investments or be listed on United States or other foreign exchange outside of China. For example, we face risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers, the use of our Consolidated Affiliated Entities, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy. In addition, since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is currently not inspected by the PCAOB. As a result, our ADSs may be delisted under the Holding Foreign Companies Accountable Act. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections. Also, the PRC governmental authorities have recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. Any such action could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors. In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline. For a detailed description of risks related to doing business in China, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China” in our 2021 Form 20-F.
The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (United States), or the PCAOB, for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely. On April 12, 2022, we were identified by the SEC under the HFCA Act as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with our filing of the annual report on Form 20-F for the fiscal year ended December 31, 2021. For more details, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — Our ADSs may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect auditors who are located in China. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections” in our 2021 Form 20-F.
Noah Holdings Limited is a Cayman Islands holding company. We rely on the contractual arrangements to carry out our domestic asset management business through the Consolidated Affiliated Entities. Under PRC law, we may provide funding to our PRC subsidiaries only through capital contributions or loans, and to the Consolidated Affiliated Entities only through loans, subject to the satisfaction of applicable government registration and approval requirements. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, our PRC subsidiaries are required to make appropriations to certain statutory reserve funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Prospectus Supplement Summary — Transfer of Funds and Other Assets between Our Company, Its Subsidiaries and the Consolidated Affiliated Entities” in this prospectus supplement.
Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this prospectus supplement or the accompanying prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
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PRICE HK$292.00 PER CLASS A ORDINARY SHARE
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Per Class A
Ordinary Share
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Total
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Public offering price
​ ​ HK$292.00 (1) ​ ​ HK$321,200,000 ​
Underwriting discounts and commissions(2)
​ ​ HK$14.60 ​ ​ HK$16,060,000 ​
Proceeds to us (before expenses)(3)
​ ​ HK$277.40 ​ ​ HK$305,140,000 ​
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(1)
Equivalent to US$18.60 per ADS, based upon two ADSs representing one Class A ordinary share and an exchange rate of HK$7.8498 to US$1.00 as of June 17, 2022, as set forth in the H.10 statistical release of the Federal Reserve Board.
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(2)
See “Underwriting” beginning on page S-85 of this prospectus supplement for additional information regarding total underwriting compensation.
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(3)
Includes net proceeds of HK$30,514,000 from the sale of 110,000 Class A ordinary shares in the Hong Kong public offering.
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We have granted the international underwriters an option, exercisable by Goldman Sachs (Asia) L.L.C., as the sole representative, on behalf of the international underwriters, or the Sole Representative, to purchase up to an additional 165,000 Class A ordinary shares at the public offering price until 30 days after the last day for the lodging of applications under the Hong Kong public offering. An affiliate of Goldman Sachs (Asia) L.L.C. has entered into a borrowing arrangement with Jing Investors Co., Ltd. and Yin Investment Co., Ltd. to facilitate the settlement of over-allocations. The affiliate of Goldman Sachs (Asia) L.L.C. is obligated to return Class A ordinary shares to Jing Investors Co., Ltd. and Yin Investment Co., Ltd. by exercising the option to purchase additional Class A ordinary shares from us or by making purchases in the open market. No fees or other remuneration will be paid by the underwriters to us or Jing Investors Co., Ltd. and Yin Investment Co., Ltd. for the loan of these Class A ordinary shares.
The underwriters expect to deliver the Class A ordinary shares against payment therefor through the facilities of the Central Clearing and Settlement System on or around July 13, 2022.
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Sole Sponsor, Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
Goldman Sachs (Asia) L.L.C.
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
(in alphabetic order)
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BOCI
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DBS
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Joint Bookrunner and Joint Lead Manager
FUTU
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Prospectus supplement dated July 6, 2022.
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You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus, or any other offering materials we file with the SEC. We have not, Jing Investors Co., Ltd. and Yin Investment Co., Ltd. have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent
 
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information, you should not rely on it. None of the underwriters, Jing Investors Co., Ltd., Yin Investment Co., Ltd., or us is making an offer to sell the securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference is accurate only as of each of their respective dates. Our business, financial condition, results of operations and prospects may have changed since those dates. Neither this prospectus supplement nor the accompanying prospectus constitutes an offer, or an invitation on our behalf or the underwriter to subscribe for and purchase, any of the Class A ordinary shares and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.
 
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ABOUT THIS PROSPECTUS SUPPLEMENT
This document consists of two parts. The first part is this prospectus supplement, which describes the specific terms of the Global Offering (as defined in the prospectus supplement under the caption “Underwriting” section) and other matters relating to us and our financial condition. The second part, the base prospectus, presents more general information about this offering. The base prospectus was included in the registration statement on Form F-3 (File No. 333-265732) that we filed with the SEC on June 21, 2022 and has been updated since that time with additional information that is incorporated by reference. Generally, when we refer only to the “prospectus,” we are referring to both parts combined, and when we refer to the “accompanying prospectus,” we are referring to the base prospectus as updated through incorporation by reference.
If information in this prospectus supplement differs from information in the accompanying prospectus, you should rely on the information in this prospectus supplement.
Other than the Hong Kong public offering, no action is being taken in any jurisdiction outside the United States to permit a public offering of the Class A ordinary shares, and no action is being taken in any jurisdiction outside the United States to permit the possession or distribution of this prospectus supplement or the accompanying prospectus in that jurisdiction. Persons who come into possession of this prospectus supplement or the accompanying prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to the Global Offering and the distribution of this prospectus supplement and the accompanying prospectus applicable to that jurisdiction.
You should not consider any information in this prospectus supplement or the accompanying prospectus to be investment, legal, or tax advice. You should consult your own counsel, accountants, and other advisors for legal, tax, business, financial, and related advice regarding the purchase of any of the securities offered by this prospectus supplement.
In this prospectus supplement, unless otherwise indicated or unless the context otherwise requires,
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“active clients” refer to registered clients who purchase one or more investment products distributed or provided by us during a given period, excluding clients in our other businesses segment;
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“ADSs” refer to our American Depositary Shares, two of which represent one Class A ordinary share;
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“assets under advisory” or “AUA” refers to clients’ total outstanding assets managed by Gopher or third party product providers;
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“assets under management” or “AUM” refers to the amount of capital commitments made by investors to the funds we provide continuous management services without adjustment for any gain or loss from investment, for which we are entitled to receive recurring service fees or performance-based income, except for public securities investments. For pubic securities investments, the “assets under management” or “AUM” refers to the net asset value of the investments we manage, for which we are entitled to receive recurring service fees and performance-based income;
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“CAGR” refers to compound annual growth rate, a method of assessing the average growth of a value over a certain time period;
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“China” or the “PRC” refers to the People’s Republic of China, excluding, for the purpose of this prospectus only, Hong Kong, Macau and Taiwan;
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“Class A ordinary shares” refer to our Class A ordinary shares, par value US$0.0005 per share;
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“Class B ordinary shares” refer to our Class B ordinary shares, par value US$0.0005 per share;
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“Companies (Winding Up and Miscellaneous Provisions) Ordinance” refers to the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended and supplemented from time to time;
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“Consolidated Affiliated Entities” refer to Noah Investment and its subsidiaries, all of which are controlled by our company through the Contractual Arrangements;
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“Contractual Arrangements” refer to variable interest entity structure and, where the context requires, the agreements underlying the structure;
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“COVID-19” refers to coronavirus disease 2019, a disease caused by a novel virus designated as severe acute respiratory syndrome coronavirus 2;
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“FOF” refers to fund of funds;
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“HK$” and “Hong Kong dollars” refer to the legal currency of the Hong Kong Special Administrative Region of the People’s Republic of China;
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“HNW” refers to high net worth;
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“HNW clients” or “HNW investors” refer to clients/investors with investable financial assets of no less than RMB6 million;
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“Hong Kong Listing Rules” refer to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to time;
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“Hong Kong Share Registrar” refers to Computershare Hong Kong Investor Services Limited;
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“investment products” refer to products we distribute to clients, such as mutual fund products, private secondary products, private equity products and other products;
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“Listing Date” refers to the date, expected to be on or about July 13, 2022, on which the Class A ordinary shares are listed on the Main Board of the Hong Kong Stock Exchange and from which dealings in the Class A ordinary shares are permitted to commence on the Main Board of the Hong Kong Stock Exchange;
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“Memorandum and Articles” refer to the currently effective fifth amended and restated memorandum and articles of association of our company;
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“NAV” refers to net asset value;
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“Noah Group” refers to Shanghai Noah Investment (Group) Co., Ltd., a limited liability company established under the laws of the PRC on August 24, 2007, and one of the significant subsidiaries;
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“Noah Investment” refers to Shanghai Noah Investment Management Co., Ltd., a limited liability company established under the laws of the PRC on August 26, 2005, and one of the Consolidated Affiliated Entities;
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“Noah Upright” refers to Noah Upright Fund Distribution Co., Ltd., a limited liability company established under the laws of the PRC on November 18, 2003, and one of the significant subsidiaries;
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“NYSE” refers to the New York Stock Exchange;
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“PCAOB” refers to the Public Company Accounting Oversight Board;
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“private funds” refer to investment funds which raise capital through non-public offerings of funds targeting qualified investors;
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“registered clients” refer to clients who have completed a preliminary know-your-client and anti-money laundering review process, but may or may not have purchased any products from us;
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“RMB” or “Renminbi” refers to the legal currency of China;
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“SFC” refers to the Securities and Futures Commission of Hong Kong;
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“SFO” or “Securities and Futures Ordinance” refers to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from time to time;
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“Shanghai Gopher” refers to Shanghai Gopher Asset Management Co., Ltd., a limited liability company established in the PRC on December 14, 2012, and one of the Consolidated Affiliated Entities;
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“Shares” or “ordinary shares” refer to our ordinary shares, which include both Class A ordinary shares and Class B ordinary shares, par value US$0.0005 per share;
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“Takeovers Code” refers to the Codes on Takeovers and Mergers and Share Buy-backs issued by the SFC;
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“transaction value” refers to the aggregate value of the investment products we distribute during a given period;
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“ultra HNW clients” or “ultra HNW investors” refer to clients/investors with investable financial assets of more than RMB50 million;
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“U.S. dollars” or “US$” refers to the legal currency of the United States; and
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“we,” “us,” “our company,” “our group,” “our” and “Noah” refer to Noah Holdings Limited, its subsidiaries and Consolidated Affiliated Entities.
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Our reporting currency is RMB. Unless otherwise noted, all translations from RMB to U.S. dollars in this prospectus supplement were made at a rate of RMB6.3726 to US$1.00, the exchange rate in effect as of December 30, 2021 as set forth in the H.10 statistical release of the Federal Reserve Board. We make no representation that any RMB amounts could have been, or could be, converted into U.S. dollars at any particular rate, or at all. On June 17, 2022, the exchange rate was RMB6.7160 to US$1.00.
All discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.
 
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, in accordance with the Exchange Act, we file annual reports and other information with the SEC. Information that we file with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov.
This prospectus supplement is part of a registration statement that we filed with the SEC, using a “shelf” registration process under the Securities Act of 1933, as amended, or the Securities Act, relating to the securities to be offered. This prospectus supplement does not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information with respect to Noah Holdings Limited and the securities, reference is hereby made to the registration statement and the prospectus contained therein. The registration statement, including the exhibits thereto, may be inspected on the SEC’s website.
 
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INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference” the information that we file with or submit to the SEC, which means that we can disclose important information to you by referring you to those documents that are considered part of this prospectus supplement and the accompanying prospectus. Each document incorporated by reference is current only as of the date of such document, and the incorporation by reference of such documents should not create any implication that there has been no change in our affairs since such date. Information that we file with or submit to the SEC in the future and incorporate by reference will automatically update and supersede the previously filed information. See “Incorporation of Documents by Reference” in the accompanying prospectus for more information. All of the documents incorporated by reference are available at www.sec.gov under Noah Holdings Limited, CIK number 0001499543.
We incorporate by reference the documents listed below in this prospectus supplement.
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Our annual report on Form 20-F for the fiscal year ended December 31, 2021 filed with the SEC on April 6, 2022 (File No. 001-34936), or our 2021 Form 20-F;
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Our current report on Form 6-K furnished to the SEC on June 21, 2022 (File No. 001-34936) including the exhibits thereto; and
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With respect to the offering of the securities under this prospectus supplement, all subsequent reports on Form 20-F, and any report on Form 6-K that indicates it (or any applicable portions thereof) is being incorporated by reference that we file with or furnish to the SEC on or after the date hereof and until the termination or completion of the offering by means of this prospectus supplement.
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As you read the documents incorporated by reference, you may find inconsistencies in information from one document to another. If you find inconsistencies, you should rely on the statements made in the most recent document.
We will provide a copy of any or all of the information that has been incorporated by reference into the accompanying prospectus, other than exhibits to those documents unless such exhibits are specially incorporated by reference in this prospectus supplement, upon written or oral request, to any person, including any beneficial owner of the securities, to whom a copy of this prospectus supplement is delivered, at no cost to such person. You may make such a request by writing or telephoning us at the following mailing address or telephone number:
Noah Holdings Limited
Building 2, 1687 Changyang Road,
Shanghai 200090
People’s Republic of China
+86 (21) 8035-9221
Attention: Investor Relations
 
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SPECIAL NOTES REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus, and the documents incorporated by reference may contain forward-looking statements that involve risks and uncertainties and reflect our current expectations and views of future events. All statements other than statements of historical facts are forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as “may,” “will,” “expect,” “anticipate,” “aim,” “intend,” “plan,” “believe,” “estimate,” “is/are likely to,” “future,” “potential,” “continue,” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements include statements relating to, among other things:
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our goals and strategies;
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our future business development, financial condition and results of operations;
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the expected growth of the industries in which we operate;
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our expectations regarding demand for and market acceptance of the products and services we distribute, manage or offer;
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our expectations regarding keeping and strengthening our relationships with product providers;
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relevant government policies and regulations relating to the industries in which we operate;
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our ability to attract and retain qualified employees;
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our ability to stay abreast of market trends and technological advances;
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our plans to invest in research and development to enhance our product choices and service offerings;
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competition in the industries in which we operate;
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general economic and business conditions in China and internationally;
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our ability to obtain certain licenses and permits necessary to operate and expand our businesses; and
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our ability to effectively protect our intellectual property rights and not infringe on the intellectual property rights of others.
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The forward-looking statements included in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein and therein are subject to risks, uncertainties, and assumptions about our company. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations may differ materially from the forward-looking statements as a result of the risk factors disclosed in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein and therein. You should read thoroughly this prospectus supplement and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
This prospectus supplement contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also includes projections based on a number of assumptions. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions.
We would like to caution you not to place undue reliance on these forward-looking statements. You should read these statements in conjunction with the risk factors disclosed herein, in the accompanying prospectus, and in the documents incorporated by reference herein and therein for a more complete discussion of the risks of an investment in our securities. We operate in a rapidly evolving environment. New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law.
 
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and notes thereto appearing elsewhere in this prospectus supplement, the accompanying prospectus, and the documents incorporated by reference herein and therein. In addition to this summary, we urge you to read the entire prospectus supplement, the accompanying prospectus, and the documents incorporated by reference carefully, especially the risks of investing in our ADSs discussed under “Risk Factors” of this prospectus supplement and under “Item 3. Key Information — D. Risk Factors” in our 2021 Form 20-F, which contains our audited consolidated financial statements as of December 31, 2020 and 2021 and for the years ended December 31, 2019, 2020, and 2021, and our current report on Form 6-K furnished to the SEC on June 21, 2022, are incorporated by reference in this prospectus supplement and the accompanying prospectus. This prospectus supplement contains information from an industry report commissioned by us and prepared by Frost & Sullivan, an independent industry consultant. We refer to this report as the “Frost & Sullivan Report.”
Overview
We are a leading HNW wealth management service provider in China with global asset management capacities. We were the eighth largest wealth management service provider with a market share of approximately 3.7% in China’s HNW wealth management services market, and the largest independent wealth management service provider with a market share of approximately 21.5% in China’s independent HNW wealth management services market, both in terms of total revenues in 2021, focused on serving HNW and ultra HNW investors, according to Frost & Sullivan. We work with worldwide top-tier general partners and fund managers, whom we define as our ecosystem partners, to provide investment products and professional services to our clients through two synergetic business segments, namely wealth management business and asset management business.
We manage wealth for HNW and ultra HNW individuals and institutions by connecting leading asset managers around the world, and thrive to deliver high-quality asset allocation and other comprehensive client services. As a pioneer in China’s HNW wealth management services industry, according to Frost & Sullivan, we are committed to creating value for our clients and have focus on innovation with many market-first achievements. Our digital transformation initiatives enable us to provide professional advices and suitable products to our clients and automate our business operations to improve efficiency.
We operate in 84 cities in mainland China, as well as in Hong Kong, Taiwan, New York, Silicon Valley and Singapore, with our domestic and overseas business accounting for 76.6% and 23.4% of total revenues in 2021, respectively. Through our global network of over 1,300 relationship managers, we distributed RMB97.2 billion (US$15.3 billion) investment products to 42,764 clients in 2021, an increase of 25.0% from 34,213 in 2020, and our AUM reached RMB156.0 billion (US$24.5 billion) as of December 31, 2021. We have demonstrated sustainable and strong growth and profitability. From 2019 to 2021, our total revenues increased at a CAGR of 12.6%, higher than the growth rate of the overall independent HNW wealth management market during the same period.
We have achieved significant growth in scale and profitability since our inception, and maintained robust growth during the years ended December 31, 2019, 2020 and 2021. Our loyal client base and the long duration of most of our investment products have supported a growing and recurring revenue stream. From 2019 to 2021, recurring services fees increased from RMB1,845.5 million to RMB2,109.0 million, contributing to 54.1% and 48.7% of our total revenues, respectively. Our industry leading investment capabilities also allow us to generate sustainable performance- based income, which grew from RMB113.1 million in 2019 to RMB784.2 million in 2021, contributing to 3.3% and 18.1% of our total revenues. During the years ended December 31, 2019, 2020 and 2021, our total revenues slightly decreased by 2.6% from RMB3,413.2 million in 2019 to RMB3,324.7 million in 2020, primarily due to the negative impact from the COVID-19 pandemic, but our total revenues further increased by 30.1% to RMB4,326.6 million (US$678.9 million) in 2021. We recorded net income of RMB863.8 million and RMB1,306.1 million (US$205.0 million) in 2019 and 2021, respectively, and net loss of RMB743.5 million in 2020. The net loss in 2020 was primarily due to the non-cash settlement expense of RMB1,828.9 million attributable to the Camsing Incident. When evaluating our operating performance, our management would also review and consider (i) share-based compensation, and (ii) settlement expense attributable to the
 
