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What changed in Lufax Holding Ltd's 20-F — 2022 vs 2023

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

+1068 added−1161 removedSource: 20-F (2024-04-23) vs 20-F (2023-04-07)

Top changes in Lufax Holding Ltd's 2023 20-F

1068 paragraphs added · 1161 removed · 872 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

342 edited+75 added−138 removed597 unchanged
Biggest changeWe also revised the comparative period presentation to conform to current period classification. 17 Table of Contents Selected Condensed Consolidating Balance Sheets Information As of December 31, 2022 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) ASSETS Cash at bank 1,644,302 39,262,021 526,040 2,449,764 — 43,882,127 Restricted cash — 25,975,201 — 533,430 — 26,508,631 Financial assets at fair value through profit or loss 767,636 23,950,065 39,097 4,332,649 — 29,089,447 Financial assets at amortized cost 6,814 528,331 1,629,734 2,551,569 — 4,716,448 Accounts and other receivables and contract assets 925,798 12,246,665 1,013,976 1,571,696 — 15,758,135 Loans to customers — 211,446,645 — — — 211,446,645 Investments accounted for using the equity method — — 39,271 — — 39,271 Investment in subsidiaries (2)(6) 106,288,653 9,754,538 — — (116,043,191 ) — Net assets of the consolidated affiliated entities — — (967,425 ) — 967,425 — Assets arising from intra-group transactions (1) — 3,702 110,117 10,328 (124,147 ) — Amounts due from consolidated entities (4) 850,333 5,141,170 9,866,828 2,412,424 (18,270,755 ) — Other assets (5) — 17,139,782 397,099 285,222 — 17,822,103 Total assets 110,483,536 345,448,120 12,654,737 14,147,082 (133,470,668 ) 349,262,807 LIABILITIES Payable to platform investors — 185,561 — 1,383,806 — 1,569,367 Borrowings 136,014 35,344,846 1,434,653 — — 36,915,513 Bond payable — 2,143,348 — — — 2,143,348 Accounts and other payables and contract liabilities 3,802,566 7,336,063 352,711 707,314 — 12,198,654 Payable to investors of consolidated structured entities — 177,105,210 — 42,516 — 177,147,726 Convertible promissory note payable 5,164,139 — — — — 5,164,139 Optionally convertible promissory notes 8,142,908 — — — — 8,142,908 Amounts due to consolidated entities (4) 4,117 3,012,166 629,106 14,625,366 (18,270,755 ) — Other liabilities (5) 43,946 10,496,140 462,140 192,251 — 11,194,477 Total liabilities 17,293,690 235,623,334 2,878,610 16,951,253 (18,270,755 ) 254,476,132 EQUITY Total equity attributable to owners of the company (1) 93,189,846 106,288,653 9,776,127 (2,805,289 ) (113,259,491 ) 93,189,846 Non-controlling interests (6) — 3,536,133 — 1,118 (1,940,422 ) 1,596,829 Total equity 93,189,846 109,824,786 9,776,127 (2,804,171 ) (115,199,913 ) 94,786,675 Total liabilities and equity 110,483,536 345,448,120 12,654,737 14,147,082 (133,470,668 ) 349,262,807 18 Table of Contents As of December 31, 2021 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) ASSETS Cash at bank 1,813,616 32,000,349 24,862 904,361 — 34,743,188 Restricted cash — 28,752,100 — 1,701,439 — 30,453,539 Financial assets at fair value through profit or loss 383,888 21,470,668 112,163 9,056,492 — 31,023,211 Financial assets at amortized cost — 1,202,102 1,219,883 1,362,628 — 3,784,613 Accounts and other receivables and contract assets 991,591 18,968,842 549,617 1,834,723 — 22,344,773 Loans to customers — 214,972,110 — — — 214,972,110 Investments accounted for using the equity method — — 39,489 420,007 — 459,496 Investment in subsidiaries (2)(6) 95,872,302 9,584,513 — — (105,456,815 ) — Net assets of the consolidated affiliated entities — — (660,588 ) — 660,588 — Assets arising from intra-group transactions (1) — 9,925 152,489 3,911 (166,325 ) — Amounts due from consolidated entities (4) 12,496,694 10,716,718 13,353,329 535,200 (37,101,941 ) — Other assets (5) — 16,383,267 366,216 5,903,073 — 22,652,556 Total assets 111,558,091 354,060,594 15,157,460 21,721,834 (142,064,493 ) 360,433,486 LIABILITIES Payable to platform investors — 106,247 — 2,641,644 — 2,747,891 Borrowings 319,926 22,017,940 3,171,769 417,782 — 25,927,417 Accounts and other payables and contract liabilities 73,968 7,213,233 739,400 787,654 — 8,814,255 Payable to investors of consolidated structured entities — 195,401,380 — 44,760 — 195,446,140 Convertible promissory note payable 10,669,498 — — — — 10,669,498 Optionally convertible promissory notes 7,405,103 — — — — 7,405,103 Amounts due to consolidated entities (4) 960 16,126,075 1,147,772 19,827,134 (37,101,941 ) — Other liabilities (5) 34,941 13,957,426 489,348 382,264 — 14,863,979 Total liabilities 18,504,396 254,822,301 5,548,289 24,101,238 (37,101,941 ) 265,874,283 EQUITY Total equity attributable to owners of the company (1) 93,053,695 95,872,302 9,609,171 (2,380,404 ) (103,101,069 ) 93,053,695 Non-controlling interests (6) — 3,365,991 — 1,000 (1,861,483 ) 1,505,508 Total equity 93,053,695 99,238,293 9,609,171 (2,379,404 ) (104,962,552 ) 94,559,203 Total liabilities and equity 111,558,091 354,060,594 15,157,460 21,721,834 (142,064,493 ) 360,433,486 19 Table of Contents Selected Condensed Consolidating Cash Flows Information For the Year Ended December 31, 2022 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousand) Cash flows from operating activities Inter-company cash flow (3)(7) — (837,108 ) 55,488 (625,594 ) 1,407,214 — Reclassification (8) — — — 1,487,448 (1,487,448 ) — Other operating activities 166,134 6,000,987 (795,511 ) (916,309 ) — 4,455,301 Net cash (used in)/generated from operating activities 166,134 5,163,879 (740,023 ) (54,455 ) (80,234 ) 4,455,301 Cash flows from investing activities Inter-company cash flow (7) — (108,890 ) (45,083 ) 564,266 (410,293 ) — Reclassification (8) — — — (1,487,448 ) 1,487,448 — Payment for advances to consolidated entities (160,000 ) (4,617,000 ) — — 4,777,000 — Receipts of repayments of the advances and capital return from consolidated entities 12,450,046 10,135,729 3,861,461 158 (26,447,394 ) — Proceeds and interest from sale of investment assets 419,538 89,438,697 1,668,394 9,229,963 — 100,756,592 Payment for acquisition of investment assets (764,885 ) (89,491,629 ) (1,801,200 ) (5,675,189 ) — (97,732,903 ) Other investing activities — (119,372 ) (583 ) 5,543,944 — 5,423,989 Net cash generated from/(used in) investing activities 11,944,699 5,237,535 3,682,989 8,175,694 (20,593,239 ) 8,447,678 Cash flows from financing activities Inter-company cash flow (7) — 996,921 — — (996,921 ) — Repayment for advances and capital return to consolidated entities — (15,084,790 ) (607,021 ) (10,755,583 ) 26,447,394 — Receipts of advances from consolidated entities — 160,000 — 4,617,000 (4,777,000 ) — Proceeds from issuance of shares and other equity securities — 15,938 — — — 15,938 Proceeds from exercise of share-based payment 95,911 — — — — 95,911 Proceeds from borrowings 134,228 8,822,110 90,000 — — 9,046,338 Repayment of interest expenses and borrowings (12,460,570 ) (3,685,647 ) (1,890,327 ) (436,274 ) — (18,472,818 ) Payment for repurchase of ordinary shares — — — — — — Other financing activities — (577,973 ) (25,199 ) (1,000 ) — (604,172 ) Net cash (used in)/generated from financing activities (12,230,431 ) (9,353,441 ) (2,432,547 ) (6,575,857 ) 20,673,473 (9,918,803 ) 20 Table of Contents For the Year Ended December 31, 2021 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousand) Cash flows from operating activities Inter-company cash flow (3)(7) — 920,254 (314,385 ) 1,369,172 (1,975,041 ) — Reclassification (8) — — — 327,497 (327,497 ) — Other operating activities (105,253 ) 5,515,423 230,532 (653,230 ) — 4,987,472 Net cash (used in)/generated from operating activities (105,253 ) 6,435,677 (83,853 ) 1,043,439 (2,302,538 ) 4,987,472 Cash flows from investing activities Inter-company cash flow (7) — (157,536 ) (1,085,232 ) (735,327 ) 1,978,095 — Reclassification (8) — — — (327,497 ) 327,497 — Capital contribution to consolidated entities (109,635 ) — — — 109,635 — Payment for advances to consolidated entities (3,689,678 ) (9,474,627 ) (2,800,000 ) (500,000 ) 16,464,305 — Receipts of repayments of the advances from consolidated entities 7,249,502 16,407,898 706,741 1,064,669 (25,428,810 ) — Proceeds and interest from sale of investment assets 6,522 111,524,589 1,720,840 20,633,784 — 133,885,735 Payment for acquisition of investment assets (383,798 ) (116,771,357 ) (1,996,000 ) (9,440,542 ) — (128,591,697 ) Other investing activities — (130,716 ) (22,656 ) (4,826,844 ) — (4,980,216 ) Net cash generated from/(used in) investing activities 3,072,913 1,398,251 (3,476,307 ) 5,868,243 (6,549,278 ) 313,822 Cash flows from financing activities Inter-company cash flow (7) — — 3,054 — (3,054 ) — Capital contribution from consolidated entities — 109,635 — — (109,635 ) — Repayment for advances to consolidated entities — (7,222,326 ) (1,092,472 ) (17,114,012 ) 25,428,810 — Receipts of advances from consolidated entities — 6,190,304 500,000 9,774,001 (16,464,305 ) — Proceeds from issuance of shares and other equity securities — 22,333 — — — 22,333 Proceeds from exercise of share-based payment 43,456 — — — — 43,456 Proceeds from borrowings 319,535 3,197,000 3,173,900 572,000 — 7,262,435 Repayment of interest expenses and borrowings (925,233 ) (635,029 ) (444,760 ) (664,880 ) — (2,669,902 ) Payment for repurchase of ordinary shares (6,438,455 ) — — — — (6,438,455 ) Other financing activities (1,131 ) (619,797 ) (46,493 ) (474 ) — (667,895 ) Net cash (used in)/generated from financing activities (7,001,828 ) 1,042,120 2,093,229 (7,433,365 ) 8,851,816 (2,448,028 ) 21 Table of Contents For the Year Ended December 31, 2020 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousand) Cash flows from operating activities Inter-company cash flow(3)(7) — (809,615 ) 1,133,480 (1,151,110 ) 827,245 — Other operating activities (98,869 ) 8,687,386 (3,302,903 ) 1,835,668 — 7,121,282 Net cash (used in)/generated from operating activities (98,869 ) 7,877,771 (2,169,423 ) 684,558 827,245 7,121,282 Cash flows from investing activities Inter-company cash flow(7) — 124,906 201,154 501,185 (827,245 ) — Capital contribution to consolidated entities (1,898,193 ) (1,788,549 ) — — 3,686,742 — Payment for advances to consolidated entities (9,456,072 ) (17,182,316 ) (80,000 ) (240,000 ) 26,958,388 — Receipts of repayments of the advances from consolidated entities 2,374,680 5,560,388 1,254,800 4,813,732 (14,003,600 ) — Proceeds and interest from sale of investment assets 1,875 130,041,066 5,978,563 16,449,825 — 152,471,329 Payment for acquisition of investment assets — (133,050,666 ) (5,078,510 ) (28,402,132 ) — (166,531,308 ) Other investing activities — (160,782 ) (85,673 ) (697,316 ) — (943,771 ) Net cash generated from/(used in) investing activities (8,977,710 ) (16,455,953 ) 2,190,334 (7,574,706 ) 15,814,285 (15,003,750 ) Cash flows from financing activities Capital contribution from consolidated entities — 1,897,472 1,789,270 — (3,686,742 ) — Repayment for advances to consolidated entities — (3,514,357 ) (1,457,697 ) (9,031,546 ) 14,003,600 — Receipts of advances from consolidated entities — 9,696,073 1,166,275 16,096,040 (26,958,388 ) — Proceeds from issuance of shares and other equity securities 17,343,739 1,564,253 — — — 18,907,992 Proceeds from borrowings — 9,594,528 463,909 531,162 — 10,589,599 Repayment of interest expenses and borrowings (2,162,653 ) (713,149 ) (875,332 ) (275,959 ) — (4,027,093 ) Other financing activities (4,745 ) (591,830 ) — — — (596,575 ) Net cash (used in)/generated from financing activities 15,176,341 17,932,990 1,086,425 7,319,697 (16,641,530 ) 24,873,923 Notes: (1) This represents the elimination of intercompany transactions among Lufax Holding Ltd, subsidiaries that are not primary beneficiaries of consolidated affiliated entities, the primary beneficiaries of consolidated affiliated entities, and consolidated affiliated entities and consolidated affiliated entities’ subsidiaries, including the elimination of the unrealized profit from inter-company platform service provided and inter-company transfer of assets.
Biggest changeSelected Condensed Consolidating Statements of Operations Information For the Year Ended December 31, 2023 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) Technology platform-based income — 14,712,670 491,117 122,039 — 15,325,826 Net interest income — 12,348,357 — — — 12,348,357 Guarantee income — 4,392,376 — — — 4,392,376 Other income — 1,142,033 — 1,737 — 1,143,770 Investment income 8,105 1,056,014 36,155 (49,821 ) — 1,050,453 Share of net profit/(loss) of investments accounted for using the equity method — — (5,416 ) — — (5,416 ) Inter-company revenues from transactions (1)(3) — (26,829 ) 2,099,755 90,513 (2,163,439 ) — Income/(loss) from subsidiaries and the consolidated affiliated entities (2) 2,042,751 560,773 117,913 — (2,721,437 ) — Total income 2,050,856 34,185,394 2,739,524 164,468 (4,884,876 ) 34,255,366 Operating expenses (155,610 ) (17,485,891 ) (2,008,507 ) (28,005 ) — (19,678,013 ) Credit impairment losses (7 ) (12,758,713 ) 26,351 35,061 — (12,697,308 ) Asset impairment losses — — (31,246 ) — — (31,246 ) Finance costs (996,833 ) 584,708 (5,558 ) 3,660 — (414,023 ) Other gains/(losses) – net (5,638 ) 342,380 (129,724 ) 3,318 — 210,336 Inter-company expenses from transactions (1)(3) (5,903 ) (1,822,148 ) (61,255 ) (311,248 ) 2,200,554 — Total expenses (1,163,991 ) (31,139,664 ) (2,209,939 ) (297,214 ) 2,200,554 (32,610,254 ) Profit/(loss) before income tax 886,865 3,045,730 529,585 (132,746 ) (2,684,322 ) 1,645,112 Less: Income tax expenses — (649,448 ) 28,981 9,841 — (610,626 ) Net profit/(loss) for the year 886,865 2,396,282 558,566 (122,905 ) (2,684,322 ) 1,034,486 Net profit/(loss) attributable to: Owners of Lufax Holding Ltd 886,865 2,042,751 558,566 (122,905 ) (2,478,412 ) 886,865 Non-controlling interests — 353,531 — — (205,910 ) 147,621 886,865 2,396,282 558,566 (122,905 ) (2,684,322 ) 1,034,486 16 Table of Contents For the Year Ended December 31, 2022 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) Technology platform-based income — 27,456,609 1,256,039 505,784 — 29,218,432 Net interest income — 18,981,376 — — — 18,981,376 Guarantee income — 7,372,509 — — — 7,372,509 Other income — 1,180,841 56,403 760 — 1,238,004 Investment income 4,667 860,985 136,350 303,623 — 1,305,625 Share of net profit/(loss) of investments accounted for using the equity method — — (218 ) — — (218 ) Inter-company revenues from transactions (1)(3) 34,028 (70,828 ) 2,577,531 156,029 (2,696,760 ) — Income/(loss) from subsidiaries and the consolidated affiliated entities (2) 10,683,088 163,230 (272,669 ) — (10,573,649 ) — Total income 10,721,783 55,944,722 3,753,436 966,196 (13,270,409 ) 58,115,728 Operating expenses (113,983 ) (23,207,619 ) (3,419,557 ) (148,192 ) — (26,889,351 ) Credit impairment losses 6,525 (16,183,163 ) (44,963 ) (328,864 ) — (16,550,465 ) Asset impairment losses — (7,101 ) — (420,007 ) — (427,108 ) Finance costs (1,753,486 ) 546,691 (73,922 ) 41,725 — (1,238,992 ) Other gains/(losses) – net (161,917 ) 36,186 (34,050 ) 163,240 — 3,459 Inter-company expenses from transactions (1)(3) 447 (2,132,463 ) (66,242 ) (540,809 ) 2,739,067 — Total expenses (2,022,414 ) (40,947,469 ) (3,638,734 ) (1,232,907 ) 2,739,067 (45,102,457 ) Profit before income tax 8,699,369 14,997,253 114,702 (266,711 ) (10,531,342 ) 13,013,271 Less: Income tax expenses — (4,160,102 ) 48,839 (126,969 ) — (4,238,232 ) Net profit for the year 8,699,369 10,837,151 163,541 (393,680 ) (10,531,342 ) 8,775,039 Net profit/(loss) attributable to: Owners of Lufax Holding Ltd 8,699,369 10,683,088 163,541 (393,798 ) (10,452,831 ) 8,699,369 Non-controlling interests — 154,063 — 118 (78,511 ) 75,670 8,699,369 10,837,151 163,541 (393,680 ) (10,531,342 ) 8,775,039 17 Table of Contents For the Year Ended December 31, 2021 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) Technology platform-based income — 36,018,357 917,668 1,358,292 — 38,294,317 Net interest income — 14,174,231 — — — 14,174,231 Guarantee income — 4,370,342 — — — 4,370,342 Other income — 3,860,371 5,925 9,111 — 3,875,407 Investment income 2,289 712,174 215,380 221,910 — 1,151,753 Share of net profit of investments accounted for using the equity method — — (3,428 ) (27,715 ) — (31,143 ) Inter-company revenues from transactions (1)(3) 57,717 320,693 2,585,766 5,249 (2,969,425 ) — Income/(loss) from subsidiaries and the consolidated affiliated entities (2) 18,035,463 (511,184 ) (747,604 ) — (16,776,675 ) — Total income 18,095,469 58,944,984 2,973,707 1,566,847 (19,746,100 ) 61,834,907 Operating expenses (113,056 ) (26,446,062 ) (3,303,952 ) (330,914 ) — (30,193,984 ) Credit impairment losses 49 (6,315,341 ) (10,901 ) (317,534 ) — (6,643,727 ) Asset impairment losses — (814,558 ) (283,809 ) (2,515 ) — (1,100,882 ) Finance costs (1,380,292 ) 360,141 (90,530 ) 115,166 — (995,515 ) Other gains/(losses) – net 197,807 267,902 32,137 1,533 — 499,379 Inter-company expenses from transactions (1)(3) 6,916 (1,703,489 ) 11,700 (1,422,021 ) 3,106,894 — Total expenses (1,288,576 ) (34,651,407 ) (3,645,355 ) (1,956,285 ) 3,106,894 (38,434,729 ) Profit before income tax 16,806,893 24,293,577 (671,648 ) (389,438 ) (16,639,206 ) 23,400,178 Less: Income tax expenses (2,513 ) (6,496,596 ) 65,495 (257,504 ) — (6,691,118 ) Net profit for the year 16,804,380 17,796,981 (606,153 ) (646,942 ) (16,639,206 ) 16,709,060 Net profit/(loss) attributable to: Owners of Lufax Holding Ltd 16,804,380 18,035,463 (606,153 ) (646,942 ) (16,782,368 ) 16,804,380 Non-controlling interests — (238,482 ) — — 143,162 (95,320 ) 16,804,380 17,796,981 (606,153 ) (646,942 ) (16,639,206 ) 16,709,060 18 Table of Contents Selected Condensed Consolidating Balance Sheets Information As of December 31, 2023 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) ASSETS Cash at bank 68,371 39,191,594 31,121 307,699 — 39,598,785 Restricted cash — 10,605,141 — 540,697 — 11,145,838 Financial assets at fair value through profit or loss — 26,547,142 500,798 1,844,664 — 28,892,604 Financial assets at amortized cost — 351,655 — 2,659,915 — 3,011,570 Accounts and other receivables and contract assets 111,852 6,214,003 365,317 602,499 — 7,293,671 Loans to customers — 129,693,954 — — — 129,693,954 Investments accounted for using the equity method — — 2,609 — — 2,609 Investment in subsidiaries and the consolidated affiliated entities (2)(6) 102,403,569 10,299,452 (842,014 ) — (111,861,007 ) — Assets arising from intra-group transactions (1) — 3,702 70,309 9,200 (83,211 ) — Amounts due from consolidated entities (4) 762 701,520 10,542,393 2,313,929 (13,558,604 ) — Other assets (5) — 16,586,663 428,622 368,693 — 17,383,978 Total assets 102,584,554 240,194,826 11,099,155 8,647,296 (125,502,822 ) 237,023,009 LIABILITIES Payable to platform investors — 121,273 — 864,488 — 985,761 Borrowings 4,080,860 34,692,296 50,128 — — 38,823,284 Bond payable — — — — — — Accounts and other payables and contract liabilities 25,228 6,499,377 356,309 96,204 — 6,977,118 Payable to investors of consolidated structured entities — 83,221,428 — 43,310 — 83,264,738 Convertible promissory note payable 5,650,268 — — — — 5,650,268 Optionally convertible promissory notes — — — — — — Amounts due to consolidated entities (4) 639,976 2,381,188 21,534 10,515,906 (13,558,604 ) — Other liabilities (5) 45,734 7,184,671 352,779 54,874 — 7,638,058 Total liabilities 10,442,066 134,100,233 780,750 11,574,782 (13,558,604 ) 143,339,227 EQUITY Total equity attributable to owners of the company (1) 92,142,488 102,403,569 10,318,405 (2,927,486 ) (109,794,488 ) 92,142,488 Non-controlling interests (6) — 3,691,024 — — (2,149,730 ) 1,541,294 Total equity 92,142,488 106,094,593 10,318,405 (2,927,486 ) (111,944,218 ) 93,683,782 Total liabilities and equity 102,584,554 240,194,826 11,099,155 8,647,296 (125,502,822 ) 237,023,009 19 Table of Contents As of December 31, 2022 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) ASSETS Cash at bank 1,644,302 39,262,021 526,040 2,449,764 — 43,882,127 Restricted cash — 25,975,201 — 533,430 — 26,508,631 Financial assets at fair value through profit or loss 767,636 23,950,065 39,097 4,332,649 — 29,089,447 Financial assets at amortized cost 6,814 528,331 1,629,734 2,551,569 — 4,716,448 Accounts and other receivables and contract assets 925,798 12,246,665 1,013,976 1,571,696 — 15,758,135 Loans to customers — 211,446,645 — — — 211,446,645 Investments accounted for using the equity method — — 39,271 — — 39,271 Investment in subsidiaries and the consolidated affiliated entities (2)(6) 106,288,653 9,754,538 (967,425 ) — (115,075,766 ) — Assets arising from intra-group transactions (1) — 3,702 110,117 10,328 (124,147 ) — Amounts due from consolidated entities (4) 850,333 5,141,170 9,866,828 2,412,424 (18,270,755 ) — Other assets (5) — 17,139,782 397,099 285,222 — 17,822,103 Total assets 110,483,536 345,448,120 12,654,737 14,147,082 (133,470,668 ) 349,262,807 LIABILITIES Payable to platform investors — 185,561 — 1,383,806 — 1,569,367 Borrowings 136,014 35,344,846 1,434,653 — — 36,915,513 Bond payable — 2,143,348 — — — 2,143,348 Accounts and other payables and contract liabilities 3,802,566 7,336,063 352,711 707,314 — 12,198,654 Payable to investors of consolidated structured entities — 177,105,210 — 42,516 — 177,147,726 Convertible promissory note payable 5,164,139 — — — — 5,164,139 Optionally convertible promissory notes 8,142,908 — — — — 8,142,908 Amounts due to consolidated entities (4) 4,117 3,012,166 629,106 14,625,366 (18,270,755 ) — Other liabilities (5) 43,946 10,496,140 462,140 192,251 — 11,194,477 Total liabilities 17,293,690 235,623,334 2,878,610 16,951,253 (18,270,755 ) 254,476,132 EQUITY Total equity attributable to owners of the company (1) 93,189,846 106,288,653 9,776,127 (2,805,289 ) (113,259,491 ) 93,189,846 Non-controlling interests (6) — 3,536,133 — 1,118 (1,940,422 ) 1,596,829 Total equity 93,189,846 109,824,786 9,776,127 (2,804,171 ) (115,199,913 ) 94,786,675 Total liabilities and equity 110,483,536 345,448,120 12,654,737 14,147,082 (133,470,668 ) 349,262,807 20 Table of Contents Selected Condensed Consolidating Cash Flows Information For the Year Ended December 31, 2023 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) Cash flows from operating activities Inter-company cash flow (3)(7) — (2,702,602 ) 1,941,230 592,730 168,642 — Reclassification (8) — — — (538,060 ) 538,060 — Other operating activities (100,314 ) 15,309,043 (793,439 ) 614,996 — 15,030,286 Net cash (used in)/generated from operating activities (100,314 ) 12,606,441 1,147,791 669,666 706,702 15,030,286 Cash flows from investing activities Inter-company cash flow (7) (4,600 ) 359,783 (802,767 ) 311,736 135,848 — Reclassification (8) — — — 538,060 (538,060 ) — Payment for advances to consolidated entities (948,295 ) (5,304,798 ) — (700,000 ) 6,953,093 — Receipts of repayments of the advances and capital return from consolidated entities 1,669,873 10,008,874 — — (11,678,747 ) — Receipts of dividends from consolidated entities 5,833,440 — — — (5,833,440 ) — Proceeds and interest from sale of investment assets 774,498 62,963,558 1,723,709 2,539,903 — 68,001,668 Payment for acquisition of investment assets — (72,564,823 ) (500,000 ) (859,230 ) — (73,924,053 ) Other investing activities — (16,773 ) 1,907 (181 ) — (15,047 ) Net cash generated from/(used in) investing activities 7,324,916 (4,554,179 ) 422,849 1,830,288 (10,961,306 ) (5,937,432 ) Cash flows from financing activities Inter-company cash flow (7) — 304,490 — — (304,490 ) — Payment of dividends to consolidated entities — (5,833,440 ) — — 5,833,440 — Repayment for advances and capital return to consolidated entities (4,695,913 ) (1,669,873 ) (633,084 ) (4,679,877 ) 11,678,747 — Receipts of advances from consolidated entities 5,266,949 1,648,294 — 37,850 (6,953,093 ) — Proceeds from issuance of shares and other equity securities — — — — — — Proceeds from exercise of share-based payment 252 — — — — 252 Proceeds from borrowings 4,069,584 10,498,705 50,178 — — 14,618,467 Repayment of interest expenses, borrowings, dividends, and principal of convertible promissory notes (14,292,086 ) (19,611,418 ) (1,451,039 ) — — (35,354,543 ) Payment for repurchase of ordinary shares — — — — — — Other financing activities 854,624 (642,061 ) (31,685 ) — — 180,878 Net cash (used in)/generated from financing activities (8,796,590 ) (15,305,303 ) (2,065,630 ) (4,642,027 ) 10,254,604 (20,554,946 ) 21 Table of Contents For the Year Ended December 31, 2022 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) Cash flows from operating activities Inter-company cash flow (3)(7) — (837,108 ) 55,488 (625,594 ) 1,407,214 — Reclassification (8) — — — 1,487,448 (1,487,448 ) — Other operating activities 166,134 6,000,987 (795,511 ) (916,309 ) — 4,455,301 Net cash (used in)/generated from operating activities 166,134 5,163,879 (740,023 ) (54,455 ) (80,234 ) 4,455,301 Cash flows from investing activities Inter-company cash flow (7) — (108,890 ) (45,083 ) 564,266 (410,293 ) — Reclassification (8) — — — (1,487,448 ) 1,487,448 — Payment for advances to consolidated entities (160,000 ) (4,617,000 ) — — 4,777,000 — Receipts of repayments of the advances and capital return from consolidated entities 12,450,046 10,135,729 3,861,461 158 (26,447,394 ) — Proceeds and interest from sale of investment assets 419,538 89,438,697 1,668,394 9,229,963 — 100,756,592 Payment for acquisition of investment assets (764,885 ) (89,491,629 ) (1,801,200 ) (5,675,189 ) — (97,732,903 ) Other investing activities — (119,372 ) (583 ) 5,543,944 — 5,423,989 Net cash generated from/(used in) investing activities 11,944,699 5,237,535 3,682,989 8,175,694 (20,593,239 ) 8,447,678 Cash flows from financing activities Inter-company cash flow (7) — 996,921 — — (996,921 ) — Repayment for advances and capital return to consolidated entities — (15,084,790 ) (607,021 ) (10,755,583 ) 26,447,394 — Receipts of advances from consolidated entities — 160,000 — 4,617,000 (4,777,000 ) — Proceeds from issuance of shares and other equity securities — 15,938 — — — 15,938 Proceeds from exercise of share-based payment 95,911 — — — — 95,911 Proceeds from borrowings 134,228 8,822,110 90,000 — — 9,046,338 Repayment of interest expenses, borrowings and dividends (12,460,570 ) (3,685,647 ) (1,890,327 ) (436,274 ) — (18,472,818 ) Payment for repurchase of ordinary shares — — — — — — Other financing activities — (577,973 ) (25,199 ) (1,000 ) — (604,172 ) Net cash (used in)/generated from financing activities (12,230,431 ) (9,353,441 ) (2,432,547 ) (6,575,857 ) 20,673,473 (9,918,803 ) 22 Table of Contents For the Year Ended December 31, 2021 Lufax Holding Ltd Subsidiaries That Are Not Primary Beneficiaries of Consolidated Affiliated Entities Primary Beneficiaries of Consolidated Affiliated Entities Consolidated Affiliated Entities and Consolidated Affiliated Entities’ Subsidiaries Elimination Consolidated (RMB in thousands) Cash flows from operating activities Inter-company cash flow (3)(7) — 920,254 (314,385 ) 1,369,172 (1,975,041 ) — Reclassification (8) — — — 327,497 (327,497 ) — Other operating activities (105,253 ) 5,515,423 230,532 (653,230 ) — 4,987,472 Net cash (used in)/generated from operating activities (105,253 ) 6,435,677 (83,853 ) 1,043,439 (2,302,538 ) 4,987,472 Cash flows from investing activities Inter-company cash flow (7) — (157,536 ) (1,085,232 ) (735,327 ) 1,978,095 — Reclassification (8) — — — (327,497 ) 327,497 — Capital contribution to consolidated entities (109,635 ) — — — 109,635 — Payment for advances to consolidated entities (3,689,678 ) (9,474,627 ) (2,800,000 ) (500,000 ) 16,464,305 — Receipts of repayments of the advances from consolidated entities 7,249,502 16,407,898 706,741 1,064,669 (25,428,810 ) — Proceeds and interest from sale of investment assets 6,522 111,524,589 1,720,840 20,633,784 — 133,885,735 Payment for acquisition of investment assets (383,798 ) (116,771,357 ) (1,996,000 ) (9,440,542 ) — (128,591,697 ) Other investing activities — (130,716 ) (22,656 ) (4,826,844 ) — (4,980,216 ) Net cash generated from/(used in) investing activities 3,072,913 1,398,251 (3,476,307 ) 5,868,243 (6,549,278 ) 313,822 Cash flows from financing activities Inter-company cash flow (7) — — 3,054 — (3,054 ) — Capital contribution from consolidated entities — 109,635 — — (109,635 ) — Repayment for advances to consolidated entities — (7,222,326 ) (1,092,472 ) (17,114,012 ) 25,428,810 — Receipts of advances from consolidated entities — 6,190,304 500,000 9,774,001 (16,464,305 ) — Proceeds from issuance of shares and other equity securities — 22,333 — — — 22,333 Proceeds from exercise of share-based payment 43,456 — — — — 43,456 Proceeds from borrowings 319,535 3,197,000 3,173,900 572,000 — 7,262,435 Repayment of interest expenses and borrowings (925,233 ) (635,029 ) (444,760 ) (664,880 ) — (2,669,902 ) Payment for repurchase of ordinary shares (6,438,455 ) — — — — (6,438,455 ) Other financing activities (1,131 ) (619,797 ) (46,493 ) (474 ) — (667,895 ) Net cash (used in)/generated from financing activities (7,001,828 ) 1,042,120 2,093,229 (7,433,365 ) 8,851,816 (2,448,028 ) Notes : (1) This represents the elimination of intercompany transactions among Lufax Holding Ltd, subsidiaries that are not primary beneficiaries of consolidated affiliated entities, the primary beneficiaries of consolidated affiliated entities, and consolidated affiliated entities and consolidated affiliated entities’ subsidiaries, including the elimination of the unrealized profit from inter-company platform services provided and inter-company transfer of assets. 23 Table of Contents (2) This represents the elimination of the investment among Lufax Holding Ltd, subsidiaries that are not the primary beneficiaries of consolidated affiliated entities, the primary beneficiaries of consolidated affiliated entities.
