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What changed in Maase Inc.'s 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Maase Inc.'s 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+411 added−392 removedSource: 20-F (2023-06-30) vs 20-F (2022-06-30)

Top changes in Maase Inc.'s 2023 20-F

411 paragraphs added · 392 removed · 325 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

100 edited+25 added−20 removed382 unchanged
Biggest changeSelected Condensed Consolidating Schedule of Financial Position As of June 30, 2022 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Cash and cash equivalents 11,732 123,276 58,647 604 - 194,259 Restricted cash - 118,796 - - - 118,796 Inter-group balance due from VIEs and subsidiaries 77 20,000 46,029 - (66,106 ) - Investments in subsidiaries 248,459 - - - (248,459 ) - Other assets - 91,869 59,012 - - 150,881 Total assets 260,268 353,941 163,688 604 (314,565 ) 463,936 Inter-group balance due to VIEs and subsidiaries - 46,008 20,000 21 (66,029 ) - Inter-group balance due to parent - - - 77 (77 ) - Other liabilities 217 181,959 21,709 - - 203,885 Total liabilities 217 227,967 41,709 98 (66,106 ) 203,885 Total equity 260,051 125,974 121,979 506 (248,459 ) 260,051 Less: Non-controlling interests - - - - - - Total Puyi Inc.’s equity 260,051 125,974 121,979 506 (248,459 ) 260,051 3 As of June 30, 2021 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Cash and cash equivalents 12,770 126,653 120,422 748 - 260,593 Restricted cash - 72,189 - - - 72,189 Inter-group balance due from VIEs and subsidiaries - 44,400 40,150 - (84,550 ) - Investments in subsidiaries 307,741 - - - (307,741 ) - Other assets - 86,310 48,811 - - 135,121 Total assets 320,511 329,552 209,383 748 (392,291 ) 467,903 Inter-group balance due to VIEs and subsidiaries - 40,129 44,400 21 (84,550 ) - Other liabilities 210 129,836 17,556 61 (61 ) 147,602 Total liabilities 210 169,965 61,956 82 (84,611 ) 147,602 Total equity 320,301 159,587 147,427 666 (307,680 ) 320,301 Less: Non-controlling interests - - - - - - Total Puyi Inc.’s equity 320,301 159,587 147,427 666 (307,680 ) 320,301 Selected Condensed Consolidating Schedule of Results of Operations For the fiscal year ended June 30, 2022 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Revenues - 159,181 46,841 - (17,281 ) 188,741 Cost of revenues - (45,535 ) (5,104 ) - 16,805 (33,834 ) Operating expenses (1,610 ) (153,695 ) (74,998 ) (159 ) 1,452 (229,010 ) Loss from operations (1,610 ) (40,049 ) (33,261 ) (159 ) 976 (74,103 ) Other income, net 227 4,784 8,476 - (976 ) 12,511 Share of loss from subsidiaries (59,220 ) - - - 59,220 - Loss before income taxes (60,603 ) (35,265 ) (24,785 ) (159 ) 59,220 (61,592 ) Income tax (expense) benefit (64 ) 1,652 (663 ) - - 925 Net loss (60,667 ) (33,613 ) (25,448 ) (159 ) 59,220 (60,667 ) Less: net loss attributable to non-controlling interests - - - - - - Net loss attributable to Puyi Inc.’s shareholders (60,667 ) (33,613 ) (25,448 ) (159 ) 59,220 (60,667 ) For the fiscal year ended June 30, 2021 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Revenues - 193,013 37,954 - (39,767 ) 191,200 Cost of revenues - (69,985 ) (13,825 ) - 39,767 (44,043 ) Operating expenses (1,369 ) (184,600 ) (35,726 ) (108 ) 1,464 (220,339 ) Loss from operations (1,369 ) (61,572 ) (11,597 ) (108 ) 1,464 (73,182 ) Other income, net 68 7,828 11,076 - (1,464 ) 17,508 Share of loss from subsidiaries (45,067 ) - - - 45,067 - Loss before income taxes (46,368 ) (53,744 ) (521 ) (108 ) 45,067 (55,674 ) Income tax (expense) benefit (2 ) 12,017 (2,407 ) - - 9,608 Net loss (46,370 ) (41,727 ) (2,928 ) (108 ) 45,067 (46,066 ) Less: net income attributable to non-controlling interests - 304 - - - 304 Net loss attributable to Puyi Inc.’s shareholders (46,370 ) (42,031 ) (2,928 ) (108 ) 45,067 (46,370 ) For the fiscal year ended June 30, 2020 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Revenues - 179,256 12,970 - (62,743 ) 129,483 Cost of revenues - (35,705 ) (58,797 ) - 62,743 (31,759 ) Operating expenses (1,286 ) (137,820 ) (13,828 ) 1,686 - (151,248 ) Income (loss) from operations (1,286 ) 5,731 (59,655 ) 1,686 - (53,524 ) Other income, net 188 13,026 3,703 662 - 17,579 Share of loss from subsidiaries (31,805 ) - - - 31,805 - Income (loss) before income taxes (32,903 ) 18,757 (55,952 ) 2,348 31,805 (35,945 ) Income tax (expense) benefit - (5,990 ) 8,384 - - 2,394 Net income (loss) (32,903 ) 12,767 (47,568 ) 2,348 31,805 (33,551 ) Less: net loss attributable to non-controlling interests - (648 ) - - - (648 ) Net income (loss) attributable to Puyi Inc.’s shareholders (32,903 ) 13,415 (47,568 ) 2,348 31,805 (32,903 ) 4 Selected Condensed Consolidating Schedule of Cash Flows For the fiscal year ended June 30, 2022 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Net cash provided by (used in) operating activities (1,455 ) 52,727 (60,676 ) (144 ) - (9,548 ) Net cash used in investing activities - (9,497 ) (1,099 ) - - (10,596 ) Net cash provided by (used in) financing activities - - - - - - Net increase (decrease) in cash and cash equivalents, and restricted cash (1,455 ) 43,230 (61,775 ) (144 ) - (20,144 ) Cash and cash equivalents, and restricted cash at the beginning of year 12,770 198,842 120,422 748 - 332,782 Effect of exchange rate changes on cash and cash equivalents 417 - - - - 417 Cash and cash equivalents, and restricted cash at the end of year 11,732 242,072 58,647 604 - 313,055 For the fiscal year ended June 30, 2021 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Net cash provided by (used in) operating activities (1,239 ) 11,169 (12,708 ) (47 ) - (2,825 ) Net cash provided by (used in) investing activities - 54,489 (6,499 ) - - 47,990 Net cash provided by (used in) financing activities - - - - - - Net increase (decrease) in cash and cash equivalents, and restricted cash (1,239 ) 65,658 (19,207 ) (47 ) - 45,165 Cash and cash equivalents, and restricted cash at the beginning of year 15,286 133,184 139,629 795 - 288,894 Effect of exchange rate changes on cash and cash equivalents (1,277 ) - - - - (1,277 ) Cash and cash equivalents, and restricted cash at the end of year 12,770 198,842 120,422 748 - 332,782 For the fiscal year ended June 30, 2020 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Net cash provided by (used in) operating activities (1,206 ) (32,961 ) (56,929 ) 2,347 - (88,749 ) Net cash provided by (used in) investing activities - (53,534 ) 453 (56,694 ) 56,694 (53,081 ) Net cash provided by financing activities - - 56,694 - (56,694 ) - Net increase (decrease) in cash and cash equivalents, and restricted cash (1,206 ) (86,495 ) 218 (54,347 ) - (141,830 ) Cash and cash equivalents, and restricted cash at the beginning of year 16,036 219,679 139,411 55,142 - 430,268 Effect of exchange rate changes on cash and cash equivalents 456 - - - - 456 Cash and cash equivalents, and restricted cash at the end of year 15,286 133,184 139,629 795 - 288,894 5 Summary of Risk Factors Below please find a summary of the principal risks we, our subsidiaries and the consolidated VIEs, face.
Biggest changeSelected Condensed Consolidating Schedule of Balance Sheets As of June 30, 2023 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Cash and cash equivalents 2,605 63,527 97,610 728 - 164,470 Restricted cash - 8,258 - - - 8,258 Inter-group balance due from VIEs and subsidiaries 809 52,080 49,160 - (102,049 ) - Investments in subsidiaries 213,620 - - - (213,620 ) - Other assets - 68,310 30,424 71 - 98,805 Total assets 217,034 192,175 177,194 799 (315,669 ) 271,533 Inter-group balance due to VIEs and subsidiaries - 49,180 52,040 21 (101,241 ) - Inter-group balance due to parent - - - 793 (793 ) - Other liabilities - 40,062 14,437 - - 54,499 Total liabilities - 89,242 66,477 814 (102,034 ) 54,499 Total equity 217,034 102,933 110,717 (15 ) (213,635 ) 217,034 3 As of June 30, 2022 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Cash and cash equivalents 11,732 123,276 58,647 604 - 194,259 Restricted cash - 118,796 - - - 118,796 Inter-group balance due from VIEs and subsidiaries 77 20,000 46,029 - (66,106 ) - Investments in subsidiaries 248,459 - - - (248,459 ) - Other assets - 91,869 59,012 - - 150,881 Total assets 260,268 353,941 163,688 604 (314,565 ) 463,936 Inter-group balance due to VIEs and subsidiaries - 46,008 20,000 21 (66,029 ) - Inter-group balance due to parent - - - 77 (77 ) - Other liabilities 217 181,959 21,709 - - 203,885 Total liabilities 217 227,967 41,709 98 (66,106 ) 203,885 Total equity 260,051 125,974 121,979 506 (248,459 ) 260,051 Selected Condensed Consolidating Schedule of Results of Operations For the fiscal year ended June 30, 2023 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Revenues - 87,728 40,582 705 (14,575 ) 114,440 Cost of revenues - (20,979 ) (7,765 ) - 12,608 (16,136 ) Operating expenses (2,084 ) (105,641 ) (51,054 ) (1,233 ) 2,904 (157,108 ) Loss from operations (2,084 ) (38,892 ) (18,237 ) (528 ) 937 (58,804 ) Other income, net 286 19,158 5,295 10 (937 ) 23,812 Share of loss from subsidiaries (41,771 ) - - - 41,771 - Loss before income taxes (43,569 ) (19,734 ) (12,942 ) (518 ) 41,771 (34,992 ) Income tax expense (8 ) (3,307 ) (5,270 ) - - (8,585 ) Net loss (43,577 ) (23,041 ) (18,212 ) (518 ) 41,771 (43,577 ) For the fiscal year ended June 30, 2022 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Revenues - 159,181 46,841 - (17,281 ) 188,741 Cost of revenues - (45,535 ) (5,104 ) - 16,805 (33,834 ) Operating expenses (1,610 ) (153,695 ) (74,998 ) (159 ) 1,452 (229,010 ) Loss from operations (1,610 ) (40,049 ) (33,261 ) (159 ) 976 (74,103 ) Other income, net 227 4,784 8,476 - (976 ) 12,511 Share of loss from subsidiaries (59,220 ) - - - 59,220 - Loss before income taxes (60,603 ) (35,265 ) (24,785 ) (159 ) 59,220 (61,592 ) Income tax (expense) benefit (64 ) 1,652 (663 ) - - 925 Net loss (60,667 ) (33,613 ) (25,448 ) (159 ) 59,220 (60,667 ) For the fiscal year ended June 30, 2021 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Revenues - 193,013 37,954 - (39,767 ) 191,200 Cost of revenues - (69,985 ) (13,825 ) - 39,767 (44,043 ) Operating expenses (1,369 ) (184,600 ) (35,726 ) (108 ) 1,464 (220,339 ) Loss from operations (1,369 ) (61,572 ) (11,597 ) (108 ) 1,464 (73,182 ) Other income, net 68 7,828 11,076 - (1,464 ) 17,508 Share of loss from subsidiaries (45,067 ) - - - 45,067 - Loss before income taxes (46,368 ) (53,744 ) (521 ) (108 ) 45,067 (55,674 ) Income tax (expense) benefit (2 ) 12,017 (2,407 ) - - 9,608 Net loss (46,370 ) (41,727 ) (2,928 ) (108 ) 45,067 (46,066 ) Less: net income attributable to non-controlling interests - 304 - - - 304 Net loss attributable to Puyi Inc.’s shareholders (46,370 ) (42,031 ) (2,928 ) (108 ) 45,067 (46,370 ) 4 Selected Condensed Consolidating Schedule of Cash Flows For the fiscal year ended June 30, 2023 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Net cash provided by (used in) operating activities (2,735 ) (165,366 ) 32,076 124 - (135,901 ) Net cash used in investing activities (6,952 ) (4,921 ) (65 ) (6,952 ) 13,904 (4,986 ) Net cash provided by financing activities - - 6,952 6,952 (13,904 ) - Net increase (decrease) in cash and cash equivalents, and restricted cash (9,687 ) (170,287 ) 38,963 124 - (140,887 ) Cash and cash equivalents, and restricted cash at the beginning of year 11,732 242,072 58,647 604 - 313,055 Effect of exchange rate changes on cash and cash equivalents 560 - - - - 560 Cash and cash equivalents, and restricted cash at the end of year 2,605 71,785 97,610 728 - 172,728 For the fiscal year ended June 30, 2022 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Net cash provided by (used in) operating activities (1,455 ) 52,727 (60,676 ) (144 ) - (9,548 ) Net cash used in investing activities - (9,497 ) (1,099 ) - - (10,596 ) Net cash provided by (used in) financing activities - - - - - - Net increase (decrease) in cash and cash equivalents, and restricted cash (1,455 ) 43,230 (61,775 ) (144 ) - (20,144 ) Cash and cash equivalents, and restricted cash at the beginning of year 12,770 198,842 120,422 748 - 332,782 Effect of exchange rate changes on cash and cash equivalents 417 - - - - 417 Cash and cash equivalents, and restricted cash at the end of year 11,732 242,072 58,647 604 - 313,055 For the fiscal year ended June 30, 2021 Parent VIEs WFOEs Other subsidiaries Eliminating adjustments Consolidated totals Net cash provided by (used in) operating activities (1,239 ) 11,169 (12,708 ) (47 ) - (2,825 ) Net cash provided by (used in) investing activities - 54,489 (6,499 ) - - 47,990 Net cash provided by (used in) financing activities - - - - - - Net increase (decrease) in cash and cash equivalents, and restricted cash (1,239 ) 65,658 (19,207 ) (47 ) - 45,165 Cash and cash equivalents, and restricted cash at the beginning of year 15,286 133,184 139,629 795 - 288,894 Effect of exchange rate changes on cash and cash equivalents (1,277 ) - - - - (1,277 ) Cash and cash equivalents, and restricted cash at the end of year 12,770 198,842 120,422 748 - 332,782 5 Summary of Risk Factors Below please find a summary of the principal risks we, our subsidiaries and the VIEs face.
In addition, fund managers managing privately raised funds are required to register with the Asset Management Association of China (“AMAC”); unregistered individuals or institutions are not permitted to conduct securities investment activities under the names of “funds” or “fund management”.
In addition, fund managers managing privately raised funds are required to register with the Asset Management Association of China (the “AMAC”); unregistered individuals or institutions are not permitted to conduct securities investment activities under the names of “funds” or “fund management”.
Any material decrease in the fee rates for our services may have an adverse effect on our revenues, cash flow and results of operations. We derive a majority of our revenues from distribution commissions and performance-based fees from wealth management services, and the management fees and carried interest from the funds that we manage.
Any material decrease in the fee rates for our services may have an adverse effect on our revenues, cash flow and results of operations. We derive a majority of our revenues from distribution commissions and performance-based fees from wealth management services, and management fees and carried interest from the funds that we manage.
If any of these occurrences results in our inability to govern the activities of any of the consolidated VIEs that most significantly impact their economic performances, and/or our failure to receive the economic benefits from the consolidated VIEs, we may not be able to consolidate the consolidated VIEs in our consolidated financial statements in accordance with U.S. GAAP.
If any of these occurrences results in our inability to govern the activities of any of the VIEs that most significantly impact their economic performances, and/or our failure to receive the economic benefits from the VIEs, we may not be able to consolidate the VIEs in our consolidated financial statements in accordance with U.S. GAAP.
GAAP as the primary beneficiary since the consolidated VIEs conduct a significant part of our operations. 20 As of the date of this annual report, it is unclear what impact the PRC government’s actions would have on us, our ability to consolidate the financial results of the consolidated VIEs in our consolidated financial statements and the value of our securities, if the PRC government authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations.
GAAP as the primary beneficiary since the VIEs conduct a significant part of our operations. 20 As of the date of this annual report, it is unclear what impact the PRC government’s actions would have on us, our ability to consolidate the financial results of the VIEs in our consolidated financial statements and the value of our securities, if the PRC government authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations.
Any failure to comply with PRC regulations regarding the registration requirements for share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Any failure to comply with PRC regulations regarding the registration and other requirements for share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Although the law in this regard is unclear, we intend to treat the consolidated VIEs as being owned by us for United States federal income tax purposes and we treat it that way, not only because we direct the operation of such entity through contractual arrangements but also because we are entitled to substantially all of the economic benefits associated with it, and, as a result, we consolidate its operating results in our consolidated U.S.
Although the law in this regard is unclear, we intend to treat the VIEs as being owned by us for United States federal income tax purposes and we treat it that way, not only because we direct the operation of such entity through contractual arrangements but also because we are entitled to substantially all of the economic benefits associated with it, and, as a result, we consolidate its operating results in our consolidated U.S.
If we or the consolidated VIEs are found to be in violation of any PRC laws or regulations, if the contractual arrangements among Puyi Consulting, the VIE and its shareholders are determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, or if we or the VIEs fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including: ● revoking the business license and/or operating license that such entities currently have or are to obtain in the future; ● discontinuing or placing restrictions or onerous conditions on our operations; ● imposing fines, confiscating the income from Puyi Consulting or the VIE, or imposing other requirements with which we or the VIE may not be able to comply; ● requiring us to restructure our structure or operations, including by terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the consolidated VIEs; or ● restricting or prohibiting our use of the proceeds from overseas offerings to finance our business and operations in China.
If we or the VIEs are found to be in violation of any PRC laws or regulations, if the contractual arrangements among Puyi Consulting, the VIE and its shareholders are determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, or if we or the VIEs fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including: ● revoking the business license and/or operating license that such entities currently have or are to obtain in the future; ● discontinuing or placing restrictions or onerous conditions on our operations; ● imposing fines, confiscating the income from Puyi Consulting or the VIE, or imposing other requirements with which we or the VIE may not be able to comply; ● requiring us to restructure our structure or operations, including by terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIEs; or ● restricting or prohibiting our use of the proceeds from overseas offerings to finance our business and operations in China.
If the America COMPETES Act is enacted into law, it would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. 30 On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of China governing inspections and investigations of audit firms based in China and Hong Kong (the “SOP”).
If the America COMPETES Act is enacted into law, it would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. 30 On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of China governing inspections and investigations of audit firms based in Mainland China and Hong Kong (the “SOP”).
Risks Related to Our Corporate Structure We, our subsidiaries and the consolidated VIEs, are also subject to risks and uncertainties related to our corporate structure, including but not limited to the following: ● If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations relating to fund management businesses, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations; ● We rely on contractual arrangements with the VIE and its principal shareholder Mr.
Risks Related to Our Corporate Structure We, our subsidiaries and the VIEs, are also subject to risks and uncertainties related to our corporate structure, including but not limited to the following: ● If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations relating to fund management businesses, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations; ● We rely on contractual arrangements with the VIE and its principal shareholder Mr.
Risk Factors.” Risks Related to Our Business and Industry We, our subsidiaries and the consolidated VIEs, are subject to risks and uncertainties related to our business and industry, including but not limited to the following: ● The wealth management products that we distribute involve various risks and our failure to identify or fully appreciate such risks will negatively affect our reputation, client relationships, operations and prospects; ● If we fail to maintain or renew existing licenses or to obtain additional licenses and permits necessary to conduct our operations in China pursuant to applicable laws and regulations from time to time governing our operations, we may be subject to limitations or uncertainties with respect to our business activities and render our operations non-compliant, and our business would be materially and adversely affected; ● We may not be able to continue to retain or expand our primary target client base of the affluent and emerging middle class population or maintain or increase the amount of investments made by our primary clients in the products we distribute; ● If we are required to obtain ICP licenses for the operation of our apps, we may not be able to offer relevant information and transaction processing services and our business and operations may be negatively affected; ● If we fail to recruit and retain qualified seed clients, independent financial advisors and in-house financial advisors, our business could suffer; ● We rely on highly qualified product providers that we collaborate with; ● A decline in the investment performance of products distributed or managed by us could negatively impact our revenues and profitability; ● Any material decrease in the fee rates for our services may have an adverse effect on our revenues, cash flow and results of operations; ● We depend on a small number of third-party fund product providers to derive a substantial portion of our net revenues and this dependence is likely to continue; ● Our risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all market environments or against all types of risk, including employee and financial advisor team misconduct.
Risk Factors.” Risks Related to Our Business and Industry We, our subsidiaries and the VIEs, are subject to risks and uncertainties related to our business and industry, including but not limited to the following: ● The wealth management products that we distribute involve various risks and our failure to identify or fully appreciate such risks will negatively affect our reputation, client relationships, operations and prospects; ● If we fail to maintain or renew existing licenses or to obtain additional licenses and permits necessary to conduct our operations in China pursuant to applicable laws and regulations from time to time governing our operations, we may be subject to limitations or uncertainties with respect to our business activities and render our operations non-compliant, and our business would be materially and adversely affected; ● We may not be able to continue to retain or expand our primary target client base of the affluent and emerging middle class population or maintain or increase the amount of investments made by our primary clients in the products we distribute; ● If we are required to obtain ICP licenses for the operation of our apps, we may not be able to offer relevant information and transaction processing services and our business and operations may be negatively affected; ● If we fail to recruit and retain qualified seed clients and financial advisors, our business could suffer; ● We rely on highly qualified product providers that we collaborate with; ● A decline in the investment performance of products distributed or managed by us could negatively impact our revenues and profitability; ● Any material decrease in the fee rates for our services may have an adverse effect on our revenues, cash flow and results of operations; ● We depend on a small number of third-party fund product providers to derive a substantial portion of our net revenues and this dependence is likely to continue; ● Our risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all market environments or against all types of risk, including employee and financial advisor team misconduct.