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Camsing Incident. In 2019, 2020 and 2021, we recorded share-based compensation expenses of RMB94.9 million, RMB59.8 million and RMB51.0 million (US$8.0 million), respectively. In 2019, 2020 and 2021, we recorded settlement expenses attributable to the Camsing Incident of nil, RMB1,828.9 million and RMB19.9 million (US$3.1 million), respectively.
Our Business Model
We provide comprehensive financial services through our subsidiaries and Consolidated Affiliated Entities, comprising our wealth management business, asset management business and other businesses, to our clients. In 2021, our wealth management business, asset management business, and other businesses contributed to 74.2%, 24.2% and 1.6% of our total revenues, respectively.
For our wealth management business, we distribute a diverse suite of investment products provided by both our ecosystem partners and our asset management arm Gopher, primarily including mutual fund products, private secondary products and other products. These products are carefully selected by our product development team in accordance with the investment objectives and risk appetites of our clients. We generate revenue primarily from transaction- based one-time commissions at the time of purchase, recurring service fees based on total capital commitments or fair value of investments, and sharing of the performance-based income earned by general partners or fund managers. In 2021, the above three revenue sources contributed to 36.8%, 45.8% and 14.6% of the total revenue from our wealth management business, respectively. We also provide other services including, among others, investor education and trust services that are complementary to our clients’ overall objectives around wealth preservation and tailored to their individual circumstances and needs.
To supplement the product portfolio and advisory services provided through our wealth management business, our asset management arm, Gopher, offers proprietary and unique investment portfolio specifically designed for our clients, which mainly include private equity investments through FoFs, feeder funds and S funds, as well as direct and co-investments, public securities investments, real estate investments, and multi-strategy and other investments. In particular, Gopher’s “wealth stabilizer” product, Target Strategy, which utilizes different sub-strategies and active portfolio rebalancing to control volatilities, with its stable strategy funds launched in August 2021 and balanced and positive strategies funds launched in April 2021, achieved cumulative returns of 1.1%, 4.9% and 5.4%, respectively, by the end of 2021, effectively mitigated market risks for clients. Gopher not only invests in funds, but also focuses on developing its direct- and co-investment capabilities to offer unique and sought-after opportunities to clients for investments into promising portfolio companies. As of December 31, 2021, we have directly or indirectly invested in more than 7,000 companies, of which more than 170 had grown into unicorn companies1 and more than 400 became publicly listed companies. Gopher’s products are distributed both by leveraging the established channel of our wealth management business and Gopher’s own direct sales team. By directly participating in a greater portion of the value chain from fund raising, investment, portfolio management to distribution, we believe we maintain stronger connectivity to our clients, are better positioned to anticipate and cater to their needs and achieve enhanced economics for our business. Gopher generates revenue primarily from recurring service fees and performance- based income from funds for which it serves as the fund manager. In 2021, these two revenue sources contributed to 61.1% and 30.1% of the total revenue of our asset management business, respectively.
In addition to our wealth management business and asset management business, we also provide other services through our subsidiaries. These services serve as value-added services that we provide to our clients to broaden and deepen client relationships. In 2019, 2020 and 2021, other businesses represented 8.5%, 1.9% and 1.3% of our net revenues, respectively. Starting from 2019, this segment mainly includes lending business services whereby we made loans secured with collateral including investment products distributed by us and real estate properties, with a typical loan-to-value ratio of below 70%, to creditworthy investors. Since the third quarter of 2019, we have decreased lending businesses as we strategically decided to focus on our core businesses.
We operate our business to cater to the needs of our clients by leveraging (i) our unique ecosystem with leading product partners, including fund managers and top PE/VC general partners, (ii) a diversified product
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1
Refers to companies with valuation over US$1.0 billion.
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mix that contributes to a favorable revenue structure with competitive profit margins and delivers successful investment results, and (iii) significant synergies and high operating efficiency.
Key Performance Indicators
We primarily serve Chinese HNW and ultra HNW clients who reside in China or overseas with total investable assets exceeding RMB6.0 million. In addition to individual clients, we also strategically provide services to certain institutional clients, including entities affiliated with individuals, such as their family offices, as well as other institutional investors. Our client base has experienced significant growth in recent years. The table below sets forth certain information regarding our clients for the periods indicated:
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Year Ended December 31,
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​ ​ ​
2019
​ ​
2020
​ ​
2021
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Number of active clients (excluding mutual fund-only clients)(1)
​ ​ ​ ​ 14,538 ​ ​ ​ ​ ​ 12,161 ​ ​ ​ ​ ​ 12,831 ​ ​
Number of active clients (including mutual fund-only clients)(1)
​ ​ ​ ​ 31,495 ​ ​ ​ ​ ​ 34,213 ​ ​ ​ ​ ​ 42,764 ​ ​
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(1)
Active clients refer to registered clients who purchase one or more investment products distributed or provided by us during a given period, excluding clients in our other businesses segment. Registered clients refer to clients who have completed a preliminary know-your-client and anti-money laundering review process, but may or may not have purchased any products from us.
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Since the third quarter of 2019, we ceased offering private credit products and transitioned to distributing more mutual fund products. The number of our active clients (including mutual fund-only clients) increased from 31,495 in 2019 to 42,764 in 2021 with a CAGR of 16.5%, a reflection of our successful shift in focus from private credit products to mutual fund products. Such transition in product mix, on the other hand, has led to a decrease in the number of active clients who intended for private credit products during the years ended December 31, 2019, 2020 and 2021.
In order to provide targeted and personalized services to our clients, we classify our clients into five categories based on their AUA with us, namely ivory, gold, platinum, diamond, and black card clients, with the black card clients being the highest level. The number of our black card clients and diamond card clients reached 1,722 and 6,475 in 2021, with an AUA per client of RMB76.1 million (US$11.9 million) and RMB16.5 million (US$2.6 million), respectively. The table below sets forth certain information of our core clients as of or for the periods indicated.
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As of/For the Year Ended December 31,
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​ ​ ​
2019(3)
​ ​
2020(3)
​ ​
2021
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Number of black card clients(1)
​ ​ ​ ​ 1,139 ​ ​ ​ ​ ​ 1,250 ​ ​ ​ ​ ​ 1,722 ​ ​
Percentage of black card clients’ AUA
​ ​ ​ ​ 46.1% ​ ​ ​ ​ ​ 41.6% ​ ​ ​ ​ ​ 46.5% ​ ​
Number of diamond card clients(2)
​ ​ ​ ​ 5,235 ​ ​ ​ ​ ​ 5,685 ​ ​ ​ ​ ​ 6,475 ​ ​
Percentage of diamond card clients’ AUA
​ ​ ​ ​ 39.6% ​ ​ ​ ​ ​ 41.6% ​ ​ ​ ​ ​ 37.8% ​ ​
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(1)
Black card clients refer to clients with an AUA of over RMB50 million (approximately US$7 million).
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(2)
Diamond card clients refer to clients with an AUA of over RMB10 million (approximately US$1.4 million) but less than RMB50 million (approximately US$7 million).
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(3)
Starting from the second quarter of 2021, in order to more accurately identify our core client group, we have made certain adjustments to our client membership AUA calculation mechanism to align with the AUA basis for charging recurring service fees. Specifically, private equity products are calculated based on subscription amount while public securities products are calculated based on NAV under the new mechanism. We have also retrospectively adjusted the calculation for the prior periods to conform to the current mechanism.
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We have a proven track record of consistently delivering a broad array of innovative and high-quality investment products and service offerings, which provide comprehensive and tailored investment opportunities to meet the specific wealth management requirements of our clients. Our total transaction value in 2021 was RMB97.2 billion (US$15.3 billion), compared with RMB94.7 billion in 2020 and RMB78.5 billion in 2019. The table below sets out the aggregate transaction value of the different types of investment products that we distributed during the periods indicated:
 
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​ ​ ​
Year Ended December 31,
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​ ​ ​
2019
​ ​
2020
​ ​
2021
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​ ​ ​
RMB
​ ​
%
​ ​
RMB
​ ​
%
​ ​
RMB
​ ​
US$
​ ​
%
​
​ ​ ​
(in millions, except for percentages)
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Product type ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Mutual fund products
​ ​ ​ ​ 15,511 ​ ​ ​ ​ ​ 19.8 ​ ​ ​ ​ ​ 37,981 ​ ​ ​ ​ ​ 40.1 ​ ​ ​ ​ ​ 37,169 ​ ​ ​ ​ ​ 5,833 ​ ​ ​ ​ ​ 38.2 ​ ​
Private secondary products
​ ​ ​ ​ 10,867 ​ ​ ​ ​ ​ 13.8 ​ ​ ​ ​ ​ 35,162 ​ ​ ​ ​ ​ 37.1 ​ ​ ​ ​ ​ 37,776 ​ ​ ​ ​ ​ 5,928 ​ ​ ​ ​ ​ 38.9 ​ ​
Private equity products
​ ​ ​ ​ 14,279 ​ ​ ​ ​ ​ 18.2 ​ ​ ​ ​ ​ 17,876(1) ​ ​ ​ ​ ​ 18.9 ​ ​ ​ ​ ​ 18,069(1) ​ ​ ​ ​ ​ 2,835 ​ ​ ​ ​ ​ 18.6 ​ ​
Private equity products provided by Gopher
​ ​ ​ ​ 13,144 ​ ​ ​ ​ ​ 16.7 ​ ​ ​ ​ ​ 14,442 ​ ​ ​ ​ ​ 15.3 ​ ​ ​ ​ ​ 18,069 ​ ​ ​ ​ ​ 2,835 ​ ​ ​ ​ ​ 18.6 ​ ​
Private equity products provided by third-party product partners
​ ​ ​ ​ 1,135 ​ ​ ​ ​ ​ 1.5 ​ ​ ​ ​ ​ 3,434 ​ ​ ​ ​ ​ 3.6 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Other products(2)
​ ​ ​ ​ 37,867 ​ ​ ​ ​ ​ 48.2 ​ ​ ​ ​ ​ 3,717 ​ ​ ​ ​ ​ 3.9 ​ ​ ​ ​ ​ 4,189 ​ ​ ​ ​ ​ 657 ​ ​ ​ ​ ​ 4.3 ​ ​
All products
​ ​ ​ ​ 78,524 ​ ​ ​ ​ ​ 100.0 ​ ​ ​ ​ ​ 94,736 ​ ​ ​ ​ ​ 100.0 ​ ​ ​ ​ ​ 97,203 ​ ​ ​ ​ ​ 15,253 ​ ​ ​ ​ ​ 100.0 ​ ​
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(1)
Following the enactment of Supervision Measures in October 2020, we ceased offering private equity products through our wealth management business, and our asset management arm started to raise capital for private equity investments directly from our clients. In particular, in 2020, our asset management arm directly raised capital of RMB5.2 billion for its private equity investments. The figures are included in the table for illustration and comparison purposes only.
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(2)
From the third quarter of 2019, we ceased offering private credit products (classified in “other products”) and transitioned to distributing more standardized public securities products. Such decision was based on a combination of (i) our commercial evaluation of the risks related to private credit products and (ii) our understanding and anticipation of the evolving regulatory and market environment following the implementation of a series of laws and regulations.
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In addition, we measure the performance of our asset management business primarily through AUM, which determines the recurring service fees and performance-based income that we are able to collect over the life cycle of the investment products managed by us. Our AUM were RMB170.2 billion, RMB152.8 billion and RMB156.0 billion (US$24.5 billion), respectively, as of December 31, 2019, 2020 and 2021. The table below summarizes our AUM and typical management fee rates chargeable by asset management services provided by Gopher for the last three years:
​ ​ ​
Year Ended December 31,
​
​ ​ ​
2019
​ ​
2020
​ ​
2021
​
​ ​ ​
Typical
management
fee rates
​ ​
RMB
​ ​
%
​ ​
Typical
management
fee rates
​ ​
RMB
​ ​
%
​ ​
Typical
management
fee rates
​ ​
RMB
​ ​
%
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​ ​ ​
(in billions, except for percentages)
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Product type ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Private equity
investments
​ ​
0.6% – 2.0%
​ ​ ​ ​ 109.6 ​ ​ ​ ​ ​ 64.4 ​ ​ ​
0.5% – 2.0%
​ ​ ​ ​ 117.7 ​ ​ ​ ​ ​ 77.0 ​ ​ ​
0.5% – 2.1%
​ ​ ​ ​ 130.9 ​ ​ ​ ​ ​ 83.9 ​ ​
Public securities
investments
​ ​
0.4% – 1.9%
​ ​ ​ ​ 9.3 ​ ​ ​ ​ ​ 5.5 ​ ​ ​
0.4% – 1.4%
​ ​ ​ ​ 9.8 ​ ​ ​ ​ ​ 6.4 ​ ​ ​
0.4% – 1.7%
​ ​ ​ ​ 11.2 ​ ​ ​ ​ ​ 7.2 ​ ​
Real estate
investments
​ ​
0.2% – 2.3%
​ ​ ​ ​ 17.6 ​ ​ ​ ​ ​ 10.3 ​ ​ ​
0.5% – 2.2%
​ ​ ​ ​ 12.7 ​ ​ ​ ​ ​ 8.3 ​ ​ ​
0.5% – 2.3%
​ ​ ​ ​ 6.6 ​ ​ ​ ​ ​ 4.3 ​ ​
Multi-strategies
investments
​ ​
0.5% – 1.1%
​ ​ ​ ​ 8.8 ​ ​ ​ ​ ​ 5.2 ​ ​ ​
0.6% – 1.1%
​ ​ ​ ​ 7.1 ​ ​ ​ ​ ​ 4.6 ​ ​ ​
0.6% – 1.1%
​ ​ ​ ​ 5.9 ​ ​ ​ ​ ​ 3.8 ​ ​
Other
investments(1)
​ ​
0.2% – 1.4%
​ ​ ​ ​ 24.9 ​ ​ ​ ​ ​ 14.6 ​ ​ ​
0.1% – 0.6%
​ ​ ​ ​ 5.5 ​ ​ ​ ​ ​ 3.7 ​ ​ ​
—
​ ​ ​ ​ 1.4 ​ ​ ​ ​ ​ 0.8 ​ ​
All products
​ ​ ​ ​ ​ ​ ​ 170.2 ​ ​ ​ ​ ​ 100.0 ​ ​ ​ ​ ​ ​ ​ ​ 152.8 ​ ​ ​ ​ ​ 100.0 ​ ​ ​ ​ ​ ​ ​ ​ 156.0 ​ ​ ​ ​ ​ 100.0 ​ ​
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(1)
Since the first quarter of 2021, we reclassified all remaining mezzanine financing products linked to corporate merger and acquisitions and buy outs from credit to private equity in the amount of RMB4.7 billion, considering its nature is more akin to equity than credit. We have also revised the comparative period presentation to conform to current period presentation.
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The following table illustrates the movement of AUM managed by Gopher for the periods indicated:
​ ​ ​
As of/For the Year Ended December 31,
​
​ ​ ​
2019
​ ​
2020
​ ​
2021
​
​ ​ ​
(RMB in billions)
​
AUM at the beginning of the year
​ ​ ​ ​ 169.2 ​ ​ ​ ​ ​ 170.2 ​ ​ ​ ​ ​ 152.8 ​ ​
Asset new subscription
​ ​ ​ ​ 36.6 ​ ​ ​ ​ ​ 24.6 ​ ​ ​ ​ ​ 22.0 ​ ​
Asset appreciation(1)
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.1 ​ ​
Asset redemption
​ ​ ​ ​ (36.3) ​ ​ ​ ​ ​ (42.8) ​ ​ ​ ​ ​ (18.9) ​ ​
AUM at the end of the year
​ ​ ​ ​ 170.2 ​ ​ ​ ​ ​ 152.8 ​ ​ ​ ​ ​ 156.0 ​ ​
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(1)
Represents NAV movement of our public securities investments.
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Competitive Landscape
In 2021, HNW wealth management services industry accounted for approximately 23.6% market share in the wealth management services industry in China, in terms of investable financial assets. China’s HNW wealth management industry is mainly composed of private banking arms of financial institutions and independent HNW wealth management service providers. According to the Frost & Sullivan Report, revenues generated by financial institutions and independent HNW wealth management services providers contributed to approximately 83.0% and 17.0% of the total revenues generated in HNW wealth management services market in China in 2021, respectively. Top ten players in China’s HNW wealth management industry accounted for an aggregate of 64.0% market share in terms of total revenues in 2021. The independent HNW wealth management market in China is a concentrated market, with top five players accounting for approximately 63.5% market share in terms of total revenues in 2021.
We were the eighth largest HNW wealth management service provider in China focusing on serving HNW and ultra HNW clients and accounted for approximately 3.7% market share in the HNW wealth management services market in terms of total revenues in 2021, with the top seven all being national bank-affiliated service providers who have different business and distribution models from independent HNW wealth management service providers. We were also the largest independent HNW wealth management service provider in China focusing on serving HNW and ultra HNW clients and accounted for approximately 21.5% market share in the independent HNW wealth management services market in terms of total revenues in 2021, according to Frost & Sullivan.
Our Strengths
We believe that the following competitive strengths contribute to our success and are differentiating factors that set us apart from our peers:
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pioneer and leader in China HNW wealth management services industry;
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high quality and loyal client base;
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unparalleled ecosystem with access to unique investment opportunities;
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industry leading technology infrastructure; and
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visionary management team and “3R”s in the Noah Triangle.
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Our Strategies
To achieve our mission and further solidify our unique position, we intend to leverage our existing strengths and pursue the following strategies:
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maintain and expand client base;
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continuous digital transformation;
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improve research and investment capacities;
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continue to optimize product mix and maintain product leadership; and
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overseas expansion.
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Summary of Risk Factors
Investing in our Class A ordinary shares involves significant risks. You should carefully consider all of the information in this prospectus supplement before making an investment in our Class A ordinary shares. Below please find a summary of the principal risks we face, organized under relevant headings. You should carefully consider the matters discussed under “Item 3. Key Information — D. Risk factors” in our 2021 Form 20-F, “Risk Factors” in Exhibit 99.1 to our current report on Form 6-K furnished to the SEC on June 21, 2022, as well as other documents incorporated by reference in to the accompanying prospectus.
Risks Related to Our Business
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The investment products that we distribute or manage involve various risks and any failure to identify or fully appreciate such risks may negatively affect our reputation, client relationships, operations and prospects.
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Our reputation and brand recognition are crucial to our business. Any harm to our reputation or failure to maintain, protect, promote or enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations.
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If we breach fiduciary duties or other contractual obligations as the general partner or fund managers of the funds, or if our third-party product partners or investment partners engage in illegal activities or market misconduct, our results of operations will be adversely impacted. In addition, misconduct of our relationship managers or other employees, including potential misuse of client funds, could harm our reputation or lead to regulatory sanctions or litigation costs.
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Our businesses may be adversely impacted by general economic and market conditions.
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The performance of our investment portfolio may affect the AUM, revenues and profitability of our asset management business.
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We may not be able to continue to grow at our historical rate of growth, and if we fail to manage our growth effectively, our business may be materially and adversely affected.
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Because a significant portion of the one-time commissions and recurring service fees we earn on the distribution of investment products are based on commission and fee rates, any decrease in these commission and fee rates may have an adverse effect on our revenues, cash flow and results of operations.
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The investment products we distribute are supplied by a limited number of product partners; and the renegotiation or termination of our relationships with such product partners could significantly impact our business.
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Because the laws and regulations governing the industries of wealth management, asset management and other businesses in China are developing and subject to further change, any failure to obtain or maintain requisite approvals, licenses or permits necessary to conduct our operations or any failure to comply with laws and regulations applicable to our business and services could harm our business.
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Some of our clients may redeem their investments from time to time, which could reduce our recurring service fees.
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Our business is subject to risks related to complaints, claims, controversies, regulatory actions, arbitration and legal proceedings.
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Our lending business is subject to credit risks, which could adversely affect our results of operations.
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Our business involves relatively new business models which may not be successful.
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Risks Related to Corporate Structure
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We are a Cayman Islands holding company primarily operating in China through our subsidiaries and Consolidated Affiliated Entities, including Noah Investment with which we have maintained
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Contractual Arrangements and its subsidiaries in the PRC. Investors thus are not purchasing, and may never directly hold, equity interests in the Consolidated Affiliated Entities. There are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to such agreements that establish the Contractual Arrangements for a portion of our company’s China operations, including potential future actions by the PRC government, which could affect the enforceability of the Contractual Arrangements with Noah Investment and its subsidiaries and, consequently, significantly affect the financial condition and results of operations of our company. If the PRC government finds that such agreements do not comply with PRC laws, regulations, and rules, or if these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in Noah Investment and its subsidiaries or forfeit its rights under the Contractual Arrangements.
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We rely on our Consolidated Affiliated Entities to operate a portion of our China operations, which may not be as effective as direct ownership in providing operational control.
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Contractual Arrangements among our PRC subsidiary, Noah Group, one of our Consolidated Affiliated Entities, Noah Investment, and Noah Investment’s shareholders may be subject to scrutiny by the PRC tax authorities, who may determine that we or Noah Investment and its subsidiaries owe additional taxes, which could substantially reduce our consolidated net income and the value of your investment.
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Because certain shareholders of our Consolidated Affiliated Entities are our directors and executive officers, their fiduciary duties to us may conflict with their respective roles in the Consolidated Affiliated Entities. If any of the shareholders of our Consolidated Affiliated Entities fails to act in the best interests of our company or our shareholders, our business and results of operations may be materially and adversely affected.
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If we exercise the option to acquire equity ownership of Noah Investment, the ownership transfer may subject us to certain limitations and substantial costs.
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Risks Related to Doing Business in China
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Our ADSs may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect auditors who are located in China. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections.
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Proceedings instituted by the SEC against certain PRC-based accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the U.S. Exchange Act.
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The approval of or filing with the CSRC or other PRC government authorities may be required in connection with this offering under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
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PRC governmental authorities’ significant authority in regulating our operations and their oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and result in a material adverse change in our operations and the value of our Shares and/or ADSs.
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Our business is subject to various evolving PRC laws and regulations regarding data privacy and cybersecurity. Failure of cybersecurity and data privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.
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Risks Related to Our ADSs, Shares and the Listing
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As a company applying for listing under Chapter 19C, we adopt different practices as to certain matters as compared with many other companies listed on the Hong Kong Stock Exchange.
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The market price for our ADSs may continue to be, and the market price of our Shares can be, volatile.
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There is no assurance if and when we will pay dividends in the future. Therefore, you should not rely on an investment in our Shares and/or ADSs as a source of future dividend income.
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Substantial future sales or perceived potential sales of our shares in the public market could cause the price of our Shares and/or ADSs to decline.
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Techniques employed by short sellers may drive down the trading price of our ordinary shares and/or ADSs.
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Risks Related to the Global Offering
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An active trading market for our Shares on the Hong Kong Stock Exchange might not develop or be sustained and trading prices of our Shares might fluctuate significantly.
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Since there will be a gap of several days between pricing and trading of our Shares, the price of our ADSs traded on the NYSE may fall during this period and could result in a fall in the price of our Shares to be traded on the Hong Kong Stock Exchange.
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There is uncertainty as to whether Hong Kong stamp duty will apply to the trading or conversion of our ADSs following the initial public offering in Hong Kong and listing of the ordinary shares on the Hong Kong Stock Exchange.
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You may experience dilution if we issue additional ordinary shares in the future.
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Our management has broad discretion over the use of proceeds from this offering, and may spend the proceeds in ways with which you may disagree or that may not be profitable.
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Our Shareholding and Corporate Structure
Our Major Shareholders
As of June 21, 2022, Ms. Jingbo Wang, co-founder, chairwoman and chief executive officer, through Jing Investors Co., Ltd., a BVI company beneficially owned and controlled by her through a trust and of which she is the sole director, indirectly held and had interest in 107,456 Class A ordinary shares and 6,730,000 Class B ordinary shares. As of June 21, 2022, Ms. Wang controlled approximately 49.1% of the aggregate voting power in our company. Immediately after the Listing, Ms. Wang will control approximately 21.9% of the aggregate voting power in our company, assuming all Class B ordinary shares have been converted into Class A ordinary shares on the Listing Date, the percentage of issued share capital held by each of the shareholders remain unchanged after June 21, 2022 and before the Listing, the international underwriters do not exercise their option to purchase additional Class A ordinary shares, and no additional Class A ordinary shares are issued under our share incentive plans.
Termination of the Weighted Voting Rights Structure
As of the date of this prospectus supplement and immediately prior to the Listing, our share capital comprised Class A ordinary shares and Class B ordinary shares. Each Class A ordinary share entitled the holder to exercise one vote, and each Class B ordinary share entitled the holder to exercise four votes, on all matters that require a shareholder’s vote. All the Class B ordinary shares were held by the co-founders, namely Ms. Jingbo Wang and Mr. Zhe Yin, as of the date of this prospectus supplement. In order to terminate our weighted voting rights structure for the purpose of the Listing, the co-founders have irrevocably undertaken that they will convert all the Class B ordinary shares held by them into Class A ordinary shares on or before the Listing Date on a one-for-one basis. We have also agreed not to issue any new Class B ordinary shares after the Listing Date. Accordingly, upon the Listing, we will only have Class A ordinary shares in issue, and will cease to have a weighted voting rights structure. Our company will amend the Memorandum and Articles to remove provisions related to Class B ordinary shares in the annual general meeting of our company to be convened after the Listing.
 