Shanghai Xiongguo holds 100% of the equity interests in Shanghai Huikang Information Technology Co., Ltd., which in turn beneficially owns 100% of the equity interests in Shanghai Lufax. (3) Ping An Puhui Enterprises Management holds the remaining 9.375% of the equity interests in Chongqing Jin’an Microloan Co., Ltd.
Shanghai Xiongguo holds 100% of the equity interests in Shanghai Huikang Information Technology Co., Ltd., which in turn beneficially owns 100% of the equity interests in Shanghai Lufax. (3) Ping An Puhui Enterprises Management Co., Ltd. holds the remaining 9.375% of the equity interests in Chongqing Jin’an Microloan Co., Ltd.
Risk Factors—Risks Relating to Doing Business in China—The PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ordinary shares or ADSs.” Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs.
Risk Factors—Risks Relating to Doing Business in China —The PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ordinary shares or ADSs.” Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ordinary shares and ADSs.
(6) In April 2020, one subsidiary of Lufax Holding Ltd included in the “subsidiaries that are not primary beneficiaries of consolidated affiliated entities” column in the above schedules, two subsidiaries included as “primary beneficiaries of consolidated affiliated entities” and Ping An Group entered into a joint investment of the establishment of Ping An Consumer Finance Co., Ltd., or Consumer Finance.
(6) In April 2020, one subsidiary of Lufax Holding Ltd included in the “subsidiaries that are not primary beneficiaries of consolidated affiliated entities” column in the above schedules, two subsidiaries included as “primary beneficiaries of consolidated affiliated entities” and Ping An Group entered into a joint investment of the establishment of Ping An Consumer Finance Co., Ltd., or Ping An Consumer Finance.
Circular 24 reiterates that the commercial banks shall independently carry out the risk management of online loans and are forbidden from outsourcing the key procedures of loan management. Moreover, regional commercial banks are prohibited from engaging in an online loan business outside the the region of their registration.
Circular 24 reiterates that the commercial banks shall independently carry out the risk management of online loans and are forbidden from outsourcing the key procedures of loan management. Moreover, regional commercial banks are prohibited from engaging in an online loan business outside the region of their registration.
To further strengthen the supervision for credit investigation businesses, the People’s Bank of China issued the Administrative Measures for Credit Investigation Business, or the Credit Investigation Measures, effective January 1, 2022, which stipulate a broad definition of credit information to include all types of information in connection with the provision of services in financial or other activities to assess credit of individuals or enterprises.
To further strengthen the supervision for credit investigation businesses, the People’s Bank of China issued the Administrative Measures for Credit Investigation Business, effective January 1, 2022, which stipulate a broad definition of credit information to include all types of information in connection with the provision of services in financial or other activities to assess credit of individuals or enterprises.
Any such historical or future misconduct by our collection team or the third-party service providers we work with, or the perception that our collection practices are aggressive or not compliant with the relevant laws and regulations, 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 loans, as well as orders of suspension or rectification, cancelation of qualifications or fines and penalties imposed by the relevant regulatory authorities, any of which may have a material adverse effect on our results of operations.
Any such historical or future misconduct by our collection team or the third-party service providers we work with, or the perception that our collection practices are aggressive or not compliant with the relevant laws and regulations, 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 loans, as well as orders of suspension or rectification, cancelation of qualifications or fines and penalties imposed by the regulatory authorities, any of which may have a material adverse effect on our results of operations.
We have used and continue to use of third-party sales channels for some of the products we enable. Our ability to supervise third parties is limited.
We have used and continue to use third-party sales channels for some of the products we enable. Our ability to supervise third parties is limited.
SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on the company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of its internal control over financial reporting.
The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on the company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of its internal control over financial reporting.
If the PRC government deems that our contractual arrangements with the consolidated affiliated entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
If the PRC government deems that our contractual arrangements with the consolidated affiliated entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
The shareholders of the relevant consolidated affiliated entities have executed powers of attorney to appoint the relevant WFOEs or directors authorized by such WFOEs and their successors to vote on their behalf and exercise voting rights as shareholders of the relevant consolidated affiliated entities.
The shareholders of the consolidated affiliated entities have executed powers of attorney to appoint the relevant WFOEs or directors authorized by such WFOEs and their successors to vote on their behalf and exercise voting rights as shareholders of the consolidated affiliated entities.
The Chinese government has provided various tax incentives to our PRC subsidiary, primarily in the form of reduced enterprise income tax rates. For example, under the Enterprise Income Tax Law and its implementation rules, the statutory enterprise income tax rate is 25%.
The Chinese government has provided various tax incentives to our PRC subsidiary, primarily in the form of reduced enterprise income tax rates. For example, under the PRC Enterprise Income Tax Law and its implementation rules, the statutory enterprise income tax rate is 25%.
Under the Enterprise Income Tax Law and its implementation rules, PRC withholding tax at a rate of 10% is generally applicable to dividends from PRC sources paid to investors that are resident enterprises outside of China and that do not have an establishment or place of business in China, or that have an establishment or place of business in China if the income is not effectively connected with the establishment or place of business.
Under the PRC Enterprise Income Tax Law and its implementation rules, PRC withholding tax at a rate of 10% is generally applicable to dividends from PRC sources paid to investors that are resident enterprises outside of China and that do not have an establishment or place of business in China, or that have an establishment or place of business in China if the income is not effectively connected with the establishment or place of business.
As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiary and Consolidated Affiliated Entity to pay any debts they may incur in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi.
As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiary and the consolidated affiliated entity to pay any debts they may incur in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
Taxation—United States Federal Income Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of distributions on the ADSs or ordinary shares to the extent such distribution is treated as an “excess distribution” under the United States federal income tax rules, and such U.S.
Taxation—United States Federal Income Tax Considerations”) may incur significantly increased U.S. federal income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of distributions on the ADSs or ordinary shares to the extent such distribution is treated as an “excess distribution” under the U.S. federal income tax rules, and such U.S.
Risk Factors—Risks Relating to Our Business—Any failure to obtain, renew or retain the requisite approvals, licenses or permits applicable to our retail credit and enablement business may have a material adverse effect on our business, financial condition and results of operations.” Furthermore, as advised by Haiwen & Partners, our PRC counsel, for historical issuances of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, and (iii) have neither received nor were denied such requisite permissions by any PRC authority.
Risk Factors—Risks Relating to Our Business—Any failure to obtain, renew or retain the requisite approvals, licenses or permits applicable to our retail credit and enablement business may have a material adverse effect on our business, financial condition and results of operations.” Furthermore, as advised by Haiwen & Partners, our PRC counsel, for historical issuances of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we (i) are not required to obtain permissions from the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, and (iii) have neither received nor were denied such requisite permissions by any PRC authority.
Risk Factors—Risks Relating to Doing Business in China—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” and “—Governmental control of currency conversion may limit our ability to utilize our income effectively and affect the value of your investment.” For the years ended December 31, 2020, 2021 and 2022, no dividends or distributions were made to Lufax Holding Ltd, the parent company, by our subsidiaries.
Risk Factors—Risks Relating to Doing Business in China—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” and “—Governmental control of currency conversion may limit our ability to utilize our income effectively and affect the value of your investment.” For the years ended December 31, 2021 and 2022, no dividends or distributions were made to Lufax Holding Ltd, the parent company, by our subsidiaries.
Although there are substantial uncertainties as to the interpretation and application of such measures, because we may collect, store and analyze certain information which falls within the scope of so-called credit-related information and conduct credit assessment based on such information and we may also share such information with our business partners under proper authorization, we may be deemed to be collecting and processing credit information of individuals and enterprises, and may be required to obtain credit data collection licenses and complete filing formalities.
Although there are substantial uncertainties as to the interpretation and application of these measures, because we may collect, store and analyze certain information which falls within the scope of so-called credit-related information and conduct credit assessment based on such information and we may also share such information with our business partners under proper authorization, we may be deemed to be collecting and processing credit information of individuals and enterprises, and may be required to obtain credit data collection licenses and complete filing formalities.
Our reputation may also be harmed. 27 Table of Contents On December 31, 2021, the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking and Insurance Regulatory Commission, the CSRC, the Cybersecurity Adminstration of China, SAFE and the State Intellectual Property Office issued the Measures for Administration of Internet Marketing of Financial Products (Draft for Comments), which regulates financial institutions and internet platform operators entrusted by such financial institutions with carrying out internet marketing activities of financial products.
Our reputation may also be harmed. 27 Table of Contents On December 31, 2021, the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking and Insurance Regulatory Commission, the CSRC, the Cybersecurity Administration of China, SAFE and the State Intellectual Property Office issued the Measures for Administration of Internet Marketing of Financial Products (Draft for Comments), which regulates financial institutions and internet platform operators entrusted by such financial institutions with carrying out internet marketing activities of financial products.
As of December 31, 2021, no peer-to-peer products enabled by our company remained outstanding, and none of the new loans we have enabled since August 2019 were funded by peer-to-peer individual investors. 31 Table of Contents To facilitate the exit of investors after we discontinued our enablement of the offering of B2C products in the second half of 2017, we decided to repurchase certain trust plans, asset management plans and debt investments from our investors as a one-time event.
As of December 31, 2021, no peer-to-peer products enabled by our company remained outstanding, and none of the new loans we have enabled since August 2019 were funded by peer-to-peer individual investors. 30 Table of Contents To facilitate the exit of investors after we discontinued our enablement of the offering of B2C products in the second half of 2017, we decided to repurchase certain trust plans, asset management plans and debt investments from our investors as a one-time event.
For example, under the newly amended Securities Law of the PRC, effective March 1, 2020, overseas securities regulatory authorities are prohibited from conducting direct investigations or evidence collection activities within the territories of the PRC, and Chinese entities and individuals are prohibited from providing documents and information in connection with any securities business activities to any organizations and/or persons aboard without the prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council.
For example, under the amended Securities Law of the PRC, effective March 1, 2020, overseas securities regulatory authorities are prohibited from conducting direct investigations or evidence collection activities within the territories of the PRC, and Chinese entities and individuals are prohibited from providing documents and information in connection with any securities business activities to any organizations and/or persons aboard without the prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council.
If we are prevented from obtaining sufficient foreign currency to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs. Recent litigation and negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of our ordinary shares or ADSs.
If we are prevented from obtaining sufficient foreign currency to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs. Litigation and negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of our ordinary shares or ADSs.
As of the date of this annual report, not all landlords of the premises we lease had completed their registration of ownership rights or the registration of our leases. Pursuant to relevant PRC laws and regulations, failure to complete these registrations may expose us to potential monetary fines ranging from RMB1,000 to RMB10,000 per lease.
As of the date of this annual report, not all landlords of the premises we lease had completed their registration of ownership rights or the registration of our leases. Pursuant to PRC laws and regulations, failure to complete these registrations may expose us to potential monetary fines ranging from RMB1,000 to RMB10,000 per lease.
If such claim is supported by the court, the relevant equity interest may be indirectly held by the shareholder’s spouse or another third party who is not subject to obligations under our contractual arrangements, which could result in a loss of the effective control over those consolidated affiliated entities by us.
If such claim is supported by the court, the equity interest may be indirectly held by the shareholder’s spouse or another third party who is not subject to obligations under our contractual arrangements, which could result in a loss of the effective control over those consolidated affiliated entities by us.
These laws and regulations are continually evolving as the Foreign Investment Law was newly enacted on January 1, 2020. On December 19, 2020, the Measures for the Security Review for Foreign Investment were jointly issued by the National Development and Reform Commission and Ministry of Commerce, which stipulates detailed rules for foreign investment that is subject to security review.
These laws and regulations are continually evolving as the Foreign Investment Law was enacted on January 1, 2020. On December 19, 2020, the Measures for the Security Review for Foreign Investment were jointly issued by the National Development and Reform Commission and the Ministry of Commerce, which stipulates detailed rules for foreign investment that is subject to security review.
Risk Factors—Risks Relating to Doing Business in China—The approval of and filings with the CSRC or other PRC governmental authorities may be required in connection with our offshore listings under PRC law, and, if required, we cannot predict whether we will be able to obtain such approval or complete such filings or how long they might take.” 10 Table of Contents Enforceability of Civil Liabilities We are incorporated under the laws of the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services.
Risk Factors—Risks Relating to Doing Business in China—The approval of and filings with the CSRC or other PRC governmental authorities may be required in connection with our offshore listings under PRC law, and, if required, we cannot predict whether we will be able to obtain such approval or complete such filings or how long they might take.” 11 Table of Contents Enforceability of Civil Liabilities We are incorporated under the laws of the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services.
The determination to make dividend distributions and the exact amount of such distributions in any particular semi-annual period will be based upon our operations and earnings, cash flow, financial condition, and other relevant factors, and subject to adjustment and determination by the board of directors. See “Item 8. Financial Information—A.
The determination to make dividend distributions and the exact amount of such distributions in any particular semi-annual period will be based upon our operations and earnings, cash flow, financial condition, and other factors, and subject to adjustment and determination by the board of directors. See “Item 8. Financial Information—A.
Relevant PRC laws and regulations require internet service providers and other network operators to clearly state the authorized purpose, methods and scope of the collection and usage of personal data and obtain the consent of users for the processing of this personal data, as well as to establish user information protection systems with remedial measures.
PRC laws and regulations require internet service providers and other network operators to clearly state the authorized purpose, methods and scope of the collection and usage of personal data and obtain the consent of users for the processing of this personal data, as well as to establish user information protection systems with remedial measures.
We operate in China’s SBO financial services industry, which is rapidly changing and may not develop as we anticipate. The regulatory framework governing the SBO financial services industry continues to develop rapidly and is expected to remain uncertain for the foreseeable future. In addition, our business and business model have evolved significantly in recent years.
We operate in China’s SBO financial services industry, which is rapidly changing and may not develop as we anticipate. The regulatory framework governing the SBO financial services industry continues to develop rapidly and may remain uncertain for the foreseeable future. In addition, our business and business model have evolved significantly in recent years.
Due to the enhanced implementation of the Anti-Monopoly Law, we may be under heightened regulatory scrutiny, which will increase our compliance costs and subject us to heightened risks and challenges. 82 Table of Contents In addition, the security review rules issued by the Ministry of Commerce and became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement.
Due to the enhanced implementation of the Anti-Monopoly Law, we may be under heightened regulatory scrutiny, which will increase our compliance costs and subject us to heightened risks and challenges. 64 Table of Contents In addition, the security review rules issued by the Ministry of Commerce and became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement.
Any similar scrutiny of us, regardless of its lack of merit, could cause the market price of our ordinary shares or ADSs to fall, divert management resources and energy, cause us to incur expenses in defending ourselves against rumors, and increase the premiums we pay for director and officer insurance. 90 Table of Contents The approval of and filings with the CSRC or other PRC governmental authorities may be required in connection with our offshore listings under PRC law, and, if required, we cannot predict whether we will be able to obtain such approval or complete such filings or how long they might take.
Any similar scrutiny of us, regardless of its lack of merit, could cause the market price of our ordinary shares or ADSs to fall, divert management resources and energy, cause us to incur expenses in defending ourselves against rumors, and increase the premiums we pay for director and officer insurance. 70 Table of Contents The approval of and filings with the CSRC or other PRC governmental authorities may be required in connection with our offshore listings under PRC law, and, if required, we cannot predict whether we will be able to obtain such approval or complete such filings or how long they might take.
If we fail to comply with the requirements and standards set by the relevant authorities or if our apps fail to remain on the white list, mobile app stores including the iOS App Store and Android app stores may cease the distribution of our mobile apps and our business may be materially and adversely affected.
If we fail to comply with the requirements and standards set by the authorities or if our apps fail to remain on the white list, mobile app stores including the iOS App Store and Android app stores may cease the distribution of our mobile apps and our business may be materially and adversely affected.
Any failure to comply with PRC property laws and relevant regulations regarding certain of our leased properties may negatively affect our business, results of operations and financial condition. We operated our businesses primarily in leased properties in Shenzhen, Shanghai, Chongqing and other cities in China.
Any failure to comply with PRC property laws and regulations regarding certain of our leased properties may negatively affect our business, results of operations and financial condition. We operated our businesses primarily in leased properties in Shenzhen, Shanghai, Chongqing and other cities in China.
We believe that recent litigation and negative publicity surrounding companies with operations in China that are listed in the United States have negatively impacted stock prices of these companies. Certain politicians in the United States have publicly warned investors to shun China-based companies listed in the United States.
We believe that litigation and negative publicity surrounding companies with operations in China that are listed in the United States have negatively impacted stock prices of these companies. Certain politicians in the United States have publicly warned investors to shun China-based companies listed in the United States.
In addition, the equity transfer price may be subject to review and tax adjustment by the relevant tax authorities. The equity transfer price to be received by the consolidated affiliated entities’ shareholders under the contractual arrangements may also be subject to enterprise income tax, and these amounts could be substantial.
In addition, the equity transfer price may be subject to review and tax adjustment by the tax authorities. The equity transfer price to be received by the consolidated affiliated entities’ shareholders under the contractual arrangements may also be subject to enterprise income tax, and these amounts could be substantial.
Much of our system hardware is hosted in leased facilities located in Shanghai, Shenzhen and Hebei that are operated by our IT staff. We also maintain a real-time backup system and a remote backup system at separate facilities also located in Shanghai, Shenzhen and Hebei.
Much of our system hardware is hosted in leased facilities located in Shanghai and Shenzhen that are operated by our IT staff. We also maintain a real-time backup system and a remote backup system at separate facilities also located in Shanghai and Shenzhen.
You should consider our business and future prospects in light of the risks and challenges we may encounter in this rapidly changing industry, including our ability to: • improve our financial performance; • attract and retain small business owners and other borrowers; • navigate a complex and evolving regulatory environment; • continue to develop, maintain and scale our mobile apps; • convince prospective borrowers, users and partners of the value of products and services on our mobile apps; • increase our market share and offer personalized and competitive services; • offer or maintain attractive fees while driving the growth and profitability of our business; • develop sufficient, diversified, sustainable, cost-efficient and reputable institutional funding partners; • source third-party credit enhancement at commercially attractive prices, or grow our balance sheet to support our financing guarantee business, to meet the demands of our funding partners; • continue to develop and improve the effectiveness, accuracy and efficiency of our proprietary credit assessment and risk management technology; • improve our operational efficiency and maintain profitability; • enhance our technology infrastructure to support the growth of our business, maintain the security of our system and the confidentiality of the information provided and utilized across our system; • effectively maintain, upgrade and scale our financial and risk management controls and procedures; • defend ourselves against legal proceedings and regulatory actions, such as claims against us relating to our sales and collection efforts, fee structures, employee and third-party misconduct, intellectual property, cybersecurity or privacy; • operate without being adversely affected by negative publicity about our industry in general and our company in particular, including baseless or ill-intentioned negative publicity; and • navigate fluctuations in economic conditions.
You should consider our business and future prospects in light of the risks and challenges we may encounter in this rapidly changing industry, including our ability to: • improve our financial performance; • attract and retain small business owners and other borrowers; • navigate a complex and evolving regulatory environment; • continue to develop, maintain and scale our mobile apps; • convince prospective borrowers, users and partners of the value of products and services on our mobile apps; • increase our market share and offer personalized and competitive services; • offer or maintain attractive fees while driving the growth and profitability of our business; • develop sufficient, diversified, sustainable, cost-efficient and reputable institutional funding partners; • grow our balance sheet to support our financing guarantee business to meet the demands of our funding partners; • continue to develop and improve the effectiveness, accuracy and efficiency of our proprietary credit assessment and risk management technology; • improve our operational efficiency and maintain profitability; • enhance our technology infrastructure to support the growth of our business, maintain the security of our system and the confidentiality of the information provided and utilized across our system; • effectively maintain, upgrade and scale our financial and risk management controls and procedures; • defend ourselves against legal proceedings and regulatory actions, such as claims against us relating to our sales and collection efforts, fee structures, employee and third-party misconduct, intellectual property, cybersecurity or privacy; • operate without being adversely affected by negative publicity about our industry in general and our company in particular, including baseless or ill-intentioned negative publicity; and • navigate fluctuations in economic conditions.
A significant judgment or regulatory action against us or a material disruption in our business arising from adverse adjudications in proceedings against our directors, officers or employees would have a material adverse effect on our liquidity, business, financial condition, results of operations, reputation and prospects. 44 Table of Contents Defending litigation or other claims against us is costly and can impose a significant burden on our management and employees, and there can be no assurances that favorable final outcomes will be obtained in all cases.
A significant judgment or regulatory action against us or a material disruption in our business arising from adverse adjudications in proceedings against our directors, officers or employees would have a material adverse effect on our liquidity, business, financial condition, results of operations, reputation and prospects. 38 Table of Contents Defending litigation or other claims against us is costly and can impose a significant burden on our management and employees, and there can be no assurances that favorable final outcomes will be obtained in all cases.
Our holding company in the Cayman Islands, the consolidated affiliated entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated affiliated entities and, consequently, significantly affect the financial performance of the consolidated affiliated entities and our company as a group. 67 Table of Contents We have been further advised by our PRC counsel, Haiwen & Partners, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
Our holding company in the Cayman Islands, the consolidated affiliated entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated affiliated entities and, consequently, significantly affect the financial performance of the consolidated affiliated entities and our company as a group. 53 Table of Contents We have been further advised by our PRC counsel, Haiwen & Partners, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.” 8 Table of Contents Our corporate structure is subject to risks associated with our contractual arrangements with the consolidated affiliated entities.
Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.” 9 Table of Contents Our corporate structure is subject to risks associated with our contractual arrangements with the consolidated affiliated entities.
New business operations, products and services also require significant expense and resources to attract and acquire customers, and they may fail to gain market acceptance for a variety of reasons: • our estimate of market demand may not be accurate so that we may not be able to launch products and services that align with and meet specific market demand, or there may not be sufficient market demand for our new business operations; • changes on our mobile apps, including the introduction of new services and mobile app functions, may not be favorably accepted by existing users; • we may fail to properly assess creditworthiness of new borrowers, or accurately price new loan products; • negative publicity or news about our existing products and services may dissuade customers from trying new products and services; • we may experience delays in launching the new business operations or loan and investment products or services; and • our competitors may offer products and services that are more attractive.
New business operations, products and services also require significant expense and resources to attract and acquire customers, and they may fail to gain market acceptance for a variety of reasons: • our estimate of market demand may not be accurate so that we may not be able to launch products and services that align with and meet specific market demand, or there may not be sufficient market demand for our new business operations; 40 Table of Contents • changes on our mobile apps, including the introduction of new services and mobile app functions, may not be favorably accepted by existing users; • we may fail to properly assess creditworthiness of new borrowers, or accurately price new loan products; • negative publicity or news about our existing products and services may dissuade customers from trying new products and services; • we may experience delays in launching the new business operations or loan and investment products or services; and • our competitors may offer products and services that are more attractive.
Haiwen & Partners, our counsel as to PRC law, has advised us that (i) it would be highly unlikely that the courts of the PRC would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers that are predicated upon the civil liability provisions of the federal securities laws of the United States or the securities laws of any state in the United States, and (ii) there is uncertainty as to whether the courts of the PRC would entertain original actions brought in the PRC against us or our directors or officers that are predicated upon the federal securities laws of the United States or the securities laws of any state in the United States.
Haiwen & Partners, our counsel as to PRC law, has advised us that (i) it would be highly uncertain that the courts of the PRC would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers that are predicated upon the civil liability provisions of the federal securities laws of the United States or the securities laws of any state in the United States, and (ii) there is uncertainty as to whether the courts of the PRC would entertain original actions brought in the PRC against us or our directors or officers that are predicated upon the federal securities laws of the United States or the securities laws of any state in the United States.
Furthermore, we cannot assure you that the information we receive from our third-party data partners are obtained and transmitted to us in full compliance with relevant laws and regulations.
Furthermore, we cannot assure you that the information we receive from our third-party data partners are obtained and transmitted to us in full compliance with laws and regulations.
Under the circumstances that we decide to make an amendment to the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying ordinary shares, but will have no right to any compensation whatsoever. 100 Table of Contents Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
Under the circumstances that we decide to make an amendment to the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their ADSs and become direct holders of the underlying ordinary shares, but will have no right to any compensation whatsoever. 77 Table of Contents Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to direct the activities of the operation of the consolidated affiliated entities, and our ability to conduct our business may be negatively affected. 70 Table of Contents The shareholders of the consolidated affiliated entities may have actual or potential conflicts of interest with us, which may adversely affect our business and financial condition.
In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to direct the activities of the operation of the consolidated affiliated entities, and our ability to conduct our business may be negatively affected. 55 Table of Contents The shareholders of the consolidated affiliated entities may have actual or potential conflicts of interest with us, which may adversely affect our business and financial condition.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities. 93 Table of Contents The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities. 71 Table of Contents The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.
For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file our annual report on Form 20-F for the fiscal year ended December 31, 2022. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file our annual report on Form 20-F for the fiscal year ended December 31, 2023. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
Nevertheless, products and services we offer may fail to attain sufficient market acceptance for many reasons, including: • users may not find the terms of retail credit products we offer competitive or appealing; • we may fail to predict market demand accurately and provide products and services that meet this demand in a timely fashion; • borrowers and funding partners using our mobile apps may not like, find useful or agree with the changes we adopt from time to time; • there may be defects, errors or failures on our mobile apps; • there may be negative publicity, including baseless or ill-intentioned negative publicity, about the products or services available on our mobile apps, or the performance or effectiveness of our mobile apps; and • regulations or rules applicable to us may constrain our operations and growth.
