What changed in CNFinance Holdings Ltd.'s 2023 10-K compared to 2022?

Across the narrative sections we track, CNFinance Holdings Ltd. (CNF) added 666 paragraphs, removed 680, and edited 537 between the 2022 and 2023 10-K filings. The biggest movers are Item 3. Legal Proceedings (+223/−247), Item 5. Market for Registrant's Common Equity (+201/−194), Item 4. Mine Safety Disclosures (+199/−195).

What changed in CNFinance Holdings Ltd.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 3 new/edited paragraphs and 2 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Did CNFinance Holdings Ltd.'s Legal Proceedings (Item 3) change in 2023?

Item 3 shows 223 added/edited paragraphs and 247 removed paragraphs — usually indicating new litigation disclosed or settled cases removed.

Where does this CNF 10-K diff come from?

The source filings are CNFinance Holdings Ltd.'s official 2022 and 2023 Form 20-F annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

CNFinance Holdings Ltd.CNF财报

NYSE · 金融 · 金融服务

CNFinance Holdings Ltd is a China-based financial services provider focused on serving micro, small and medium enterprises and individual customers across tier 2 to 4 Chinese cities. It offers secured lending products, credit evaluation, and risk management services, mainly operating in the residential property-backed lending segment for groups with limited access to traditional banking services.

What changed in CNFinance Holdings Ltd.'s 20-F — 2022 vs 2023

Top changes in CNFinance Holdings Ltd.'s 2023 20-F

666 paragraphs added · 680 removed · 537 edited across 5 sections

Item 3. Legal Proceedings+223 / −247 · 194 edited
Item 5. Market for Registrant's Common Equity+201 / −194 · 137 edited
Item 4. Mine Safety Disclosures+199 / −195 · 167 edited
Item 6. [Reserved]+40 / −42 · 37 edited
Item 7. Management's Discussion & Analysis+3 / −2 · 2 edited

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

194 edited+29 added−53 removed605 unchanged

2022 filing

2023 filing

On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.

However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC.

The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a Commission-Identified Issuer and risk of delisting could continue to adversely affect the trading price of our securities.

Risk Factors—Risks Related to Doing Business in China—Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past.

However, the application of the M&A Rules remains unclear.

These opinions call for strengthened regulation over illegal securities activities and supervision on overseas listings by China-based companies and propose to take effective measures, such as promoting the development of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.

According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.

If a company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, it may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

The Overseas Listing Trial Measures also provide that a company in mainland China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market.

On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies and held a press conference for the release of the Overseas Listing Trial Measures, which, among others, clarified that the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these companies should complete filing with the CSRC for their financing activities in accordance with the Overseas Listing Trial Measures.

If our company is deemed to be a CII operator or a network platform operator under such rules, we could be subject to cybersecurity review by the CAC and other relevant PRC regulatory authorities and be required to change our existing practices in data privacy and cybersecurity matters at substantial costs.

During such cybersecurity review, we may be required to stop providing services to our customers.

In any such event, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from future offerings of securities overseas into the PRC or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as our ability to complete future offerings of securities overseas or to maintain the listing status of our ADSs.

We also cannot rule out the possibility that certain of our customers may be deemed as CII operators, in which case our products or services or data processing activities, if being deemed as related to national security, will need to be submitted for cybersecurity review before we can enter into agreements with such customers, and before the conclusion of such procedure, the customers will not be allowed to use our products or services.

If the reviewing authority considers that the use of our services by certain of our customers involves risk of disruption, is vulnerable to external attacks, or may negatively affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers, which could have a material adverse effect on our results of operations and prospects.

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law of the People’s Republic of China (“PRC Foreign Investment Law”),and the State Council promulgated the Implementing Regulations to the PRC Foreign Investment Law (“Implementing Regulations”) on December 26, 2019, both of which came into effect on January 1, 2020.

If a foreign investment enterprise (the “FIE”) proposes to conduct business in an industry subject to foreign investment “restrictions” in the negative list, the FIE must meet certain conditions under the negative list before being established.

If an FIE proposes to conduct business in an industry subject to foreign investment “prohibitions” in the “negative list,” it must not engage in the business. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special Administrative Region shall be governed by the PRC Foreign Investment Law and its Implementing Regulations.

On December 27, 2021, the NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Access of Foreign Investments (2021 Edition), as came into effect on January 1, 2022, according to which the industry of loan service has not been subject to foreign investment “restrictions” or “prohibitions” in the Negative List.

Our PRC legal advisor, Merits & Tree Law Offices, advises us that according to the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further foreign opening and economic and social development, adjust the Negative List where appropriate.

Therefore, if the industry of loan service is subject to the foreign investment restrictions or prohibitions under the negative list issued subsequently, our failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance, and business operations.

Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor, and as a result, U.S. national securities exchanges, such as the NYSE, may determine to delist our securities.

More recently, as part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular China’s, the United States enacted the Holding Foreign Companies Accountable Act, or the HFCAA, in December 2020.

Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor for two consecutive years.

On December 16, 2021, the PCAOB issued the HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, or the 2021 Determinations, including our auditor.

The inability of the PCAOB to conduct inspections in the past also deprived our investors of the benefits of such inspections. On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly.

As of the date of this annual report, we have not been subject to any fines or penalties under the aforementioned regulations with respect to our collaboration model with sales partners.

If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, results of operations and financial condition. We are involved in various legal proceedings in the ordinary course of business from time to time.

We are involved in legal proceedings in the ordinary course of our business from time to time. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, results of operations and financial condition. We are involved in various legal proceedings in the ordinary course of business from time to time.

Service of court documents on a Cayman Islands company can be effected by serving the documents at the Company’s registered office and it may be possible to enforce foreign judgments in the Cayman Islands against a Cayman Islands company, subject to some exceptions.

The incurrence of debt could have a variety of negative effects, including: ● default and foreclosure on our assets if our operating income is insufficient to repay debt obligations; ● acceleration of obligations to repay the indebtedness (or other outstanding indebtedness), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; ● our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; ● diverting a substantial portion of cash flow to pay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes; and ● creating potential limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate.

The incurrence of debt could have a variety of negative effects, including: ● default and foreclosure on our assets if our operating income is insufficient to repay debt obligations; ● acceleration of obligations to repay the indebtedness (or other outstanding indebtedness), even if we make all principal and interest payments when due, if we breach any covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; 41 ● our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; ● diverting a substantial portion of cash flow to pay principal and interest on such debt, which would reduce the funds available for expenses, capital expenditures, acquisitions and other general corporate purposes; and ● creating potential limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate.

Based on the foregoing, our ADS holders and shareholders (i) generally are permitted to apply the Active Financing Exception for a taxable year ending on or before December 31, 2020 (provided that we in fact satisfied the exception’s conditions for the relevant year), (ii) should expect that the Internal Revenue Service will not agree with a return positon that applies the Active Financing Exception for any subsequent taxable year, and (iii) should be aware that if the 2020 Proposed Regulations are finalized in their current form they will not be able to take the position that the Active Financing Exception applies for any taxable year to which the regulations will apply.

Based on the foregoing, our ADS holders and shareholders (i) generally are permitted to apply the Active Financing Exception for a taxable year ending on or before December 31, 2020 (provided that we in fact satisfied the exception’s conditions for the relevant year), (ii) should expect that the Internal Revenue Service will not agree with a return position that applies the Active Financing Exception for any subsequent taxable year, and (iii) should be aware that if the 2020 Proposed Regulations are finalized in their current form they generally will not be able to take the position that the Active Financing Exception applies for any taxable year to which the regulations will apply.

For risks related to the COVID-19, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.” In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities.

For risks related to the COVID-19, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.” 46 In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities.

If such a determination is made, the courts of the Cayman Islands will not recognize or enforce a judgment predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are taxes, fines or penal in nature, or otherwise contrary to public policy, including punitive damages.

If such a determination is made, the courts of the Cayman Islands will not recognize or enforce a judgment predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are taxes, fiscal, fines or penal in nature, or otherwise contrary to public policy, including punitive damages.

These uncertainties may impede our ability to enforce contracts in China and could materially and adversely affect our business and results of operations. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect.

These uncertainties may impede our ability to enforce contracts in China and could materially and adversely affect our business and results of operations. 9 Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect.

Unless we are able to control our labor costs or pass on these increased labor costs to borrowers by increasing the fees of our services, our financial condition and results of operations may be adversely affected. 35 If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.

Unless we are able to control our labor costs or pass on these increased labor costs to borrowers by increasing the fees of our services, our financial condition and results of operations may be adversely affected. If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.

The enforceability of a contractual predispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement.

The enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement.

Reason for the Offer and Use of Proceeds Not applicable. 4 3.D. Risk Factors The PRC government has significant authority to exert influence on the ability of a company based in China, such as ours, to conduct its business, accept foreign investments or list on U.S. or other foreign exchanges.

Reason for the Offer and Use of Proceeds Not applicable. 3.D. Risk Factors The PRC government has significant authority to exert influence on the ability of a company based in China, such as ours, to conduct its business, accept foreign investments or list on U.S. or other foreign exchanges.

Any of these occurrences could result in our diminished ability to operate our business, potential liability to third parties, inability to attract third parties, reputational damage, regulatory intervention or financial harm, which could negatively impact our business, financial condition and results of operations. If we do not compete effectively in our target markets, our operating results could be harmed.

Any of these occurrences could result in our diminished ability to operate our business, potential liability to third parties, inability to attract third parties, reputational damage, regulatory intervention or financial harm, which could negatively impact our business, financial condition and results of operations. 39 If we do not compete effectively in our target markets, our operating results could be harmed.

However, there can be no assurance that we would be able to utilize such additional resources in a cost-efficient manner. 24 Moreover, Circular 141 provides that all types of institutions or entrusted third-party institutions shall not collect loans through violence, intimidation, insult, slander, harassment, etc.

However, there can be no assurance that we would be able to utilize such additional resources in a cost-efficient manner. Moreover, Circular 141 provides that all types of institutions or entrusted third-party institutions shall not collect loans through violence, intimidation, insult, slander, harassment, etc.

If the adjustments and the rectification cannot be completed within the prescribed period, we may face administrative penalties such as being banned in accordance with the law, confiscation of illegal gains, fines, etc. If we are unable to maintain relationships with our third-party service providers, our business will suffer.

If the adjustments and the rectification cannot be completed within the prescribed period, we may face administrative penalties such as being banned in accordance with the law, confiscation of illegal gains, fines, etc. 38 If we are unable to maintain relationships with our third-party service providers, our business will suffer.

If we are treated as owning only the subordinated units and the portion of the trust plans’ loans attributable thereto, our PFIC status for any taxable year may depend on the relative values of the loans we are treated as owning and our other passive assets on the one hand, and the value of our goodwill (to the extent attributable to the services we provide) and fee receivables on the other hand.

If we are treated as owning only the subordinated units and the portion of the trust plans’ loans attributable thereto, our PFIC status for any taxable year may depend on the relative values of the loans we are treated as owning and our other passive assets on the one hand, and the value of our goodwill and other intangible assets (to the extent attributable to the services we provide) and fee receivables on the other hand.

We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses.

We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. 44 We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses.

Strategic alliances will also divert the management’s time and resources from our normal operations and we may have to incur unexpected liabilities or expenses. 38 Risks Related to Our American Depositary Shares The trading price of our ADSs may be volatile, which could result in substantial losses to investors.

Strategic alliances will also divert the management’s time and resources from our normal operations and we may have to incur unexpected liabilities or expenses. Risks Related to Our American Depositary Shares The trading price of our ADSs may be volatile, which could result in substantial losses to investors.

Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on Stock Incentive Plans.” 14 If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders.

Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on Stock Incentive Plans.” If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders.

We may from time to time introduce new loan services and products, make adjustments to our existing loan facilitation services and products and our risk management system, or make adjustments to our business operations in general. The regulatory framework and market condition for China’s home equity loan market is evolving and may remain uncertain for the foreseeable future.

We may from time to time introduce new loan services and products, make adjustments to our existing loan facilitation services and products and our risk management system, or make adjustments to our business operations in general. 23 The regulatory framework and market condition for China’s home equity loan market is evolving and may remain uncertain for the foreseeable future.

If national security will be affected or may be affected, the CII operator shall apply to the CRO for a cybersecurity review. 10 Given the nature of our business and as advised by our PRC legal advisor, Merits & Tree Law Offices, we do not believe that our company is either a “CII operator” or a “network platform operator” who possesses personal information of more than one million users, and therefore are not required to file for a cybersecurity review under the new measures, although we cannot guarantee that the relevant PRC regulatory authority will agree with such conclusion reached.

If national security will be affected or may be affected, the CII operator shall apply to the CRO for a cybersecurity review. 13 Given the nature of our business and as advised by our PRC legal advisor, Merits & Tree Law Offices, we do not believe that our company is either a “CII operator” or a “network platform operator” who possesses personal information of more than one million users, and therefore are not required to file for a cybersecurity review under the new measures, although we cannot guarantee that the relevant PRC regulatory authority will agree with such conclusion reached.

As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 15 Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past.

As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 20 Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past.

If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. 34 We may have exposure to greater than anticipated tax liabilities.

If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. We may have exposure to greater than anticipated tax liabilities.

In addition, there is no guarantee with regard to Cayman Islands law that a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature.

If such situations occur, our business, financial condition, results of operations and prospects would be materially and adversely affected. 22 We lack product and business diversification. Accordingly, our future operating income and earnings are more susceptible to fluctuations than a more diversified company.

If such situations occur, our business, financial condition, results of operations and prospects would be materially and adversely affected. We lack product and business diversification. Accordingly, our future operating income and earnings are more susceptible to fluctuations than a more diversified company.

If any of the foregoing were to occur, our results of operations and financial condition could be materially and adversely affected. 27 We are subject to credit cycle and the risk of deterioration of credit profiles of borrowers. Our business is subject to the credit cycle associated with the volatility of the general economy.

If any of the foregoing were to occur, our results of operations and financial condition could be materially and adversely affected. We are subject to credit cycle and the risk of deterioration of credit profiles of borrowers. Our business is subject to the credit cycle associated with the volatility of the general economy.

Therefore, our reputation, and as a result, our business and results of operations could be materially and adversely affected. Our business operations may be negatively impacted if borrowers use loan proceeds to engage in activities prohibited or not encouraged by regulators.

Therefore, our reputation, and as a result, our business and results of operations could be materially and adversely affected. 34 Our business operations may be negatively impacted if borrowers use loan proceeds to engage in activities prohibited or not encouraged by regulators.

Passive income generally includes interest, income equivalent to interest, rents, dividends, royalties and gains from financial investments. It is not entirely clear how the PFIC rules should apply to a company with a business such as ours.

Passive income generally includes interest, income equivalent to interest, rents, dividends, royalties and gains from financial investments. 52 It is not entirely clear how the PFIC rules should apply to a company with a business such as ours.

Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand and adversely impact our business. 33 We may be sued by third parties for alleged infringement of their proprietary rights, which could harm our business.

Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand and adversely impact our business. We may be sued by third parties for alleged infringement of their proprietary rights, which could harm our business.

Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. 43 You may be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary.

Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. You may be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary.

Furthermore, such trading prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition and prospects. 16 Proceedings instituted by the SEC against Chinese affiliates of the “big four” accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act.

Furthermore, such trading prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition and prospects. 21 Proceedings instituted by the SEC against Chinese affiliates of the “big four” accounting firms, including our independent registered public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act.

For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures.

For example, as a result of becoming a public company, we need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures.

Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and any investment in the ADSs could be greatly reduced or even rendered worthless. 40 Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment.

Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and any investment in the ADSs could be greatly reduced or even rendered worthless. 48 Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment.

Although our PFIC status for any taxable year is not entirely clear, based on the composition of our income and assets and the manner in which we currently operate our business, we were likely a PFIC for our 2022 and prior taxable years, and will likely be a PFIC for our 2023 taxable year and future taxable years, subject to the discussion in the subsequent paragraph regarding the Active Financing Exception, as defined below.

Although our PFIC status for any taxable year is not entirely clear, based on the composition of our income and assets and the manner in which we currently operate our business, we were likely a PFIC for our 2023 and prior taxable years, and will likely be a PFIC for our 2024 taxable year and future taxable years, subject to the discussion in the subsequent paragraph regarding the Active Financing Exception, as defined below.

In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar could materially and adversely affect the price of our ADSs in U.S. dollars without giving effect to any underlying change in our business or results of operations. 12 Governmental control of currency conversion may limit our ability to utilize our operating income effectively and affect the value of your investment.

In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar could materially and adversely affect the price of our ADSs in U.S. dollars without giving effect to any underlying change in our business or results of operations. 16 Governmental control of currency conversion may limit our ability to utilize our operating income effectively and affect the value of your investment.

There is no assurance that the list of goods impacted by additional tariffs will not be expanded or the tariffs will not be increased materially. 7 There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China.

There is no assurance that the list of goods impacted by additional tariffs will not be expanded or the tariffs will not be increased materially. 8 There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China.

If the marketing activities of us or our sales partners are found to be in violation of the above notice, we may be penalized by relevant authorities and our marketing activities may be suspended, which could adversely affect our business operations. 30 The collecting, storing and sharing of information among us, our sales partners and the trust companies might face compliance risks.