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Contractual Arrangements
We operate our domestic asset management business under the Contractual Arrangements. In our domestic asset management business, we act as the general partner of relevant investment funds which investment portfolio includes, among others, investments in third-party managed funds and equity investments into private companies. The PRC government regulates certain businesses through strict business licensing requirements and laws and regulations, including restrictions on foreign investment. These third-party managed funds or investee companies may target or operate certain business that are subject to foreign investment restrictions, which may require that investors shall not be foreign-invested enterprises, or FIEs, or their foreign ownership percentage shall be limited to a specified ceiling to the extent permitted by relevant foreign investment regulations. We adopted the Contractual Arrangements because if we were to conduct our domestic asset management business through our PRC subsidiaries which are FIEs, we may lose the accessibility to the investments in certain businesses that are subject to foreign investment restrictions. Therefore, we rely on the Contractual Arrangements that we entered into with Noah Investment and its shareholders to carry out our domestic asset management business.
Noah Group, Noah Investment and its shareholders have entered into a series of contractual agreements, including an exclusive option agreement, an exclusive support service agreement, a share pledge agreement and powers of attorney. These Contractual Arrangements enable us to (1) have power to direct the activities that most significantly affect the economic performance of Noah Investment and its subsidiaries; (2) receive substantially all of the economic benefits from Noah Investment and its subsidiaries in consideration for the services provided by Noah Group; and (3) have an exclusive option to purchase all or part of the equity interests in Noah Investment when and to the extent permitted by PRC law, or request any existing shareholder of Noah Investment to transfer any or part of the equity interests in Noah Investment to another PRC person or entity designated by us at any time at our discretion. The Contractual Arrangements allow us to consolidate the financial results of Noah Investments and its operating subsidiaries. For the years ended December 31, 2019, 2020 and 2021, net revenues generated from entities we controlled through the Contractual Arrangements amounted to RMB816.5 million, RMB935.5 million and RMB1,466.7 million, respectively, accounting for 24.1%, 28.3% and 34.2%, respectively, of our net revenue.
Below is the simplified structure of the Contractual Arrangements as of the date of this prospectus supplement. Our directors and our PRC legal adviser confirm that there has been no substantial change in the structure of the Contractual Arrangements since our listing in the U.S in November 2010.
[MISSING IMAGE: tm2218258d4-fc_companybw.jpg]
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Note:
(1)
The registered shareholders of Noah Investment consisted of (i) Ms. Jingbo Wang with 46% equity interests, (ii) Mr. Zhe Yin with 12% equity interests, (iii) Mr. Boquan He with 25% equity interests, (iv) Ms. Xinjun Zhang with 4% equity interests, (v) Ms. Yan Wei with 3% equity interests and (vi) Ms. Qianghua Yan with 10% equity interests. Each of Ms. Jingbo Wang, Mr. Zhe Yin and Mr. Boquan He are our Directors. Ms. Xinjun Zhang and Ms. Yan Wei are employees of our Group. Ms. Qianghua Yan is an early and long-term investor in our Group and an Independent Third Party.
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Additionally, we have been advised by our PRC legal adviser that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations, and accordingly, the PRC regulatory authorities or courts may take a view that is contrary to the above opinion of the PRC legal adviser. It is uncertain whether any new PRC laws or regulations relating to contractual arrangements will be adopted or if adopted, what they would provide. If the corporate structure and the Contractual Arrangements are deemed by relevant regulatory authority or court to be illegal or invalid, either in whole or in part, we may lose control of its Consolidated Affiliated Entities and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to its business. Further, if the corporate structure and the Contractual Arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authority would have broad discretion to take action in dealing with the violation or failure, in which case, we could be subject to severe penalties, including being prohibited from continuing its operations or unwinding the Contractual Arrangements.
As of the date of this prospectus supplement, we had not encountered any interference or encumbrance from any PRC regulators in operating our business through Noah Investment and its operating subsidiaries under the Contractual Arrangements.
Our Corporate Structure and Contractual Arrangements with Our Consolidated Affiliated Entities and Their Respective Individual Shareholders
Noah Holdings Limited is a Cayman Islands holding company. We operate our domestic asset management business under the contractual arrangements. In our domestic asset management business, we act as the general partner of relevant investment funds which investment portfolio includes, among others, investments in third-party managed funds and equity investments into private companies. The PRC government regulates certain businesses through strict business licensing requirements and laws and regulations, including restrictions on foreign investment. These third-party managed funds or investee companies may target or operate certain business that are subject to foreign investment restrictions, which may require that investors shall not be foreign-invested enterprises, or FIEs, or their foreign ownership percentage shall be limited to a specified ceiling to the extent permitted by relevant foreign investment regulations. We adopted the contractual arrangements because if we were to conduct our domestic asset management business through our PRC subsidiaries which are FIEs, we may lose the accessibility to the investments in certain businesses that are subject to foreign investment restrictions. Therefore, we rely on the contractual arrangements that we entered into with Noah Investment and its shareholders to carry out our domestic asset management business through our Consolidated Affiliated Entities. For more details of these contractual arrangements, see “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements” in our 2021 Form 20-F.
Because of the Contractual Arrangements, we are the primary beneficiary of Noah Investment and its subsidiaries and hence treat them as our consolidated entities and consolidate their results of operations into ours. Our Consolidated Affiliated Entities, Noah Investment and its subsidiaries, generated RMB816.5 million, RMB935.5 million and RMB1,466.7 million in net revenues (after intra-group eliminations) in 2019, 2020 and 2021, respectively, which contributed 24.1%, 28.3% and 34.2% of our total net revenues in the respective years. In addition, we hold the required licenses and permits necessary to conduct our asset management business in China through our Consolidated Affiliated Entities. Investors of our ADSs are not purchasing equity interest in our Consolidated Affiliated Entities in China but instead are purchasing equity interest in a Cayman Islands holding company with no direct equity ownership of our Consolidated Affiliated Entities.
Our corporate structure is subject to risks associated with the Contractual Arrangements with our Consolidated Affiliated Entities. The Contractual Arrangements may not be as effective as direct ownership in providing us with control over our Consolidated Affiliated Entities and we may incur substantial costs to enforce the terms of the arrangements. Additionally, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. It is uncertain whether any new PRC laws or regulations relating to the Contractual Arrangements will be adopted or if adopted, what they would provide. If the corporate structure and the Contractual Arrangements are deemed by relevant regulatory authority or court to be illegal or invalid, either in whole or in part, we may lose control
 
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of our Consolidated Affiliated Entities and have to modify such structure to comply with regulatory requirements. Further, if the corporate structure and the Contractual Arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authority would have broad discretion to take action in dealing with the violation or failure, in which case, we could be subject to severe penalties, including being prohibited from continuing its operations or unwinding the Contractual Arrangements. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. Our Cayman Islands holding company, our subsidiaries and Consolidated Affiliated Entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with our Consolidated Affiliated Entities and, consequently, significantly affect the financial performance of our Consolidated Affiliated Entities and our company as a whole. See “Item 3. Key Information — D. Risk Factors — Risks Related to Corporate Structure” in our 2021 Form 20-F.
We face various legal and operational risks and uncertainties associated with being based in and having our operations primarily in China and the complex and evolving PRC laws and regulations. The PRC government has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business, accept foreign investments or be listed on United States or other foreign exchange outside of China. For example, we face risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers, the use of our Consolidated Affiliated Entities, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy. In addition, since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is currently not inspected by the PCAOB. As a result, our ADSs may be delisted under the Holding Foreign Companies Accountable Act. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections. Also, the PRC governmental authorities have recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. Any such action could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors. In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline. For a detailed description of risks related to doing business in China, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China” in our 2021 Form 20-F.
Transfer of Funds and Other Assets between Our Company, Its Subsidiaries and the Consolidated Affiliated Entities
Noah Holdings Limited is a holding company incorporated in the Cayman Islands. We conduct business in the PRC through our PRC subsidiaries and Consolidated Affiliated Entities. Under PRC law, we may provide funding to our PRC subsidiaries only through capital contributions or loans, and to the Consolidated Affiliated Entities only through loans, subject to the satisfaction of applicable government registration and approval requirements.
We may also rely significantly on dividends and other distributions by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and pay any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. Under the Contractual Arrangements, we, through our PRC subsidiary Noah Group, are also entitled to substantially all of the economic benefits of the Consolidated Affiliated Entities in the form of service fees and license fees. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — PRC regulations relating to offshore investment activities by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us” and “Item 3. Key Information — D. Risk Factors — Risks Related to
 
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Doing Business in China — The dividends we receive from our PRC subsidiaries may be subject to PRC tax under the PRC Enterprise Income Tax Law, which would have a material adverse effect on our financial condition and results of operations. In addition, if we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders” in our 2021 Form 20-F. In addition, the PRC tax authorities may require us to adjust our taxable income under the Contractual Arrangements, which would materially and adversely affect its ability to pay dividends and other distributions to us.
Our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC laws, each of our PRC subsidiaries and our Consolidated Affiliated Entities are required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. As a result of these PRC laws and regulations, our PRC subsidiaries are restricted in their ability to transfer a portion of their net assets, including general reserve and registered capital, either in the form of dividends, loans or advances. Such restricted portion amounted to RMB1,765.1 million, RMB2,040.5 million and RMB2,950.5 million (US$463.0 million) as of December 31, 2019, 2020 and 2021, respectively.
Under the Contractual Arrangements, Noah Group provides certain support services to our Consolidated Affiliated Entities and is entitled to receive service fees from our Consolidated Affiliated Entities in exchange. The Contractual Arrangements provide that our Consolidated Affiliated Entities shall pay Noah Group a service fee on a quarterly basis. The amount of the service fees shall be verified and determined according to actual services provided by Noah Group, provided that the total service fees shall be equal to the revenue less expenses and the license fees. The license fees are paid by our Consolidated Affiliated Entities to Noah Group on a yearly basis, in consideration of the intellectual property rights licenses granted by Noah Group. The amount of the license fees shall be determined by the board of Noah Group. Pursuant to the Contractual Arrangements, Noah Group is entitled to collect all or part of the revenue as the agent of our Consolidated Affiliated Entities, subject to a joint decision by the parties. Under that circumstance, Noah Group shall deduct the service fees from the revenue it collects on behalf of our Consolidated Affiliated Entities. During the three years ended December 31, 2019, 2020 and 2021, Noah Group did not charge any service fees or licenses fees from our Consolidated Affiliated Entities under the Contractual Arrangements, and there was no cash flows or transfers of other assets between Noah Group and our Consolidated Affiliated Entities under the Contractual Arrangements. See “Certain Financial Data — Financial Information Related to the Consolidated Affiliated Entities” and “Certain Financial Data — Intercompany Revenues between the Consolidated Affiliated Entities and Our Subsidiaries” for other services provided, cash flows or transfer of other assets between our company, our subsidiaries and our Consolidated Affiliated Entities during the three years ended December 31, 2019, 2020 and 2021.
Neither the PRC subsidiaries of our company nor the Consolidated Affiliated Entities is obligated to make dividends or distributions to our company under the Contractual Arrangements. To date, no dividends or distributions have been made to our company by our PRC subsidiaries or the Consolidated Affiliated Entities.
Furthermore, cash transfers from our PRC subsidiaries to our subsidiaries outside of China are subject to PRC government control of currency conversion. Restrictions on the availability of foreign currency may affect the ability of our PRC subsidiaries and Consolidated Affiliated Entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — PRC foreign exchange control regulations restricting the conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect the value of your investment” in our 2021 Form 20-F.
Public Offering and Listing in Hong Kong
We are offering 1,100,000 Class A ordinary shares, par value US$0.0005 per share, as part of a Global Offering, consisting of an international offering of 990,000 Class A ordinary shares offered hereby, and a
 
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Hong Kong public offering of 110,000 Class A ordinary shares. The international offering contemplated herein consists of a U.S. offering and a non-U.S. offering made outside the U.S. in accordance with applicable law. We are paying a registration fee for Class A ordinary shares sold in the United States, as well as for Class A ordinary shares initially offered and sold outside the United States in the Global Offering that may be resold from time to time in the United States.
Approval-in-principle has been granted by the Hong Kong Stock Exchange pursuant to Chapter 19C of the Hong Kong Stock Exchange Listing Rules for the listing of, and permission to deal in, our Class A ordinary shares under the stock code “6686.”
Fungibility and Conversion between ADSs and Class A Ordinary Shares
All Class A ordinary shares offered in both the international offering and the Hong Kong public offering will be registered on the Hong Kong share register in order to be listed and traded on the Hong Kong Stock Exchange. Holders of Class A ordinary shares registered on the Hong Kong share register will be able to convert these Class A ordinary shares into ADSs, and vice versa. See “Conversion between Class A Ordinary Shares and ADSs.”
In connection with the Hong Kong public offering, and to facilitate fungibility and conversion between ADSs and Class A ordinary shares and trading between the NYSE and the Hong Kong Stock Exchange, we intend to move a portion of our issued Class A ordinary shares from our register of members maintained in the Cayman Islands to our Hong Kong share register.
It is unclear whether, as a matter of Hong Kong law, the trading or conversion of ADSs constitutes a sale or purchase of the underlying Hong Kong-registered ordinary shares that is subject to Hong Kong stamp duty. We advise investors to consult their own tax advisors on this matter. See “Risk Factors — Risks Related to Our ADSs, Shares and the Listing — There is uncertainty as to whether Hong Kong stamp duty will apply to the trading or conversion of our ADSs following the initial public offering in Hong Kong and listing of the ordinary shares on the Hong Kong Stock Exchange.”
Corporate Information
Our principal executive offices are currently located in leased office space at Building 2, 1687 Changyang Road, Yangpu District, Shanghai and Building C and F, 32 Qinhuangdao Road, Yangpu District, Shanghai, which occupy approximately a total of 23,263 square meters. In May 2021, we purchased new headquarter premises with a gross floor area of approximately 72,000 square meters at 218, Shaohong Road, 1226 and 1256, South Shenbin Road, Minhang District, Shanghai, which will be used as our new headquarters. Our telephone number is +86 (21) 8035-9221. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our corporate internet address is ir.noahgroup.com. The information contained on our website is not a part of this prospectus supplement. Information appearing on our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus.
The Holding Foreign Companies Accountable Act
The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (United States), or the PCAOB, for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely. On April 12, 2022, we were identified by the SEC under the HFCA Act as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with our filing of the annual report on Form 20-F for the fiscal year ended December 31, 2021. For more details, see “Risk Factors — Risks Related to Doing Business in China — Our
 
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ADSs may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect auditors who are located in China. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections.”
Recent Developments
Summary of First Quarter 2022 Highlights
•
Total revenues for the three months ended March 31, 2022 were RMB802.5 million (US$126.6 million), a decrease of 34.8% from the three months ended March 31, 2021. Total revenues from the wealth management business for the three months ended March 31, 2022 were RMB581.2 million (US$91.7 million), a decrease of 38.9% from the three months ended March 31, 2021. Total revenues from the asset management business for the three months ended March 31, 2022 were RMB201.7 million (US$31.8 million), a decrease of 25.7% from the three months ended March 31, 2021. Total revenues from other businesses for the three months ended March 31, 2022 were RMB19.6 million (US$3.1 million), an increase of 136.1% from the three months ended March 31, 2021.
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•
Income from operations for the three months ended March 31, 2022 was RMB313.8 million (US$49.5 million), a decrease of 37.5% from the three months ended March 31, 2021.
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•
Net income attributable to Noah’s shareholders for the three months ended March 31, 2022 was RMB305.2 million (US$48.2 million), a decrease of 32.8% from the three months ended March 31, 2021.
​
Unless otherwise stated, all translations of RMB into U.S. dollars in this “Recent Developments” section were made at a rate of RMB6.3393 to US$1.00, the effective noon buying rate for March 31, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board. Percentages are calculated based on the RMB amounts and there may be minor differences due to rounding.
Business Updates
Wealth Management
Set forth below are certain material developments on our business and results of operations under our wealth management business segment in the first quarter of 2022:
•
While our aggregate registered clients and active clients continued to grow, the number of our active clients (including mutual fund-only clients) decreased by 46.2% from 27,846 during the three months ended March 31, 2021 to 14,970 during the three months ended March 31, 2022, and the number of our active clients (excluding mutual fund-only clients) decreased by 55.3% from 6,299 during the three months ended March 31, 2021 to 2,818 during the three months ended March 31, 2022. The lower client activity was primarily because investor confidence was negatively affected by the adverse performance of the secondary market in the first quarter of 2022, mainly due to the combination of: (i) uncertainties over the global macroeconomic environment and political conditions and (ii) the impact of the recent resurgence of COVID-19 outbreaks in China.
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Despite various restrictions on offline client interaction as a result of COVID-19, we remain active in maintaining close communication with our clients through a series of online investor seminars and forums to keep our clients posted on the market trends and provide them with investment advice on wealth preservation and risk protection. We have also invested in our branding and marketing activities in major cities to promote our brand awareness and attract potential investors. As the government has gradually lifted restrictions and quarantine measures in China, we will be able to have face-to-face interaction and hold offline events more frequently with our clients, which is expected to contribute to the growth of our active client base.
•
The market volatility also adversely impacted our total transaction value in the first quarter of 2022. The aggregate transaction value of the investment products distributed during the three months
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ended March 31, 2022 was RMB15.0 billion (US$2.4 billion), representing a 44.6% decrease from RMB27.1 billion during the three months ended March 31, 2021, primarily due to a 68.7%, 33.2% and 17.8% decrease of the private secondary products, private equity products and mutual fund products we distributed, respectively.
The table below sets out the aggregate transaction value of the different types of investment products that we distributed during the periods indicated:
​ ​ ​
Three months ended March 31,
​
​ ​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
%
​ ​
RMB
​ ​
US$
​ ​
%
​
​ ​ ​
(in millions, except for percentages)
​
Product type ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Mutual fund products
​ ​ ​ ​ 8,645 ​ ​ ​ ​ ​ 31.9 ​ ​ ​ ​ ​ 7,110 ​ ​ ​ ​ ​ 1,122 ​ ​ ​ ​ ​ 47.4 ​ ​
Private secondary products
​ ​ ​ ​ 12,864 ​ ​ ​ ​ ​ 47.5 ​ ​ ​ ​ ​ 4,027 ​ ​ ​ ​ ​ 635 ​ ​ ​ ​ ​ 26.9 ​ ​
Private equity products
​ ​ ​ ​ 4,763 ​ ​ ​ ​ ​ 17.6 ​ ​ ​ ​ ​ 3,180 ​ ​ ​ ​ ​ 502 ​ ​ ​ ​ ​ 21.2 ​ ​
Other products
​ ​ ​ ​ 820 ​ ​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 679 ​ ​ ​ ​ ​ 107 ​ ​ ​ ​ ​ 4.5 ​ ​
All products
​ ​ ​ ​ 27,092 ​ ​ ​ ​ ​ 100.0 ​ ​ ​ ​ ​ 14,996 ​ ​ ​ ​ ​ 2,366 ​ ​ ​ ​ ​ 100.0 ​ ​
​
•
Our client service network covered 83 cities in mainland China as of March 31, 2022. The total number of our relationship managers remained relatively stable as of March 31, 2022 at 1,281.
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Asset Management
Gopher’s total AUM as of March 31, 2022 remained stable at RMB156.1 billion (US$24.6 billion) as compared to December 31, 2021. In particular, we continue to focus on managing more private equity assets and Gopher’s AUM in relation to private equity investments increased from RMB130.9 billion as of December 31, 2021 to RMB132.7 billion (US$20.9 billion) as of March 31, 2022. In addition, Gopher’s AUM in relation to public securities investments decreased by 7.1% from RMB11.2 billion as of December 31, 2021 to RMB10.4 billion (US$1.6 billion) as of March 31, 2022, primarily due to the less satisfactory performance of the secondary market during the first quarter of 2022 as compared to 2021; Gopher’s AUM in relation to real estate investments decreased by 6.1% from RMB6.6 billion as of December 31, 2021 to RMB6.2 billion (US$1.0 billion) as of March 31, 2022 as a result of the redemptions of real estate assets, which was in line with our strategic transformation to decrease the size of real estate investment funds managed by Gopher; Gopher’s AUM in relation to multi-strategy investments decreased by 8.5% from RMB5.9 billion as of December 31, 2021 to RMB5.4 billion (US$0.9 billion) as of March 31, 2022, mainly as a result of a shift in investor preference away from bond investments; Gopher’s AUM in relation to other investments, which include funds investing in private credit related underlying products, remained stable at RMB1.4 billion (US$0.2 billion) as of March 31, 2022. The table below summarizes Gopher’s AUM by investment type for the periods indicated:
​ ​ ​
As of December 31, 2021
​ ​
As of March 31, 2022
​
​ ​ ​
RMB
​ ​
%
​ ​
RMB
​ ​
%
​
​ ​ ​
(in billions, except for percentages)
​
Product type ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Private equity investments
​ ​ ​ ​ 130.9 ​ ​ ​ ​ ​ 83.9 ​ ​ ​ ​ ​ 132.7 ​ ​ ​ ​ ​ 85.0 ​ ​
Public securities investments
​ ​ ​ ​ 11.2 ​ ​ ​ ​ ​ 7.2 ​ ​ ​ ​ ​ 10.4 ​ ​ ​ ​ ​ 6.6 ​ ​
Real estate investments
​ ​ ​ ​ 6.6 ​ ​ ​ ​ ​ 4.3 ​ ​ ​ ​ ​ 6.2 ​ ​ ​ ​ ​ 4.1 ​ ​
Multi-strategies investments
​ ​ ​ ​ 5.9 ​ ​ ​ ​ ​ 3.8 ​ ​ ​ ​ ​ 5.4 ​ ​ ​ ​ ​ 3.4 ​ ​
Other investments
​ ​ ​ ​ 1.4 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 1.4 ​ ​ ​ ​ ​ 0.9 ​ ​
All products
​ ​ ​ ​ 156.0 ​ ​ ​ ​ ​ 100.0 ​ ​ ​ ​ ​ 156.1 ​ ​ ​ ​ ​ 100.0 ​ ​
 