Nevertheless, products and services we offer may fail to attain sufficient market acceptance for many reasons, including: • users may not find the terms of retail credit products we offer competitive or appealing; • we may fail to predict market demand accurately and provide products and services that meet this demand in a timely fashion; • borrowers and funding partners using our mobile apps may not like, find useful or agree with the changes we adopt from time to time; 39 Table of Contents • there may be defects, errors or failures on our mobile apps; • there may be negative publicity, including baseless or ill-intentioned negative publicity, about the products or services available on our mobile apps, or the performance or effectiveness of our mobile apps; and • regulations or rules applicable to us may constrain our operations and growth.
For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F. 9 Table of Contents Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F. 10 Table of Contents Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid in China and Hong Kong, assuming that we have taxable earnings in the consolidated affiliated entities and we pay a dividend to shareholders of Lufax Holding Ltd: Taxation Scenario Statutory Tax and Standard Hypothetical pre-tax earnings in the consolidated affiliated entities (1) 100.00 % Tax on earnings at statutory rate of 25% at the level of the wholly foreign-owned enterprise (2) (25.00 )% Net earnings available for distribution 75.00 % Withholding tax at standard rate of 10% (3) (7.50 )% Net distributions to Lufax Holding Ltd/Shareholders 67.50 % Notes: (1) For purposes of this example, the tax calculation has been simplified.
For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid in China and Hong Kong, assuming that we have taxable earnings in the consolidated affiliated entities and we pay a dividend to shareholders of Lufax Holding Ltd: Taxation Scenario Statutory Tax and Standard Hypothetical pre-tax earnings in the consolidated affiliated entities (1) 100.00 % Tax on earnings at statutory rate of 25% at the level of the wholly foreign-owned enterprise (2) (25.00 )% Net earnings available for distribution 75.00 % Withholding tax at standard rate of 10% (3) (7.50 )% Net distributions to Lufax Holding Ltd/Shareholders 67.50 % 15 Table of Contents Notes: (1) For purposes of this example, the tax calculation has been simplified.
Non-compliance with any existing or new regulation may result in penalties, limitations and prohibitions on our business activities, and we have been modifying and may need to continue to modify our business operations in response to changes in laws and regulations.” 26 Table of Contents Furthermore, there remain uncertainties regarding whether our charging strategies for service fees and the amount of service fees charged by our financing guarantee company could be accepted or supported by the local courts, and we cannot rule out the possibility that we may be required to change our charging strategies for service fees and the amount of service fees charged by our financing guarantee company if there is any change in the interpretation and implementation of applicable laws, regulations and governmental policies in the future.
Non-compliance with any existing or new regulation may result in penalties, limitations and prohibitions on our business activities, and we have been modifying and may need to continue to modify our business operations in response to changes in laws and regulations.” Furthermore, there remain uncertainties regarding whether our charging strategies for service fees and the amount of service fees charged by our financing guarantee company could be accepted or supported by the local courts, and we cannot rule out the possibility that we may be required to change our charging strategies for service fees and the amount of service fees charged by our financing guarantee company if there is any change in the interpretation and implementation of applicable laws, regulations and governmental policies in the future.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business. 61 Table of Contents Our quarterly operational results, including the levels of our income, expenses and other key metrics, may vary significantly in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results may not be meaningful, especially given our relatively limited operating history.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business. 49 Table of Contents Our quarterly operational results, including the levels of our income, expenses and other key metrics, may vary significantly in the future due to a variety of factors, some of which are outside of our control, and period-to-period comparisons of our operating results may not be meaningful, especially given our relatively limited operating history.
SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. 83 Table of Contents Under these foreign exchange regulations, PRC residents who make, or have previously made, prior to the implementation of these foreign exchange regulations, direct or indirect investments in offshore companies are required to register those investments.
SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. 65 Table of Contents Under these foreign exchange regulations, PRC residents who make, or have previously made, prior to the implementation of these foreign exchange regulations, direct or indirect investments in offshore companies are required to register those investments.
If we are unable to control our labor costs or pass on these increased labor costs, our financial condition and results of operations may be adversely affected. 63 Table of Contents International expansion may expose us to additional risks. While our historical operations have been focused in China, we have expanded our operations internationally in recent years.
If we are unable to control our labor costs or pass on these increased labor costs, our financial condition and results of operations may be adversely affected. 50 Table of Contents International expansion may expose us to additional risks. While our historical operations have been focused in China, we have expanded our operations internationally in recent years.
If we or the consolidated affiliated entities are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals to operate our business, the relevant PRC regulatory authorities, including the Ministry of Commerce and the Ministry of Industry and Information Technology, would have broad discretion to take action in dealing with such violations or failures, including: • revoking the business licenses and/or operating licenses of such entities; • imposing fines on us; • confiscating any of our income that they deem to be obtained through illegal operations; • discontinuing or placing restrictions or onerous conditions on our operations; • placing restrictions on our right to collect income; • shutting down our servers or blocking our app/websites; • requiring us to restructure our ownership structure or operations; • restricting or prohibiting our use of the proceeds from our initial public offering or other of our financing activities to finance the business and operations of the consolidated affiliated entities and their subsidiaries; 68 Table of Contents • imposing conditions or requirements with which we may not be able to comply; or • taking other regulatory or enforcement actions that could be harmful to our business.
If we or the consolidated affiliated entities are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals to operate our business, the PRC regulatory authorities, including the Ministry of Commerce and the Ministry of Industry and Information Technology, may have broad discretion to take action in dealing with such violations or failures, including: • revoking the business licenses and/or operating licenses of such entities; • imposing fines on us; • confiscating any of our income that they deem to be obtained through illegal operations; • discontinuing or placing restrictions or onerous conditions on our operations; • placing restrictions on our right to collect income; • shutting down our servers or blocking our app/websites; • requiring us to restructure our ownership structure or operations; • restricting or prohibiting our use of the proceeds from our initial public offering or other of our financing activities to finance the business and operations of the consolidated affiliated entities and their subsidiaries; • imposing conditions or requirements with which we may not be able to comply; or • taking other regulatory or enforcement actions that could be harmful to our business.
During our daily operations, we are subject to the risk of errors, misconduct and illegal activities by our employees and third-party business partners and service providers, including: • engaging in misrepresentation or fraudulent activities when marketing our products or performing our services to borrowers; 43 Table of Contents • improperly acquiring, using or disclosing confidential information of our borrowers or other parties; • failing to report conflicts of interest accurately or timely; • concealing unauthorized or unsuccessful illegal activities; or • otherwise not complying with applicable laws and regulations or our internal policies or procedures.
During our daily operations, we are subject to the risk of errors, misconduct and illegal activities by our employees and third-party business partners and service providers, including: • engaging in misrepresentation or fraudulent activities when marketing our products or performing our services to borrowers; • improperly acquiring, using or disclosing confidential information of our borrowers or other parties; • failing to report conflicts of interest accurately or timely; • concealing unauthorized or unsuccessful illegal activities; or • otherwise not complying with applicable laws and regulations or our internal policies or procedures.
Three platforms operated by the consolidated affiliated entities were engaging in peer-to-peer lending services at that time. After close consultation with regulators, we ceased enabling new loans using peer-to-peer funding since August 2019, and as of December 31, 2022, none remained outstanding.
Three platforms operated by the consolidated affiliated entities were engaging in peer-to-peer lending services at that time. After close consultation with regulators, we ceased enabling new loans using peer-to-peer funding since August 2019, and as of December 31, 2023, none remained outstanding.
Such competition may adversely affect our competitive position and business prospects. 37 Table of Contents Our cooperation with various third parties is integral to the smooth operation of our business. If these third parties fail to perform or provide reliable or satisfactory services, our business, financial condition and results of operations may be materially and adversely affected.
Such competition may adversely affect our competitive position and business prospects. 34 Table of Contents Our cooperation with various third parties is integral to the smooth operation of our business. If these third parties fail to perform or provide reliable or satisfactory services, our business, financial condition and results of operations may be materially and adversely affected.
Nonconformity with the property’s planned use may lead to fines imposed by the competent authority, and in extreme case, government order to revoke the lease or reclaim the land. Moreover, a small portion of the leased properties may also be subject to mortgage at the time the leases were entered into.
Nonconformity with the property’s planned use may lead to fines imposed by the competent authority, and in extreme cases, government order to revoke the lease or reclaim the land. Moreover, a small portion of the leased properties may also be subject to mortgage at the time the leases were entered into.
According to 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.
According to this notice, 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.
In this consolidated affiliated entity consolidating schedule, Consumer Finance’s financial information was recorded in the “subsidiaries that are not primary beneficiaries of consolidated affiliated entities” column. The three subsidiaries applied equity method in accounting for their investments in Consumer Finance. Each of the three subsidiaries has significant influence but not control over Consumer Finance.
In this consolidated affiliated entity consolidating schedule, Ping An Consumer Finance’s financial information was recorded in the “subsidiaries that are not primary beneficiaries of consolidated affiliated entities” column. The three subsidiaries applied equity method in accounting for their investments in Ping An Consumer Finance. Each of the three subsidiaries has significant influence but not control over Ping An Consumer Finance.
Uncertainty remains with respect to how this regulation will be interpreted, implemented or applied by the CSRC or other relevant government authorities.
Uncertainty remains with respect to how this regulation will be interpreted, implemented or applied by the CSRC or other government authorities.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.
Additionally, the Cybersecurity Review Measures also grant the Cybersecurity Administration of China and other competent authorities the right to initiate a cybersecurity review without application, if any member organization of the cybersecurity review mechanism has reason to believe any internet products, services or data processing activities affect or may affect national security.
Additionally, the new version of the Cybersecurity Review Measures also grant the Cybersecurity Administration of China and other competent authorities the right to initiate a cybersecurity review without application, if any member organization of the cybersecurity review mechanism has reason to believe any internet products, services or data processing activities affect or may affect national security.
The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States.
The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States or Hong Kong. In particular, the Cayman Islands has a less developed body of securities laws than the United States.
Reasons for the Offer and Use of Proceeds Not applicable. 23 Table of Contents D. Risk Factors Risks Relating to Our Business and Industry Our industry is rapidly changing, and our business has evolved significantly in recent years, which makes it difficult to evaluate our future prospects.
Reasons for the Offer and Use of Proceeds Not applicable. 24 Table of Contents D. Risk Factors Risks Relating to Our Business and Industry Our industry is rapidly changing, and our business has evolved significantly in recent years, which makes it difficult to evaluate our future prospects.
In particular, the operations of our business may be severely affected in a credit crisis or prolonged downturn in the credit markets. For example, we may face increased risk of default or delinquency of borrowers, which will result in lower returns or losses for our funding partners, credit enhancement providers and us.
In particular, the operations of our business may be severely affected in a credit crisis or prolonged downturn in the credit markets. For example, we may face increased risk of default or delinquency of borrowers, which will result in lower returns or losses for our funding partners and us.
These factors could damage our brand and reputation, divert our employees’ attention and subject us to liability, any of which could adversely affect our business, financial condition and results of operations. 57 Table of Contents Our operations depend on the performance of the internet infrastructure and telecommunications networks in China.
These factors could damage our brand and reputation, divert our employees’ attention and subject us to liability, any of which could adversely affect our business, financial condition and results of operations. 46 Table of Contents Our operations depend on the performance of the internet infrastructure and telecommunications networks in China.
Any such tax may reduce the returns on your investment in our ordinary shares or ADSs. 79 Table of Contents We face uncertainties with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.
Any such tax may reduce the returns on your investment in our ordinary shares or ADSs. 62 Table of Contents We face uncertainties with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.
See also “—We may be subject to risks due to the business conducted by our microloan subsidiaries prior to 2021.” 32 Table of Contents If our credit assessment and risk management model is flawed or ineffective, or if the data that we collect for credit analysis inaccurately reflects borrowers’ creditworthiness, or if we fail or are perceived to fail to effectively manage the default risks of loans we enable for any other reason, our business and results of operations may be adversely affected.
See also “—We may be subject to risks due to the business conducted by our microloan subsidiaries prior to 2021.” If our credit assessment and risk management model is flawed or ineffective, or if the data that we collect for credit analysis inaccurately reflects borrowers’ creditworthiness, or if we fail or are perceived to fail to effectively manage the default risks of loans we enable for any other reason, our business and results of operations may be adversely affected.
(4) Ping An Insurance holds the remaining 30% of the equity interests in Ping An Consumer Finance Co., Ltd. 7 Table of Contents Lufax Holding Ltd is not an operating company in China but a Cayman Islands holding company with no equity ownership in its consolidated affiliated entities.
(4) Ping An Insurance holds the remaining 30% of the equity interests in Ping An Consumer Finance Co., Ltd. 8 Table of Contents Lufax Holding Ltd is not an operating company in China but a Cayman Islands holding company with no equity ownership in its consolidated affiliated entities.
However, due to the evolving regulatory environment of the credit investigation industry and the lack of detailed interpretation, we cannot assure you that our retail credit and enablement business will not be regarded as credit investigation business and we will not be required to obtain the approval or license for credit investigation business or have to modify our business model, which could cause us to incur significant costs and expenses, divert resources and disrupt our operations, which may materially and adversely affect our results of operations and financial condition.
However, due to the evolving regulatory environment of the credit investigation industry, we cannot assure you that our retail credit and enablement business will not be regarded as credit investigation business and we will not be required to obtain the approval or license for credit investigation business or have to modify our business model, which could cause us to incur significant costs and expenses, divert resources and disrupt our operations, which may materially and adversely affect our results of operations and financial condition.
Business Overview—Risk Management and Internal Control.” Our management has concluded that our internal control over financial reporting was effective as of December 31, 2022. Our independent registered public accounting firm has issued an attestation report, which has concluded that our internal control over financial reporting was effective in all material aspects as of December 31, 2022.
Business Overview—Risk Management and Internal Control.” Our management has concluded that our internal control over financial reporting was effective as of December 31, 2023. Our independent registered public accounting firm has issued an attestation report, which has concluded that our internal control over financial reporting was effective in all material aspects as of December 31, 2023.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States or Hong Kong.
The Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, which was issued by the State Administration of Taxation of the PRC on April 22, 2009 and further amended on December 29, 2017, or Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
The Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, which was issued by the State Administration of Taxation of the PRC on April 22, 2009 and further amended on December 29, 2017, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
We have gradually adjusted to charge fees through our licensed financing guarantee subsidiaries since early 2018. 53 Table of Contents In addition, some of our microloan subsidiaries maintained leverage ratios that were above the maximum level allowed historically.
We have gradually adjusted to charge fees through our licensed financing guarantee subsidiaries since early 2018. 43 Table of Contents In addition, some of our microloan subsidiaries maintained leverage ratios that were above the maximum level allowed historically.
As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed under Bulletin 7 and Bulletin 37, and may be required to expend valuable resources to comply with them or to establish that we and our non-resident enterprises should not be taxed under these regulations, which may have a material adverse effect on our financial condition and results of operations.
As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed under SAT Circular 7 and SAT Circular 37, and may be required to expend valuable resources to comply with them or to establish that we and our non-resident enterprises should not be taxed under these regulations, which may have a material adverse effect on our financial condition and results of operations.
As there currently exists no bilateral treaty, international convention or other form of reciprocity between China and the United States or the Cayman Islands governing the recognition of judgments, including those predicated upon the liability provisions of the U.S. federal securities laws, it would be highly unlikely that a PRC court would enforce judgments rendered by courts in the U.S. or in the Cayman Islands. 11 Table of Contents Cash and Asset Flows through Our Organization Lufax Holding Ltd is a holding company with no operations of its own.
As there currently exists no bilateral treaty, international convention or other form of reciprocity between China and the United States or the Cayman Islands governing the recognition of judgments, including those predicated upon the liability provisions of the U.S. federal securities laws, it would be highly uncertain that a PRC court would enforce judgments rendered by courts in the U.S. or in the Cayman Islands. 12 Table of Contents Cash and Asset Flows Through Our Organization Lufax Holding Ltd is a holding company with no operations of its own.
If a credit crisis or prolonged downturn were to occur, particularly in China’s credit markets, our business, financial performance and prospects may be materially and adversely affected. 34 Table of Contents Furthermore, a credit crisis may lead to fluctuations in interest rates.
If a credit crisis or prolonged downturn were to occur, particularly in China’s credit markets, our business, financial performance and prospects may be materially and adversely affected. 32 Table of Contents Furthermore, a credit crisis may lead to fluctuations in interest rates.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeForeign exchange income of capital accounts and capital in Renminbi obtained by foreign-invested enterprises from foreign exchange settlement may not be directly or indirectly used for the following purposes: (i) payment outside of the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) investment in securities or financial schemes other than bank-guaranteed products unless otherwise provided by relevant laws and regulations; (iii) granting loans to non-connected enterprises, unless otherwise permitted by its business scope; and (iv) construction or purchase of real estate that is not for self-use (except for the real estate enterprises). 168 Table of Contents On January 26, 2017, the State Administration of Foreign Exchange promulgated the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control, 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 must check board resolutions regarding profit distribution, the original versions of tax filing records and audited financial statements; and (ii) domestic entities must hold income to account against previous years’ losses before remitting profits.
Biggest changeOn January 26, 2017, SAFE promulgated the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control, 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 must check board resolutions regarding profit distribution, the original versions of tax filing records and audited financial statements; and (ii) domestic entities must hold income to account against previous years’ losses before remitting profits.
Circular 24 reiterates that the commercial banks shall independently carry out the risk management of online loans and are forbidden from outsourcing the key procedures of loan management.
Circular 24 reiterates that commercial banks shall independently carry out the risk management of online loans and are forbidden from outsourcing the key procedures of loan management.
In addition, the Circular 24 provides that, when a commercial bank and its joint lending partner jointly contribute funds to issue online loans, the funding contribution percentage of its joint lending partner shall not be less than 30%; a bank’s proprietary loan balance under the joint lending partnership with a single partner should be no higher than 25% of its net tier-1 capital, and its proprietary loan balance under the joint lending partnership with all partners should not exceed 50% of its total outstanding loans.
In addition, Circular 24 provides that, when a commercial bank and its joint lending partner jointly contribute funds to issue online loans, the funding contribution percentage of its joint lending partner shall not be less than 30%, a bank’s proprietary loan balance under the joint lending partnership with a single partner should be no higher than 25% of its net tier-1 capital, and its proprietary loan balance under the joint lending partnership with all partners should not exceed 50% of its total outstanding loans.
On November 25, 2010, China Banking Regulatory Commission issued the Notice on Issuing the Guidelines for the Corporate Governance of Financing Guarantee Companies, which was the basis for the Supervision and evaluation of the corporate governance of financing guarantee companies.
On November 25, 2010, the China Banking Regulatory Commission issued the Notice on Issuing the Guidelines for the Corporate Governance of Financing Guarantee Companies, which was the basis for the Supervision and evaluation of the corporate governance of financing guarantee companies.
The Implementation Rules for the Enterprise Income Tax Law of the PRC were issued by the State Council in 2007 and were amended on April 23, 2019. According to these regulations, taxpayers consist of resident enterprises and non-resident enterprises.
The Implementation Rules for the PRC Enterprise Income Tax Law were issued by the State Council in 2007 and were amended on April 23, 2019. According to these regulations, taxpayers consist of resident enterprises and non-resident enterprises.
According to the Enterprise Income Tax Law, foreign-invested enterprises in the PRC are generally subject to a uniform enterprise income tax rate of 25%.
According to the PRC Enterprise Income Tax Law, foreign-invested enterprises in the PRC are generally subject to a uniform enterprise income tax rate of 25%.
However, based on the Circular of the State Administration of Taxation on Relevant Issues relating to the Implementation of Dividend Clauses in Tax Agreements, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.
However, based on the Circular of the State Administration of Taxation on Relevant Issues relating to the Implementation of Dividend Clauses in Tax Agreements, if the PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.
SAFE Circular 37 supersedes the Notice on Relevant Issues on the Foreign Exchange Administration of Raising Funds through Overseas Special Purpose Vehicle and Investing Back in China by Domestic Residents, and revises and regulates the relevant matters involving foreign exchange registration for round-trip investment.
SAFE Circular 37 supersedes the Notice on Relevant Issues on the Foreign Exchange Administration of Raising Funds through Overseas Special Purpose Vehicle and Investing Back in China by Domestic Residents, and revises and regulates matters involving foreign exchange registration for round-trip investment.
Shanghai Xiongguo holds 100% of the equity interests in Shanghai Huikang Information Technology Co., Ltd., which in turn beneficially owns 100% of the equity interests in Shanghai Lufax. (3) Ping An Puhui Enterprises Management holds the remaining 9.375% of the equity interests in Chongqing Jin’an Microloan Co., Ltd.
Shanghai Xiongguo holds 100% of the equity interests in Shanghai Huikang Information Technology Co., Ltd., which in turn beneficially owns 100% of the equity interests in Shanghai Lufax. (3) Ping An Puhui Enterprises Management Co., Ltd. holds the remaining 9.375% of the equity interests in Chongqing Jin’an Microloan Co., Ltd.
Pursuant to the Decision on the Maintenance of Internet Security issued by the Standing Committee of the National People’s Congress in 2000 and amended on August 27, 2009, persons may be subject to criminal liabilities in China for any attempt to: (i) gain improper entry to a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information or (v) infringe upon intellectual property rights and other activities prohibited by relevant laws and regulations.
Pursuant to the Decision on the Maintenance of Internet Security issued by the Standing Committee of the National People’s Congress in 2000 and amended on August 27, 2009, persons may be subject to criminal liabilities in China for any attempt to: (i) gain improper entry to a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information or (v) infringe upon intellectual property rights and other activities prohibited by laws and regulations.
Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, issued by the State Administration of Taxation in 2006, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon receiving approval from the in-charge tax authority.
Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, issued by the State Administration of Taxation in 2006, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon receiving approval from the in-charge tax authority.
The provisions provide that algorithmic recommendation service providers shall (i) fulfill their responsibilities for algorithm security, (ii) establish and improve management systems for algorithm mechanism examination, ethical vetting in technology, user registration, information release vetting, protection of data security and personal information, anti- telecommunications and internet fraud, security assessment and monitoring, emergency response to security incidents, etc., and (iii) formulate and disclose relevant rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service.
The provisions provide that algorithmic recommendation service providers shall (i) fulfill their responsibilities for algorithm security, (ii) establish and improve management systems for algorithm mechanism examination, ethical vetting in technology, user registration, information release vetting, protection of data security and personal information, anti- telecommunications and internet fraud, security assessment and monitoring, emergency response to security incidents, etc., and (iii) formulate and disclose rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service.
Furthermore, non-compliance with the Trial Measures or an overseas listing completed in breach of the Trial Measures may result in (i) relevant domestic companies being required to correct the illegal behavior, and a warning and a fine of RMB1 million to RMB10 million imposed on the them; (ii) a warning and a fine of RMB500,000 to RMB5,000,000 imposed on the directly responsible supervisors and other directly responsible person; (iii) if the controlling shareholder or actual controller of the domestic enterprise organizes or incites the aforesaid illegal acts, a fine of RMB1 million to RMB10 million shall be imposed on them, and a fine of RMB500,000 to RMB5,000,000 shall be imposed on the directly responsible supervisors and other directly responsible person.
Furthermore, non-compliance with the Trial Measures or an overseas listing completed in breach of the Trial Measures may result in (i) domestic companies being required to correct the illegal behavior, and a warning and a fine of RMB1 million to RMB10 million imposed on the them; (ii) a warning and a fine of RMB500,000 to RMB5,000,000 imposed on the directly responsible supervisors and other directly responsible person; (iii) if the controlling shareholder or actual controller of the domestic enterprise organizes or incites the aforesaid illegal acts, a fine of RMB1 million to RMB10 million shall be imposed on them, and a fine of RMB500,000 to RMB5,000,000 shall be imposed on the directly responsible supervisors and other directly responsible person.
According to the Confidentiality and Archives Management Provisions, domestic companies, whether offering and listing securities overseas directly or indirectly, must strictly abide by the applicable laws and regulations, enhance the sense of confidentiality, improve the archives management system, and take necessary measures to implement the confidentiality and archives management responsibilities when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities services providers such as securities companies and accounting firms or overseas regulators in the process of their overseas offering and listing.
According to these provisions, domestic companies, whether offering and listing securities overseas directly or indirectly, must strictly abide by the applicable laws and regulations, enhance the sense of confidentiality, improve the archives management system, and take necessary measures to implement the confidentiality and archives management responsibilities when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities services providers such as securities companies and accounting firms or overseas regulators in the process of their overseas offering and listing.
In the event that such documents or materials contain any information related to state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority; and in the event that such documents or materials, if divulged, will jeopardize national security or public interest, domestic companies should strictly fulfill relevant procedures stipulated by applicable laws and regulations.
In the event that such documents or materials contain any information related to state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority; and in the event that such documents or materials, if divulged, will jeopardize national security or public interest, domestic companies should strictly fulfill the procedures stipulated by the applicable laws and regulations.
Circular 141 also provides that institutions or third-party agencies shall not conduct loan collection by means of violence, intimidation, insult, defamation, harassment or other illegal methods. In case of violation, the relevant authorities, depending on the severity of the circumstances, may suspend such entity’s business, order rectification, reprimand such entity, reject its filing procedures, or terminate its business qualification.
Circular 141 also provides that institutions or third-party agencies shall not conduct loan collection by means of violence, intimidation, insult, defamation, harassment or other illegal methods. In case of violation, the authorities, depending on the severity of the circumstances, may suspend such entity’s business, order rectification, reprimand such entity, reject its filing procedures, or terminate its business qualification.
Circular 86 stipulates the following requirements with respect to the microloan companies, including without limitation: (i) the financing balance of the microloan company funding by bank loans, shareholder loans and other nonstandard financing instruments shall not exceed such company’s net assets; (ii) the financing balance of the microloan company funding by issuance of bonds, asset securitization products and other instruments of standardized debt assets shall not exceed four times of its net assets; (iii) the balance of loans offered to one borrower shall not exceed 10% of the net assets of the microloan company, and the balance of loans offered to one borrower and such borrower’s related parties shall not exceed 15% of the net assets of the microloan company; (iv) microloan companies are prohibited from upfront deduction of interest, commission fees, management fees or deposits from the principal of the loans before they are released to the borrowers, and if microloan companies has deducted any upfront fees in violation of rules and regulations, the borrower will only need to repay the actual loan amount after the exclusion of the interest and fees deducted, and the loan’s interest rate shall be calculated accordingly; (v) microloan companies shall conduct business in the administrative area at the county level where the company is domiciled in principle, except as otherwise provided for the operation of online microloan business; and (vi) the microloan companies and third-party loan collection agencies entrusted shall not collect loans by violence, threats of violence, or other ways that intentionally cause harm, infringe personal freedom, illegally occupy property, or interfere with day-to-day life through insulting, slandering, harassing, or disseminating private personal information, or other illegal methods.
It stipulates the following requirements with respect to the microloan companies, including without limitation: (i) the financing balance of the microloan company funding by bank loans, shareholder loans and other nonstandard financing instruments shall not exceed such company’s net assets; (ii) the financing balance of the microloan company funding by issuance of bonds, asset securitization products and other instruments of standardized debt assets shall not exceed four times of its net assets; (iii) the balance of loans offered to one borrower shall not exceed 10% of the net assets of the microloan company, and the balance of loans offered to one borrower and such borrower’s related parties shall not exceed 15% of the net assets of the microloan company; (iv) microloan companies are prohibited from upfront deduction of interest, commission fees, management fees or deposits from the principal of the loans before they are released to the borrowers, and if microloan companies has deducted any upfront fees in violation of rules and regulations, the borrower will only need to repay the actual loan amount after the exclusion of the interest and fees deducted, and the loan’s interest rate shall be calculated accordingly; (v) microloan companies shall conduct business in the administrative area at the county level where the company is domiciled in principle, except as otherwise provided for the operation of online microloan business; and (vi) the microloan companies and third-party loan collection agencies entrusted shall not collect loans by violence, threats of violence, or other ways that intentionally cause harm, infringe personal freedom, illegally occupy property, or interfere with day-to-day life through insulting, slandering, harassing, or disseminating private personal information, or other illegal methods.
However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishment institutions or premises in the PRC but there is no actual relationship between the relevant income derived in the PRC and the established institutions or premises set up by them, the enterprise income tax is, in that case, set at the rate of 10% for their income sourced from inside the PRC.
However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishment institutions or premises in the PRC but there is no actual relationship between the income derived in the PRC and the established institutions or premises set up by them, the enterprise income tax is, in that case, set at the rate of 10% for their income sourced from inside the PRC.
These automatically follow up on customer application break-points and rout the applicant to the right department within our company. In 2020, we also introduced our latest pioneering regulatory technology, which focuses on making regulatory compliance more efficient and native to our core processes. The system uses natural language processing to cope with new regulations.
These automatically follow up on customer application break-points and rout the applicant to the right department within our company. In 2020, we also introduced pioneering regulatory technology which focuses on making regulatory compliance more efficient and native to our core processes. The system uses natural language processing to cope with new regulations.
According to the Announcement of the Instructions regarding the Safety Assessment Clauses of the Regulations on the Management of Blockchain Information Services issued by the Cyberspace Administration of China on August 9, 2019, enterprises conducting blockchain information services are required to carry out safety assessment measures, such as entrusting qualified assessment agencies to conduct safety assessments or conducting self-assessment of safety risks on blockchain information services, and such enterprises are required to submit the relevant assessment reports to the relevant authorities.