If the marketing activities of us or our sales partners are found to be in violation of the above notice, we may be penalized by relevant authorities and our marketing activities may be suspended, which could adversely affect our business operations. 37 The collecting, storing and sharing of information among us, our sales partners and the trust companies might face compliance risks.

Description of Securities Other Than Equity Securities-American Depositary Shares” for more information. 41 ADSs 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.

Description of Securities Other Than Equity Securities-American Depositary Shares” for more information. 49 ADSs 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.

Under the collaboration model, sales partners contribute an amount equal to 10% to 25% of the loans issued to the borrowers introduced by them (such contribution, the “Credit Risk Mitigation Position,” or “CRMP”) and will receive incentive fees upon a pre-agreed schedule and other conditions.

Under the collaboration model, sales partners contribute an amount equal to 5% to 25% of the loans issued to the borrowers introduced by them (such contribution, the “Credit Risk Mitigation Position,” or “CRMP”) and will receive incentive fees upon a pre-agreed schedule and other conditions.

Therefore, our PFIC status for any taxable year may depend on the relative amounts of our fee and interest income (which may be less than the amount of interest income shown on our income statement, if we are treated as owning only a portion of the trusts’ loans).

Therefore, our PFIC status for any taxable year may depend on the relative amounts of our fee and interest income (which as discussed above may be less than the amount of interest income shown on our income statement, if we are treated as owning only a portion of the trusts’ loans).

Under the 2018 Plan, the maximum aggregate number of shares which may be issued pursuant to all awards is 307,608,500 shares. As of the date of this annual report, options to purchase a total of 307,608,500 ordinary shares were outstanding under the 2018 Plan.

Under the 2018 Plan, the maximum aggregate number of shares which may be issued pursuant to all awards is 307,608,510 shares. As of the date of this annual report, options to purchase a total of 307,608,510 ordinary shares were outstanding under the 2018 Plan.

According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

Risk Factors—Risks Related to Doing Business in China.” Below please find a summary of the principal risks we face, organized under relevant headings. 5 Risks Related to Doing Business in China ● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations in China could adversely affect us and limit the legal protections available to you and us. ● The PRC government has significant oversight over the conduct of our business and as such may influence our operations, which may potentially result in a material adverse effect on our operations. ● The oversight of the China Securities Regulatory Commission, Cybersecurity Administration of China or other governmental authorities may adversely affect our business and their approval may be required in connection with future offerings of securities overseas or to maintain the listing status of our ADSs, and, if required, we cannot predict whether we will be able to obtain such approval. ● We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. ● PRC regulations of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of our public offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. ● The collaboration model we have in place with our sales partners to acquire borrowers might be regarded as financial marketing and might face compliance risks. ● Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past.

Risks Related to Doing Business in China ● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations in China could adversely affect us and limit the legal protections available to you and us. ● The PRC government has significant oversight over the conduct of our business and as such may influence our operations, which may potentially result in a material adverse effect on our operations. ● The oversight of the China Securities Regulatory Commission, Cybersecurity Administration of China or other governmental authorities may adversely affect our business and their approval may be required in connection with future offerings of securities overseas or to maintain the listing status of our ADSs, and, if required, we cannot predict whether we will be able to obtain such approval. ● We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. ● PRC regulations of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of our public offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. 6 ● The collaboration model we have in place with our sales partners to acquire borrowers might be regarded as financial marketing and might face compliance risks. ● Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past.

Business Overview—Our Products—Funding Sources.” In 2020, 2021 and 2022, we transferred our right of earnings in subordinated units to a certain private equity fund and to a certain third party. Our financing costs under such repurchase arrangement ranged from 10.5% to 13.8% per annum of the transfer prices in 2020, 2021 and 2022.

Business Overview—Our Products—Funding Sources.” In 2021, 2022 and 2023, we transferred our right of earnings in subordinated units to a certain private equity fund and to a certain third party. Our financing costs under such repurchase arrangement ranged from 10.0% to 13.8% per annum of the transfer prices in 2021, 2022 and 2023.

Among the loans originated through our trust lending model, 69.3%, 62.1% and 62.3%, were funded through FOTIC trust plans in 2020, 2021 and 2022, respectively. We generally acquire borrowers through the collaboration model where we collaborate with sales partners who introduce borrowers and receive incentives. See “Item 4. Information on the Company—B.

Among the loans originated through our trust lending model, 62.1%, 62.3% and 55.8% were funded through FOTIC trust plans in 2021, 2022 and 2023, respectively. We generally acquire borrowers through the collaboration model where we collaborate with sales partners who introduce borrowers and receive incentives. See “Item 4. Information on the Company—B.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, require an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission (“CSRC”) prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, require an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

In 2020, 2021 and 2022, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.

In 2021, 2022 and 2023, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.

If any of the funding sources is deemed to violate the PRC laws and regulations, we may need to secure new funding, failure of which may result in material and adverse impact on our business, financial condition, results of operations and prospects.” 19 As our business grows, we may need to obtain new funding sources or require current funding partners to increase the amount of funding provided.

If any of the funding sources is deemed to violate the PRC laws and regulations, we may need to secure new funding, failure of which may result in material and adverse impact on our business, financial condition, results of operations and prospects.” As our business grows, we may need to obtain new funding sources or require current funding partners to increase the amount of funding provided, such as collaborating with commercial banks.

The JOBS Act also permits an emerging growth company to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies.

The JOBS Act also permits an emerging growth company to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have elected to “opt out” of this provision and, as a result, we have been complying with new or revised accounting standards as required when they were adopted for public companies.

Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed.

Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became effective in 2008 and was amended on December 29, 2017, requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed.

These risks and challenges include, among other things, our ability to: ● offer customized and competitive loan services and products; ● increase the utilization of our loan services by existing borrowers as well as new borrowers; ● maintain low delinquency ratio of loans originated by us; ● achieve an effective and efficient collection and foreclosure process to assist our trust company partners to recover delinquent loans in the event of loan default; ● develop sufficient, diversified, cost-efficient and reputable funding sources; ● broaden our prospective borrower base; ● navigate through a complex and evolving regulatory environment; ● improve our operational efficiency; ● promote standardized and disciplined operational procedures in local offices; ● attract, retain and motivate talented employees to support our business growth; ● maintain and enhance relationships with our business partners; ● enhance our technology infrastructure to support the growth of our business and maintain the security of our system and the confidentiality of the information provided and utilized across our system; ● navigate economic condition and fluctuation; and ● defend ourselves against legal and regulatory actions. 18 Our credit strengthening services to the trust plans as the subordinated unit holder might be subject to challenges by relevant regulatory authorities, and we may potentially be required to obtain licenses.

These risks and challenges include, among other things, our ability to: ● offer customized and competitive loan services and products; ● increase the utilization of our loan services by existing borrowers as well as new borrowers; ● maintain low delinquency ratio of loans originated by us; ● achieve an effective and efficient collection and foreclosure process to assist our trust company partners to recover delinquent loans in the event of loan default; 24 ● develop sufficient, diversified, cost-efficient and reputable funding sources; ● broaden our prospective borrower base; ● navigate through a complex and evolving regulatory environment; ● improve our operational efficiency; ● promote standardized and disciplined operational procedures in local offices; ● attract, retain and motivate talented employees to support our business growth; ● maintain and enhance relationships with our business partners; ● enhance our technology infrastructure to support the growth of our business and maintain the security of our system and the confidentiality of the information provided and utilized across our system; ● navigate economic condition and fluctuation; and ● defend ourselves against legal and regulatory actions.

Any such misconduct by our collection personnel or the perception that our collection practices are considered to be aggressive and not compliant with the relevant laws and regulations in the PRC may result in harm to our reputation and business, which could further reduce our ability to collect payments from borrowers, lead to decrease in the willingness of prospective borrowers to apply for the home equity loans we facilitate, or fines and penalties imposed by the relevant regulatory authorities, any of which may have a material adverse effect on our results of operations.

As of December 31, 2022, we operated our businesses primarily in over 50 leased properties in Shenzhen, Guangzhou, Chongqing, Beijing and other cities in China.

As of December 31, 2023, we operated our businesses primarily in over 102 leased properties in Shenzhen, Guangzhou, Chongqing, Beijing and other cities in China.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

167 edited+32 added−28 removed293 unchanged

2022 filing

2023 filing

If at any time the balance of CRMP provided by sales partners is lower than the agreed percentage of the principal amount of the loans it introduced, the sales partner is required to make up the balance reach the agreed CRMP percentage.

It is stipulated it is illegal to engage in financial business without a business license or beyond the permitted business scope, and market entities that fail to obtain relevant financial business qualifications shall not conduct marketing and publicity activities relating to the financial business, except that information release platforms and media entrusted by relevant financial business qualifications carry out financial marketing and publicity activities for them.

It is stipulated that it is illegal to engage in financial business without a business license or beyond the permitted business scope, and market entities that fail to obtain relevant financial business qualifications shall not conduct marketing and publicity activities relating to the financial business, except that information release platforms and media entrusted by relevant financial business qualifications carry out financial marketing and publicity activities for them.

The key regulations of small loan companies in Chongqing are as follows: ● if a small loan company is a foreign investment company, its registered capital must be at least US$30 million, and the shareholding of the foreign investor must be more than 50%; ● for small loan companies with sound corporate management and strong risk management ability, the balance of the capital borrowed from banking financial institutions can be 100% of its net capital; ● the balance of loans granted to a single borrower by a small loan company must not exceed 10% of the net capital of the Company and the balance of credit limit granted to a single client as a group enterprise must not exceed 15% of the net capital of the small loan company; ● support qualified small loan companies to increase their capital and shares, as well as mergers and acquisitions to enhance their capital strength; and ● support small loan companies to list on domestic and overseas capital markets, and make good use of cross-border financing channels such as cross-border loans and overseas bond issuance under the China-Singapore (Chongqing) Strategic Interconnection Demonstration Project to obtain low-cost and long-term overseas funds.

The key regulations of small loan companies in Chongqing are as follows: ● if a small loan company is a foreign investment company, its registered capital must be at least US$30 million, and the shareholding of the foreign investor must be more than 50%; ● for small loan companies with sound corporate management and strong risk management ability, the balance of the capital borrowed from banking financial institutions can be 100% of its net capital; ● the balance of loans granted to a single borrower by a small loan company must not exceed 10% of the net capital of the Company and the balance of credit limit granted to a single client as a group enterprise must not exceed 15% of the net capital of the small loan company; 78 ● support qualified small loan companies to increase their capital and shares, as well as mergers and acquisitions to enhance their capital strength; and ● support small loan companies to list on domestic and overseas capital markets, and make good use of cross-border financing channels such as cross-border loans and overseas bond issuance under the China-Singapore (Chongqing) Strategic Interconnection Demonstration Project to obtain low-cost and long-term overseas funds.

The key regulations of small loan companies in Shenzhen are as follows: ● if a small loan company is a limited liability company, its registered capital must be at least RMB300 million; if it is a company limited by shares, its registered capital must be at least RMB400 million; ● the balance of funds obtained by a small loan company from external legitimate channels may not exceed 200% of its net capital the previous year; ● the main promoter of a small loan company shall (1) have net assets no less than RMB200 million and an asset-liability ratio of no more than 65%, and, in principle, the long-term investment amount after investing in this project shall be no more than 60% of net assets (on a consolidated financial statements basis); and (2) have continuous positive earnings for three years with a total net profit of no less than RMB60 million, and the total tax contribution shall be no less than RMB18 million (on a consolidated financial statements basis); ● enterprise, social organization or economic organization as other contributors shall be divided into two categories: (1) if the ratio of investments is 30% or more, it shall be subject to the approval process as the main promoter; and (2) if the ratio of investments is no more than 30%, it shall be subject to the following conditions: having been incorporated for more than three years with net assets no less than RMB100 million and an asset-liability ratio no more than 65%, and, in principle, the long-term investment amount after investing on this project shall be no more than 60% of net assets, having continuous positive earnings for two years with a total net profit of no less than RMB20 million, and the total tax contribution shall be no less than RMB6 million (on a consolidated financial statement basis); ● if a foreign financial institution or small loan credit company (or other similar entity) is the main promoter, it shall be subject to the following conditions: (1) having total assets no less than RMB2 billion (on a consolidated financial statement basis); (2) having been engaged in financial business and continuously operating for no less than 10 years with sufficient analysis and research on the small loan market in China; and (3) shall obtain the approval of the financial regulation authorities as a bank financing institution; 68 ● the key management personnel may hold no more than 5% of shares of the small loan company, and, as a temporary restriction, no other social natural person may contribute to the small loan company; ● the main promoter shall contribute no less than 30% of the total registered capital and shall control the Company relatively, other contribution by other entities shall be no less than 5% of the total registered capital; and ● the equity interests of a small loan company may be transferred, but no transfer or pledge is allowed in the first three years following the incorporation of the small loan company.

The key regulations of small loan companies in Shenzhen are as follows: ● if a small loan company is a limited liability company, its registered capital must be at least RMB300 million; if it is a company limited by shares, its registered capital must be at least RMB400 million; ● the balance of funds obtained by a small loan company from external legitimate channels may not exceed 200% of its net capital the previous year; ● the main promoter of a small loan company shall (1) have net assets no less than RMB200 million and an asset-liability ratio of no more than 65%, and, in principle, the long-term investment amount after investing in this project shall be no more than 60% of net assets (on a consolidated financial statements basis); and (2) have continuous positive earnings for three years with a total net profit of no less than RMB60 million, and the total tax contribution shall be no less than RMB18 million (on a consolidated financial statements basis); ● enterprise, social organization or economic organization as other contributors shall be divided into two categories: (1) if the ratio of investments is 30% or more, it shall be subject to the approval process as the main promoter; and (2) if the ratio of investments is no more than 30%, it shall be subject to the following conditions: having been incorporated for more than three years with net assets no less than RMB100 million and an asset-liability ratio no more than 65%, and, in principle, the long-term investment amount after investing on this project shall be no more than 60% of net assets, having continuous positive earnings for two years with a total net profit of no less than RMB20 million, and the total tax contribution shall be no less than RMB6 million (on a consolidated financial statement basis); 77 ● if a foreign financial institution or small loan credit company (or other similar entity) is the main promoter, it shall be subject to the following conditions: (1) having total assets no less than RMB2 billion (on a consolidated financial statement basis); (2) having been engaged in financial business and continuously operating for no less than 10 years with sufficient analysis and research on the small loan market in China; and (3) shall obtain the approval of the financial regulation authorities as a bank financing institution; ● the key management personnel may hold no more than 5% of shares of the small loan company, and, as a temporary restriction, no other social natural person may contribute to the small loan company; ● the main promoter shall contribute no less than 30% of the total registered capital and shall control the Company relatively, other contribution by other entities shall be no less than 5% of the total registered capital; and ● the equity interests of a small loan company may be transferred, but no transfer or pledge is allowed in the first three years following the incorporation of the small loan company.

Risk Factors—Risks Related to Doing Business in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.” 75 Regulations Relating to Tax Enterprise Income Tax PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, or the EIT Law, promulgated by the NPC and implemented in January 2008, and most recently amended on December 29, 2018, and (ii) the implementation rules to the EIT Law promulgated by the State Council and implemented in January 2008, and most recently amended on April 23, 2019.

Risk Factors—Risks Related to Doing Business in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.” Regulations Relating to Tax Enterprise Income Tax PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, or the EIT Law, promulgated by the NPC and implemented in January 2008, and most recently amended on December 29, 2018, and (ii) the implementation rules to the EIT Law promulgated by the State Council and implemented in January 2008, and most recently amended on April 23, 2019.

If any of the funding sources is deemed to violate the PRC laws and regulations, we may need to secure new funding, failure of which may result in a material and adverse impact on our business, financial condition, results of operations and prospects.” 51 Matching of Terms of Funding Sources and Loans We forecast our cash flows each month to determine our use and need of cash for the next month and take into account the amount of loans becoming due, amount of trust products becoming due and target size of loan products to be facilitated.

If any of the funding sources is deemed to violate the PRC laws and regulations, we may need to secure new funding, failure of which may result in a material and adverse impact on our business, financial condition, results of operations and prospects.” Matching of Terms of Funding Sources and Loans We forecast our cash flows each month to determine our use and need of cash for the next month and take into account the amount of loans becoming due, amount of trust products becoming due and target size of loan products to be facilitated.

The LTV ratio varies for different types of real properties and is also adjusted pursuant to a borrower’s credit history and quality of the collateral and may be lowered in the event of a past default. 58 We offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount when due.

The LTV ratio varies for different types of real properties and is also adjusted pursuant to a borrower’s credit history and quality of the collateral and may be lowered in the event of a past default. We offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount when due.

Step 1: Borrower assessment After obtaining the list of qualified borrowers, we first perform due diligence on such borrowers and then share those customers’ information with the guarantor company we work with for its own risk assessment. Step 2: Loan application referral After passing the guarantor’s risk assessment, the borrower will be introduced to our commercial bank partner.