Yu Haifeng for a portion of our China operations, which may not be as effective as ownership in directing operational activities of the consolidated VIEs; ● The contractual arrangements we have entered into with the VIE and its major shareholder, and any other arrangements and transactions among related parties that we currently have or will have in future, may be subject to scrutiny by the PRC tax authorities, which may determine that we owe additional taxes, which could substantially reduce our consolidated net income and the value of your investment; 6 ● The shareholder of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition; ● We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of certain portion of our business if the VIE goes bankrupt or become subject to a dissolution or liquidation proceeding; ● If we were deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business and the price of our ordinary shares.
Yu Haifeng for a portion of our China operations, which may not be as effective as ownership in directing operational activities of the VIEs; ● The contractual arrangements we have entered into with the VIE and its principal shareholder, and any other arrangements and transactions among related parties that we currently have or will have in future, may be subject to scrutiny by the PRC tax authorities, which may determine that we owe additional taxes, which could substantially reduce our consolidated net income and the value of your investment; 6 ● The principal shareholder of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition; ● We may lose the ability to use and enjoy assets held by the VIEs that are material to the operation of certain portion of our business if the VIEs goes bankrupt or become subject to a dissolution or liquidation proceeding; ● If we were deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business and the price of our ordinary shares.
If the PRC government determines that we or the consolidated VIEs do not comply with applicable laws, it could revoke the consolidated VIEs’ business and operating licenses, require the consolidated VIEs to discontinue or restrict the consolidated VIEs’ operations, restrict the consolidated VIEs’ right to collect revenues, block the consolidated VIEs’ online apps and websites, require the consolidated VIEs to restructure our operations, impose additional conditions or requirements with which the consolidated VIEs may not be able to comply, impose restrictions on the consolidated VIEs’ business operations, or take other regulatory or enforcement actions against the consolidated VIEs that could be harmful to their business.
If the PRC government determines that we or the VIEs do not comply with applicable laws, it could revoke the VIEs’ business and operating licenses, require the VIEs to discontinue or restrict the VIEs’ operations, restrict the VIEs’ right to collect revenues, block the VIEs’ online apps and websites, require the VIEs to restructure our operations, impose additional conditions or requirements with which the VIEs may not be able to comply, impose restrictions on the VIEs’ business operations, or take other regulatory or enforcement actions against the VIEs that could be harmful to their business.
Further, the Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources, some of which may benefit the overall Chinese economy but have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.
Further, the Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources, some of which may benefit the overall China’s economy but have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.
The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following: ● regulatory developments in our target markets affecting us, our clients or our competitors; ● announcements of studies and reports relating to the quality of our products and services or those of our competitors; ● changes in the economic performance or market valuations of other companies that provide wealth management services; ● actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; ● changes in financial estimates by securities research analysts; ● conditions in the wealth management services industry; ● announcements by us or our competitors of new services, acquisitions, strategic relationships, joint ventures or capital commitments; 32 ● addition or departure of our senior management; ● fluctuations of exchange rates between the Renminbi and the U.S. dollar; ● release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares; and ● sales or perceived potential sales of additional ordinary shares.
The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following: ● regulatory developments in our target markets affecting us, our clients or our competitors; ● announcements of studies and reports relating to the quality of our products and services or those of our competitors; ● changes in the economic performance or market valuations of other companies that provide wealth management services; ● actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; ● changes in financial estimates by securities research analysts; ● conditions in the wealth management services industry; ● announcements by us or our competitors of new services, acquisitions, strategic relationships, joint ventures or capital commitments; 33 ● addition or departure of our senior management; ● fluctuations of exchange rates between the Renminbi and the U.S. dollar; ● release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares; and ● sales or perceived potential sales of additional ordinary shares.
Even if we are able to recruit a sufficient financial advisor team, we may need to incur significant training and administrative related expenses in order to prepare them to market our products or services, which would increase our operating costs and reduce our profitability. In addition, we pay service fees to our seed clients and independent financial advisors as returns.
Even if we are able to recruit a sufficient financial advisor team, we may need to incur significant training and administrative related expenses in order to prepare them to market our products or services, which would increase our operating costs and reduce our profitability. In addition, we pay service fees to our seed clients and financial advisors as returns.
Furthermore, as we continue to grow our asset management business, we may face similar risks in connection with the fee rates for the provision of related services. 11 We depend on a small number of third-party fund product providers to derive a substantial portion of our net revenues and this dependence is likely to continue.
Furthermore, as we continue to grow our asset management business, we may face similar risks in connection with the fee rates for the provision of related services. 11 We depend on a small number of third-party product providers to derive a substantial portion of our net revenues and this dependence is likely to continue.
Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this annual report: ● a decline or slowdown of the growth in the value of wealth management products, which may reduce the value of products we distribute for wealth management product providers and the products provided by us and, in turn, our revenues and cash flows; ● negative public perception and reputation of the wealth management services industry; ● unanticipated delays of anticipated rollouts of our products or services; ● unanticipated changes to economic terms in contracts with our wealth management product providers, including renegotiations; ● changes in laws or regulatory policy that could impact our ability to provide wealth management services and/or asset management services; ● failure to enter into contracts with new wealth management product providers; ● cancellations or non-renewal of existing contracts with wealth management product providers; and ● changes in the number of clients who decide to terminate their relationship with us or who ask us to redeem their investment in our products.
Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this annual report: ● a decline or slowdown of the growth in the value of wealth management products, which may reduce the value of products we distribute for wealth management product providers and the products provided by us and, in turn, our revenues and cash flows; ● negative public perception and reputation of the wealth management services industry; ● unanticipated delays of anticipated rollouts of our products or services; ● unanticipated changes to economic terms in contracts with our wealth management product providers, including renegotiations; ● changes in laws or regulatory policies that could impact our ability to provide wealth management services and/or asset management services; ● failure to enter into contracts with new wealth management product providers; ● cancellations or non-renewal of existing contracts with wealth management product providers; and ● changes in the number of clients who decide to terminate their relationship with us or who ask us to redeem their investment in our products.
Any reference to control or benefits that accrue to us because of contractual arrangement with the consolidated VIEs are limited to and subject to conditions that we have satisfied for consolidation of the VIEs under U.S. GAAP. Puyi Inc. consolidates the operations and financial results of the consolidated VIEs in its financial statements as the primary beneficiary for accounting purposes.
Any reference to control or benefits that accrue to us because of contractual arrangement with the VIEs are limited to and subject to conditions that we have satisfied for consolidation of the VIEs under U.S. GAAP. Puyi Inc. consolidates the operations and financial results of the VIEs in its financial statements as the primary beneficiary for accounting purposes.
As of the date of this annual report, Puyi Inc. has not declared any dividend and does not have a plan to declare a dividend to its shareholders. No cash have been transferred to our investors. We currently do not have cash management policies that dictate how funds are transferred between us, our subsidiaries and the consolidated VIEs.
As of the date of this annual report, Puyi Inc. has not declared any dividend and does not have a plan to declare a dividend to its shareholders. No cash have been transferred to our investors. We currently do not have cash management policies that dictate how funds are transferred between us, our subsidiaries and the VIEs.
In particular, our ability to direct the activities of the consolidated VIEs depends on the Power of Attorney, pursuant to which our PRC subsidiary, Puyi Consulting, can vote on all matters requiring shareholder approval of the VIE. We believe this Power of Attorney is legally enforceable but may not be as effective as equity ownership.
In particular, our ability to direct the activities of the VIEs depends on the Power of Attorney, pursuant to which our PRC subsidiary, Puyi Consulting, can vote on all matters requiring shareholder approval of the VIE. We believe this Power of Attorney is legally enforceable but may not be as effective as equity ownership.
Under the Measures for the Supervision and Administration of Distributors of Publicly Offered Securities Investment Funds which was promulgated by the China Securities Regulatory Commission (the “CSRC”) on August 28, 2020 and effective on October 1, 2020 (the “Distributor Measures”), a license is required for the distribution of standardized products, including publicly raised fund products and privately raised securities investment fund products.
Under the Measures for the Supervision and Administration of Distributors of Publicly Raised Securities Investment Funds which was promulgated by the China Securities Regulatory Commission (the “CSRC”) on August 28, 2020 and effective on October 1, 2020 (the “Distributor Measures”), a license is required for the distribution of standardized products, including publicly raised fund products and privately raised securities investment fund products.
If the PRC government deems that our contractual arrangements with the VIE do not comply with the relevant PRC regulations, or if these regulations or the interpretations of existing regulations are to change or are interpreted differently in the future, we and the consolidated VIEs could be subject to severe penalties or be forced to relinquish our interests in those operations.
If the PRC government deems that our contractual arrangements with the VIE do not comply with the relevant PRC regulations, or if these regulations or the interpretations of existing regulations are to change or are interpreted differently in the future, we and the VIEs could be subject to severe penalties or be forced to relinquish our interests in those operations.
Although we believe we, our PRC subsidiaries and the consolidated VIEs, are not in violation of current PRC laws and regulations, we cannot assure you that the PRC government would agree that our 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.
Although we believe we, our PRC subsidiaries and the VIEs, are not in violation of current PRC laws and regulations, we cannot assure you that the PRC government would agree that our 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.
ITEM 3. KEY INFORMATION Our Corporate Structure and Contractual Arrangements with the Consolidated VIEs and Their Respective Individual Shareholders Puyi Inc. is not an operating company but a Cayman Islands holding company with operations primarily conducted by its subsidiaries and by the consolidated VIEs based in China through contractual arrangements.
ITEM 3. KEY INFORMATION Our Corporate Structure and Contractual Arrangements with the VIEs and Their Respective Individual Shareholders Puyi Inc. is not an operating company but a Cayman Islands holding company with operations primarily conducted by its subsidiaries and by the VIEs based in China through contractual arrangements.
The contractual arrangements may not be as effective as equity ownership in providing us with control over the consolidated VIEs and we may incur substantial costs to enforce the terms of these arrangements. Additionally, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations.
The contractual arrangements may not be as effective as equity ownership in providing us with control over the VIEs and we may incur substantial costs to enforce the terms of these arrangements. Additionally, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations.
If so, we may be subject to fines and/or may be ordered to cease paying such fees to our seed clients and independent financial advisors, and unable to attract and retain highly productive seed clients and independent financial advisors, and our business could be materially and adversely affected. 10 We rely on highly qualified product providers that we collaborate with.
If so, we may be subject to fines and/or may be ordered to cease paying such fees to our seed clients and financial advisors, and unable to attract and retain highly productive seed clients and financial advisors, and our business could be materially and adversely affected. 10 We rely on highly qualified product providers that we collaborate with.
If we lose any of our major third-party fund product providers or any of these major third-party fund product providers significantly reduces its volume of business with us, and we are unable to seek alternative third-party fund product providers on a timely basis, or at all, our net revenues and profitability would be substantially reduced.
If we lose any of our major third-party product providers or any of these major third-party product providers significantly reduces its volume of business with us, and we are unable to seek alternative third-party product providers on a timely basis, or at all, our net revenues and profitability would be substantially reduced.
Our Cayman Islands holding company, our subsidiaries and the consolidated VIEs, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements in connection with the VIE and, consequently, significantly affect the financial performance of the consolidated VIEs and our company as a whole.
Our Cayman Islands holding company, our subsidiaries and the VIEs, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements in connection with the VIE and, consequently, significantly affect the financial performance of the VIEs and our company as a whole.
GAAP financial statements. If it were determined, however, that we are not the owner of the consolidated VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for our current taxable year and any subsequent taxable year.
GAAP financial statements. If it were determined, however, that we are not the owner of the VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for our current taxable year and any subsequent taxable year.
As of the date of this annual report, none of our subsidiaries and the consolidated VIEs has declared or paid any dividends or made any distributions to their respective holding companies, including Puyi Inc., nor does any of them have intention to do so.
As of the date of this annual report, none of our subsidiaries and the VIEs has declared or paid any dividends or made any distributions to their respective holding companies, including Puyi Inc., nor does any of them have intention to do so.
Although such fees are not prohibited by applicable laws and regulations, we cannot assure you that relevant authorities would not deem that our seed clients and independent financial advisors are distributing products on our behalf and prohibit such fee payment in the future.
Although such fees are not prohibited by applicable laws and regulations, we cannot assure you that relevant authorities would not deem that our seed clients and financial advisors are distributing products on our behalf and prohibit such fee payment in the future.
We rely on contractual arrangements with the VIE and its principal shareholder Mr. Yu Haifeng for a significant portion of our operations in China, which may not be as effective as ownership in directing operational activities of the consolidated VIEs.
We rely on contractual arrangements with the VIE and its principal shareholder Mr. Yu Haifeng for a significant portion of our operations in China, which may not be as effective as ownership in directing operational activities of the VIEs.
Risk Factors—Risks Related to Doing Business in China—Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect our operations and the value of your investment.” Financial Information Related to the Consolidated VIEs The following tables present the selected condensed consolidating schedules depicting the financial position, results of operations and cash flows for the parent, the consolidated VIEs, the WFOEs and an aggregation of other entities, eliminating intercompany amounts and consolidated totals (in thousands of RMB) as of and for the fiscal years ended June 30, 2020, 2021 and 2022.
Risk Factors—Risks Related to Doing Business in China—Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect our operations and the value of your investment.” Financial Information Related to the VIEs The following tables present the selected condensed consolidating schedules depicting the financial position as of June 30, 2022 and 2023, and results of operations and cash flows for the fiscal years ended June 30, 2021, 2022 and 2023 for the parent, the VIEs, the WFOEs and an aggregation of other entities, eliminating intercompany amounts and consolidated totals (in thousands of RMB).
We rely on contractual arrangements with the VIE, Puyi Bohui, and its principal shareholder, including the Power of Attorney with such shareholder, for our business operations in China. These contractual arrangements allow us to obtain economic benefits from the consolidated VIEs.
We rely on contractual arrangements with the VIE, Puyi Bohui, and its principal shareholder, including the Power of Attorney with such shareholder, for our business operations in China. These contractual arrangements allow us to obtain economic benefits from the VIEs.
Business Overview—Cash Flows among Us, Our Subsidiaries and the Consolidated VIEs.” There are limitations on our ability to transfer cash between us, our subsidiaries and the consolidated VIEs, and there is no assurance that China’s government will not intervene or impose restrictions on the ability of us, our subsidiaries and the consolidated VIEs to transfer cash.
Business Overview—Cash Flows among Us, Our Subsidiaries and the VIEs.” There are limitations on our ability to transfer cash between us, our subsidiaries and the VIEs, and there is no assurance that China’s government will not intervene or impose restrictions on the ability of us, our subsidiaries and the VIEs to transfer cash.
Due to PRC restrictions on foreign ownership of fund management businesses in China, we operate our business in China through the VIE and its subsidiaries, or the consolidated VIEs, in which we have only 0.96% equity interests through our WFOE.
Due to PRC restrictions on foreign ownership of fund management businesses in China, we operate our business in China through the VIE and its subsidiaries, or the VIEs, in which we have only 0.96% equity interests through our WFOE.
The depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the deposit agreement be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreement, although the arbitration provisions do not preclude you from pursuing claims under the Securities Act or the Exchange Act in federal courts. 34 ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the deposit agreement be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreement, although the arbitration provisions do not preclude you from pursuing claims under the Securities Act or the Exchange Act in federal courts. 35 ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
Any of these or similar occurrences could significantly disrupt our or the consolidated VIEs’ business operations or restrict the consolidated VIEs from conducting a substantial portion of their business operations, which could materially and adversely affect the consolidated VIEs’ business, financial condition and results of operations.
Any of these or similar occurrences could significantly disrupt our or the VIEs’ business operations or restrict the VIEs from conducting a substantial portion of their business operations, which could materially and adversely affect the VIEs’ business, financial condition and results of operations.
We conduct our business in China primarily through our PRC subsidiaries in which we hold equity interest and the consolidated VIEs of which we could direct the operational activities in China through contractual arrangements. Our operations in China are governed by PRC laws and regulations.
We conduct our business in China primarily through our PRC subsidiaries in which we hold equity interest and the VIEs of which we could direct the operational activities in China through contractual arrangements. Our operations in China are governed by PRC laws and regulations.
As of the date of this annual report, we owned only 0.96% equity interests in the consolidated VIEs through our WFOE, and thus may be unable to enforce the terms of the contractual arrangements.
As of the date of this annual report, we owned only 0.96% equity interests in the VIEs through our WFOE, and thus may be unable to enforce the terms of the contractual arrangements.
Investors in our ordinary shares or the ADSs thus are not purchasing equity interest in the consolidated VIEs in China (except for the 0.96% equity interest we hold in the consolidated VIEs) but instead are purchasing equity interest in a Cayman Islands holding company.
Investors in our ordinary shares or the ADSs thus are not purchasing equity interest in the VIEs in China (except for the 0.96% equity interest we hold in the VIEs) but instead are purchasing equity interest in a Cayman Islands holding company.
In addition, our securities may decline in value or become worthless if we are unable to consolidate the operations and financial results of the consolidated VIEs in our financial statements in accordance with U.S.
In addition, our securities may decline in value or become worthless if we are unable to consolidate the operations and financial results of the VIEs in our financial statements in accordance with U.S.
We are an offshore holding company conducting our operations in China through our PRC subsidiaries and the consolidated VIEs through contractual arrangements. We may make loans to our PRC subsidiary and the consolidated VIEs, or we may make additional capital contributions to our PRC subsidiary.
We are an offshore holding company conducting our operations in China through our PRC subsidiaries and the VIEs through contractual arrangements. We may make loans to our PRC subsidiary and the VIEs, or we may make additional capital contributions to our PRC subsidiary.
We derive a substantial portion of our net revenues from a limited number of third-party fund product providers. For accounting purposes, we treat these third-party product providers as our customers under our wealth management services.
We derive a substantial portion of our net revenues from a limited number of third-party product providers. For accounting purposes, we treat these third-party product providers as our customers under our wealth management services.
As such, our business is heavily dependent on our relationships with these third-party providers and, although we have maintained stable relationships with them, any material deterioration or termination of our relationships with any major product providers or fund managers, or the failure to further expand our network with such third-party products, could inhibit our ability to secure products or manage funds, which in turn would have a material adverse effect on our business, financial condition and growth prospects.
As such, our business is heavily dependent on our relationships with these third-party providers and, although we have maintained stable relationships with them, any material deterioration or termination of our relationships with any major product providers or fund managers, or the failure to further expand our network with such third-party products, could inhibit our ability to secure products, which in turn would have a material adverse effect on our business, financial condition and growth prospects.
There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. 35 Our corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and by the Companies Act (as amended) and common law of the Cayman Islands.
There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. 36 Our corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and by the Companies Act (as amended) and common law of the Cayman Islands.
Currently, according to the effective contractual arrangements between Puyi Consulting and the VIE, we conduct a significant part of our business activities through the consolidated VIEs in China.
Currently, according to the effective contractual arrangements between Puyi Consulting and the VIE, we conduct a significant part of our business activities through the VIEs in China.
For details regarding the cash transfer between us, our subsidiaries and the consolidated VIEs, see “—Financial Information Related to the Consolidated VIEs” and “Item 4. Information on Our Group—B.
For details regarding the cash transfer between us, our subsidiaries and the VIEs, see “—Financial Information Related to the VIEs” and “Item 4. Information on Our Group—B.
As of the date of this annual report, we do not hold an ICP license for two of the three apps, and cannot rule out the possibility that the local departments of the Information Communications Administration would take the view that the current primary information services and transaction processing services provided by us through the apps would require an ICP license or that, without such license, we would be prohibited from rendering such services.
As of the date of this annual report, we do not hold an ICP license for two of the three apps, and cannot rule out the possibility that the local counterparts of the Information Communications Administration would take the view that the current primary information services and transaction processing services provided by us through the apps would require an ICP license or that, without such license, we would be prohibited from rendering such services.
There is no assurance that the PRC government will not intervene or impose restrictions on the ability of us, our subsidiaries or the consolidated VIEs to transfer cash.
There is no assurance that the PRC government will not intervene or impose restrictions on the ability of us, our subsidiaries or the VIEs to transfer cash.
You are urged to consult your tax advisor concerning the United States federal income tax consequences of acquiring, holding, and disposing of ADSs or ordinary shares if we are or become classified as a PFIC. See “Item 10. Additional Information — E. Taxation — U.S. Federal Income Tax Considerations — Passive Foreign Investment Company Considerations.” 36
You are urged to consult your tax advisor concerning the United States federal income tax consequences of acquiring, holding, and disposing of ADSs or ordinary shares if we are or become classified as a PFIC. See “Item 10. Additional Information — E. Taxation — U.S. Federal Income Tax Considerations — Passive Foreign Investment Company Considerations.” 37
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. As of June 30, 2022, our management concluded that our internal controls over financial reporting were effective.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. As of June 30, 2023, our management concluded that our internal controls over financial reporting were effective.
Accordingly, our business, financial condition, results of operations and prospects are significantly affected by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
Accordingly, our business, financial condition, results of operations and prospects are significantly affected by economic, political and legal developments in China. The China’s economy differs from the economies of most developed countries in many respects, including amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
If we were required to obtain an ICP license for these two apps, our inability to obtain the license in a timely manner or at all may have a material adverse effect on our business and operations. If we fail to recruit and retain qualified seed clients, independent financial advisors and in-house financial advisors, our business could suffer.
If we were required to obtain an ICP license for these two apps, our inability to obtain the license in a timely manner or at all may have a material adverse effect on our business and operations. If we fail to recruit and retain qualified seed clients and financial advisors, our business could suffer.
Therefore, our investors face potential uncertainty from actions taken by the PRC government affecting our business. 31 Our results of operations and the value of our ADSs may be affected by geopolitical events, trade tensions and other developments beyond our control, which may in turn adversely affect the economic and market conditions in China and globally.
Therefore, our investors face potential uncertainty from actions taken by the PRC government affecting our business. 32 Our results of operations and the value of our ADSs may be affected by geopolitical events, trade tensions and other developments beyond our control, which may in turn adversely affect the economic and market conditions in China and globally.
For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “—D. Risk Factors—Risks Related to Our Corporate Structure.” We, our PRC subsidiaries and the consolidated VIEs, face various legal and operational risks and uncertainties related to being based in and having the majority of our operations in China, including Hong Kong.
