《陆金所(LU)美股IPO招股说明书(更新版)(474页).pdf》由会员分享,可在线阅读,更多相关《陆金所(LU)美股IPO招股说明书(更新版)(474页).pdf(474页珍藏版)》请在三个皮匠报告上搜索。
1、F-1/A 1 d934009df1a.htm AMENDMENT NO.2 TO FORM F-1Table of ContentsAs filed with the Securities and Exchange Commission on October 22,2020Registration No. SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549 AMENDMENT NO.2ToFORM F-1REGISTRATION STATEMENTUNDERTHE SECURITIES ACT OF 1933 Lu
2、fax Holding Ltd(Exact name of Registrant as specified in its charter)Not Applicable(Translation of Registrants name into English)Cayman Islands 6199 Not Applicable(State or other jurisdiction of incorporation or organization)(Primary Standard Industrial Classification Code Number)(I.R.S.Employer Ide
3、ntification Number)No.1333 Lujiazui Ring Road 15/FPudong New District,ShanghaiPeoples Republic of China+86 21-38632121(Address,including zip code,and telephone number,including area code,of Registrants principal executive offices)Cogency Global Inc.122 East 42nd Street,18th FloorNew York,NY 10168+1
4、800-221-0102(Name,address,including zip code,and telephone number,including area code,of agent for service)Copies to:Z.Julie Gao,Esq.Skadden,Arps,Slate,Meagher&Flom LLPc/o 42/F,Edinburgh TowerThe Landmark15 Queens Road Central,Hong Kong+852 3740-4700 Haiping Li,Esq.Skadden,Arps,Slate,Meagher&Flom LL
5、PJing An Kerry CentreTower II,46th Floor1539 Nanjing West RoadShanghai 200040,China+86 21-6193-8200 David T.Zhang,Esq.Steve Lin,Esq.Kirkland&Ellis International LLPc/o 26th Floor,Gloucester TowerThe Landmark15 Queens Road Central,Hong Kong+852 3761-3300 Approximate date of commencement of proposed s
6、ale to the public:as soon as practicable after the effective date of this registration statement.If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933,checkthe following box.If this Form is file
7、d to register additional securities for an offering pursuant to Rule 462(b)under the Securities Act,check the following box and list the SecuritiesAct registration statement number of the earlier effective registration statement for the same offering.If this Form is a post-effective amendment filed
8、pursuant to Rule 462(c)under the Securities Act,check the following box and list the Securities Act registrationstatement number of the earlier effective registration statement for the same offering.If this Form is a post-effective amendment filed pursuant to Rule 462(d)under the Securities Act,chec
9、k the following box and list the Securities Act registrationstatement number of the earlier effective registration statement for the same offering.Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.Emerging growth company
10、If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP,indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B)o
11、f the Securities Act.The term“new or revised financial accounting standard”refers to any update issued by the Financial Accounting Standards Board to its Accounting StandardsCodification after April 5,2012.CALCULATION OF REGISTRATION FEE Title of each class of securities to be registered Amountto be
12、registered(2)(3)Proposedmaximumoffering priceper share(3)Proposedmaximumaggregateoffering price(2)(3)Amount of registration fee(4)Ordinary shares,par value US$0.00001 per share(1)100,625,000 US$27.00 US$2,716,875,000 US$296,411.06 (1)American depositary shares issuable upon deposit of the ordinary s
13、hares registered hereby will be registered under a separate registration statement on Form F-6(Registration No.333-).Two American depositary shares represent one ordinary share.(2)Includes ordinary shares initially offered and sold outside the United States that may be resold from time to time in th
14、e United States either as part of theirdistribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public,andalso includes ordinary shares that may be purchased by the underwriters pursuant to an over-
15、allotment option.These ordinary shares are not being registered for thepurpose of sales outside the United States.(3)Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a)under the Securities Act of 1933.(4)Includes$10,910 that was previously pa
16、id.The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shallfile a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section
17、 8(a)of theSecurities Act of 1933,as amended,or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission,actingpursuant to such Section 8(a),may determine.Table of ContentsThe information in this preliminary prospectus is not complete and may be