After obtaining the list of qualified borrowers, we first perform due diligence on such borrowers and then share those customers’ information with the guarantor company we work with for its own risk assessment. Step 2: Loan application referral After passing the guarantor’s risk assessment, the borrower will be introduced to our commercial bank partner.

If investment information is not filed in accordance with the Measures, foreign-invested enterprises may be required to make corrections or be subject to fines. Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version) The Negative List uniformly lists special administrative measures on foreign investment access such as requirements on equity interest and management.

If investment information is not filed in accordance with the Measures, foreign-invested enterprises may be required to make corrections or be subject to fines. 75 Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version) The Negative List uniformly lists special administrative measures on foreign investment access such as requirements on equity interest and management.

If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites. 72 PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure.

If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites. PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure.

Specifically, our trust company partners are independently responsible for, reviewing loan applications and verifying applicants’ personal, business and collateral information collected by us through various procedures. Our trust company partners are responsible for approving the loan application. 53 Step 4: Credit extension Our trust company partners will make the credit decision based on its own credit assessment.

Specifically, our trust company partners are independently responsible for, reviewing loan applications and verifying applicants’ personal, business and collateral information collected by us through various procedures. Our trust company partners are responsible for approving the loan application. Step 4: Credit extension Our trust company partners will make the credit decision based on its own credit assessment.

In third- and lower-tier cities, the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to 15%. Sales partners who pay 20% of the loan principal as the CRMP are mainly individual and smaller-scale loan service providers in Tier 1 and Tier 2 cities.

In third- and lower-tier cities, the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to 15%. 62 Sales partners who pay 20% of the loan principal as the CRMP are mainly individual and smaller-scale loan service providers in Tier 1 and Tier 2 cities.

We cannot assure you that we will be able to complete any required filing in a timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities offerings in the future.

We cannot assure you that we will be able to complete such filing in a timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities offerings in the future.

Regulations Relating to Foreign Investment The establishment, operation and management of companies in China is governed by the PRC Company Law, as amended in 2005, 2013, and 2018. According to the PRC Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability companies.

Regulations Relating to Foreign Investment The establishment, operation and management of companies in China is governed by the PRC Company Law, as amended in 2005, 2013, 2018, and 2023. According to the PRC Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability companies.

We as the subordinated unit holder also retain any residual value in trust plans after deducting (i) repayment of principal amount invested by senior unit holders, (ii) financing costs for the senior units, which primarily consist of the expected rate of return to the senior unit holders, (iii) administrative fee payments to trust companies and certain fee payments to third-party service providers (mainly depositary fees charged by the banks) and (iv) a performance-based service fee to us as service provider of up to 7% per annum of the size of the trust plan.

We consider our insurance coverage sufficient and in line with market practice for our business operations in China. 65 Regulation This section sets forth a summary of the most significant rules and regulations affecting our business that we operate in China.

We consider our insurance coverage sufficient and in line with market practice for our business operations in China. Regulation This section sets forth a summary of the most significant rules and regulations affecting our business that we operate in China.

Such searches are supplemented with online revaluation of collateral through our appraisal company partners and the search results will be shared real-time with sales partners through the mobile app. Debt collection .

In order to further implement the Computer Software Protection Regulations promulgated by the State Council on December 20, 2001 and amended on January 30, 2013, the State Copyright Bureau issued the Computer Software Copyright Registration Procedures on February 20, 2002, which applies to software copyright registration, license contract registration and transfer contract registration. 74 Trademarks Trademarks are protected by the PRC Trademark Law adopted in 1982 and subsequently amended in 1993, 2001, 2013, and 2019 as well as the Implementation Regulation of the PRC Trademark Law adopted by the State Council in 2002 and amended on April 29, 2014.

In order to further implement the Computer Software Protection Regulations promulgated by the State Council on December 20, 2001 and amended on January 30, 2013, the State Copyright Bureau issued the Computer Software Copyright Registration Procedures on February 20, 2002, which applies to software copyright registration, license contract registration and transfer contract registration. 85 Trademarks Trademarks are protected by the PRC Trademark Law adopted in 1982 and subsequently amended in 1993, 2001, 2013, and 2019 as well as the Implementation Regulation of the PRC Trademark Law adopted by the State Council in 2002 and amended on April 29, 2014.

According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as 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 global income o nly if all of the following conditions are met: ● the primary location of the day-to-day operational management and the places where they perform their duties are in the PRC; ● decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval of organizations or personnel in the PRC; ● the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and ● 50% or more of voting board members or senior executives habitually reside in the PRC.

According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as 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 global income only if all of the following conditions are met: ● the primary location of the day-to-day operational management and the places where they perform their duties are in the PRC; ● decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval of organizations or personnel in the PRC; ● the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and ● 50% or more of voting board members or senior executives habitually reside in the PRC.

Credit risk mitigation embedded in product design The home equity loans we facilitate primarily take real properties located in Tier 1 and Tier 2 and other major cities as collateral. Our loan portfolio spreads over 70 cities across China. We believe that such geographic diversification better protects us against deterioration of local housing and economic conditions.

Credit risk mitigation embedded in product design The home equity loans we facilitate primarily take real properties located in Tier 1 and Tier 2 and other major cities as collateral. Our loan portfolio spreads over 60 cities across China. We believe that such geographic diversification better protects us against deterioration of local housing and economic conditions.

In 2020, 2021 and 2022, we transferred our rights to earnings in subordinated units to a private equity fund and to certain third parties. We utilize multiple funding sources to support our business, some of which may be subject to challenges by regulatory authorities from time to time under the evolving legal environment. For details, please refer to “Item 3.

In 2021, 2022 and 2023, we transferred our rights to earnings in subordinated units to a private equity fund and to certain third parties. We utilize multiple funding sources to support our business, some of which may be subject to challenges by regulatory authorities from time to time under the evolving legal environment. For details, please refer to “Item 3.

Financial and non-banking payment institutions should report large-value and suspicious transactions as required, and analyze and identify related accounts having suspected association with illegal fundraising. 71 Regulations Relating to Mortgage The principal regulations governing mortgage include the Part II Property Rights (including Security Rights) of Civil Code of the PRC and their respective Interpretations of the Supreme People’s Court.

Financial and non-banking payment institutions should report large-value and suspicious transactions as required, and analyze and identify related accounts having suspected association with illegal fundraising. 81 Regulations Relating to Mortgage The principal regulations governing mortgage include the Part II Property Rights (including Security Rights) of Civil Code of the PRC and their respective Interpretations of the Supreme People’s Court.

If the financing guarantee companies do not comply with the requirement of regulatory authorities, regulatory authorities can exert penalties in compliance with relevant laws and regulations. 70 Regulations Relating to Illegal Fundraising Raising funds by entities or individuals from the general public must be conducted in strict compliance with applicable PRC laws and regulations to avoid administrative and criminal liabilities.

If the financing guarantee companies do not comply with the requirement of regulatory authorities, regulatory authorities can exert penalties in compliance with relevant laws and regulations. 80 Regulations Relating to Illegal Fundraising Raising funds by entities or individuals from the general public must be conducted in strict compliance with applicable PRC laws and regulations to avoid administrative and criminal liabilities.

Our sales partners and local channel partners are responsible for recommending micro- and small-enterprise (“MSE”) owners with financing needs to us and we introduce eligible borrowers to licensed financial institutions with sufficient funding sources including trust companies and commercial banks who will then conduct their own risk assessments and make credit decisions.

Our sales partners are responsible for recommending micro- and small-enterprise (“MSE”) owners with financing needs to us and we introduce eligible borrowers to licensed financial institutions with sufficient funding sources including trust companies and commercial banks who will then conduct their own risk assessments and make credit decisions.

Business Overview—OurProducts—Small Loan Direct Lending.” We generally rely on and will continue to rely primarily on our trust lending model and commercial bank partnership model, which are supplemented with our direct lending model. Our Borrowers Borrower Base We strategically target MSE owners who own properties in Tier 1 and Tier 2 and other major cities in China.

Business Overview—Our Products—Small Loan Direct Lending.” We generally rely on and will continue to rely primarily on our trust lending model and commercial bank partnership model, which are supplemented with our direct lending model. Our Borrowers Borrower Base We strategically target MSE owners who own properties in Tier 1 and Tier 2 and other major cities in China.

The following chart illustrates a typical arrangement among sales partners, borrowers, trust plans, trust plan investors and us. 52 We provide a convenient and user-friendly transaction process, which is implemented through our standardized home equity loan application procedures across our local offices. Our standardized transaction process under trust lending model is illustrated as below.

The following chart illustrates a typical arrangement among sales partners, borrowers, trust plans, trust plan investors and us. 60 We provide a convenient and user-friendly transaction process, which is implemented through our standardized home equity loan application procedures across our local offices. Our standardized transaction process under trust lending model is illustrated as below.

Through our sales partners, local channel partners and our established network and branch offices, we reach prospective MSE borrowers and assess their creditworthiness and value of collaterals, and if these borrowers meet our requirements, we refer them to our trust company and commercial bank partners who make their own independent credit assessment and decisions before directly lending to qualified borrowers.

Through our sales partners and our established network and branch offices, we reach prospective MSE borrowers and assess their creditworthiness and value of collaterals, and if these borrowers meet our requirements, we refer them to our trust company and commercial bank partners who make their own independent credit assessment and decisions before directly lending to qualified borrowers.

The borrowers are obliged to mortgage their real estate properties to the commercial bank partner as collateral, while the guarantor is obliged to provide the guarantee deposit and assist us with preliminary review of the borrower, other pre-loan inspections and forward transfer services of past due loans as credit strengthing.

By contributing an amount equal to 10% to 25% of the loans issued to the borrowers introduced by them, sales partners receive incentive fees upon a pre-agreed schedule and other conditions. For details, please refer to “Item 4. Information on the Company—B.

By contributing an amount equal to 5% to 25% of the loans issued to the borrowers introduced by them, sales partners receive incentive fees upon a pre-agreed schedule and other conditions.] For details, please refer to “Item 4. Information on the Company—B.

Collaboration Model We have switched to a collaboration business model to optimize the trust lending model since December 2018 to broaden our prospective borrower bases. Under the collaboration model, we generally require sales partners to contribute from a range of 10% to 25% of the loan principal they introduced (such contribution, the “CRMP”).

Collaboration Model We have switched to a collaboration business model to optimize the trust lending model since December 2018 to broaden our prospective borrower bases. Under the collaboration model, we generally require sales partners to contribute from a range of 5% to 25% of the loan principal they introduced (such contribution, the “CRMP”).

In addition, SAFE promulgated another circular of the State Administration of Foreign Exchange on Printing and Distributing the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC must be conducted by way of registration, and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

In addition, SAFE promulgated another circular of the State Administration of Foreign Exchange on Printing and Distributing the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents in May 2013(amended in 2018 and 2019), which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC must be conducted by way of registration, and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

Under the pass-through repayment method, the principal amount invested in the trust products is repaid as the underlying loans are repaid. As a result, terms of the underlying trust funding matched tenor of all loans we facilitated in 2020, 2021 and 2022.

As of December 31, 2022, for all of the loans with payment over 60 days past due, our sales partners have either fulfilled or are in the process of fulfilling their obligations under our agreements with them.

As of December 31, 2023, for all of the loans with payment over 60 days past due, our sales partners have either fulfilled or are in the process of fulfilling their obligations under our agreements with them.

Under the 2018 FOTIC Service Fee Structure, our service fee charged to a trust plan is performance-based and up to 7% per annum of the size of the trust plan decreases with the growth of the NPLs in the loans we facilitated.

Under the 2018 FOTIC Service Fee Structure, our service fee charged to a trust plan is performance-based and up to 5% per annum of the size of the trust plan decreases with the growth of the NPLs in the loans we facilitated.

For a complete list of our subsidiaries, please refer to note 1 to our consolidated financial statements as of and for the years ended December 31, 2020, 2021 and 2022 included elsewhere in this annual report.

For a complete list of our subsidiaries, please refer to note 1 to our consolidated financial statements as of and for the years ended December 31, 2021, 2022 and 2023 included elsewhere in this annual report.

Domain Names Internet domain name registration and related matters are primarily regulated by the Measures on the Administration of Domain Names for the Chinese Internet, issued by the MIIT on November 5, 2004 and effective as of December 20, 2004, which was replaced by the Measures on Administration of Internet Domain Names issued by the MIIT as of November 1, 2017 and the Implementing Rules on Registration of National Toplevel Domain Names issued by China Internet Network Information Center in June, 2019.

Domain Names Internet domain name registration and related matters are primarily regulated by the Measures on the Administration of Domain Names for the Chinese Internet, issued by the MIIT on November 5, 2004 and effective as of December 20, 2004, which was replaced by the Measures on Administration of Internet Domain Names issued by the MIIT as of November 1, 2017 and the Implementing Rules on Registration of National Top-level Domain Names issued by China Internet Network Information Center in June, 2019.

The shorter average tenor of outstanding loans in 2022 than that of 2021 is mainly attributable to the fact that the majority of loans we facilitated in 2022 were short-term loans with a one-year maturity.

The shorter average tenor of outstanding loans in 2022 and 2023 than that of 2021 is mainly attributable to the fact that the majority of loans we facilitated in 2022 and 2023 were short-term loans with a one-year maturity.

(2) Shenzhen Fanhua United Investment Group Co., Ltd. operates our loan services business through various subsidiaries in the PRC and operates our small loan business through Beijing Fanhua Micro-credit Company Limited and Shenzhen Fanhua Micro-credit Co., Ltd. 82 4.D.

On June 9, 2016, the SAFE promulgated Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, which expands the application scope from only the capital of the foreign-invested enterprises to the capital, the foreign debt fund and the fund from overseas public offerings.

On June 9, 2016, the SAFE promulgated Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts(amended in 2023), or Circular 16, which expands the application scope from only the capital of the foreign-invested enterprises to the capital, the foreign debt fund and the fund from overseas public offerings.

Moreover, unlike in the United States where home equity loans commonly serve as a financing alternative, traditional lenders in China, such as banks, typically do not grant loans secured by second lien interests and are generally less incentivized to introduce innovative home equity loan products. 46 We aim to serve our target borrowers by facilitating home equity loans and providing tailored services.

Moreover, unlike in the United States where home equity loans commonly serve as a financing alternative, traditional lenders in China, such as large commercial banks, typically do not grant loans secured by second lien interests and are generally less incentivized to introduce innovative home equity loan products. 54 We aim to serve our target borrowers by facilitating home equity loans and providing tailored services.

We facilitate home equity loans with flexible tenors typically ranging from one to three years enabling borrowers’ short-term and long-term business planning. In 2020, 2021 and 2022, the average tenor of the home equity loans we originated was 24, 15 and 12 months, respectively.

We facilitate home equity loans with flexible tenors typically ranging from one to three years enabling borrowers’ short-term and long-term business planning. In 2021, 2022 and 2023, the average tenor of the home equity loans we originated was 15, 12 and 12 months, respectively.

Due to regulatory financing/net capital ratio constraints and for liquidity reasons, we expect that direct lending will remain a fairly limited and immaterial part of our business in the near future. For the years ended December 31, 2020, 2021 and 2022, our loan origination volume through direct lending was RMB22 million, RMB17 million and RMB15 million, respectively.

Due to regulatory financing/net capital ratio constraints and for liquidity reasons, we expect that direct lending will remain a fairly limited and immaterial part of our business in the near future. For the years ended December 31, 2021, 2022 and 2023, our loan origination volume through direct lending was RMB17 million, RMB15 million RMB48 million, respectively.

We help our trust company partners closely monitor loan repayments, and help our sales partners closely monitor the realtime repayment status by posting them on the mobile app. Our system generates automatic payment reminders through SMSs one week before the due date.

We help our trust company partners closely monitor loan repayments, and help our sales partners closely monitor the real-time repayment status by posting them on the mobile app. Our system generates automatic payment reminders through SMSs one week before the due date.

We receive a performance-based service fee up to 7% per annum of the size of the trust plan charged to the trust plans for the services we provide. 47 In December 2018, we introduced our collaboration model to optimize our collaboration with trust companies. Sales partners recommend borrowers to us by direct cooperation with us or joining limited partnerships.

We receive a performance-based service fee up to 5% per annum of the size of the trust plan charged to the trust plans for the services we provide. 55 In December 2018, we introduced our collaboration model to optimize our collaboration with trust companies. Sales partners recommend borrowers to us by direct cooperation with us or joining limited partnerships.

Borrowers are obligated to return loan proceeds if the pledge is not successfully registered under extreme circumstances. 59 Judicial foreclosure of the collateral We usually suggest our trust partners pursue foreclosure for loans more than 90 days past due. In 2020, 2021 and 2022, 7.4%, 3.3% and 0.4%, of the delinquent loans the Company facilitated entered into foreclosure process, respectively.

Borrowers are obligated to return loan proceeds if the pledge is not successfully registered under extreme circumstances. 68 Judicial foreclosure of the collateral We usually suggest our trust partners pursue foreclosure for loans more than 90 days past due. In 2021, 2022 and 2023, 3.3%, 0.4% and 0.3% of the delinquent loans the Company facilitated entered into foreclosure process, respectively.

Business Overview—Our Products—Collaboration Model.” As of the date of this annual report, we have around 1,978 contracted sales partners in total, among which around 1,284 are effective sales partners. In order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial banks in 2021.