For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “—D. Risk Factors—Risks Related to Our Corporate Structure.” We, our subsidiaries and the VIEs, face various legal and operational risks and uncertainties related to being based in and having the majority of our operations in China, including Hong Kong.
We are incorporated in the Cayman Islands, but most of our, our subsidiaries’ and the consolidated VIEs’ operations are conducted in the PRC and most of our, our subsidiaries’ and the consolidated VIEs’ assets are located in the PRC.
We are incorporated in the Cayman Islands, but most of our, our subsidiaries’ and the VIEs’ operations are conducted in the PRC and most of our, our subsidiaries’ and the VIEs’ assets are located in the PRC.
Mr. Yu Haifeng, our founder, beneficially owns 44.5% of our share capital and as a result, has substantial influence over our business operations, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. Mr.
Mr. Yu Haifeng, our founder, beneficially owns 44.5% of our share capital and as a result, has substantial influence over our business operations, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets and other significant corporate actions. Mr.
While the Chinese economy has experienced significant growth in the past 40 years, the growth has been uneven across different periods, regions and among various economic sectors of China, and the rate of growth has been slowing since 2012. We cannot assure you that the Chinese economy will continue to grow.
While the China’s economy has experienced significant growth in the past 40 years, the growth has been uneven across different periods, regions and among various economic sectors of China, and the rate of growth has been slowing since 2012. We cannot assure you that the China’s economy will continue to grow.
Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs to decline. 33 You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.
Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs to decline. 34 You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.
For a detailed description of the risk factors we, our subsidiaries and the consolidated VIEs, face, see “—D.
For a detailed description of the risk factors we, our subsidiaries and the VIEs face, see “—D.
In addition, the profitability of our growing asset management services depends on, among others, fees charged based on the AUM.
In addition, the profitability of our asset management services depends on, among others, fees charged based on the AUM.
A series of contractual agreements, including an exclusive option agreement, an exclusive technical and consulting service agreement, an equity interest pledge agreement, a spousal consent letter and a power of attorney, have been entered into by and among Puyi Consulting, Puyi Bohui and its nominee shareholders.
A series of contractual agreements, including an exclusive option agreement, an exclusive technical and consulting service agreement, an equity interest pledge agreement, a spousal consent letter and a power of attorney, have been entered into by and among Puyi Consulting, Puyi Bohui and its nominee shareholder.
In order to succeed the intense competition and keep up with the evolving market trend, we anticipate that we will need to continuously implement a variety of initiatives and allocate more resources to drive the continuing growth of our business. All of these endeavors involve risks and will require substantial management efforts, attention and skills, and additional expenditure.
In order to succeed the intense competition and keep up with the evolving market trend, we anticipate that we will need to continuously implement a variety of initiatives to drive the continuing growth of our business. All of these endeavors involve risks and will require substantial management efforts, attention and skills, and additional expenditure.
Pursuant to the Social Insurance Law of the PRC promulgated in 2010 and the Regulations on Management of Housing Provident Funds promulgated in 1999 and amended in 2002, an enterprise is required, within a prescribed time limit, to register with the relevant social security authority and housing provident fund management center, and to open the relevant accounts and make timely contributions for their employees; failure to do so may subject the enterprise to order for rectification, and certain fines if the enterprise fails to rectify in time.
Pursuant to the Social Insurance Law of the PRC promulgated in 2010 as amended in 2018 and the Regulations on Management of Housing Provident Funds promulgated in 1999 as amended in 2019, an enterprise is required, within a prescribed time limit, to register with the relevant social security authority and housing provident fund management center, and to open the relevant accounts and make timely contributions for their employees; failure to do so may subject the enterprise to order for rectification, and certain fines if the enterprise fails to rectify in time.
Risks Related to Doing Business in China We, our subsidiaries and the consolidated VIEs, face risks and uncertainties related to doing business in China in general, including but not limited to the following: ● Adverse changes in the political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business; ● Uncertainties with respect to the PRC legal system could adversely affect us; ● Fluctuations in exchange rates may have a material adverse effect on your investment; ● Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect our operations and the value of your investment; ● PRC regulations relating to the establishment of offshore special purpose companies by PRC residents and filing requirements for overseas securities offering by offshore special purpose companies established by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us; ● We may rely principally on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business; ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of conversion of foreign currencies into Renminbi may delay or prevent us from using any offshore cash we may have to make loans to our PRC subsidiary and the VIE or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business; ● Any failure to comply with PRC regulations regarding the registration requirements for share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions; ● The dividends we receive from our PRC subsidiary may be subject to PRC tax under the PRC Enterprise Income Tax Law, which would likely have a material adverse effect on our financial condition and results of operations; ● We may be subject to penalties for failure to make adequate contributions to social security and housing provident fund by some subsidiaries of the VIE pursuant to the relevant PRC laws and regulations. 7 Risks Related to Our ADSs We, our subsidiaries and the consolidated VIEs, are subject to risks and uncertainties related to our ADSs, including but not limited to the following: ● The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our ADSs; ● Our results of operations and the value of our ADSs may be affected by geopolitical events, trade tensions and other developments beyond our control, which may in turn adversely affect the economic and market conditions in China and globally; ● The market price for our ADSs may continue to be volatile; ● We do not expect to pay dividends in the foreseeable future and you may have to rely on price appreciation of our ADSs for any return on your investment; ● Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline; ● You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote; ● Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings and you may not receive cash dividends if it is impractical to make them available to you; ● You may be subject to limitations on transfer of your ADSs; ● Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement; ● ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
Risks Related to Doing Business in China We, our subsidiaries and the VIEs, face risks and uncertainties related to doing business in China in general, including but not limited to the following: ● Adverse changes in the political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business; ● Uncertainties with respect to the PRC legal system could adversely affect us; ● Fluctuations in exchange rates may have a material adverse effect on your investment; ● Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect our operations and the value of your investment; ● PRC regulations relating to the establishment of offshore special purpose companies by PRC residents and filing requirements for overseas securities offering by offshore special purpose companies established by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us; ● We may rely principally on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business; ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of conversion of foreign currencies into Renminbi may delay or prevent us from using any offshore cash we may have to make loans to our PRC subsidiary and the VIE or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business; ● Any failure to comply with PRC regulations regarding the registration requirements for share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions; ● The dividends we receive from our PRC subsidiary may be subject to PRC tax under the PRC Enterprise Income Tax Law, which would likely have a material adverse effect on our financial condition and results of operations; ● We may be subject to penalties for failure to make adequate contributions to social security and housing provident fund by some subsidiaries of the VIE pursuant to the relevant PRC laws and regulations; ● If the Administrative Measures for the Compliance Audit on Personal Information Protection takes effect in the coming years, we may be obliged to carry out compliance audit (or have compliance audit carried out) on personal information protection at least once for every two years. 7 Risks Related to Our ADSs We, our subsidiaries and the VIEs, are subject to risks and uncertainties related to our ADSs, including but not limited to the following: ● The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our ADSs; ● Our results of operations and the value of our ADSs may be affected by geopolitical events, trade tensions and other developments beyond our control, which may in turn adversely affect the economic and market conditions in China and globally; ● The market price for our ADSs may continue to be volatile; ● We do not expect to pay dividends in the foreseeable future and you may have to rely on price appreciation of our ADSs for any return on your investment; ● Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline; ● You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote; ● Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings and you may not receive cash dividends if it is impractical to make them available to you; ● You may be subject to limitations on transfer of your ADSs; ● Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement; ● ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
In addition, we actively seek collaborative opportunities with well-recognized fund managers to manage our FoFs, which allows us to deliver returns to our clients in a cost-effective manner.
In addition, we actively seek collaborative opportunities with well-recognized fund managers, which allows us to deliver returns to our clients in a cost-effective manner.
Our current independent accounting firm, Marcum Asia CPAs LLP, whose audit report is included in this annual report on Form 20-F, headquartered in Manhattan, New York, was not included in the list of PCAOB identified firms in the PCAOB release and has been inspected by the PCAOB on a regular basis with the last inspection in 2020.
Our current independent accounting firm, Marcum Asia CPAs LLP, whose audit report is included in this annual report on Form 20-F, headquartered in Manhattan, New York, was not included in the list of PCAOB identified firms in the PCAOB release and has been inspected by the PCAOB on a regular basis.
According to the Provisions on the Administration of Mobile Internet Application Information Services, or the App Provisions, issued by Cyberspace Administration of China on June 28, 2016, any owner or operator providing information services through a mobile internet application, or an “app,” must obtain the relevant qualification(s) as required by laws and regulations.
According to the Provisions on the Administration of Mobile Internet Application Information Services, or the App Provisions, issued by Cyberspace Administration of China on June 28, 2016 and as amended on August 1, 2022, any owner or operator providing information services through a mobile internet application, or an “app,” must obtain the relevant qualification(s) as required by laws and regulations.
The Circular provides that portfolios of publicly raised funds are required to be distributed through institutions with qualified investment consulting license; institutions without qualified investment consulting license are not permitted to conduct distribution of portfolios of publicly raised funds under the names “portfolios.” To comply with PRC laws, we currently collaborate with licensed institutions to distribute portfolios of publicly raised funds and structure our selection of portfolios as providing services to them.
The Circular and the Draft provide that portfolios of publicly raised funds are required to be distributed through institutions with qualified investment consulting licenses; institutions without qualified investment consulting licenses are not permitted to conduct distribution of portfolios of publicly raised funds under the names “portfolios.” To comply with PRC laws, we currently collaborate with licensed institutions to distribute portfolios of publicly raised funds and structure our selection of portfolios as providing services to them.
These risks 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, or cause such securities to significantly decline in value or become worthless. For a detailed description of risks related to doing business in China, see “—D.
These risks could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our future offering of securities to investors, or cause such securities to significantly decline in value or become worthless. For a detailed description of risks related to doing business in China, see “—D.
We, our PRC subsidiaries and the consolidated VIEs, face potential risks associated with regulatory approvals of offshore offerings, the use of the VIE, oversight on cybersecurity and data privacy.
We, our subsidiaries and the VIEs, face potential risks associated with regulatory approvals of offshore future offerings, the use of the VIE, oversight on cybersecurity and data privacy.
Facing this fierce competition, our strategy is to build a strong platform empowering our individual financial advisors to provide full life-cycle asset allocation services to our clients to cater to their needs. To achieve this goal, we will strive to enhance our individual financial advisors’ professional skills and efficiency and productivity.
Facing this fierce competition, our strategy is to build a strong platform empowering our financial advisor team to provide full life-cycle asset allocation services to our clients to cater to their needs. To achieve this goal, we will strive to enhance our financial advisor team’s professional skills and efficiency and productivity.
Due to the aforementioned restrictions when our group was established, we operate a significant part of our business through contractual arrangements between the VIEs and Puyi Inc.’s subsidiary. The contractual arrangements are not equivalent to an equity ownership in the consolidated VIEs.
Due to the aforementioned restrictions when our group was established, we operate a significant part of our business through contractual arrangements between the VIEs and our WFOE. The contractual arrangements are not equivalent to an equity ownership in the VIEs.
We have launched three mobile apps; one is “Puyi Fund” (普益基金), which enables our clients to complete transactions online in relation to our fund products; the second is “i Financial Planner” (i理财师), which provides seed clients (our repeat clients who also market our products or services to potential clients) with a one-stop online management tool and empowers our in-house financial advisors to provide better services; and the third is “Puyi business school” (普益商学院), which provides investor education.
We have launched three mobile apps; one is “Puyi Fund” ( 普益基金 ), which enables our clients to complete transactions online in relation to our fund products; the second is “i Financial Planner” (i 理财师 ), which provides a one-stop online management tool and empowers financial advisors to provide better services; and the third is “Puyi business school” ( 普益商学院 ), which provides investor education.
We rely on our seed clients, independent financial advisors and in-house financial advisors (collectively referred to as our “financial advisor team”) to market our products or services to potential clients as well as to provide services to and to develop and maintain relationships with our existing clients.
We rely on our seed clients (our repeat clients who also market our products or services to potential clients) and financial advisors (collectively referred to as our “financial advisor team”) to market our products or services to potential clients as well as to provide services to and to develop and maintain relationships with our existing clients.
In these tables, “Parent” refers to Puyi Inc., the Nasdaq listed company which is a Cayman exempted company. “VIEs” refers to Puyi Bohui and its subsidiaries (the consolidated VIEs). “WFOEs” refers to Puyi’s wholly-owned Chinese subsidiaries, Puyi Consulting, Puyi Dake and Puyi FO.
In these tables, “parent” refers to Puyi Inc., the Nasdaq listed company which is a Cayman exempted company. “VIEs” refers to Puyi Bohui and its subsidiaries. “WFOEs” refers to Puyi’s wholly-owned PRC subsidiaries, Puyi Consulting and its subsidiaries.
These contractual agreements enable us to (i) have power to direct the activities that most significantly affect the economic performance of the VIE and its subsidiaries; (ii) receive substantially all of the economic benefits from the VIE and its subsidiaries in consideration for the services provided by Puyi Consulting; and (iii) have an exclusive option to purchase all the equity interests in the VIE when and to the extent permitted by PRC laws.
These contractual agreements enable us to (i) have power to direct the activities that most significantly affect the economic performance of the VIE and its subsidiaries; (ii) receive substantially all of the economic benefits from the VIE and its subsidiaries in consideration for the services provided by Puyi Consulting; and (iii) have an exclusive option to purchase all the equity interests in the VIE when and to the extent permitted by PRC laws. 1 Our corporate structure is subject to risks associated with our contractual arrangements in connection with the VIE.
There have been concerns over unrest, terrorist threats and the potential for war in the Middle East, Europe and elsewhere, as well as over the conflicts involving Ukraine, Syria and North Korea.
There have been concerns over unrest, terrorist threats and the potential for war in the Middle East, Europe and elsewhere, as well as over the increasing of conflicts involving Ukraine, Syria, Kosovo, Serbia, Sudan, Kashmir and North Korea.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeOn April 2, 2022, the CSRC promulgated the Provisions on Strengthening Confidentiality and Archives Administration in respect of Overseas Securities Issuance and Listing by Domestic Enterprises (Draft for Comments) (“关于加强境内企业境外发行证券和上市相关保密和档案管理工作的规定（征求意见稿）”), which provides that PRC issuers having their securities listed on overseas stock exchanges need to file a notice to CSRC.
Biggest changeMoreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls. 65 PRC Regulations Relating to Overseas Listing and Financing of Domestic Enterprises On April 2, 2022, the CSRC promulgated the Provisions on Strengthening Confidentiality and Archives Administration in respect of Overseas Securities Issuance and Listing by Domestic Enterprises (Draft for Comments) (“ 关于加强境内企业境外发行证券和上市相关保密和档案管理工作的规定（征求意见稿） ”), which was later amended by the Provisions on Strengthening Confidentiality and Archives Administration in Respect of Overseas Offering and Listing of Securities by Domestic Enterprises (“ 关于加强境内企业境外发行证券和上市相关保密和档案管理工作的规定 ”) promulgated by the CRSC, the Ministry of Finance, the National Administration for Protection of State Secrets and the National Archives Administration jointly on February 24, 2023, which took effect on March 31, 2023.
As a result of the contractual arrangements entered into among us, the VIE and its principal shareholder, we treat the consolidated VIEs as our consolidated affiliated entities under U.S. GAAP, and have consolidated the financial results of the consolidated VIEs in our consolidated financial statements in accordance with U.S. GAAP.
As a result of the contractual arrangements entered into among us, the VIE and its principal shareholder, we treat the VIEs as our consolidated affiliated entities under U.S. GAAP, and have consolidated the financial results of the VIEs in our consolidated financial statements in accordance with U.S. GAAP.
The Provisional Administrative Measures for Filing of Establishment and Modifications of Foreign Investment Enterprises has been repealed by the Measures for the Reporting of Foreign Investment Information (“外商投资信息报告办法”), hereinafter referred to as the “Measures for Reporting”), promulgated by the Ministry of Commerce of the People’s Republic of China and the State Administration for Market Regulation on December 30, 2019, effective on January 1, 2020.
The Provisional Administrative Measures for Filing of Establishment and Modifications of Foreign Investment Enterprises (“ 外商投资企业设立及变更备案管理暂行办法 ”) has been repealed by the Measures for the Reporting of Foreign Investment Information (“ 外商投资信息报告办法 ”), hereinafter referred to as the “Measures for Reporting”, promulgated by the Ministry of Commerce of the People’s Republic of China and the State Administration for Market Regulation on December 30, 2019, effective on January 1, 2020.
Neither a fund distributor nor its employees may engage in fund distribution activities if under any of the following circumstances: (i) false records, misleading statements, or major omissions; (ii) promises, in violation of the provisions, of no or limited amount/proportion of losses in income or principal; (iii) prediction on fund investment performance or publicity of prospective yield rate; (iv) seducing investors to purchase any fund product that beyond their risk bearing capacities; (v) failure to effectively disclose to investors important information on the actual distributor or the fund products distributed or obscuring such information by glossing over the service platform or the service brand; 54 (vi) distributing funds by the means of lottery, rebate or giving out material gifts, insurance, fund units or other presents; (vii) engaging in fund distribution business, disseminating/releasing fund promotion materials to the general public; or offering fund units to them before the application for fund offering registration is duly completed; (viii) distributing funds not at the time provided for by the laws and regulations, the CSRC rules, the prospectus or the fund units offering announcement; or altering fund unit offering date without required announcement; (ix) misappropriation of fund distribution settlement capital or fund units; irregularly evading the close-loop operation requirements for fund distribution settlement capital by the means of, inter alia , fund unit transfer to the detriment of investors’ capital safety; (x) using or promising to use fund assets or fund distribution business for the purpose of benefit transfer or benefit exchange; (xi) leaking relevant information of investors or non-public information concerning fund investment operation in violation of provisions; (xii) distributing funds at the expenses lower than the cost; (xiii) implementing discriminative, exclusive and bundled sales arrangements; and (xiv) other circumstances prohibited by the CSRC.
Neither a fund distributor nor its employees may engage in fund distribution activities if under any of the following circumstances: (i) false records, misleading statements, or major omissions; (ii) promises, in violation of the provisions, of no or limited amount/proportion of losses in income or principal; (iii) prediction on fund investment performance or publicity of prospective yield rate; (iv) seducing investors to purchase any fund product that beyond their risk bearing capacities; (v) failure to effectively disclose to investors important information on the actual distributor or the fund products distributed or obscuring such information by glossing over the service platform or the service brand; 55 (vi) distributing funds by the means of lottery, rebate or giving out material gifts, insurance, fund units or other presents; (vii) engaging in fund distribution business, disseminating/releasing fund promotion materials to the general public; or offering fund units to them before the application for fund offering registration is duly completed; (viii) distributing funds not at the time provided for by the laws and regulations, the CSRC rules, the prospectus or the fund units offering announcement; or altering fund unit offering date without required announcement; (ix) misappropriation of fund distribution settlement capital or fund units; irregularly evading the close-loop operation requirements for fund distribution settlement capital by the means of, inter alia , fund unit transfer to the detriment of investors’ capital safety; (x) using or promising to use fund assets or fund distribution business for the purpose of benefit transfer or benefit exchange; (xi) leaking relevant information of investors or non-public information concerning fund investment operation in violation of provisions; (xii) distributing funds at the expenses lower than the cost; (xiii) implementing discriminative, exclusive and bundled sales arrangements; and (xiv) other circumstances prohibited by the CSRC.
The Several Provisions on Strengthening the Regulation of Privately Raised Investment Funds (“关于加强私募投资基金监管的若干规定”), which was promulgated by the CSRC on December 30, 2020 and took effect on the even date, stipulates that fund managers and fund distributors or any of their employees shall not directly or indirectly commit the following conduct when distributing a privately raised fund: (i) raising funds from an entity or individual other than a qualified investor specified in the Interim Measures for Privately Raised Funds, or providing an investor with convenience to meet the requirements of qualified investors such as piecing together by several persons, borrowing or lending money, etc.; (ii) giving promotional materials and recommendations to unspecific investors through a newspaper, a periodical, a radio station, a TV station, the Internet, or any other media outlet, or by a lecture, a report meeting, an analysis meeting, or any other means, or by a bulletin, a leaflet, a short message, an instant messaging tool, a blog, an e-mail, or any other medium, with the exception of giving promotional materials and recommendations to qualified investors through a website, an application, or any other Internet medium with procedures to determine specific investors; (iii) directly or indirectly giving investors a promise (orally, in writing, by a short message, by an instant messaging tool, or any other means) to protect the principal and return, including the protection of the principal of investments from loss, a fixed proportion of loss, and a promise of minimum return; (iv) inflating and giving one-sided publicity to a private fund, including the use of “safety”, “principal protection”, “zero risk”, “a guarantee of return”, “high return”, “secure principal”, or any other expression that may render investors unable to accurately understand the risk of a private fund and the use of rate of return, target rate of return, benchmark rate of return, or any other expression in promotional materials given to investors; (v) The investments of the private fund of which investors are informed by promotional materials are inconsistent with the investments agreed in the private fund contract; (vi) promotional and recommendation materials contain a false statement, misleading statement, or material omission, including failure to truthfully, accurately and completely disclose the transaction structure of the private fund, the main rights and obligations of each party, income distribution, fee arrangements, related-party transactions, the capital contributor and actual controller of an authorized third-party institution and the private fund manager, among others; (vii) giving misleading publicity and recommendations by means of credit enhancement under the guise of registration and filing, the custody of a financial institution, or government funding, among others; (viii) authorizing an entity or individual not qualified for fund distribution business to engage in fund-raising activities; (ix) establishing or establishing in a disguised form a branch for the purpose of engaging in fund-raising activities; or (x) other circumstances prohibited by laws, administrative regulations, and the CSRC.