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The following table illustrates the movement of AUM managed by Gopher for the periods indicated:
​ ​ ​
As of/for the
year ended
December 31, 2021
​ ​
As of/for the
period ended
March 31, 2022
​
​ ​ ​
(RMB in billions)
​
AUM at the beginning of the year/period
​ ​ ​ ​ 152.8 ​ ​ ​ ​ ​ 156.0 ​ ​
Asset new subscription
​ ​ ​ ​ 22.0 ​ ​ ​ ​ ​ 5.5 ​ ​
Asset appreciation(1)
​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ (0.1) ​ ​
Asset redemption
​ ​ ​ ​ (18.9) ​ ​ ​ ​ ​ (5.3) ​ ​
AUM at the end of the year/period
​ ​ ​ ​ 156.0 ​ ​ ​ ​ ​ 156.1 ​ ​
​
(1)
Represents NAV movement of our public securities investments.
​
Financial Updates
The unaudited interim condensed consolidated statements of operations and cash flows for the three months ended March 31, 2021 and 2022 and the unaudited interim condensed consolidated balance sheet as of March 31, 2022 presented below are derived from our unaudited interim condensed consolidated financial statements in Exhibit 99.2 to our current report on Form 6-K furnished to the SEC on June 21, 2022, titled “Unaudited Interim Condensed Consolidated Financial Statements as of December 31, 2021 and March 31, 2022 and for the three months ended March 31, 2021 and 2022.” Our unaudited interim condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and reviewed by our auditor. The consolidated financial information below should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements for the three years ended December 31, 2021 and as of December 31, 2019, 2020 and 2021 and related notes, “Item 5. Operating and Financial Review and Prospects” in our 2021 Form 20-F, and “Financial Information” in Exhibit 99.1 to our current report on Form 6-K furnished to the SEC on June 21, 2022. Our historical results do not necessarily indicate results expected for any future periods, and the results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2022.
​ ​ ​
For the three months ended March 31,
​
​ ​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Unaudited Interim Condensed Consolidated Statements of Operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenues from others
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
One-time commissions
​ ​ ​ ​ 278,704 ​ ​ ​ ​ ​ 81,154 ​ ​ ​ ​ ​ 12,802 ​ ​
Recurring service fees
​ ​ ​ ​ 220,513 ​ ​ ​ ​ ​ 193,379 ​ ​ ​ ​ ​ 30,505 ​ ​
Performance-based income
​ ​ ​ ​ 276,524 ​ ​ ​ ​ ​ 142,911 ​ ​ ​ ​ ​ 22,544 ​ ​
Other service fees
​ ​ ​ ​ 23,713 ​ ​ ​ ​ ​ 38,760 ​ ​ ​ ​ ​ 6,114 ​ ​
Total revenues from others
​ ​ ​ ​ 799,454 ​ ​ ​ ​ ​ 456,204 ​ ​ ​ ​ ​ 71,965 ​ ​
Revenues from funds Gopher manages
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
One-time commissions
​ ​ ​ ​ 46,146 ​ ​ ​ ​ ​ 21,155 ​ ​ ​ ​ ​ 3,337 ​ ​
Recurring service fees
​ ​ ​ ​ 256,697 ​ ​ ​ ​ ​ 293,052 ​ ​ ​ ​ ​ 46,228 ​ ​
Performance-based income
​ ​ ​ ​ 128,556 ​ ​ ​ ​ ​ 32,067 ​ ​ ​ ​ ​ 5,058 ​ ​
Total revenues from funds Gopher manages
​ ​ ​ ​ 431,399 ​ ​ ​ ​ ​ 346,274 ​ ​ ​ ​ ​ 54,623 ​ ​
Total revenues
​ ​ ​ ​ 1,230,853 ​ ​ ​ ​ ​ 802,478 ​ ​ ​ ​ ​ 126,588 ​ ​
Less: VAT related surcharges
​ ​ ​ ​ (6,117) ​ ​ ​ ​ ​ (6,786) ​ ​ ​ ​ ​ (1,070) ​ ​
 
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​ ​ ​
For the three months ended March 31,
​
​ ​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Net revenues
​ ​ ​ ​ 1,224,736 ​ ​ ​ ​ ​ 795,692 ​ ​ ​ ​ ​ 125,518 ​ ​
Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Compensation and benefits
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Relationship manager compensation
​ ​ ​ ​ (206,872) ​ ​ ​ ​ ​ (109,995) ​ ​ ​ ​ ​ (17,351) ​ ​
Other compensations
​ ​ ​ ​ (375,253) ​ ​ ​ ​ ​ (247,910) ​ ​ ​ ​ ​ (39,107) ​ ​
Total compensation and benefits
​ ​ ​ ​ (582,125) ​ ​ ​ ​ ​ (357,905) ​ ​ ​ ​ ​ (56,458) ​ ​
Selling expenses
​ ​ ​ ​ (83,455) ​ ​ ​ ​ ​ (59,906) ​ ​ ​ ​ ​ (9,450) ​ ​
General and administrative expenses
​ ​ ​ ​ (80,285) ​ ​ ​ ​ ​ (58,207) ​ ​ ​ ​ ​ (9,182) ​ ​
(Provision for) reversal of credit losses
​ ​ ​ ​ (3,407) ​ ​ ​ ​ ​ 9,198 ​ ​ ​ ​ ​ 1,451 ​ ​
Other operating expenses, net
​ ​ ​ ​ (27,088) ​ ​ ​ ​ ​ (29,635) ​ ​ ​ ​ ​ (4,675) ​ ​
Government subsidies
​ ​ ​ ​ 54,014 ​ ​ ​ ​ ​ 14,558 ​ ​ ​ ​ ​ 2,296 ​ ​
Total operating costs and expenses
​ ​ ​ ​ (722,346) ​ ​ ​ ​ ​ (481,897) ​ ​ ​ ​ ​ (76,018) ​ ​
Income from operations
​ ​ ​ ​ 502,390 ​ ​ ​ ​ ​ 313,795 ​ ​ ​ ​ ​ 49,500 ​ ​
Other income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest income
​ ​ ​ ​ 22,927 ​ ​ ​ ​ ​ 12,637 ​ ​ ​ ​ ​ 1,993 ​ ​
Investment income
​ ​ ​ ​ 34,361 ​ ​ ​ ​ ​ 25,373 ​ ​ ​ ​ ​ 4,002 ​ ​
Other expense
​ ​ ​ ​ (486) ​ ​ ​ ​ ​ (278) ​ ​ ​ ​ ​ (44) ​ ​
Total other income
​ ​ ​ ​ 56,802 ​ ​ ​ ​ ​ 37,732 ​ ​ ​ ​ ​ 5,951 ​ ​
Income before taxes and income from equity in affiliates
​ ​ ​ ​ 559,192 ​ ​ ​ ​ ​ 351,527 ​ ​ ​ ​ ​ 55,451 ​ ​
Income tax expense
​ ​ ​ ​ (129,846) ​ ​ ​ ​ ​ (77,336) ​ ​ ​ ​ ​ (12,199) ​ ​
Income from equity in affiliates
​ ​ ​ ​ 23,513 ​ ​ ​ ​ ​ 30,020 ​ ​ ​ ​ ​ 4,736 ​ ​
Net income
​ ​ ​ ​ 452,859 ​ ​ ​ ​ ​ 304,211 ​ ​ ​ ​ ​ 47,988 ​ ​
Less: net loss attributable to non-controlling interests
​ ​ ​ ​ (1,234) ​ ​ ​ ​ ​ (1,031) ​ ​ ​ ​ ​ (163) ​ ​
Net income attributable to Noah’s shareholders
​ ​ ​ ​ 454,093 ​ ​ ​ ​ ​ 305,242 ​ ​ ​ ​ ​ 48,151 ​ ​
​
​ ​ ​
As of March 31, 2022
​
​ ​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Unaudited Interim Condensed Consolidated Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​ ​ 3,899,892 ​ ​ ​ ​ ​ 615,193 ​ ​
Restricted cash
​ ​ ​ ​ 512 ​ ​ ​ ​ ​ 81 ​ ​
Short-term investments (including short-term investments measured at fair value of RMB44,722 as of March 31, 2022)
​ ​ ​ ​ 64,347 ​ ​ ​ ​ ​ 10,150 ​ ​
Accounts receivable, net of allowance for credit losses of RMB1,288 as of March 31, 2022
​ ​ ​ ​ 396,485 ​ ​ ​ ​ ​ 62,544 ​ ​
Amounts due from related parties, net of allowance for credit losses of RMB30,021 as
of March 31, 2022
​ ​ ​ ​ 532,533 ​ ​ ​ ​ ​ 84,005 ​ ​
Loans receivable, net of allowance for credit losses of RMB84,111 as of March 31, 2022
​ ​ ​ ​ 578,355 ​ ​ ​ ​ ​ 91,233 ​ ​
Other current assets
​ ​ ​ ​ 170,813 ​ ​ ​ ​ ​ 26,945 ​ ​
Total current assets
​ ​ ​ ​ 5,642,937 ​ ​ ​ ​ ​ 890,151 ​ ​
 
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​ ​ ​
As of March 31, 2022
​
​ ​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Long-term investments (including long-term investments measured at fair value of RMB551,670 as of March 31, 2022)
​ ​ ​ ​ 699,174 ​ ​ ​ ​ ​ 110,292 ​ ​
Investment in affiliates
​ ​ ​ ​ 1,430,346 ​ ​ ​ ​ ​ 225,632 ​ ​
Property and equipment, net
​ ​ ​ ​ 2,544,521 ​ ​ ​ ​ ​ 401,388 ​ ​
Operating lease right-of-use assets, net
​ ​ ​ ​ 212,993 ​ ​ ​ ​ ​ 33,599 ​ ​
Deferred tax assets
​ ​ ​ ​ 335,911 ​ ​ ​ ​ ​ 52,989 ​ ​
Other non-current assets, net of allowance for credit losses of RMB4,000 as of March 31, 2022
​ ​ ​ ​ 162,206 ​ ​ ​ ​ ​ 25,587 ​ ​
Total non-current assets
​ ​ ​ ​ 5,385,151 ​ ​ ​ ​ ​ 849,487 ​ ​
Total assets
​ ​ ​ ​ 11,028,088 ​ ​ ​ ​ ​ 1,739,638 ​ ​
Accrued payroll and welfare expenses
​ ​ ​ ​ 880,353 ​ ​ ​ ​ ​ 138,872 ​ ​
Income tax payable
​ ​ ​ ​ 236,915 ​ ​ ​ ​ ​ 37,372 ​ ​
Deferred revenues
​ ​ ​ ​ 79,970 ​ ​ ​ ​ ​ 12,615 ​ ​
Other current liabilities
​ ​ ​ ​ 518,214 ​ ​ ​ ​ ​ 81,746 ​ ​
Contingent liabilities
​ ​ ​ ​ 431,080 ​ ​ ​ ​ ​ 68,001 ​ ​
Total current liabilities
​ ​ ​ ​ 2,146,532 ​ ​ ​ ​ ​ 338,606 ​ ​
Operating lease liabilities, non-current
​ ​ ​ ​ 120,790 ​ ​ ​ ​ ​ 19,054 ​ ​
Deferred tax liabilities
​ ​ ​ ​ 232,848 ​ ​ ​ ​ ​ 36,731 ​ ​
Other non-current liabilities
​ ​ ​ ​ 83,931 ​ ​ ​ ​ ​ 13,240 ​ ​
Total liabilities
​ ​ ​ ​ 2,584,101 ​ ​ ​ ​ ​ 407,631 ​ ​
Net current assets
​ ​ ​ ​ 3,496,405 ​ ​ ​ ​ ​ 551,545 ​ ​
Net assets
​ ​ ​ ​ 8,443,987 ​ ​ ​ ​ ​ 1,332,007 ​ ​
Total Shareholders’ Equity
​ ​ ​ ​ 8,443,987 ​ ​ ​ ​ ​ 1,332,007 ​ ​
Total Liabilities and Equity
​ ​ ​ ​ 11,028,088 ​ ​ ​ ​ ​ 1,739,638 ​ ​
​
​ ​ ​
For the three months ended March 31,
​
​ ​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Unaudited Interim Condensed Consolidated Statements of Cash Flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net cash provided by operating activities
​ ​ ​ ​ 495,940 ​ ​ ​ ​ ​ 501,184 ​ ​ ​ ​ ​ 79,061 ​ ​
Net cash (used in) provided by investing activities
​ ​ ​ ​ (68,874) ​ ​ ​ ​ ​ 9,341 ​ ​ ​ ​ ​ 1,474 ​ ​
Net cash used in financing activities
​ ​ ​ ​ (542,963) ​ ​ ​ ​ ​ (12,058) ​ ​ ​ ​ ​ (1,903) ​ ​
Effect of exchange rate changes
​ ​ ​ ​ 15,004 ​ ​ ​ ​ ​ (3,176) ​ ​ ​ ​ ​ (501) ​ ​
Net (decrease) increases in cash, cash equivalents and restricted cash
​ ​ ​ ​ (100,893) ​ ​ ​ ​ ​ 495,291 ​ ​ ​ ​ ​ 78,131 ​ ​
Cash, cash equivalents and restricted cash at the beginning of the period
​ ​ ​ ​ 5,022,704 ​ ​ ​ ​ ​ 3,412,613 ​ ​ ​ ​ ​ 538,326 ​ ​
Cash, cash equivalents and restricted cash at the end of the period
​ ​ ​ ​ 4,921,811 ​ ​ ​ ​ ​ 3,907,904 ​ ​ ​ ​ ​ 616,457 ​ ​
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
Total Revenues.   Our total revenues decreased by 34.8% from RMB1,230.9 million for the three months ended March 31, 2021 to RMB802.5 million (US$126.6 million) for the three months ended March 31, 2022. The decrease in our total revenues was primarily due to decreases in one-time commissions and performance-based incomes, partially offset by increases in recurring service fees and other service fees.
Operating Costs and Expenses.   Our operating costs and expenses decreased by 33.3% from RMB722.3 million for the three months ended March 31, 2021 to RMB481.9 million (US$76.0 million) for
 
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the three months ended March 31, 2022, primarily due to less relationship manager compensation related to the decreased transaction value of investment products distributed, less performance fee compensation, less selling expenses incurred, less general and administrative expenses incurred as well as a reversal of provision for credit losses.
Other Income.   Our other income decreased by 33.6% from RMB56.8 million for the three months ended March 31, 2021 to RMB37.7 million (US$6.0 million) for the three months ended March 31, 2022, primarily due to (i) a decrease in interest income as a result of a decrease in cash, primarily due to a net cash of RMB2,191.5 million used in acquiring our new headquarter premises in Shanghai in May 2021, and (ii) a decrease in investment income resulting from certain long-term investments measured at fair value.
Income Tax Expenses.   Our income tax expenses decreased by 40.4% from RMB129.8 million for the three months ended March 31, 2021 to RMB77.3 million (US$12.2 million) for the three months ended March 31, 2022, primarily due to less taxable income.
Net Income Attributable to Noah’s Shareholders.   Our net income attribute to Noah’s shareholders was RMB305.2 million (US$48.2 million) for the three months ended March 31, 2022, compared with net income attributable to Noah’s shareholders of RMB454.1 million for the three months ended March 31, 2021. Due to uncertainties in the global and China’s economies, volatility in financial markets as well as the resurgence of COVID-19 outbreaks, we expect to experience lower growth in net income in 2022 as compared to the previous year.
Wealth Management
​ ​ ​
For the three months ended March 31,
​
​ ​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenues from others:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
One-time commissions
​ ​ ​ ​ 278,463 ​ ​ ​ ​ ​ 81,154 ​ ​ ​ ​ ​ 12,802 ​ ​
Recurring service fees
​ ​ ​ ​ 219,319 ​ ​ ​ ​ ​ 193,379 ​ ​ ​ ​ ​ 30,505 ​ ​
Performance-based income
​ ​ ​ ​ 276,524 ​ ​ ​ ​ ​ 142,911 ​ ​ ​ ​ ​ 22,544 ​ ​
Other service fees
​ ​ ​ ​ 14,017 ​ ​ ​ ​ ​ 19,113 ​ ​ ​ ​ ​ 3,015 ​ ​
Total revenues from others
​ ​ ​ ​ 788,323 ​ ​ ​ ​ ​ 436,557 ​ ​ ​ ​ ​ 68,865 ​ ​
Revenues from funds Gopher manages:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
One-time commissions
​ ​ ​ ​ 16,270 ​ ​ ​ ​ ​ 11,859 ​ ​ ​ ​ ​ 1,871 ​ ​
Recurring service fees
​ ​ ​ ​ 95,971 ​ ​ ​ ​ ​ 118,871 ​ ​ ​ ​ ​ 18,751 ​ ​
Performance-based income
​ ​ ​ ​ 50,726 ​ ​ ​ ​ ​ 13,868 ​ ​ ​ ​ ​ 2,188 ​ ​
Total revenues from funds Gopher manages
​ ​ ​ ​ 162,967 ​ ​ ​ ​ ​ 144,598 ​ ​ ​ ​ ​ 22,810 ​ ​
Total revenues
​ ​ ​ ​ 951,290 ​ ​ ​ ​ ​ 581,155 ​ ​ ​ ​ ​ 91,675 ​ ​
Less: VAT related surcharges
​ ​ ​ ​ (4,838) ​ ​ ​ ​ ​ (2,711) ​ ​ ​ ​ ​ (428) ​ ​
Net Revenues
​ ​ ​ ​ 946,452 ​ ​ ​ ​ ​ 578,444 ​ ​ ​ ​ ​ 91,247 ​ ​
Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Compensation and benefits
​ ​ ​ ​ (422,079) ​ ​ ​ ​ ​ (247,823) ​ ​ ​ ​ ​ (39,093) ​ ​
Selling expenses
​ ​ ​ ​ (66,827) ​ ​ ​ ​ ​ (52,043) ​ ​ ​ ​ ​ (8,210) ​ ​
General and administrative expenses
​ ​ ​ ​ (55,924) ​ ​ ​ ​ ​ (42,754) ​ ​ ​ ​ ​ (6,744) ​ ​
Provision for credit losses
​ ​ ​ ​ — ​ ​ ​ ​ ​ (603) ​ ​ ​ ​ ​ (95) ​ ​
Other operating expenses
​ ​ ​ ​ (22,083) ​ ​ ​ ​ ​ (5,516) ​ ​ ​ ​ ​ (870) ​ ​
Government subsidies
​ ​ ​ ​ 38,596 ​ ​ ​ ​ ​ 5,639 ​ ​ ​ ​ ​ 890 ​ ​
Total operating costs and expenses
​ ​ ​ ​ (528,317) ​ ​ ​ ​ ​ (343,100) ​ ​ ​ ​ ​ (54,123) ​ ​
Income from operations:
​ ​ ​ ​ 418,135 ​ ​ ​ ​ ​ 235,344 ​ ​ ​ ​ ​ 37,125 ​ ​
 