Business Overview—Our Products—Collaboration Model.” As of the date of this annual report, we have around 2,078 contracted sales partners in total, among which around 1,378 are effective sales partners. In order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial banks in 2021.

As of December 31, 2022, we had 532 employees in our risk management team. We impose strict guidelines on loan approvals and separation of loan approval and risk management. The loans we originated are divided into different categories by amount and are reviewed by various levels of seniority.

As of December 31, 2023, we had 510 employees in our risk management team. We impose strict guidelines on loan approvals and separation of loan approval and risk management. The loans we originated are divided into different categories by amount and are reviewed by various levels of seniority.

For the years ended December 31, 2020, 2021 and 2022, home equity loans we facilitated under the trust lending model amounted to RMB8.8 billion, RMB12.8 billion and RMB12.2 billion (US$1.8 billion), respectively. Each trust plan issues multiple trust products which are funded with senior and subordinated units at a predetermined ratio.

For the years ended December 31, 2021, 2022 and 2023, home equity loans we facilitated under the trust lending model amounted to RMB12.8 billion, RMB12.2 billion and RMB12.3 billion (US$1.7 billion), respectively. Each trust plan issues multiple trust products which are funded with senior and subordinated units at a predetermined ratio.

As of the date of this annual report, we have 1,978 contracted sales partners in total, among which around 1,284 are effective sales partners. Under such collaboration model, we will pay incentive fees, or collaboration cost, to each sales partner upon a pre-agreed schedule and conditions, which will be re-distributed to the sales partners.

As of the date of this annual report, we have 2,078 contracted sales partners in total, among which around 1,378 are effective sales partners. Under such collaboration model, we will pay incentive fees, or collaboration cost, to each sales partner upon a pre-agreed schedule and conditions, which will be re-distributed to the sales partners.

As of December 31, 2020 2021 2022 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Outstanding loan principal (excluding loans held for sale) by collateral city tier Tier 1 2,202 24.4 % 2,851 30.3 % 3,110 34.6 % Tier 2 6,080 67.2 % 5,992 63.7 % 5,497 61.1 % Others 760 8.4 % 565 6.0 % 384 4.3 % Total 9,042 100.0 % 9,408 100.0 % 8,991 100.0 % 62 The process for updating collateral values during the period the loan is held includes the following: (i) regular review and reappraisal of collateral value based on the data from multiple external online appraisal firms; (ii) if the difference between the reappraised value and the value at origination exceeds 20%, we will determine whether such difference is due to regional market fluctuations and accept such reappraised value if the difference is determined to result from regional market fluctuations, and (iii) if the value difference is determined to be isolated from regional market fluctuations, we will check with recognized housing agent companies for the latest market sales price for properties with similar conditions such as locations, floorplans and ages, and use the average value of such similar properties as the ultimate reappraised value of the collateral.

As of December 31, 2021 2022 2023 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Outstanding loan principal (excluding loans held for sale) by collateral city tier Tier 1 2,851 30.3 % 3,110 34.6 % 4,479 48.7 % Tier 2 5,992 63.7 % 5,497 61.1 % 4,453 48.5 % Others 565 6.0 % 384 4.3 % 256 2.8 % Total 9,408 100.0 % 8,991 100.0 % 9,188 100.0 % The process for updating collateral values during the period the loan is held includes the following: (i) regular review and reappraisal of collateral value based on the data from multiple external online appraisal firms; (ii) if the difference between the reappraised value and the value at origination exceeds 20%, we will determine whether such difference is due to regional market fluctuations and accept such reappraised value if the difference is determined to result from regional market fluctuations, and (iii) if the value difference is determined to be isolated from regional market fluctuations, we will check with recognized housing agent companies for the latest market sales price for properties with similar conditions such as locations, floorplans and ages, and use the average value of such similar properties as the ultimate reappraised value of the collateral.

The project cost is typically between 10.0%-15.8% of the loan principal, and the percentage varies based on different collaboration model types and the terms of the loan. The project cost in the loan agreement will not change once determined. The collaboration cost is settled monthly as agreed in the collaboration agreement.

The project cost is typically between 9.4%-15.8% of the loan principal, and the percentage varies based on different collaboration model types and the terms of the loan. The project cost in the loan agreement will not change once determined. The collaboration cost is settled monthly as agreed in the collaboration agreement.

In 2020, 2021 and 2022, the average tenor of the home equity loans we originated was 24, 15 and 12 months with the weighted average effective interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 17.3% , 16.5% and 17.2% per annum, respectively.

In 2021, 2022 and 2023, the average tenor of the home equity loans we originated was 15, 12 and 12 months with the weighted average effective interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 16.5%, 17.2% and 16.9% per annum, respectively.

The home equity loans we originate under trust lending model are also competitively priced, with a weighted average effective interest rate of 17.3% 16.5% and 17.2% per annum in 2020, 2021 and 2022, respectively. The interest rates of our loan product under commercial bank partnership model ranged from 9.0% to 15.5%, which had attracted more borrowers with higher credit record.

The home equity loans we originate under trust lending model are also competitively priced, with a weighted average effective interest rate of 16.5%, 17.2% and 16.9% per annum in 2021, 2022 and 2023, respectively. The interest rates of our loan product under commercial bank partnership model ranged from 13.2% to 16.8%, which had attracted more borrowers with higher credit record.

Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to 11.5% per annum of the issuance number of senior units in 2022, and our financing costs for subordinated units under repurchase arrangements with financial institutions was 10.5% to 13.8% per annum of the transfer prices for such subordinated units in 2022.

Our financing costs for the senior units, excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023, and our financing costs for subordinated units under repurchase arrangements with financial institutions was 10.0% to 13.8% per annum of the transfer prices for such subordinated units in 2023.

Since in the event that loans issued under the collaboration model are in default, the respective sales partners will share the credit risks with us by choosing from the above-mentioned options. Besides, the CRMPs from sales partners, by their nature, will also mitigate our exposure to credit losses.

We believe such collaboration model will decrease our risk exposure. Since in the event that loans issued under the collaboration model are in default, the respective sales partners will share the credit risks with us by choosing from the above-mentioned options. Besides, the CRMPs from sales partners, by their nature, will also mitigate our exposure to credit losses.

To further limit credit risk, we devoted to control home equity loans up to 70% LTV ratio with weighted average LTV ratio of 54.6%, 58.5% and 60.0%, for home equity loans originated in 2020, 2021 and 2022, respectively, to ensure recovery in the event of borrower default.

To further limit credit risk, we devoted to control home equity loans up to 70% LTV ratio with weighted average LTV ratio of 58.5%, 60.0% and 62.0% for home equity loans originated in 2021, 2022 and 2023, respectively, to ensure recovery in the event of borrower default.

We retrieve such information with consent and have safeguards designed to protect such information. We store our data in encrypted form, which offers an additional layer of protection. We also verify data interchange with our funding partners using digital signatures, which enhances the security of such interchange.

Providing second lien home equity loans or title loans is limited for commercial banks in China, given the high level of regulatory supervision from relevant regulatory authorities. These products have instead been developed by non-traditional financial institutions like us to fulfill the unserved demand.

The balances of the borrowings that were funded by third parties for the small loan direct lending business were RMB9.3 million, nil and nil, as of December 31, 2020, 2021 and 2022, respectively. Our Funding Model We have explored various funding sources and have focused on collaboration with our trust company partners starting in 2014.

The balances of the borrowings that were funded by third parties for the small loan direct lending business were nil, nil and nil, as of December 31, 2021, 2022 and 2023, respectively. 65 Our Funding Model We have explored various funding sources and have focused on collaboration with our trust company partners starting in 2014.

As of December 31, 2022, we had 44 registered trademarks, including our “CNFH” and company logo. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to obtain and use our intellectual property.

As of December 31, 2023, we had 46 registered trademarks, including our “CNFH” and company logo. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to obtain and use our intellectual property.

We help trust companies and commercial banks sign loan agreements with borrowers directly, and assist borrowers in pledging collateral for the benefit of trust companies and commercial banks. In 2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by our sales partners under the collaboration model. For details, please refer to “Item 4.

We help trust companies and commercial banks sign loan agreements with borrowers directly, and assist borrowers in pledging collateral for the benefit of trust companies and commercial banks. In 2021, 2022 and 2023, over 99.7% of our borrowers were introduced to us by our sales partners under the trust lending model. For details, please refer to “Item 4.

Our Products The home equity loans we facilitate permit borrowers to borrow relatively large amounts up to 70% LTV ratio. Our weighted average LTV ratio was 54.6%, 58.5% and 60.0%, for home equity loans originated in 2020, 2021 and 2022, respectively.

Our Products The home equity loans we facilitate permit borrowers to borrow relatively large amounts up to 70% LTV ratio. Our weighted average LTV ratio was 58.5%, 60.0% and 62.0%, for home equity loans originated in 2021, 2022 and 2023, respectively.

To a lesser extent, we historically utilized a direct lending model through our small loan subsidiaries. In 2021, we launched a new funding model in cooperation with commercial banks to expand our financing channels. In 2020, 2021 and 2022, 100.0% 99.8% and 82.7% of the total home equity loan origination volume was originated under the trust lending model , respectively.

To a lesser extent, we historically utilized a direct lending model through our small loan subsidiaries. In 2021, we launched a new funding model in cooperation with commercial banks to expand our financing channels. In 2021, 2022 and 2023, 99.5%, 82.7% and 70.7% of the total home equity loan origination volume was originated under the trust lending model, respectively.

Funding Partners As of the date of this annual report, we have formed partnerships with well-established trust companies under our trust lending model, including FOTIC, Zhonghai Trust, Zhongyuan Trust, Bairui Trust, Hunan Chasing Trust, Shaanxi International Trust, Bohai Trust, Everbright Trust, Shaanxi International Trust and National Trust.

Funding Partners As of the date of this annual report, we have formed partnerships with well-established trust companies under our trust lending model, including FOTIC, COFCO Trust, Zhonghai Trust, Zhongyuan Trust, Shaanxi International Trust, Bohai Trust, and National Trust.

In 2022, the amount of loans where the Company abandoned the foreclosure process was RMB12.2 million. We abandon foreclosure when the defaulting borrower has regenerated ability to repay its debt by financing efforts or selling the collateral on its own and seeks to settle with the Company.

In 2023, the amount of loans where the Company abandoned the foreclosure process was RMB5.3 million. We abandon foreclosure when the defaulting borrower has regenerated ability to repay its debt by financing efforts or selling the collateral on its own and seeks to settle with the Company.

We recovered loan principal, interest and penalties which equal to 102.4%, 83.3% and 105.2%, of the actual outstanding loan principal of these delinquent loans in 2020, 2021 and 2022, respectively. Transferring default loans to third parties is one of our loan recovery methods.

We recovered loan principal, interest and penalties which equal to 83.3%, 105.2% and 106.9% of the actual outstanding loan principal of these delinquent loans in 2021, 2022 and 2023, respectively. Transferring default loans to third parties is one of our loan recovery methods.

Through these collaborative partnerships, we have access to flexible funding of RMB7.7 billion sourced from the senior unit holders as of December 31, 2022. 69.3%, 62.1% and 62.3%, of the loans we originated in 2020, 2021 and 2022, respectively, were funded through FOTIC, mainly due to our familiarity and long-standing relationship with FOTIC.

Through these collaborative partnerships, we have access to flexible funding of RMB8.1 billion sourced from the senior unit holders as of December 31, 2023. 62.1%, 62.3% and 55.8%, of the loans we originated in 2021, 2022 and 2023, respectively, were funded through FOTIC, mainly due to our familiarity and long-standing relationship with FOTIC.

The following table illustrates the breakdown of our home equity loan origination volume under trust lending model originated by first lien and second lien in the periods indicated.

The following table illustrates the breakdown of our home equity loan origination volume originated by first lien and second lien in the periods indicated.

For the Year Ended December 31, 2020 2021 2022 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Loan origination volume by funding model Trust lending 8,846 100.0 % 12,816 99.5 % 12,163 82.7 % Bank lending — — 35 0.3 % 2,533 17.2 % Direct lending — 0.0 % 22 0.2 % 15 0.1 % Total 8,846 100.0 % 12,873 100.0 % 14,712 100.0 % 57 The following table illustrates our funding capital from different sources as of December 31, 2020, 2021 and 2022, respectively.

For the Year Ended December 31, 2021 2022 2023 Amount (RMB in millions) % of total Amount (RMB in millions) % of total Amount (RMB in millions) % of total Loan origination volume by funding model Trust lending 12,816 99.5 % 12,163 82.7 % 12,222 70.7 % Bank lending 35 0.3 % 2,533 17.2 % 5,017 29.0 % Direct lending 22 0.2 % 15 0.1 % 56 0.3 % Total 12,873 100.0 % 14,712 100.0 % 17,295 100.0 % The following table illustrates our funding capital from different sources as of December 31, 2021, 2022 and 2023, respectively.

In January 2017, the SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting profits.

Moreover, Circular 16 allows the enterprises to use their foreign exchange capitals under capital accounts allowed by the relevant laws and regulations. 89 In January 2017, the SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting profits.

Our investment return from the subordinated units was RMB658.8 million, RMB578.7 million and RMB381.3 million (US$55.3 million) for the same periods. 50 Credit Strengthening Services We have been working with FOTIC to implement the 2018 FOTIC Funding Arrangements and implementing our credit strengthening services since 2018.

Our investment return from the subordinated units was RMB578.7 million, RMB381.3 million and RMB495.9 million (US$69.9 million) for the same periods. Credit Strengthening Services We have been working with FOTIC to implement the 2018 FOTIC Funding Arrangements and implementing our credit strengthening services since 2018.

Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to 11.5% per annum of the issuance number of senior units in 2022. Each trust plan sets a predetermined contractual structural leverage ratio between senior units and subordinated units.

Our financing costs for the senior units, excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023. 59 Each trust plan sets a predetermined contractual structural leverage ratio between senior units and subordinated units.

Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We originated home equity loans for 17,703, 22,060 and 23,923 (including 3,891 under the commercial bank partnership model) borrowers in 2020, 2021 and 2022, respectively.

Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We originated home equity loans for 22,060, 23,923 and 23,910 (including 7,117 under the commercial bank partnership model) borrowers in 2021, 2022 and 2023, respectively.

As of December 31, 2020 2021 2022 Outstanding loan principal (RMB in millions) % of total Outstanding loan principal (RMB in millions) % of total Outstanding loan principal (RMB in millions) % of total On-balance sheet loan 9,042 100 % 9,408 99.7 % 8,991 78.4 % Trust lending model 8,992 99.5 % 9,392 99.5 % 8,976 78.3 Direct lending 50 0.5 % 16 0.2 % 15 0.1 % Off-balance sheet loan - - - - 2,470 21.6 % Commercial bank partnership model - - 31 0.3 % 2,470 21.6 % Total 9,042 100.0 % 9,439 100.0 % 11,461 100.0 % The following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) by city tier as of December 31, 2020, 2021 and 2022, respectively.

As of December 31, 2021 2022 2023 Outstanding loan principal (RMB in millions) % of total Outstanding loan principal (RMB in millions) % of total Outstanding loan principal (RMB in millions) % of total On-balance sheet loan 9,408 99.7 % 8,991 78.4 % 11,828 74.1 % Trust lending model 9,392 99.5 % 8,976 78.3 % 11,784 73.9 % Direct lending 16 0.2 % 15 0.1 % 44 0.2 % Off-balance sheet loan - - 2,470 21.6 4,128 25.9 % Commercial bank partnership model 31 0.3 2,470 21.6 % 4,128 25.9 % Total 9,439 100.0 % 11,461 100.0 % 15,956 100.0 % 71 The following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) by city tier as of December 31, 2021, 2022 and 2023, respectively.

Information on the Company—B. Business Overview—Our Products—Collaboration Model.” In 2022, 100.0% of borrowers introduced to commercial banks were acquired through local channel partners including corporate and individual offline channels and telemarketing companies.

Step 9: Repayment of loan principal and interest The borrower repays all principal and interest directly to the commercial bank partner. After the borrower settles the principal and interest of the loan in advance or at maturity, the commercial bank partner will issue a settlement report, and the borrower can apply for collateral release with the assistance from the guarantor.

After the borrower settles the principal and interest of the loan in advance or at maturity, the commercial bank partner will issue a settlement report, and the borrower can apply for collateral release with the assistance from the guarantor.

Once payment is 30 to 90 days past due, we and our sales partners will continue the collecting efforts, including initiating private negotiations with the borrower and requesting the borrower to repay the loan through self-raising of money or voluntary sale of the collateral, transferring the defaulted loans to the third parties, and move forward with the arbitration process. 60 ● Typically, when payment is over 60 days past due, we will keep the sales partners informed and the sales partners shall choose from the following options, including (i)(1) full repayment to us for the total unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower and acquiring respective credit rights, (i)(2) repayment in installments to us for the total unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower and acquiring respective credit rights under each installments (this option was introduced since the first quarter in 2020 recognizing the fact that the sales partners’ cash flow may be affected by the COVID-19 pandemic and may need to make repayment to us in installments); (ii) repayment to us for the unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower, and if the borrower pays the payments under the loan agreement, the repayment by the sales partner on behalf of the borrower will be refunded to the sales partner; or (iii) relinquishing the respective CRMPs for such loan.