According to the Announcement of the Instructions regarding the Safety Assessment Clauses of the Regulations on the Management of Blockchain Information Services issued by the Cyberspace Administration of China on August 9, 2019, enterprises conducting blockchain information services are required to carry out safety assessment measures, such as entrusting qualified assessment agencies to conduct safety assessments or conducting self-assessment of safety risks on blockchain information services, and such enterprises are required to submit the assessment reports to the authorities.
Each signing spouse further confirmed that such equity interest may be disposed of pursuant to the relevant contractual arrangements, and committed that he or she will take all necessary measures for the performance of those arrangements. Agreements that Provide Us with Option to Purchase the Equity Interests and Assets in Shenzhen Lufax Enterprise Management Exclusive Option Agreements.
Each signing spouse further confirmed that such equity interest may be disposed of pursuant to the contractual arrangements, and committed that he or she will take all necessary measures for the performance of those arrangements. Agreements That Provide Us With Option to Purchase the Equity Interests and Assets in Shenzhen Lufax Enterprise Management Exclusive Option Agreements.
Pursuant to the Circular of the State Administration of Foreign Exchange on Further Simplification and Improvement of Foreign Exchange Administration on Direct Investment, which was amended on December 30, 2019, the registrations described in the preceding paragraph must be directly reviewed and handled by qualified banks, and the State Administration of Foreign Exchange and its branches will perform indirect regulation over the foreign exchange registration through qualified banks.
Pursuant to the Circular of the State Administration of Foreign Exchange on Further Simplification and Improvement of Foreign Exchange Administration on Direct Investment, which was amended on December 30, 2019, the registrations described in the preceding paragraph must be directly reviewed and handled by qualified banks, and SAFE and its branches will perform indirect regulation over the foreign exchange registration through qualified banks.
Failure to comply with the registration procedures set forth in the State Administration of Foreign Exchange Circular 37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.
Failure to comply with the registration procedures set forth in the State Administration of Foreign Exchange Circular 37 may result in restrictions being imposed on the foreign exchange activities of the onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, and may also subject PRC residents to penalties under PRC foreign exchange administration regulations.
As a result, our insurance policies may not be able to cover all of our losses and we cannot provide any assurance that we will not incur losses or suffer claims beyond the limits of, or outside the relevant coverage of, our insurance policies. For details of risks relating to our insurance coverage, see “Item 3. Key Information—D.
As a result, our insurance policies may not be able to cover all of our losses and we cannot provide any assurance that we will not incur losses or suffer claims beyond the limits of, or outside the coverage of, our insurance policies. For details of risks relating to our insurance coverage, see “Item 3. Key Information—D.
Regulations on Loans Between a Foreign Company and its Chinese Subsidiaries A loan made by foreign investors as shareholders in a foreign-invested enterprise is considered to be foreign debt in the PRC and is regulated by various laws and regulations, including the Regulation on Foreign Exchange Administration of the PRC, the Interim Provisions on the Management of Foreign Debts promulgated by the State Administration of Foreign Exchange, the National Development and Reform Commission and the Ministry of Finance and most recently amended on July 26, 2022, the Administrative Measures for Registration of Foreign Debts promulgated by the State Administration of Foreign Exchange and amended on May 4, 2015, and the Notice of the People’s Bank of China on Matters Concerning the Prudent Macro Management of All Cross-Border Financing promulgated on January 11, 2017.
Regulations on Loans Between a Foreign Company and its Chinese Subsidiaries A loan made by foreign investors as shareholders in a foreign-invested enterprise is considered to be foreign debt in the PRC and is regulated by various laws and regulations, including the Regulation on Foreign Exchange Administration of the PRC, the Interim Provisions on the Management of Foreign Debts promulgated by SAFE, the National Development and Reform Commission and the Ministry of Finance and most recently amended on July 26, 2022, the Administrative Measures for Registration of Foreign Debts promulgated by SAFE and amended on May 4, 2015, and the Notice of the People’s Bank of China on Matters Concerning the Prudent Macro Management of All Cross-Border Financing promulgated on January 11, 2017.
Pursuant to the relevant regulations and rules regarding financing guarantee companies, the minimum registered capital of a financing guarantee company is not less than RMB20 million and its net assets must be no less than one-fifteenth of the total outstanding guaranteed amount it has guaranteed.
Pursuant to the regulations and rules regarding financing guarantee companies, the minimum registered capital of a financing guarantee company is not less than RMB20 million and its net assets must be no less than one-fifteenth of the total outstanding guaranteed amount it has guaranteed.
We regularly evaluate our agency partner companies based on their performance, service quality, experience in the industry and compliance with relevant laws and regulations. In addition to the collection efforts described above, we have an additional foreclosure procedure for our secured loans.
We regularly evaluate our agency partner companies based on their performance, service quality, experience in the industry and compliance with laws and regulations. In addition to the collection efforts described above, we have an additional foreclosure procedure for our secured loans.
For insurance companies engaged in credit guarantee insurance, the core solvency adequacy ratio at the end of the last two quarters must be no less than 75%, and the comprehensive solvency adequacy ratio must be no less than 150%. We engage in a strict assessment process in selecting our credit enhancement providers.
For insurance companies engaged in credit guarantee insurance, the core solvency adequacy ratio at the end of the last two quarters must be no less than 75%, and the comprehensive solvency adequacy ratio must be no less than 150%. We engaged in a strict assessment process in selecting our credit enhancement providers.
If the applications violate the amended provisions, relevant laws and regulations, and service agreements, the application distribution platform shall take such measures as giving warnings, suspension of services, removal of the application from the platform, etc. It shall also keep relevant records and report the breach to competent authorities.
If the applications violate the amended provisions, laws and regulations, and service agreements, the application distribution platform shall take such measures as giving warnings, suspension of services, removal of the application from the platform, etc. It shall also keep records and report the breach to competent authorities.
On November 4, 2015, the General Office of the State Council issued the Guiding Opinions on Strengthening the Protection of Financial Consumers’ Rights and Interests , which stipulated that financial management departments shall, according to the relevant requirements of the state on the development of inclusive finance, expand the coverage of inclusive finance and improve the permeability.
On November 4, 2015, the General Office of the State Council issued the Guiding Opinions on Strengthening the Protection of Financial Consumers’ Rights and Interests, which stipulated that financial management departments shall, according to the requirements of the state on the development of inclusive finance, expand the coverage of inclusive finance and improve the permeability.
The Notice of State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment was issued by the State Administration of Foreign Exchange in 2012 and last amended on December 30, 2019, under which PRC enterprises must register for overseas direct investment with local banks.
The Notice of State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment was issued by SAFE in 2012 and last amended on December 30, 2019, under which PRC enterprises must register for overseas direct investment with local banks.
These share pledge agreements will remain effective until Shanghai Xiongguo and Shanghai Lufax and their shareholders discharge all their obligations under the contractual arrangements. We have completed the registration of the above share pledge with the relevant office of the Administration for Industry and Commerce of China in 2015.
These share pledge agreements will remain effective until Shanghai Xiongguo and Shanghai Lufax and their shareholders discharge all their obligations under the contractual arrangements. We completed the registration of the above share pledge with the relevant office of the Administration for Industry and Commerce of China in 2015.
According to the Trial Measures, an overseas offering and listing is prohibited under any of the following circumstances: (i) if the intended securities offering and listing is specifically prohibited by national laws and regulations and relevant provisions; (ii) if the intended securities offering and listing constitutes endangers to national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy; (iv) if the domestic enterprise is under investigation according to law for suspected crimes or major violations of laws and regulations, but no clear conclusions have been reached; or (v) if there are material ownership disputes over the equity held by the controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. 173 Table of Contents The Filing Measures, among others, require the issuer or its main operational entity in the PRC to: (i) file with the CSRC for its initial public offering or listing within three working days after the submission of listing application documents outside mainland China; (ii) file with the CSRC for its follow-on securities offerings in the same offshore market within three working days after the completion of such offerings; (iii) file with the CSRC for its offerings or listing in offshore stock market other than the stock market of its initial public offering or listing within three working days after the submission of offering application outside mainland China; (iv) report material events to the CSRC within three working days after the occurrence and announcement of such events, including, among other things, the change of control, investigation or penalties imposed by relevant authorities, the conversion of listing status or the transfer of listing board.
According to the Trial Measures, an overseas offering and listing is prohibited under any of the following circumstances: (i) if the intended securities offering and listing is specifically prohibited by national laws and regulations and provisions; (ii) if the intended securities offering and listing constitutes endangers to national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy; (iv) if the domestic enterprise is under investigation according to law for suspected crimes or major violations of laws and regulations, but no clear conclusions have been reached; or (v) if there are material ownership disputes over the equity held by the controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. 129 Table of Contents The Filing Measures require the issuer or its main operational entity in the PRC to: (i) file with the CSRC for its initial public offering or listing within three working days after the submission of listing application documents outside mainland China; (ii) file with the CSRC for its follow-on securities offerings in the same offshore market within three working days after the completion of such offerings; (iii) file with the CSRC for its offerings or listing in offshore stock market other than the stock market of its initial public offering or listing within three working days after the submission of offering application outside mainland China; (iv) report material events to the CSRC within three working days after the occurrence and announcement of such events, including, among other things, the change of control, investigation or penalties imposed by the authorities, the conversion of listing status or the transfer of listing board.
The following table shows our average APR for new loans in 2020, 2021 and 2022 for general unsecured loans, secured loans and consumer finance loans. We have not enabled any loans with an APR higher than 24% for loan applications after September 4, 2020.
The following table shows our average APR for new loans in 2021, 2022 and 2023 for general unsecured loans, secured loans and consumer finance loans. We have not enabled any loans with an APR higher than 24% for loan applications after September 4, 2020.
Operators are required to submit an application within the prescribed period to the original permit-issuing authority with respect to changes in the business scope or the operating entity resulting from shareholder changes or the merger and division of the company as prescribed under relevant regulations.
Operators are required to submit an application within the prescribed period to the original permit-issuing authority with respect to changes in the business scope or the operating entity resulting from shareholder changes or the merger and division of the company as prescribed under regulations.
Where an overseas organization or individual engages in personal information processing activities infringing upon the personal information rights and interests of PRC citizens or endangering the national security and public interests of the PRC, the Cyberspace Administration of China may include such organization or individual in the list of subjects to whom provision of personal information is restricted or prohibited, announce the same, and take measures such as restricting or prohibiting provision of personal information to such organization or individual. 160 Table of Contents Regulations Relating to Taxation Regulations on Enterprise Income Tax The Enterprise Income Tax Law of the PRC was issued by the Standing Committee of the National People’s Congress in 2007 and most recently amended on December 29, 2018.
Where an overseas organization or individual engages in personal information processing activities infringing upon the personal information rights and interests of PRC citizens or endangering the national security and public interests of the PRC, the Cyberspace Administration of China may include such organization or individual in the list of subjects to whom provision of personal information is restricted or prohibited, announce the same, and take measures such as restricting or prohibiting provision of personal information to such organization or individual. 120 Table of Contents Regulations Relating to Taxation Regulations on Enterprise Income Tax The PRC Enterprise Income Tax Law was issued by the Standing Committee of the National People’s Congress in 2007 and most recently amended on December 29, 2018.
In addition, it stipulates that qualified enterprises in certain pilot areas may use their capital income from capital, foreign debt and overseas listing, for the purpose of domestic payments without providing authenticity certifications to the relevant banks in advance for those domestic payments.
In addition, it stipulates that qualified enterprises in certain pilot areas may use their capital income from capital, foreign debt and overseas listing, for the purpose of domestic payments without providing authenticity certifications to the banks in advance for those domestic payments.
These agreements will generally include provisions specifying the proportion of loans to be insured or guaranteed by the credit enhancement provider and the geographical scope of the collaboration, and some of them set out the rate of interest to be charged by the funding partner for the loans.
These agreements generally include provisions specifying the proportion of loans to be insured or guaranteed by the credit enhancement provider and the geographical scope of the collaboration, and some of them set out the rate of interest to be charged by the funding partner for the loans.
On December 26, 2022, the China Banking and Insurance Regulatory Commission issued the Administrative Measures for the Protection of Consumers’ Rights and Interests by Banking and Insurance Institutions, which will came into effect on March 1, 2023.
On December 26, 2022, the China Banking and Insurance Regulatory Commission issued the Administrative Measures for the Protection of Consumers’ Rights and Interests by Banking and Insurance Institutions, which came into effect on March 1, 2023.
The Protection Authorities are responsible for organizing the identification of critical information infrastructures in their own industries and sectors in accordance with the identification rules, promptly notifying the operators of the identification results and reporting to the public security department of the State Council. 158 Table of Contents The Administrative Provisions on Security Vulnerability of Network Products were jointly promulgated by the Ministry of Industry and Information Technology, the Cyberspace Administration of China and the Ministry of Public Security on July 12, 2021 and came into effect on September 1, 2021.
The Protection Authorities are responsible for organizing the identification of critical information infrastructures in their own industries and sectors in accordance with the identification rules, promptly notifying the operators of the identification results and reporting to the public security department of the State Council. 118 Table of Contents The Administrative Provisions on Security Vulnerability of Network Products were jointly promulgated by the Ministry of Industry and Information Technology, the Cyberspace Administration of China and the Ministry of Public Security on July 12, 2021 and came into effect on September 1, 2021.
Such a company may be ordered to suspend its business for rectification, and, under serious circumstances, its license for financing guarantee business may be revoked. 142 Table of Contents The Notice on Issuing Four Supporting Systems for the Regulations on the Supervision and Administration of Financing Guarantee Companies, or the Four Supporting Systems, was jointly promulgated by the China Banking and Insurance Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Agriculture and Rural Affairs, the People’s Bank of China and the State Administration for Market Regulation on April 2, 2018 and amended on June 21, 2021, which includes the Administrative Measures on Financing Guarantee Business Permits, the Measures on the Measurement of the Balance of Financing Guarantee Liability, the Administrative Measures on the Asset Proportions of Financing Guarantee Companies and the Guidelines for Business Cooperation between Banking Financial Institutions and Financing Guarantee Companies.
Such a company may be ordered to suspend its business for rectification, and, under serious circumstances, its license for financing guarantee business may be revoked. 106 Table of Contents The Notice on Issuing Four Supporting Systems for the Regulations on the Supervision and Administration of Financing Guarantee Companies was jointly promulgated by the China Banking and Insurance Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Agriculture and Rural Affairs, the People’s Bank of China and the State Administration for Market Regulation on April 2, 2018 and amended on June 21, 2021, which includes the Administrative Measures on Financing Guarantee Business Permits, the Measures on the Measurement of the Balance of Financing Guarantee Liability, the Administrative Measures on the Asset Proportions of Financing Guarantee Companies and the Guidelines for Business Cooperation between Banking Financial Institutions and Financing Guarantee Companies.
In case of violation, the relevant authorities, depending on the severity of the circumstances, may suspend such microloan company’s business, order rectification, reprimand such company, reject its filing procedures, or terminate its business qualification.
In case of violation, the authorities, depending on the severity of the circumstances, may suspend such microloan company’s business, order rectification, reprimand such company, reject its filing procedures, or terminate its business qualification.
The Internet Finance Guidelines define the internet finance as a new financial business model whereby traditional financial institutions and internet enterprises use internet technology and information and communications technology to provide loans, payments, investments and information intermediary services.
These guidelines define the internet finance as a new financial business model whereby traditional financial institutions and internet enterprises use internet technology and information and communications technology to provide loans, payments, investments and information intermediary services.
Separately, entities providing “services with credit investigation function” in the name of “credit information service, credit service, credit evaluation, credit rating, credit repair and other services” are also subject to the Credit Investigation Measures.
Separately, entities providing “services with credit investigation function” in the name of “credit information service, credit service, credit evaluation, credit rating, credit repair and other services” are also subject to these measures.
Our sizing model for secured loans further takes into consideration the value of the pledged collateral, which we determine in an efficient and expeditious manner with help from online valuers. Since we specialize in large ticket size loans, a borrower only qualifies for a general unsecured or secured loan if they meet the minimum creditworthiness threshold of at least RMB20,000.
Our sizing model for secured loans further takes into consideration the value of the pledged collateral, which we determine in an efficient and expeditious manner with help from online valuers. Since we specialize in large ticket size loans, a borrower only qualifies for a general unsecured or secured loan if they meet the minimum creditworthiness threshold of at least RMB10,000.
The interpretation applies to any contractual dispute arising from the acquisition of relevant rights and interests by a foreign investor through gift, division of property, merger of enterprises, division of enterprises, etc.
The interpretation applies to any contractual dispute arising from the acquisition of rights and interests by a foreign investor through gift, division of property, merger of enterprises, division of enterprises, etc.
The Credit Investigation Measures define “credit information” to include “basic information, borrowing and lending information and other relevant information collected pursuant to the law to provide services for financial and other activities for identifying and judging the credit standing of businesses and individuals, as well as analysis and evaluation formed based on the aforesaid information.” They apply to entities that carry out credit investigation business and “activities relating to credit investigation business” in China.
These measures define “credit information” to include “basic information, borrowing and lending information and other information collected pursuant to the law to provide services for financial and other activities for identifying and judging the credit standing of businesses and individuals, as well as analysis and evaluation formed based on the aforesaid information.” They apply to entities that carry out credit investigation business and “activities relating to credit investigation business” in China.
On December 31, 2021, the People’s Bank of China published the Regulations on the Local Financial Supervision and Administration (Draft for Comments), which requires that, among others, (i) six types of financial organizations, including financing guarantee companies, are deemed as local financial organizations, and the incorporation of local financial organizations should be approved by the competent provincial regulatory authorities before they apply for the business licenses, (ii) local financial organizations are required to operate their business within the area approved by the competent provincial regulatory authorities and are not allowed to conduct business across provinces in principle, and (iii) the rules for cross-province business carried out by local financial organizations should be formulated by the State Council or by the financial regulatory department of the State Council as authorized by the State Council.
On December 31, 2021, the People’s Bank of China published the Regulations on the Local Financial Supervision and Administration (Draft for Comments), which requires that, among other things, (i) six types of financial organizations, including financing guarantee companies, are deemed as local financial organizations, and the incorporation of local financial organizations should be approved by the competent provincial regulatory authorities before they apply for the business licenses, (ii) local financial organizations are required to operate their business within the area approved by the competent provincial regulatory authorities and in principle are not allowed to conduct business across provinces, and (iii) the rules for cross-province business carried out by local financial organizations should be formulated by the State Council or by the financial regulatory department of the State Council as authorized by the State Council.
AI has helped us to reduce costs by increasing productivity and making decisions based on information that is too complex for a human to process. Our technology possesses leading artificial neural networks and by processing more examples from our over 17 years of through-cycle proprietary data, our neural network system evolves better and better over time.
AI has helped us to reduce costs by increasing productivity and making decisions based on information that is too complex for a human to process. Our technology possesses leading artificial neural networks and by processing more examples from our over 18 years of through-cycle proprietary data, our neural network system evolves better and better over time.
It does not mention the relevant concept and regulatory regime of consolidated affiliated entities structures and uncertainties still exist with regards to its interpretation and implementation.
It does not mention the concept and regulatory regime of consolidated affiliated entities structures and uncertainties still exist with regards to its interpretation and implementation.
The Ministry of Industry and Information Technology issued the Notice on the Further Special Rectification of Apps Infringing upon Users’ Personal Rights and Interests, or the Further Rectification Notice, on July 22, 2020.
The Ministry of Industry and Information Technology issued the Notice on the Further Special Rectification of Apps Infringing upon Users’ Personal Rights and Interests on July 22, 2020.
On December 29, 2020, the Supreme People’s Court also issued the Reply Regarding the Scope of Application of the New Private Lending Judicial Interpretation, which provides that the two amendments are not applicable to disputes arising from the relevant financial business of microloan companies, financing guarantee companies, and five other types of local financial organizations which are regulated by local financial authorities. 140 Table of Contents The Notice on Regulating and Cleaning up the Cash Loan Business, or Circular 141, introduces the regulation guidance on cash loan businesses, including online micro-lending companies, peer-to-peer lending platforms and banking financial institutions.
On December 29, 2020, the Supreme People’s Court also issued the Reply Regarding the Scope of Application of the New Private Lending Judicial Interpretation, which provides that the two amendments are not applicable to disputes arising from the financial business of microloan companies, financing guarantee companies, and five other types of local financial organizations which are regulated by local financial authorities. 104 Table of Contents The Notice on Regulating and Cleaning up the Cash Loan Business, or Circular 141, introduces the regulation guidance on cash loan businesses, including online micro-lending companies, peer-to-peer lending platforms and banking financial institutions.
On July 14, 2020, the Guidelines for Off-site Supervision of Financing Guarantee Companies was issued by the China Banking and Insurance Regulatory Commission, effective on September 1, 2020, which provide the guidelines for the competent regulatory authorities to continuously analyze and evaluate the risk of financing guarantee companies and the financing guarantee industry, by way of collecting report data and other internal and external data of the financing guarantee companies and carrying out corresponding measures.
On July 14, 2020, the Guidelines for Off-site Supervision of Financing Guarantee Companies was issued by the China Banking and Insurance Regulatory Commission, effective on September 1, 2020, which provide the guidelines for the competent regulatory authorities to continually analyze and evaluate the risk of financing guarantee companies and the financing guarantee industry, by way of collecting report data and other internal and external data of the financing guarantee companies and carrying out corresponding measures.
Individual referrals are rewarded on the basis of a referral program where individuals sign up with our group and receive fees on successfully referred borrowers. Corporate referrals are referrals from corporate entities. These include certain Ping An associated entities, but all of the entities combined contributed less than 0.5% of our new loan volume in 2022.
Individual referrals are rewarded on the basis of a referral program where individuals sign up with our group and receive fees on successfully referred borrowers. Corporate referrals are referrals from corporate entities. These include certain Ping An associated entities, but all of the entities combined contributed less than 0.5% of our new loan volume in 2023.
The real estate collateral is well diversified across China, with a large proportion located in more developed cities. As we continue to focus on serving more SBOs and higher quality borrowers, there has been an increase in the average ticket size for our secured loans in 2020, 2021 and 2022.
The real estate collateral is well diversified across China, with a large proportion located in more developed cities. As we continue to focus on serving more SBOs and higher quality borrowers, there has been an increase in the average ticket size for our secured loans in 2021, 2022 and 2023.
The loan products we enable under our Puhui brand permit large ticket sizes, long tenors and early repayment options, which are important features for small business owners. The maximum permitted ticket size in 2022 was RMB10 million for secured loans and RMB1 million for general unsecured loans . Average loan size for these loans was considerably smaller.
The loan products we enable under our Puhui brand permit large ticket sizes, long tenors and early repayment options, which are important features for small business owners. The maximum permitted ticket size in 2023 was RMB10 million for secured loans and RMB1 million for general unsecured loans. Average loan size for these loans was considerably smaller.
For our secured loans, we focus on SBOs who have residential property located in economically more developed cities which can be pledged as collaterals, given such cities’ relatively stable economic growth and real estate prices. The majority of the outstanding balance of secured loans is secured by real estate and the remainder by automobiles.
For our secured loans, we focus on SBOs who have residential property located in economically more developed cities which can be pledged as collateral, given such cities’ relatively stable economic growth and real estate prices. The majority of the outstanding balance of secured loans is secured by real estate and the remainder by automobiles.
The local financial regulatory authorities may further lower the ratio caps in (i) and (ii) in accordance with regulatory requirements. 146 Table of Contents On November 2, 2020, the China Banking and Insurance Regulatory Commission, the People’s Bank of China and other regulatory authorities released a consultation draft of the Interim Measures for the Administration of Online Microloan Business, which states that a microloan company must obtain the official approval of the China Banking and Insurance Regulatory Commission to conduct an online micro lending businesses outside the province where it is registered.
The local financial regulatory authorities may further lower the ratio caps in (i) and (ii) in accordance with regulatory requirements. 110 Table of Contents On November 2, 2020, the China Banking and Insurance Regulatory Commission, the People’s Bank of China and other regulatory authorities released a consultation draft of the Interim Measures for the Administration of Online Microloan Business, which states that a microloan company must obtain the official approval of the China Banking and Insurance Regulatory Commission to conduct online micro lending businesses outside the province where it is registered.
These third-party credit enhancement providers provide credit guarantee insurance or guarantees on the loans we enable and will repay the lenders if a loan becomes sufficiently delinquent. We are not aware of any instance where our credit enhancement providers have ever failed to fulfill their insurance or guarantee obligations.
These third-party credit enhancement providers provide credit guarantee insurance or guarantees on the loans we enabled and will repay the lenders if a loan becomes sufficiently delinquent. We are not aware of any instance where our credit enhancement providers have ever failed to fulfill their insurance or guarantee obligations.
We have accumulated over 17 years of through-cycle credit data, supplemented by Ping An ecosystem analytics and insights and access to enterprise data through external data providers, and our data-mining capabilities enable us to convert the originally unstructured data into structured data using deep learning and artificial intelligence techniques.
We have accumulated over 18 years of through-cycle credit data, supplemented by Ping An ecosystem analytics and insights and access to enterprise data through external data providers, and our data-mining capabilities enable us to convert the originally unstructured data into structured data using deep learning and artificial intelligence techniques.
In particular, the amended provisions stipulate the obligations in relation to cyber security, data security and personal information protection, emphasizing the necessity for personal information collection and the fact that users shall not be denied the use of the basic function services of certain applications merely on account of their refusal to provide unnecessary personal information.
In particular, the amended provisions stipulate the obligations regarding cyber security, data security and personal information protection, emphasizing the necessity for personal information collection and the fact that users shall not be denied the use of the basic function services of certain applications merely on account of their refusal to provide unnecessary personal information.
Pursuant to the CII Regulations, “critical information infrastructures” refers to important network facilities and information systems of important industries and sectors such as public communications and information services, energy, transport, water conservation, finance, public services, e-government, and science and technology industry for national defense, as well as other important network facilities and information systems that may seriously endanger national security, national economy and citizen’s livelihood and public interests if they are damaged or suffer from malfunctions, or if any leakage of data in relation thereto occurs.
Pursuant to these regulations, “critical information infrastructures” refers to important network facilities and information systems of important industries and sectors such as public communications and information services, energy, transport, water conservation, finance, public services, e-government, and science and technology industry for national defense, as well as other important network facilities and information systems that may seriously endanger national security, national economy and citizen’s livelihood and public interests if they are damaged or suffer from malfunctions, or if any leakage of data in relation thereto occurs.
This notice requires that all local regulatory authorities shall conduct a comprehensive investigation to supervise if the entities engaging in financing guarantee businesses have been licensed or not. For companies engaging in financing guarantee business without the financing guarantee business operation license, the relevant authority may order them to close down the relevant financing guarantee business.
This notice requires that all local regulatory authorities shall conduct a comprehensive investigation to supervise if the entities engaging in financing guarantee businesses have been licensed or not. For companies engaging in financing guarantee business without the financing guarantee business operation license, the authorities may order them to close down the financing guarantee business.
Under our core retail credit and enablement business model, we directly share data relating to potential borrowers with our institutional partners by our financing guarantee subsidiary. Pursuant to the Credit Investigation Measures and the notice relating to disconnecting direct connection, the abovementioned operations may be deemed to be engaging in credit investigation business.
Under our core retail credit and enablement business model, we directly share data relating to potential borrowers with our institutional partners by our financing guarantee subsidiary. Pursuant to the Administrative Measures on Credit Investigation and the notice relating to disconnecting direct connection, the abovementioned operations may be deemed to be engaging in credit investigation business.
Circular 141 requires the relevant regulatory authorities to suspend the approval of the establishment of online microloan companies and the approval of any microloan business across provinces.
Circular 141 requires the regulatory authorities to suspend the approval of the establishment of online microloan companies and the approval of any microloan business across provinces.
Such investments should be real and should be in compliance with the relevant laws, regulations and rules, including the provisions of the 2021 Negative List.
Such investments should be real and should be in compliance with the laws, regulations and rules, including the provisions of the 2021 Negative List.
The following table presents the DPD 90+ delinquency rates for general unsecured loans and secured loans as of December 31, 2020, 2021 and 2022. We define the DPD 90+ delinquency rate as the outstanding balance of loans for which any payment is 90 to 179 calendar days past due, divided by the outstanding balance of loans.
The following table presents the DPD 90+ delinquency rates for general unsecured loans and secured loans as of December 31, 2021, 2022 and 2023. We define the DPD 90+ delinquency rate as the outstanding balance of loans for which any payment is 90 to 179 calendar days past due, divided by the outstanding balance of loans.
In addition to meeting the basic requirements on nationality, age, residency and the availability of credit and other history, a borrower must pass both our anti-fraud and credit assessments before we will refer them to funding partners and credit enhancement providers for a potential loan.
In addition to meeting the basic requirements on nationality, age, residency and the availability of credit and other history, a borrower must pass both our anti-fraud and credit assessments before we will refer them to funding partners for a potential loan.
The amended provisions also outline the requirements for application providers, which include, among others, (i) verifying user identity information; (ii) obtaining an internet news and information services license or other administrative licenses for information services; and (iii) establishing a mechanism for examining the content of the information.
The amended provisions also outline the requirements for application providers, which include, among other things, (i) verifying user identity information; (ii) obtaining an internet news and information services license or other administrative licenses for information services; and (iii) establishing a mechanism for examining the content of the information.