The Filing FOAs took effect immediately. 58 The Several Provisions on Strengthening the Regulation of Privately Raised Investment Funds (“ 关于加强私募投资基金监管的若干规定 ”), which was promulgated by the CSRC on December 30, 2020 and took effect on the even date, stipulates that fund managers and fund distributors or any of their employees shall not directly or indirectly commit the following conduct when distributing a privately raised fund: (i) raising funds from an entity or individual other than a qualified investor specified in the Interim Measures for Privately Raised Funds, or providing an investor with convenience to meet the requirements of qualified investors such as piecing together by several persons, borrowing or lending money, etc.; (ii) giving promotional materials and recommendations to unspecific investors through a newspaper, a periodical, a radio station, a TV station, the Internet, or any other media outlet, or by a lecture, a report meeting, an analysis meeting, or any other means, or by a bulletin, a leaflet, a short message, an instant messaging tool, a blog, an e-mail, or any other medium, with the exception of giving promotional materials and recommendations to qualified investors through a website, an application, or any other Internet medium with procedures to determine specific investors; (iii) directly or indirectly giving investors a promise (orally, in writing, by a short message, by an instant messaging tool, or any other means) to protect the principal and return, including the protection of the principal of investments from loss, a fixed proportion of loss, and a promise of minimum return; (iv) inflating and giving one-sided publicity to a private fund, including the use of “safety”, “principal protection”, “zero risk”, “a guarantee of return”, “high return”, “secure principal”, or any other expression that may render investors unable to accurately understand the risk of a private fund and the use of rate of return, target rate of return, benchmark rate of return, or any other expression in promotional materials given to investors; (v) The investments of the private fund of which investors are informed by promotional materials are inconsistent with the investments agreed in the private fund contract; (vi) promotional and recommendation materials contain a false statement, misleading statement, or material omission, including failure to truthfully, accurately and completely disclose the transaction structure of the private fund, the main rights and obligations of each party, income distribution, fee arrangements, related-party transactions, the capital contributor and actual controller of an authorized third-party institution and the private fund manager, among others; (vii) giving misleading publicity and recommendations by means of credit enhancement under the guise of registration and filing, the custody of a financial institution, or government funding, among others; (viii) authorizing an entity or individual not qualified for fund distribution business to engage in fund-raising activities; (ix) establishing or establishing in a disguised form a branch for the purpose of engaging in fund-raising activities; or (x) other circumstances prohibited by laws, administrative regulations, and the CSRC.
SAT Bulletin 45 was amended by Announcement on Amending Administrative the Measures for Assessment and Collection of Enterprise Income Tax on Non-Resident Enterprises and Other Documents (“关于修改《非居民企业所得税核定征收管理办法》等文件的公告”), hereinafter referred to as the “SAT Bulletin 22”), dated April 17, 2015 and effective on June 1, 2015. 63 According to the SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or enterprise group will be considered a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operation functions have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its board of directors and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or senior management with voting rights habitually reside in the PRC.
SAT Bulletin 45 was amended by Announcement on Amending Administrative the Measures for Assessment and Collection of Enterprise Income Tax on Non-Resident Enterprises and Other Documents (“ 关于修改《非居民企业所得税核定征收管理办法》等文件的公告 ”), hereinafter referred to as the “SAT Bulletin 22”), dated April 17, 2015 and effective on June 1, 2015. 67 According to the SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or enterprise group will be considered a PRC resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operation functions have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its board of directors and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or senior management with voting rights habitually reside in the PRC.
Offending personal information processors may be subject to penalties of warning, confiscation of illegal gains, suspension of the app processing personal information or order for cessation of service, suspension of relevant business or cessation of business for rectification, revocation of relevant business permit or revocation of business license, a fine not exceeding RMB50,000,000 or 5% of its revenue for the previous year, and so forth; the personnel directly in-charge or other personnel with direct responsibility of the personal information processor may be subject to a fine ranging from RMB10,000 to RMB1,000,000 and a prohibition for a prescribed period to act as director, supervisor, senior executive or officer in charge of personal information protection of a personal information processing enterprise. 69 In September 2019, the PBOC promulgated the Circular on Issuing Financial Industry Standards and Strengthening Finance Client-side Mobile Application Software Security Administration (“关于发布金融行业标准加强移动金融客户端应用软件安全管理的通知”), hereinafter referred to as the “Financial App Circular”), and also promulgated the Financial Industry Standard Financial Client-side Mobile Application Software Security Administration Specifications (JR / T 0092-2019, “Specifications”).
Offending personal information processors may be subject to penalties of warning, confiscation of illegal gains, suspension of the app processing personal information or order for cessation of service, suspension of relevant business or cessation of business for rectification, revocation of relevant business permit or revocation of business license, a fine not exceeding RMB50,000,000 or 5% of its revenue for the previous year, and so forth; the personnel directly in-charge or other personnel with direct responsibility of the personal information processor may be subject to a fine ranging from RMB10,000 to RMB1,000,000 and a prohibition for a prescribed period to act as director, supervisor, senior executive or officer in charge of personal information protection of a personal information processing enterprise. 73 In September 2019, the PBOC promulgated the Circular on Issuing Financial Industry Standards and Strengthening Finance Client-side Mobile Application Software Security Administration (“ 关于发布金融行业标准加强移动金融客户端应用软件安全管理的通知 ”), hereinafter referred to as the “Financial App Circular”), and also promulgated the Financial Industry Standard Financial Client-side Mobile Application Software Security Administration Specifications (JR / T 0092-2019, “Specifications”).
Risk Factors—Risks Related to Doing Business in China—Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect our operations and the value of your investment, and—We may rely principally on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business, and—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of conversion of foreign currencies into Renminbi may delay or prevent us from using any offshore cash we may have to make loans to our PRC subsidiary and the VIE or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business”. 46 Our Client Services We classify our target clients into different categories in terms of risk appetite.
Risk Factors—Risks Related to Doing Business in China—Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect our operations and the value of your investment, and—We may rely principally on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business, and—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of conversion of foreign currencies into Renminbi may delay or prevent us from using any offshore cash we may have to make loans to our PRC subsidiary and the VIE or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business”. 47 Our Client Services We classify our target clients into different categories in terms of risk appetite.
In addition, the AMAC has promulgated a series of self-disciplinary rules since February 2016, regulating internal control, information disclosure and registration of privately raised fund managers, including, among others, the Guidelines for Internal Control of Privately Raised Investment Fund Managers (“私募投资基金管理人内部控制指引”), the Administrative Measures for Information Disclosure by Privately Raised Investment Funds (“私募投资基金信息披露管理办法”), and the Announcement of Several Issues in Further Regulating the Registration of Privately Raised Fund Managers (“关于进一步规范私募基金管理人登记若干事项的公告”), together with the “Administrative Measures for Privately Raised Funds”.
The AMAC has promulgated a series of self-disciplinary rules since February 2016, regulating internal control, information disclosure and registration of privately raised fund managers, including, among others, the Guidelines for Internal Control of Privately Raised Investment Fund Managers ( “私募投资基金管理人内部控制指引” ), the Administrative Measures for Information Disclosure by Privately Raised Investment Funds ( “私募投资基金信息披露管理办法” ), and the Announcement of Several Issues in Further Regulating the Registration of Privately Raised Fund Managers ( “关于进一步规范私募基金管理人登记若干事项的公告” ), together with the “Administrative Measures for Privately Raised Funds”.
China Internet Network Information Center promulgated the Implementation Rules on Registration of Domain Names (“域名注册实施细则”) on May 29, 2012 with immediate effect and the Measures for National Top Level Domain Name Disputes Resolution (“国家顶级域名争议解决办法”) on November 21, 2014, which has been repealed by the Implementation Rules on Registration of Domain Names (“国家顶级域名注册实施细则”) on June 18, 2019.
China Internet Network Information Center promulgated the Implementation Rules on Registration of Domain Names (“ 域名注册实施细则 ”) on May 29, 2012 with immediate effect and the Measures for National Top Level Domain Name Disputes Resolution (“ 国家顶级域名争议解决办法 ”) on November 21, 2014, which has been repealed by the Implementation Rules on Registration of Domain Names (“ 国家顶级域名注册实施细则 ”) and Measures for National Top Level Domain Name Disputes Resolutions (“ 国家顶级域名争议解决办法 ”) on June 18, 2019.
The Cyber Security Law sets forth various security protection obligations for network operators, which are defined as “owners and administrators of networks and network service providers,” including, among other obligations, complying with a series of requirements of tiered cyber protection systems, verifying users’ real identities, localizing the personal information and important data gathered and produced by key information infrastructure operators during operations within the PRC, and providing assistance and support to government authorities where necessary for protecting national security and investigating crimes. 67 The National Standards under the Information Security Technology-Personal Information Security Specification (“信息安全技术个人信息安全规范”), hereinafter referred to as the “Standards”), was promulgated on March 6, 2020 and took effect on October 1, 2020.
The Cyber Security Law sets forth various security protection obligations for network operators, which are defined as “owners and administrators of networks and network service providers,” including, among other obligations, complying with a series of requirements of tiered cyber protection systems, verifying users’ real identities, localizing the personal information and important data gathered and produced by key information infrastructure operators during operations within the PRC, and providing assistance and support to government authorities where necessary for protecting national security and investigating crimes. 71 The National Standards under the Information Security Technology-Personal Information Security Specification (“ 信息安全技术个人信息安全规范 ”), hereinafter referred to as the “Standards”), was promulgated on March 6, 2020 and took effect on October 1, 2020.
Pursuant to a circular issued by NDRC and MOFCOM on October 8, 2016, the special entry management measures shall be implemented with reference to the relevant regulations as stipulated in the Catalogue of Industries for Guiding Foreign Investment in relation to the restricted foreign investment industries, prohibited foreign investment industries and encouraged foreign investment industries.
Pursuant to a circular issued by NDRC and MOFCOM on October 8, 2016, the special entry management measures shall be implemented with reference to the relevant regulations as stipulated in the Catalogue of Industries for Guiding Foreign Investment ( “外商投资产业指导名录” ) in relation to the restricted foreign investment industries, prohibited foreign investment industries and encouraged foreign investment industries.
Yang Yuanfen, shareholders of Puyi Bohui, each executed a Power of Attorney in favor of Puyi Consulting and Puyi Bohui, pursuant to which both shareholders of Puyi Bohui irrevocably authorize and constitute Puyi Consulting as their attorney-in-fact to exercise on the shareholders’ behalf any and all rights that shareholders of Puyi Bohui have in respect of their equity interests in Puyi Bohui, including but not limited to: (i) attending shareholders’ meetings; (ii) exercising all the shareholder’s rights and shareholders’ voting rights that the shareholders are entitled to under the laws of China and the Articles of Association of Puyi Bohui, including the sale, transfer, pledge or otherwise disposition of shares in part or in whole; and (iii) designating and appointing on behalf of the shareholders the legal representative, the executive director and/or director, supervisor, the chief executive officer and other senior executives of Puyi Bohui.
Yang Yuanfen, shareholders of Puyi Bohui, each executed a Power of Attorney in favor of Puyi Consulting and Puyi Bohui, pursuant to which both shareholders of Puyi Bohui irrevocably authorize and constitute Puyi Consulting as their attorney-in-fact to exercise on the shareholders’ behalf any and all rights that shareholders of Puyi Bohui have in respect of their equity interests in Puyi Bohui, including but not limited to: (i) attending shareholders’ meetings; (ii) exercising all the shareholder’s rights and shareholders’ voting rights that the shareholders are entitled to under the PRC laws and the Articles of Association of Puyi Bohui, including the sale, transfer, pledge or otherwise disposition of shares in part or in whole; and (iii) designating and appointing on behalf of the shareholders the legal representative, the executive director and/or director, supervisor, the chief executive officer and other senior executives of Puyi Bohui.
For details regarding financial position, results of operations and cash flows for the parent, the consolidated VIEs, the WFOEs and an aggregation of other entities, see “Item 3. Key Information—Financial Information Related to the Consolidated VIEs.” There are limitations on our ability to transfer cash between us, our subsidiaries and the consolidated VIEs.
For details regarding financial position, results of operations and cash flows for the parent, the VIEs, the WFOEs and an aggregation of other entities, see “Item 3. Key Information—Financial Information Related to the VIEs.” There are limitations on our ability to transfer cash between us, our subsidiaries and the VIEs.
Pursuant to the Circular on Strengthening the Self-Discipline Management of Privately Raised Funds Information Disclosure (“关于加强私募基金信息披露自律管理相关事项的通知”) by the AMAC on September 30, 2018, if a fund manager fails to provide a requisite update on any changes in such information on two separate occasions, it will be included in the list of abnormal institutions and will be suspended from filing new fund products with the Asset Management Association of China. 56 Unlike the distribution of publicly raised funds, neither the Securities Investment Fund Law nor the Interim Measures for Privately Raised Funds requires fund distributor to obtain any license or permit before engaging in such business.
Pursuant to the Circular on Strengthening the Self-Discipline Management of Privately Raised Funds Information Disclosure (“ 关于加强私募基金信息披露自律管理相关事项的通知 ”) by the AMAC on September 30, 2018, if a fund manager fails to provide a requisite update on any changes in such information on two separate occasions, it will be included in the list of abnormal institutions and will be suspended from filing new fund products with the Asset Management Association of China. 57 Unlike the distribution of publicly raised funds, neither the Securities Investment Fund Law nor the Interim Measures for Privately Raised Funds requires fund distributor to obtain any license or permit before engaging in such business.
On January 8, 2003, the NDRC, SAFE and Ministry of Finance jointly promulgated the Circular on the Interim Administrative Measures for Foreign Debts (“外债管理暂行办法”), hereinafter referred to as the “Foreign Debts Administrative Measures”, which took effect on March 1, 2003, and partially repealed on May 10, 2015.
On January 8, 2003, the NDRC, SAFE and Ministry of Finance jointly promulgated the Circular on the Interim Administrative Measures for Foreign Debts (“ 外债管理暂行办法 ”), hereinafter referred to as the “Foreign Debts Administrative Measures,” which took effect on March 1, 2003, and partially repealed on May 10, 2015.
The Copyright Protection Center of China is designated as the software registration authority, which grants registration certificates to the computer software copyright applicants to conform with both the Regulation on the Protection of Computer Software and the Measures for the Registration of Computer Software Copyright. 58 Trademarks Registered trademarks are protected under the Trademark Law of the PRC (“商标法”), which was promulgated by SCNPC on August 23, 1982, recently amended on April 23, 2019 and effective on November 1, 2019; the Implementation Regulations of the Trademark Law of the PRC (“商标法实施条例”), which was promulgated by the State Council on August 3, 2002, amended on April 29, 2014 and effective on May 1, 2014.
The Copyright Protection Center of China is designated as the software registration authority, which grants registration certificates to the computer software copyright applicants to conform with both the Regulation on the Protection of Computer Software and the Measures for the Registration of Computer Software Copyright. 60 Trademarks Registered trademarks are protected under the Trademark Law of the PRC (“ 商标法 ”), which was promulgated by SCNPC on August 23, 1982, recently amended on April 23, 2019 and effective on November 1, 2019; the Implementation Regulations of the Trademark Law of the PRC (“ 商标法实施条例 ”), which was promulgated by the State Council on August 3, 2002, amended on April 29, 2014 and effective on May 1, 2014.
There is no explicit provision or official interpretation stating that a merger or acquisition of a company engaging in marketplace lending business requires security review. 66 The Measures for the Security Review of Foreign Investment (“外商投资安全审查办法”), hereinafter referred to as the “Review Measures”), was issued by the National Development and Reform Commission and the Ministry of Commerce on December 19, 2020 and took effect on January 18, 2021.
There is no explicit provision or official interpretation stating that a merger or acquisition of a company engaging in marketplace lending business requires security review. 70 The Measures for the Security Review of Foreign Investment (“ 外商投资安全审查办法 ”), hereinafter referred to as the “Review Measures”), was issued by the National Development and Reform Commission and the Ministry of Commerce on December 19, 2020 and took effect on January 18, 2021.
Most of our cash is in Renminbi, and the PRC government could prevent the cash maintained from leaving the PRC, could restrict deployment of the cash into our, our subsidiaries’ and the consolidated VIEs’ business and restrict the ability to pay dividends.
Most of our cash is in Renminbi, and the PRC government could prevent the cash maintained from leaving the PRC, could restrict deployment of the cash into our, our subsidiaries’ and the VIEs’ business and restrict the ability to pay dividends.
There is no assurance that China’s government will not intervene or impose restrictions on the ability of us, our subsidiaries and the consolidated VIEs to transfer cash.
There is no assurance that China’s government will not intervene or impose restrictions on the ability of us, our subsidiaries and the VIEs to transfer cash.
The funds raised under the VIE structure can only be used in the business activities of domestic operating entities after the settlement of foreign exchange is made under the above conditions. 61 PRC Regulations Relating to Foreign Debt We are an offshore holding company conducting operations in China through our PRC subsidiary and the VIE and its subsidiaries, which are consolidated into our financial statements.
The funds raised under the VIE structure can only be used in the business activities of domestic operating entities after the settlement of foreign exchange is made under the above conditions. 63 PRC Regulations Relating to Foreign Debt We are an offshore holding company conducting operations in China through our PRC subsidiary and the VIE and its subsidiaries, which are consolidated into our financial statements.
Fund distributors and fund distribution service providers may join AMAC and submit to its self-regulation rules. 53 The Measures for Distribution of Securities Funds has been superseded by the Supervisory and Administrative Measures for Distributors of Publicly Raised Securities Investment Funds (“公开募集证券投资基金销售机构监督管理办法”), hereinafter referred to as the “Distributor Measures”, which was promulgated by the CSRC on August 28, 2020 and took effect on October 1, 2020.
Fund distributors and fund distribution service providers may join AMAC and submit to its self-regulation rules. 54 The Measures for Distribution of Securities Funds has been superseded by the Supervisory and Administrative Measures for Distributors of Publicly Raised Securities Investment Funds (“ 公开募集证券投资基金销售机构监督管理办法 ”), hereinafter referred to as the “Distributor Measures”, which was promulgated by the CSRC on August 28, 2020 and took effect on October 1, 2020.
On March 20, 2019, the Ministry of Finance, the SAT and the General Administration of Customs promulgated the Announcement on Relevant Policies for Deepening the Value-Added Tax Reform (“关于深化增值税改革有关政策的公告”), hereinafter referred to as the “Deepening Reform Announcement”, which took effect on April 1, 2019. 64 Pursuant to the Pilot Plan and relevant circulars, VAT is generally imposed nationwide on the modern service industries.
On March 20, 2019, the Ministry of Finance, the SAT and the General Administration of Customs promulgated the Announcement on Relevant Policies for Deepening the Value-Added Tax Reform (“ 关于深化增值税改革有关政策的公告 ”), hereinafter referred to as the “Deepening Reform Announcement”, which took effect on April 1, 2019. 68 Pursuant to the Pilot Plan and relevant circulars, VAT is generally imposed nationwide on the modern service industries.
We will continue to have gross outflows due to the deduction of management fees, fund custodian fees and operation services fees in line with the expansion of our asset management services. 44 Consulting and other Services Starting from January 2021, we collaborated with an insurance agency which is a related party and started to provide consulting service in connection with such agency’s insurance products.
We will continue to have gross outflows due to the deduction of management fees, fund custodian fees and operation services fees in line with the expansion of our asset management services. 45 Consulting and other Services Starting from January 2021, we collaborated with an insurance agency which is a related party and started to provide consulting service in connection with such agency’s insurance products.
For details regarding the restrictions on our ability to transfer cash between us, our subsidiaries and the consolidated VIEs, see “Item 3. Key Information—D.
For details regarding the restrictions on our ability to transfer cash between us, our subsidiaries and the VIEs, see “Item 3. Key Information—D.
We have set up an online client service system equipped with intelligent interactive tools to further enhance the quality and efficiency of our client services. ● Investment advisor platform . We have developed and continue to optimize the “i Financial Planner”, an intelligent business app that provides seed clients and financial advisors a one-stop management tool.
We have set up an online client service system equipped with intelligent interactive tools to further enhance the quality and efficiency of our client services. ● Investment advisor platform . We have developed and continue to optimize the “i Financial Planner”, an intelligent business app that provides financial advisors a one-stop management tool.
We rely on a combination of trademark and trade secret laws as well as confidentiality agreements and non-compete covenants with our employees and our third-party wealth management product providers. We also enter into confidentiality agreements with our seed clients. We hold 55 pieces of registered computer software copyrights, 12 registered trademarks and 19 registered domain names.
We rely on a combination of trademark and trade secret laws as well as confidentiality agreements and non-compete covenants with our employees and our third-party wealth management product providers. We also enter into confidentiality agreements with our seed clients. We hold 60 pieces of registered computer software copyrights, 12 registered trademarks and 19 registered domain names.
As of the date of this annual report, Fanhua Puyi distributes fund products, including but not limited to mixed fund products, which is not in violation of any prohibitive regulations of the CSRC. 55 On May 10, 2022, the AMAC promulgated the Administrative Rules for Fund Practitioners (“基金从业人员管理规则”), hereinafter referred to as the “AMAC Rules”, effective on the same date.
As of the date of this annual report, Fanhua Puyi distributes fund products, including but not limited to mixed fund products, which is not in violation of any prohibitive regulations of the CSRC. 56 On May 10, 2022, the AMAC promulgated the Administrative Rules for Fund Practitioners (“ 基金从业人员管理规则 ”), hereinafter referred to as the “AMAC Rules”, effective on the same date.
Yu Haifeng for a portion of our China operations, which may not be as effective as ownership in directing operational activities of the consolidated VIEs.” Such arbitration provisions have no effect on the rights of our shareholders to pursue claims against us under U.S. federal securities laws. 73 Periodic Reporting and Audited Financial Statements Puyi has registered its securities under the Securities Exchange Act of 1934 and has reporting obligations, including the requirement to file annual reports with the SEC.
Yu Haifeng for a portion of our China operations, which may not be as effective as ownership in directing operational activities of the VIEs.” Such arbitration provisions have no effect on the rights of our shareholders to pursue claims against us under U.S. federal securities laws. 77 Periodic Reporting and Audited Financial Statements Puyi has registered its securities under the Securities Exchange Act of 1934 and has reporting obligations, including the requirement to file annual reports with the SEC.
We also distributed FoFs of privately raised securities investment funds. 41 As privately raised funds typically require higher net worth and/or investment sophistication and are offered to a limit number of qualified investors, such funds charge higher fee rates and managers of such funds sometimes allow fund distributors to earn a portion of the performance-based fees.
We also distributed FoFs of privately raised securities investment funds. 42 As privately raised funds typically require higher net worth and/or investment sophistication and are offered to a limit number of qualified investors, such funds charge higher fee rates and managers of such funds sometimes allow fund distributors to earn a portion of the performance-based fees.