Once payment is 30 to 90 days past due, we and our sales partners will continue the collecting efforts, including initiating private negotiations with the borrower and requesting the borrower to repay the loan through self-raising of money or voluntary sale of the collateral, transferring the defaulted loans to the third parties, and move forward with the arbitration process. ● Typically, when payment is over 60 days past due, we will keep the sales partners informed and the sales partners shall choose from the following options, including (i)(1) full repayment to us for the total unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower and acquiring respective credit rights, (i)(2) repayment in installments to us for the total unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower and acquiring respective credit rights under each installments; (ii) repayment to us for the unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower, and if the borrower pays the payments under the loan agreement, the repayment by the sales partner on behalf of the borrower will be refunded to the sales partner; or (iii) relinquishing the respective CRMPs for such loan.

Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to 11.5% per annum of the issuance number of senior units in 2022. We received performance-based fee payments of RMB505.9 million, RMB440.1 million and RMB446.0 million (US$64.7 million), in 2020, 2021 and 2022, respectively.

Our financing costs for the senior units, excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023. We received performance-based fee payments of RMB440.1 million, RMB446.0 million and RMB409.0 million (US$57.6 million) in 2021, 2022 and 2023, respectively.

In 2022, loan origination volume originated under the commercial bank partnership accounted for 17.2% of our total loan origination volume. The following table illustrates the breakdown of the home equity loan origination volume by funding sources in the periods indicated.

In 2023, loan origination volume originated under the commercial bank partnership accounted for 29.0% of our total loan origination volume. The following table illustrates the breakdown of the home equity loan origination volume by funding sources in the periods indicated.

Step 4: Verification of collateral condition We also take measures to verify the condition of proposed collateral. Local office staff together with sales partners visit the property that a loan applicant intends to pledge. As part of the collateral assessment, we cross-check the preliminary valuation provided by our appraisal company partners with local real estate agents and bank mortgage documents.

Local office staff together with sales partners visit the property that a loan applicant intends to pledge. As part of the collateral assessment, we cross-check the preliminary valuation provided by our appraisal company partners with local real estate agents and bank mortgage documents.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

137 edited+64 added−57 removed160 unchanged

2022 filing

2023 filing

The services not within the scope of other Topics should be accounted for in accordance with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance.

Investing Activities Net cash used in investing activities was RMB1,098.2 million (US$159.2 million) in 2022, which was attributable to (i) purchase of investment securities of RMB8,567.3 million, (ii) purchases of property, equipment and intangible assets of RMB89.9 million, (iii) loans originated, net of principal collected of RMB2,556.9 million, and (iv) purchases of non-marketable equity securities of RMB25.0 million offset by (i) proceeds from sales of investment securities of RMB9,002.2 million, (ii) proceeds from disposal of property, equipment and intangible assets of RMB0.3 million, and (iii) proceeds from sales of loans of RMB1,088.4 million. and.

Net cash used in investing activities was RMB1,098.2 million (US$159.2 million) in 2022, which was attributable to (i) purchase of investment securities of RMB8,567.3 million, (ii) purchases of property, equipment and intangible assets of RMB89.9 million, (iii) loans originated, net of principal collected of RMB2,556.9 million, and (iv) purchases of non-marketable equity securities of RMB25.0 million offset by (i) proceeds from sales of investment securities of RMB9,002.2 million, (ii) proceeds from disposal of property, equipment and intangible assets of RMB0.3 million, and (iii) proceeds from sales of loans of RMB1,088.4 million. and.

Financing Activities Net cash used in financing activities was RMB288.2 million (US$41.8 million) in 2022, which was attributable to (i) repayment of interest-bearing borrowings of RMB6,333.6 million, and (ii) repurchase of ordinary shares of RMB87.6 million, partially offset by (i) proceeds from interest-bearing borrowings of RMB6,082.3 million and (ii) proceeds from contributions from non-controlling shareholders of RMB50.8 million.

Net cash used in financing activities was RMB288.2 million (US$41.8 million) in 2022, which was attributable to (i) repayment of interest-bearing borrowings of RMB6,333.6 million, and (ii) repurchase of ordinary shares of RMB87.6 million, partially offset by (i) proceeds from interest-bearing borrowings of RMB6,082.3 million and (ii) proceeds from contributions from non-controlling shareholders of RMB50.8 million.

Once the loan is approved by and originated by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending relationship between the borrower and the third-party commercial bank is established through a loan agreement.

Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” 109 As of the date of this annual report, the majority of our PRC subsidiaries are still required to contribute to general reserve fund and these contributions are not expected to cease in the near term.

Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” As of the date of this annual report, the majority of our PRC subsidiaries are still required to contribute to general reserve fund and these contributions are not expected to cease in the near term.

(4) NPL provision coverage ratio represents amount of allowance for loan principal, interest and financing service fee receivables as a percentage of the outstanding balance of NPL principal as of the date. * Certain December 31, 2020 and 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.

(4) NPL provision coverage ratio represents amount of allowance for loan principal, interest and financing service fee receivables as a percentage of the outstanding balance of NPL principal as of the date. * Certain December 31, 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.

The SAT promulgated the Announcement on Certain Issues Concerning the Beneficial Owner in a Tax Agreement, or Circular 9, on February 3, 2018, effective as April 1, 2018, which provides guidance for determining whether a resident of a tax treaty country is the “beneficial owner” of income under China’s tax treaties and similar arrangements. 93 China Financial Services Group Limited may be able to benefit from the 5% withholding tax rate for the dividends it receives from our PRC subsidiaries if it satisfies the conditions prescribed under SAT Circular 81 and other relevant tax rules and regulations.

The SAT promulgated the Announcement on Certain Issues Concerning the Beneficial Owner in a Tax Agreement, or Circular 9, on February 3, 2018, effective as April 1, 2018, which provides guidance for determining whether a resident of a tax treaty country is the “beneficial owner” of income under China’s tax treaties and similar arrangements. 107 China Financial Services Group Limited may be able to benefit from the 5% withholding tax rate for the dividends it receives from our PRC subsidiaries if it satisfies the conditions prescribed under SAT Circular 81 and other relevant tax rules and regulations.

Operating expenses Our operating expenses consist of employee compensation and benefits, share-based compensation expenses, taxes and surcharges, operating lease cost, offering expenses and other expenses. The following table sets forth our operating expenses, in absolute amounts and as percentages of total operating income, for the periods indicated.

Operating expenses Our operating expenses consist of employee compensation and benefits, share-based compensation expenses, taxes and surcharges, operating lease cost, offering expenses and other expenses. 105 The following table sets forth our operating expenses, in absolute amounts and as percentages of total operating income, for the periods indicated.

Adjustment for changes in operating assets and liabilities consisted of (i) a decrease in other operating liabilities of RMB12.5 million, (ii) an increase in other operating assets of RMB167.2 million, (iii) an decrease in deposits of RMB11.9 million, (iv) an increase of CRMP of RMB6.2 million and (v) an increase in deposits of RMB168.8 million.

Adjustment for changes in operating assets and liabilities consisted of (i) a decrease in other operating liabilities of RMB12.5 million, (ii) an increase in other operating assets of RMB167.2 million, (iii) a decrease in deposits of RMB11.9 million, (iv) an increase of CRMP of RMB6.2 million and (v) an increase in guarantee deposits of RMB168.8 million.

Realized gains/(losses) on sales of investments Realized gains/(losses) consist of realized gains and losses from the sale of investment securities, presented on a net basis. 95 Net gains/(losses) on sales of loans Net gains/(losses) on sales of loans refer to any gains and losses from the disposal of loans which is accounted for as a sale under ASC 860.

Realized gains/(losses) on sales of investments Realized gains/(losses) consist of realized gains and losses from the sale of investment securities, presented on a net basis. Net gains/(losses) on sales of loans Net gains/(losses) on sales of loans refer to any gains and losses from the disposal of loans which is accounted for as a sale under ASC 860.

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 year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.

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 year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.

Upon the revision, the Company considers loans principal, interest and financial service fee receivables of loans that are 180 days past due uncollectable and the balance shall be charged down to net realizable value (fair value of collaterals, less estimated cost to sell), unless such loans are well-secured and already in the process of recollection. 89 Selected Income Statement Items Total operating income Our total operating income represents the sum of (i) net interest and fees income after collaboration cost and (ii) total non-interest income.

Upon the revision, the Company considers loans principal, interest and financial service fee receivables of loans that are 180 days past due uncollectable and the balance shall be charged down to net realizable value (fair value of collaterals, less estimated cost to sell), unless such loans are well-secured and already in the process of recollection. 102 Selected Income Statement Items Total operating income Our total operating income represents the sum of (i) net interest and fees income after collaboration cost and (ii) total non-interest income.

Effectively, the Group offers loan facilitation services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers referred by the Group. The Group continues to provide post-origination services to the borrowers over the term of the loan agreement.

Effectively, the Group offers loan facilitation services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers referred by the Group. The Group continues to provide post-facilitation services to the borrowers over the term of the loan agreement.

According to the Notice of the Ministry of Finance and the SAT on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax in an All-round Manner, which became effective on May 1, 2016, as amende on March 20, 2019, entities and individuals engaged in the sale of services, intangible assets or fixed assets within the PRC territory are required to pay value-added tax instead of business tax.

According to the Notice of the Ministry of Finance and the SAT on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax in an All-round Manner, which became effective on May 1, 2016, as amended on March 20, 2019, entities and individuals engaged in the sale of services, intangible assets or fixed assets within the PRC territory are required to pay value-added tax instead of business tax.

Estimation of CECLs requires us to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models. we incorporate forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the assets.

Estimation of ACL requires us to make assumptions regarding the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and exposure at default (EAD) models. we incorporate forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the assets.

We facilitate loans by connecting MSE owners with our funding partners. Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We have established a national network of 87 branches and sub-branches in over 50 cities in China.

We facilitate loans by connecting MSE owners with our funding partners. Our primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We have established a national network of 113 branches and sub-branches in over 50 cities in China.

Forfeiture rates are estimated based on historical and future expectations of employee turnover rates. In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan, or the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,720 options to its certain management members and employees to purchase up to 187,933,720 ordinary shares.

Forfeiture rates are estimated based on historical and future expectations of employee turnover rates. In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan, or the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,730 options to its certain management members and employees to purchase up to 187,933,730 ordinary shares.

When credit expectations change, the valuation account is adjusted with changes reported in provision for credit losses. If amounts previously charged off are subsequently expected to be collected, we may recognize a negative allowance, which is limited to the amount that was previously charged off.

When credit expectations change, the valuation account is adjusted with changes reported in provision for credit losses. If amounts previously charged off are subsequently expected to be collected, the Group may recognize a negative allowance, which is limited to the amount that was previously charged off.

Under the collaboration model, when the Group grants loans through Trust Plan, the loan is with the borrower and guarantee is entered into with a separate counterparty (the sales partner). As such, under the definition of ASC 326-20-20, the guarantee arrangement and lending arrangement would be considered freestanding arrangements.

Under the trust lending model, when the Group grants a loan through a trust plan, the loan is with the borrower and guarantee is entered into with a separate counterparty (the sales partner). As such, under the definition of ASC 326-20-20, the guarantee arrangement and lending arrangement would be considered freestanding arrangements.

As a result, we are entitled to (i) the investment return payable to us as subordinated unit holder and (ii) a performance-based service fee up to 7% per annum of the size of trust plans payable to us for our services provided to trust plans.

As a result, we are entitled to (i) the investment return payable to us as subordinated unit holder and (ii) a performance-based service fee up to 5% per annum of the size of trust plans payable to us for our services provided to trust plans.

As a result, we are entitled to (i) the investment return payable to us as subordinated holder and (ii) a performance-based service fee of up to 7% per annum of the size of trust plans payable to us for our services provided to trust plans.

As a result, we are entitled to (i) the investment return payable to us as subordinated holder and (ii) a performance-based service fee of up to 5% per annum of the size of trust plans payable to us for our services provided to trust plans.

These variables include, but are not limited to, gross-domestic product rates and consumer price indexes.

These variables include, but are not limited to, gross-domestic product rates and consumer price indexes. 128

There was no income tax benefit recognized associated with the share-based compensation expenses. As of December 31, 2022, the expenses in relation to the 2019 Option have been fully recognized. Non-GAAP Financial Measure Adjusted Net Income We use adjusted net income, a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes.

There was no income tax benefit recognized associated with the share-based compensation expenses. As of December 31, 2023, the expenses in relation to the 2019 Option have been fully recognized. 115 Non-GAAP Financial Measure Adjusted Net Income We use adjusted net income, a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes.

The incremental borrowing rates determined forcomputing the lease liabilities are based on the People’s Bank of China (PBOC) Benchmark Rates for terms of loans ranging from zero (exclusive) to five years and above. The following tables present the operating lease cost and other supplemental information.

The incremental borrowing rates determined for computing the lease liabilities are based on the People’s Bank of China (PBOC) Benchmark Rates for terms of loans ranging from zero (exclusive) to five years and above. 125 The following tables present the operating lease cost and other supplemental information.

We acquire our borrowers primarily through our sales partners under trust lending model. In 2020, 2021 and 2022, over 99.5% of our borrowers who obtained loans from trust companies were introduced to us by our sales partners under the collaboration model. For details, please refer to “Item 4. Information on the Company—B.

We acquire our borrowers primarily through our sales partners under trust lending model. In 2021, 2022 and 2023, over 99.7% of our borrowers who obtained loans from trust companies were introduced to us by our sales partners under the collaboration model. For details, please refer to “Item 4. Information on the Company—B.

Date of options grant Options granted Exercise price Fair value of option Fair value of ordinary shares January 3, 2017 75,173,492 RMB0.50 RMB1.26 RMB1.72 Date of options grant Options granted Exercise price Fair value of option Fair value of ordinary shares January 3, 2017 112,760,238 RMB0.50 RMB1.27 RMB1.72 December 31, 2019 83,772,346 RMB1.00 RMB0.71 RMB1.40 December 31, 2019 35,902,434 RMB1.00 RMB0.75 RMB1.40 99 For the option granted on January 3, 2017, the Group recognized compensation expenses of RMB39,715,168 and RMB15,886,067 in year 2018 and 2019, respectively.

Date of options grant Options granted Exercise price Fair value of option Fair value of ordinary shares January 3, 2017 75,173,492 RMB0.50 RMB1.26 RMB1.72 Date of options grant Options granted Exercise price Fair value of option Fair value of ordinary shares January 3, 2017 112,760,238 RMB0.50 RMB1.27 RMB1.72 December 31, 2019 83,772,346 RMB1.00 RMB0.71 RMB1.40 December 31, 2019 35,902,434 RMB1.00 RMB0.75 RMB1.40 December 31, 2023 150,346,984 RMB0.50 RMB0.34 RMB0.29 For the 2018 Option, the Group recognized compensation expenses of RMB39,715,168 and RMB15,886,067 in year 2018 and 2019, respectively.

In 2020, 2021 and 2022, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.

In 2021, 2022 and 2023, CNFinance has not transferred any cash proceeds to any of its PRC subsidiaries.

Excluding the options containing service vesting conditions, we calculated the estimated fair value of the options on the respective grant dates using a binomial option pricing model with assistance from independent valuation firms, with the following assumptions: Share awards granted on January 3, 2017 (“2018 Option”) Share awards granted on December 31, 2019 (“2019 Option”) Expected volatility 40.00 % 41.52 % Expected dividends — — Risk-free interest rate 3.10 % 3.12 % Expected term (in years) 5 5 Expected life (in years) 6 8 The contractual life of the share option is used as an input into the binomial option pricing model.

Excluding the options containing service vesting conditions, we calculated the estimated fair value of the options on the respective grant dates using a binomial option pricing model with assistance from independent valuation firms, with the following assumptions: Share awards granted on January 3, 2017 (“2018 Option”) Share awards granted on January 3, 2019 (“2019 Option”) Share awards granted on December 31, 2023 (“Extend 2018 Option”) Expected volatility 40.00 % 41.52 % 59.27 % Expected dividends — — — Risk-free interest rate 3.10 % 3.12 % 2.08 % Expected term (in years) 5 5 — Expected life (in years) 6 8 1 114 The contractual life of the share option is used as an input into the binomial option pricing model.

In order to comply with ASC 310 and ASC 326, the Group considers loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectable and charged-off: (i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement departments; (iii) sales of loans to third parties; (iv) settlement with the borrower, where the Group releases irrecoverable loans through private negotiations with the borrower where the borrower cannot repay the loan in full through self-funding or voluntary sale of the collateral; (v) disposal through legal proceedings, including but not limited to online arbitrations, judicial auctions and court enforcements; or (vi) loans are 180 days past due unless both well-secured and in the process of collection. 96 Allowance for credit losses Allowance for credit losses represents management’s best estimate of probable losses inherent in the portfolio.

Allowance for credit loss and guaranteed liabilities Commencing January 1, 2020, we adopted ASC 326, which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses with an expected loss methodology that is referred to as the CECL model.