The notice requires that certain conducts of app service providers should be inspected, including, among others (i) collecting personal information without the user’s consent, collecting or using personal information beyond the necessary scope of providing services, and forcing users to receive advertisements; (ii) requesting user’s permission in a compulsory and frequent manner, or frequently launching third-parties apps; and (iii) deceiving and misleading users into downloading apps or providing personal information.
The notice requires that certain conducts of app service providers should be inspected, including, among other things (i) collecting personal information without the user’s consent, collecting or using personal information beyond the necessary scope of providing services, and forcing users to receive advertisements; (ii) requesting user’s permission in a compulsory and frequent manner, or frequently launching third-parties apps; and (iii) deceiving and misleading users into downloading apps or providing personal information.
Regulations on Dividend Tax Pursuant to the Circular of the State Administration of Taxation on Relevant Issues relating to the Implementation of Dividend Clauses in Tax Agreements, which took effect on February 20, 2009, all of the following requirements must be satisfied to enjoy the preferential tax rates provided under the tax agreements: (1) the tax resident that receives dividends should be a company as provided in the tax agreement; (2) the equity interest and voting shares of the PRC resident company directly owned by the tax resident satisfy the percentages specified in the tax agreement; and (3) the equity interest of the PRC resident company directly owned by such tax resident at any time during the 12 months prior to receiving the dividends satisfy the percentage specified in the tax agreement.
Regulations on Dividend Tax Pursuant to the Circular of the State Administration of Taxation on Relevant Issues relating to the Implementation of Dividend Clauses in Tax Agreements, which took effect on February 20, 2009, all of the following requirements must be satisfied to enjoy the preferential tax rates provided under the tax agreements: (i) the tax resident that receives dividends should be a company as provided in the tax agreement; (ii) the equity interest and voting shares of the PRC resident company directly owned by the tax resident satisfy the percentages specified in the tax agreement; and (3) the equity interest of the PRC resident company directly owned by such tax resident at any time during the 12 months prior to receiving the dividends satisfy the percentage specified in the tax agreement.
Spousal Consent Letters. The spouses of the four individual shareholders of the direct shareholders of Shenzhen Lufax Enterprise Management each signed a spousal consent letter.
The spouses of the four individual shareholders of the direct shareholders of Shenzhen Lufax Enterprise Management each signed a spousal consent letter.
Regulations on Value-added Tax All entities and individuals engaged in the sale of goods, provision of processing, repairs and replacement services, and the importation of goods within the territory of the PRC must pay value-added tax, or VAT, in accordance with the Provisional Regulations on Value-added Tax of the PRC and its implementation rules.
Regulations on Value-added Tax All entities and individuals engaged in the sale of goods, provision of processing, repairs and replacement services, and the importation of goods within the territory of the PRC must pay value-added tax in accordance with the Provisional Regulations on Value-added Tax of the PRC and its implementation rules.
However, it is not freely convertible for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval is obtained from the State Administration of Foreign Exchange, or its local branch, and prior registration with the State Administration of Foreign Exchange is made. 167 Table of Contents Pursuant to the Regulation of Settlement, Sale and Payment of Foreign Exchange, promulgated by the People’s Bank of China and effective on July 1, 1996, foreign-invested enterprises may only buy, sell or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial supporting documents and, in the case of capital account item transactions, obtaining approvals from the State Administration of Foreign Exchange or its local counterpart.
However, it is not freely convertible for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval is obtained from SAFE, or its local branch, and prior registration with SAFE is made. 125 Table of Contents Pursuant to the Regulation of Settlement, Sale and Payment of Foreign Exchange, promulgated by the People’s Bank of China and effective on July 1, 1996, foreign-invested enterprises may only buy, sell or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial supporting documents and, in the case of capital account item transactions, obtaining approvals from SAFE or its local counterpart.
Enterprises that are recognized as high and new technology enterprises in accordance with the Administrative Measures for the Determination of High and New Tech Enterprises, issued by the Ministry of Science, the Ministry of Finance and the State Administration of Taxation on April 14, 2008 and last amended on January 29, 2016, effective January 1, 2019, are entitled to enjoy a preferential enterprise income tax rate of 15%.
Enterprises that are recognized as high and new technology enterprises in accordance with the Administrative Measures for the Determination of High and New Tech Enterprises, issued by the Ministry of Science, the Ministry of Finance and the State Administration of Taxation on April 14, 2008 and last amended on January 29, 2016, are entitled to enjoy a preferential enterprise income tax rate of 15%.
The table below sets forth the estimated effective tenor of loans that we do not consolidate on our balance sheet, after considering assumptions of early repayment, as of December 31, 2020, 2021 and 2022.
The table below sets forth the estimated effective tenor of loans that we do not consolidate on our balance sheet, after considering assumptions of early repayment, as of December 31, 2021, 2022 and 2023.
We provide loan enablement services for borrowers and enable borrowers to obtain loans from trusts. We perform credit assessments and match borrowers to the trust plans. We partnered with six trust companies in each of 2020, 2021 and 2022.
We provide loan enablement services for borrowers and enable borrowers to obtain loans from trusts. We perform credit assessments and match borrowers to the trust plans. We partnered with six trust companies in each of 2021, 2022 and 2023.
Risk Factors—Risks Relating to Our Business and Industry—We have limited insurance coverage, which could expose us to significant costs and business disruption.” 134 Table of Contents Regulation We operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC and foreign laws, rules and regulations across numerous aspects of our business.
Risk Factors—Risks Relating to Our Business and Industry—We have limited insurance coverage, which could expose us to significant costs and business disruption.” Regulation We operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC and foreign laws, rules and regulations across numerous aspects of our business.
We apply advanced risk analytics leveraging our 17 years of proprietary data to assess the creditworthiness of potential borrowers and co-design loan product terms with our funding partners to serve their needs.
We apply advanced risk analytics leveraging our 19 years of proprietary data to assess the creditworthiness of potential borrowers and co-design loan product terms with our funding partners to serve their needs.
On July 22, 2020, the Supreme People’s Court and the National Development and Reform Commission jointly released the Opinions on Providing Judicial Services and Safeguards for Accelerating the Improvement of the Socialist Market Economic System for the New Era.
On July 20, 2020, the Supreme People’s Court and the National Development and Reform Commission jointly released the Opinions on Providing Judicial Services and Safeguards for Accelerating the Improvement of the Socialist Market Economic System for the New Era.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

139 edited+25 added−32 removed65 unchanged
Biggest changeFor the Year Ended December 31, 2020 2021 2022 (RMB) (RMB) (RMB) (US$) (in millions) Technology platform–based income Retail credit and enablement service fees Loan enablement service fees 7,142 5,676 3,446 500 Post-origination service fees 32,315 30,411 24,028 3,484 Referral income from platform service 131 706 1,147 166 Retail credit and enablement service fees 39,588 36,793 28,621 4,150 Other technology platform–based income 1,634 1,501 597 87 Total technology platform–based income 41,222 38,294 29,218 4,237 Net interest income 7,750 14,174 18,981 2,752 Guarantee income 602 4,370 7,373 1,069 Other income 1,517 3,875 1,238 179 Investment income 940 1,152 1,306 189 Share of net profit/(loss) of investments accounted for using the equity method 15 (31 ) 0 0 Total income 52,046 61,835 58,116 8,426 Sales and marketing expenses: Borrower acquisition expenses (11,506 ) (10,120 ) (7,865 ) (1,140 ) Investor acquisition and retention expenses (820 ) (677 ) (301 ) (44 ) General sales and marketing expenses (5,403 ) (6,637 ) (6,654 ) (965 ) Referral expenses from platform service (84 ) (559 ) (937 ) (136 ) Sales and marketing expenses (17,814 ) (17,993 ) (15,757 ) (2,285 ) General and administrative expenses (2,976 ) (3,559 ) (2,830 ) (410 ) Operation and servicing expenses (6,031 ) (6,558 ) (6,430 ) (932 ) Technology and analytics expenses (1,792 ) (2,084 ) (1,872 ) (271 ) Credit impairment losses (3,035 ) (6,644 ) (16,550 ) (2,400 ) Asset impairment losses (7 ) (1,101 ) (427 ) (62 ) Finance costs (2,866 ) (996 ) (1,239 ) (180 ) Other gains/(losses) – net 384 499 3 1 Total expenses (34,136 ) (38,435 ) (45,102 ) (6,539 ) Profit before income tax expenses 17,910 23,400 13,013 1,887 Less: Income tax expenses (5,634 ) (6,691 ) (4,238 ) (615 ) Net profit attributable to: Owners of our company 12,354 16,804 8,699 1,261 Non-controlling interests (78 ) (95 ) 76 11 12,276 16,709 8,775 1,272 197 Table of Contents Year ended December 31, 2022 compared to year ended December 31, 2021 Technology Platform–based Income Our technology platform–based income decreased by 23.7% from RMB38.3 billion in 2021 to RMB29.2 billion (US$4.2 billion) in 2022.
Biggest changeFor the Year Ended December 31, 2021 2022 2023 (RMB) (RMB) (RMB) (US$) (in millions) Technology platform–based income Retail credit and enablement service fees Loan enablement service fees 5,676 3,446 979 138 Post-origination service fees 30,411 24,028 13,729 1,934 Referral income from platform service 706 1,147 426 60 Retail credit and enablement service fees 36,793 28,621 15,134 2,132 Other technology platform–based income 1,501 597 192 27 Total technology platform–based income 38,294 29,218 15,326 2,159 Net interest income 14,174 18,981 12,348 1,739 Guarantee income 4,370 7,373 4,392 619 Other income 3,875 1,238 1,144 161 Investment income 1,152 1,306 1,050 148 Share of net profit/(loss) of investments accounted for using the equity method (31 ) 0 (5 ) (1 ) Total income 61,835 58,116 34,255 4,825 Sales and marketing expenses: Borrower acquisition expenses (10,120 ) (7,865 ) (5,031 ) (709 ) Investor acquisition and retention expenses (677 ) (301 ) (24 ) (3 ) General sales and marketing expenses (6,637 ) (6,654 ) (4,377 ) (617 ) Referral expenses from platform service (559 ) (937 ) (435 ) (61 ) Sales and marketing expenses (17,993 ) (15,757 ) (9,867 ) (1,390 ) General and administrative expenses (3,559 ) (2,830 ) (2,305 ) (325 ) Operation and servicing expenses (6,558 ) (6,430 ) (6,119 ) (862 ) Technology and analytics expenses (2,084 ) (1,872 ) (1,387 ) (195 ) Credit impairment losses (6,644 ) (16,550 ) (12,697 ) (1,788 ) Asset impairment losses (1,101 ) (427 ) (31 ) (4 ) Finance costs (996 ) (1,239 ) (414 ) (58 ) Other gains/(losses) – net 499 3 210 30 Total expenses (38,435 ) (45,102 ) (32,610 ) (4,593 ) Profit before income tax expenses 23,400 13,013 1,645 232 Less: Income tax expenses (6,691 ) (4,238 ) (611 ) (86 ) Net profit attributable to: Owners of our company 16,804 8,699 887 125 Non-controlling interests (95 ) 76 148 21 16,709 8,775 1,034 146 148 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Technology Platform–based Income Our technology platform–based income decreased by 47.5% from RMB29.2 billion in 2022 to RMB15.3 billion (US$2.2 billion) in 2023.
The decrease in accounts and other payables and payables to investors of consolidated structured entities was mainly due to decrease in payables to investors of consolidated trust plans as a result of decrease in outstanding balance of loans originated by consolidated trust plans.
The decrease in accounts and other payables and payables to investors of consolidated structured entities was mainly due to the decrease in payables to investors of consolidated trust plans as a result of the decrease in outstanding balance of loans originated by consolidated trust plans.
Business Overview—Regulations Relating to Foreign Exchange.” Substantially all of our future income is likely to be in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled.
Business Overview—Regulation—Regulations Relating to Foreign Exchange.” Substantially all of our future income is likely to be in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled.
Retail credit and enablement service fees include loan enablement services and post origination services, which are considered to be two distinctive services under one product provided to our borrowers and funding partners, as well as referral income from platform service, which includes income from the referral service we provide to bank partners through Lujintong.
Retail credit and enablement service fees include loan enablement services and post origination services, which are considered to be two distinctive services under one product provided to our borrowers and funding partners, as well as referral income from platform service, which includes income from the referral service we used to provide to bank partners through Lujintong.
The decrease of 22.2% in retail credit and enablement service fees was mainly due to a decrease of 39.3% in loan enablement service fees from RMB5.7 billion in 2021 to RMB3.4 billion (US$0.5 billion) in 2022 and a decrease of 21.0% in post-origination service fees from RMB30.4 billion in 2021 to RMB24.0 billion (US$3.5 billion) in 2022, which were primarily due to a decrease in new loan sales of our off-balance sheet loans which are funded by banks and by unconsolidated trust plans, and changes in our business model that resulted in more income being recognized as net interest income and guarantee income, partially offset by an increase of 62.4% in referral income from platform services from RMB0.7 billion in 2021 to RMB1.1 billion (US$0.2 billion) in 2022 as a result of an increase in new loan sales through Lujintong.
The decrease of 22.2% in retail credit and enablement service fees was mainly due to a decrease of 39.3% in loan enablement service fees from RMB5.7 billion in 2021 to RMB3.4 billion in 2022 and a decrease of 21.0% in post-origination service fees from RMB30.4 billion in 2021 to RMB24.0 billion in 2022, which were primarily due to a decrease in new loan sales of our off-balance sheet loans which are funded by banks and by unconsolidated trust plans, and changes in our business model that resulted in more income being recognized as net interest income and guarantee income, partially offset by an increase of 62.4% in referral income from platform services from RMB0.7 billion in 2021 to RMB1.1 billion in 2022 as a result of an increase in new loan sales through Lujintong.
Asset impairment losses decreased by 61.2% from RMB1.1 billion in 2021 to RMB0.4 billion (US$0.1 billion) in 2022. Finance Costs Our finance costs increased by 24.5% from RMB1.0 billion in 2021 to RMB1.2 billion (US$0.2 billion) in 2022, due primarily to our redemption of convertible promissory notes as well as the increase in our total borrowings.
Asset impairment losses decreased by 61.2% from RMB1.1 billion in 2021 to RMB0.4 billion in 2022. Finance Costs Our finance costs increased by 24.5% from RMB1.0 billion in 2021 to RMB1.2 billion in 2022, due primarily to our redemption of convertible promissory notes as well as the increase in our total borrowings.
If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%.
If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%.
Other than as shown above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2022. Holding Company Structure Lufax Holding Ltd is a holding company with no material operations of its own. We conduct operations in China primarily through our subsidiaries, the consolidated affiliated entities and their subsidiaries in China.
Other than as shown above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2023. Holding Company Structure Lufax Holding Ltd is a holding company with no material operations of its own. We conduct operations in China primarily through our subsidiaries, the consolidated affiliated entities and their subsidiaries in China.
Loan enablement services include credit assessment of the borrower, enabling loans from the funding partner to the borrower and providing technical assistance to the borrower and the funding partner. Post-origination services include repayment reminders, payment processing, and collection services. Lujintong is designed to help banks with strong risk capabilities acquire borrowers directly through dispersed third-party agents nation-wide.
Loan enablement services include credit assessment of the borrower, enabling loans from the funding partner to the borrower and providing technical assistance to the borrower and the funding partner. Post-origination services include repayment reminders, payment processing, and collection services. Lujintong was designed to help banks with strong risk capabilities acquire borrowers directly through dispersed third-party agents nation-wide.
If the loans are 90 days past due, we record our losses based on our best estimate of recoverable amount. 186 Table of Contents Key Operating Metrics We regularly review a number of operating metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions.
If the loans are 90 days past due, we record our losses based on our best estimate of recoverable amount. 140 Table of Contents Key Operating Metrics We regularly review a number of operating metrics to evaluate our business, measure our performance, identify trends, formulate financial projections and make strategic decisions.
Going forward, we expect the volatility of our credit impairment losses and indemnity losses to increase as we increase the volume of new loans we guarantee and as we experience fluctuations in delinquency indicators as a result of deterioriation or improvement in borrowers’ repayment ability and macro-economic environment changes.
Going forward, we expect the volatility of our credit impairment losses and indemnity losses to increase as we increase the volume of new loans we guarantee and as we experience fluctuations in delinquency indicators as a result of deterioration or improvement in borrowers’ repayment ability and macro-economic environment changes.
The table below sets forth the estimated effective tenor of loans that we do not consolidate on our balance sheet, after considering the actual early repayments that have occurred and expected future early repayments, as of December 31, 2020, 2021 and 2022.
The table below sets forth the estimated effective tenor of loans that we do not consolidate on our balance sheet, after considering the actual early repayments that have occurred and expected future early repayments, as of December 31, 2021, 2022 and 2023.
The following table sets forth the sum of the loan enablement service fees and post-origination service fees that is expected to arise from the remaining performance of long-term contracts for our financial enablement services as of December 31, 2022.
The following table sets forth the sum of the loan enablement service fees and post-origination service fees that is expected to arise from the remaining performance of long-term contracts for our financial enablement services as of December 31, 2023.
General sales and marketing expenses Our general sales and marketing expenses increased by 0.3% from RMB6.6 billion in 2021 to RMB6.7 billion (US$1.0 billion) in 2022. This increase was primarily due to the increase in staff costs for sales and marketing personnel.
General Sales and Marketing Expenses Our general sales and marketing expenses increased by 0.3% from RMB6.6 billion in 2021 to RMB6.7 billion in 2022. This increase was primarily due to the increase in staff costs for sales and marketing personnel.
The decrease in loans to customers and accounts and other receivables was mainly due to decrease in outstanding balance of loans originated by consolidated trust plans and decrease in accounts and other receivables as we prudently scale down our business due to macroeconomic challenges.
The decrease in loans to customers and accounts and other receivables was mainly due to the decrease in outstanding balance of loans originated by consolidated trust plans and the decrease in accounts and other receivables as we prudently scaled down our business due to macroeconomic challenges.
The guarantee leverage ratio of Ping An Puhui Financing Guarantee Co., Ltd, our subsidiary which provides financing guarantee services, was 1.8×, 1.8× and 2.0× as of December 31, 2020, 2021 and 2022, respectively.
The guarantee leverage ratio of Ping An Puhui Financing Guarantee Co., Ltd, our subsidiary which provides financing guarantee services, was 1.8×, 2.0× and 1.8× as of December 31, 2021, 2022 and 2023, respectively.
Sales and Marketing Expenses Our sales and marketing expenses decreased by 12.4% from RMB18.0 billion in 2021 to RMB15.8 billion (US$2.3 billion) in 2022. Borrower acquisition expenses Our borrower acquisition expenses decreased by 22.3% from RMB10.1 billion in 2021 to RMB7.9 billion (US$1.1 billion) in 2022.
Sales and Marketing Expenses Our sales and marketing expenses decreased by 12.4% from RMB18.0 billion in 2021 to RMB15.8 billion in 2022. Borrower Acquisition Expenses Our borrower acquisition expenses decreased by 22.3% from RMB10.1 billion in 2021 to RMB7.9 billion in 2022.
Net Interest Income Our net interest income increased by 33.9% from RMB14.2 billion in 2021 to RMB19.0 billion (US$2.8 billion) in 2022. Consolidated trust plans Our net interest income from consolidated trust plans increased by 22.0% from RMB12.8 billion in 2021 to RMB15.7 billion (US$2.3 billion) in 2022.
Net Interest Income Our net interest income increased by 33.9% from RMB14.2 billion in 2021 to RMB19.0 billion in 2022. Consolidated Trust Plans Our net interest income from consolidated trust plans increased by 22.0% from RMB12.8 billion in 2021 to RMB15.7 billion in 2022.
See “—On- and Off-Balance Sheet Treatment of Loans and Risk Exposure.” 190 Table of Contents The following table sets forth the breakdown of our net interest income for the years indicated.
See “—On- and Off-Balance Sheet Treatment of Loans and Risk Exposure.” The following table sets forth the breakdown of our net interest income for the years indicated.
Credit impairment losses increased by 149% from RMB6.6 billion in 2021 to RMB16.6 billion (US$2.4 billion) in 2022, primarily due to the increase of provision and indemnity loss driven by increased risk exposure and by worsening credit performance due to the impact of successive COVID-19 outbreaks on the Chinese economy.
Credit impairment losses increased by 149% from RMB6.6 billion in 2021 to RMB16.6 billion in 2022, primarily due to the increase of provision and indemnity loss driven by increased risk exposure and by worsening credit performance due to the impact of successive COVID-19 outbreaks on the Chinese economy.
As a result, more loans enabled with trust plans were consolidated since we were entitled to higher proportion of the variable return. As of December 31, 2021 and 2022, we consolidated 90.1% and 95.6%, respectively, of the outstanding balance of loans we enabled with trusts as the funding source.
As a result, more loans enabled with trust plans were consolidated since we were entitled to higher proportion of the variable return. As of December 31, 2021, 2022 and 2023, we consolidated 90.1%, 95.6% and 96.0%, respectively, of the outstanding balance of loans we enabled with trusts as the funding source.
Risk management empowers us to identify creditworthy customers who have been underserved by traditional financial institutions, offer differentiated products to borrowers with different risks profiles, and improve our overall loan performance. 182 Table of Contents Delinquency rate is a backward looking indictor that reflects asset quality trend during a period in the past.
Risk management empowers us to identify creditworthy customers who have been underserved by traditional financial institutions, offer differentiated products to borrowers with different risks profiles, and improve our overall loan performance. Delinquency rate is a backward looking indictor that reflects asset quality trend during a period in the past.
The decrease in borrower acquisition expenses was primarily due to decreased new loan sales and reductions in commissions. Investor acquisition and retention expenses Our investor acquisition and retention expenses decreased by 55.5% from RMB0.7 billion in 2021 to RMB0.3 billion (US$43.7 million) in 2022. This decrease was primarily due to the decrease in sales of wealth management products.
The decrease in borrower acquisition expenses was primarily due to decreased new loan sales and reductions in commissions. Investor Acquisition and Retention Expenses Our investor acquisition and retention expenses decreased by 55.5% from RMB0.7 billion in 2021 to RMB0.3 billion in 2022. This decrease was primarily due to the decrease in sales of wealth management products.
Under this model, we earn referral fees based on transaction volume and do not participate in credit risk assessment and sharing. As a result, we do not count loans enabled through Lujintong as part of our volume of new loans enabled or our total outstanding loans.
Under this model, we earned referral fees based on transaction volume and did not participate in credit risk assessment and sharing. As a result, we do not count loans enabled through Lujintong as part of our volume of new loans enabled or our total outstanding loans.
Risk Factors—Risks Relating 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.” Income Tax Expenses For the years ended December 31, 2020, 2021 and 2022, our income tax expenses were RMB5.6 billion, RMB6.7 billion and RMB4.2 billion (US$0.6 billion), respectively.
Risk Factors—Risks Relating 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.” Income Tax Expenses For the years ended December 31, 2021, 2022 and 2023, our income tax expenses were RMB6.7 billion, RMB4.2 billion and RMB0.6 billion (US$0.1 billion), respectively.
As we have increased the proportion of the loans we enable for which we provide credit enhancement, guarantee income has accounted an increasing though still relatively low proportion of our total income, from 1.2% in 2020 to 7.1% in 2021 and 12.7% in 2022. Other income Other income includes account management service fees, penalty fees and other services fees.
As we have increased the proportion of the loans we enable for which we provide credit enhancement, guarantee income has accounted an increasing though still relatively low proportion of our total income, from 7.1% in 2021 to 12.7% in 2022 and 12.8% in 2023. Other Income Other income includes account management service fees, penalty fees and other services fees.
Net cash generated from investing activities for 2022 was RMB8.4 billion (US$1.2 billion), primarily as a result of proceeds from sale of investment assets of RMB99.0 billion (US$14.4 billion), a decrease in securities purchases under agreements to resell of RMB5.5 billion (US$0.8 billion) and interest received on investment assets of RMB1.7 billion (US$0.3 billion), partially offset by payment for acquisition of investment assets of RMB97.7 billion (US$14.2 billion). 206 Table of Contents Net cash generated from investing activities for the year ended December 31, 2021 was RMB0.3 billion, primarily as a result of proceeds from sale of investment assets of RMB132.4 billion, partially offset by payment for acquisition of investment assets of RMB128.6 billion and an increase in securities purchases under agreements to resell of RMB4.8 billion.
Net cash generated from investing activities for 2022 was RMB8.4 billion, primarily as a result of proceeds from sale of investment assets of RMB99.0 billion, a decrease in securities purchases under agreements to resell of RMB5.5 billion and interest received on investment assets of RMB1.7 billion, partially offset by payment for acquisition of investment assets of RMB97.7 billion. 155 Table of Contents Net cash generated from investing activities for the year ended December 31, 2021 was RMB0.3 billion, primarily as a result of proceeds from sale of investment assets of RMB132.4 billion, partially offset by payment for acquisition of investment assets of RMB128.6 billion and an increase in securities purchases under agreements to resell of RMB4.8 billion.
As of December 31, 2020, 2021 and 2022, our DPD 30+ delinquency rate was 2.0%, 2.2% and 4.6%, respectively, and our DPD 90+ delinquency rate was 1.2%, 1.2% and 2.6%, respectively. Flow rate is a forward-looking indicator that estimates the percentage of current loans that will become non-performing at the end of three months.
As of December 31, 2021, 2022 and 2023, our DPD 30+ delinquency rate was 2.2%, 4.6% and 6.9%, respectively, and our DPD 90+ delinquency rate was 1.2%, 2.6% and 4.1%, respectively. Flow rate is a forward-looking indicator that estimates the percentage of current loans that will become non-performing at the end of three months.
To properly control our risk exposure, we have prudently managed our guarantee leverage ratio following “Regulations on the Supervision and Administration of Financing Guarantee Companies.” The regulations set forth that the outstanding guarantee liabilities of a financing guarantee company shall not exceed ten times its net assets, though the upper limit can be raised to 15 times for a financing guarantee company that mainly provides services to small and micro enterprises, the agriculture sector, rural villages and farmers.
To properly control the risk exposure in our consumer finance business, we have prudently managed our guarantee leverage ratio following “Regulations on the Supervision and Administration of Financing Guarantee Companies.” The regulations set forth that the outstanding guarantee liabilities of a financing guarantee company shall not exceed 10 times its net assets, though the upper limit can be raised to 15 times for a financing guarantee company that mainly provides services to small and micro enterprises, the agriculture sector, rural villages and farmers.
While credit quality deterioration took place across the board in China during 2022, we witnessed growing differences in economic resilience in various regions, which led to significant divergence in credit performance by region.
While credit quality deterioration took place across the board in China in 2022 and 2023, we witnessed growing differences in economic resilience in various regions, which led to significant divergence in credit performance by region.
Other income accounted for 2.9% of our total income in 2020, 6.3% of our total income in 2021 and 2.1% of our total income in 2022. 191 Table of Contents Investment income Investment income primarily consists of interest income and realized and unrealized gains and losses on financial assets and financial investments, which mainly consist of asset management plans, mutual fund investments, trust plans, factoring products, structured deposits, bank wealth management products and debt investments.
Other income accounted for 6.3% of our total income in 2021, 2.1% of our total income in 2022 and 3.3% of our total income in 2023. 144 Table of Contents Investment Income Investment income primarily consists of interest income and realized and unrealized gains and losses on financial assets and financial investments, which mainly consist of asset management plans, mutual fund investments, trust plans, factoring products, structured deposits, bank wealth management products and debt investments.
This decrease was primarily due to a decrease of 22.2% in retail credit and enablement service fees from RMB36.8 billion in 2021 to RMB28.6 billion (US$4.1 billion) in 2022 and a decrease of 60.2% in other technology platform-based income from RMB1.5 billion in 2021 to RMB0.6 billion (US$0.1 billion) in 2022.
This decrease was primarily due to a decrease of 22.2% in retail credit and enablement service fees from RMB36.8 billion in 2021 to RMB28.6 billion in 2022 and a decrease of 60.2% in other technology platform-based income from RMB1.5 billion in 2021 to RMB0.6 billion in 2022.
All of our cash at bank are held by major financial institutions located in China, which we believe are of high credit quality. As of December 31, 2022, there were three banks with which our cash and cash equivalents balance exceeded 10% of our total cash at bank.
All of our cash at bank are held by major financial institutions located in China, which we believe are of high credit quality. As of December 31, 2023, there were two banks with which our cash and cash equivalents balance exceeded 10% of our total cash at bank.
Net cash used in financing activities for 2022 was RMB9.9 billion (US$1.4 billion), primarily as a result of payment for interest expenses and dividend declared of RMB8.9 billion (US$1.3 billion), repayment of borrowings of RMB5.8 billion (US$0.8 billion) and repayment of convertible promissory note payable of RMB3.7 billion (US$0.5 billion), partially offset by proceeds from borrowings of RMB9.0 billion (US$1.3 billion).
Net cash used in financing activities for 2022 was RMB9.9 billion, primarily as a result of payment for interest expenses and dividend declared of RMB8.9 billion, repayment of borrowings of RMB5.8 billion and repayment of convertible promissory note payable of RMB3.7 billion, partially offset by proceeds from borrowings of RMB9.0 billion.