Cash Flows among Us, Our Subsidiaries and the Consolidated VIEs Our subsidiaries and the consolidated VIEs conduct business transactions that primarily include wealth management services and asset management services.
Cash Flows among Us, Our Subsidiaries and the VIEs Our subsidiaries and the VIEs conduct business transactions that primarily include wealth management services and asset management services.
The Foreign Investment Law replaces the current laws and regulations governing the three traditional type of foreign-invested enterprises (equity joint ventures, cooperative joint ventures and wholly-foreign owned enterprises). The Implementation Regulations for the Foreign Investment Law of the PRC was promulgated by the State Council on December 26, 2019 and took effect on January 1, 2020.
The Foreign Investment Law replaces the current laws and regulations governing the three traditional types of foreign-invested enterprises (equity joint ventures, cooperative joint ventures and wholly-foreign owned enterprises). The Implementation Regulations for the Foreign Investment Law of the PRC was promulgated by the State Council on December 26, 2019 and took effect on January 1, 2020.
For foreign exchange proceeds under the capital accounts, approval from the SAFE is generally required for the retention or sale of such proceeds to a financial institution engaged in settlement and sale of foreign exchange. 60 Since 2012, the SAFE has promulgated several circulars to substantially amend and simplify the current foreign exchange procedure.
For foreign exchange proceeds under the capital accounts, approval from the SAFE is generally required for the retention or sale of such proceeds to a financial institution engaged in settlement and sale of foreign exchange. 62 Since 2012, the SAFE has promulgated several circulars to substantially amend and simplify the current foreign exchange procedure.
In the fiscal year ended June 30, 2022, we strategically focused on providing wealth management and asset management services for the financial assets of middle-class and affluent families, and continued to improve our financial advisors program to better serve our clients more knowledgeably and professionally.
In the fiscal year ended June 30, 2023, we strategically focused on providing wealth management and asset management services for the financial assets of middle-class and affluent families, and continued to improve our financial advisors program to better serve our clients more knowledgeably and professionally.
We make full use of our accumulated big data together with artificial intelligence technology to launch professional, tailor-made and comprehensive financial asset management services, which enable us to assist our seed clients and financial advisors in meeting wealth management needs at different levels.
We make full use of our accumulated big data together with artificial intelligence technology to launch professional, tailor-made and comprehensive financial asset management services, which enable us to assist financial advisors in meeting wealth management needs at different levels.
Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. 59 In September 2016, the National People’s Congress Standing Committee published its decision to revise the laws relating to wholly foreign-owned enterprises and other foreign-invested enterprises.
Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. 61 In September 2016, the National People’s Congress Standing Committee published its decision to revise the laws relating to wholly foreign-owned enterprises and other foreign-invested enterprises.
We strive to continuously provide our clients products with attractive returns and controllable risks. We further enriched our product offerings to keep up with clients’ evolving needs. In the fiscal year ended June 30, 2022, we continued to adhere to our strategy of standardized product transformation.
We strive to continuously provide our clients products with attractive returns and controllable risks. We further enriched our product offerings to keep up with clients’ evolving needs. In the fiscal year ended June 30, 2023, we continued to adhere to our strategy of standardized product transformation.
Business Overview We are a leading third-party wealth management services provider in China with a focus on the affluent and emerging middle class population. Historically, a majority of the affluent and emerging middle class population in China rely on wealth management products issued and distributed by commercial banks and their wealth management subsidiaries.
Business Overview We are a leading third-party wealth management services provider in China with a focus on the affluent and emerging middle class population. Historically, a majority of the affluent and emerging middle class population in China relied on wealth management products issued and distributed by commercial banks and their wealth management subsidiaries.
We primarily provide wealth management services and asset management services, and through cooperation with our business partners we also provide insurance consulting services, trust consulting services and ancillary services. 39 Wealth Management Services Under our wealth management services, we provide our clients with a wide range of product offerings including publicly raised fund products and privately raised securities investment fund products.
We primarily provide wealth management services and asset management services, and through cooperation with our business partners we also provide insurance consulting services, trust consulting services and ancillary services. 40 Wealth Management Services Under our wealth management services, we provide our clients with a wide range of product offerings including publicly raised fund products and privately raised securities investment fund products.
As the state’s supervision of data security and protection of personal information continues to deepen, the legislation and law enforcement activities of information protection in the financial field are gradually being strengthened. We will pay close attention to the latest regulatory developments on consumer financial information. 70 C.
As the state’s supervision of data security and protection of personal information continues to deepen, the legislation and law enforcement activities of information protection in the financial field are gradually being strengthened. We will pay close attention to the latest regulatory developments on consumer financial information.
An ICP service operator is also required to properly keep the user personal information, and in the case of any leak or likely leak of the users’ personal information, the ICP service operator must take immediate remedial measures and, in severe circumstances, to make an immediate report to the telecommunications regulatory authority.
An ICP service operator is also required to properly keep the user personal information, and in the case of any leak or likely leak of the users’ personal information, the ICP service operator must take immediate remedial measures and, in severe circumstances, to make an immediate report to the telecommunication regulatory authority.
We strategically focused on attracting individual clients first to accumulate a large trading balance, which in turn can help attract institutional clients and increase our bargain power with the public-raised funds management service providers.
We strategically focused on attracting individual clients first to accumulate a large trading balance, which in turn can help attract institutional clients and increase our bargain power with the publicly raised funds management service providers.
We believe publicly raised fund products, product portfolios in particular, will continue to be a key product category for us. 40 Along with the development of the wealth management industry, more institutional investors began to invest in publicly raised funds.
We believe publicly raised fund products, product portfolios in particular, will continue to be a key product category for us. 41 Along with the development of the wealth management industry, more institutional investors began to invest in publicly raised funds.
To date, investment decisions made by such fund managers with respect of these funds have been consistent with our investment proposals. 50 Information Technology We have developed our integrated IT infrastructure that provides technology support to all aspects of our business.
To date, investment decisions made by such fund managers with respect of these funds have been consistent with our investment proposals. 51 Information Technology We have developed our integrated IT infrastructure that provides technology support to all aspects of our business.
Yu Haifeng for any reason, she agreed to be bound by the existing contractual arrangements relating to such shareholders equity interest in Puyi Bohui. 72 Agreements that Provide Us with the Option to Purchase the Equity Interest in Puyi Bohui Exclusive Option Agreement .
Yu Haifeng for any reason, she agreed to be bound by the existing contractual arrangements relating to such shareholders equity interest in Puyi Bohui. 76 Agreements that Provide Us with the Option to Purchase the Equity Interest in Puyi Bohui Exclusive Option Agreement .
The Provisions on Guiding Orientation of Foreign Investment (“指导外商投资方向规定”), the 2020 revision of the Catalogue of Encouraged Industries for Foreign Investment, and the 2021 Special Administrative Measures for Access of Foreign Investment (the “Negative List”) classify foreign investment projects into four categories: encouraged projects, permitted projects, restricted projects and prohibited projects.
The Provisions on Guiding Orientation of Foreign Investment (“ 指导外商投资方向规定 ”), the 2022 revision of the Catalogue of Encouraged Industries for Foreign Investment (“ 鼓励外商投资产业目录（2022年版） ”), and the 2021 Special Administrative Measures for Access of Foreign Investment (the “Negative List”) classify foreign investment projects into four categories: encouraged projects, permitted projects, restricted projects and prohibited projects.
(重庆锋毅企业管理咨询有限公司, or “Chongqing Fengyi”), which historically operated our corporate finance service business and now provides client service. 37 Due to the PRC legal restrictions on foreign investment in wealth and asset management businesses when our group was established, which restrictions were removed from the Special Administrative Measures (Negative List) for Foreign Investment Access (2020 Edition), we operate a significant part of our business through contractual arrangements between the VIE and our subsidiary.
( 重庆锋毅企业管理咨询有限公司 , or “Chongqing Fengyi”), which historically operated our corporate finance service business and now provides client service. 38 Due to the PRC legal restrictions on foreign investment in wealth and asset management businesses when our group was established, which restrictions were removed from the Special Administrative Measures (Negative List) for Foreign Investment Access (2020 Edition), we operate a significant part of our business through contractual arrangements between the VIE and our WFOE.
There is no fixed term of the seed client/financial advisor engagement under the introduction agreement unless such agreement is terminated after negotiation or due to a material breach by either party. 48 The map below shows our coverage network by number of seed clients and wealth management studios (1) as of June 30, 2022: (1) The red flags represent provinces where we have established cooperation with wealth management studios.
There is no fixed term of the seed client/financial advisor engagement under the introduction agreement unless such agreement is terminated after negotiation or due to a material breach by either party. 49 The map below shows our coverage network by number of seed clients and wealth management studios (1) as of June 30, 2023: (1) The red flags represent provinces where we have established cooperation with wealth management studios.
Any reference to control or benefits that accrue to us because of the consolidated VIEs is limited to and subject to conditions we have satisfied for consolidation of the VIEs under U.S. GAAP. 71 Agreement that Allows Us to Receive Economic Benefits from Puyi Bohui Exclusive Technical and Consulting Services Agreement .
Any reference to control or benefits that accrue to us because of the VIEs is limited to and subject to conditions we have satisfied for consolidation of the VIEs under U.S. GAAP. 75 Agreement that Allows Us to Receive Economic Benefits from Puyi Bohui Exclusive Technical and Consulting Services Agreement .
Risk Factors” above. 52 Regulations PRC Regulations Relating to Wealth Management Services The distribution of wealth management products, depending on the type of product, is subject to different sets of laws, regulations and rules.
Risk Factors” above. 53 Regulations PRC Regulations Relating to Wealth Management Services The distribution of wealth management products, depending on the type of product, is subject to different sets of laws, regulations and rules.
Except for 14 FoFs under our management as of June 30, 2022, all other privately raised fund products that we distribute are sourced from third parties. See “– Asset Management Services”. Agreements with Product Providers Our distribution is typically governed by agreements entered with product providers, primarily comprising fund managers and securities firms on a product-by-product basis.
Except for ten FoFs under our management as of June 30, 2023, all other privately raised fund products that we distribute are sourced from third-parties. See “– Asset Management Services”. Agreements with Product Providers Our distribution is typically governed by agreements entered with product providers, primarily comprising fund managers and securities firms on a product-by-product basis.
For the fiscal year ended June 30, 2022, all of the privately raised fund products we distributed were privately raised securities investment funds, including investments through QDII funds.
For the fiscal year ended June 30, 2023, all of the privately raised fund products we distributed were privately raised securities investment funds, including investments through QDII funds.
According to the “Distributor Measures”, “Fund Distribution” means activities of opening fund transaction accounts for investors, publicizing and promoting funds, handling offering/subscription/redemption of fund units and inquiring on fund transaction accounts. “Fund Distributors” means organizations registered with the CSRC or its local offices and qualified to engage in fund distribution business.
According to the Distributor Measures, “Fund Distribution” means activities of opening fund transaction accounts for investors, publicizing and promoting funds, handling offering/subscription/redemption of fund units and inquiring on fund transaction accounts. “Fund Distributors” means organizations registered with the CSRC or its local offices and qualified to engage in fund distribution business.
As of June 30, 2022, we had 14 FoFs products under our management. We have a stringent process in selecting fund managers for managing our underlying FoFs assets. We require the fund managers to make investments in accordance with our investment strategy and continuously monitor their investment decisions.
As of June 30, 2023, we had ten FoFs products under our management. We have a stringent process in selecting fund managers for managing our underlying FoFs assets. We require the fund managers to make investments in accordance with our investment strategy and continuously monitor their investment decisions.
Our principal executive offices are located in leased office space at 61F, Pearl River Tower No. 15 Zhujiang West Road, Zhujiang New Town, Tianhe, Guangzhou, Guangdong Province. This office has a gross floor area of approximately 2,800 square meters.
Our principal executive offices are located in leased office space at 61F, Pearl River Tower No. 15 Zhujiang West Road, Zhujiang New Town, Tianhe, Guangzhou, Guangdong Province. This office has a gross floor area of approximately 1,700 square meters.
Now we have 1,085 courses, totaling more than 345 hours on the service app “Puyi Business School”. These courses covered various aspects including introduction of our group and our products, skill development, practice examination and latest market situation.
Now we have 1,493 courses, totaling more than 417 hours on the service app “Puyi Business School”. These courses covered various aspects including introduction of our group and our products, skill development, practice examination and latest market situation.
We launched our core app, Puyi Fund, which provides target clients product information and a full-scope of online transaction processing services for fund products including subscription, redemption, clearance and settlement, and allows clients to monitor their investment portfolio in a more convenient manner.
We launched our core app, Puyi Fund, which provides target clients product information and a full-scope of online transaction processing services for fund products including subscription, redemption, clearance and settlement, and allows clients to monitor their investment portfolio in a more convenient manner. ● Web-based Institution Master system.
FoF Rate of management fees (1) Rate of subscription fees (2) Carried interest (3) (4) Hurdle rate Hebi FoF series 1.2% 1.0% Nil to 10.0% 8.0% (3) Ruixuan FoF 1.4% 1.0% Nil to 15.0% High water mark (4) Jingheng FoF series 1.0%-1.5 % 1.0% Nil to 15.0% 5.0%-6.0% (3) Bailixin FoF series 1.0%-1.5 % Nil to 1.0 % Nil to 20.0% 5.0%-6.0% (3) Notes: (1) We charge clients management fees for each fund we manage in terms of committed capital.
FoF Rate of management fees (1) Rate of subscription fees (2) Carried interest (3) Hurdle rate Hebi FoF series 1.2% 1.0% Nil to 10.0% 8.0% Jingheng FoF series 1.0%-1.5% 1.0% Nil to 15.0% 5.0%-6.0% Bailixin FoF series 1.0%-1.5% Nil to 1.0% Nil to 20.0% 5.0%-6.0 % Notes: (1) We charge clients management fees for each fund we manage in terms of committed capital.
As of June 30, 2022, Fanhua Puyi had a total of 270 qualified fund professionals. It is also an active member of the AMAC with its membership being valid through May 14, 2023.
As of June 30, 2023, Fanhua Puyi had a total of 214 qualified fund professionals. It is also an active member of the AMAC with its membership being valid through May 14, 2025.
Unless otherwise provided for by the CSRC, independent fund distributor may not engage in any other business. The “Distributor Measures” sets forth the requirements for independent fund distributors.
Unless otherwise provided for by the CSRC, independent fund distributor may not engage in any other business. The Distributor Measures sets forth the requirements for independent fund distributors.
We combine the above custom-developed or commercially available business systems with our OA system, finance system and other internal back-end functions, to help us operate more efficiently. 51 Employees We had 552 employees as of June 30, 2022. The following table sets forth the breakdown of our employees by function as of June 30, 2022.
We combine the above custom-developed or commercially available business systems with our OA system, finance system and other internal back-end functions, to help us operate more efficiently. 52 Employees We had 288 employees as of June 30, 2023. The following table sets forth the breakdown of our employees by function as of June 30, 2023.
As of June 30, 2022, we have transformed a batch of seed clients into independent financial advisors. For the fiscal year ended June 30, 2022, we ceased cooperation with certain under-performed seed clients, with the number of our seed clients decreased to approximately 26,000 as of June 30, 2022 from 38,000 as of June 30, 2021.
As of June 30, 2023, we have transformed a batch of seed clients into financial advisors. For the fiscal year ended June 30, 2023, we ceased cooperation with certain under-performed seed clients, with the number of our seed clients decreased to approximately 23,000 as of June 30, 2023 from 26,000 as of June 30, 2022.
In July 2018, we incorporated Puyi Holdings (Hong Kong) Limited, or Puyi HK, which became the wholly owned subsidiary of Puyi Group Limited in August 2018. In August 2018, Puyi Enterprises Management Consulting Co., Ltd.
In July 2018, we incorporated Puyi Group Limited in the British Virgin Islands, which became the wholly owned subsidiary of Puyi Inc. in August 2018. In July 2018, we incorporated Puyi Holdings (Hong Kong) Limited, or Puyi HK, which became the wholly owned subsidiary of Puyi Group Limited in August 2018. In August 2018, Puyi Enterprises Management Consulting Co., Ltd.
To ensure smooth transition, a three-month transition period is provided for and, from September 3, 2022 onward, all applicants shall submit documents as required under the updated Registration Document List. The Filing FOAs took effect immediately.
To ensure smooth transition, a three-month transition period is provided for and, from September 3, 2022 onward, all applicants shall submit documents as required under the updated Registration Document List.
The aforesaid provisions also apply to managers of privately raised funds. 57 PRC Regulations Relating to Asset Management Services In terms of the management of privately raised funds, the Securities Investment Fund Law requires that any individual or institution, without registration, shall not conduct securities investment activities under the name of “funds” or “fund management.” The Interim Measures for Private Funds further requires that mangers of privately raised funds of any type shall apply for registration with the AMAC, and thus subject fund managers to the self-disciplinary rules promulgated by the AMAC.
In terms of the management of privately raised funds, the Securities Investment Fund Law requires that any individual or institution, without registration, shall not conduct securities investment activities under the name of “funds” or “fund management.” The Interim Measures for Private Funds further requires that mangers of privately raised funds of any type shall apply for registration with the AMAC, and thus subject fund managers to the self-disciplinary rules promulgated by the AMAC.
Sales and Marketing Our headquarters are located in Guangzhou, and we have a branch network of 37 offices covering 24 provinces/municipalities and hundreds of cities.
Sales and Marketing Our headquarters are located in Guangzhou, and we have a branch network of 18 offices covering 23 provinces/municipalities and hundreds of cities.
To incentivize our seed clients and wealth management studios to be more proactive in selling our publicly raised fund products, we provide competitive commission of approximately 0.2% per annum, subject to our management’s adjustment.
The amount of the commission depends on the amount of products the client purchases. To incentivize our seed clients and wealth management studios to be more proactive in selling our publicly raised fund products, we provide competitive commission of approximately 0.2% per annum, subject to our management’s adjustment.
In addition, since July 2021, we have been providing trust consulting services, where we assist our clients to set up trust funds with entrusted assets of approximately RMB1.0 billion as of June 30, 2022.
In addition, since July 2021, we have been providing trust consulting services, where we assist our clients to set up trust funds with entrusted assets of approximately RMB4.1 billion as of June 30, 2023.
As of June 30, 2022, we had engaged 135 wealth management studios. We have also continued to provide trainings through both our online platforms and offline in-person sessions to solidify and update professional knowledge of our financial advisor team. In the fiscal year ended June 30, 2022, we launched 611 new, innovative and knowledgeable courses totaling 136 hours.
As of June 30, 2023, we had engaged hundreds of wealth management studios. We have also continued providing trainings through both our online platforms and offline in-person sessions to solidify and update professional knowledge of our financial advisor team. In the fiscal year ended June 30, 2023, we launched 408 new, innovative and knowledgeable courses totaling 72 hours.
Our result of operations (calculated as net revenues minus operating costs and expenses) was a loss of RMB74.1 million (US$11.1 million) for the fiscal year ended June 30, 2022, as compared to a loss of RMB73.2 million for the fiscal year ended June 30, 2021.
Our result of operations (calculated as net revenues minus operating costs and expenses) was a loss of RMB58.8 million (US$8.1 million) for the fiscal year ended June 30, 2023, as compared to a loss of RMB74.1 million for the fiscal year ended June 30, 2022.
In the future, we strive to become a comprehensive investment advisory and wealth inheritance advisory platform to support financial advisors in order to meet our clients’ various needs in their full life cycle. 38 Our net revenues were RMB188.7 million (US$28.2 million) for the fiscal year ended June 30, 2022, as compared to RMB191.2 million for the fiscal year ended June 30, 2021.
In the future, we strive to become a comprehensive investment advisory and wealth inheritance advisory platform to support financial advisors in order to meet our clients’ various needs in their full life cycle. 39 Our net revenues were RMB114.4 million (US$15.8 million) for the fiscal year ended June 30, 2023, as compared to RMB188.7 million for the fiscal year ended June 30, 2022.
(深圳宝盈商业保理有限公司, or “Shenzhen Baoying”) from Guangdong Puyi Asset Management Co., Ltd (广东普益资产管理有限公司, or “Puyi Asset Management”) (previously known as Guangdong Fanhua Puyi Asset Management Co., Ltd.) and a third party, and Shenzhen Baoying was deregistered in July 2020. In May 2020, Puyi Dake Information Technology Co., Ltd. (普益达科信息技术有限公司, or “Puyi Dake”) was established as a wholly-owned subsidiary of our WFOE.
( 深圳宝盈商业保理有限公司 , or “Shenzhen Baoying”) from Guangdong Puyi Asset Management Co., Ltd ( 广东普益资产管理有限公司 , or “Puyi Asset Management”) (previously known as Guangdong Fanhua Puyi Asset Management Co., Ltd.) and a third-party, and Shenzhen Baoying was deregistered in July 2020. In May 2020, Puyi Dake Information Technology Co., Ltd.
Elite financial advisors team includes top seed clients, in-house financial advisors, and wealth management studios which consist of independent financial advisors. Top seed clients are the top 15.6% of seed clients who contributed approximately 80% of our sales generated through seed clients. Several of these top seed clients have already transformed to independent financial advisors.
Elite financial advisors team includes top seed clients and wealth management studios which consist of independent financial advisors. Top seed clients are the top seed clients who contributed approximately 80% of our sales generated through seed clients. Dozens of these top seed clients have already transformed to become professional financial advisors.
In January 2021, we started to collaborate with an insurance agency to provide insurance products consulting services, which collaboration enhances our financial asset allocation services as insurance is a significant part of asset allocation service.
Since January 2021, we have been collaborating with an insurance agency to provide insurance products consulting services, which collaboration enhances our financial asset allocation services as insurance is a significant part of asset allocation service.
Privately Raised Fund Products Since 2016, we have offered privately raised funds, increasing our focus on the higher end segment of the market and because these products are more financially attractive to us.
We manage the investment of different funds according to the customer’s risk appetite and our judgment of the market. Privately Raised Fund Products Since 2016, we have offered privately raised funds, increasing our focus on the higher end segment of the market and because these products are more financially attractive to us.