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Total Revenue.   Our total revenue from wealth management business decreased by 38.9% from RMB951.3 million for the three months ended March 31, 2021 to RMB581.2 million (US$91.7 million) for the three months ended March 31, 2022, primarily due to decreases in one-time commissions and performance-based incomes as a result of the adverse performance of the secondary market, partially offset by increase in other service fees.
•
Total revenue from one-time commissions decreased by 68.4% from RMB294.7 million for the three months ended March 31, 2021 to RMB93.0 million (US$14.7 million) for the three months ended March 31, 2022, primarily due to a 68.7% decrease in transaction value of private secondary products that we distributed.
​
•
Total revenue from recurring service fees was RMB312.3 million (US$49.3 million) for the three months ended March 31, 2022, compared with RMB315.3 million for the three months ended March 31, 2021.
​
•
Total revenue from performance-based income decreased by 52.1% from RMB327.3 million for the three months ended March 31, 2021 to RMB156.8 million (US$24.7 million) for the three months ended March 31, 2022, primarily due to less performance- based income that were shared from private secondary products providers.
​
•
Total revenue from other service fees increased by 36.4% from RMB14.0 million for the three months ended March 31, 2021 to RMB19.1 million (US$3.0 million) for the three months ended March 31, 2022, primarily due to more value-added services such as trust services that we offered to our HNW clients.
​
Operating Costs and Expenses.   Our operating costs and expenses for wealth management business decreased by 35.1% from RMB528.3 million for the three months ended March 31, 2021 to RMB343.1 million (US$54.1 million) for the three months ended March 31, 2022, primarily due to less relationship manager compensation related to the decreased transaction value of investment products distributed as a result of the adverse performance of the secondary market and less selling, general and administrative expenses incurred.
•
Compensation and benefits include compensation for relationship managers and other employees. Compensation and benefits decreased by 41.3% from RMB422.1 million for the three months ended March 31, 2021 to RMB247.8 million (US$39.1 million) for the three months ended March 31, 2022, primarily due to (i) a decrease in relationship manager compensation related to transaction value of investment products distributed as a result of the adverse performance of the secondary market, and (ii) a decrease in other compensations as a result of a decrease in annual bonus for other employees.
​
•
Selling expenses decreased by 22.1% from RMB66.9 million for the three months ended March 31, 2021 to RMB52.0 million (US$8.2 million) for the three months ended March 31, 2022, primarily due to a decrease in our offline advertising and marketing activities due to the recurrent outbreaks of COVID-19 in China.
​
•
General and administrative expenses decreased by 23.5% from RMB56.0 million for the three months ended March 31, 2021 to RMB42.8 million (US$6.7 million) for the three months ended March 31, 2022, primarily due to a decrease in consulting fees.
​
•
Other operating expenses decreased by 75.0% from RMB22.1 million for the three months ended March 31, 2021 to RMB5.5 million (US$0.9 million) for the three months ended March 31, 2022, primarily due to the decreased transaction value of investment products distributed.
​
•
Government subsidies were RMB38.6 million for the three months ended March 31, 2021 and RMB5.6 million (US$0.9 million) for the three months ended March 31, 2022, respectively.
​
​
 
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Asset Management
​ ​ ​
For the three months ended March 31,
​
​ ​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenues from others:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
One-time commissions
​ ​ ​ ​ 241 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Recurring service fees
​ ​ ​ ​ 1,194 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Performance-based income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Other service fees
​ ​ ​ ​ 1,390 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total revenues from others
​ ​ ​ ​ 2,825 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Revenues from funds Gopher manages:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
One-time commissions
​ ​ ​ ​ 29,876 ​ ​ ​ ​ ​ 9,296 ​ ​ ​ ​ ​ 1,466 ​ ​
Recurring service fees
​ ​ ​ ​ 160,726 ​ ​ ​ ​ ​ 174,181 ​ ​ ​ ​ ​ 27,476 ​ ​
Performance-based income
​ ​ ​ ​ 77,830 ​ ​ ​ ​ ​ 18,199 ​ ​ ​ ​ ​ 2,871 ​ ​
Total revenues from funds Gopher manages
​ ​ ​ ​ 268,432 ​ ​ ​ ​ ​ 201,676 ​ ​ ​ ​ ​ 31,814 ​ ​
Total revenues
​ ​ ​ ​ 271,257 ​ ​ ​ ​ ​ 201,676 ​ ​ ​ ​ ​ 31,814 ​ ​
Less: VAT related surcharges
​ ​ ​ ​ (1,229) ​ ​ ​ ​ ​ (1,039) ​ ​ ​ ​ ​ (164) ​ ​
Net Revenues
​ ​ ​ ​ 270,028 ​ ​ ​ ​ ​ 200,637 ​ ​ ​ ​ ​ 31,650 ​ ​
Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Compensation and benefits
​ ​ ​ ​ (138,936) ​ ​ ​ ​ ​ (99,824) ​ ​ ​ ​ ​ (15,747) ​ ​
Selling expenses
​ ​ ​ ​ (12,001) ​ ​ ​ ​ ​ (4,234) ​ ​ ​ ​ ​ (668) ​ ​
General and administrative expenses
​ ​ ​ ​ (18,094) ​ ​ ​ ​ ​ (10,029) ​ ​ ​ ​ ​ (1,582) ​ ​
Provision for credit losses
​ ​ ​ ​ — ​ ​ ​ ​ ​ (227) ​ ​ ​ ​ ​ (36) ​ ​
Other operating expenses
​ ​ ​ ​ (1,805) ​ ​ ​ ​ ​ (1,270) ​ ​ ​ ​ ​ (200) ​ ​
Government subsidies
​ ​ ​ ​ 15,283 ​ ​ ​ ​ ​ 8,885 ​ ​ ​ ​ ​ (1,402) ​ ​
Total operating costs and expenses
​ ​ ​ ​ (155,553) ​ ​ ​ ​ ​ (106,699) ​ ​ ​ ​ ​ (16,831) ​ ​
Income from operations:
​ ​ ​ ​ 114,475 ​ ​ ​ ​ ​ 93,938 ​ ​ ​ ​ ​ 14,818 ​ ​
Total Revenue.   Our total revenue from asset management business decreased by 25.7% from RMB271.3 million for the three months ended March 31, 2021 to RMB201.7 million (US$31.8 million) for the three months ended March 31, 2022, primarily due to decreases in one-time commissions and performance-based incomes, partially offset by increase in recurring service fees.
•
Total revenue from one-time commissions decreased by 69.1% from RMB30.1 million for the three months ended March 31, 2021 to RMB9.3 million (US$1.5 million) for the three months ended March 31, 2022, primarily due to less private equity products sold.
​
•
Total revenue from recurring service fees increased by 7.5% from RMB162.0 million for the three months ended March 31, 2021 to RMB174.2 million (US$27.5 million) for the three months ended March 31, 2022, primarily due to an increase in assets under management.
​
•
Total revenue from performance-based income for the three months ended March 31, 2022 was RMB18.2 million (US$2.9 million), compared with RMB77.8 million for the three months ended March 31, 2021. The decrease was primarily due to less performance-based income realized from private equity products.
​
Operating Costs and Expenses.   Our operating costs and expenses for asset management business decreased by 31.4% from RMB155.6 million for the three months ended March 31, 2021 to RMB106.7 million
 
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(US$16.8 million) for the three months ended March 31, 2022, primarily due to less performance fee compensation as well as less selling, general and administrative expenses incurred.
•
Compensation and benefits include compensation of investment professionals and other employees. Compensation and benefits decreased by 28.2% from RMB138.9 million for the three months ended March 31, 2021 to RMB99.8 million (US$15.7 million) for the three months ended March 31, 2022, primarily due to less performance fee compensation.
​
•
Selling expenses decreased by 64.7% from RMB12.0 million for the three months ended March 31, 2021 to RMB4.2 million (US$0.7 million) for the three months ended March 31, 2022, primarily due to a decrease in our offline advertising and marketing activities due to the recurrent outbreaks of COVID-19 in China.
​
•
General and administrative expenses decreased by 44.6% from RMB18.1 million for the three months ended March 31, 2021 to RMB10.0 million (US$1.6 million) for the three months ended March 31, 2022, primarily due to a decrease in consulting fees.
​
•
Other operating expenses was RMB1.3 million (US$0.2 million) for the three months ended March 31, 2022, compared with RMB1.8 million for the three months ended March 31, 2021.
​
•
Government subsidies were RMB15.3 million for the three months ended March 31, 2021 and RMB8.9 million (US$1.4 million) for the three months ended March 31, 2022, respectively.
​
Other Businesses
​ ​ ​
For the three months ended March 31,
​
​ ​ ​
2021
​ ​
2022
​
​ ​ ​
RMB
​ ​
RMB
​ ​
US$
​
​ ​ ​
(in thousands)
​
Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenues from others:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Other service fees
​ ​ ​ ​ 8,306 ​ ​ ​ ​ ​ 19,647 ​ ​ ​ ​ ​ 3,099 ​ ​
Total revenues from others
​ ​ ​ ​ 8,306 ​ ​ ​ ​ ​ 19,647 ​ ​ ​ ​ ​ 3,099 ​ ​
Total revenues
​ ​ ​ ​ 8,306 ​ ​ ​ ​ ​ 19,647 ​ ​ ​ ​ ​ 3,099 ​ ​
Less: VAT related surcharges
​ ​ ​ ​ (50) ​ ​ ​ ​ ​ (3,036) ​ ​ ​ ​ ​ (479) ​ ​
Net Revenues
​ ​ ​ ​ 8,256 ​ ​ ​ ​ ​ 16,611 ​ ​ ​ ​ ​ (2,620) ​ ​
Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Compensation and benefits
​ ​ ​ ​ (21,110) ​ ​ ​ ​ ​ (10,258) ​ ​ ​ ​ ​ (1,618) ​ ​
Selling expenses
​ ​ ​ ​ (4,627) ​ ​ ​ ​ ​ (3,629) ​ ​ ​ ​ ​ (572) ​ ​
General and administrative expenses
​ ​ ​ ​ (6,267) ​ ​ ​ ​ ​ (5,424) ​ ​ ​ ​ ​ (856) ​ ​
(Provision for) reversal of credit losses
​ ​ ​ ​ (3,407) ​ ​ ​ ​ ​ 10,028 ​ ​ ​ ​ ​ 1,582 ​ ​
Other operating expenses
​ ​ ​ ​ (3,200) ​ ​ ​ ​ ​ (22,849) ​ ​ ​ ​ ​ (3,604) ​ ​
Government subsidies
​ ​ ​ ​ 135 ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 5 ​ ​
Total operating costs and expenses
​ ​ ​ ​ (38,476) ​ ​ ​ ​ ​ (32,098) ​ ​ ​ ​ ​ (5,063) ​ ​
Loss from operations:
​ ​ ​ ​ (30,220) ​ ​ ​ ​ ​ (15,487) ​ ​ ​ ​ ​ (2,443) ​ ​
Total Revenue.   Our total revenue from other business increased by 136.1% from RMB8.3 million for the three months ended March 31, 2021 to RMB19.6 million (US$3.1 million) for the three months ended March 31, 2022, primarily due to an increase in other service fees as result of rental income generated from rented properties that we purchased as part of our new headquarter premises in Shanghai in 2021.
Operating Costs and Expenses.   Our operating costs and expenses for other businesses decreased by 16.6% from RMB38.5 million for the three months ended March 31, 2021 to RMB32.1 million (US$5.1 million) for the three months ended March 31, 2022, primarily due to less compensation and
 
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benefits and a reversal of provision for credit losses, partially offset by an increase in other operating expenses related to depreciation expense of our new headquarter premises.
Certain Balance Sheet Items
As of March 31, 2022, we had RMB3,899.9 million (US$615.2 million) in cash and cash equivalents, mainly consisting of cash on hand and money market funds, which are unrestricted as to withdrawal and use.
Accounts Receivables
Our accounts receivables represent amounts invoiced or we have the right to invoice. The balances of our accounts receivables as of March 31, 2022 were substantially within one year. As of December 31, 2021 and March 31, 2022, our accounts receivables, net of allowance for credit losses of RMB0.5 million and RMB1.3 million, respectively, amounted to RMB808.0 million and RMB396.5 million (US$62.5 million), respectively. The decrease was primarily due to the subsequent settlement of certain accounts receivables and decreases in total revenues of our wealth management for the three months ended March 31, 2022.
Amounts Due from Related Parties
During the three months ended March 31, 2022, we had certain related party transactions. For details, see Note 16 to the unaudited interim condensed consolidated financial statements set out in Exhibit 99.2 to our current report on Form 6-K furnished to the SEC on June 21, 2022. As of March 31, 2022, our amounts due from related parties of RMB479.4 million (US$75.6 million) are trade in nature, and amounts due from related parties of RMB53.1 million (US$8.4 million) associated with loan distributed are non-trade in nature. These non-trade loans are due on demand and expected to be matured within one year, most of which are interest free.
Loans Receivable
Our loans receivable represents loans offered to our individual clients as value-added services in our other business. As of December 31, 2021 and March 31, 2022, our loans receivable, net of allowance for credit losses of RMB94.0 million and RMB84.1 million, respectively, amounted to RMB595.8 million and RMB578.4 million (US$91.2 million), respectively. The decrease was primarily due to the subsequent settlement of certain loans receivable.
Investments
We have classified our investments into short-term investments and long-term investments, in terms of contractual maturity date of less than one year or more than one year. Our balance of short-term investments (including short-term investments measured at fair value of RMB63.5 million and RMB44.7 million as of December 31, 2021 and March 31, 2022, respectively) decreased by 30.7% from RMB92.8 million as of December 31, 2021 to RMB64.3 million (US$10.2 million) as of March 31, 2022, primarily due to redemption of certain trading debt securities. Our balance of long-term investments (including long-term investments measured at fair value of RMB457.3 million and RMB551.7 million as of December 31, 2021 and March 31, 2022, respectively) were RMB668.6 million as of December 31, 2021 and RMB699.2 million (US$110.3 million) as of March 31, 2022, respectively.
Investments in Affiliates
Our investments in affiliates primarily consist of (i) investments in affiliated companies, over which we had significant influence generally through an ownership interest of 20% or higher, but not considered as control, and (ii) investments in funds that we served as general partner or fund manager. Our investments in affiliates were RMB1,430.3 million (US$225.6 million) as of March 31, 2022, compared to RMB1,402.1 million as of December 31, 2021. The increase was primarily due to investment income in affiliates recorded in the three months ended March 31, 2022.
 
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Cash Flow and Capital Expenditures
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2022 was RMB501.2 million (US$79.1 million), primarily as a result of operating cash inflow generated by net income of RMB304.2 million (US$48.0 million) and collection of accounts receivables of RMB653.8 million (US$103.1 million). Net cash provided by operating activities for the three months ended March 31, 2021 was RMB495.9 million, primarily as a result of operating cash inflow generated by net income of RMB452.9 million.
Investing Activities
Net cash provided by investing activities for the three months ended March 31, 2022 was RMB9.3 million (US$1.5 million), primarily due to the collection of loans originated. Net cash used in investing activities for the three months ended March 31, 2021 was RMB68.9 million, primarily due to the net loans initiated to borrowers.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2022 was RMB12.1 million (US$1.9 million), primarily due to payment of assumed liability resulting from certain asset acquisition. Net cash used in financing activities for the three months ended March 31, 2021 was RMB543.0 million, primarily due to repurchasing ordinary shares as well as acquiring additional shares from non-controlling interest shareholder in one of our subsidiaries.
Capital Expenditures
We made capital expenditures of RMB11.8 million and RMB4.1 million (US$0.7 million) for the three months ended March 31, 2021 and 2022, respectively. Our capital expenditures for the three months ended March 31, 2021 and 2022 consisted primarily of expenditures related to expansion of our fulfillment infrastructure, technology platform as well as renovation and upgrade of our office buildings. We currently do not have any commitment for capital expenditures or other cash requirements outside of our ordinary course of business.
Impact of COVID-19
The COVID-19 pandemic has caused an adverse impact on the Chinese and global economy, as well as the HNW wealth management services industry. Perceived or actual changes in investable assets and client confidence in the economy could reduce the demand for HNW and ultra HNW wealth management service we provide and negatively impact our operating results. We have experienced decrease in total revenues generated from our overseas businesses and domestic value-added services as a result of the COVID-19 pandemic. Following the outbreak of the COVID-19 pandemic, we have increased our investment in technology to develop online transactional and operational capabilities. We are currently able to complete substantially all of our transactions and investor education online. In 2021, our business operation had substantially returned to normal levels.
Recently, there has been an increasing number of COVID-19 cases, including the COVID-19 Delta and Omicron variant cases, in multiple cities in China. As a result, various measures, including city lockdowns, travel restrictions and stay-at-home orders, have been reinstated and we may have to adjust various aspects of our operations. For example, since late March 2022, new waves of COVID-19 infections have emerged in Shanghai, where our headquarters are located and a majority of our management and employees currently reside, as well as in Beijing. To contain the spread of COVID-19, the local governments have imposed various restrictions on business and social activities. We have not experienced any business suspension as a result of the recent COVID-19 resurgence in the affected areas such as Shanghai and Beijing, and substantially all of our transactions could be completed online. However, the execution and delivery of certain papers were delayed due to disruptions to the logistics and transportation services in certain regions, and face-to-face meetings with clients were limited due to quarantine measures and travel bans. Such delays and limitations
 
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have impacted our operational efficiency to a certain extent. Moreover, the spread of COVID-19, together with uncertainties over economic, political and other conditions in China and globally, has affected the overall investor sentiment and resulted in sporadic volatility in capital markets. As a result, we have experienced an immediate reduction in our results of operations as compared to the same periods in the previous year. Specifically, our total revenues in April 2022 was RMB218 million, down approximately 28% from April 2021. Despite the overall challenges posed by the COVID-19 pandemic, we believe that changes in investors’ behaviors and preference brought about by the COVID-19 pandemic also have a positive impact on our business. For example, due to the economic turmoil and unprecedented volatility in the global capital markets caused by the COVID-19 pandemic as well as the rising inflation, we have seen a growing number of clients becoming more active in seeking professional investment advice from us, especially on wealth preservation and risk protection. Leveraging our wide selection of product and service offerings, we remain optimistic of meeting our clients’ demands for wealth management and asset allocation during and post COVID-19.
Having considered (i) the governmental authorities’ significant resources and efforts to contain the recent regional outbreaks, (ii) our comprehensive product offerings coupled with our strong online transaction capabilities, which could cater to the evolving needs of our clients under different circumstances and conditions and enable us to offer suitable investment products and portfolios that provide better protection to our clients amid the COVID-19 outbreak, and (iii) our sufficient level of liquidity, we believe that despite that we may continue to experience slowdown in our business operations in the short term, the recurrence of COVID-19 is unlikely to have a material adverse impact on our business, results of operations and financial condition as a whole in the long term. As of the date of this prospectus supplement, we had incurred expenses of approximately RMB2.0 million to fight against the COVID-19, including expenses relating to purchase of medical and rescue supplies to support our frontline employees as well as technology investments to ensure online transactional and operational capabilities. However, there still remain significant uncertainties surrounding COVID-19, including the existing and new variants of COVID-19, and its further development as a global pandemic, including the effectiveness of vaccine programs against existing and any new variants of COVID-19. For risks relating to potential future outbreak of COVID-19, see “Risk Factors — Risks Related to Our Business — We may face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.”
Recent Regulatory Developments
Regulatory Changes on Data and Cybersecurity
Recently, the PRC governmental authorities have promulgated, among others, the Personal Information Protection Laws and Data Security Laws to ensure cybersecurity, data and personal information protection, which demonstrates that relevant laws and regulations governing such areas are developing along with the enforced and constantly tightening of relevant regulatory supervision. Specifically, on December 28, 2021, the Cyberspace Administration of China, or the CAC, and other twelve PRC regulatory authorities jointly revised and promulgated the Measures for Cybersecurity Review, which came into effect on February 15, 2022. The Measures for Cybersecurity Review provides that, among others, the procurement of network products and services by critical information infrastructure operators and the data processing activities conducted by network platform operators which affect or may affect national security shall be subject to cybersecurity review. Besides, according to the Measures for Cybersecurity Review, a network platform operator who processes the personal information of more than one million users and is seeking for listing in a foreign country must apply for a cybersecurity review. As advised by our PRC legal adviser, we should not be deemed as an operator of critical information infrastructure and the network products and services purchased and used by us are general network products and services in the market, and there is no obvious risk of supply chain interruption. In addition, as confirmed during a consultation with the China Cybersecurity Review Technology and Certification Center, or the Center, and advised by our PRC legal adviser, that the obligations to proactively apply for cybersecurity review by an entity seeking listing in a foreign country shall not be applicable to our proposed Listing in Hong Kong.
On November 14, 2021, the CAC published the Regulations on Network Data Security Management (Draft for Comments), or the Draft Network Data Regulations, which specified that data processors seeking a public listing in Hong Kong that affect or may affect national security are required to apply for
 