Interest income from consolidated trust plans increased by 21.9% from RMB21.2 billion in 2021 to RMB25.9 billion (US$3.8 billion) in 2022, and interest expenses increased by 21.6% from RMB8.4 billion in 2021 to RMB10.2 billion (US$1.5 billion) in 2022, in both cases primarily driven by the increase in our average balance of loans originated by consolidated trust plans from RMB157.2 billion in 2021 to RMB194.3 billion (US$28.2 billion) in 2022.
Interest income from consolidated trust plans increased by 21.9% from RMB21.2 billion in 2021 to RMB25.9 billion in 2022, and interest expenses increased by 21.6% from RMB8.4 billion in 2021 to RMB10.2 billion in 2022, in both cases primarily driven by the increase in our average balance of loans originated by consolidated trust plans from RMB157.2 billion in 2021 to RMB194.3 billion in 2022.
Interest income from microloans and consumer finance increased by 162% from RMB1.5 billion in 2021 to RMB4.0 billion (US$0.6 billion) in 2022, and interest expense from microloans and consumer finance increased from RMB0.2 billion in 2021 to RMB0.7 billion (US$0.1 billion) in 2022.
Interest income from microloans and consumer finance increased by 162% from RMB1.5 billion in 2021 to RMB4.0 billion in 2022, and interest expense from microloans and consumer finance increased from RMB0.2 billion in 2021 to RMB0.7 billion in 2022.
As a result, the net carrying value of the loans we enabled plus the interest receivables on those loans amounted to RMB215.0 billion as of December 31, 2021 and RMB211.4 billion (US$30.7 billion) as of December 31, 2022, which was recorded as loans to customers on our balance sheet.
As a result, the net carrying value of the loans we enabled plus the interest receivables on those loans amounted to RMB215.0 billion as of December 31, 2021, RMB211.4 billion as of December 31, 2022 and RMB129.7 billion (US$18.3 billion) as of December 31, 2023, which was recorded as loans to customers on our balance sheet.
Investment income accounted for 1.8% of our total income in 2020, 1.9% of our total income in 2021 and 2.2% of our total income in 2022. Total Expenses Our expenses include sales and marketing expenses, general and administrative expenses, operation and servicing expenses, technology and analytics expenses, and credit impairment costs, among others.
Investment income accounted for 1.9% of our total income in 2021, 2.2% of our total income in 2022 and 3.1% of our total income in 2023. Total Expenses Our expenses include sales and marketing expenses, general and administrative expenses, operation and servicing expenses, technology and analytics expenses, and credit impairment costs, among others.
As of December 31, 2021 and 2022, we had credit risk exposure to 16.6% and 23.5%, respectively, of the outstanding balance of the loans we enabled. The credit risk exposure between our third-party external partners and ourselves is on a pari passu basis, meaning that we share losses in proportion to our respective arrangements.
As of December 31, 2021, 2022 and 2023, we had credit risk exposure to 16.6%, 23.5% and 39.8%, respectively, of the outstanding balance of the loans we enabled. The credit risk exposure between our third-party external partners and ourselves is on a pari passu basis, meaning that we share all losses in proportion to our respective commitments.
Impairment Losses Under IFRS 9, we use an expected loss model to determine and recognize impairments, which were recorded within credit impairment losses. 194 Table of Contents The following table sets forth credit and asset impairment losses for the years indicated: For the Year Ended December 31, 2020 2021 2022 (RMB in millions) Credit impairment losses 3,035 6,644 16,550 Asset impairment losses 7 1,101 427 Total 3,042 7,745 16,978 The following table sets forth the key components of impairment losses for the years indicated: For the Year Ended December 31, 2020 2021 2022 (RMB in millions) Loan-related (1) 2,996 6,349 15,931 Investment-related (2) 18 273 575 Others (3) 28 1,123 472 Total 3,042 7,745 16,978 Notes: (1) Loan-related impairment losses consist of actual and expected losses from loan to customers, accounts and other receivables and contract assets related to our retail credit and enablement business and guarantee contracts.
Impairment Losses Under IFRS 9, we use an expected loss model to determine and recognize impairments, which were recorded within credit impairment losses. 146 Table of Contents The following table sets forth credit and asset impairment losses for the years indicated: For the Year Ended December 31, 2021 2022 2023 (RMB in millions) Credit impairment losses 6,644 16,550 12,697 Asset impairment losses 1,101 427 31 Total 7,745 16,978 12,729 The following table sets forth the key components of impairment losses for the years indicated: For the Year Ended December 31, 2021 2022 2023 (RMB in millions) Loan-related (1) 6,349 15,931 12,728 Investment-related (2) 273 575 (28 ) Others (3) 1,123 472 28 Total 7,745 16,978 12,729 Notes: (1) Loan-related impairment losses consist of actual and expected losses from loan to customers, accounts and other receivables and contract assets related to our retail credit and enablement business and guarantee contracts.
Our fixed costs as a percentage of our total income declined from 9.2% in 2020 to 9.1% in 2021 and 8.1% in 2022. Regulatory Environment in China The regulatory environment for retail credit enablement in China is developing and evolving, creating both challenges and opportunities that could affect our financial performance.
Our fixed costs as a percentage of our total income declined from 9.1% in 2021 to 8.1% in 2022 and then increased to 10.8% in 2023. Regulatory Environment in China The regulatory environment for retail credit enablement in China is developing and evolving, creating both challenges and opportunities that could affect our financial performance.
In 2020, 2021 and 2022, we have gradually lowered the APR on loans we enable.
In 2021, 2022 and 2023, we have gradually lowered the APR on loans we enable.
Information on the Company—B. Business Overview—How We Enable Our Institutional Partners—Credit Risk Management” for more explanation.
See “Item 4. Information on the Company—B. Business Overview—How We Enable Our Institutional Partners—Credit Risk Management” for more explanation.
In addition, the evolution of our business model has led to changes in the structure of our total income. The income contribution from guarantee income increased from 1.2% in 2020 to 7.1% in 2021 and 12.7% in 2022.
In addition, the evolution of our business model has led to changes in the structure of our total income. The income contribution from guarantee income increased from 7.1% in 2021 to 12.7% in 2022 and 12.8% in 2023.
Operating Activities Net cash generated from operating activities for the year ended December 31, 2022 was RMB4.5 billion (US$646 million), as compared to profit before income tax expenses of RMB13.0 billion (US$1.9 billion) for the same period.
Net cash generated from operating activities for the year ended December 31, 2022 was RMB4.5 billion, as compared to profit before income tax expenses of RMB13.0 billion for the same period.
Our mature collection framework and data collected from these efforts also represent an integral part of our value propositions, enhancing our relationship with our funding partners and credit enhancement providers. Operational Efficiency Our operational efficiency and cost structure have a large impact on the results of our business.
Our mature collection framework and data collected from these efforts also represent an integral part of our value propositions, enhancing our relationship with our funding partners. 139 Table of Contents Operational Efficiency Our operational efficiency and cost structure have a large impact on the results of our business.
Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Some of our PRC subsidiaries will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds or general risk reserves. 208 Table of Contents C.
Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Some of our PRC subsidiaries will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds or general risk reserves. C. Research and Development See “Item 4.
In addition to our core retail credit and enablement model, we earn referral income from platform service for the referral service we provide to bank partners through Lujintong, other technology platform–based income for service fees generated from distribution of financial institutions’ products, net interest income for loans made by our consumer finance subsidiary, and other income from account management service fees, penalty fees and other services fees.
In addition to our core retail credit and enablement model, we earn other technology platform–based income for service fees generated from distribution of financial institutions’ products, net interest income for loans made by our consumer finance subsidiary, and other income from account management service fees, penalty fees and other services fees.
The difference was primarily due to an decrease in loans to customers and accounts and other receivables of RMB10.4 billion (US$1.5 billion) and a decrease in accounts and other payables of RMB24.1 billion (US$3.5 billion).
The difference was primarily due to a decrease in loans to customers and accounts and other receivables of RMB10.4 billion and a decrease in accounts and other payables of RMB24.1 billion.
Since April 1, 2018, our subsidiaries incorporated in Hong Kong have been subject to Hong Kong profit tax at a rate of 8.25% on assessable profits up to HK$2,000,000 and 16.5% on any part of assessable profits over that amount. Hong Kong does not impose a withholding tax on dividends.
Hong Kong Our subsidiaries incorporated in Hong Kong are subject to Hong Kong profit tax at a rate of 8.25% on assessable profits up to HK$2,000,000 and 16.5% on any part of assessable profits over that amount. Hong Kong does not impose a withholding tax on dividends.
Historically, our ability to enable loans has not been constrained by our funding supply, but our funding supply in the future could be constrained by the commercial dynamics discussed in “—The Evolution of Our Business Model.” In addition, we collaborate with seven third-party credit insurance companies, including primarily Ping An P&C, to extend credit enhancement for loans whose borrowers meet their desired risk profile.
Historically, our ability to enable loans has not been constrained by our funding supply, but our funding supply in the future could be constrained by the commercial dynamics discussed in “—The Evolution of Our Business Model.” In addition, prior to our adoption of our 100% guarantee business model, we collaborated with seven third-party credit insurance companies, including primarily Ping An P&C, to provide credit enhancement for loans whose borrowers met their desired risk profile.
The expenses for our online direct marketing channel consist primarily of incentives paid for new investor referrals, coupons, and online marketing expenses. Our general sales and marketing expenses mainly represent payroll and related expenses for personnel engaged in marketing, brand promotion costs, business development costs and other marketing and advertising costs.
The expenses for our online direct marketing channel consist primarily of incentives paid for new investor referrals, coupons, and online marketing expenses. Our general sales and marketing expenses mainly represent payroll and related expenses for personnel engaged in marketing, brand promotion costs, business development costs and other marketing and advertising costs. Referral expenses from platform service are related to Lujintong.
Interest income represents interest income receivable by loans funded by these trust plans while interest expenses represent interest payable by these consolidated trust plans to their investors. Microloans and consumer finance Our net interest income from microloans and consumer finance increased by 147% from RMB1.3 billion in 2021 to RMB3.3 billion (US$0.5 billion) in 2022.
Interest income represents interest income receivable by loans funded by these trust plans while interest expenses represent interest payable by these consolidated trust plans to their investors. 151 Table of Contents Microloans and Consumer Finance Our net interest income from microloans and consumer finance increased by 147% from RMB1.3 billion in 2021 to RMB3.3 billion in 2022.
Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority.
We are also subject to surcharges on value added tax payments in accordance with PRC law. 147 Table of Contents Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the Hong Kong entity satisfies all the requirements under the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority.
In addition to these changes in our working capital accounts, the difference between our net cash generated from operating activities and our profit before income tax expenses was also due to the impact of certain other items, in particular credit impairment losses of RMB2.8 billion, finance cost classified as financing activities of RMB3.1 billion and depreciation of right-to-use assets of RMB0.6 billion, partially offset by investment income classified as investing activities of RMB1.1 billion.
In addition to these changes in our working capital accounts, the difference between our net cash generated from operating activities and our profit before income tax expenses was also due to the impact of certain other items, in particular unrealized credit impairment losses of RMB5.6 billion and finance cost classified as financing activities of RMB1.8 billion, partially offset by investment income classified as investing activities of RMB1.2 billion.
We provide guarantee services through our financing guarantee subsidiary, which has licensed branches in 29 provinces. For loans funded by third parties where the lender requires credit enhancement, we guarantee a portion of the risk on each new loan transaction along with our credit enhancement providers.
We provide guarantee services through our financing guarantee subsidiary, which has licensed branches in 30 provinces. For loans funded by third parties requiring credit enhancement, we used to guarantee a portion of the risk on each new loan transaction along with our credit enhancement providers.
Borrowers’ early repayments of loans reduce the number of months that our retail credit and enablement service fees or interest income can be recognized and thus affect the total amount of our fees and interest income in absolute terms.
Our borrowers’ repayment behaviors and early repayment options affect the effective tenors of the loans we enable. Borrowers’ early repayments of loans reduce the number of months that our retail credit and enablement service fees or interest income can be recognized and thus affect the total amount of our fees and interest income in absolute terms.
This increase was primarily attributable to the increase in the proportion of the loans we enabled for which we had provided credit enhancement. Other Income Our other income decreased by 68.1% from RMB3.9 billion in 2021 to RMB1.2 billion (US$0.2 billion) in 2022.
Guarantee Income Our guarantee income increased by 68.7% from RMB4.4 billion in 2021 to RMB7.4 billion in 2022. This increase was primarily attributable to the increase in the proportion of the loans we enabled for which we had provided credit enhancement. Other Income Our other income decreased by 68.1% from RMB3.9 billion in 2021 to RMB1.2 billion in 2022.
Referral expenses from platform service are related to Lujintong. 193 Table of Contents The following table sets forth the breakdown of our sales and marketing expenses, both in absolute amounts and as percentages of our total sales and marketing expenses, for the years indicated: For the Year Ended December 31, 2020 2021 2022 (RMB) (%) (RMB) (%) (RMB) (%) (in millions, except percentages) Borrower acquisition expenses 11,506 64.6 10,120 56.2 7,865 49.9 Investor acquisition and retention expenses 820 4.6 677 3.8 301 1.9 General sales and marketing expenses 5,403 30.3 6,637 36.9 6,654 42.2 Referral expenses from platform service 84 0.5 559 3.1 937 5.9 Total sales and marketing expenses 17,814 100.0 17,993 100.0 15,757 100.0 General and administrative expenses General and administrative expenses consist primarily of employee benefit expenses and office rentals that are not included in sales and marketing, operation and servicing, or technology and analytics expenses, tax surcharges, consulting service fees, business entertainment costs and other expenses.
The following table sets forth the breakdown of our sales and marketing expenses, both in absolute amounts and as percentages of our total sales and marketing expenses, for the years indicated: For the Year Ended December 31, 2021 2022 2023 (RMB) (%) (RMB) (%) (RMB) (%) (in millions, except percentages) Borrower acquisition expenses 10,120 56.2 7,865 49.9 5,031 51.0 Investor acquisition and retention expenses 677 3.8 301 1.9 24 0.2 General sales and marketing expenses 6,637 36.9 6,654 42.2 4,377 44.4 Referral expenses from platform service 559 3.1 937 5.9 435 4.4 Total sales and marketing expenses 17,993 100.0 15,757 100.0 9,867 100.0 General and Administrative Expenses General and administrative expenses consist primarily of employee benefit expenses and office rentals that are not included in sales and marketing, operation and servicing, or technology and analytics expenses, tax surcharges, consulting service fees, business entertainment costs and other expenses.
As of December 31, 2020 2021 2022 (months) Estimated Effective Tenor for Off–Balance Sheet Loans General unsecured loans 19.18 19.37 19.75 Secured loans 12.64 13.44 14.62 The table below sets forth the impact of changes in estimated effective tenor on the sum of loan enablement service fees and post-origination service fees of RMB18,911 million expected as of December 31, 2022 to be recognized in the remaining period of the loans when the remaining performance obligations are satisfied.
As of December 31, 2021 2022 2023 (months) Estimated Effective Tenor for Off–Balance Sheet Loans General unsecured loans 19.37 19.75 20.46 Secured loans 13.44 14.62 15.50 The table below sets forth the impact of changes in estimated effective tenor on the sum of loan enablement service fees and post-origination service fees of RMB8,631 million expected as of December 31, 2023 to be recognized in the remaining period of the loans when the remaining performance obligations are satisfied.
Meanwhile, the growth in our consumer finance business together with our increased use of consolidated third-party trust plans has led to growing income contribution from net interest income, which we recognize on loans funded by these sources. The income contribution from net interest income increased from 14.9% in 2020 to 22.9% in 2021 and 32.7% in 2022.
Meanwhile, the growth in our consumer finance business together with our increased use of consolidated third-party trust plans has led to growing income contribution from net interest income, which we recognize on loans funded by these sources.
As our retail credit enablement service fees are comprised of loan enablement service fees and post-origination service fees, the relatively large ticket sizes and long tenors of the general unsecured loans and secured loans we enable give us a larger and more stable income stream with visibility beyond the current period. 184 Table of Contents Our borrowers’ repayment behaviors and early repayment options affect the effective tenors of the loans we enable.
As our retail credit enablement service fees are comprised of loan enablement service fees and post-origination service fees, the relatively large ticket sizes and long tenors of the general unsecured loans and secured loans we enable give us a larger and more stable income stream with visibility beyond the current period.
As a result, although other means are available for us to obtain financing at the holding company level, Lufax Holding Ltd’s ability to pay dividends to its shareholders and to service any debt it may incur may depend upon dividends paid by our PRC subsidiaries and on technical and consulting service fees paid by the consolidated affiliated entities in China.
As a result, although other means are available for us to obtain financing at the holding company level, Lufax Holding Ltd’s ability to continue paying dividends to its shareholders and investors of the ADSs in the future, as well as its ability to service any debt it has incurred or may incur, may depend upon dividends paid by our PRC subsidiaries and, indirectly, on technical and consulting service fees paid by the consolidated affiliated entities in China.
Our borrower acquisition expenses primarily represent the expenses we incur as compensation for new loans we enabled that generated technology platform–based income, both for loans enabled in 2021 and for loans enabled in prior years whose remaining balance and tenor of obligations had not lapsed.
Our borrower acquisition expenses primarily represent the expenses we incur as compensation for new loans we enabled that generated technology platform–based income, both for loans enabled in 2022 and for loans enabled in prior years whose remaining balance and tenor of obligations had not lapsed. The decrease in borrower acquisition expenses was primarily due to the decreased new loan sales.
The following table sets forth the breakdown of our borrower acquisition costs, both in absolute amounts and percentages of total borrower acquisition costs, for the years indicated: For the Year Ended December 31, 2020 2021 2022 (RMB) (%) (RMB) (%) (RMB) (%) (in millions, except percentages) Direct sales 4,928 42.8 4,462 44.1 3,814 48.5 Channel partners 5,510 47.9 4,922 48.6 3,555 45.2 Online and telemarketing 1,068 9.3 735 7.3 496 6.3 Total borrower acquisition costs 11,506 100.0 10,120 100.0 7,865 100.0 The borrower acquisition costs are all related to the off–balance sheet loans.
The following table sets forth the breakdown of our borrower acquisition costs, both in absolute amounts and percentages of total borrower acquisition costs, for the years indicated: For the Year Ended December 31, 2021 2022 2023 (RMB) (%) (RMB) (%) (RMB) (%) (in millions, except percentages) Direct sales 4,462 44.1 3,814 48.5 2,593 51.6 Channel partners 4,922 48.6 3,555 45.2 2,135 42.4 Online and telemarketing 735 7.3 496 6.3 302 6.0 Total borrower acquisition costs 10,120 100.0 7,865 100.0 5,031 100 145 Table of Contents The borrower acquisition costs are all related to the off–balance sheet loans.
This decrease was primarily due to our improved efficiency. Impairment Losses Our impairment losses, including credit impairment losses and asset impairment losses, increased by 119% from RMB7.7 billion in 2021 to RMB17.0 billion (US$2.5 billion) in 2022.
This decrease was primarily due to our improved efficiency. 152 Table of Contents Impairment Losses Our impairment losses, including credit impairment losses and asset impairment losses, increased by 119% from RMB7.7 billion in 2021 to RMB17.0 billion in 2022.
The percentage of our total outstanding loans with credit risk exposure for our company increased from 6.3% in 2020 to 16.6% in 2021 and further to 23.5% in 2022, including both loans we guarantee through our financing guarantee subsidiary and loans we make through our consumer finance subsidiary.
The percentage of our total outstanding loans with credit risk exposure for our company increased from 16.6% as of December 31, 2021 to 23.5% as of December 31, 2022 and further to 39.8% as of December 31, 2023, including both loans we guarantee through our financing guarantee subsidiary and loans we make through our consumer finance subsidiary.
Our flow rate for general unsecured loans was around 0.5% or 0.6% for most of 2020 and 2021 before rising to around 1.2% as of December 31, 2022. Similarly, our flow rate for secured loans was around 0.1% or 0.2% for most of 2020 and 2021 before rising to around 0.7% by December 31, 2022. See “Item 4.
Our flow rate for general unsecured loans was around 0.5% or 0.6% in 2021 before rising to around 1.1% as of December 31, 2022 and further to around 1.4% as of December 31, 2023. Similarly, our flow rate for secured loans was around 0.1% or 0.2% in 2021 before rising to around 0.7% as of December 31, 2022 and 2023.
As of December 31, 2020 2021 2022 (RMB) (RMB) (RMB) (US$) (in millions) Financing guarantee commitments 20,969 64,731 68,503 9,932 Aside from the above, we have not entered into any financing guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties.
As of December 31, 2021 2022 2023 (RMB) (RMB) (RMB) (US$) (in millions) Financing guarantee commitments 64,731 68,503 54,903 7,733 Aside from the above, we have not entered into any financing guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties.
Finance costs Finance cost primarily consists of the interest expenses in connection with our convertible promissory note issued in October 2015 for acquiring our retail credit and enablement business, interest expenses on the debt component of the convertible redeemable preferred shares, and the interest expenses of our bank borrowings for general corporate operations that are not related to our retail credit and enablement business. 195 Table of Contents Taxation Cayman Islands We are incorporated as an exempted company in the Cayman Islands.
Finance Costs Finance cost primarily consists of the interest expenses in connection with our convertible promissory note issued in October 2015 for acquiring our retail credit and enablement business, interest expenses on the debt component of the convertible redeemable preferred shares, and the interest expenses of our bank borrowings for general corporate operations that are not related to our retail credit and enablement business.
As of and For the Year Ended December 31, 2020 2021 2022 Number of active borrowers (thousands) 4,382 4,906 4,805 Number of active funding partners 58 66 81 (RMB in billions except where otherwise indicated) Outstanding balance of loans enabled 545.1 661.0 576.5 General unsecured loans 447.8 520.1 423.8 Secured loans 93.7 129.3 123.1 Consumer finance loans 3.6 11.6 29.7 Percentage with risk exposure for our company 6.3 % 16.6 % 23.5 % Off–balance sheet 426.7 446.3 360.4 Without credit risk exposure 405.7 381.5 291.9 With credit risk exposure 21.0 64.7 68.5 On–balance sheet 118.5 214.8 216.1 Without credit risk exposure 105.3 169.6 149.2 With credit risk exposure 13.2 45.1 66.9 Volume of new loans enabled 565.0 648.4 495.4 Off–balance sheet 423.1 414.2 279.5 Without credit risk exposure 399.8 341.7 219.8 With credit risk exposure 23.2 72.5 59.7 On–balance sheet 141.9 234.2 215.8 Without credit risk exposure 127.2 175.0 125.3 With credit risk exposure 14.7 59.2 90.6 Financing guarantee subsidiary leverage ratio (×) (1) 1.8× 1.8× 2.0× Net assets of financing guarantee subsidiary 13.4 47.4 47.9 Net assets of Lufax Holding (consolidated) 83.2 94.6 94.8 30 day+ delinquency rate (2) (%) 2.0 % 2.2 % 4.6 % 90 day+ delinquency rate (2) (%) 1.2 % 1.2 % 2.6 % Cost-to-income ratio (3) (%) 55.0 % 48.8 % 46.3 % Credit impairment losses 3.0 6.6 16.6 Notes: (1) Calculated in accordance with “Supervision and Administration of Financing Guarantee Companies.” The leverage ratio of the financing guarantee subsidiary is calculated as the outstanding guarantee liabilities of the financing guarantee company divided by its net assets.
As of or For the Year Ended December 31, 2021 2022 2023 Number of active borrowers (thousands) 4,906 4,805 3,924 Number of active funding partners 66 81 85 (RMB in billions except where otherwise indicated) Outstanding balance of loans enabled 661.0 576.5 315.4 General unsecured loans 520.1 423.8 207.9 Secured loans 129.3 123.1 70.4 Consumer finance loans 11.6 29.7 37.1 Percentage with risk exposure for our company 16.6 % 23.5 % 39.8 % Off–balance sheet 446.3 360.4 180.1 Without credit risk exposure 381.5 291.9 125.2 With credit risk exposure 64.7 68.6 54.9 On–balance sheet 214.8 216.1 135.3 Without credit risk exposure 169.6 149.2 64.6 With credit risk exposure 45.1 66.9 70.7 Volume of new loans enabled 648.4 495.4 208.0 Off–balance sheet 414.2 279.5 81.5 Without credit risk exposure 341.7 219.8 42.9 With credit risk exposure 72.5 59.7 38.6 On–balance sheet 234.2 215.8 126.5 Without credit risk exposure 175.0 125.3 35.3 With credit risk exposure 59.2 90.6 91.2 Financing guarantee subsidiary leverage ratio (×) (1) 1.8 × 2.0 × 1.8 × Net assets of financing guarantee subsidiary 47.4 47.9 44.6 Net assets of Lufax Holding (consolidated) 94.6 94.8 93.7 30 day+ delinquency rate (2) (%) 2.2 % 4.6 % 6.9 % 90 day+ delinquency rate (2) (%) 1.2 % 2.6 % 4.1 % Cost-to-income ratio (3) (%) 48.8 % 46.3 % 57.4 Credit impairment losses 6.6 16.6 12.7 Notes : (1) Calculated in accordance with “Supervision and Administration of Financing Guarantee Companies.” The leverage ratio of the financing guarantee subsidiary is calculated as the outstanding guarantee liabilities of the financing guarantee company divided by its net assets.
We assess various options for the deployment of surplus capital or surplus funds, including investment in financial assets, acquisitions or dividend payouts to shareholders. As of December 31, 2022, we had RMB43.9 billion (US$6.4 billion) in cash at bank, of which 95.2% was held in Renminbi.
We assess various options for the deployment of surplus capital or surplus funds, including investment in financial assets, acquisitions or dividend payouts to shareholders. As of December 31, 2023, we had RMB39.6 billion (US$5.6 billion) in cash at bank, of which 98.8% was held in Renminbi.
Borrower acquisition expenses are capitalized and amortized on a systematic basis consistent with revenue recognition. For our on–balance sheet loans, as part of the cash flows directly attributable to the loans, the corresponding expenses were reflected in net interest income rather than in borrower acquisition expenses, in accordance with IFRS 9.
For our on–balance sheet loans, as part of the cash flows directly attributable to the loans, the corresponding expenses were reflected in net interest income rather than in borrower acquisition expenses, in accordance with IFRS 9.
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 income, expenses, 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 conditions.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period since January 1, 2024 that are reasonably likely to have a material effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
We are subject to value added tax, or VAT, at rates of 3% or 6% on the services we provide to borrowers and investors, less any deductible VAT we have already paid or borne. We are also subject to surcharges on VAT payments in accordance with PRC law.
We are subject to value added tax at rates of 3% or 6% on the services we provide to borrowers and investors, less any deductible value added tax we have already paid or borne.
In addition to these changes in our working capital accounts, the difference between our net cash generated from operating activities and our profit before income tax expenses was also due to the impact of certain other items, in particular unrealized credit impairment losses of RMB12.0 billion (US$1.7 billion), finance cost classified as financing activities of RMB2.5 billion (US$0.4 billion) and foreign exchange losses of RMB0.9 billion (US$0.1 billion), partially offset by investment income classified as investing activities of RMB1.5 billion (US$0.2 billion). 205 Table of Contents Net cash generated from operating activities for the year ended December 31, 2021 was RMB5.0 billion, as compared to profit before income tax expenses of RMB23.4 billion for the same period.
In addition to these changes in our working capital accounts, the difference between our net cash generated from operating activities and our profit before income tax expenses was also due to the impact of certain other items, in particular unrealized credit impairment losses of RMB12.0 billion, finance cost classified as financing activities of RMB2.5 billion and foreign exchange losses of RMB0.9 billion, partially offset by investment income classified as investing activities of RMB1.5 billion.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
The following table sets forth a summary of our cash flows for the years presented: For the Year Ended December 31, 2020 2021 2022 (RMB) (RMB) (RMB) (US$) (in millions) Summary Consolidated Cash Flows Data: Net cash generated from operating activities 7,121 4,987 4,455 646 Net cash (used in)/generated from investing activities (15,004 ) 314 8,448 1,225 Net cash generated from/(used in) financing activities 24,874 (2,448 ) (9,919 ) (1,438 ) Effect of exchange rate changes on cash and cash equivalents (518 ) (143 ) 57 8 Net increase/(decrease) in cash and cash equivalents 16,474 2,711 3,041 441 Cash and cash equivalents at beginning of the year 7,312 23,786 26,496 3,842 Cash and cash equivalents at end of the year 23,786 26,496 29,538 4,283 Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
The following table sets forth a summary of our cash flows for the years presented: For the Year Ended December 31, 2021 2022 2023 (RMB) (RMB) (RMB) (US$) (in millions) Summary Consolidated Cash Flows Data: Net cash generated from operating activities 4,987 4,455 15,030 2,117 Net cash (used in)/generated from investing activities 314 8,448 (5,937 ) (836 ) Net cash generated from/(used in) financing activities (2,448 ) (9,919 ) (20,555 ) (2,895 ) Effect of exchange rate changes on cash and cash equivalents (143 ) 57 405 57 Net increase/(decrease) in cash and cash equivalents 2,711 3,041 (11,057 ) (1,557 ) Cash and cash equivalents at beginning of the year 23,786 26,496 29,538 4,160 Cash and cash equivalents at end of the year 26,496 29,538 18,480 2,603 153 Table of Contents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Research and Development See “Item 4. Information on the Company—B. Business Overview—Our Technology” and “—Intellectual Property.” D.
Information on the Company—B. Business Overview—Our Technology” and “—Intellectual Property.” D.