AUM in RMB (in thousands) Balance, as of July 1, 2019 502,794 Gross inflows (1) 418,690 Gross outflows (2) (244,662 ) Fair value changes (3) 172,180 Balance, as of June 30, 2020 849,002 Gross inflows (1) 638,860 Gross outflows (2) (407,710 ) Fair value changes (3) 36,948 Balance, as of June 30, 2021 1,117,100 Gross inflows (1) 375,090 Gross outflows (2) (580,786 ) Fair value changes (3) 30,783 Balance, as of June 30, 2022 942,187 (1) Include increased amounts contributed by new funds established and additional capital raised for existing funds during the indicated period.
AUM in RMB (in thousands) Balance, as of July 1, 2020 849,002 Gross inflows (1) 638,860 Gross outflows (2) (407,710 ) Fair value changes (3) 36,948 Balance, as of June 30, 2021 1,117,100 Gross inflows (1) 375,090 Gross outflows (2) (580,786 ) Fair value changes (3) 30,783 Balance, as of June 30, 2022 942,187 Gross inflows (1) 26,020 Gross outflows (2) (402,154 ) Fair value changes (3) (24,180 ) Balance, as of June 30, 2023 541,873 (1) Include increased amounts contributed by new funds established and additional capital raised for existing funds during the indicated period.
For the fiscal years ended June 30, 2021 and 2022, the aggregated transaction value of the wealth management products we distributed totaled RMB18.1 billion and RMB14.1 billion (US$2.1 billion), respectively. Since 2018, we have built a fast-growing asset management business allowing us to select and form FOFs for our clients.
For the fiscal years ended June 30, 2022 and 2023, the aggregated transaction value of the wealth management products we distributed totaled RMB14.1 billion and RMB11.3 billion (US$1.6 billion), respectively. Since 2018, we have built an asset management business allowing us to select and form FOFs for our clients.
For the fiscal year ended June 30, 2022, we distributed approximately 1,484 publicly raised fund products, with an aggregate transaction value of RMB13.1 billion (US$2.0 billion), among which transaction value contributed by institutional clients was RMB1.5 billion. The outstanding ending balance of publicly raised fund products distributed by us was RMB8.1 billion (US$1.2 billion) as of June 30, 2022.
For the fiscal year ended June 30, 2023, we distributed approximately 1,546 publicly raised fund products, with an aggregate transaction value of RMB11.1 billion (US$1.5 billion), among which transaction value contributed by institutional clients was RMB5.4 billion. The outstanding ending balance of publicly raised fund products distributed by us was RMB7.2 billion (US$1.0 billion) as of June 30, 2023.
Institution Master is a one-stop service solution for institutional investors to manage their OTC fund investments. It provides more professional, efficient and intelligent trading experience through our leading intelligent trading system, extensive product portfolios and comprehensive investment research system. With this system, we provide institutional investors with customized fund trading solutions to better meet their needs. ● Client service.
It provides more professional, efficient and intelligent trading experience through our leading intelligent trading system, extensive product portfolios and comprehensive investment research system. With this system, we provide institutional investors with customized fund trading solutions to better meet their needs. ● Client service.
For the fiscal year ended June 30, 2022, we distributed 25 privately raised securities investment funds with an aggregate transaction value of RMB1.0 billion (US$0.2 billion). The outstanding ending balance of privately raised fund products distributed by us was RMB4.5 billion (US$0.7 billion) as of June 30, 2022.
For the fiscal year ended June 30, 2023, we distributed 14 privately raised securities investment funds with an aggregate transaction value of RMB203.8 million (US$28.1 million). The outstanding ending balance of privately raised fund products distributed by us was RMB1.5 billion (US$0.2 billion) as of June 30, 2023.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of June 30, 2021 2022 RMB RMB US$ (in thousands) ASSETS: Current assets: Cash and cash equivalents 260,593 194,259 29,002 Restricted cash 72,189 118,796 17,736 Accounts receivable, net 55,154 59,507 8,884 Short term investments - 5,000 746 Other receivables and current assets 14,669 14,298 2,135 Amount due from related parties 721 2,895 432 Total current assets 403,326 394,755 58,935 Property and equipment, net 10,018 9,156 1,367 Intangible assets, net 1,599 1,114 166 Long-term prepayments 43 551 82 Deferred tax assets 21,588 23,978 3,580 Right-of-use asset 31,329 34,382 5,134 Total assets 467,903 463,936 69,264 LIABILITIES: Current liabilities: Accounts payable 12,299 11,668 1,742 Investors’ deposit 72,189 118,796 17,736 Other payables and accrued expenses 19,124 19,445 2,903 Lease liability, current 13,705 11,889 1,775 Income taxes payable 875 3,536 528 Other tax liabilities, current 12,100 - - Advance receipts from related parties - 1,500 224 Amount due to related parties - 292 44 Total current liabilities 130,292 167,126 24,952 Other tax liabilities, non-current - 13,500 2,015 Lease liabilities, non-current 17,310 23,259 3,472 Total liabilities 147,602 203,885 30,439 Restricted Cash Restricted cash balances were mainly uninvested cash balances of our clients after purchasing privately raised fund products and publicly raised fund products, which were temporarily deposited in our bank account.
Biggest changeAs of June 30, 2022 2023 RMB RMB US$ (in thousands) ASSETS: Current assets: Cash and cash equivalents 194,259 164,470 22,681 Restricted cash 118,796 8,258 1,139 Accounts receivable, net 59,507 37,601 5,185 Short term investments 5,000 - - Other receivables and current assets 14,298 27,666 3,816 Amount due from related parties 2,895 - - Total current assets 394,755 237,995 32,821 Property and equipment, net 9,156 1,566 216 Intangible assets, net 1,114 1,791 247 Long-term prepayments 551 22 3 Deferred tax assets 23,978 16,552 2,283 Right-of-use asset 34,382 13,607 1,876 Total assets 463,936 271,533 37,446 LIABILITIES: Current liabilities: Accounts payable 11,668 6,292 868 Investors’ deposit 118,796 8,258 1,139 Other payables and accrued expenses 19,445 9,163 1,264 Lease liability, current 11,889 4,793 660 Income taxes payable 3,536 1,757 242 Advance receipts from third parties - 803 111 Advance receipts from related parties 1,500 - - Amount due to related parties 292 - - Total current liabilities 167,126 31,066 4,284 Other tax liabilities, non-current 13,500 13,760 1,898 Lease liabilities, non-current 23,259 9,673 1,334 Total liabilities 203,885 54,499 7,516 Restricted Cash Restricted cash balances were mainly uninvested cash balances of our clients after purchasing privately raised fund products and publicly raised fund products, which were temporarily deposited in our bank account.
Pursuant to the relevant laws and regulations in the PRC, Puyi Bohui is regarded as an accredited software company and a High and New Technology Enterprise (“HNTE”), and thus enjoys preferential tax treatments, including being exempted from PRC Income Tax for two years starting from its first profit-making year, followed by a 50% reduction for the next three years.
Pursuant to the relevant laws and regulations in the PRC, Puyi Bohui is regarded as an accredited software company and a High and New Technology Enterprise (“HNTE”), and thus enjoys preferential tax treatments, including being exempted from PRC Enterprise Income Tax for two years starting from its first profit-making year, followed by a 50% reduction for the next three years.
Uncertain tax position In order to assess uncertain tax positions, we analyze each individual entity’s uncertain income tax positions concerning transfer pricing on a regular basis, which were primarily concerned with sales activities conducted among the subsidiaries and the consolidated VIEs that had different income tax rates (ranging from nil to 25%) and the amount of taxes that could have been paid additionally, in aggregation, had those sales activities were conducted among the subsidiaries and the consolidated VIEs without any preferential income tax rates.
Uncertain tax position In order to assess uncertain tax positions, we analyze each individual entity’s uncertain income tax positions concerning transfer pricing on a regular basis, which were primarily concerned with sales activities conducted among the subsidiaries and the VIEs that had different income tax rates (ranging from nil to 25%) and the amount of taxes that could have been paid additionally, in aggregation, had those sales activities were conducted among the subsidiaries and the VIEs without any preferential income tax rates.
We also charge recurring management fees for the management service, which are determined based on the types of financial products we distribute and calculated as either (i) pre-agreed percentage with the daily outstanding balance confirmed with the issuer, prorated daily (ii) pre-agreed charge rate with the amount of products distributed, prorated by the actual period length of the product, or (iii) as a percentage of the fair value of the total investment in the financial products, calculated daily.
We also charge recurring management fees for the management service, which are determined based on the types of financial products we distribute and calculated as either (i) pre-agreed percentage with the daily outstanding balance confirmed with the issuer, prorated daily (ii) pre-agreed charge rate with the amount of products distributed, the actual period length of the product, or (iii) as a percentage of the fair value of the total investment in the financial products, calculated daily.
Valuation allowances have been established for deferred tax assets based on a more-likely-than-not threshold. Our ability to realize deferred tax assets depends on each individual entity’s ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. We operate through our subsidiaries and the consolidated VIEs.
Valuation allowances have been established for deferred tax assets based on a more-likely-than-not threshold. Our ability to realize deferred tax assets depends on each individual entity’s ability to generate sufficient taxable income within the carry forward periods provided for in the tax law. We operate through our subsidiaries and the VIEs.
Although we consolidate the results of the consolidated VIEs, we only have access to cash balances or future earnings of the consolidated VIEs through our contractual arrangements with the VIE. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure — We rely on contractual arrangements with the VIE and its principal shareholder Mr.
Although we consolidate the results of the VIEs, we only have access to cash balances or future earnings of the VIEs through our contractual arrangements with the VIE. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure — We rely on contractual arrangements with the VIE and its principal shareholder Mr.
Under PRC law, each of our wholly owned subsidiaries and the consolidated VIEs in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve funds reach 50% of its registered capital.
Under PRC law, each of our wholly owned subsidiaries and the VIEs in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve funds reach 50% of its registered capital.
Yu Haifeng for a portion of our China operations, which may not be as effective as equity ownership in directing operational activities of the consolidated VIEs”. For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “— Holding Company Structure” below.
Yu Haifeng for a portion of our China operations, which may not be as effective as equity ownership in directing operational activities of the VIEs”. For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “— Holding Company Structure” below.
In addition, our wholly foreign-owned subsidiary in China may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and each of the consolidated VIEs may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion.
In addition, our wholly foreign-owned subsidiary in China may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and each of the VIEs may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the fiscal year ended June 30, 2022 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that are reasonably likely to cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the fiscal year ended June 30, 2023 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that are reasonably likely to cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
In line with the changing regulatory environment directed by the 2018 Guidelines and the continuing shift of investment focus from real properties to market-based standardized wealth management products among Chinese population with investable assets, for the fiscal year ended June 30, 2022, we have primarily distributed portfolios of standardized fund products. ● Asset management services .
In line with the changing regulatory environment directed by the 2018 Guidelines and the continuing shift of investment focus from real properties to market-based standardized wealth management products among Chinese population with investable assets, for the fiscal year ended June 30, 2023, we have primarily distributed portfolios of standardized fund products. ● Asset management services .
Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. 89 The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements.
Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. 93 The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements.
The discussion and analysis about the fiscal year ended June 30, 2020, including year-to-year comparison between the fiscal years ended June 30, 2020 and 2021, are not included in this annual report. For details of such information, see “Item 5. Operating and Financial Review and Prospects” in the 2021 annual report of the group. A.
The discussion and analysis about the fiscal year ended June 30, 2021, including year-to-year comparison between the fiscal years ended June 30, 2021 and 2022, are not included in this annual report. For details of such information, see “Item 5. Operating and Financial Review and Prospects” in the 2022 annual report of the group. A.
We had no bank borrowings as of June 30, 2022 . We believe that our current cash and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for at least the next 12 months from the date of this report.
We had no bank borrowings as of June 30, 2023 . We believe that our current cash and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for at least the next 12 months from the date of this report.
Asset Management Services Revenue under asset management services represents the management fees and carried interest from the funds that we manage. (The subscription fees we collect for the funds we manage are recorded as revenue under wealth management services. See “ – Wealth Management Services – By Revenue Type”.) We currently manage 14 FoFs. See “Item 4.
Asset Management Services Revenue under asset management services represents the management fees and carried interest from the funds that we manage. (The subscription fees we collect for the funds we manage are recorded as revenue under wealth management services. See “– Wealth Management Services – By Revenue Type”.) We currently manage ten FoFs. See “Item 4.
We currently plan to reinvest all earnings from our wholly-owned subsidiary in China to its business development and do not plan to request dividend distributions from it. 88 Off-Balance Sheet Arrangements As of June 30, 2022, we did not enter any off-balance sheet arrangements such as any financial guarantees or other commitments to guarantee the payment obligations of any third parties, which in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operation.
We currently plan to reinvest all earnings from our wholly-owned subsidiary in China to its business development and do not plan to request dividend distributions from it. 92 Off-Balance Sheet Arrangements As of June 30, 2023, we did not enter any off-balance sheet arrangements such as any financial guarantees or other commitments to guarantee the payment obligations of any third-parties, which in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operation.
In addition, we receive performance-based fee income mainly for the privately raised funds we distribute. Performance-based fees are calculated based on the extent by which the fund’s investment performance exceeds a certain threshold. Performance-based fees are typically calculated and recognized when the cumulative return of the fund can be determined, and is not subject to clawback provision.
In addition, we receive performance-based fee income mainly for the privately raised funds we distribute. Performance-based fees are calculated based on the extent by which the fund’s investment performance exceeds a certain threshold. Performance-based fees are typically calculated and recognized when the cumulative return of the fund can be determined, and is not subject to claw back provision.
For the fiscal year ended June 30, 2022, we generated revenue primarily from wealth management services. The table below sets forth the components of our net revenues for the period indicated.
For the fiscal year ended June 30, 2023, we generated revenue primarily from wealth management services. The table below sets forth the components of our net revenues for the period indicated.
General and Administrative Expenses General and administrative expenses primarily consist of (i) salaries and benefits related to our management and administrative employees, (ii) rental expenses, and (iii) expenses of upgrading our information technology infrastructure.
General and Administrative Expenses General and administrative expenses primarily consist of (i) salaries and benefits related to our management and administrative employees, (ii) expenses of upgrading our information technology infrastructure, and (iii) rental and leasehold improvement expenses.
Financing Activities We did not have any cash inflow or outflow due to financing activities for the fiscal year ended June 30, 2022.
Financing Activities We did not have any cash inflow or outflow due to financing activities for the fiscal year ended June 30, 2023.
We expect that net revenues from distribution of publicly raised fund products, absolute terms and a percentage of net revenues from wealth management services, would continue to increase in the future as a result of our efforts to attract more institutional clients. ● Privately raised fund products . 35.9% of our wealth management services revenue is derived from privately raised fund products.
We expect that net revenues from distribution of publicly raised fund products, absolute terms and a percentage of net revenues from wealth management services, would continue to increase in the future as a result of our efforts to attract more institutional clients. ● Privately raised fund products . 27.1% of our wealth management services revenue is derived from privately raised fund products.
Major Factors Affecting Our Results of Operations We believe that the major factors affecting our results of operations include the following: Operating Costs and Expenses Our operating costs and expenses have a significant impact on our financial results, therefore we began to cut costs in all aspects in the fiscal year 2022.
Major Factors Affecting Our Results of Operations We believe that the major factors affecting our results of operations include the following: Operating Costs and Expenses Our operating costs and expenses have a significant impact on our financial results; therefore, we continued to cut costs in all aspects in the fiscal year 2023.
Discussion of Key Balance Sheet Items The following table sets forth selected information from our Consolidated Statement of Financial Position as of June 30, 2021 and 2022. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report.
Discussion of Key Balance Sheet Items The following table sets forth selected information from our Consolidated Balance Sheets as of June 30, 2022 and 2023. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report.
As of June 30, 2021 and 2022, valuation allowance on deferred tax assets was RMB2.3 million and RMB6.1 million (US$0.9 million), respectively, because we believe that it is more-likely-than-not that certain of the subsidiaries and the consolidated VIEs registered in the PRC will not be able to generate sufficient taxable income in the near future, to realize the deferred tax assets carried-forwards.
As of June 30, 2022 and 2023, valuation allowance on deferred tax assets was RMB6.1 million and RMB21.7 million (US$3.0 million), respectively, because we believe that it is more-likely-than-not that certain of the subsidiaries and the VIEs registered in the PRC will not be able to generate sufficient taxable income in the near future, to realize the deferred tax assets carried-forwards.
As a result, the transaction value of publicly raised fund products distributed continued to be more than RMB13 billion for the fiscal year ended June 30, 2022.
As a result, the transaction value of publicly raised fund products distributed continued to be more than RMB11 billion for the fiscal year ended June 30, 2023.
Other income Our other income primarily consists of (i) interest income from wealth management products we purchased and short-term loans we provided to a third party company, and (ii) sundry income, including grants from local government.
Other income Our other income primarily consists of (i) our investment income from the disposal of a subsidiary, (ii) interest income from wealth management products we purchased and short-term loans we provided to a third-party company, and (iii) sundry income, including grants from local government.
The number of our seed clients and their ability to attract more potential clients are vital to the expansion of our business, and approximately 98.6% of our total sales from wealth management services for the fiscal year ended June 30, 2022 were generated by our seed clients.
The number of our seed clients and their ability to attract more potential clients are vital to the expansion of our business, and approximately 99.4% of our total sales from wealth management services for the fiscal year ended June 30, 2023 were generated by our seed clients.
Due to events beyond our control, such as the continuous global COVID-19 pandemic, the trade tension between U.S. and China, and the Russia-Ukraine conflict, China’s economic growth has been shriveling and no longer maintains its high growth rate.
Due to events beyond our control, such as the global COVID-19 pandemic, the trade tension between U.S. and China, and the geopolitical conflicts, China’s economic growth has been shriveling and no longer maintains its high growth rate.
Income (loss) before income taxes As a result of the foregoing, we incurred loss before income taxes of RMB55.7 million for the fiscal year ended June 30, 2021 and loss before income tax of RMB61.6 million for the fiscal year ended June 30, 2022. Income Tax Expense The Cayman Islands Puyi Inc. is incorporated in the Cayman Islands.
Income (loss) before income taxes As a result of the foregoing, we incurred loss before income taxes of RMB61.6 million for the fiscal year ended June 30, 2022 and loss before income tax of RMB35.0 million for the fiscal year ended June 30, 2023. Income Tax Expense The Cayman Islands Puyi Inc. is incorporated in the Cayman Islands.
Accordingly, our cost of sales as a percentage of net revenues decreased from 23.0% for the fiscal year ended June 30, 2021 to 17.9% for the fiscal year ended June 30, 2022, and our gross profit margin (calculated as the difference between net revenues and the cost of sales divided by the net revenues) increased from 77.0% for the fiscal year ended June 30, 2021 to 82.1% for the fiscal year ended June 30, 2022.
Accordingly, our cost of sales as a percentage of net revenues decreased from 17.9% for the fiscal year ended June 30, 2022 to 14.1% for the fiscal year ended June 30, 2023, and our gross profit margin (calculated as the difference between net revenues and the cost of sales divided by the net revenues) increased from 82.1% for the fiscal year ended June 30, 2022 to 85.9% for the fiscal year ended June 30, 2023.
Our result from operations (calculated as net revenues minus operating costs and expenses) was a loss of RMB74.1 million (US$11.1 million) for the fiscal year ended June 30, 2022, as compared to a loss of RMB73.2 million for the fiscal year ended June 30, 2021.
Our result from operations (calculated as net revenues minus operating costs and expenses) was a loss of RMB58.8 million (US$8.1 million) for the fiscal year ended June 30, 2023, as compared to a loss of RMB74.1 million for the fiscal year ended June 30, 2022.
Our general and administrative expenses as a percentage of net revenues was 47.2% for the fiscal year ended June 30, 2021 and 54.2% for the fiscal year ended June 30, 2022.
Our general and administrative expenses as a percentage of net revenues was 54.2% for the fiscal year ended June 30, 2022 and 80.7% for the fiscal year ended June 30, 2023.
The distribution commission fees are calculated by multiplying a pre-agreed charge rate with the amount of products distributed. For the fiscal year ended June 30, 2022, our net revenues from the privately raised fund products, increased to RMB61.6 million (US$9.2 million) for the fiscal year ended June 30, 2022 from RMB47.7 million for the fiscal year ended June 30, 2021.
The distribution commission fees are calculated by multiplying a pre-agreed charge rate with the amount of products distributed. For the fiscal year ended June 30, 2023, our net revenues from the privately raised fund products, decreased to RMB25.7 million (US$3.6 million) for the fiscal year ended June 30, 2023 from RMB61.6 million for the fiscal year ended June 30, 2022.
Under asset management services, we are entitled to management fees amounting to a percentage of capital committed and a performance-based carried interest based on the extent of which the fund’s investment performance exceeds a certain threshold. 74 Our net revenues were RMB188.7 million (US$28.2 million) for the fiscal year ended June 30, 2022, as compared to RMB191.2 million for the fiscal year ended June 30, 2021.
Under asset management services, we are entitled to management fees amounting to a percentage of capital committed and a performance-based carried interest based on the extent of which the fund’s investment performance exceeds a certain threshold. 78 Our net revenues were RMB114.4 million (US$15.8 million) for the fiscal year ended June 30, 2023, as compared to RMB188.7 million for the fiscal year ended June 30, 2022.
An increasing number of institutional clients have been purchasing our products, with the transaction value contributed by institutional clients reached RMB1.5 billion for the fiscal year ended June 30, 2022.
An increasing number of institutional clients have been purchasing our products, with the transaction value contributed by institutional clients reached RMB5.4 billion for the fiscal year ended June 30, 2023.
For the fiscal year ended June 30, 2022, the total operating costs and expenses as a percentage of our revenue increased slightly to 139.3% from 138.3% for the fiscal year June 30, 2021.
For the fiscal year ended June 30, 2023, the total operating costs and expenses as a percentage of our revenue increased to 151.4% from 139.3% for the fiscal year June 30, 2022.
Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated from our operating activities and proceeds from issuance and sales of ADSs in our initial public offering. Our cash and cash equivalents decreased from RMB260.6 million as of June 30, 2021 to RMB194.3 million (US$29.0 million) as of June 30, 2022.
Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated from our operating activities and proceeds from issuance and sales of ADSs in our initial public offering. Our cash and cash equivalents decreased from RMB194.3 million as of June 30, 2022 to RMB164.5 million (US$22.7 million) as of June 30, 2023.
