1,What is the business reason for China Noahs potential currency exposure? Does the company really need to subject itself to substantial exchange rate risk? Is the risk material to China Noah? Do you think China Noah should hedge?

2,How does China Noahs profitability (using return on sales as the primary metric) change depending on whether the IDR/CNY exchange rate follows (a) forecast spot rates, (b) forward rate quotes, or (c) fixed rate baseline assumption?

3,Assuming Noah made 6-month payments on its wood purchases from Indonesia, what is the schedule of foreign currency amounts over time?

4,What would be your outlook on the future direction of the Indonesian rupiah and the Chinese renminbi? Should this influence the hedging approach used by Noah?

5,Which of the hedging choices would you recommend?

23079 Gross margin G&A expense (20.0) EBITDA margin EBIT margin (159) 2010e 2012e Exhibit I. China Noah's Consolidated Statement of Income (actual and forecast, million Chinese yuan) (CNY million) 2007 2008 2009 2010e 201le 2012 2013e 2014e 2015e Sales revenue 1,2904 Assumption 1.394.6 1,602.7 1,9232 2,769.5 3,323.4 3,988.0 4,785.6 Cost of goods sold (849.4) (943.4) (1,110.0) (1.294.0) (1.610.3) 2.000.7) (2.491.1) (3,096.8) (3,848.2) Gross profit 441.0 4512 492 629.3 697.6 768.8 8322 891.2 937.4 34.2% 32.4% 30.7% 32.7% 30.2% 27.8% 25.0% 22.3% 19.6% Selling expense (216.0) (208.0) (201.8) (2423) (290.8) (349.0) (418.7) (502.5) (603.0) 12.6% (19.6) (20.1) (24.1) (28.9) (34.7) (41.7) (50.0) (600) 1.3% EBITDA 205. 223.6 271.1 362.8 3779 385.1 371.8 338.71 274.4 13.9% 16.0% 16.9% 18.99 16.4 13.9% 11.2% 8.3% 3.7 Depreciation (40.3) (45.3) (49.4) (575) (60.8) (64.0) (673) (70.5) (73.7) EBIT 165.6 1784 221.9 3053 317.1 321.1 3043 268.2 200.7 12.8% 12.8% 13.8% 15.9% 13.7% 11.6% 9.2% 6.7% 4.2% Interest expense (7.1) (12.0) (15.1) (13.9) (11.2) (7.7) (2.2) EBT 1385 166.4 206.8 2894 303 2 309.9 296.8 263.8 1983 Income tax (8.4) (18.0) (20.0) (28.9) (303) (31.0) (29.7) (26.4) (19.9) 10.0% Net income 150.1 148. 186.8 260.5 2729 278.9 267.1 2375 178.7 Return on sales 11.6% 10.8% 11.7% 13.5% 11.8% 10.1% 8.0% 6.0% 3.7% Assumes sales growth of 20% per year. Estimated costs assume NR 1344 =1.00 RUB. Projected selling expenses assumed 12.6% of sales G&A expenses at 1.3% of sales, and income tax expenses at 10% of EBT. Cost of goods sold assumptions for 2010-2015e are based on Edhibit 3 which folloss. Exhibit 3. China Noah Corporation's Cost of Goods Sold Composition CNY/m' floorboard 2007 2008 2009 2011e 2013e 2014e 2015e TVood Cost Chinese wood cost 59.9 61.8 65.2 67.8 70.5 73.3 76.3 79.3 82.5 4.0% Percent Chinese 100% 100% 100% 70%. 67% 60% 56% 52% Indonesian wood cost (IDR m): 84.090 87.454 90,952 94.590 98,373 102,308 4.0% Cost in CNY/m 62.6 65.1 67.7 70.4 73.2 76.1 Percent Indonesian 0% 0 0% 30% 33% 36% 40% 44% 48% 10.0% Weighted wood cost 59.9 61.8 65.2 66.2 68.7 713 73.9 76.6 79.4 Other Cost 29 29 3.0 3.1 3.2 3.3 3.4 3.5 3.6 Utilities 0.4 0.4 04 0.4 0.4 0.4 0.5 0.5 0.5 Labor 1.0 1.0 1.1 1.1 12 1.2 1.2 1.3 1.3 Delivery 1.4 1.4 1.5 1.5 1.6 1.6 1.7 1.7 1.8 Sand 09 09 0.8 0.8 0.8 0.8 0.8 0.9 0.9 Other 2.0 2.0 2.0 2.1 2.1 2.2 2.3 2.3 24 Total COGS (CNY/m2) 68.3 70.4 14.0 752 78.0 80.8 83.8 86.8 89.9 Flooring Output (milliom m 12.4 13.4 15.0 172 20.6 29. 35.7 42.8 20.0% Wood COGS 87.4% 87.8% 88.1% 88.0% 88.1%. 88.2% 88.2% 88.3% 88.3% Total COGS (million (NY) 849.4 943.4 1.110.0 1.294.0 1,6103 2,000.7 2.491.1 3,848.2 Assumes INR 1344 = 1.00 CNY for 2010-2015, flooring output growth at 20% Chinese wood prices increasing % per year, Indonesian wood prices increasing 4% per year, percentage increase in Indonesian sourcing 10% per year from 30% in 2010. IDR CNY spot exchange rate 1.344 1 344 1,344 1,344 1,344 1,344 Forecast spot rate (outlook) 1,480 1,405 1,373 1,338 1.299 1.269 Forward rate quotes 1.450 1,470 1,652 1,784 1,915 2,050 Amount of output from Indo 5.16 6.81 8.99 11.87 15.67 20.68 Indo cost discount to China 7.7% 7.7% 7.7% 7.7% 7.7% 7.7% Chinese wood price increases 4.0% 4.0% 4.0% 4.0% 4.0% 21.7% Exposure (payment in IDR) based on chosen exchange rate 433,904 595,664 817,727 1,122,576 1,341,073 2,115,585 China Noah's Estimated Indonesian Sourcing Exposure 2007 2008 2009 2010e 201le 2012e 2013e 2014e 2015e Flooring Output (milliom m 17,200,000 12.4 13.4 15.0 172 20.6 24.8 29.7 35.7 42.8 30% Percent from Indonesia 0% 0% 0% 30% 33% 36% 40% 44% 48% 5.160,000 Indonesian purchases (million m') 5.16 6.81 8.99 11.87 15.67 20.68 every six months 2.58 3.41 4.50 5.93 7.83 10.34 84,090 Indonesian wood cost (IDR m) 84,090 87,454 90,952 94,590 98,373 102,308 433,904,400,000 Total IDR cost exposure) 433,904 595,664 817,727 1,122.576 1,541,073 2,115,585 133.904 billion rupiah Exchange rate (IDR = 1.00 CNY) 1,344 1.344 1,344 1,344 1,344 1,344 Indonesian wood in CNY (CNY/m) 62.6 65.1 67.7 70.4 73.2 76.1 Packaging 3,096.8 4.09