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cybersecurity review. The CAC has solicited comments on this draft until December 13, 2021, however, as of the date of this prospectus supplement, the Network Data Regulations had not yet been formally adopted and there is no timetable as to when it will be enacted. As such, substantial uncertainties exist with respect to the enactment timetable, final content, interpretation and implementation, including the standards for determining whether a listing in Hong Kong “affects or may affect national security”. As confirmed during a consultation with the Center and advised by our PRC legal adviser, since the Draft Network Data Regulations are only drafts for comments and not currently in effect, we are not required to apply for cybersecurity review under the current regulatory regime. However, we cannot assure you that relevant governmental authorities will not interpret the laws and regulations in ways that may negatively affect us. For more details, please see “Risk Factors — Risks Related to Doing Business in China — Our business is subject to various evolving PRC laws and regulations regarding data privacy and cybersecurity. Failure of cybersecurity and data privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.”
Regulatory Developments on Overseas Listing
On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law, or the Opinions on Securities Activities, which announced the plans to take effective measures to enhance the administration over illegal securities activities and the supervision on the offering and listing of PRC domestic companies in an overseas market, including promoting the construction of relevant regulatory systems.
On December 24, 2021, the China Securities Regulatory Commission, or the CSRC, promulgated the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Overseas Listing Administration Provisions, and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Overseas Listing Filing Measures, which, if become effective, require that a PRC domestic company that seeks to offer and list securities in an overseas market, whether through direct or indirect form, to file the required documents with the CSRC within three working days after such application for overseas offering and listing is submitted, and stipulate certain circumstances under which the overseas offering and listing would be prohibited, as well as the measures taken by the CSRC if a PRC domestic company falls into any of such circumstances prior to the overseas offering and listing, such as imposing a postponement or termination of the proposed overseas offering and listing, and canceling the corresponding filing on the conditions that the proposed overseas offering and listing application documents have been filed. As of the date of this prospectus supplement, the Draft Overseas Listing Administration Provisions and the Draft Overseas Listing Filing Measures were released for public comments and the final version and effective date of such regulations are subject to change with substantial uncertainty. If the Draft Overseas Listing Administration Provisions and the Draft Overseas Listing Filing Measures become effective in their current forms before the Listing is completed, we may be required to obtain the approval from or complete the filing procedures with the CSRC for the Listing. Our directors and PRC legal adviser are of the view that, as long as we comply with all relevant legal requirements, take all necessary steps, and submit all relevant materials in accordance with the Draft Overseas Listing Administration Provisions and the Draft Overseas Listing Filing Measures, there will not be material legal impediment to obtaining the approval from or completing the filing procedures with the CSRC for the Listing. For more details, please see “Risk Factors — Risks Related to Doing Business in China — The approval of or filing with the CSRC or other PRC government authorities may be required in connection with this offering under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.”
 
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THE GLOBAL OFFERING
Public Offering Price
HK$292.00, or US$37.20 per Class A ordinary share.
The Global Offering
We are offering 1,100,000 Class A ordinary shares in the Global Offering, consisting of an international offering of 990,000 Class A ordinary shares offered hereby, and a Hong Kong public offering of 110,000 Class A ordinary shares. For more information, see “Underwriting.”
Option to Purchase Additional Class A Ordinary Shares
We have granted the international underwriters an option, exercisable by the Sole Representative, on behalf of the international underwriters, until 30 days after the last day for the lodging of applications under the Hong Kong public offering, to require us to allot and issue up to 165,000 additional Class A ordinary shares at the public offering price. An affiliate of Goldman Sachs (Asia) L.L.C. has entered into a borrowing arrangement with Jing Investors Co., Ltd. and Yin Investment Co., Ltd. to facilitate the settlement of over-allocations.
Ordinary Shares Outstanding Immediately After the Global
Offering
31,189,233 Class A ordinary shares, assuming all Class B ordinary shares have been converted into Class A ordinary shares on the Listing Date and excluding 909,737 treasury stock that we repurchased (or 31,354,233 Class A ordinary shares if the Sole Representative exercises, on behalf of the international underwriters, their option to purchase additional Class A ordinary shares in full).
Use of Proceeds
We estimate that we will receive net proceeds from the Global Offering of approximately HK$270.0 million, or US$34.4 million, after deducting the underwriting fees and the estimated offering expenses payable by us and assuming the international underwriters do not exercise their option to purchase additional Class A ordinary shares.
We intend to use the net proceeds from the Global Offering for (i) further developing our wealth management business, (ii) further developing our asset management business, (iii) selectively pursuing potential investments, (iv) investing in our in-house technology across all business lines, (v) our overseas expansion, and (vi) general corporate purposes.
See “Use of Proceeds” for more information.
Lock-up
In connection with the Global Offering, we have agreed with the underwriters to certain lock-up restrictions in respect of our ordinary shares and ADSs, and any securities convertible into or exchangeable or exercisable for any of our ordinary shares or ADSs, for a period commencing on the date of the Hong Kong underwriting agreement and ending on, and including, the date that is 90 days after the Listing Date, subject to certain exceptions. In addition, certain of our directors and executive officers have agreed with the underwriters to certain lock-up restrictions in respect of our ordinary shares and ADSs, and any securities convertible into or exchangeable or exercisable for any of our ordinary shares or ADSs, for a period commencing on the date on which the public offering
 
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price is to be fixed and ending on, and including, the date that is 90 days after that date, subject to certain exceptions.
See “Shares Eligible for Future Sale” and “Underwriting” for more information.
Risk Factors
You should carefully read “Risk Factors” beginning on page S-35 and the other information included in this prospectus supplement and the accompanying prospectus, our 2021 Form 20-F and our current report on Form 6-K furnished to the SEC on June 21, 2022, as well as other documents incorporated by reference herein and therein, for a discussion of factors you should carefully consider before deciding to invest in our Class A ordinary shares.
Hong Kong Stock Exchange Code for the Class A Ordinary
Shares
6686
Payment and Settlement
The underwriters expect to deliver the Class A ordinary shares against payment therefor through the facilities of the Central Clearing and Settlement System on or around July 13, 2022.
 
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RISK FACTORS
An investment in our Class A ordinary shares involves risks. You should carefully consider the risks described below together with the risks described in our 2021 Form 20-F, Exhibit 99.1 to our current report on Form 6-K furnished to the SEC on June 21, 2022, and the other information contained in this prospectus supplement and the accompanying prospectus, including the documents incorporated by reference. Any of these risks could have a material adverse effect on our business, financial condition, and results of operations. In any such case, the market price of our Class A ordinary shares could decline, and you may lose all or part of your investment.
Please see “Where You Can Find More Information” and “Incorporation of Documents by Reference” for information on where you can find the documents we have filed with or furnished to the SEC and which are incorporated by reference in this prospectus supplement.
Risks Relating to Our Business
The investment products that we distribute or manage involve various risks and any failure to identify or fully appreciate such risks may negatively affect our reputation, client relationships, operations and prospects.
We distribute and manage a variety of investment products, including onshore and offshore private equity and venture capital products, public securities products, and other products. These products often have complex structures and involve default risks, interest rate risks, liquidity risks, market risks, counterparty risks, fraud risks and other risks.
Our success in distributing, managing and offering our products and services depends, in part, on our ability to successfully identify and fully appreciate the risks associated with such products and services. Not only must we be cautious about these risks in designing and developing our products and services, we must also accurately describe and disclose the risks associated with our products and services to, and evaluate them for, our clients. Our risk management policies and procedures may not be fully effective in mitigating the risk exposure for all of our clients in all market environments or covering all types of risks.
If we fail to identify and fully appreciate the risks associated with the products and services we distribute, manage and offer, or fail to disclose such risks to our clients, or if our clients suffer financial losses or other damages resulting from the investment products or services we distribute, manage or offer, our reputation, client relationships, business, results of operations and prospects may be materially and adversely affected.
In addition, we are subject to risks arising from any potential fraudulent activities or other misconduct or violation of laws by the third-party product partners or investment partners we collaborate with. Any such misconduct or violation of laws may adversely affect the performance of the relevant products we distribute and expose our clients to losses. Despite product risk warnings and platform disclaimers, our clients may attempt to hold us responsible for their losses, which may subject us to civil or criminal liability, harm our reputation and cause us to incur additional costs and expenses. Furthermore, in order to maintain social harmony and financial market stability, and as a result of the lack of maturity of wealth management and asset management markets in the PRC, we may also face pressure from regulatory authorities or expectation from the public to compensate or bail out our clients whose investments are negatively impacted by misconduct or violation of laws of our product partners or investment partners, which could have a material and adverse impact on our business, results of operations and financial condition.
Our reputation and brand recognition are crucial to our business. Any harm to our reputation or failure to maintain, protect, promote or enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations.
Our reputation and brand recognition, which depend on earning and maintaining the trust and confidence of our clients or prospective clients, are critical to our business. Our reputation and brand recognition are vulnerable to threats that are difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations, lawsuits initiated by clients or other third parties, employee misconduct, perceptions of conflicts of interest and rumors, among others, could substantially damage our reputation, even if they are baseless.
 
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Moreover, any misconduct or allegations of misconduct by our product managers of third-party funds we distribute could result in negative media publicity and adversely affect our reputation and the confidence of our clients. For example, certain credit funds, or the Camsing Credit Funds, managed by Shanghai Gopher had invested in supply chain account receivables, or the Camsing Accounts Receivables, with respect to the sale of computer, consumer electronics and communication products by affiliates of Camsing International Holding Limited as underlying investable assets. Certain companies and individuals in connection with such supply chain account receivables were later suspected to commit fraudulent activities, or the Camsing Incident. As of the date of this prospectus supplement, a total of 818 clients of Shanghai Gopher who invested in the Camsing Credit Funds were affected, and the outstanding amount of the Camsing Accounts Receivables under the Camsing Credit Funds which are subject to repayment default amounted to RMB3,415.5 million. While we believe we have solid legal grounds to defend any legal claims from the affected clients in the Camsing Incident against us, as a gesture of goodwill and to avoid distractions to our management and to minimize the potential legal costs for handling 818 potential legal proceedings, we voluntarily made an ex gratia settlement offer, or the Offer, to affected clients. An affected client who accepted the offer shall receive restricted share units that become a Class A ordinary shares holder of our company upon vesting, and in return (i) forego all outstanding legal rights associated with the investment in the Camsing Credit Funds, and (ii) irrevocably release our company and all our affiliated entities and individuals from any and all claims immediately, known or unknown, that relate to the Camsing Credit Funds. As approved by the board, new Class A ordinary shares not exceeding 1.6% of the share capital of our company will be issued under the settlement plan annually for ten consecutive years. As of December 31, 2021, 595 of the total of 818 affected clients (approximately 72.7%) had accepted the Offer, representing RMB2,574.9 million (US$404.1 million) (approximately 75.4%) of the total amount of outstanding Camsing Accounts Receivables. We recorded a settlement expense attributable to the Camsing Incident of RMB1,828.9 million and RMB19.9 million for the years ended December 31, 2020 and 2021, respectively. If we were to settle with the 223 unsettled affected clients on terms similar to the settlement with the 595 affected clients, the maximum financial impact on our Group would be RMB433.3 million, which has been recognized in full as an expense and a contingent liability. We believe that the Camsing Incident did not have a material adverse impact on our total transaction value and we have recovered from the impact of the Camsing Incident to our reputation.
Furthermore, any negative media coverage about the financial service industry in general or product/​service quality problems in the industry, may also negatively impact our reputation and brand recognition. If we are unable to maintain a good reputation or further enhance our brand recognition, our ability to attract and retain clients, product partners and key employees could be harmed and, as a result, our business and revenues may be materially and adversely affected.
If we breach fiduciary duties or other contractual obligations as the general partner or fund managers of the funds, or if our third-party product partners or investment partners engage in illegal activities or market misconduct, our results of operations will be adversely impacted. In addition, misconduct of our relationship managers or other employees, including potential misuse of client funds, could harm our reputation or lead to regulatory sanctions or litigation costs.
Because we serve as the general partner or manager for the funds under our asset management business, we have fiduciary duty to the limited partners or the investors. If we are deemed to breach the fiduciary duty, such as failure to establish or implement appropriate controls when handling and processing our clients’ cash investments, we may be exposed to risks and losses. We could also experience losses on our principal in a fund in the form of limited liability partnership for which we act as the general partner, as the general partner typically bears unlimited liabilities for the debts of a limited liability partnership. In addition, illegal activities or market misconduct committed by the third-party product partners or investment partners we collaborate with may adversely impact our product offerings and reputation, discourage clients from purchasing products distributed or provided by us, lead to regulatory actions and penalties, and cause us to share any losses incurred by our clients. Furthermore, as PRC laws and regulations are silent on the legal segregation of losses or liabilities incurred by contract-based private funds and assets of the fund manager, we cannot assure you that whether our assets will be subject to third-party claims arising from losses or liabilities incurred by contract-based private funds that we manage. If the assets managed by us are subject to such claims, our future growth may be materially and adversely affected.
 
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In addition, misconduct of our relationship managers or other employees could result in violations of law, regulatory sanctions, litigation or serious reputational or financial harm, among other consequences. Misconduct may include but not limited to:
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engaging in misrepresentation, negligence or fraudulent activities when distributing investment products or providing asset management or other services to clients;
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improperly using or disclosing confidential information of our clients, product partners or other parties;
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•
concealing unauthorized or unsuccessful activities, resulting in unknown and unmanaged risks or losses;
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•
accessing and misusing client funds, especially those maintained in segregated accounts for our contract-based private funds; or
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•
other conducts not complying with laws and regulations or our internal policies or procedures.
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Our internal control system which supervises service quality and regulatory compliance may not always deter misconduct of our relationship managers or other employees, and the precautions we take to prevent and detect misconduct may not be effective in all cases. Any of the abovementioned misconduct could impair our ability to attract, serve and retain clients and may lead to significant legal liability, reputational harm and material adverse effects on our business, results of operations or financial condition.
We may not be able to continue to grow at our historical rate of growth, and if we fail to manage our growth effectively, our business may be materially and adversely affected.
We commenced our business in 2005 as a consulting services provider focusing on wealth management and have gradually transitioned to a comprehensive integrated financial services group with wealth management, asset management, and other businesses. Over the last five years, we have experienced substantial growth, with our net revenues increasing at a compound annual growth rate of 11.3% from 2016 to 2021. We cannot assure you that we will continue to grow at our historical rate of growth, or that we will be able to achieve expected results, in future. For instance, our total revenues decreased from RMB1,230.9 million for the three months ended March 31, 2021 to RMB802.5 million (US$126.6 million) for the three months ended March 31, 2022, and our net income attribute to Noah’s shareholders was RMB305.2 million (US$48.2 million) for the three months ended March 31, 2022 compared to RMB454.1 million for the three months ended March 31, 2021, based on an exchange rate of RMB6.3393 to US$1.00 as of March 31, 2022, as set forth in the H.10 statistical release of the Federal Reserve Board. Moreover, due to uncertainties in the global and China’s economies, volatility in financial markets as well as the resurgence of COVID-19 outbreaks, we expect to experience lower growth in net income in 2022 as compared to the previous year. It is also difficult to predict whether the new investment products and services we continuously develop will be attractive to our clients and prospective clients. In addition, our growth has placed, and will continue to place, a significant strain on our management, personnel, systems and resources. We may not manage our growth effectively or accurately predict our future results of operations. As a result, our historical growth rate may not be indicative of our future performance.
Because the laws and regulations governing the industries of wealth management, asset management and other businesses in China are developing and subject to further change, any failure to obtain or maintain requisite approvals, licenses or permits necessary to conduct our operations or any failure to comply with laws and regulations applicable to our business and services could harm our business.
The relevant regulatory authorities, including the CSRC and the Asset Management Association of China, or the AMAC, have released various laws and regulations governing the industries of wealth management, asset management and other businesses in China, including regulations over private equity products, privately-raised securities investment funds, asset management plans managed by securities companies or mutual fund management companies, trust products and insurance products. However, these laws and regulations are subject to further changes and the PRC government has not adopted a unified regulatory framework yet.
 
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As for our asset management business, the CSRC is in charge of the supervision and regulation of private funds, including, without limitation, private equity funds, venture capital funds, privately-raised securities investment funds and other forms of private funds. The AMAC has promulgated a series of rules and measures regulating the registration of private funds, qualified investor standards, fund raising, investment advice service provided by third parties, structured asset management plan and private asset management plans investing into real estate development enterprises or projects and etc. In addition, the CSRC and AMAC may adopt further detailed regulations and implementing policies that govern private funds and private fund managers. These laws, rules and regulations could be highly complex, continuously evolving and could change or be reinterpreted to be burdensome or difficult to comply with. Since fund management business is a significant part of our asset management business, our asset management business is subject to such regulations on private funds and related implementation rules thereof.
As the regulators of the wealth management and asset management industries in China are enhancing their supervision over the industries, applicable laws and regulations may be adopted to address new issues that arise from time to time or to require additional licenses and permits. For example, on April 27, 2018, the People’s Bank of China, or the PBOC, the China Banking and Insurance Regulatory Commission, or the CBIRC, the CSRC and the State Administration of Foreign Exchange of the PRC jointly released the Guidance Opinions on Regulating the Asset Management Business of Financial Institutions, or the Guidance Opinions, which prohibits the issuance of private credit products that contain maturity mismatch arrangements or any direct or indirect guarantee of return, and requires relevant institutions to follow detailed guidance with regards to the maximum volume of private credit products issued and minimum liquidity thresholds. The Guidance Opinions will apply to private funds in the absence of specific laws and regulations thereto. On July 20, 2018, the PBOC issued the Circular on Further Clarifying Matters concerning the Guidance Opinions on Regulating the Asset Management Business of Financial Institutions. On October 22, 2018, the CSRC issued the Administrative Measures on Private Asset Management Business of Securities and Futures Institutions. Furthermore, according to the Instructions for the Filing of Privately-Raised Investment Funds (2019 Version), or the Filing Instructions, issued by the AMAC on December 23, 2019, the AMAC does not accept the filing application of private funds engaging in regular and operational private lending activities in form of entrustment loans, trust loans or other means. In line with our understanding and anticipation of the changing regulatory and market environment given the publication of the new rules including the Guidance Opinions and the Filing Instructions, we have strategically ceased offering substantially all of our credit products from the third quarter of 2019, which had a negative impact on our results of operations.
Furthermore, on August 28, 2020, the CSRC issued the Supervision Measures on Distribution Institutions of Publicly-Raised Securities Investment Fund, or the Supervision Measures, which came into effect in October 2020. The Supervision Measures provides that independent fund distribution institutions, like Noah Upright, shall specialize in the distribution of publicly-raised securities investment funds and privately-raised securities investment funds, except as otherwise provided by the CSRC. Following the enactment of the Supervision Measures, we ceased offering investment products that invest in private equity investments through Noah Upright, and collaborate with our private equity product partners solely through our asset management business.
As we develop our business, the products we manage or distribute might be subject to detailed regulations and implementing policies to be issued by the CSRC or AMAC in the future and we cannot assure you that our asset management or wealth management business will not be materially and adversely affected if any supervisory authority enhances its regulation over asset management plans.
Furthermore, the Notice on Regulation and Renovation of the “Cash Loan” Business promulgated on December 1, 2017, or the Circular 141, requires microloan companies and other entities to charge synthetic fund costs, including the interest and fees paid by the borrowers, in compliance with the rules provided by the Supreme People’s Court, and such costs shall be within the legally allowed annualized interest rate for private lending. The Circular 141 and subsequent rules and regulations also provide that no institution or third-party agency shall collect loans by actual or threatened violence, intimidation, insult, defamation, harassment, disseminating private information, or other ways that cause harm. In addition, the Opinions on Several Issues Concerning Handling Illegal Lending Criminal Cases, jointly promulgated by the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Public Security, and the Ministry of
 