Allowance for credit loss and guaranteed liabilities Commencing January 1, 2020, we adopted ASC 326, which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses with a current expected credit loss methodology that is referred to as the ACL model.

Since our financial reporting process inherently relies on the use of estimates and assumptions, our actual results could differ from what we expect.We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used n the current period, would have a material impact on our financial condition or results of operations.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used n the current period, would have a material impact on our financial condition or results of operations.

Business Overview—Risk Management.” Relationship with our funding partners Our collaborative relationships with our funding partners are critical to our operations. We mainly collaborate with our trust company partners through trust lending model. In 2020, 2021 and 2022, 100%, 99.8% and 82.7%of our total home equity loan origination volume was originated under trust lending model, respectively.

Business Overview—Risk Management.” 96 Relationship with our funding partners Our collaborative relationships with our funding partners are critical to our operations. We mainly collaborate with our trust company partners through trust lending model. In 2021, 2022 and 2023, 99.5%, 82.7% and 70.7% of our total home equity loan origination volume was originated under trust lending model, respectively.

Our financing costs for senior units excluding the trust administrative fees, ranged from 6.0% to 11.5% per annum of the issuance number of senior units in 2022. The interest charged by trust company partners to our borrowers affects our profitability.

Our financing costs for senior units excluding the trust administrative fees, ranged from 8.0% to 9.5% per annum of the issuance number of senior units in 2023. The interest charged by trust company partners to our borrowers affects our profitability.

As of December 31, 2022, we had cash and cash equivalents of RMB1.8 billion (US$256.9 million), as compared to cash and cash equivalents of RMB2.2 billion as of December 31, 2021, substantially all of which were held by our PRC subsidiaries. Our cash and cash equivalents consist primarily of bank deposits and are primarily denominated in Renminbi.

As of December 31, 2023, we had cash and cash equivalents of RMB2.0 billion (US$0.3 million), as compared to cash and cash equivalents of RMB1.8 billion as of December 31, 2022, substantially all of which were held by our PRC subsidiaries. Our cash and cash equivalents consist primarily of bank deposits and are primarily denominated in Renminbi.

Net cash used in investing activities was RMB2,350.6 million (US$368.9 million) in 2021, which was attributable to (i) purchase of investment securities of RMB9,496.3 million, (ii) purchases of property, equipment and intangible assets of RMB3.8 million, (iii) loans originated, net of principal collected of RMB2,839.5 million, offset by (i) proceeds from sales of investment securities of RMB8,956.5 million, (i) proceeds from disposal of property, equipment and intangible assets of RMB0.6 million, (iii) proceeds from sales of loans of RMB1,022.0 million, and (iv) proceeds from disposal of non-marketable equity securities of RMB10.0 million. 124 Financing Activities Net cash provided by financing activities was RMB1,005.5 million (US$141.6 million) in 2023, which was attributable to proceeds from interest-bearing borrowings of RMB10,402.3 million, offset by repayment of interest-bearing borrowings of RMB9,294.9 million.

Our research and development expenses which was reported in other expenses of the consolidated statements of comprehensive income were RMB10.0 million, RMB1.6 million and RMB0.8 million (US$0.1 million) in 2020, 2021 and 2022, respectively. 111 5.D.

Our research and development expenses which was reported in other expenses of the consolidated statements of comprehensive income were RMB1.6 million, RMB0.8 million and RMB1.8 million (US$0.25 million) in 2021, 2022 and 2023, respectively. 5.D.

The following table sets forth our charge-off ratio for the periods indicated. For the Year Ended December 31, 2020 2021 2022 Charge-off ratio 4.06 % 0.85 % 0.43 % Our charge-off ratio was 4.06%, 0.85% and 0.43% in 2020, 2021 and 2022.

The following table sets forth our charge-off ratio for the periods indicated. For the Year Ended December 31, 2021 2022 2023 Charge-off ratio 0.85 % 0.43 % 0.82 % Our charge-off ratio was 0.85%, 0.43% and 0.82% in 2021, 2022 and 2023.

The interest rates of our loan products under commercial bank partnership ranged from 9.0% to 15.5% Our practical risk assessment procedure focuses on both credit risks of borrowers and quality of the collateral. We have also established guidelines on characteristics and quality of collateral, including, among others, an LTV ratio capped at 70%.

The interest rates of our loan products under commercial bank partnership ranged from 13.2% to 16.8%. 95 Our practical risk assessment procedure focuses on both credit risks of borrowers and quality of the collateral. We have also established guidelines on characteristics and quality of collateral, including, among others, an LTV ratio capped at 70%.

The restricted amounts of our PRC subsidiaries totaled RMB420.5 million, RMB423.3 million and RMB428.4 million (US$62.1 million) as of December 31, 2020, 2021 and 2022, respectively. In addition, ADS holders may potentially be subject to PRC taxes on dividends paid by CNFinance in the event it is deemed as a PRC resident enterprise for PRC tax purposes.

The restricted amounts of our PRC subsidiaries totaled RMB423.3 million, RMB428.4 million and RMB432.6 million (US$60.9 million) as of December 31, 2021, 2022 and 2023, respectively. In addition, ADS holders may potentially be subject to PRC taxes on dividends paid by CNFinance in the event it is deemed as a PRC resident enterprise for PRC tax purposes.

As of and for the Year Ended December 31, Loan performance metrics (including loans held for sale)* 2020 2021 2022 Delinquency ratio (1) 23.70 % 26.22 % 33.22 % NPL ratio (2) 12.89 % 11.93 % 16.95 % Allowance ratio (3) 7.06 % 10.98 % 9.23 % NPL provision coverage ratio (4) 54.76 % 92.03 % 52.27 % As of and for the Year Ended December 31, Loan performance metrics (excluding loans held for sale) 2020 2021 2022 Delinquency ratio (1) 17.22 % 16.17 % 18.26 % NPL ratio (2) 6.06 % 2.13 % 1.12 % Allowance ratio (3) 6.71 % 10.36 % 8.22 % NPL provision coverage ratio (4) 110.68 % 487.21 % 720.38 % Notes: (1) Delinquency ratio represents total balance of outstanding loan principal for which any installment payment is one or more days past-due as a percentage of the outstanding loan principal as of the date.

As of and for the Year Ended December 31, Loan performance metrics (including loans held for sale)* 2021 2022 2023 Delinquency ratio (1) 26.22 % 33.22 % 34.36 % NPL ratio (2) 11.93 % 16.95 % 21.25 % Allowance ratio (3) 10.98 % 9.23 % 7.56 % NPL provision coverage ratio (4) 92.03 % 52.27 % 35.56 % 97 As of and for the Year Ended December 31, Loan performance metrics (excluding loans held for sale) 2021 2022 2023 Delinquency ratio (1) 16.17 % 18.26 % 15.54 % NPL ratio (2) 2.13 % 1.12 % 1.11 % Allowance ratio (3) 10.36 % 8.22 % 7.90 % NPL provision coverage ratio (4) 487.21 % 720.38 % 713.25 % Notes: (1) Delinquency ratio represents total balance of outstanding loan principal for which any installment payment is one or more days past-due as a percentage of the outstanding loan principal as of the date.

Therefore, the service fee charged to trust plans is considered inter-company transaction and is eliminated together with management service expenses of trust plans for accounting purposes. In 2020, 2021 and 2022, we generated service fees charged to trust plans of RMB505.9 million, RMB440.1 million and RMB446.0 million (US$ 64.7 million), respectively.

Therefore, the service fee charged to trust plans is considered inter-company transaction and is eliminated together with management service expenses of trust plans for accounting purposes. In 2021, 2022 and 2023, we generated service fees charged to trust plans of RMB446.0 million, RMB505.9 million and RMB409.0 million and (US$ 57.6 million), respectively.

Total non-interest income/(losses) comprises net gains/(losses) on sales of loans, net realized gains on sales of investments and other gains, net. In 2020, 2021 and 2022, we generated total non-interest income of RMB206.9 million, non-interest losses of RMB438.4 million and non-interest income of RMB65.9 million (US$9.6 million), respectively.

Total non-interest income/(losses) comprises of net gains/(losses) on sales of loans, net realized gains on sales of investments and other gains, net. In 2021, 2022 and 2023, we generated total non-interest losses of RMB438.4 million, non-interest income of RMB65.9 million and non-interest losses of RMB5.8 million (US$0.8 million), respectively.

Such transfer would be recorded as sales according to ASC 860-10-40-5. At the time of derecognition, any related loan loss allowance is released. Gains and losses on loans transfer as a sale are recognized in the non-interest income.

The loan is derecognized if the Group does not retain any risk and rewards after transferring the loan. Such transfer would be recorded as sales according to ASC 860-10-40-5. At the time of derecognition, any related loan loss allowance is released. Gains and losses on loans transfer as a sale are recognized in the non-interest income.

The fair value of options granted to employees is determined based on a number of factors including valuations. In determining the fair value of our equity instruments, we referred to valuation reports prepared by an independent third-party appraisal firm, based on data we provided.

There were no market conditions associated with the share option grants. The fair value of options granted to employees is determined based on a number of factors including valuations. In determining the fair value of our equity instruments, we referred to valuation reports prepared by an independent third-party appraisal firm, based on data we provided.

Particularly, in the event of a loan defaults and the sales partner chooses to repurchase such loan in installments, the Company charges certain percentage of the loan as the interest income charged to sales partners.

Other gains, net Other gains, net mainly consists of gains of confiscating CRMPs. Particularly, in the event of a loan defaults and the sales partner chooses to repurchase such loan in installments, the Company charges certain percentage of the loan as the interest income charged to sales partners.

Our Effective tax rate decreased to 21.57% for the fiscal year of 2022 from 30.46% in the same period of 2021, primarily due to the combined effect of (a) the non-deductible share-based compensation expenses which decreased to RMB5.8 million (US$0.8 million) for the fiscal year of 2022 from RMB18.8 million in the same period of 2021; and (b) one subsidiary turned losses into incomes during the fourth quarter in 2022, resulting in reversal of the full valuation allowance of the deferred tax asset.

Interest and fees expenses Total interest and fees expenses refer to interest expenses on interest-bearing borrowings and increased by 1.2% to RMB784.8 million (US$113.8 million) for the fiscal year of 2022 as compared to RMB775.6 million for the same period of 2021, primarily due to an increase in daily average outstanding principal of other borrowings.

Interest on deposit with banks Interest on deposits with banks increased by 9.2% to RMB13.1 million (US$1.9 million) for the fiscal year of 2022 as compared to RMB12.0 million for the same period of 2021, primarily due to the higher daily average amount of time deposits. 120 Interest and fees expenses Total interest and fees expenses refer to interest expenses on interest-bearing borrowings and increased by 1.2% to RMB784.8 million (US$113.8 million) for the fiscal year of 2022 as compared to RMB775.6 million for the same period of 2021, primarily due to an increase in daily average outstanding principal of other borrowings.

In 2020, 2021 and 2022, the interest expenses on interest-bearing borrowings was RMB731.3 million, RMB775.6 million and RMB784.8 million (US$113.8 million), accounting for 100%, 100% and 100%, respectively, of our total interest and fees expenses for the same periods.

In 2021, 2022 and 2023, the interest expenses on interest-bearing borrowings was RMB775.6 million, RMB784.8 million and RMB723.1 million (US$101.8 million), accounting for 100%, 100% and 100%, respectively, of our total interest and fees expenses for the same periods.

The term of the options will not exceed ten years from the date of the grant. Accordingly, 60%, 20% and 20% of the award options shall vest on December 31 of each of the years 2017 to 2019, respectively. Unless terminated earlier, the 2017 Plan will terminate automatically in 2022.

As of December 31, 2022 (Including loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 94.87 % 39.77 % 40.08 % NPL Ratio 87.44 % 21.15 % 21.59 % Second lien Delinquency Ratio 36.43 % 30.92 % 30.98 % NPL Ratio 36.41 % 14.86 % 15.09 % As of December 31, 2022 (Excluding loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 71.82 % 21.83 % 21.84 % NPL Ratio 30.99 % 1.06 % 1.11 % Second lien Delinquency Ratio 2.92 % 17.69 % 17.57 % NPL Ratio 2.89 % 1.14 % 1.16 % As of December 31, 2021 (Including loans held for sale)* The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 76.88 % 31.65 % 32.62 % NPL Ratio 60.67 % 15.62 % 16.59 % Second lien Delinquency Ratio 77.87 % 21.23 % 22.07 % NPL Ratio 67.30 % 8.04 % 8.92 % * Certain December 31, 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.

As of December 31, 2023* (Including loans held for sale) Total First lien Delinquency Ratio 38.51 % NPL Ratio 24.90 % Second lien Delinquency Ratio 31.65 % NPL Ratio 18.88 % 98 As of December 31, 2023* (Excluding loans held for sale) Total First lien Delinquency Ratio 17.41 % NPL Ratio 1.38 % Second lien Delinquency Ratio 14.40 % NPL Ratio 0.94 % As of December 31, 2022 (Including loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 94.87 % 39.77 % 40.08 % NPL Ratio 87.44 % 21.15 % 21.59 % Second lien Delinquency Ratio 36.43 % 30.92 % 30.98 % NPL Ratio 36.41 % 14.86 % 15.09 % As of December 31, 2022 (Excluding loans held for sale) The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 71.82 % 21.83 % 21.84 % NPL Ratio 30.99 % 1.06 % 1.11 % Second lien Delinquency Ratio 2.92 % 17.69 % 17.57 % NPL Ratio 2.89 % 1.14 % 1.16 % As of December 31, 2021 (Including loans held for sale)** The traditional facilitation model The collaboration model Total First lien Delinquency Ratio 76.88 % 31.65 % 32.62 % NPL Ratio 60.67 % 15.62 % 16.59 % Second lien Delinquency Ratio 77.87 % 21.23 % 22.07 % NPL Ratio 67.30 % 8.04 % 8.92 % * As of December 31, 2023, we ceased calculating and providing delinquency and NPL ratio under the traditional facilitation model separately because the balance of outstanding loan principal under the traditional facilitation model was small and immaterial to the overall loan portfolio. ** Certain December 31, 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.

Interest and fees expenses We recorded interest and fees expenses of RMB731.3 million, RMB775.6 million and RMB784.8 million (US$113.8 million) in 2020, 2021 and 2022, respectively. Our interest and fees expenses consists of interest expenses on interest-bearing borrowings and interest expenses paid to related parties.

Interest and fees expenses We recorded interest and fees expenses of RMB775.6 million, RMB784.8 million and RMB723.1 million (US$101.8 million) in 2021, 2022 and 2023, respectively. Our interest and fees expenses consists of interest expenses on interest-bearing borrowings and interest expenses paid to related parties.

As a result, at inception of the guarantee, the Group recognized a stand-ready guarantee liability under ASC 460 at fair value with an associated guarantee receivable. Subsequently, the stand-ready guarantee is released into gains from guarantee liabilities on a straight-line basis over the term of the guarantee. See Note 20 in our Consolidated Financial Statements for more details.

Year ended December 31, 2020 2021 2022 RMB RMB RMB Operating lease cost(1) 21,719,042 14,764,364 13,966,943 (1) Amounts include short-term leases that are immaterial.

Year ended December 31, 2021 2022 2023 RMB RMB RMB Operating lease cost (1) 14,764,364 13,966,943 16,366,797 (1) Amounts include short-term leases that are immaterial.

Net interest and fees income after collaboration cost represents total interest and fees income netting of total interest and fees expenses and collaboration cost for sales partners. In 2020, 2021 and 2022, we generated net interest and fees income after collaboration cost of RMB708.4 million, RMB614.6 million and RMB683.3 million (US$99.1 million), respectively.

Net interest and fees income after collaboration cost represents total interest and fees income netting of total interest and fees expenses and collaboration cost for sales partners. In 2021, 2022 and 2023, we generated net interest and fees income after collaboration cost of RMB614.6 million, RMB683.3 million and RMB775.9 million (US$109.3 million), respectively.

Following the implementation of the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax, or the VAT Pilot Plan, most of our PRC subsidiaries and affiliates have been subject to VAT, at a rate of 1% (pursuant to the regulatory development in 2020 in response to the COVID-19 pandemic), 3% or 6%, instead of business tax.

Interest on deposit with banks Interest on deposits with banks increased by 49.6% to RMB19.6 million (US$2.8 million) for the fiscal year of 2023 as compared to RMB13.1 million for the same period of 2022, primarily due to the higher daily average amount of time deposits during the year.

For details, see Note 2(w) to Consolitated Financial Statements on page F-31. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Interest and fees income Total interest and fees income for fiscal year 2022 decreased by 4.6% to RMB1,731.4 million (US$251.0 million) as compared to RMB1,815.8 million for the same period of 2021.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Interest and fees income Total interest and fees income for fiscal year 2022 decreased by 4.6% to RMB1,731.4 million (US$251.0 million) as compared to RMB1,815.8 million for the same period of 2021.

Our cost of the subordinated units as measured by the investment amount was RMB3,045.2 million, RMB2,919.4 million and RMB2,627.4 million (US$380.9 million) as of December 31, 2020, 2021 and 2022, respectively. Our investment return from the subordinated units was RMB658.8 million, RMB578.7 million and RMB381.3 million (US$55.3 million) in 2020, 2021 and 2022, respectively.