KYC assesses the SBOs’ creditworthiness as individuals, while KYB assesses the cash flow sustainability of their businesses. Sourcing borrowers with low credit risk provides value to both third-party funding partners and third-party credit enhancement providers and strengthens our relationships with them.
The foundation of our loan enablement proposition is a dual KYC-plus-KYB approach. KYC assesses the SBOs’ creditworthiness as individuals, while KYB assesses the cash flow sustainability of their businesses. Sourcing borrowers with low credit risk provides value to third-party funding partners and strengthens our relationships with them.

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

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Biggest changeThe following table sets forth a breakdown of our employees by function as of December 31, 2022: Function Number of Employees Percentage Sales and marketing Direct sales 46,991 66.2 Channel management 3,756 5.3 Online sales 3,381 4.8 Total sales and marketing 54,128 76.2 Credit assessment 1,993 2.8 Post-origination services 9,547 13.4 General and administrative 4,420 6.2 Technology and research 745 1.0 Other 201 0.3 Total 71,034 100.0 The following table sets forth the number of our employees by geography as of December 31, 2022: Number of Employees Percentage Jiangsu 8,193 11.5 % Guangdong 7,519 10.6 % Shanghai 4,974 7.0 % Shandong 4,665 6.6 % Hebei 4,499 6.3 % Hubei 4,161 5.9 % Henan 3,648 5.1 % Sichuan 3,581 5.0 % Anhui 3,306 4.7 % Hunan 2,445 3.4 % Others 24,043 33.8 % Total 71,034 100.0 % As part of our retention strategy, we offer employees competitive salaries, performance-based cash bonuses, incentive share grants and other incentives.
Biggest changeThe following table sets forth a breakdown of our employees by function as of December 31, 2023: Function Number of Employees Percentage Sales and marketing Direct sales 21,443 59.2 % Channel management 1,614 4.5 % Online sales 1,608 4.4 % Total sales and marketing 24,665 68.1 % Credit assessment 1,260 3.5 % Post-origination services 6,340 17.5 % General and administrative 3,163 8.7 % Technology and research 567 1.6 % Other 220 0.6 % Total 36,215 100.0 % The following table sets forth the number of our employees by geography as of December 31, 2023: Number of Employees Percentage Jiangsu 4,816 13.3 % Guangdong 3,605 10.0 % Shanghai 2,588 7.1 % Shandong 2,518 7.0 % Hebei 2,504 6.9 % Hubei 2,347 6.5 % Henan 1,859 5.1 % Sichuan 1,790 4.9 % Anhui 1,770 4.9 % Hunan 1,434 4.0 % Others 10,984 30.3 % Total 36,215 100.0 % 166 Table of Contents As part of our retention strategy, we offer employees competitive salaries, performance-based cash bonuses, incentive share grants and other incentives.
The nomination and remuneration 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, age, skills, experience and availability of service to us; • selecting and recommending to the board the names of directors to serve as members of the audit committee, as well as of the nomination and remuneration committee itself; • monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; • reviewing the total compensation package for our executive officers and making recommendations to the board with respect to it; • reviewing the compensation of our non-employee directors and making recommendations to the board with respect to it; and • periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, and employee pension and welfare benefit plans.
The nomination and remuneration 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 structure, size and composition of the board with regards to characteristics such as independence, age, skills, experience and availability of service to us; • selecting and recommending to the board the names of directors to serve as members of the audit committee, as well as of the nomination and remuneration committee itself; • monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; • reviewing the total compensation package for our executive officers and making recommendations to the board with respect to it; • reviewing the compensation of our non-employee directors and making recommendations to the board with respect to it; and • periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, and employee pension and welfare benefit plans.
Zhang also served as an independent director of Ping An Securities Co., Ltd. from January 2017 to November 2022 and is an independent director of Chifeng Jilong Gold Mining Co., Ltd., a company listed on the Shanghai Stock Exchange (stock code: 600988) since January 2022. Mr. Zhang is currently the chairman of Huakong Tsingjiao Information Science (Beijing) Co., Ltd. Mr.
Zhang also served as an independent director of Ping An Securities Co., Ltd. from January 2017 to November 2022 and serves as a director of Chifeng Jilong Gold Mining Co., Ltd., a company listed on the Shanghai Stock Exchange (stock code: 600988), since January 2022. Mr. Zhang is currently the chairman of Huakong Tsingjiao Information Science (Beijing) Co., Ltd. Mr.
The holders of the Ping An Convertible Promissory Notes shall have the right (but not obligation) to require us to redeem the outstanding principal amount of the Ping An Convertible Promissory Notes and accrued interests after the occurrence of an event of default under the Ping An Convertible Promissory Notes and our company fails to take any remedial steps within 45 days after the receipt of the written notice served by the holders of the Ping An Promissory Notes specifying the occurrence of any of the events of defaults.
The holders of the Ping An Convertible Promissory Notes shall have the right (but not obligation) to require us to redeem the outstanding principal amount of the Ping An Convertible Promissory Notes and accrued interest after the occurrence of an event of default under the Ping An Convertible Promissory Notes and our company fails to take any remedial steps within 45 days after the receipt of the written notice served by the holders of the Ping An Promissory Notes specifying the occurrence of any of the events of defaults.
We also purchase commercial health and accident insurance coverage for our employees. In 2020, 2021 and 2022, we complied with all material aspects of these requirements and were not subject to any material administrative fines or penalties. To date, we have not experienced any labor strikes or other material labor disputes that have affected our operations.
We also purchase commercial health and accident insurance coverage for our employees. In 2021, 2022 and 2023, we complied with all material aspects of these requirements and were not subject to any material administrative fines or penalties. To date, we have not experienced any labor strikes or other material labor disputes that have affected our operations.
The shareholders of Lanbang Investment Company Limited also hold the entire equity interest in Shanghai Lanbang Investment Limited Liability Company (“Shanghai Lanbang”), which holds 18.29% of the equity interest in two of the consolidated affiliated entities, Shanghai Xiongguo and Shenzhen Lufax Enterprise Management. Each of Mr. Jingkui Shi and Mr.
The shareholders of Lanbang Investment Company Limited also hold the entire equity interest in Shanghai Lanbang Investment Limited Liability Company, which holds 18.29% of the equity interest in two of the consolidated affiliated entities, Shanghai Xiongguo and Shenzhen Lufax Enterprise Management. Each of Mr. Jingkui Shi and Mr.
Following a declaration of nature of interest pursuant to our memorandum and articles of association and subject to any separate requirement for Audit Committee approval under applicable law or the listing rules of the NYSE, and unless disqualified by the chairman of the relevant board meeting, a director may vote with respect to any contract, proposed contract, or arrangement in which he or she is interested.
Following a declaration of nature of interest pursuant to our memorandum and articles of association and subject to any separate requirement for audit committee approval under applicable law, the listing rules of the NYSE or the Hong Kong Listing Rules, and unless disqualified by the chairman of the board meeting, a director may vote with respect to any contract, proposed contract, or arrangement in which he or she is interested.
He was the chairman of Sapinda Asia Pacific Holdings Limited from July 2014 to September 2016. Mr. Zhang obtained his master’s degree in community economic development from Southern New Hampshire University (formerly known as New Hampshire College) in September 1990. Mr. David Xianglin Li has been an independent director of our company since January 2021. Mr.
He was the chairman of Sapinda Asia Pacific Holdings Limited from July 2014 to September 2016. Mr. Zhang obtained his master’s degree in community economic development from Southern New Hampshire University (formerly known as New Hampshire College) in September 1990. 159 Table of Contents Mr. David Xianglin Li has been an independent director of our company since January 2021. Mr.
Fu has also been serving as a non-executive director of OneConnect Financial Technology Co., Ltd., a company listed on the NYSE (stock code: OCFT) and on the Hong Kong Stock Exchange (stock code: 6638), since November 2022. Ms. Fu obtained a master’s degree in business administration from Shanghai Jiao Tong University in June 2012. Mr.
Fu has also been serving as a non-executive director of OneConnect Financial Technology Co., Ltd., a company listed on the NYSE (stock code: OCFT) and on the Hong Kong Stock Exchange (stock code: 6638), since November 2022. Ms. Fu obtained a master’s degree in business administration from Shanghai Jiao Tong University in June 2012. 158 Table of Contents Mr.
A director may exercise all the powers of the company to raise or borrow money, to mortgage or charge all or any part of its undertaking, property and assets (present and future) and uncalled capital and subject to the Companies Act (As Revised) of the Cayman Islands, to issue debentures, bonds or other securities whether outright or as collateral security for any debt, liability or obligation of the company or of any third party.
The directors may exercise all the powers of the company to raise or borrow money, to mortgage or charge all or any part of its undertaking, property and assets (present and future) and uncalled capital and subject to the Companies Act (As Revised) of the Cayman Islands, to issue debentures, bonds or other securities whether outright or as collateral security for any debt, liability or obligation of the company or of any third party.
Name Ordinary Shares Underlying Unvested Performance Share Units Granted Date of Grant Unlocking Period Date of Expiration Yong Suk Cho * November 1, 2020 4 years November 1, 2030 Gregory Dean Gibb * November 1, 2020 4 years November 1, 2030 Guangheng Ji * April 1, 2020 and November 1, 2020 4 years April 1, 2030 and November 1, 2030 Dongqi Chen * November 1, 2020 4 years November 1, 2030 Youn Jeong Lim * November 1, 2020 4 years November 1, 2030 David Siu Kam Choy * June 3, 2020 and November 1, 2020 4 years June 3, 2030 and November 1, 2030 Jinliang Mao * November 1, 2020 4 years November 1, 2030 * Less than 1% of our total outstanding shares.
Name Ordinary Shares Underlying Unvested Performance Share Units Granted Date of Grant Unlocking Period Date of Expiration Yong Suk Cho * November 1, 2020 4 years November 1, 2030 Gregory Dean Gibb * November 1, 2020 4 years November 1, 2030 Dongqi Chen * November 1, 2020 4 years November 1, 2030 Youn Jeong Lim * November 1, 2020 4 years November 1, 2030 David Siu Kam Choy * June 3, 2020 and November 1, 2020 4 years June 3, 2030 and November 1, 2030 Jinliang Mao * November 1, 2020 4 years November 1, 2030 * Less than 1% of our total outstanding shares.
He joined Ping An in April 1993 and has since then held various positions relating to information management within Ping An Group. Mr. Mao obtained his bachelor’s degree in engineering from National University of Defense Technology in July 1988 and master’s degree in engineering from National University of Defense Technology in June 1991. B.
He joined Ping An in April 1993 and has since then held various positions relating to information management within Ping An Group. Mr. Mao obtained his bachelor’s degree in engineering from National University of Defense Technology in July 1988 and master’s degree in engineering from National University of Defense Technology in June 1991. 160 Table of Contents B.
The registered address of Tun Kung Company Limited, Tongjun Investment Company Limited and Lanbang Investment Company Limited is Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, VG1110, British Virgin Islands. Tongjun Investment Company Limited is a company directly held by two individuals, Mr. Wenwei Dou and Ms.
The registered address of Tun Kung Company Limited, Tongjun Investment Company Limited and Lanbang Investment Company Limited is Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, VG1110, British Virgin Islands. 168 Table of Contents Tongjun Investment Company Limited is a company directly held by two individuals, Mr. Wenwei Dou and Ms.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his or her creditors; or (ii) dies or is found by our company to be of unsound mind or (iii) without special leave of absence from the board, is absent from meetings of the board three consecutive meetings and the board resolves that his office be vacated; or (iv) is prohibited by law from being a director; or (v) ceases to be a director by virtue of any provision of the law of the Cayman Islands or our memorandum and articles of association or is removed from office pursuant to our memorandum and articles of association.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his or her creditors; or (ii) dies or is found by our company to be of unsound mind or (iii) without special leave of absence from the board, is absent from meetings of the board for three consecutive meetings and the board resolves that his office be vacated; or (iv) is prohibited by law or the listing rules of the NYSE or the Hong Kong Listing Rules from being a director; or (v) ceases to be a director by virtue of any provision of the law of the Cayman Islands or is removed from office pursuant to our memorandum and articles of association.
Name Ordinary Shares Underlying Outstanding Options Granted Exercise Price for Options (Per Ordinary Share in RMB) Date of Grant Vesting Period Date of Expiration Yong Suk Cho * 98.06 –118.0 April 8, 2016 and December 29, 2017 4 years April 8, 2026 and December 29, 2027 Gregory Dean Gibb * 8.0 – 98.06 December 22, 2014 to April 1, 2017 4 years December 22, 2024 to April 1, 2027 Dongqi Chen * 98.06 August 1, 2016 4 years August 1, 2026 Youn Jeong Lim * 98.06 August 1, 2016 4 years August 1, 2026 Jinliang Mao * 50.0 –118.00 August 14, 2015 to December 29, 2017 4 years August 14, 2025 to December 29, 2027 * Less than 1% of our total outstanding shares. 215 Table of Contents The following table summarizes, as of February 28, 2023, the number of ordinary shares underlying outstanding performance share units that we granted to our directors and executive officers pursuant to the 2019 Plan.
Name Ordinary Shares Underlying Outstanding Options Granted Exercise Price for Options (Per Ordinary Share in RMB) Date of Grant Vesting Period Date of Expiration Yong Suk Cho * 98.06 – 118.0 April 8, 2016 and December 29, 2017 4 years April 8, 2026 and December 29, 2027 Gregory Dean Gibb * 8.0 – 98.06 December 22, 2014 to April 1, 2017 4 years December 22, 2024 to April 1, 2027 Dongqi Chen * 98.06 August 1, 2016 4 years August 1, 2026 Youn Jeong Lim * 98.06 August 1, 2016 4 years August 1, 2026 Jinliang Mao * 50.0 – 118.00 August 14, 2015 to December 29, 2017 4 years August 14, 2025 to December 29, 2027 * Less than 1% of our total outstanding shares. 163 Table of Contents The following table summarizes, as of March 31, 2024, the number of ordinary shares underlying outstanding performance share units that we granted to our directors and executive officers pursuant to the 2019 Plan.
Mr. Chen received his bachelor’s degree in insurance from Nankai University in July 1991. 211 Table of Contents Ms. Youn Jeong Lim has been the chief risk officer of our company since August 2022.
Mr. Chen received his bachelor’s degree in insurance from Nankai University in July 1991. Ms. Youn Jeong Lim has been the chief risk officer of our company since August 2022.
Duties of Directors Under Cayman Islands law, our directors have fiduciary duties, including duties of loyalty and a duty to act honestly in good faith with a view to our best interests. Our directors also have a duty to act with skill and care.
Duties of Directors Under Cayman Islands law, our directors have fiduciary duties, including duties of loyalty and a duty to act honestly, in good faith with a view to our best interests. Our directors also owe a duty of care, diligence and skill to us.
Mr. Yang has been a partner at Zhongtianyun Certified Public Accountants (Special General Partnership) since January 2020. Mr. Yang obtained his master’s degree in accounting from Jinan University in June 1993. Mr. Yang is a certified public accountant since January 1995 and is currently a certified tax agent in the PRC. 210 Table of Contents Mr.
Mr. Yang has been a partner at Zhongtianyun Certified Public Accountants (Special General Partnership) since January 2020. Mr. Yang obtained his master’s degree in accounting from Jinan University in June 1993. Mr. Yang is a certified public accountant since January 1995 and is currently a certified tax agent in the PRC. Mr.
Memorandum and Articles of Association— Differences in Corporate Law” for additional information on our standard of corporate governance under Cayman Islands law. 217 Table of Contents Terms of Directors and Officers Our officers are elected by and serve at the discretion of the board of directors.
Memorandum and Articles of Association—Differences in Corporate Law” for additional information on our standard of corporate governance under Cayman Islands law. 165 Table of Contents Terms of Directors and Officers Our officers are appointed by and serve at the discretion of the board of directors.
China Ping An Insurance Overseas (Holdings) Limited is a direct wholly owned subsidiary of Ping An Insurance. The registered address of China Ping An Insurance Overseas (Holdings) Limited is Suite 2318, 23/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong.
The registered address of An Ke Technology Company Limited is Suite 2353, 23/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. China Ping An Insurance Overseas (Holdings) Limited is a direct wholly owned subsidiary of Ping An Insurance.
The audit committee is responsible for, among other things: • selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; • reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; 216 Table of Contents • reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; • discussing the annual audited financial statements with management and the independent registered public accounting firm; • reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; • annually reviewing and reassessing the adequacy of our audit committee charter; • meeting separately and periodically with management and the independent registered public accounting firm; and • reporting regularly to the board.
The audit committee is responsible for, among other things: • selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm, subject to shareholders’ approval regarding the appointment, removal and remuneration of the independent auditors pursuant to the Hong Kong Listing Rules; 164 Table of Contents • reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; • reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; • discussing the annual audited financial statements with management and the independent registered public accounting firm; • reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; • annually reviewing and reassessing the adequacy of our audit committee charter; • meeting separately and periodically with management and the independent registered public accounting firm; and • reporting regularly to the board.
In December 2022, China Ping An Insurance Overseas (Holdings) Limited, An Ke Technology Company Limited and our company entered into an amendment and supplemental agreement to amend the terms of the Ping An Convertible Promissory Notes, pursuant to which (i) the parties agreed to extend the maturity date from October 8, 2023 to October 8, 2026 and the commencement date of the conversion period from April 30, 2023 to April 30, 2026 for the remaining 50% outstanding Ping An Convertible Promissory Notes, and (ii) 50% of the outstanding principal amount of the Ping An Convertible Promissory Notes shall be deemed redeemed from the effective date of the amendment and supplemental agreement.
We refer to the aforementioned convertible promissory notes issued to Ping An Insurance Overseas (Holdings) Limited and An Ke Technology Company Limited as the Ping An Convertible Promissory Notes in this annual report. 169 Table of Contents In December 2022, China Ping An Insurance Overseas (Holdings) Limited, An Ke Technology Company Limited and our company entered into an amendment and supplemental agreement to amend the terms of the Ping An Convertible Promissory Notes, pursuant to which (i) the parties agreed to extend the maturity date from October 8, 2023 to October 8, 2026 and the commencement date of the conversion period from April 30, 2023 to April 30, 2026 for the remaining 50% outstanding Ping An Convertible Promissory Notes, and (ii) 50% of the outstanding principal amount of the Ping An Convertible Promissory Notes shall be deemed redeemed from the effective date of the amendment and supplemental agreement.
Ordinary Shares Beneficially Owned Number % Directors and Executive Officers**: Yong Suk Cho * * Gregory Dean Gibb * * Guangheng Ji (1) * * Xin Fu (2) — — Yuqiang Huang (2) — — Rusheng Yang (3) — — Weidong Li (4) — — Xudong Zhang (5) — — David Xianglin Li (6) — — Dongqi Chen * * Youn Jeong Lim * * David Siu Kam Choy * * Jinliang Mao * * All Directors and Executive Officers as a Group * * Principal Shareholders: Ping An Group (7) 474,905,000 41.4 Tun Kung Company Limited (8) 323,829,680 28.3 * Less than 1% of our total outstanding shares. 219 Table of Contents ** Except as indicated otherwise below, the business address of our directors and executive officers is Tower A, Shanghai Ping An Building, No. 206 Kaibin Road, Xuhui District, Shanghai, the People’s Republic of China.
Ordinary Shares Beneficially Owned Number % Directors and Executive Officers**: Yong Suk Cho * * Gregory Dean Gibb * * Yonglin Xie (1) — — Xin Fu (1) — — Yuqiang Huang (1) — — Rusheng Yang (2) — — Weidong Li (3) — — Xudong Zhang (4) — — David Xianglin Li (5) — — Dongqi Chen * * Youn Jeong Lim * * David Siu Kam Choy * * Jinliang Mao * * All Directors and Executive Officers as a Group * * Principal Shareholders: Ping An Group (6) 474,905,000 41.4 Tun Kung Company Limited (7) 308,198,174 26.9 * Less than 1% of our total outstanding shares. ** Except as indicated otherwise below, the business address of our directors and executive officers is Tower A, Shanghai Ping An Building, No. 206 Kaibin Road, Xuhui District, Shanghai, the People’s Republic of China.
On August 20, 2021, we were notified that An Ke Technology Company Limited and its parent company, Shenzhen Ping An Financial Technology Consulting Co. Ltd., amended the exercise period of the Call Options.
The Offshore Call Options and the Onshore Call Options are collectively referred to as the Call Options. On August 20, 2021, we were notified that An Ke Technology Company Limited and its parent company, Shenzhen Ping An Financial Technology Consulting Co. Ltd., amended the exercise period of the Call Options.
Unless otherwise permitted by applicable law and agreed upon by our board of directors, performance share units may not be transferred, pledged or otherwise disposed of in any manner by the participants. Termination and amendment . Our board of directors has the authority to terminate or change the 2019 Plan at any time at its discretion.
Unless otherwise permitted by applicable law and agreed upon by our board of directors, performance share units may not be transferred, pledged or otherwise disposed of in any manner by the participants. Amendment and termination . Unless otherwise permitted by the 2019 Plan or applicable rules, our board of directors has discretionary authority to amend the 2019 Plan.
Our employees may also attend external training with the approval of their supervisor. 218 Table of Contents As required by PRC laws and regulations, we participate in housing fund and various employee social security plans that are organized by the regional government authorities, including housing, pension, medical, work-related injury, maternity insurance and unemployment benefit plans, under which we make contributions at specified percentages of the salaries of our employees.
As required by PRC laws and regulations, we participate in housing fund and various employee social security plans that are organized by the regional government authorities, including housing, pension, medical, work-related injury, maternity insurance and unemployment benefit plans, under which we make contributions at specified percentages of the salaries of our employees.
Under these agreements, we agree to indemnify them against certain liabilities and expenses that they incur in connection with claims made by reason of their being a director or officer of our company.
We have also entered into indemnification agreements with our directors and senior executive officers. Under these agreements, we agree to indemnify them against certain liabilities and expenses that they incur in connection with claims made by reason of their being a director or officer of our company.
The following table summarizes, as of February 28, 2023, the number of ordinary shares underlying outstanding options that we granted to our directors and executive officers pursuant to the 2014 Plan and the 2015 Plan.
The following table summarizes, as of March 31, 2024, the number of ordinary shares underlying outstanding options that we granted to our directors and executive officers pursuant to the 2014 Plan.
Xuelian Yang, has granted an option to An Ke Technology Company Limited to purchase up to 100% of his shares in Lanbang Investment Company Limited (the “Lanbang Offshore Call Options”). Lanbang Investment Company Limited held 52.8% of the shares of Tun Kung Company Limited, which in turn beneficially owned 28.3% of our ordinary shares.
Xuelian Yang, has granted an option to An Ke Technology Company Limited to purchase up to 100% of his shares in Lanbang Investment Company Limited, which we refer to as the Lanbang Offshore Call Options. Lanbang Investment Company Limited held 52.8% of the shares of Tun Kung Company Limited, which in turn beneficially owned 14.2% of our ordinary shares.
Compensation Compensation of Directors and Executive Officers For the year ended December 31, 2022, we paid an aggregate of RMB37 million (US$5 million) in cash and benefits to our executive officers and directors.
Compensation Compensation of Directors and Executive Officers For the year ended December 31, 2023, we paid an aggregate of RMB33.7 million (US$4.7 million) in cash and benefits to our executive officers and directors.
Gibb joined Ping An Insurance and served as the chief innovation officer from May 2011 to April 2013. Mr. Gibb obtained his bachelor of arts degree from Middlebury College in May 1989. 209 Table of Contents Mr. Guangheng Ji has been a director of our company since November 2022.
Gibb joined Ping An Insurance and served as the chief innovation officer from May 2011 to April 2013. Mr. Gibb obtained his bachelor of arts degree from Middlebury College in May 1989. Mr. Yonglin Xie has been a director of our company since August 2023. Mr.
As of February 28, 2023, our employees and consultants other than directors and executive officers as a group held options to purchase and performance share units to receive 14,049,419.5 ordinary shares, with exercise prices ranging from RMB8 per share to RMB118 per share for outstanding options. C. Board Practices Board of Directors Our board of directors consists of 9 directors.
As of March 31, 2024, our employees and consultants other than directors and executive officers as a group held options to purchase and performance share units to receive 11,993,506.5 ordinary shares, with exercise prices ranging from RMB8 per share to RMB118 per share for outstanding options. C. Board Practices Board of Directors Our board of directors consists of 9 directors.
In addition to on-the-job training, we regularly provide management, financial, technology, regulatory and other training to our employees by internally sourced speakers or externally hired consultants.
In addition to on-the-job training, we regularly provide management, financial, technology, regulatory and other training to our employees by internally sourced speakers or externally hired consultants. Our employees may also attend external training with the approval of their supervisor.
The Ping An Convertible Promissory Notes can be converted into an aggregate of 72,631,970 ordinary shares of our company as of February 28, 2023. Unless converted or purchased and canceled prior to October 8, 2026, we will redeem the remaining 50% outstanding principal amount of the Ping An Convertible Promissory Notes together with accrued interests on October 8, 2026.
The Ping An Convertible Promissory Notes can be converted into an aggregate of 76,679,748 ordinary shares of our company as of March 31, 2024. Unless converted or purchased and canceled prior to October 8, 2026, we will redeem the remaining 50% outstanding principal amount of the Ping An Convertible Promissory Notes together with accrued interest on October 8, 2026.
Directors and Executive Officers Age Position/Title Yong Suk Cho 51 Chairman of the Board and Chief Executive Officer Gregory Dean Gibb 56 Director and Co-Chief Executive Officer Guangheng Ji 54 Director Xin Fu 43 Director Yuqiang Huang 41 Director Rusheng Yang 54 Independent Director Weidong Li 54 Independent Director Xudong Zhang 57 Independent Director David Xianglin Li 59 Independent Director Dongqi Chen 54 General Manager Youn Jeong Lim 51 Chief Risk Officer David Siu Kam Choy 48 Chief Financial Officer Jinliang Mao 56 Chief Technology Officer Mr.
Directors and Executive Officers Age Position/Title Yong Suk Cho 52 Chairman of the Board and Chief Executive Officer Gregory Dean Gibb 57 Director and Co-Chief Executive Officer Yonglin Xie 55 Director Xin Fu 44 Director Yuqiang Huang 42 Director Rusheng Yang 56 Independent Director Weidong Li 55 Independent Director Xudong Zhang 58 Independent Director David Xianglin Li 60 Independent Director Dongqi Chen 55 General Manager Youn Jeong Lim 53 Chief Risk Officer David Siu Kam Choy 49 Chief Financial Officer Jinliang Mao 57 Chief Technology Officer 157 Table of Contents Mr.
Our board of directors further determines the time and number of performance share units to be unlocked, the number of unlocked performance share units to be vested, and other terms and conditions of each grant. Grant notice .
Our board of directors further determines the time and number of performance share units to be unlocked, the number of unlocked performance share units to be vested, and other terms and conditions of each grant. Grant letter . Each option grant should be supported by a grant letter issued by our company to the participants.
The calculations in the table below are based on 1,146,018,927 ordinary shares outstanding (excluding shares underlying the ADSs repurchased by our company pursuant to the share repurchase programs and shares issued to the depositary for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of options or awards granted under the share incentive plans) as of February 28, 2023.
The calculations in the table below are based on 1,146,570,557 ordinary shares outstanding (excluding shares underlying the ADSs repurchased by our company pursuant to the share repurchase programs and shares issued to the depositary for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of options or awards granted under the share incentive plans) as of March 31, 2024. 167 Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Yang currently is a partner at Jonten Certified Public Accountants and has also been an independent director of Ping An Bank, a company listed on the Shenzhen Stock Exchange (stock code: 000001), since February 2017, and an independent non-executive director of IPE Group Limited, a company listed on the Hong Kong Stock Exchange (stock code: 929), since June 2017. Mr.
Yang currently is a partner at Jonten Certified Public Accountants and an independent non-executive director of IPE Group Limited, a company listed on the Hong Kong Stock Exchange (stock code: 929), since June 2017. Mr. Yang has over 20 years of experience in the finance, audit and tax industries. Mr.
Xuelian Yang has granted an option to Shenzhen Ping An Financial Technology Consulting Co. Ltd., the parent company of An Ke Technology Company Limited, to purchase up to 100% of his equity interest in Shanghai Lanbang (the “Onshore Call Options,” and together with the Offshore Call Options, the “Call Options”).
Xuelian Yang has granted an option to Shenzhen Ping An Financial Technology Consulting Co. Ltd., the parent company of An Ke Technology Company Limited, to purchase up to 100% of his equity interest in Shanghai Lanbang Investment Limited Liability Company, which we refer to as the Onshore Call Options.
We may also terminate a senior executive officer’s employment without cause upon 60-day advance written notice, and a senior executive officer may terminate his/her employment agreement voluntarily at any time with a 60-day advance written notice.
We may also terminate a senior executive officer’s employment without cause upon 60-day advance written notice, and a senior executive officer may terminate his/her employment agreement voluntarily at any time with a 60-day advance written notice. The employment agreements also contain confidentiality, non-disclosure, assignment of intellectual property, non-competition, non-solicitation and non-interference provisions.
The maximum aggregate number of shares authorized and reserved under the 2014 Plan is 20,644,803 ordinary shares. As of February 28, 2023, options to purchase a total of 10,604,963 ordinary shares are outstanding under the 2014 Plan. The following paragraphs summarize the principal terms of the 2014 Plan. Grant of options .