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Justice on July 23, 2019, provides rules on supervision of and punishment for illegal lending, such as debt-collection by means of violence. Although we have decreased the scale of our lending businesses since the third quarter of 2019, we cannot assure you whether the funding party, loan collection agencies or other service providers we cooperate with charge extra fees from the borrower or conduct other behaviors in violation of the provisions of the relevant rules and regulations. The local authorities have broad discretion in interpreting, implementing and enforcing the applicable laws, rules, regulations and governmental policies, such as capital reserve ratio, the maximum amount of a single loan, limitation on operating territory, payment method of interest and fees, restrictions on financing and methods of debt collection. As a result, there are uncertainties in the interpretation, implementation and enforcement of such laws, rules, regulations and governmental policies, and occasionally, we may receive instructions issued by the local authorities on our microloan business model from time to time, or have to depend on verbal clarifications from local authorities. Therefore, if the local authorities make unfavorable interpretation, instruction or ruling against our microloan business model, or modify the local regulatory policies on microloan business in the future, our lending business might be restricted and negatively impacted.
In accordance with the relevant laws and regulations in jurisdictions in which we operate, our subsidiaries and Consolidated Affiliated Entities are required to obtain and maintain various approvals, licenses and permits necessary to operate our business from the central and/or local government, including but not limited to, business license, fund distribution license, certificate for privately-raised investment fund manager, family trust license, insurance brokerage license, and trust business license. These approvals, licenses and permits are obtained upon satisfactory compliance with, among other things, the applicable laws and regulations, which are developing and might conflict with each other. For example, pursuant to the relevant PRC laws and regulations, a company who carries out microloan business shall obtain requisite approval from local financial authority for its business operations as well as the establishment and change of its shareholding structure. Our lending business subsidiary, Noah Rongyitong (Wuhu) Microloan Co., Ltd., or Rongyitong, has been approved to carry out microloan business by the local government of Anhui Province. The Guidance on the Pilot Establishment of Microloan Companies, jointly promulgated by the China Banking Regulatory Commission on May 4, 2008, which was merged into the CBIRC, and the PBOC, requires that the capital contribution from one individual, entity or other association (including the capital from its related parties) to a microloan company may not exceed 10% of such company’s total registered capital. The Guidance Opinions of Finance Office of Anhui Province on Carrying out the Pilot Work of Microloan Companies promulgated on October 10, 2008 provides, however, that the shareholding percentage of the major founding shareholder shall not exceed 20% in principle, and the shareholding percentage of another shareholder and its related parties shall not exceed 10%. On October 24, 2011, the government of Anhui Province published the Opinions of Finance Office of Anhui Province on Promoting the Standardized Development of Microloan Companies across Anhui Province, which eased the restrictions on the shareholding percentage of microloan companies and provided that, when applying for the establishment of a microloan company, the shareholding percentage of the major founding shareholder shall not exceed 35% in principle, and the shareholding percentage of the major founding shareholder and its related parties in aggregate shall not exceed 50%. The Finance Office of Anhui Province, which is the competent authority for the regulation of microloan companies in Anhui Province, has approved Rongyitong for its microloan business and its initial shareholding structure in 2013, namely, Shanghai Noah Financial Services Corp. as a founding shareholder holding 35% equity interests in Rongyitong with all the shareholders of Rongyitong being its related parties. Subsequently, when Shanghai Noah Financial Services Corp. transferred its equity interests to Noah Group in 2017, Rongyitong obtained the approval from the Finance Office of Anhui Province on the change of its shareholding structure as well. The shareholding structure remains unchanged thereafter with Noah Group holding 35% equity interests in Rongyitong and all the shareholders being its related parties. As of the date of this prospectus supplement, we had not received any queries or notifications from the Finance Office of Anhui Province and had not been subject to any administrative penalties or other sanctions in relation to shareholding structure of Rongyitong. As such, our PRC legal adviser is of the view that, Rongyitong has obtained requisite approvals for carrying out microloan business and for its current shareholding structure. However, we cannot assure you that whether we will be required to adjust Rongyitong’s shareholding structure and transfer a portion of our equity interests in Rongyitong to third parties to comply with relevant rules and regulations. If that were to occur, such transfer could affect our overall control of Rongyitong. If we fail to obtain or maintain the required licenses, permits and approvals, we may be subject to fines, confiscation of the income derived from the related
 
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business, the suspension of operations and adverse publicity arising from such non-compliance with government regulations. In addition, there can be no assurance that we will be able to obtain, maintain and renew all of the approvals, licenses and permits required for our business operations upon their expiration in a timely manner or at all, which may materially impact our business operations.
As of the date of this prospectus supplement, our Significant Subsidiaries had obtained all material licenses, approvals and permits necessary from competent regulatory authorities for our business operations in the jurisdictions in which we operate. We renew all such permits and licenses from time to time to comply with the relevant laws and regulations. As of the date of this prospectus supplement, we were not aware of any facts that would prevent us from renewing permits or licenses material to our Group.
Our business is subject to risks related to complaints, claims, controversies, regulatory actions, arbitration and legal proceedings.
We are subject to lawsuits, regulatory actions and other claims in the ordinary course of our business from time to time. In particular, we may face lawsuits, arbitrations or other claims brought by our clients who purchase investment products or services we distribute, offer or provide which turn out to be unsuitable for any reason, such as misconduct by the managers of the third-party funds, or providers of the products that we have recommended or made available to our clients, or illegal, non-compliance or unsatisfactory actions taken by third parties such as suppliers, service providers and other business partners that are outside of our control, or change of legal requirements or regulatory environment. For example, certain credit funds managed by Shanghai Gopher had invested in supply chain account receivables with respect to the sale of computer, consumer electronics and communication products by affiliates of Camsing International Holding Limited as underlying investable assets. Certain companies and individuals in connection with such supply chain account receivables were later suspected to commit fraudulent activities. Shanghai Gopher, as the fund manager, has received notices from court and arbitration tribunal concerning claims initiated by individual clients. We may also encounter claims alleging misrepresentation by our relationship managers or other employees. Moreover, we may not be able to comply with any new regulatory requirement in a timely manner or at all, and we may also be subject to regulatory actions and may encounter additional lawsuits, arbitrations or other claims from our investors. These risks may be heightened during periods when credit, equity or other financial markets are deteriorating in value or are volatile, or when clients or investors are experiencing losses.
Claims or actions brought against us may result in settlements, awards, injunctions, fines, claims and penalties or other results adverse to us, including harm to our reputation. In the event that we become subject to claims caused by actions taken or unsatisfactory performance by our suppliers, service providers or other business partners, we may attempt to seek compensation from the relevant suppliers, service providers or other business partners. However, such compensation may be limited. If no claim can be asserted against a supplier, service provider or business partner, or amounts that we claim cannot be fully recovered from the supplier, service provider or business partner, we may be required to bear such losses and compensation at our own costs. Even if we are successful in defending against these actions, we may incur significant expenses. Predicting the outcome of such matters is inherently difficult, particularly where claimants seek substantial or unspecified damages, or when legal or other proceedings are at an early stage. A substantial judgment, award, settlement, fine, or penalty may be materially adverse to our results of operations and financial condition.
We may face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
Our business may be materially and adversely affected by the effects of natural disasters, health epidemics or other public safety concerns. For example, the outbreak of a novel strain of coronavirus (COVID-19), first reported in December 2019, has spread rapidly throughout the world. On March 11, 2020, the World Health Organization declared the outbreak a “global pandemic”. Many businesses and social activities in mainland China and other countries and regions have been seriously disrupted, including those of us, our suppliers, partners, clients and employees. The global outbreak has also caused market panic, which materially and negatively affected the global financial markets. In particular, we and our clients have experienced and may continue to experience limitations to face-to-face meetings due to quarantine
 
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measures and travel bans adopted by governments to contain the spread of this outbreak. In 2020, we have experienced decrease in total revenues generated from our overseas businesses and domestic value-added services as a result of the COVID-19 pandemic. In 2021, our business operation had substantially returned to normal levels. Recently, there has been an increasing number of COVID-19 cases, including the COVID-19 Delta and Omicron variant cases, in multiple cities in China. As a result, various measures, including city lockdowns, travel restrictions and stay-at-home orders, have been reinstated and we may have to adjust various aspects of our operations. The restrictions on business and social activities imposed in the affected areas such as Shanghai and Beijing since late March 2022 have negatively affected our operational efficiency to a certain extent and the overall investor sentiment, which led to a slowdown in our business and results of operations during such periods. In addition, the highly-contagious Delta and Omicron variants of COVID-19 have caused authorities in various countries to reimpose restrictions such as mask mandates, curfews and prohibitions on large gatherings. There remain significant uncertainties surrounding COVID-19, including the existing and new variants of COVID-19, and its further development as a global pandemic, including the effectiveness of vaccine programs against existing and any new variants of COVID-19. The extent to which the COVID-19 outbreak may continue to adversely affect the macro-economic environment as well as our business, results of operations and financial condition remains uncertain, and will depend on future developments, including the duration, severity and reach of the COVID-19 outbreak, and actions taken to contain the outbreak or treat its impacts.
Our headquarters is located in Shanghai, where most of our management and employees currently reside. Our relationship managers are based in 84 cities in China, and various offices overseas. Consequently, if any natural disasters, health epidemics or other public safety concerns were to affect Shanghai and other locations where our offices reside in, our operation may experience material disruptions, which may materially and adversely affect our business, financial condition and results of operations. We are also vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server or service interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware, as well as adversely affect our ability to provide products and services. Our business operation could also be disrupted if any of our employees are suspected of having contracted any contagious disease or condition, since it could require our employees to be quarantined or our offices to be closed down and disinfected. All of these may have a material adverse effect on our results of operations and financial condition in the near terms. Additionally, if the outbreak persists or escalates, we may be subject to further negative impact on our business operations or financial condition.
In addition, our business, results of operations, financial conditions and prospects could also be adversely affected to the extent that any natural disasters, health epidemics and other outbreaks harms the Chinese and global economies in general.
We are subject to credit risk.
We are subject to credit risk related to accounts receivable, amounts due from related parties and loans receivable, and any significant default on our receivables could materially and adversely affect our liquidity, financial condition and results of operations. As of December 31, 2019, 2020 and 2021, our accounts receivables amounted to RMB219.6 million, RMB434.5 million and RMB808.0 million (US$126.8 million), respectively, our amounts due from related parties amounted to RMB548.7 million, RMB520.2 million and RMB451.4 million (US$70.8 million), respectively, and our loans receivable amounted to RMB654.1 million, RMB418.9 million and RMB595.8 million (US$93.5 million). We may not be able to collect all such receivables due to a variety of factors that are beyond our control. For example, fund investors may not satisfy their contractual obligation to fund capital calls when requested by Gopher or other fund managers of the funds. This may result in shortfalls in capital and may affect the ability of our funds to consummate investments and adversely affect our ability to receive service fees and other income. If we are not able to effectively manage the credit risk associated with our receivables, or if one or more counterparties run into financial difficulties, this could result in losses for us. The performance of our funds may also be affected by credit risk, which could have an adverse effect on our income.
 
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Fluctuation of fair value change of short-term and long-term investments that we made and valuation uncertainty of other long-term investments measured at fair value due to the use of unobservable inputs may adversely affect our financial condition, results of operations, and prospects.
From time to time, we purchase short-term investments, which mainly include held-to-maturity investments, available-for-sale investments, trading debt securities and investments held by consolidated investment funds measured at fair value, and long-term investments, which consist of investments in several private equity funds as a limited partner and equity investments of common shares of several companies. The methodologies that we use to assess the fair value of the short-term and long-term investments involve a significant degree of management judgment and are inherently uncertain. We are exposed to credit risks in relation to our short-term and long-term investments, which may adversely affect the net changes in their fair value. As of December 31, 2019, 2020 and 2021, we had short-term investments of RMB671.3 million, RMB114.9 million and RMB92.8 million (US$14.6 million), and long- term investments of RMB881.1 million, RMB536.4 million and RMB668.6 million (US$104.9 million), respectively. In addition, certain of our other long-term investments are measured at fair value with significant unobservable inputs used in the valuation techniques. Changes in any of these unobservable inputs may result in changes of the valuation of our other long-term investments measured at fair value, which leads to uncertainty in accounting estimation. We cannot assure you that market conditions will create gains on our short-term and long-term investments or we will not incur any fair value losses or impairment losses on our short-term and long-term investments in the future. If we incur such fair value losses or impairment losses, our financial condition, results of operations, and prospects may be adversely affected.
We are subject to risk of recoverability of deferred tax assets.
We recorded deferred tax assets of RMB167.4 million, RMB224.2 million, RMB335.9 million (US$52.7 million), respectively, as of December 31, 2019, 2020 and 2021. We periodically assess the probability of the realization of deferred tax assets, using significant judgments and estimates with respect to, among other things, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with tax attributes expiring unused and tax planning alternatives. Our ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. Any changes in management’s judgment as well as our future taxable profits and tax planning strategies would affect the carrying amounts of deferred tax assets to be recognized and the recoverability of deferred tax assets recognized in our consolidated financial statements, and therefore could materially and adversely affect our financial condition and results of operation in future years.
Our investments in affiliates may not be successful and we may incur significant losses or be subject to liquidity risk as a result.
Our investments in affiliates primarily consist of (i) investments in affiliated companies, over which we had significant influence generally through an ownership interest of 20% or higher, but not considered as control, and (ii) investments in funds that we served as general partner or fund manager, including Gopher Transform Private Fund, real estate funds and real estate funds of funds, private equity funds of funds, and other public securities funds of funds. We may not be successful in achieving the strategic objective upon which any given investment or joint venture is premised, and we could lose all or part of our investment. As of December 31, 2019, 2020 and 2021, we recorded investments in affiliates of RMB1,272.3 million, RMB1,264.7 million and RMB1,402.1 million (US$220.0 million), respectively. We recognized impairment losses on investments in affiliates of nil, RMB38.2 million and nil for the years ended December 31, 2019, 2020 and 2021, respectively, which were recorded as income from equity in affiliates in the consolidated statements of operations. Therefore, any such losses may have a material adverse effect on our results of operations, and in particular, our net income or loss.
In addition, our investments in affiliates are relatively illiquid as there is no cash flow until proceeds from the disposal of investments and payments of dividends, among others, have been received. We cannot predict whether such entities will declare any dividends or make any other distributions to us. Therefore, the illiquidity nature of our investments in affiliates may limit our ability to respond to adverse changes in the performance of such investees and subject us to liquidity risk, which may in turn materially and adversely affect our financial condition and result or operations.
 
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The government subsidies received by us during the years ended December 31, 2019, 2020 and 2021 were non- recurring in nature.
For the years ended December 31, 2019, 2020 and 2021, certain government subsidies of RMB89.3 million, RMB113.4 million and RMB115.9 million (US$18.2 million), respectively, were granted to us as incentives for our investing and operating in certain local districts in the PRC. These government subsidies are non-recurring in nature and the amounts of these subsidies were subject to the discretion of local governments and there were no fulfilled conditions or contingencies. There is no assurance that we will receive such government subsidies for future financial years. For more information on the government subsidies, see Note 2 to the consolidated financial statements in our 2021 Form 20-F.
Risks Related to Corporate Structure
We are a Cayman Islands holding company primarily operating in China through our subsidiaries and Consolidated Affiliated Entities, including Noah Investment with which we have maintained Contractual Arrangements and its subsidiaries in the PRC. Investors thus are not purchasing, and may never directly hold, equity interests in the Consolidated Affiliated Entities. There are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to such agreements that establish the Contractual Arrangements for a portion of our company’s China operations, including potential future actions by the PRC government, which could affect the enforceability of the Contractual Arrangements with Noah Investment and its subsidiaries and, consequently, significantly affect the financial condition and results of operations of our company. If the PRC government finds that such agreements do not comply with PRC laws, regulations, and rules, or if these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in Noah Investment and its subsidiaries or forfeit its rights under the Contractual Arrangements.
We operate our domestic asset management business under the Contractual Arrangements. In our domestic asset management business, we act as the general partner of relevant investment funds which investment portfolio includes, among others, investments in third-party managed funds and equity investments into private companies. The PRC government regulates certain businesses through strict business licensing requirements and laws and regulations, including restrictions on foreign investment. These third-party managed funds or investee companies may target or operate certain businesses that are subject to foreign investment restrictions, which may require that investors shall not be foreign-invested enterprises, or FIEs, or their foreign ownership percentage shall be limited to a specified ceiling to the extent permitted by relevant foreign investment regulations. We adopted the Contractual Arrangements because if we were to conduct our domestic asset management business through our PRC subsidiaries which are FIEs, we may lose the accessibility to the investments in certain businesses that are subject to foreign investment restrictions. Therefore, we rely on the Contractual Arrangements that we entered into with Noah Investment and its shareholders to carry out our domestic asset management business.
The Contractual Arrangements with Noah Investment and its shareholders enable us to (1) have power to direct the activities that most significantly affect the economic performance of Noah Investment and its subsidiaries; (2) receive substantially all of the economic benefits from Noah Investment and its subsidiaries in consideration for the services provided by Noah Group; and (3) have an exclusive option to purchase all or part of the equity interests in Noah Investment when and to the extent permitted by PRC law, or request any existing shareholder of Noah Investment to transfer any or part of the equity interests in Noah Investment to another PRC person or entity designated by us at any time at our discretion. Because of the Contractual Arrangements, we are the primary beneficiary of Noah Investment and its subsidiaries and hence treat them as our Consolidated Affiliated Entities and consolidate their results of operations into ours. In addition, we hold the required licenses and permits necessary to conduct our asset management business in China through our Consolidated Affiliated Entities. Investors of our Shares and/or ADSs are not purchasing equity interest in our Consolidated Affiliated Entities in China but instead are purchasing equity interest in a Cayman Islands holding company with no direct equity ownership of our Consolidated Affiliated Entities.
One of the shareholders of Noah Investment ceased to be a PRC citizen in 2018. According to the provisions of the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
 
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(Revised in 2009) issued by the Ministry of Commerce of the PRC on June 22, 2009, the change of nationality of a shareholder of a domestic company who is a natural person will not cause the company to cease to be deemed a domestic company. However, if the funds for which we have been acting, or will act as the general partner or fund manager invest into other equity investment funds or investee companies in China, it is possible that these funds or investee companies may be recognized by PRC governmental authorities as having foreign ultimate beneficiaries. This may result in violation of foreign investment restrictions by these funds or investee companies or limit our potential investment opportunities due to restrictions on foreign investments in certain industries in China, thus adversely affect our domestic asset management business.
We believe that our corporate structure and the Contractual Arrangements do not result in a violation of the current applicable PRC laws and regulations. Our PRC legal adviser, based on its understanding of PRC laws and regulations currently in effect, is of the opinion that each of the contracts under the Contractual Arrangements among our wholly-owned PRC subsidiary, Noah Group, Noah Investment, and its shareholders, is valid, legal and binding in accordance with its terms. However, we have been further advised by our PRC legal adviser that as there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations and relevant regulatory measures concerning the foreign investment restrictions and administrative licenses and permits related to various underlying industries, there can be no assurance that the PRC government authorities or courts, or other authorities that regulate the industries that our funds are directly or indirectly investing into, would agree that our corporate structure or any of the contracts under the Contractual Arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. PRC laws and regulations governing the legality, validity and enforceability of the Contractual Arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations.
If our corporate structure and the Contractual Arrangements are deemed by relevant regulatory authorities to be illegal, either in whole or in part, we may lose control of our Consolidated Affiliated Entities and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our business. Further, if our corporate structure and the Contractual Arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:
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revoking our business and operating licenses;
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levying fines on us;
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confiscating any of our income that they deem to be obtained through illegal operations;
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shutting down our services;
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discontinuing or restricting our operations in China;
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imposing conditions or requirements with which we may not be able to comply;
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requiring us to change our corporate structure and the Contractual Arrangements;
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restricting or prohibiting our use of the proceeds from overseas offering to finance our Consolidated Affiliated Entities’ business and operations; and
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taking other regulatory or enforcement actions that could be harmful to our business.
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As of the date of this prospectus supplement, we had not encountered any interference or encumbrance from any PRC regulators in operating our business through our Consolidated Affiliated Entities under the Contractual Arrangements. However, new PRC laws, rules and regulations may be introduced to impose additional requirements that may be applicable to our corporate structure and the Contractual Arrangements. Occurrence of any of these events could materially and adversely affect our business, financial condition and results of operations. In addition, if the imposition of any of these penalties or requirement to restructure our corporate structure causes us to lose the rights to direct the activities of our Consolidated Affiliated Entities or our right to receive its economic benefits, we would no longer be able to consolidate the financial results of our Consolidated Affiliated Entities in our consolidated financial statements.
 