Our cost of the subordinated units as measured by the investment amount was RMB2,919.4 million, RMB2,627.4 million and RMB2,377.2 million (US$334.8 million) as of December 31, 2021, 2022 and 2023, respectively. Our investment return from the subordinated units was RMB578.7 million, RMB381.3 million and RMB495.9 million (US$69.9 million) in 2021, 2022 and 20223, respectively.

For the Year Ended December 31 2018 2019 2020 2021 2022 RMB RMB RMB RMB RMB US$ Adjusted net income 900,623,879 550,530,009 176,925,893 83,973,831 141,125,677 20,461,300 Adjusted net income is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP.

For the Year Ended December 31 2019 2020 2021 2022 2023 RMB RMB RMB RMB RMB US$ Adjusted net income 550,530,009 176,925,893 83,973,831 141,125,677 172,134,910 24,244,695 Adjusted net income is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP.

When calculating the effective interest rate, we estimate cash flows considering all contractual terms of the financial instrument but do not consider future credit losses.

When calculating the effective interest rate, we estimate cash flows considering all contractual terms of the financial instrument but do not consider future credit losses. Interest on the impaired assets is recognized using the rate of interest used to discount future cash flows.

Please refer to Note 2(w) to Consolitated Financial Statement on page F-31. (1) Additional provisions refer to the total amount of additional losses of individual loans, which is beyond what was already recorded in the allowance for credit losses at the point of charge-off in different scenarios.

(1) Additional provisions refer to the total amount of additional losses of individual loans, which is beyond what was already recorded in the allowance for credit losses at the point of charge-off in different scenarios.

In 2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by our sales partners under the collaboration model. We originated home equity loans for 17,703, 22,060 and 23,923 (including 3,891 under the commercial bank partnership) borrowers in 2020, 2021 and 2022, respectively.

In 2021, 2022 and 2023, over 99.7% of our borrowers were introduced to us by our sales partners under trust lending model. We originated home equity loans for 22,060 23,923 and 23,910 (including 7,117 under the commercial bank partnership) borrowers in 2021, 2022 and 2023, respectively.

All intercompany transactions and balances, including payment of service fees from trust plans to us, are eliminated in consolidation. Revenue recognition Interest and financing service fees on loans which are amortized over the contractual life of the related loans are recognized in consolidated statements of comprehensive income in accordance with Accounting Standard Codification (“ASC”) 310 using the effective interest method.

Revenue recognition Interest and financing service fees on loans which are amortized over the contractual life of the related loans are recognized in consolidated statements of comprehensive income in accordance with Accounting Standard Codification (“ASC”) 310 using the effective interest method.

Net cash used in financing activities in 2020 was RMB1,367.1 million, which was attributable to repayment of interest-bearing borrowings of RMB7,382.1 million, offset by proceeds from interest-bearing borrowings of RMB6,015.0 million. 107 Capital Expenditures Our capital expenditures represent purchases of property, equipment and intangible assets necessary to support our operations.

Net cash used in financing activities in 2021 was RMB1,932.6 million, which was attributable to repayment of interest-bearing borrowings of RMB7,068.0 million, offset by proceeds from interest-bearing borrowings of RMB5,135.4 million. Capital Expenditures Our capital expenditures represent purchases of property, equipment and intangible assets necessary to support our operations.

Interest on the impaired assets is recognized using the rate of interest used to discount future cash flows. 94 Interest income on debt investment Interest income on debt securities is calculated by applying the effective interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.

Interest income on debt investment Interest income on debt securities is calculated by applying the effective interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.

Pools are reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics. Expected credit losses for loans that do not share similar risk characteristics with other financial assets are measured individually. The collective ACL is measured based on loans that share similar risk characteristics and includes both quantitative and qualitative components.

Our net income decreased from RMB114.9 million in 2020, representing a decrease of 43.2% to RMB65.2 million in 2021, and increased to RMB135.3 million in 2022, representing an increase of 107.5%. 83 Under the contractual arrangements with our trust company partners, we subscribe to subordinated units of trust plans and provide services to trust plans.

Our net income increased from RMB65.2 million in 2021 to RMB135.3 million in 2022, representing an increase of 107.5%, and further increased to RMB164.6 million (US$23.2 million) in 2023, representing an increase of 21.6%. Under the contractual arrangements with our trust company partners, we subscribe to subordinated units of trust plans and provide services to trust plans.

The aggregate amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to post-origination services were RMB67.08 million as of December 31, 2022, among which 64.6% of the remaining performance obligations will be recognized over the following 12 months, and with the remainder recognized thereafter.

The aggregate amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to post-origination services were RMB67.08million and RMB17.53 million as of December 31, 2022 and 2023, respectively. 64.6% and 100% of the remaining performance obligations will be recognized over the following 12 months for the years ended December 31, 2022 and 2023, respectively.

The decrease in VAT was attributable to the characterization of certain amounts as “service fees charged to trust plans” which are a non-deductible item. According to PRC tax regulations, “service fees charged to trust plans” incur a 6% VAT on the subsidiary level, but are not recorded as an input VAT on a consolidated trust plan level.

According to the PRC tax regulations, “service fees charged to trust plans” incur a 6% VAT on the subsidiary level, but are not recorded as an input VAT on a consolidated trust plan level.

The asset-specific component is calculated under ASC 310-10-35, on an individual basis for the loans whose payments are contractually past due more than 90 days or which are considered impaired. A financial asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral.

The individual ACL is estimated on an individual basis for loans whose payments are contractually past due more than 90 days or do not share similar risk characteristics.. A financial asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral.

Charge-off policies For the years ended December 31, 2018 and 2019, the Group considered loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectible charged off: (i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement departments or (iii) the Group concludes that it has exhausted its collection efforts.

Loans principal, interest and financing service fee receivables may be returned to accrual status when all of the borrower’s delinquent balances of loans principal, interest and financing service fees have been settled and the borrower continues to perform in accordance with the loan terms for a period of at least six months. 110 Charge-off policies For the years ended December 31, 2018 and 2019, the Group considered loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectible charged off: (i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement departments or (iii) the Group concludes that it has exhausted its collection efforts.

The weighted average LTV ratio of the home equity loan origination volume was 54.6%, 58.5% and 60.0% in 2020, 2021 and 2022, respectively. As of December 31, 2020, 2021 and 2022, our NPL ratio was 12.89%, 11.93% and 16.95%, respectively. Charge-off ratio in 2020, 2021 and 2022 was 4.06%, 0.85% and 0.43%, respectively.

The weighted average LTV ratio of the home equity loan origination volume was 58.5%, 60.0% and 62.0% in 2021, 2022 and 2023, respectively. As of December 31, 2021, 2022 and 2023, our NPL ratio (including loans held for sale) was 11.93%, 16.95% and 21.25%, respectively. Charge-off ratio in 2021, 2022 and 2023 was 0.85%, 0.43% and 0.82%, respectively.

We cannot assure you, in light of the restrictions in place, or any amendment to be made from time to time, that our current or future PRC subsidiaries will be able to satisfy their respective payment obligations that are denominated in foreign currencies, including the remittance of dividends out of the PRC. 127 Recent Accounting Pronouncements The ASU 2022-02 was adopted on a prospective basis and was effective for the Group on January 1, 2023.

Commencing January 1, 2020, CNFinance adopted ASC 326, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses (“ACL”) with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) model.

Commencing January 1, 2020, CNFinance adopted ASC 326, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaced the incurred loss methodology for determining the provision for credit losses and allowance for credit losses with a current expected credit loss methodology (“ACL”), which is based on past events, current conditions and reasonable and supportable forecasts over the life of the loans.

Also, mortgage agency service revenue, asset management revenue and revenue from rendering of services are recognized in accordance with ASC 606 when following conditions are met: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Also, asset management revenue and revenue from rendering of services are recognized in accordance with ASC 606 when following conditions are met: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. 108 The criteria of revenue recognition as they relate to each of the following major revenue generating activities are described below: Interest and financing service fees on loans Interest and financing service fees on loans, which include financing service fees on loans, are collected from borrowers for loans and related services.

For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % Operating expenses Employee compensation and benefits 190,374,014 27.7 % 211,168,519 119.8 % 197,035,872 28,567,516 26.3 % Share-based compensation expenses 62,073,367 9.0 % 18,766,367 10.6 % 5,774,266 837,190 0.8 % Taxes and surcharges 49,452,609 7.2 % 35,729,101 20.3 % 35,890,761 5,203,671 4.8 % Operating lease cost 21,719,042 3.2 % 14,764,364 8.4 % 13,966,943 2,025,016 1.9 % Other expenses 124,042,182 18.0 % 100,500,388 57.0 % 85,889,497 12,452,807 11.5 % Total operating expenses 447,661,214 65.1 % 380,928,739 216.2 % 338,557,339 49,086,200 45.2 % Other expenses primarily consist of (i) advertising and promotion expenses; (ii) litigation fees; (iii) consulting fees; (iv) research and development expenses; (v) office and commute expenses, which mainly include expenses relating to office renovation, office facility expansion and daily commute; (vi) attorney fees and (vii) entertainment and traveling expenses.

For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % Operating expenses Employee compensation and benefits 211,168,519 119.8 % 197,035,872 26.3 % 204,573,389 28,813,559 26.6 % Share-based compensation expenses 18,766,367 10.6 % 5,774,266 0.8 % 7,517,349 1,058,796 1.0 % Taxes and surcharges 35,729,101 20.3 % 35,890,761 4.8 % 31,343,671 4,414,664 4.1 % Operating lease cost 14,764,364 8.4 % 13,966,943 1.9 % 16,366,797 2,305,215 2.1 % Other expenses 100,500,388 57.0 % 85,889,497 11.5 % 121,520,772 17,115,843 15.8 % Total operating expenses 380,928,739 216.2 % 338,557,339 45.2 % 381,321,978 53,708,077 49.5 % Other expenses primarily consist of (i) advertising and promotion expenses; (ii) litigation fees; (iii) consulting fees; (iv) research and development expenses; (v) office and commute expenses, which mainly include expenses relating to office renovation, office facility expansion and daily commute; (vi) attorney fees and (vii) entertainment and traveling expenses.

Net income Net income increased by 107.7% to RMB135.4 million (US$19.6 million) for the fiscal year of 2022 as compared to RMB65.2 million for the same period of 2021.

Net income Net income increased by 21.5% to RMB164.5 million (US$23.2 million) for the fiscal year of 2023 as compared to RMB135.4 million for the same period of 2022.

For the Year Ended December 31 2018 2019 2020 2021 2022 RMB RMB RMB RMB RMB US$ Net Income 860,908,711 534,643,942 114,852,526 65,207,464 135,351,411 19,624,110 Add: share-based compensation expenses 39,715,168 15,886,067 62,073,367 18,766,367 5,774,266 837,190 Adjusted net income 900,623,879 550,530,009 176,925,893 83,973,831 141,125,677 20,461,300 100 Results of Operations The following table sets forth a summary of our consolidated statements of comprehensive income for the periods presented.

For the Year Ended December 31 2019 2020 2021 2022 2023 RMB RMB RMB RMB RMB US$ Net Income 534,643,942 114,852,526 65,207,464 135,351,411 164,617,561 23,185,899 Add: share-based compensation expenses 15,886,067 62,073,367 18,766,367 5,774,266 7,517,349 1,058,796 Adjusted net income 550,530,009 176,925,893 83,973,831 141,125,677 172,134,910 24,244,695 116 Results of Operations The following table sets forth a summary of our consolidated statements of comprehensive income for the periods presented.

Net cash used in operating activities in 2020 was RMB1,119.6 million due to net income of RMB114.9 million, mainly adjusted for (i) provision for credit losses of RMB77.3 million, (ii) share-based compensation expenses of RMB62.1 million, (iii) depreciation and amortization of RMB6.0 million, (iv) losses on sale of loans of RMB50.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB152.1 million and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB637.7 million.

Net cash provided by operating activities in 2022 was RMB919.3 million (US$133.3 million) due to net income of RMB135.4 million (US$19.6 million), mainly adjusted for (i) provision for credit losses of RMB238.1 million, (ii) share-based compensation expenses of RMB5.8 million, (iii) depreciation and amortization of RMB2.2 million, (iv) losses on sale of loans of RMB44.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB585.4 million and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,550.0 million.

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Item 6. [Reserved]

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

37 edited+3 added−5 removed56 unchanged

2022 filing

2023 filing

The board of directors or any entity appointed by the board of directors to administer the 2018 Plan shall determine the provisions, terms, and conditions of each award including, but not limited to, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, and form of payment upon settlement of the award. Terms of Award .

Conditions of Award . The board of directors or any entity appointed by the board of directors to administer the 2018 Plan shall determine the provisions, terms, and conditions of each award including, but not limited to, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, and form of payment upon settlement of the award.

The audit committee is responsible for, among other things: ● reviewing and recommending to our board for approval, the appointment, re-appointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor; ● approving the remuneration and terms of engagement of the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors at least annually; ● obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● discussing with our independent auditor, among other things, the audits of the financial statements, including whether any material information should be disclosed, issues regarding accounting and auditing principles and practices; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to our board for inclusion in our annual reports; 117 ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; ● establishing and overseeing procedures for the handling of complaints and whistleblowing; ● meeting separately and periodically with management and the independent registered public accounting firm; ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and ● reporting regularly to the board.

The audit committee is responsible for, among other things: ● reviewing and recommending to our board for approval, the appointment, re-appointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor; ● approving the remuneration and terms of engagement of the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors at least annually; ● obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● discussing with our independent auditor, among other things, the audits of the financial statements, including whether any material information should be disclosed, issues regarding accounting and auditing principles and practices; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● reviewing and recommending the financial statements for inclusion within our quarterly earnings releases and to our board for inclusion in our annual reports; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; ● establishing and overseeing procedures for the handling of complaints and whistleblowing; ● meeting separately and periodically with management and the independent registered public accounting firm; ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and ● reporting regularly to the board.

Xu received his bachelor’s degree in mathematics from Hunan Shaoyang Normal College, his first master’s degree in economics from Nankai University and his second master’s degree of public administration from the Lee Kuan Yew School of Public Policy at National University of Singapore. 113 Xi Wang has served as our Independent Director since March 2019. Dr.

Xu received his bachelor’s degree in mathematics from Hunan Shaoyang Normal College, his first master’s degree in economics from Nankai University and his second master’s degree of public administration from the Lee Kuan Yew School of Public Policy at National University of Singapore. Xi Wang has served as our Independent Director since March 2019. Dr.

Gao currently also serves as the independent director of China Haisum Engineering Co., Ltd. and Great Wall Movie and Television Co. Ltd. Mr. Gao received both his bachelor’s degree and master’s degree in finance from Nankai University in China. Lin Xu has served as our Independent Director since our initial public offering. Mr.

Gao currently also serves as the independent director of China Haisum Engineering Co., Ltd. and Great Wall Movie and Television Co. Ltd. Mr. Gao received both his bachelor’s degree and master’s degree in finance from Nankai University in China. 129 Lin Xu has served as our Independent Director since our initial public offering. Mr.

Name Number of Options Outstanding (1) Ordinary Shares Underlying Equity Awards Granted (1) Exercise Price (Per share) (1) Date of Grant (1) Date of Expiration Bin Zhai 40,000,000 40,000,000 RMB0.5 January 3, 2017 December 31,2022 Ning Li 30,000,000 30,000,000 RMB0.5 January 3, 2017 December 31,2022 Jun Qian 20,000,000 20,000,000 RMB0.5 January 3, 2017 December 31,2022 Zehui Zhang 20,000,000 20,000,000 RMB0.5 January 3, 2017 December 31,2022 All directors and executive officers as a group 110,000,000 110,000,000 RMB0.5 January 3, 2017 December 31,2022 Notes: (1) Does not include 35,902,434 options to purchase up to 35,902,434 of our ordinary shares granted under the 2018 Plan on December 31, 2019, with an exercise price of RMB1.0 per share.

Name Number of Options Outstanding (1) Ordinary Shares Underlying Equity Awards Granted (1) Exercise Price (Per share) (1) Date of Grant (1) Date of Expiration Bin Zhai 40,000,000 40,000,000 RMB0.5 January 3, 2017 December 31,2024 Ning Li 30,000,000 30,000,000 RMB0.5 January 3, 2017 December 31,2024 Jun Qian 20,000,000 20,000,000 RMB0.5 January 3, 2017 December 31,2024 Zehui Zhang 20,000,000 20,000,000 RMB0.5 January 3, 2017 December 31,2024 All directors and executive officers as a group 110,000,000 110,000,000 RMB0.5 January 3, 2017 December 31,2024 Notes: (1) Does not include 35,902,434 options to purchase up to 35,902,434 of our ordinary shares granted under the 2018 Plan on December 31, 2019, with an exercise price of RMB1.0 per share.

We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. Audit Committee Our audit committee consists of Mr. Fengyong Gao, Mr. Lin Xu and Mr. Xi Wang, and is chaired by Mr. Fengyong Gao. We have determined that Mr. Fengyong Gao, Mr. Lin Xu and Mr.