The maximum aggregate number of shares authorized and reserved under the 2014 Plan is 30,644,803 ordinary shares. As of March 31, 2024, options to purchase a total of 12,482,505 ordinary shares were outstanding under the 2014 Plan. The following paragraphs summarize the principal terms of the 2014 Plan. Grant of options .
Ltd., which is wholly owned by Ping An Insurance, a company incorporated under the laws of the PRC whose shares are listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange. The registered address of An Ke Technology Company Limited is Suite 2353, 23/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong.
An Ke Technology Company Limited is a wholly owned subsidiary of Shenzhen Ping An Financial Technology Consulting Co. Ltd., which is wholly owned by Ping An Insurance, a company incorporated under the laws of the PRC whose shares are listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange.
As of February 28, 2023, performance share units to receive a total of 2,320,547 ordinary shares are outstanding under the 2019 Plan. The following paragraphs summarize the principal terms of the 2019 Plan. 214 Table of Contents Grant of performance share units .
As of March 31, 2024, performance share units to receive a total of 1,789,050 ordinary shares were outstanding under the 2019 Plan. 162 Table of Contents The following paragraphs summarize the principal terms of the 2019 Plan. Grant of performance share units .
Our board of directors may delegate authority to a director, a committee of the board, or other designated person to administer the 2014 Plan. Grant notice .
Our board of directors may delegate authority to a director, a committee of the board, or other designated person to administer the 2014 Plan. 161 Table of Contents Grant letter . Each option grant should be supported by a grant letter issued by our company to the participants.
(1) The business address of Mr. Guangheng Ji is No. 1333 Lujiazui Ring Road, Pudong New District, Shanghai, the People’s Republic of China. (2) The business address of Ms. Xin Fu and Mr. Yuqiang Huang is Ping An Financial Center, No. 5033 Yitian Road, Futian District, Shenzhen, Guangdong, the People’s Republic of China. (3) The business address of Mr.
(1) The business address of Mr. Yonglin Xie, Ms. Xin Fu and Mr. Yuqiang Huang is Ping An Financial Center, 5033 Yitian Road, Futian District, Shenzhen, Guangdong, the People’s Republic of China. (2) The business address of Mr. Rusheng Yang is 2609B Golden Central Tower, 3037 Jintian Road, Futian District, Shenzhen, Guangdong, the People’s Republic of China.
Unless otherwise permitted by applicable law and agreed upon by our board of directors, options may not be transferred, pledged or otherwise disposed of in any manner by the participants. Termination and amendment .
Lapse of options . Options remain valid for ten years from the grant date and lapse automatically at the term’s end unless exercised or already lapsed. Transfer restriction . Unless otherwise permitted by applicable law and agreed upon by our board of directors, options may not be transferred, pledged or otherwise disposed of in any manner by the participants.
Each shareholder of Lanbang Investment Company Limited is entitled to his voting and other rights in Lanbang Investment Company Limited prior to An Ke Technology Company Limited’s exercise of the Lanbang Offshore Call Options. 220 Table of Contents Lanbang Investment Company Limited has also granted an option to An Ke Technology Company Limited to purchase up to 100% of its shares in Tun Kung Company Limited (the “Tun Kung Offshore Call Options,” and together with the Lanbang Offshore Call Options, the “Offshore Call Options”).
Each shareholder of Lanbang Investment Company Limited is entitled to his voting and other rights in Lanbang Investment Company Limited prior to An Ke Technology Company Limited’s exercise of the Lanbang Offshore Call Options.
(7) Represents 285,000,000 ordinary shares held by An Ke Technology Company Limited, a Hong Kong company, and 189,905,000 ordinary shares held by China Ping An Insurance Overseas (Holdings) Limited, a Hong Kong company. An Ke Technology Company Limited is a wholly owned subsidiary of Shenzhen Ping An Financial Technology Consulting Co.
David Xianglin Li is Office 714, 211 West Huaihai Road, Shanghai, the People’s Republic of China. (6) Represents 285,000,000 ordinary shares held by An Ke Technology Company Limited, a Hong Kong company, and 189,905,000 ordinary shares held by China Ping An Insurance Overseas (Holdings) Limited, a Hong Kong company.
Xudong Zhang is 10/F, Chuangye Building, Tsinghua University Science Park, Haidian District, Beijing, the People’s Republic of China. (6) The business address of Mr. David Xianglin Li is Office 714, 211 West Huaihai Road, Shanghai, the People’s Republic of China.
(3) The business address of Mr. Weidong Li is Pilkem Commercial Centre, 8 Pilkem Street, Kowloon, Hong Kong. (4) The business address of Mr. Xudong Zhang is 10/F, Chuangye Building, Tsinghua University Science Park, Haidian District, Beijing, the People’s Republic of China. (5) The business address of Mr.
The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States. Except as described elsewhere herein, we are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. F.
Except as described elsewhere herein, we are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable.
The automatically convertible promissory notes were converted into 7,566,665 ordinary shares upon the closing of our initial public offering in November 2020. The optionally convertible promissory notes can be converted into an aggregate of 43,506,290 ordinary shares as of February 28, 2023.
The automatically convertible promissory notes were converted into 7,566,665 ordinary shares upon the closing of our initial public offering in November 2020. In October 2023, we fully repaid the US$1,158 million total principal amount of the optionally convertible promissory notes, along with the accrued interest.
D. Employees Our success depends on our ability to attract, retain and motivate qualified personnel, including personnel from both the finance and technology industries. We had a total of 71,034 full-time employees as of December 31, 2022. Almost all of our employees are based in China.
We had a total of 92,380 full-time employees as of December 31, 2021, a total of 71,034 full-time employees as of December 31, 2022, and a total of 36,215 full-time employees as of December 31, 2023. Almost all of our employees are based in China.
(8) Represents 275,203,430 ordinary shares held by Tun Kung Company Limited, a British Virgin Islands company, plus, as of January 30, 2023, (i) 33,626,250 ordinary shares which were converted to 67,252,500 ADSs and recorded in and represented by the collateral accounts and the custodial accounts held in the name of Tun Kung Company Limited with Goldman Sachs International pursuant to certain covered call arrangements by and among Tun Kung Company Limited, Goldman Sachs International and Goldman Sachs (Asia) L.L.C. between June and December 2022, and (ii) 15,000,000 ordinary shares which were converted to 30,000,000 ADSs and recorded in and represented by a collateral account held in the name of Tun Kung Company Limited with Morgan Stanley & Co.
(7) Represents 308,198,174 ordinary shares beneficially owned by Tun Kung Company Limited, a British Virgin Islands company, consisting of (i) 246,550,714 ordinary shares held of record by Tun Kung Company Limited, (ii) 32,994,744 ordinary shares (represented by 16,497,372 ADSs) recorded in and represented by the collateral accounts and the custodial accounts held in the name of Tun Kung Company Limited with Goldman Sachs International pursuant to certain covered call arrangements by and among Tun Kung Company Limited, Goldman Sachs International and Goldman Sachs (Asia) L.L.C. between June and September 2023, and (iii) 28,652,716 ordinary shares lent by Tun Kung Company Limited to certain designated dealers (including J.P.
Share Incentive Plans Amended and Restated Phase I Share Incentive Plan In December 2014, we adopted the Phase I Share Incentive Plan, which, as amended and restated, most recently on July 21, 2021, we refer to as the 2014 Plan in this annual report.
Simultaneously, we further amended and restated the Phase I Share Incentive Plan, which we refer to as the 2014 Plan in this annual report. This modification aimed to merge the award pools of both plans and ensure that the 2014 Plan complies with Chapter 17 of the Hong Kong Listing Rules.
International plc pursuant to certain variable prepaid share forward arrangements between Tun Kung Company Limited and Morgan Stanley & Co. International plc between April and June 2022. As of December 9, 2022, each of Tongjun Investment Company Limited and Lanbang Investment Company Limited owned 47.2% and 52.8% of the issued and outstanding share capital of Tun Kung Company Limited, respectively.
Each of Tongjun Investment Company Limited and Lanbang Investment Company Limited holds 47.2% and 52.8% of the issued and outstanding share capital of Tun Kung Company Limited, respectively, as reported in a Schedule 13G/A jointly filed by Tun Kung Company Limited, Tongjun Investment Company Limited, and Lanbang Investment Company Limited on February 9, 2024.
Unless otherwise permitted by applicable law and agreed upon by our board of directors, options may not be transferred, pledged or otherwise disposed of in any manner by the participants. Termination and amendment . Our board of directors has the authority to terminate or change the 2015 Plan at any time at its discretion.
Amendment and termination . Unless otherwise permitted by the 2014 Plan or applicable rules, our board of directors has discretionary authority to amend the 2014 Plan.
Amended and Restated 2019 Performance Share Unit Plan In September 2019, we adopted the 2019 Performance Share Unit Plan, which, as amended and restated, most recently on July 21, 2021, we refer to as the 2019 Plan in this annual report. The maximum aggregate number of shares authorized and reserved under the 2019 Plan is 15,000,000 ordinary shares.
We have amended and restated the 2019 Plan from time to time, most recently in April 2023, when we further amended and restated it to ensure that it complies with Chapter 17 of the Hong Kong Listing Rules. The maximum aggregate number of shares authorized and reserved under the 2019 Plan is 15,000,000 ordinary shares.
Exercise of options . Our board of directors determines the exercise price for each grant, which is stated in the grant notice.
Our board of directors determines the exercise price per ordinary share or per ADS for each option in accordance with the terms of the 2014 Plan.
Currently, she has been serving as the chief operating officer of Ping An Group since March 2022 and director of the strategic development center of Ping An Group since March 2020.
Mr. Xie joined Ping An Insurance in 1994 and has been serving as a director of Ping An Insurance since April 2020. He was the deputy director of Ping An Insurance’s Strategic Development & Reform Center from June 2005 to March 2006.
Vest of performance share units . The purchase price for each grant is stated in the grant notice but may be changed by our board of directors at its discretion.
Our board may adjust the performance targets attached to each grant. Vest of performance share units .
Currently, he has been serving as senior vice president of Ping An Group since March 2022. Mr. Ji served as the chairman of the board of directors of our company from January 2021 to August 2022 and the co-chairman of the board of directors of our company from April 2020 to January 2021. Mr.
Xie graduated from Nanjing University with a Ph.D. in Corporate Management and a Master of Science degree. Ms. Xin Fu has been a director of our company since November 2022. Currently, she has been serving as the senior vice president of Ping An Group since August 2023.
Removed
Ji has years of experience in the finance industry. Mr.
Added
Xie is currently an executive director, the president and co-CEO of Ping An Insurance (a company whose shares are dually listed on the Shanghai Stock Exchange (stock code: 601318) and the Hong Kong Stock Exchange (stock code: 2318) and one of the controlling shareholders of our company) and the chairman of Ping An Bank (a company whose shares are listed on the Shenzhen Stock Exchange (stock code: 000001)).
Removed
Ji served as the vice president of Shanghai Pudong Development Bank Co., Ltd., a company listed on the Shanghai Stock Exchange (stock code: 600000), from April 2009 to October 2015, the chairman of the board of Shanghai Rural Commercial Bank Co., Ltd., a company subsequently listed on the Shanghai Stock Exchange (stock code: 601825), and vice chairman of the board and co-president of Shenzhen Baoneng Investment Group Limited from March 2019 to March 2020.
Added
He held positions of the operations director, the human resources director, and a vice president of Ping An Bank from March 2006 to November 2013, and served as the special assistant to the chairman, the president and the CEO, and the chairman of Ping An Securities Co., Ltd. from November 2013 to November 2016 consecutively.
Removed
Mr. Ji obtained his bachelor’s degree in economic geography, master’s degree in human geography and Ph.D. degree in regional economics from Peking University in July 1991, July 1994 and July 2009, respectively. Ms. Xin Fu has been a director of our company since November 2022.
Added
He was a senior vice president of Ping An Insurance from September 2016 to December 2019. Previously, Mr.
Removed
Yang has over 20 years of experience in the finance, audit and tax industries. Mr.
Added
Xie served as the deputy general manager of sub-branches of Ping An Property & Casualty Insurance Company of China, Ltd., the deputy general manager and then the general manager of branches of Ping An Life Insurance Company of China, Ltd., and the general manager of the marketing department of Ping An Life. Mr.
Removed
The employment agreements also contain confidentiality, non-disclosure, assignment of intellectual property, non-competition, non-solicitation and non-interference provisions. 212 Table of Contents We have also entered into indemnification agreements with our directors and senior executive officers.
Added
Share Incentive Plans Amended and Restated Phase I Share Incentive Plan We adopted the Phase I Share Incentive Plan in December 2014 and the Phase II Share Incentive Plan in August 2015. These plans were amended and restated from time to time. In April 2023, we terminated the Phase II Share Incentive Plan.
Removed
Options granted under the 2014 Plan are evidenced by a grant notice that sets forth the number of options granted, date of grant, vesting schedule, exercise price, term of effectiveness, exercisable periods, and other terms and conditions. Eligibility . We may grant options to our directors, officers, employees, consultants, and other persons determined by our board of directors.
Added
Each grant is subject to all terms and conditions outlined in the 2014 Plan, and the corresponding grant letter will specify the terms for each grant. Eligible participants . We may grant options to our directors, officers, employees, service providers, and employees of any entity directly or indirectly controlling us, controlled by us, or under common control with us.
Removed
Unless otherwise stated in the 2014 Plan and the grant notice or determined by the board of directors, options vested will be exercisable on and after the initial exercise date, prior to the expiration of its term of effectiveness.
Added
Vesting is subject to performance targets. In determining vested options for each grant, our board considers the operating results of our company and related entities and the individual performance of the participants in the most recent appraisal and their performance ranking. Our board may adjust the performance targets attached to each grant. Exercise of options .
Removed
Unless determined otherwise by our board of directors, the initial exercise date will not be earlier than six months after the occurrence of our initial public offering and not be later than eight years after the date of grant.
Added
The exercise price per ordinary share may not be set below the higher of (i) the fair market value of one ordinary share on the grant date and (ii) the par value of one ordinary share.
Removed
Options that are vested and exercisable will terminate if they are not exercised prior to the time stated under the 2014 Plan and the grant notice. Unless otherwise agreed, each grant of options has a term of effectiveness of ten years from its date of grant. Transfer restrictions .
Added
In the case of options exercisable into ADSs with the exercise price in U.S. dollars, the exercise price per ADS may not be set below the closing price of the ADSs as stated in the NYSE’s daily quotations sheet on the grant date, if the grant date is a trading day of the NYSE, or the average closing price of the ADSs as stated in the NYSE’s daily quotation sheets for the five business days immediately preceding the grant date, if the grant date is not a trading day of the NYSE.
Removed
Our board of directors has the authority to terminate or change the 2014 Plan at any time at its discretion. 213 Table of Contents Amended and Restated Phase II Share Incentive Plan In August 2015, we adopted the Phase II Share Incentive Plan, which, as amended and restated, most recently on July 21, 2021, we refer to as the 2015 Plan in this annual report.

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Item 7. Management's Discussion & Analysis

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

17 edited+5 added−1 removed4 unchanged
Biggest changeThe holders of the Ping An Convertible Promissory Notes shall have the right (but not obligation) to require us to redeem the outstanding principal amount of the Ping An Convertible Promissory Notes and accrued interests after the occurrence of an event of default under the Ping An Convertible Promissory Notes and our company fails to take any remedial steps within 45 days after the receipt of the written notice served by the holders of the Ping An Promissory Notes specifying the occurrence of any of the events of defaults. 223 Table of Contents In consideration of the above redemption and the extension of the maturity date and taking into account the fair market value of the Ping An Convertible Promissory Notes determined by the independent valuers, pursuant to the amendment and supplemental agreement, we agreed to pay China Ping An Insurance Overseas (Holdings) Limited and An Ke Technology Company Limited a total amount of US$1,071.1 million together with the unpaid interest accrued on the redeemed notes up to and including the effective date of the amendment and supplemental agreement.
Biggest changeIn consideration of the above redemption and the extension of the maturity date and taking into account the fair market value of the Ping An Convertible Promissory Notes determined by the independent valuers, pursuant to the amendment and supplemental agreement, we agreed to pay China Ping An Insurance Overseas (Holdings) Limited and An Ke Technology Company Limited a total amount of US$1,071.1 million together with the unpaid interest accrued on the redeemed notes up to and including the effective date of the amendment and supplemental agreement.
For the years ended December 31, 2020, 2021 and 2022, the contractual interest we were required to pay on the convertible promissory notes were US$7.5 million, US$7.5 million and US$3.5 million to China Ping An Insurance Overseas (Holdings) Limited and US$6.9 million, US$6.9 million and US$10.4 million to An Ke Technology Company Limited, respectively.
For the years ended December 31, 2021, 2022 and 2023, the contractual interest we were required to pay on the convertible promissory notes were US$7.5 million, US$3.5 million and US$3.7 million to China Ping An Insurance Overseas (Holdings) Limited and US$6.9 million, US$10.4 million and US$3.5 million to An Ke Technology Company Limited, respectively.
Unless converted or purchased and canceled prior to October 8, 2026, we will redeem the remaining 50% outstanding principal amount of the Ping An Convertible Promissory Notes together with accrued interests on October 8, 2026.
Unless converted or purchased and canceled prior to October 8, 2026, we will redeem the remaining 50% outstanding principal amount of the Ping An Convertible Promissory Notes together with accrued interest on October 8, 2026.
As of December 31, 2020, 2021 and 2022, in addition to the convertible promissory notes we issued to China Ping An Insurance Overseas (Holdings) Limited as described below, we had borrowings due to Ping An Group in the amount of nil, nil and RMB820.7 million (US$119.0 million), respectively, representing nil, nil and 0.3% of our total liabilities as of December 31, 2020, 2021 and 2022, respectively.
As of December 31, 2021, 2022 and 2023, in addition to the convertible promissory notes we issued to China Ping An Insurance Overseas (Holdings) Limited as described below, we had borrowings due to Ping An Group in the amount of nil, RMB820.7 million and nil, respectively, representing nil, 0.3% and 0.0% of our total liabilities as of December 31, 2021, 2022 and 2023, respectively.
Convertible Promissory Notes Issued to China Ping An Insurance Overseas (Holdings) Limited and An Ke Technology Company Limited In October 2015, in connection with our acquisition of the retail credit and enablement business from Ping An Insurance, we issued convertible promissory notes in an aggregate principal amount of US$1,953,800,000 to China Ping An Insurance Overseas (Holdings) Limited.
Convertible Promissory Notes Issued to China Ping An Insurance Overseas (Holdings) Limited and An Ke Technology Company Limited In October 2015, in connection with our acquisition of the retail credit and enablement business from Ping An Insurance, we issued convertible promissory notes in an aggregate principal amount of US$1,953.8 million to China Ping An Insurance Overseas (Holdings) Limited.
We had paid the first tranche payment in the total amount of US$535.5 million in December 2022 and the second tranche payment in the total amount of US$535.6 million in March 2023. As of December 31, 2022, the outstanding principal amount of the Ping An Convertible Promissory Notes amounted to RMB6,803.7 million.
We had paid the first tranche payment in the total amount of US$535.5 million in December 2022 and the second tranche payment in the total amount of US$535.6 million in March 2023. As of December 31, 2023, the outstanding principal amount of the Ping An Convertible Promissory Notes amounted to US$976.9 million.
As of December 31, 2020, 2021 and 2022, we had balance of financial assets at amortized cost and financial investments (loans and receivables) and financial assets at fair value through profit or loss with Ping An Group in the amount of RMB7,189.1 million, RMB4,779.9 million and RMB2,504.6 million (US$363.1 million), respectively, primarily in connection with certain asset management plan products we purchased from Ping An Group, representing 2.9%, 1.3% and 0.7% of our total assets as of December 31, 2020, 2021 and 2022, respectively.
As of December 31, 2021, 2022 and 2023, we had balance of financial assets at amortized cost and financial investments (loans and receivables) and financial assets at fair value through profit or loss with Ping An Group in the amount of RMB4,779.9 million, RMB2,504.6 million and RMB1,501.0 million (US$211.4 million), respectively, primarily in connection with certain asset management plan products we purchased from Ping An Group, representing 1.3%, 0.7% and 0.6% of our total assets as of December 31, 2021, 2022 and 2023, respectively.
In December 2022, China Ping An Insurance Overseas (Holdings) Limited, An Ke Technology Company Limited and our company entered into an amendment and supplemental agreement to amend the terms of the Ping An Convertible Promissory Notes, pursuant to which (i) the parties agreed to extend the maturity date from October 8, 2023 to October 8, 2026 and the commencement date of the conversion period from April 30, 2023 to April 30, 2026 for the remaining 50% outstanding Ping An Convertible Promissory Notes, and (ii) 50% of the outstanding principal amount of the Ping An Convertible Promissory Notes shall be deemed redeemed from the effective date of the amendment and supplemental agreement.
We refer to the aforementioned convertible promissory notes issued to Ping An Insurance Overseas (Holdings) Limited and An Ke Technology Company Limited as the Ping An Convertible Promissory Notes in this annual report. 171 Table of Contents In December 2022, China Ping An Insurance Overseas (Holdings) Limited, An Ke Technology Company Limited and our company entered into an amendment and supplemental agreement to amend the terms of the Ping An Convertible Promissory Notes, pursuant to which (i) the parties agreed to extend the maturity date from October 8, 2023 to October 8, 2026 and the commencement date of the conversion period from April 30, 2023 to April 30, 2026 for the remaining 50% outstanding Ping An Convertible Promissory Notes, and (ii) 50% of the outstanding principal amount of the Ping An Convertible Promissory Notes shall be deemed redeemed from the effective date of the amendment and supplemental agreement.
As of December 31, 2020, 2021 and 2022, we had account and other payables and contract liabilities due to Ping An Group in the amount of RMB1,888.1 million, RMB801.7 million and RMB4,400.7 million (US$638.0 million), respectively, representing 1.1%, 0.3% and 1.7% of our total liabilities as of December 31, 2020, 2021 and 2022, respectively.
As of December 31, 2021, 2022 and 2023, we had account and other payables and contract liabilities due to Ping An Group in the amount of RMB801.7 million, RMB4,400.7 million and RMB184.7 million (US$26.0 million), respectively, representing 0.3%, 1.7% and 0.1% of our total liabilities as of December 31, 2021, 2022 and 2023, respectively.
For the years ended December 31, 2020, 2021 and 2022, we had investment income and interest income from Ping An Group in the amount of RMB408.8 million, RMB841.7 million and RMB619.4 million (US$89.8 million), respectively, in connection with our investment products issued or managed by Ping An Group and bank deposits at Ping An Group, representing 0.8%, 1.4% and 1.1% of our total income for the years ended December 31, 2020, 2021 and 2022, respectively.
For the years ended December 31, 2021, 2022 and 2023, we had investment income and interest income from Ping An Group in the amount of RMB841.7 million, RMB619.4 million and RMB457.8 million (US$64.5 million), respectively, in connection with our investment products issued or managed by Ping An Group and bank deposits at Ping An Group, representing 1.4%, 1.1% and 1.3% of our total income for the years ended December 31, 2021, 2022 and 2023, respectively.
On the same date, China Ping An Insurance Overseas (Holdings) Limited agreed to transfer US$937,824,000 of the outstanding principal amount of the notes and all rights, benefits and interests attached thereunder to An Ke Technology Company Limited.
On the same date, China Ping An Insurance Overseas (Holdings) Limited agreed to transfer approximately US$937.8 million of the outstanding principal amount of the notes and all rights, benefits and interest attached thereunder to An Ke Technology Company Limited.
We had account and other receivables and contract assets due from Ping An Group in the amount of RMB2,040.9 million, RMB3,052.1 million and RMB2,951.6 million (US$427.9 million) as of December 31, 2020, 2021 and 2022, respectively, representing 0.8%, 0.8% and 0.8% of our total assets as of December 31, 2020, 2021 and 2022, respectively.
We had account and other receivables and contract assets due from Ping An Group in the amount of RMB3,052.1 million, RMB2,951.6 million and RMB1,508.0 million (US$212.4 million) as of December 31, 2021, 2022 and 2023, respectively, representing 0.8%, 0.8% and 0.6% of our total assets as of December 31, 2021, 2022 and 2023, respectively.
Such income represented 3.6%, 8.0% and 4.4% of our total income for the years ended December 31, 2020, 2021 and 2022, respectively.
Such income represented 8.0%, 4.4% and 4.7% of our total income for the years ended December 31, 2021, 2022 and 2023, respectively.
For the years ended December 31, 2020, 2021 and 2022, we had total expenses (excluding finance costs) to Ping An Group in the amount of RMB3,589.6 million, RMB3,506.0 million and RMB2,569.1 million (US$372.5 million), respectively, primarily in connection with technology support, transaction settlement, custodian, accounting processing, HR support, data communication, customer acquisition services and foreign exchange swaps provided by Ping An Group to us, representing 10.5%, 9.1% and 5.7% of our total expenses for the years ended December 31, 2020, 2021 and 2022, respectively.
For the years ended December 31, 2021, 2022 and 2023, we had total expenses (excluding finance costs) to Ping An Group in the amount of RMB3,506.0 million, RMB2,569.1 million and RMB2,022.9 million (US$284.9 million), respectively, primarily in connection with accounting processing, data communication, transaction settlement, custodian, office premise rental services, technology support and HR support provided by Ping An Group to us, representing 9.1%, 5.7% and 6.2% of our total expenses for the years ended December 31, 2021, 2022 and 2023, respectively.
Organizational Structure.” Transactions with Ping An Group Summary of Transactions with Ping An Group For the years ended December 31, 2020, 2021 and 2022, we provided various types of services, including loan account management, platform service and other services, to Ping An Group for an aggregate of RMB1,869.8 million, RMB4,953.9 million and RMB2,583.2 million (US$374.5 million) in technology platform based income and other income, respectively.
Organizational Structure.” 170 Table of Contents Transactions with Ping An Group Summary of Transactions with Ping An Group For the years ended December 31, 2021, 2022 and 2023, we provided various types of services, including loan account management, wealth management product enablement and other services, to Ping An Group for an aggregate of RMB4,953.9 million, RMB2,583.2 million and RMB1,610.6 million (US$226.8 million) in technology platform based income and other income, respectively.
We incurred interest expense to Ping An Group in the aggregate amount of RMB67.5 million, RMB6.2 million and RMB25.4 million (US$3.7 million), respectively, for the years ended December 31, 2020, 2021 and 2022, in connection with borrowings from Ping An Group and interest paid to Ping An Group for its subscription in the consolidated wealth management products managed by us, representing 0.2%, 0.0% and 0.1% of our total expenses for the years ended December 31, 2020, 2021 and 2022, respectively. 222 Table of Contents We had cash balances of RMB14.4 billion, RMB9.6 billion and RMB14.3 billion (US$2.1 billion) held at banks who are affiliates with Ping An Group as of December 31, 2020, 2021 and 2022, respectively, representing 5.8%, 2.7% and 4.1% of our total assets as of December 31, 2020, 2021 and 2022, respectively.
We incurred interest expense to Ping An Group in the aggregate amount of RMB6.2 million, RMB25.4 million and RMB14.1 million (US$2.0 million), respectively, for the years ended December 31, 2021, 2022 and 2023, in connection with borrowings from Ping An Group and interest paid to Ping An Group for its subscription in the consolidated wealth management products managed by us, representing 0.0%, 0.1% and 0.0% of our total expenses for the years ended December 31, 2021, 2022 and 2023, respectively.
The entity obtained approval to open from the China Banking and Insurance Regulatory Commission in March 2020 and started operating a consumer finance business from April 2020. Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Share Incentive Plan See “Item 6. Directors, Senior Management and Employees—B. Compensation.” C.
The entity obtained approval to open from the China Banking and Insurance Regulatory Commission in March 2020 and started operating a consumer finance business from April 2020.
Removed
We refer to the aforementioned convertible promissory notes issued to Ping An Insurance Overseas (Holdings) Limited and An Ke Technology Company Limited as the Ping An Convertible Promissory Notes in this annual report.
Added
We had cash balances of RMB9.6 billion, RMB14.3 billion and RMB10.9 billion (US$1.5 billion) held at banks who are affiliates with Ping An Group as of December 31, 2021, 2022 and 2023, respectively, representing 2.7%, 4.1% and 4.6% of our total assets as of December 31, 2021, 2022 and 2023, respectively.
Added
The holders of the Ping An Convertible Promissory Notes shall have the right (but not obligation) to require us to redeem the outstanding principal amount of the Ping An Convertible Promissory Notes and accrued interest after the occurrence of an event of default under the Ping An Convertible Promissory Notes and our company fails to take any remedial steps within 45 days after the receipt of the written notice served by the holders of the Ping An Promissory Notes specifying the occurrence of any of the events of defaults.
Added
Acquisition of Ping An OneConnect Bank (Hong Kong) Limited On November 13, 2023, we entered into a share purchase agreement with our related parties, OneConnect Financial Technology Co., Ltd. and Ping An OneConnect Bank (Hong Kong) Limited.
Added
Pursuant to this agreement, OneConnect Financial Technology Co., Ltd. agreed to sell the entire issued share capital of Jin Yi Tong Limited, the indirect holding company of Ping An OneConnect Bank (Hong Kong) Limited, to us for a consideration of HK$933 million (US$131 million) in cash.
Added
The transaction was closed on April 2, 2024, and we paid the purchase price in full on the same day. Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Share Incentive Plan See “Item 6. Directors, Senior Management and Employees—B. Compensation.” C. Interests of Experts and Counsel Not applicable. 172 Table of Contents

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