For the fiscal year ended June 30, 2022, the total transaction value of publicly raised fund products distributed by us decreased to RMB13.1 billion (US$2.0 billion) from RMB17.1 billion for the fiscal year ended June 30, 2021, among which, the transaction value for institutional clients has reached RMB1.5 billion.
For the fiscal year ended June 30, 2023, the total transaction value of publicly raised fund products distributed by us decreased to RMB11.1 billion (US$1.5 billion) from RMB13.1 billion for the fiscal year ended June 30, 2022, among which, the transaction value for institutional clients has reached RMB5.4 billion.
Our selling expenses as a percentage of net revenues was 68.1% for the fiscal year ended June 30, 2021 and 67.2% for the fiscal year ended June 30, 2022.
Our selling expenses as a percentage of net revenues was 67.2% for the fiscal year ended June 30, 2022 and 56.5% for the fiscal year ended June 30, 2023.
Our restricted cash amounted to RMB72.2 million as of June 30, 2021 and RMB118.8 million (US$17.7 million) as of June 30, 2022, reflecting the uninvested balance level as of each fiscal year end. 86 Accounts receivable, net Accounts receivable primarily relates to the amount that we earned from our wealth management services.
Our restricted cash amounted to RMB118.8 million as of June 30, 2022 and RMB8.3 million (US$1.1 million) as of June 30, 2023, reflecting the uninvested balance level as of each fiscal year end. 90 Accounts receivable, net Accounts receivable primarily relates to the amount that we earned from our wealth management services.
As of June 30, 2021 and 2022 we had RMB12.1 million and RMB13.5 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate. 90
As of June 30, 2022 and 2023 we had RMB13.5 million and RMB13.8 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate. 94
For the fiscal year ended June 30, 2020 2021 2022 RMB % RMB % RMB % US$ (in thousands, except for %) Cost of sales 31,759 17.4 44,043 16.7 33,834 12.9 5,051 Selling expenses 84,074 45.9 130,145 49.2 126,743 48.2 18,922 General and administrative 67,174 36.7 90,194 34.1 102,267 38.9 15,268 Total operating costs and expenses 183,007 100.0 264,382 100.0 262,844 100.0 39,241 Cost of Sales Our cost of sales primarily consisted of (i) commission costs paid to sales agents based on the pre-agreed percentage and the amount of wealth management product distributions that were directly related to the contributions made by the sales agents, such as the amount of investments they have referred to the Group, and (ii) transaction fees paid to the third-party payment platforms through which the investors’ purchase funds are transferred.
For the fiscal year ended June 30, 2021 2022 2023 RMB % RMB % RMB % US$ (in thousands, except for %) Cost of sales 44,043 16.7 33,834 12.9 16,136 9.3 2,225 Selling expenses 130,145 49.2 126,743 48.2 64,709 37.4 8,924 General and administrative 90,194 34.1 102,267 38.9 92,399 53.3 12,742 Total operating costs and expenses 264,382 100.0 262,844 100.0 173,244 100.0 23,891 Cost of Sales Our cost of sales primarily consisted of (i) commission costs paid to sales agents based on the pre-agreed percentage and the amount of wealth management product distributions that were directly related to the contributions made by the sales agents, such as the amount of investments they have referred to the Group, and (ii) transaction fees paid to the third-party payment platforms through which the investors’ purchase funds are transferred.
For the fiscal year ended June 30, 2020 2021 2022 RMB % RMB % RMB % US$ (in thousands, except for %) Distribution commissions 99,600 93.6 176,573 100.0 168,489 98.2 25,154 Performance-based fees 6,844 6.4 16 - * 3,052 1.8 456 Total net revenues 106,444 100.0 176,589 100.0 171,541 100.0 25,610 * The percentage is less than 0.1% 78 By product type Publicly Raised Fund Products Starting from 2019, we have been strategically devoting our resources to publicly raised fund products and have begun to develop and distribute portfolios of publicly raised fund products.
For the fiscal year ended June 30, 2021 2022 2023 RMB % RMB % RMB % US$ (in thousands, except for %) Distribution commissions 176,573 100.0 168,489 98.2 93,188 98.1 12,851 Performance-based fees 16 - * 3,052 1.8 1,825 1.9 252 Total net revenues 176,589 100.0 171,541 100.0 95,013 100.0 13,103 * The percentage is less than 0.1% 82 By product type Publicly Raised Fund Products Starting from 2019, we have been strategically devoting our resources to publicly raised fund products and have begun to develop and distribute portfolios of publicly raised fund products.
The net revenues generating from asset management services decreased to RMB5.9 million (US$0.9 million) for the fiscal year ended June 30, 2022 from RMB13.5 million for the fiscal year ended June 30, 2021, as a result of a decrease of 69.2% in performance-based carried interest income to RMB2.4 million (US$0.4 million) generated by our actively managed FoFs from RMB7.8 million for the fiscal year ended June 30, 2021. 76 ● Other services.
The net revenues generating from asset management services decreased to RMB2.0 million (US$0.3 million) for the fiscal year ended June 30, 2023 from RMB5.9 million for the fiscal year ended June 30, 2022, as a result of a decrease in performance-based carried interest income to RMB96,000 (US$13,000) generated by our actively managed FoFs from RMB2.4 million for the fiscal year ended June 30, 2022. 80 ● Consulting and other services.
Investment Incom e Our investment income was nil for the fiscal year ended June 30, 2022, while investment income was RMB1.9 million for the fiscal year ended June 30, 2021 which primarily due to investment income of RMB1.2 million from the disposal of our subsidiary.
Investment Incom e Our investment income was RMB13.6 million (US$1.9 million) for the fiscal year ended June 30, 2023, while investment income was nil for the fiscal year ended June 30, 2022 which primarily due to investment income of RMB13.7 million from the disposal of a subsidiary.
Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of conversion of foreign currencies into Renminbi may delay or prevent us from using any offshore cash we may have to make loans to our PRC subsidiary and the VIE or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” For the fiscal year ended June 30, 2020 2021 2022 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (88,749 ) (2,825 ) (9,548 ) (1,425 ) Net cash provided by (used in) investing activities (53,081 ) 47,990 (10,596 ) (1,582 ) Net cash provided by financing activities - - - - Net increase (decrease) in cash and cash equivalents, and restricted cash (141,830 ) 45,165 (20,144 ) (3,007 ) Cash and cash equivalents and restricted cash at beginning of year 430,268 288,894 332,782 49,683 Effect of exchange rate changes on cash and cash equivalents 456 (1,277 ) 417 62 Cash and, cash equivalents and restricted cash at end of year 288,894 332,782 313,055 46,738 87 Operating Activities Net cash used in operating activities for the fiscal year ended June 30, 2022 was RMB9.5 million (US$1.4 million).
Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of conversion of foreign currencies into Renminbi may delay or prevent us from using any offshore cash we may have to make loans to our PRC subsidiary and the VIE or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” For the fiscal year ended June 30, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (2,825 ) (9,548 ) (135,901 ) (18,741 ) Net cash provided by (used in) investing activities 47,990 (10,596 ) (4,986 ) (688 ) Net cash provided by financing activities - - - - Net increase (decrease) in cash and cash equivalents, and restricted cash 45,165 (20,144 ) (140,887 ) (19,429 ) Cash and cash equivalents and restricted cash at beginning of year 288,894 332,782 313,055 43,172 Effect of exchange rate changes on cash and cash equivalents (1,277 ) 417 560 77 Cash and, cash equivalents and restricted cash at end of year 332,782 313,055 172,728 23,820 91 Operating Activities Net cash used in operating activities for the fiscal year ended June 30, 2023 was RMB135.9 million (US$18.7 million).
Holding Company Structure Puyi, Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our wholly-owned subsidiaries in which we hold equity interest and the consolidated VIEs through contractual arrangements in China. As a result, our ability to pay dividends depends upon dividends paid by our wholly owned subsidiaries.
We conduct our operations primarily through our wholly-owned subsidiaries in which we hold equity interest and the VIEs through contractual arrangements in China. As a result, our ability to pay dividends depends upon dividends paid by our wholly owned subsidiaries.
Shenzhen Puyi Zhongxiang Information Technology Co., Ltd. is qualified for Shenzhen Qianhai modern services cooperation district entity tax preference and is subject to an income tax rate for 15%. Chongqing Fengyi and Puyi Consulting are qualified for west development taxation preference and is subject to an income tax rate for 15%.
Shenzhen Zhongxiang is qualified for Shenzhen Qianhai modern services cooperation district entity tax preference and is subject to an income tax rate for 15%, and Shenzhen Zhongxiang was sold to a third-party in March 2023. Chongqing Fengyi and Puyi Consulting are qualified for west development taxation preference and is subject to an income tax rate for 15%.
For the fiscal year ended June 30, 2020 2021 2022 RMB % RMB % RMB % US$ (in thousands, except for %) Wealth management 106,444 82.2 176,589 92.4 171,541 90.9 25,610 Corporate financing 6 0.0 - - - - - Asset management 23,033 17.8 13,464 7.0 5,890 3.1 879 Consulting and other services - - 1,147 0.6 11,310 6.0 1,689 Total net revenues 129,483 100.0 191,200 100.0 188,741 100.0 28,178 Wealth Management Services By revenue type A majority of our net revenues from wealth management services are commissions paid by wealth management product providers.
For the fiscal year ended June 30, 2021 2022 2023 RMB % RMB % RMB % US$ (in thousands, except for %) Wealth management 176,589 92.4 171,541 90.9 95,013 83.0 13,103 Asset management 13,464 7.0 5,890 3.1 1,983 1.7 273 Consulting and other services 1,147 0.6 11,310 6.0 17,444 15.3 2,406 Total net revenues 191,200 100.0 188,741 100.0 114,440 100.0 15,782 Wealth Management Services By revenue type A majority of our net revenues from wealth management services are commissions paid by wealth management product providers.
Wealth management services Net revenues from wealth management services decreased by RMB5.0 million, or 2.9%, from RMB176.6 million for the fiscal year ended June 30, 2021 to RMB171.5 million (US$25.6 million). ● Publicly raised fund products .
Wealth management services Net revenues from wealth management services decreased by RMB76.5 million, or 44.6%, from RMB171.5 million for the fiscal year ended June 30, 2022 to RMB95.0 million (US$13.1 million). ● Publicly raised fund products .
Income Tax Benefit We incurred income tax benefit of RMB9.6 million and RMB 0.9 million for the fiscal year ended June 30, 2021 and 2022, respectively, which was due to deferred tax assets generated from net loss. 85 Net loss As a result of the foregoing, we recorded a net loss of RMB60.7 million for the fiscal year ended June 30, 2022 as compared to a net loss of RMB46.1 million for the fiscal year ended June 30, 2021.
Income Tax Benefit We incurred income tax of RMB8.6 million for the fiscal year ended June 30, 2023 which was due to the valuation allowance on the deferred tax assets generated from the previous year while incurred income tax benefit of RMB 0.9 million for the fiscal year ended June 30, 2022 primarily due to deferred tax assets generated from net loss. 89 Net loss As a result of the foregoing, we recorded a net loss of RMB43.6 million for the fiscal year ended June 30, 2023 as compared to a net loss of RMB60.7 million for the fiscal year ended June 30, 2022.
This reflected the net loss of RMB60.7 million (US$9.1 million), as adjusted for non-cash and non-operating items, primarily including (i) depreciation of property and equipment of RMB5.6 million (US$0.8 million); (ii) amortization of right-of-use assets of RMB13.6 million (US$2.0 million); and (iii) provision on uncertain tax liability of RMB1.4 million (US$0.2 million).
This reflected the net loss of RMB43.6 million (US$6.0 million), as adjusted for non-cash and non-operating items, primarily including (i) depreciation of property and equipment of RMB3.5 million (US$0.5 million); (ii) amortization of right-of-use assets of RMB8.8 million (US$1.2 million); (iii) allowance for deferred tax assets of RMB15.6 million (US$2.2 million); and (iv) gain on disposal of subsidiary of RMB13.7 million (US$1.9 million).
Our accounts receivable increased from RMB55.2 million as of June 30, 2021 to RMB59.5 million (US$8.9 million) as of June 30, 2022, primarily due to an increase in the commission receivable for our privately raised fund products. B.
Our accounts receivable decreased from RMB59.5 million as of June 30, 2022 to RMB37.6 million (US$5.2 million) as of June 30, 2023, primarily due to a decrease in the commission receivable for our privately raised fund products. B.
Investing Activities Net cash used in investing activities for the fiscal year ended June 30, 2022 was RMB10.6 million (US$1.6 million), which was primarily attributable to (i) purchase of short-term investment of RMB5.0 million (US$0.7 million), and (ii) purchase of property and equipment of RMB4.7 million (US$0.7 million).
Investing Activities Net cash used in investing activities for the fiscal year ended June 30, 2023 was RMB5.0 million (US$0.7 million), which was primarily attributable to (i) disposal of a subsidiary of RMB7.9 million (US$1.1 million), and (ii) proceeds from disposal of short-term investments of RMB4.8 million (US$0.7 million).
For the fiscal year ended June 30, 2020 2021 2022 RMB % RMB % RMB % US$ (in thousands, except for %) Commission cost Publicly raised fund products and exchange administered products 10,680 33.6 15,593 35.5 13,333 39.4 1,991 Gross-commission-based Privately raised fund products 14,658 46.2 8,686 19.7 8,839 26.1 1,319 Subtotal 25,338 79.8 24,279 55.2 22,172 65.5 3,310 Payment processing fees 393 1.2 2,082 4.7 4,094 12.1 611 Others 6,028 19.0 17,682 40.1 7,568 22.4 1,130 Total cost of sales 31,759 100.0 44,043 100.0 33,834 100.0 5,051 81 Selling Expenses Selling expenses primarily consist of (i) salaries and benefits of our in-house financial advisors, investment advisors and other sales and marketing employees, (ii) rewards to independent financial advisors and seed clients who introduced clients, and (iii) rental expenses.
For the fiscal year ended June 30, 2021 2022 2023 RMB % RMB % RMB % US$ (in thousands, except for %) Commission cost Publicly raised fund products and exchange administered products 15,593 35.5 13,333 39.4 7,683 47.6 1,060 Gross-commission-based Privately raised fund products 8,686 19.7 8,839 26.1 (63 ) * (0.4 ) (9 ) Subtotal 24,279 55.2 22,172 65.5 7,620 47.2 1,051 Payment processing fees 2,082 4.7 4,094 12.1 2,271 14.1 313 Others 17,682 40.1 7,568 22.4 6,245 38.7 861 Total cost of sales 44,043 100.0 33,834 100.0 16,136 100.0 2,225 * The negative amount was due to a reversal of cost of sales in previous year. 85 Selling Expenses Selling expenses primarily consist of (i) salaries and benefits of our in-house financial advisors, investment advisors and other sales and marketing employees, and (ii) rental and leasehold improvement expenses.
As of June 30, 2022, we had established cooperation with 135 wealth management studios. We continued to optimize our two organic sales channels. One sales channel is through collaboration with seed clients — existing clients who believe in our service capabilities — to actively market our products or services on social media platforms to their family, friends and acquaintances.
One sales channel is through collaboration with seed clients — existing clients who believe in our service capabilities — to actively market our products or services on social media platforms to their family, friends and acquaintances.
Revenue from consulting and other services increased by RMB10.2 million, or 886.1% from RMB1.1 million for the fiscal year ended June 30, 2021 to RMB11.3 million (US$1.7 million) million for the fiscal year ended June 30, 2022, primarily due to a significant increase in service fee from insurance consulting services. 84 Operating Costs and Expenses Our total operating costs and expenses decreased by RMB1.5 million, or 0.6%, from RMB264.4 million for the fiscal year ended June 30, 2021 to RMB262.8 million (US$39.2 million) for the fiscal year ended June 30, 2022.
Revenue from consulting and other services increased by RMB6.1 million, or 54.2% from RMB11.3 million for the fiscal year ended June 30, 2022 to RMB17.4 million (US$2.4 million) million for the fiscal year ended June 30, 2023, primarily due to an increase in service fee from trust consulting services and insurance services. 88 Operating Costs and Expenses Our total operating costs and expenses decreased by RMB89.6 million, or 34.1%, from RMB262.8 million for the fiscal year ended June 30, 2022 to RMB173.2 million (US$23.9 million) for the fiscal year ended June 30, 2023.
For the fiscal year ended June 30, 2022, our performance-based fees increased to RMB3.1 million (US$0.5 million) from RMB16,000 for the fiscal year ended June 30, 2021, primarily due to the better performance of the privately raised fund products that were liquidated in the fiscal year ended June 30, 2022.
For the fiscal year ended June 30, 2023, our performance-based fees decreased to RMB1.8 million (US$0.3 million) from RMB3.1 million for the fiscal year ended June 30, 2022, primarily due to that the privately raised fund products liquidated in the fiscal year ended June 30, 2023 did not reach the expected performance.
The number of our seed clients was approximately 26,000 as of June 30, 2022, while the number of active seed clients was 24,114, accounting for 93.8% of our total seed clients for the same period.
The number of our seed clients was approximately 23,000 as of June 30, 2023, while the number of active seed clients was 20,090, accounting for 87.6% of our total seed clients for the same period.
For the fiscal year ended June 30, 2020 2021 2022 RMB % RMB % RMB % US$ (in thousands, except for %) Net revenues 129,483 100.0 191,200 100.0 188,741 100.0 28,178 Total operating costs and expenses (183,007 ) (141.3 ) (264,382 ) (138.3 ) (262,844 ) (139.3 ) (39,241 ) Income (loss) from operations (53,524 ) (41.3 ) (73,182 ) (38.3 ) (74,103 ) (39.3 ) (11,063 ) Other income, net: 17,579 13.6 17,508 9.2 12,511 6.7 1,868 Income (loss) before income taxes (35,945 ) (27.7 ) (55,674 ) (29.1 ) (61,592 ) (32.6 ) (9,195 ) Income tax (expense) benefit 2,394 1.8 9,608 5.0 925 0.5 138 Net income (loss) (33,551 ) (25.9 ) (46,066 ) (24.1 ) (60,667 ) (32.1 ) (9,057 ) less: net income (loss) attributable to non-controlling interests (648 ) (0.5 ) 304 0.2 - - - Net income (loss) attributable to our shareholders (32,903 ) (25.4 ) (46,370 ) (24.3 ) (60,667 ) (32.1 ) (9,057 ) Year Ended June 30, 2022 Compared to Year Ended June 30, 2021 83 Net Revenues Our net revenues decreased by RMB2.5 million, or 1.3%, from RMB191.2 million for the fiscal year ended June 30, 2021 to RMB188.7 million (US$28.2 million) for the fiscal year ended June 30, 2022.
For the fiscal year ended June 30, 2021 2022 2023 RMB % RMB % RMB % US$ (in thousands, except for %) Net revenues 191,200 100.0 188,741 100.0 114,440 100.0 15,782 Total operating costs and expenses (264,382 ) (138.3 ) (262,844 ) (139.3 ) (173,244 ) (151.4 ) (23,891 ) Income (loss) from operations (73,182 ) (38.3 ) (74,103 ) (39.3 ) (58,804 ) (51.4 ) (8,109 ) Other income, net: 17,508 9.2 12,511 6.7 23,812 20.8 3,283 Income (loss) before income taxes (55,674 ) (29.1 ) (61,592 ) (32.6 ) (34,992 ) (30.6 ) (4,826 ) Income tax (expense) benefit 9,608 5.0 925 0.5 (8,585 ) (7.5 ) (1,184 ) Net income (loss) (46,066 ) (24.1 ) (60,667 ) (32.1 ) (43,577 ) (38.1 ) (6,010 ) less: net income (loss) attributable to non-controlling interests 304 0.2 - - - - - Net income (loss) attributable to our shareholders (46,370 ) (24.3 ) (60,667 ) (32.1 ) (43,577 ) (38.1 ) (6,010 ) Year Ended June 30, 2023 Compared to Year Ended June 30, 2022 87 Net Revenues Our net revenues decreased by RMB74.3 million, or 39.4%, from RMB188.7 million for the fiscal year ended June 30, 2022 to RMB114.4 million (US$15.8 million) for the fiscal year ended June 30, 2023.
Interest Incom e Our interest income decreased by 31.6% from RMB10.9 million for the fiscal year ended June 30, 2021 to RMB7.5 million (US$1.1 million) for the fiscal year ended June 30, 2022, primarily due to the decrease in interest income from short-term loans.
Interest Incom e Our interest income increased by 14.9% from RMB7.5 million for the fiscal year ended June 30, 2022 to RMB8.6 million (US$1.2 million) for the fiscal year ended June 30, 2023, primarily due to the increase in interest income from short-term loans to an unrelated third party with good cooperation history.
Our selling expenses slightly decreased by RMB3.4 million, or 2.6% from RMB130.1 million for the fiscal year ended June 30, 2021 to RMB126.7 million (US$18.9 million) for the fiscal year ended June 30, 2022, primarily due to (i) the decrease in incentives to seed clients and independent financial advisors for acquiring new clients as we now focus on exploring existing clients; partially offset by (i) an increase in salary; and (ii) an increase in rental expense.
Our selling expenses decreased by RMB62.0 million, or 48.9% from RMB126.7 million for the fiscal year ended June 30, 2022 to RMB64.7 million (US8.9 million) for the fiscal year ended June 30, 2023, primarily due to (i) decrease in labor cost related to the optimization of our sales and marketing team (ii) decrease in incentives to seed clients and independent financial advisors for acquiring new clients as we now focus on exploring existing clients; and (iii) decrease in rental expense.
For the year ended June 30, 2020 2021 2022 RMB % RMB % RMB % US$ (in thousands, except for %) Publicly raised fund products 6,851,092 80.6 17,052,377 94.3 13,070,694 92.8 1,951,403 Exchange administered products 504,204 5.9 - - - - - Privately raised fund products* 1,145,690 13.5 1,032,180 5.7 1,016,040 7.2 151,691 Total 8,500,986 100.0 18,084,557 100.0 14,086,734 100.0 2,103,094 * Privately raised fund products are all gross commission based funds.
For the year ended June 30, 2021 2022 2023 RMB % RMB % RMB % US$ (in thousands, except for %) Publicly raised fund products 17,052,377 94.3 13,070,694 92.8 11,122,785 98.2 1,533,902 Privately raised fund products* 1,032,180 5.7 1,016,040 7.2 203,750 1.8 28,098 Total 18,084,557 100.0 14,086,734 100.0 11,326,535 100.0 1,562,000 * Privately raised fund products are all gross commission-based funds.