We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. 133 Audit Committee Our audit committee consists of Mr. Fengyong Gao, Mr. Lin Xu and Mr. Xi Wang, and is chaired by Mr. Fengyong Gao. We have determined that Mr. Fengyong Gao, Mr. Lin Xu and Mr.

For share incentive grants to our directors and executive officers, please refer to “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.” Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.

For share incentive grants to our directors and executive officers, please refer to “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan.” 130 Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.

Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 702A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr. Lin Xu is No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing. The business address for Mr.

Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 703A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr. Lin Xu is No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing. The business address for Mr.

The term of the options will not exceed ten years from the date of the grant. 2018 CNFinance Holdings Limited Share Incentive Plan On August 27, 2018, we adopted the 2018 CNFinance Holdings Limited Share Incentive Plan, or the 2018 Plan, to replace the 2017 Plan and granted 187,933,720 options to certain management members and employees to purchase up to 187,933,720 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017 Plan.

The term of the options will not exceed ten years from the date of the grant. 2018 CNFinance Holdings Limited Share Incentive Plan On August 27, 2018, we adopted the 2018 CNFinance Holdings Limited Share Incentive Plan, or the 2018 Plan, to replace the 2017 Plan and granted 187,933,730 options to certain management members and employees to purchase up to 187,933,730 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017 Plan.

The term of each award is stated in the award agreement between the Company and the grantee of such award. Amendment, Modification, Suspension or Termination of the 2018 Plan .

Terms of Award . The term of each award is stated in the award agreement between the Company and the grantee of such award. Amendment, Modification, Suspension or Termination of the 2018 Plan .

Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 702A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr.

Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People’s Republic of China. The business address for Mr. Fengyong Gao is Room 703A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr.

The 2018 Plan provides for the issuance of up to an aggregate of 307,608,500 of our ordinary shares. The following paragraphs summarize the terms of the 2018 Plan. Types of Awards . The 2018 Plan permits the awards of options, restricted shares and restricted share units and other rights or benefits under the 2018 Plan. Plan Administration .

The 2018 Plan provides for the issuance of up to an aggregate of 307,608,510 of our ordinary shares. The following paragraphs summarize the terms of the 2018 Plan. Types of Awards . The 2018 Plan permits the awards of options, restricted shares and restricted share units and other rights or benefits under the 2018 Plan. Plan Administration .

Share Ownership The following table sets forth information concerning the beneficial ownership of our ordinary shares, as of March 31, 2023, by: ● each of our directors and executive officers; and ● each person known to us to beneficially own more than 5% of our ordinary shares.

Share Ownership The following table sets forth information concerning the beneficial ownership of our ordinary shares, as of March 31, 2024, by: ● each of our directors and executive officers; and ● each person known to us to beneficially own more than 5% of our ordinary shares.

Xu currently serves as the director general of China Center for Urban Development of NDRC and the chairman of the board of U.S.-China Green Fund. Prior to that, Mr. Xu served as the director general of Development Planning Department of NDRC from 2012 to 2017. Mr.

Xu currently serves as the chairman of the board of U.S.-China Green Fund. Prior to that, Mr. Xu served as the director general of China Center for Urban Development of NDRC from 2017 to 2018, the director general of Development Planning Department of NDRC from 2012 to 2017. Mr.

Share Incentive Plan 2017 SFIL Share Incentive Plan In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan, or the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,720 options to its certain management members and employees to purchase up to 187,933,720 ordinary shares.

Share Incentive Plan 2017 SFIL Share Incentive Plan In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan, or the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,730 options to its certain management members and employees to purchase up to 187,933,730 ordinary shares.

Operating Results—Critical Accounting Policies, Judgments and Estimates—Share-based compensation expenses.” 116 6.C. Board Practices Board of Directors Our Board of Directors consists of six directors, including three independent directors. A director is not required to hold any shares in our company to qualify to serve as a director.

Operating Results—Critical Accounting Policies, Judgments and Estimates—Share-based compensation expenses.” 6.C. Board Practices Board of Directors Our Board of Directors consists of six directors, including four independent directors. A director is not required to hold any shares in our company to qualify to serve as a director.

The compensation committee is responsible for, among other things: ● overseeing the development and implementation of compensation programs in consultation with our management; ● at least annually, reviewing and approving, or recommending to the board for its approval, the compensation for our executive officers; ● at least annually, reviewing and recommending to the board for determination with respect to the compensation of our non-executive directors; ● at least annually, reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; ● reviewing executive officer and director indemnification and insurance matters; ● overseeing our regulatory compliance with respect to compensation matters, including our policies on restrictions on compensation plans and loans to directors and executive officers; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management; and ● reporting regularly to the board. 118 Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Mr.

The compensation committee is responsible for, among other things: ● overseeing the development and implementation of compensation programs in consultation with our management; ● at least annually, reviewing and approving, or recommending to the board for its approval, the compensation for our executive officers; 134 ● at least annually, reviewing and recommending to the board for determination with respect to the compensation of our non-executive directors; ● at least annually, reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; ● reviewing executive officer and director indemnification and insurance matters; ● overseeing our regulatory compliance with respect to compensation matters, including our policies on restrictions on compensation plans and loans to directors and executive officers; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management; and ● reporting regularly to the board.

The calculations in the table below are based on 1,371,643,240 ordinary shares issued and outstanding as of the date of March 31, 2023. 120 Beneficial ownership is determined in accordance with the rules and regulations of the SEC.

The calculations in the table below are based on 1,371,643,240 ordinary shares issued and outstanding as of the date of March 31, 2024. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.

Employees We had 930 employees as of December 31, 2022. Our employees are based in our headquarters in Guangzhou, Guangdong province and various local offices over 50 cities across China. The following table sets forth the breakdown of our employees by function as of December 31, 2022.

Employees We had 897 employees as of December 31, 2023. Our employees are based in our headquarters in Guangzhou, Guangdong province and various local offices over 50 cities across China. The following table sets forth the breakdown of our employees by function as of December 31, 2023.

Bin Zhai, Mr. Jun Qian and Mr. Xi Wang, and is chaired by Mr. Bin Zhai. We have determined that Mr. Xi Wang satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the NYSE.

Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Mr. Bin Zhai, Mr. Jun Qian and Mr. Xi Wang, and is chaired by Mr. Bin Zhai. We have determined that Mr. Xi Wang satisfies the “independence” requirements of Section 303A of the Corporate Governance Rules of the NYSE.

Directors and Executive Officers Age Position/Title Bin Zhai 53 Chairman, Director, Chief Executive Officer Jun Qian 50 Director and Vice President Fengyong Gao 53 Independent Director Lin Xu 61 Independent Director Xi Wang 54 Independent Director Ge Yang 52 Independent Director Zehui Zhang 50 Vice President Huiling Jiang 43 Vice President Jing Li 42 Acting Chief Financial Officer Bin Zhai has served as our Chairman of the Board of Directors since 2017 and our Chief Executive Officer since 2010.

Directors and Executive Officers Age Position/Title Bin Zhai 54 Chairman, Director, Chief Executive Officer Jun Qian 51 Director and Vice President Fengyong Gao 54 Independent Director Lin Xu 62 Independent Director Xi Wang 55 Independent Director Ge Yang 53 Independent Director Zehui Zhang 51 Vice President Huiling Jiang 44 Vice President Jing Li 43 Acting Chief Financial Officer Bin Zhai has served as our Chairman of the Board of Directors since 2017 and our Chief Executive Officer since 2010.

We may also terminate an executive officer’s employment by giving a 30 days’ prior written notice or by paying a compensation of an amount equal to one month’s wages of such executive officer.

We may also terminate an executive officer’s employment by giving a 30 days’ prior written notice or by paying a compensation of an amount equal to one month’s wages of such executive officer. An executive officer may terminate his or her employment at any time by giving a 30 days’ prior written notice.

The administrator of the 2018 Plan may amend, alter, suspend, discontinue or terminate this 2018 Plan, or any Award Agreement hereunder or any portion hereof or thereof at any time; provided, however, that (a) to the extent necessary and desirable to comply with applicable laws defined therein, or stock exchange rules, the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the 2018 Plan that (i) increases the number of shares available under the 2018 Plan (other than any adjustment as provided by Article 8 of the 2018 Plan), (ii) permits the Committee to extend the term of the 2018 Plan or the exercise period for an option beyond ten years from the date of grant, or (iii) results in a material increase in benefits or a change in eligibility requirements.

Bin Zhai may be deemed to have the power to direct voting and disposition of the 243,949,380 of our ordinary shares held by Kylin Investment. The business address of Kylin Investment Holdings Limited is Floor 44, Building G, Winter Square, Gaode Land, Guangzhou, Guangdong Province, People’s Republic of China. 6.F.

The nominating and corporate governance committee is responsible for, among other things: ● recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, expertise, diversity and availability of service to us; ● developing and recommending to our board such policies and procedures with respect to nomination or appointment of members of our board and chairs and members of its committees or other corporate governance matters as may be required pursuant to any SEC or NYSE rules, or otherwise considered desirable and appropriate; ● selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; ● at least annually, reviewing and reassessing the adequacy of the committee charter; ● developing and reviewing at least annually the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices; and ● evaluating the performance and effectiveness of the board as a whole.

Compensation Compensation For the fiscal year ended December 31, 2022, we paid an aggregate of RMB 4.4 million (US$0.6 million) in cash to our executive officers (including our executive directors), and we did not pay any cash compensation to our non-executive directors.

Compensation Compensation For the fiscal year ended December 31, 2023, we paid an aggregate of RMB5.7 million (US$0.8 million) in cash to our executive officers (including our executive directors), and we did not pay any cash compensation to our non-executive directors.

Our directors also owe to our company a duty to exercise the skill they actually possess and such care and diligence that a reasonable prudent person would exercise in comparable circumstances.

Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to exercise the skill they actually possess and such care and diligence that a reasonable prudent person would exercise in comparable circumstances.

For the fiscal year ended December 31, 2022, we paid for our executive officers (including our executive directors) an aggregate of RMB442,334 (US$64,132) of social insurance plans and housing provident funds required by PRC law. We did not pay such insurance or housing fund for our non-executive directors.

For the fiscal year ended December 31, 2023, we paid for our executive officers (including our executive directors) an aggregate of RMB430,686 (US$60,661) of social insurance plans and housing provident funds required by PRC law. We did not pay such insurance or housing fund for our non-executive directors.

An executive officer may terminate his or her employment at any time by giving a 30 days’ prior written notice. 114 Each executive officer has agreed to hold, unless expressly consented to by us, at all times during and after the termination of his or her employment agreement, in strict confidence and not to use, any of our confidential information or the confidential information of our customers and suppliers.

Each executive officer has agreed to hold, unless expressly consented to by us, at all times during and after the termination of his or her employment agreement, in strict confidence and not to use, any of our confidential information or the confidential information of our customers and suppliers.

A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) without special leave of absence from our Board of Directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director; or (vi) is removed from office pursuant to any other provisions of our post-offering amended and restated memorandum and articles of association. 119 Interested Transactions A director may, subject to approval of the chairman of the relevant board meeting and under applicable law or applicable NYSE rules, vote in respect of any contract or transaction in which he or she is interested, provided that the nature of the interest of any directors in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter. 6.D.

As of December 31, 2022 Functions Number % of Total Employees Risk Management 532 57.2 % Sales and Marketing 174 18.7 % General and Administration 99 10.6 % Finance 65 7.0 % Others 60 6.5 % Total 930 100.0 % As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including, among other things, housing, pension, medical insurance and unemployment insurance.

As of December 31, 2023 Functions Number % of Total Employees Risk Management 510 50 % Sales and Marketing 191 21 % General and Administration 89 10 % Finance 48 12 % Others 59 7 % Total 897 100 % 136 As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including, among other things, housing, pension, medical insurance and unemployment insurance.

The purpose of the 2018 Plan is to promote the success and enhance the value of the Company by linking the personal interests of the members of the board of directors, employees and consultants to those of the Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company shareholders.

Pursuant to the terms of 2018 Plan, 50%, 30% and 20% of the award options shall vest on December 31 of each of the years of 2021, 2022 and 2023, respectively. 131 The purpose of the 2018 Plan is to promote the success and enhance the value of the Company by linking the personal interests of the members of the board of directors, employees and consultants to those of the Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company shareholders.

Pursuant to the terms of 2018 Plan, 50%, 30% and 20% of the award options shall vest on December 31 of each of the years of 2021, 2022 and 2023, respectively.

Pursuant to the terms of the 2018 Plan, 60%, 20% and 20% of the award options shall vest on December 31 of each of the years 2017, 2018 and 2019, respectively. On December 31, 2023, 80% of the options issued in 2018 had expired.

Each award under the 2018 Plan is designated in an award agreement, which is a written agreement evidencing the grant of an award executed by the company and the grantee, including any amendments thereto. Conditions of Award .

An employee or consultant who has been granted an award may, if he or she is otherwise eligible, be granted additional awards. Designation of Award . Each award under the 2018 Plan is designated in an award agreement, which is a written agreement evidencing the grant of an award executed by the company and the grantee, including any amendments thereto.

Ordinary Shares Beneficially Owned as of March 31, 2023 Functions Number %* Directors and Executive Officers:† Bin Zhai (1) 283,949,380 20.1 % Jun Qian (2) 20,000,000 1.4 % Zehui Zhang (3) 20,000,000 1.4 % Huiling Jiang — — Jing Li — — Fengyong Gao — — Lin Xu — — Xi Wang — — Ge Yang — — Principal Shareholders: Kylin Investment Holdings Limited (4) 243,949,380 17.8 % Notes: * For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 1,371,643,240, being the number of ordinary shares as of March 31, 2023 and (ii) the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after March 31, 2023. † The business address of our directors and executive officers except for Mr.

Donald Sussman (5) 139,187,000 10.1 % Notes: * For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 1,371,643,240, being the number of ordinary shares as of March 31, 2024 and (ii) the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after March 31, 2024. 137 † The business address of our directors and executive officers except for Mr.

Pursuant to the terms of the 2018 Plan, 60%, 20% and 20% of the award options shall vest on December 31 of each of the years 2017, 2018 and 2019, respectively. On December 31, 2019, we granted 119,674,780 options to certain management members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan.

The Board authorized the Company to extend the expiration date of the expired portion from December 31, 2023 to December 31, 2024. On December 31, 2019, we granted 119,674,780 options to certain management members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan.

Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation Not applicable 121

Donald Sussman is 888 E Las Olas Blvd, Suite 710, Fort Lauderdale, Florida 33301-2395, U.S.A. 6.F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable

Removed

An employee or consultant who has been granted an award may, if he or she is otherwise eligible, be granted additional awards. 115 Designation of Award .

Added

Interested Transactions A director may, subject to approval of the chairman of the relevant board meeting and under applicable law or applicable NYSE rules, vote in respect of any contract or transaction in which he or she is interested, provided that the nature of the interest of any directors in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter. 6.D.

Removed

The following table summarizes, as of the date of this annual report, the outstanding equity awards granted to our directors and executive officers under the 2018 Plan, which replaced the 2017 Plan.

Added

Ordinary Shares Beneficially Owned as of March 31, 2024 Functions Number %* Directors and Executive Officers:† Bin Zhai (1) 283,949,380 20.1 % Jun Qian (2) 20,000,000 1.4 % Zehui Zhang (3) 20,000,000 1.4 % Huiling Jiang — — Jing Li — — Fengyong Gao — — Lin Xu — — Xi Wang — — Ge Yang — — Principal Shareholders: Kylin Investment Holdings Limited (4) 243,949,380 17.8 % S.

Removed

The Corporate Governance Rules of the NYSE generally require that a majority of an issuer’s board of directors must consist of independent directors. However, the Corporate Governance Rules of the NYSE permit foreign private issuers like us to follow “home country practice” in certain corporate governance matters.

Added

S. Donald Sussman, which may be held, in part, in the forms of ADS, with each ADS representing 20 ordinary shares. The foregoing beneficial ownership information of Mr. S. Donald Sussman is based on the Amendment No.3 to the Schedule 13G filed by Mr. S. Donald Sussman with the SEC on February 14, 2024. The business address of Mr. S.

Removed

We rely on this “home country practice” exception and do not have a majority of independent directors serving on our Board of Directors.

Removed

Duties and Functions of Directors Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose.

Item 7. Management's Discussion & Analysis

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

2 edited+1 added−0 removed0 unchanged

2022 filing

2023 filing

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 7.A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” 7.B. Related Party Transactions Employment Agreements See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Employment Agreements and Indemnification Agreements” for a description of the employment agreements we have entered into with our senior executive officers.

Share Incentives See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Share Incentive Plan” for a description of share options we have granted to our directors, officers and other individuals as a group. Other Related Party Transactions The Group did not have any other related party transactions in the year ended December 31, 2022. 7.C.

Compensation—Employment Agreements and Indemnification Agreements” for a description of the employment agreements we have entered into with our senior executive officers. 138 Share Incentives See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Share Incentive Plan” for a description of share options we have granted to our directors, officers and other individuals as a group.

Added

Other Related Party Transactions The Group did not have any other related party transactions in the year ended December 31, 2023. 7.C. Interests of Experts and Counsel Not applicable.

Other CNF 10-K year-over-year comparisons

CNF 10-K 2023 vs 2024