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If we exercise the option to acquire equity ownership of Noah Investment, the ownership transfer may subject us to certain limitations and substantial costs.
Pursuant to the Contractual Arrangements, Noah Group or its designated person(s) has the exclusive option to elect to purchase at any time, when permitted by the then applicable PRC laws, all or any part of the equity interests in Noah Investment from its shareholder. The transfer price of the relevant equity interest shall be the minimum purchase price permitted under PRC law or a higher price as otherwise agreed by Noah Group. In the event that Noah Group exercises the options under the Exclusive Option Agreement to acquire the equity interests in Noah Investment, the equity transfer price may be subject to review and tax adjustment by the relevant tax authority. Such tax amounts could be substantial and our financial condition may be adversely affected as a result.
Risks Related to Doing Business in China
Our ADSs may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect auditors who are located in China. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections.
The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over the counter trading market in the U.S. On December 2, 2021, the SEC finalized its rules under the HFCA Act that set forth submission and disclosure requirements for commission-identified issuers identified under the HFCA Act, specify the processes by which the SEC will identify and notify commission-identified issuers, and implement trading prohibitions after three consecutive years of identification.
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely. On April 12, 2022, we were identified by the SEC under the HFCA Act as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with our filing of the annual report on Form 20-F for the fiscal year ended December 31, 2021. On April 13, 2022, we made a press release where we provided an update on our status under the HFCA Act. Based on our discussions with our U.S. legal advisor and our understanding that the SEC’s role at this stage of the process is solely to identify issuers that have used such PCAOB-identified public accounting firms to audit their financial statements and a company will be delisted from a U.S. stock exchange only if the company has been identified by the SEC for three consecutive years due to PCAOB’s inability to inspect or investigate its auditor under the HFCA Act, we believe such initial identification would not affect, among others, our track record of good regulatory compliance of at least five full financial years on the NYSE, as required by Criteria A under Rule 19C.05A of the Hong Kong Listing Rules. As of the date of this prospectus supplement, over 140 China-based U.S. listed companies were identified by the SEC as commission-identified issuers, including the vast majority of those that had been listed under Chapter 19C of the Hong Kong Listing Rules. According to the latest statements from the SEC, there have been ongoing and productive discussions between Chinese and U.S. authorities regarding audit inspection and investigations to reach an agreement. Based on the foregoing, our directors are of the view that being listed as a commission-identified issuer by the SEC has no immediate impact to our business operations, our ability to maintain our listing status on the NYSE and pursue the proposed Listing, or the Group as a whole before April 30, 2024, the filing due date of our financial statements on the annual report on Form 20-F for the year ending December 31, 2023.
Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on the annual report on Form 20-F for the year ending December 31, 2023 which is due by April 30, 2024, or at all, is subject to substantial uncertainty and depends on a number of factors out of
 
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our, and our auditor’s, control. If the PCAOB and Chinese authorities cannot reach an agreement timely and our ADSs are prohibited from trading in the United States, there is no certainty that a market for our shares will develop outside of the United States. Such a prohibition would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would materially and adversely affect our business, financial condition, and prospects.
On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among other things, an identical provision. If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act is reduced from three years to two, then our shares and ADSs could be prohibited from trading in the United States in 2023.
The approval of or filing with the CSRC or other PRC government authorities may be required in connection with this offering under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law, or the Opinions on Securities Activities”, which announced the plans to take effective measures to enhance the administration over illegal securities activities and the supervision on the offering and listing of PRC domestic companies in an overseas market, including promoting the construction of relevant regulatory systems.
On December 24, 2021, the CSRC promulgated the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) , or the Draft Overseas Listing Administration Provisions, and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Overseas Listing Filing Measures, which, if become effective, require that a PRC domestic company that seeks to offer and list securities in an overseas market, whether through direct or indirect form, to file the required documents with the CSRC within three working days after such application for overseas offering and listing is submitted, and stipulate certain circumstances under which the overseas offering and listing would be prohibited, as well as the measures taken by the CSRC if a PRC domestic company falls into any of such circumstances prior to the overseas offering and listing, such as imposing a postponement or termination of the proposed overseas offering and listing, and canceling the corresponding filing on the conditions that the proposed overseas offering and listing application documents have been filed. As of the date of this prospectus supplement, the Draft Overseas Listing Administration Provisions and the Draft Overseas Listing Filing Measures were released for public comments and the final version and effective date of such regulations are subject to change with substantial uncertainty. If the Draft Overseas Listing Administration Provisions and the Draft Overseas Listing Filing Measures become effective in their current forms, issuers like us with contractual arrangements seeking for overseas offering and listing may be required to obtain the approval from or complete the filing procedures with the CSRC. Our directors and PRC legal adviser are of the view that, as long as we comply with all relevant legal requirements, take all necessary steps, and submit all relevant materials in accordance with the Draft Overseas Listing Administration Provisions and the Draft Overseas Listing Filing Measures, there will not be material legal impediment to obtaining the approval from or completing the filing procedures with the CSRC for the Listing. This view is on the basis that, although the implementation of the Draft Overseas Listing Administration Provisions and the Draft Overseas Listing Filing Measures, if adopted in their current forms, will be subject to the discretion and interpretation of the CSRC, we are not aware of any major issues that would cause this Listing to be deemed to have violated Article 7 of the Draft Overseas Listing Administration Provisions that prohibits overseas offerings and listings under certain circumstances. However, as the filing requirements are subject to change with substantial uncertainty, we cannot assure you that we will be able to complete all filing requirements that may be implemented under the proposed regulatory regime in time or at all.
 
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On 14 November 2021, the Cyberspace Administration of China, or the CAC, publicly solicited opinions on the Regulations on Network Data Security Management (Draft for Comments), according to which, data processors seeking a public listing in Hong Kong that affect or may affect national security shall apply for cybersecurity review. On December 28, 2021, the Revised Cybersecurity Review Measures was released, which stipulate, among others, that any online platform operator holding personal information of over one million users that intends to apply for overseas listing shall apply for a cybersecurity review. See also “— Risks Related to Our Business — Our business is subject to various evolving PRC laws and regulations regarding data privacy and cybersecurity. Failure of cybersecurity and data privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.”
Furthermore, the PRC governmental authorities may have wide discretion on the interpretation and enforcement of the foregoing regulations, and we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on this offering. If it is determined in the future that approvals, filings, registrations or other kind of governmental authorisation from the CSRC or other PRC governmental authorities are required for this offering, it is uncertain whether we can or how long it will take us to obtain such authorisation, and whether any such authorisation could be rescinded. Any failure to obtain or delay in obtaining such authorisation for this offerings, or a rescission of any such authorization if obtained by us, may subject us to regulatory actions or other sanctions from the CSRC or other PRC governmental authorities, which may have a material adverse effect on our business, financial condition or results of operations.
Our business is subject to various evolving PRC laws and regulations regarding data privacy and cybersecurity. Failure of cybersecurity and data privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.
We face significant challenges with respect to cybersecurity and data privacy, including the receipt, processing, storage, and transmission of the data of our clients and others, much of which is confidential. We are subject to various regulatory requirements relating to cybersecurity and data privacy, including, without limitation the PRC Cybersecurity Law, or the Cybersecurity Law. The Cybersecurity Law requires, among others, a network operator to adopt technical measures and other necessary measures to safeguard the safety and stability of network operations, effectively respond to network security incidents, prevent illegal and criminal activities, and maintain the integrity, confidentiality and availability of network data. The Cybersecurity Law also reaffirms certain basic principles and requirements on personal information protection.
Regulatory requirements on cybersecurity and data privacy are constantly evolving and can be subject to varying interpretations or significant changes, resulting in uncertainties about the scope of our responsibilities in that regard. For example, on June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, or the Data Security Law, which took effect on September 1, 2021. The Data Security Law applies to data processing activities, including the collection, storage, use, processing, transmission, availability and disclosure of data, and security supervision of such activities within the territory of the PRC. According to the Data Security Law, whoever carries out data processing activities shall establish a sound data security management system throughout the whole process, organize data security education and training, and take corresponding technical measures and other necessary measures to ensure data security. The Data Security Law provides a national data security review system, under which data processing activities that affect or may affect national security shall be reviewed, and prohibits any individual or entity in China from providing data stored in PRC to foreign judicial or law enforcement departments without the approval of competent PRC authorities. In Addition, the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, issued on August 20, 2021 by the Standing Committee of the National People’s Congress, further details the general rules and principles on personal information processing and further increases the potential liability of personal information processor. We have implemented internal policies to safeguard our clients’ personal information in accordance with the legal requirements under the Personal Information Protection Law, which specify, among others, the requirements regarding identification and classification of personal information, measures on collection, storage, processing, use, transmission, provision, disclosure and deletion of personal information, mechanism to ensure individual’s rights with respect to their privacy, and security incident response mechanisms. We have also adopted policies on personal information protection impact assessment,
 
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or the IPIA, pursuant to which we would conduct assessment on our personal information processing activities that involve greater risks, such as when processing sensitive personal information. In addition, to inform our clients about how their personal information is processed as required by relevant laws, we have formulated our own privacy policies that are embedded with our mobile applications and websites. We have also made great efforts to deploy various cybersecurity techniques to improve our privacy and data security systems and processes. Even though we have already taken necessary organizational and technical measures in accordance with applicable legal requirements to protect the safety of our network facilities and the data processed by us, we may still face risks inherent in handling and protecting large volumes of data, including protecting the data temporarily hosted in our system, detecting and prohibiting unauthorized data sharing and transfers, preventing attacks on our system by outside parties, foiling any fraudulent behavior or improper use by our employees, and maintaining and updating our database. Any system failure, security breach or attempts by third parties to illegally obtain the data that results in any actual or perceived release of client data could damage our reputation and brand, deter current and potential clients from using our services, affect our business and results of operations, and expose us to potential legal liability.
The Regulations on Network Data Security Management (Draft for Comments), or the Draft Network Data Regulations, was released by CAC on November 14, 2021. According to the Draft Network Data Regulations, data processors seeking a public listing in Hong Kong that affect or may affect national security are required to apply for cybersecurity review. The CAC has solicited comments on this draft until December 13, 2021, however, as of the date of this prospectus supplement, the Network Data Regulations had not yet been formally adopted and there is no timetable as to when it will be enacted. As such, substantial uncertainties exist with respect to the enactment timetable, final content, interpretation and implementation, including the standards for determining whether a listing in Hong Kong “affects or may affect national security”. We cannot assure you that relevant governmental authorities will not interpret the laws and regulations in ways that may negatively affect us. At this stage, we are unable to predict the possible consequences of these drafts, if any, and we are monitoring and assessing the rulemaking process closely. Any failure, or perceived failure to maintain the security of our user data or to comply with applicable PRC privacy, data security and personal information protection laws and obligations may result in civil or regulatory liability, including governmental or data protection authority enforcement actions and investigations, fines, penalties, enforcement orders requiring us to cease operating in a certain way, litigation, or adverse publicity, and may require us to expend significant resources in responding to and defending allegations and claims. If our proposed Listing is considered a listing in Hong Kong that affects or may affect national security, we may be required to apply for cybersecurity review, but there can be no assurance that we are able to obtain approval from the regulatory authorities in a timely manner, or at all. Any failure to obtain such approval or clearance from the regulatory authorities could materially constrain our liquidity and have a material adverse impact on our business operations and financial results, especially if we need additional capital or financing.
As announced by the CAC, the substantive cybersecurity review work is delegated to the China Cybersecurity Review Technology and Certification Center, or the Center. According to our consultation with the Center on whether we are subject to cybersecurity review in respect of the proposed Listing pursuant to Article 13 of the Draft Network Data Regulations. As confirmed during the consultation, since the Draft Network Data Regulations are only drafts for comments and not currently in effect, we are not required to apply for cybersecurity review under the current regulatory regime. As of the date of this prospectus supplement, the Draft Network Data Regulations had not been formally promulgated.
If the Draft Network Data Regulations become effective in its current form, our PRC legal adviser does not foresee any material legal impediment for us to complying with the Draft Network Data Regulations on the basis that, we have implemented internal policies on personal information protection, data security management and cybersecurity management to ensure compliance relevant laws and regulations. We also have a dedicated team responsible for cybersecurity and data security management by taking stringent technical measures to safeguard our technology infrastructure. As of the date of this prospectus supplement, we had not been subject to any material administrative penalties, mandatory rectifications, or other sanctions by any competent regulatory authorities in relation to cybersecurity and data protection, nor had there been any material cybersecurity and data protection incidents with respect to personal information leakage, violation of data protection laws and regulations or investigation or other legal proceeding against us in this regard. In anticipation of the Draft Network Data Regulations to become effective in the future, we have studied the
 
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specific requirements under the Draft Network Data Regulations and will proactively implement various measures to ensure timely compliance, including thoroughly reviewing our business practices and operational policies, improving our privacy policies and service agreements, and, if required, filing important data and submitting relevant data security assessment report with competent authorities. We will closely monitor the legislative and regulatory development in connection with cybersecurity and data protection, including the Draft Network Data Regulations and the interpretation or implementation rules of laws and regulations of cybersecurity and data protection, proactively maintain communications with relevant authorities, and adjust and enhance our data practices in a timely manner to ensure compliance once the regulations come into effect.
On December 28, 2021, Measures for Cybersecurity Review was issued by CAC jointly with other governmental authorities, which took effect on February 15, 2022. Under the Measures for Cybersecurity Review, the procurement of network products and services by critical information infrastructure operators and the data processing activities conducted by network platform operators which affect or may affect national security shall be subject to cybersecurity review. Besides, according to Article 7 of the Measures for Cybersecurity Review, a network platform operator who processes the personal information of more than one million users and is seeking for listing in a foreign country must apply for a cybersecurity review. In addition, according to Article 16 of the Measures for Cybersecurity Review, member organizations of the cybersecurity review working mechanism, or the Working Members, may initiate cybersecurity review towards network products, network services, and data processing activities ex officio, which means we may be also subject to cybersecurity review when the Working Members initiate such cybersecurity review ex officio.
Based on Measures for Cybersecurity Review, cybersecurity review shall focus on the assessment of a number of national security risk factors of the relevant object or situation, including but not limited to, risks of any illegal control or supply chain interruption of critical information infrastructure, and risks of illegal use or cross-border transmission of data. As advised by our PRC legal adviser, we should not be deemed as an operator of critical information infrastructure and the network products and services purchased and used by us are general network products and services in the market, and there is no obvious risk of supply chain interruption. We have not received any material queries or notifications from the CAC or other PRC governmental authorities and have not been subject to any material administrative penalties or other sanctions by any competent regulatory authorities in relation to cybersecurity, data and personal information protection. There has been no material cybersecurity or data protection incidents with respect to data or personal information theft, leakage, damage or loss. Our data will be transferred to recipients located in regions and countries outside the territory of mainland China, such as Hong Kong and the United States. However, since we process less than one million users’ personal information and transmit an insignificant number of users’ personal information to overseas recipients, the possibility for us to apply to the CAC for cybersecurity review is relatively low. Besides, we have taken necessary technical and organizational measures to protect the security of the data being transferred abroad, including using data encryption to secure personal information when it is in transit. We have also established a basic cybersecurity and data protection system pursuant to the Cybersecurity Law, the Data Security Law, the Personal Information Protection Law and other relevant laws and regulations.
Further, we consulted with the Center on whether we are required to apply for cybersecurity review in respect of the proposed Listing under the Measures for Cybersecurity Review. According to the consultation, Article 7 of the Measures for Cybersecurity Review applies to network platform operators that intend to list in a foreign country, and our proposed Listing in Hong Kong shall not be considered as a listing in a foreign country.
As such, our PRC legal adviser is of the view that we are not required to apply for a cybersecurity review pursuant to Article 7 of the Measures for Cybersecurity Review. However, we cannot completely exclude the risks of being required to apply for cybersecurity review in consideration of the provisions of the Draft Network Data Regulations and Article 16 of the Measures for Cybersecurity Review. According to the Draft Network Data Regulations, if our proposed Listing is considered a listing in Hong Kong that affects or may affect national security, we may be required to apply for cybersecurity review. There can be no assurance that we are able to obtain approval from the regulatory authorities in a timely manner, or at all, when we are required to apply for cybersecurity review. Any failure to obtain such approval or clearance
 
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from the regulatory authorities could materially constrain our liquidity and have a material adverse impact on our business operations and financial results, especially if we need additional capital or financing.
Risks Related to Our ADSs, Shares and the Listing
As a company applying for listing under Chapter 19C, we adopt different practices as to certain matters as compared with many other companies listed on the Hong Kong Stock Exchange.
As we are applying for listing under Chapter 19C of the Hong Kong Listing Rules, we will not be subject to certain provisions of the Hong Kong Listing Rules pursuant to Rule 19C.11, including, among others, rules on notifiable transactions, connected transactions, share option schemes and content of financial statements as well as certain other continuing obligations. In addition, in connection with the Listing, we have applied for a number of waivers and/or exemptions from strict compliance with the Hong Kong Listing Rules, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Takeovers Code and the SFO. As a result, we will adopt different practices as to those matters as compared with other companies listed on the Hong Kong Stock Exchange that do not enjoy those exemptions or waivers. Shareholders will not have the benefit of the Hong Kong Listing Rules that are so waived. There is no assurance that the Hong Kong Stock Exchange or SFC will not revoke any of these waivers granted or impose certain conditions on any of these waivers. If any of these waivers were to be revoked or to be subject to certain conditions, we may be subject to additional compliance obligations and incur additional compliance costs, all of which could materially and adversely affect us and our Shareholders.
Our Memorandum and Articles are specific to us and include certain provisions that may be different from the requirements under the Hong Kong Listing Rules and common practices in Hong Kong. For example, Rule 19C.07(7) of the Hong Kong Listing Rules provides that the minimum stake required to convene an extraordinary general meeting and add resolutions to a meeting agenda must not be higher than 10% of the voting rights, on a one vote per share basis, in the share capital of a Qualifying Issuer, but our Memorandum and Articles do not provide such a provision. We will put forth a resolution at or before our next annual general meeting to be held after the Listing to revise our Memorandum and Articles to comply with Rule 19C.07(7) of the Hong Kong Listing Rules. The next annual general meeting after the Listing is expected to be held in the fourth quarter of this year.
Furthermore, if 55% or more of the total worldwide trading volume, by dollar value, of our ADSs and Shares over our most recent fiscal year takes place on the Hong Kong Stock Exchange, the Hong Kong Stock Exchange will regard us as having a dual primary listing in Hong Kong and we will no longer enjoy certain exemptions or waivers from strict compliance with the requirements under the Hong Kong Listing Rules, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Takeovers Code and the SFO, which could result in us having to amend our corporate structure and Memorandum and Articles and our incurring of incremental compliance costs.
The market price for our ADSs may continue to be, and the market price of our Shares can be, volatile.
The trading prices of our ADSs have been, and are likely to continue to be, volatile and could fluctuate widely due to factors beyond our control. The trading prices of our Shares, likewise, can be volatile for similar or different reasons. The trading prices of our ADSs ranged from US$28.58 to US$52.77 in 2021. In addition, securities markets may from time to time experience significant price and volume fluctuations that may or may not relate to our operating performance, which may have a material and adverse effect on the market price of our Shares and/or ADSs. In particular, volatility in the PRC stock markets in the last few years has resulted in some volatility in the trading prices of most China-based companies whose shares are traded in Hong Kong and/or the United States. The market price for our Shares and/or ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:
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variation in our revenues, earnings, cash flow and data related to our user base or user engagement;
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regulatory developments in our target markets affecting us, our clients or our competitors;
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announcements of studies and reports relating to the quality of our products and services or those of our competitors;
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changes in the performance or market valuations of other companies in the industries in which we operate;
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actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;
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changes in financial estimates by securities research analysts;
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detrimental adverse publicity about us or our industry;
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conditions in the industries in which we operate;
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announcements by us or our competitors of new services, investments, acquisitions, strategic relationships, joint ventures or capital commitments;
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addition or departure of key personnel;
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fluctuations of exchange rates between the Renminbi and the U.S. dollar;
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release or expiry of transfer restrictions on our outstanding ordinary shares or ADSs;
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sales or perceived potential sales of additional ordinary shares or ADSs; and
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potential litigation or regulatory investigations.
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In addition, the market prices for China-based companies listed in the United States and/or Hong Kong have experienced volatility that might have been unrelated to the operating performance of such companies. The substantial declines in the market prices of the securities of China-based companies may affect the attitudes of investors toward Chinese companies listed in Hong Kong and/or the United States in general, which consequently may impact the market price of our Shares and/or ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inappropriate corporate governance practices or corporate structure, fraudulent accounting or other matters of some China-based companies may also negatively affect the attitudes of investors towards China-based companies in general, including us, regardless of whether we have engaged in any inappropriate activities.
The global financial crisis and the ensuing economic recessions in many countries have contributed and may continue to contribute to extreme volatility in the global stock markets, such as the large declines in share prices in the United States, mainland China, Hong Kong and other jurisdictions at various times since 2008. These broad market and industry fluctuations may adversely affect the prices of our Shares and/or ADSs, regardless of our operating performance. In the past, shareholders of a public company have often instituted securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
The volatility resulting from any of the above factors may affect the price at which you could sell the Shares or ADSs.
There is no assurance if and when we will pay dividends in the future. Therefore, you should not rely on an investment in our Shares and/or ADSs as a source of future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends, subject to our Memorandum and Articles and Cayman Islands law. In addition, our shareholders by ordinary resolution may declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our
 
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