As we had less other income, net for the fiscal year ended June 30, 2022, primarily due to less loan interests received from third-party companies, we incurred an increased net loss before income taxes (calculated as result from operations plus other income, net) of RMB61.6 million (US$9.2 million) for the fiscal year ended June 30, 2022, as compared to a net loss before income taxes of RMB55.7 million for the fiscal year ended June 30, 2021.
As we had more other income, net for the fiscal year ended June 30, 2023, primarily due to disposal of a subsidiary, we incurred a decreased net loss before income taxes (calculated as result from operations plus other income, net) of RMB35.0 million (US$4.8 million) for the fiscal year ended June 30, 2023, as compared to a net loss before income taxes of RMB61.6 million for the fiscal year ended June 30, 2022.
As we plan to fulfill our clients’ diversified needs in wealth management, we expect that we will generate an increasing proportion of our revenue from providing consulting service in connection with other types of wealth management products (such as insurance products and trust products). 80 Operating Costs and Expenses Our operating costs and expenses consist of (i) cost of sales, (ii) selling expenses, and (iii) general and administrative expenses.
Information on Our Group – B. Business Overview – Our Services – Asset Management Services”. Consulting and other Services As we plan to fulfill our clients’ diversified needs in wealth management, we expect that we will generate an increasing proportion of our revenue from providing consulting service in connection with other types of wealth management products, such as trust products.
Asset management services We commenced our asset management services by launching two FoFs in April 2018. As of June 30, 2022, we had 14 funds under management with AUM of RMB942.2 million (US$140.7 million), including four new funds managed by us in the fiscal year ended June 30, 2022.
Asset management services We commenced our asset management services by launching two FoFs in April 2018. As of June 30, 2023, we had ten funds under management with AUM of RMB541.9 million (US$74.7 million).
This amount was further adjusted by negative changes in working capital primarily including: (i) an increase of RMB4.4 million (US$0.7 million) in accounts receivable, primarily due to an increase in the commission receivable of privately raised fund products; (ii) a decrease of RMB12.6 million (US$1.9 million) in lease liabilities, primarily due to the payment of rents; and (iii) an increase of RMB6.2 million (US$0.9 million) in deferred tax assets generated from net loss.
This amount was further adjusted by negative changes in working capital primarily including (i) an increase of RMB8.2 million (US$1.1 million) in deferred tax assets generated from net loss; (ii) a decrease of RMB110.5 million (US$15.2 million) in investor’s deposit, primarily due to the decrease in the uninvested cash balances of our clients; and (iii) a decrease of RMB7.7 million (US$1.1 million) in lease liabilities, primarily due to the early termination of rents.
Capital Expenditures We made capital expenditures of RMB9.0 million and RMB5.6 million (US$0.8 million) for the fiscal years ended June 30, 2021 and 2022, respectively, which were primarily related to leasehold improvement and our purchase of office equipment, motor vehicles, software and our long-term prepayments for our purchase of software.
Capital Expenditures We made capital expenditures of RMB5.6 million and RMB1.9 million (US$0.3 million) for the fiscal years ended June 30, 2022 and 2023, respectively, which were primarily related to leasehold improvement and our purchase of office equipment and software. Holding Company Structure Puyi, Inc. is a holding company with no material operations of its own.
Our general and administrative expenses increased by RMB12.1 million or 13.4%, from RMB90.2 million for the fiscal year ended June 30, 2021 to RMB102.3 million (US$15.3 million) for the fiscal year ended June 30, 2022, primarily due to (i) increases in the general salary level of our employees; (ii) increase in rental expense; and (iii) increase in the expenses of upgrading our information technology infrastructure.
Our general and administrative expenses decreased by RMB9.9 million or 9.6%, from RMB102.3 million for the fiscal year ended June 30, 2022 to RMB92.4 million (US$12.7 million) for the fiscal year ended June 30, 2023, primarily due to (i) decrease in labor cost related to the optimization of our admin workforce; (ii) decrease in rental expense; and (iii) decrease in the expenses of upgrading our information technology infrastructure.
We expect our AUM will continue to increase as we will launch more funds under our management in the future. Consulting and other Services Revenue from consulting and other services primarily consists of service fee from facilitating of insurance products for an insurance agency partner and service fee from providing comprehensive trust consulting service.
Consulting and other Services Revenue from consulting and other services primarily consists of service fee from facilitating of insurance products for an insurance agency partner and service fee from providing comprehensive trust consulting service.
As a result, concerns on future uncertainty have led to Chinese investors’ significantly declined willingness to invest, which in turn resulted in a limited growth on the sales of our publicly raised fund and privately raised fund products. In addition, the COVID-19 pandemic continues to have a material adverse impact on our business expansion.
As a result, concerns on future uncertainty have led to Chinese investors’ significantly declined willingness to invest, which in turn resulted in a limited growth on the sales of our publicly raised fund and privately raised fund products. Against this backdrop, investors, particularly middle-class investors, are more inclined to products with lower volatility or more pronounced returns.
The negative changes were partially offset by (i) a decrease of RMB2.3 million (US$0.3 million) in other receivables and current assets, primarily due to a decrease in rental deposit; and (ii) an increase of RMB46.6 million (US$7.0 million) in investor’s deposit, primarily due to an increase in the uninvested cash balances of our clients.
The negative changes were partially offset by (i) a decrease of RMB21.9 million (US$3.0 million) in accounts receivable, primarily due to a decrease in the commission receivable of privately raised fund products; and (ii) a decrease of RMB5.9 million (US$0.8 million) in other receivables and current assets, primarily due to a decrease in rental deposit.
The information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of results that may be expected for any further period.
Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated. The information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report.
For the fiscal year ended June 30, 2020 2021 2022 RMB % RMB % RMB % US$ (in thousands, except for %) Publicly raised fund products 48,809 45.9 128,544 72.8 109,938 64.1 16,413 Exchange administered products 13,103 12.3 300 0.2 - - - Privately raised fund products Net commission based funds* 5,852 5.5 29,451 16.6 35,611 20.7 5,316 - Distribution commission 5,852 5.5 29,451 16.6 35,611 20.7 5,316 - Performance-based fees - - - - - - - Gross commission based funds 38,680 36.3 18,294 10.4 25,992 15.2 3,881 - Distribution commission 31,836 29.9 18,278 10.4 22,940 13.4 3,425 - Performance-based fees 6,844 6.4 16 0.0 3,052 1.8 456 Subtotal 44,532 41.8 47,745 27.0 61,603 35.9 9,197 Total 106,444 100.0 176,589 100.0 171,541 100.0 25,610 * Revenue from net commission based funds was from the existing funds. 79 The following table sets forth the transaction value of the different product categories under our wealth management services for the periods indicated.
For the fiscal year ended June 30, 2021 2022 2023 RMB % RMB % RMB % US$ (in thousands, except for %) Publicly raised fund products 128,544 72.8 109,938 64.1 69,273 72.9 9,553 Exchange administered products (1) 300 0.2 - - - - - Privately raised fund products Net commission-based funds (2) 29,451 16.6 35,611 20.7 9,705 10.2 1,338 - Distribution commission 29,451 16.6 35,611 20.7 9,705 10.2 1,338 - Performance-based fees - - - - - - - Gross commission-based funds 18,294 10.4 25,992 15.2 16,035 16.9 2,212 - Distribution commission 18,278 10.4 22,940 13.4 14,210 15.0 1,960 - Performance-based fees 16 0.0 3,052 1.8 1,825 1.9 252 Subtotal 47,745 27.0 61,603 35.9 25,740 27.1 3,550 Total 176,589 100.0 171,541 100.0 95,013 100.0 13,103 (1) We distributed exchange administered products in the past but ceased offering new exchange administered products since October 2019.
As Puyi HK is a holding company, it did not generate any assessable profits arising or derived from Hong Kong for the fiscal years ended June 30, 2020, 2021 and 2022, no provision for Hong Kong profits tax were made in these three fiscal years. 82 PRC The Group’s PRC subsidiaries and the consolidated VIEs incorporated in PRC are subject to the PRC Income Tax laws.
As Puyi HK was a holding company for the fiscal years ended June 30, 2020 and 2021, it did not generate any assessable profits arising or derived from Hong Kong. For the fiscal year ended June 30, 2023, Puyi HK generated a net taxable loss arising or derived from Hong Kong.
Our net revenues from privately raised fund products increased by RMB13.9 million, or 29%, from RMB47.7 million for the fiscal year ended June 30, 2021 to RMB61.6 million (US$9.2 million), primarily due to the increase in commission income (including management fee) of privately raised fund products and the increase in performance-based fees.
Our net revenues from privately raised fund products decreased by RMB35.9 million, or 58.2%, from RMB61.6 million for the fiscal year ended June 30, 2022 to RMB25.7 million (US$3.6 million).
Our cost of sales decreased by RMB10.2 million, or 23.2%, from RMB44.0 million for the fiscal year ended June 30, 2021 to RMB33.8 million (US$5.1 million) for the fiscal year ended June 30, 2022, primarily due to a decrease in transaction fees as a result of the decrease in the technical support service expense paid to a third-party service provider related to publicly raised fund products since we switched to use our own technology.
Our cost of sales decreased by RMB17.7 million, or 52.3%, from RMB33.8 million for the fiscal year ended June 30, 2022 to RMB16.1 million (US$2.2 million) for the fiscal year ended June 30, 2023, primarily due to a decrease in transaction value of publicly raised fund products and privately raised fund products.
Such increase was primarily due to the increase in commission income (including management fee) of privately raised fund products as well as the increase in performance-based fees. ● Exchange administered products . Historically, we also distributed exchange administered products. We ceased offering new exchange administered products since October 2019.
Such decrease was primarily due to the decrease in commission income (including management fee) of privately raised fund products as well as the decrease in performance-based fees. 81 Key Components of Results of Operations Net Revenues Our net revenues are total revenues net of VAT.
As we continue to expand our coverage network, we will increase our capacity and capability to cultivate and serve new clients, which may result in an increase in the number of new clients. Business Mix Other than the wealth management services we have provided since our inception, we also commenced asset management services in April 2018.
We believe that our financial advisor salesforce has and will continue to play a vital role in winning trust from and retaining existing clients as well as attracting new clients. Business Mix Other than the wealth management services we have provided since our inception, we also commenced asset management services in April 2018.
In July 2021, we started our trust consulting service and helping 86 affluent families to set up trust accounts with entrusted assets of RMB1.0 billion. We aspire to win trust from our clients by assisting them to successfully set up trust accounts so as to attract them to engage with us for more products and/or services.
By implementing the above measures, we believe we can better assist our clients in optimizing their asset allocation strategies, thereby enlarging our client base. Meanwhile, we aspire to win trust from our clients by assisting them to successfully set up trust accounts so as to attract them to engage with us for more products and/or services.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeRen received his bachelor’s degree in accounting from Southwestern University of Finance and Economics in 2005 and received his master’s degree in finance from Shandong University in 2011. Hu Anlin Mr. Hu has served as our Chief Financial Officer since July 2018 and our director since August 2018. Prior to joining us, Mr.
Biggest changeHe obtained a doctorate degree in finance from Renmin University of China in 2005. Hu Anlin Mr. Hu has served as our Chief Financial Officer since July 2018 and our director since August 2018. Prior to joining us, Mr. Hu served as department vice president at Fanhua Inc.
The functions and powers of our board of directors include, among others: The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the term of office of the officers; ● exercising the borrowing powers of our company and mortgaging the property of our company; and ● approving the transfer of shares in our company, including the registration of such shares in our share register. 94 Terms of Directors and Officers Our officers are elected by and serve at the discretion of the board of directors.
The functions and powers of our board of directors include, among others: The functions and powers of our board of directors include, among others: ● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ● declaring dividends and distributions; ● appointing officers and determining the term of office of the officers; ● exercising the borrowing powers of our company and mortgaging the property of our company; and ● approving the transfer of shares in our company, including the registration of such shares in our share register. 98 Terms of Directors and Officers Our officers are elected by and serve at the discretion of the board of directors.
Our PRC subsidiaries and the consolidated VIEs are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan. 92 2018 Share Incentive Plan Under the 2018 Share Incentive Plan, or the 2018 Plan, the maximum aggregate number of ordinary shares available for issuance will be 18,094,402 ordinary shares, equal to 20% of the total outstanding ordinary shares of our company.
Our PRC subsidiaries and the VIEs are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan. 96 2018 Share Incentive Plan Under the 2018 Share Incentive Plan, or the 2018 Plan, the maximum aggregate number of ordinary shares available for issuance will be 18,094,402 ordinary shares, equal to 20% of the total outstanding ordinary shares of our company.
As a foreign private issuer, we follow our home country practice and do not establish a compensation committee or a nominating/corporate governance committee. 93 Audit Committee . Our audit committee consists of three independent directors, Mr. Luo Jidong, Mr. Zhang Jianjun and Dr. Zhai Lihong, and is chaired by Mr. Luo Jidong.
As a foreign private issuer, we follow our home country practice and do not establish a compensation committee or a nominating/corporate governance committee. 97 Audit Committee . Our audit committee consists of three independent directors, Mr. Luo Jidong, Mr. Zhang Jianjun and Dr. Zhai Lihong, and is chaired by Mr. Luo Jidong.
Luo obtained a master’s degree in economics from Southwestern University of Finance of Economics in 1996 and a PhD degree in economics from Southwestern University of Finance and Economics in 2010. 91 Zhang Jianjun Mr. Zhang has been our independent director since March 2019. Mr.
Luo obtained a master’s degree in economics from Southwestern University of Finance of Economics in 1996 and a PhD degree in economics from Southwestern University of Finance and Economics in 2010. 95 Zhang Jianjun Mr. Zhang has been our independent director since March 2019. Mr.
We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes. 95 E. Share Ownership See Item 7 below.
We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes. 99 E. Share Ownership See Item 7 below.
For the fiscal year ended June 30, 2022, we paid an aggregate of approximately RMB3.1 million (US$0.5 million) in cash to our executive officers and an aggregate of approximately RMB0.9 million in cash (US$130,000) to our independent directors.
For the fiscal year ended June 30, 2023, we paid an aggregate of approximately RMB3.2 million (US$0.4 million) in cash to our executive officers and an aggregate of approximately RMB0.9 million in cash (US$130,000) to our independent directors.
Hu has been our director since August 2018. Mr. Hu was the chairman of the board of Fanhua Inc. (NASDAQ: CISG) from 1998 to 2017 and subsequently served as the director of this company from 2017 to 2021. From 1998 to October 2011, Mr. Hu served as the chief executive officer of Fanhua Inc.
Hu was the chairman of the board of Fanhua Inc. (NASDAQ: CISG) from 1998 to 2017 and subsequently served as the director of this company from 2017 to 2021. From 1998 to October 2011, Mr. Hu served as the chief executive officer of Fanhua Inc.
Board Diversity Board Diversity Matrix (As of August 31, 2022) Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Director 6 Part I: Gender Identity Female Male Non-Binary Did not Disclose Gender Directors - 6 - - Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction - LGBTQ+ - Did Not Disclose Demographic Background - D.
Board Diversity Board Diversity Matrix (As of August 31, 2023) Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Director 7 Part I: Gender Identity Female Male Non-Binary Did not Disclose Gender Directors - 7 - - Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction - LGBTQ+ - Did Not Disclose Demographic Background - The membership of our Board currently does not include female directors.
Hu served as department vice president at Fanhua Inc. (NASDAQ: FANH) from September 2013 to June 2018 and served as financial manager, audit manager, department director and financial controller in this company from October 2001 to August 2013. Mr. Hu received his bachelor’s degree in accounting from Zhengzhou University of Aeronautics in July 2001. Hu Yinan Mr.
(NASDAQ: FANH) from September 2013 to June 2018 and served as financial manager, audit manager, department director and financial controller in this company from October 2001 to August 2013. Mr. Hu received his bachelor’s degree in accounting from Zhengzhou University of Aeronautics in July 2001. Hu Yinan Mr. Hu has been our director since August 2018. Mr.
Functional Area Number of employees Percentage of total Investment advisory 289 52.4 % In-house financial advisory 83 15.0 % Management and administrative 56 10.1 % Technical department 87 15.8 % Risk management 7 1.3 % Asset management 30 5.4 % Total 552 100.0 % As required by PRC regulations, we participate in various employee social security plans that are organized by municipal and provincial governments, including pension, unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance.
Functional Area Number of employees Percentage of total Investment advisory 166 57.7 % Management and administrative 33 11.5 % Technical department 64 22.2 % Risk management 5 1.7 % Asset management 20 6.9 % Total 288 100.0 % As required by PRC regulations, we participate in various employee social security plans that are organized by municipal and provincial governments, including pension, unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance.
Name Age Position Ren Yong 39 Chairman of the board, Chief Executive Officer Hu Anlin 41 Director, Chief Financial Officer and Vice President Hu Yinan 57 Director Luo Jidong 69 Independent Director Zhang Jianjun 65 Independent Director Zhai Lihong 53 Independent Director Ren Yong Mr.
Name Age Position Ren Yong 40 Chairman of the board, Chief Executive Officer Kong Youjie 59 Co-chairman of the board Hu Anlin 42 Director, Chief Financial Officer and Vice President Hu Yinan 58 Director Luo Jidong 70 Independent Director Zhang Jianjun 66 Independent Director Zhai Lihong 54 Independent Director Ren Yong Mr.
Employees We had 716 and 552 employees as of June 30, 2021 and 2022, respectively. The following table sets forth the number of our employees by function as of June 30, 2022.
The following table sets forth the number of our employees by function as of June 30, 2023.
Added
Ren received his bachelor’s degree in accounting from Southwestern University of Finance and Economics in 2005 and received his master’s degree in finance from Shandong University in 2011. Kong Youjie Mr. Kong has served as our co-chairman of the Board since October 2022. He has more than 30 years of working experience in the financial industry in China.
Added
Prior to joining us, Mr. Kong worked at the People’s Bank of China and the China Insurance Regulatory Commission, as well as multiple security firms, fund management companies and insurance companies. Since 2005, he has successively served as vice general manager, general manager, director, or chairman of the board in several well-known financial institutions.
Added
But we are in the process of actively seeking female directors to refresh the composition of our Board, and adding new members to further strengthen the Board’s expertise and skill set, and to introduce fresh perspectives. D. Employees We had 288 and 552 employees as of June 30, 2023 and 2022, respectively.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeMr. Jianguo Cheng is the sole director of Advance Tycoon Limited. The disposal of ordinary shares held by Advance Tycoon Limited is decided by 61 individuals, who entrusted their voting power of such ordinary shares to Mr. Cheng except for the matters related to share disposal. Mr.
Biggest changeAdvance Tycoon Limited is a BVI business company incorporated with limited liability in the British Virgin Islands. Mr. Jianguo Cheng is the sole director of Advance Tycoon Limited. The disposal of ordinary shares held by Advance Tycoon Limited is decided by 61 individuals, who entrusted their voting power of such ordinary shares to Mr.
Such employment agreements also contain a non-compete clause for a duration of 24 months following their employment, which prohibited the executive officers render services to or for, directly or indirectly, our competitors. 97 Share Incentive Plan See “Directors, Senior Management and Employees — B.
Such employment agreements also contain a non-compete clause for a duration of 24 months following their employment, which prohibited the executive officers render services to or for, directly or indirectly, our competitors. 101 Share Incentive Plan See “Directors, Senior Management and Employees — B.
The disposal of ordinary shares held by Danica Surge Limited are decided by 82 individuals, all of which are our current employees, who entrusted their voting power of such ordinary shares to Ms. Liu except for the matters related to share disposal. Ms.
The disposal of ordinary shares held by Danica Surge Limited are decided by 82 individuals, some of which are our current employees, who entrusted their voting power of such ordinary shares to Ms. Liu except for the matters related to share disposal. Ms.
The registered address of Worldwide Success Group Limited is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. (3) Represents 8,916,669 ordinary shares. Winter Dazzle Limited is a limited liability company incorporated in the British Virgin Islands. Mr. Lin Yang is the sole director of Winter Dazzle Limited.
The registered address of Worldwide Success Group Limited is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. (3) Represents 8,916,669 ordinary shares. Winter Dazzle Limited is a BVI business company incorporated with limited liability in the British Virgin Islands. Mr. Lin Yang is the sole director of Winter Dazzle Limited.
Worldwide Success Group Limited is a limited liability company incorporated in the British Virgin Islands and is wholly owned by Mr. Yu Haifeng. (2) Represents 40,240,500 ordinary shares. Worldwide Success Group Limited is a limited liability company incorporated in the British Virgin Islands and is wholly owned by Mr. Yu Haifeng.
Worldwide Success Group Limited is a BVI business company incorporated with limited liability in the British Virgin Islands and is wholly owned by Mr. Yu Haifeng. (2) Represents 40,240,500 ordinary shares. Worldwide Success Group Limited is a BVI business company incorporated with limited liability in the British Virgin Islands and is wholly owned by Mr. Yu Haifeng.
The registered address of Winter Dazzle Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. 96 (4) Represents 17,670,666 ordinary shares. Danica Surge Limited is a limited liability company incorporated in the British Virgin Islands. Ms. Jia Liu is the sole director of Danica Surge Limited.
The registered address of Winter Dazzle Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. 100 (4) Represents 17,670,666 ordinary shares. Danica Surge Limited is a BVI business company incorporated with limited liability in the British Virgin Islands. Ms. Jia Liu is the sole director of Danica Surge Limited.
Liu and the 82 individuals are deemed as the beneficial owners of ordinary shares held by Danica Surge Limited. The registered address of Danica Surge Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. (5) Represents 12,404,165 ordinary shares. Advance Tycoon Limited is a limited liability company incorporated in the British Virgin Islands.
Liu and the 82 individuals are deemed as the beneficial owners of ordinary shares held by Danica Surge Limited. The registered address of Danica Surge Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. (5) Represents 12,404,165 ordinary shares.
Cheng and the 61 individuals are deemed as the beneficial owners of ordinary shares held by Advance Tycoon Limited. The registered address of Advance Tycoon Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.
Cheng except for the matters related to share disposal. Mr. Cheng and the 61 individuals are deemed as the beneficial owners of ordinary shares held by Advance Tycoon Limited. The registered address of Advance Tycoon Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.