18、changed.We may not sell these securities until theregistration statement filed with the Securities and Exchange Commission is effective.This preliminary prospectus is not anoffer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or
19、sale isnot permitted.Subject to Completion.Dated October 22,2020175,000,000 American Depositary Shares Lufax Holding LtdRepresenting 87,500,000 Ordinary Shares This is the initial public offering of American depositary shares,or ADSs,of Lufax Holding Ltd.We are offering 175,000,000 ADSs.Two ADSs rep
20、resent one of our ordinary shares,par value US$0.00001 per share.It is currently estimated thatthe initial public offering price will be between US$11.50 and US$13.50 per ADS.Prior to this offering,there has been no public market for our ADSs or our ordinary shares.We intend to list the ADSs on the
21、New York StockExchange,or NYSE,under the symbol“LU.”See“Risk Factors”on page 20 to read about factors you should consider before buying the ADSs.PRICE US$PER ADS Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of thesesecurities
22、or passed upon the accuracy or adequacy of this prospectus.Any representation to the contrary is a criminal offense.Per ADS Total Initial public offering price US$US$Underwriting discount and commissions(1)US$US$Proceeds,before expenses,to us US$US$(1)For a description of the compensation payable to
23、 the underwriters,see“Underwriting.”To the extent the underwriters sell more than 175,000,000 ADSs,the underwriters have a 30-day option to purchase up to an additional26,250,000 ADSs from us at the initial public offering price less the underwriting discount.The underwriters expect to deliver the A
24、DSs against payment in U.S.dollars to purchasers on or about ,2020.Goldman Sachs(Asia)L.L.C.BofA Securities UBS Investment Bank HSBC China PA Securities(Hong Kong)Company Limited Morgan Stanley CLSA Jefferies J.P.Morgan BOCI Haitong International Stifel China Renaissance KeyBanc Capital MarketsProsp
25、ectus dated ,2020Table of ContentsTable of ContentsTable of ContentsTABLE OF CONTENTS PROSPECTUS SUMMARY 1 THE OFFERING 14 SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA 17 RISK FACTORS 20 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA 81 USE OF PROCEEDS 82 DIVIDEND POLICY 83
26、 CAPITALIZATION 84 DILUTION 86 ENFORCEABILITY OF CIVIL LIABILITIES 88 CORPORATE HISTORY AND STRUCTURE 90 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 97 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 101 MARKET OPPORTUNITIES 147 BUSINESS 156 REGULATION 212
27、 MANAGEMENT 246 PRINCIPAL SHAREHOLDERS 256 RELATED PARTY TRANSACTIONS 260 DESCRIPTION OF SHARE CAPITAL 263 DESCRIPTION OF AMERICAN DEPOSITARY SHARES 278 SHARES ELIGIBLE FOR FUTURE SALE 290 TAXATION 292 UNDERWRITING 299 EXPENSES RELATED TO THIS OFFERING 310 LEGAL MATTERS 311 EXPERTS 312 WHERE YOU CAN
28、 FIND ADDITIONAL INFORMATION 313 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1 You should rely only on the information contained in this prospectus or in any related free-writing prospectus.We have not authorized anyone toprovide you with information different from that contained in this prospectus
29、 or in any related free-writing prospectus.We are offering to sell,andseeking offers to buy,the ADSs only in jurisdictions where offers and sales are permitted.The information contained in this prospectus is current only asof the date of this prospectus,regardless of the time of delivery of this pro
30、spectus or of any sale of the ADSs.We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of thisprospectus or any filed free writing prospectus outside the United States.Persons outside the United States who come in
31、to possession of this prospectusor any filed free writing prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distributionof this prospectus or any filed free writing prospectus outside the United States.Until ,2020(the 25th day after the
32、 date of this prospectus),all dealers that buy,sell or trade ADSs,whether or not participatingin this offering,may be required to deliver a prospectus.This is in addition to the obligation of dealers to deliver a prospectus when acting asunderwriters and with respect to their unsold allotments or su
33、bscriptions.iTable of ContentsPROSPECTUS SUMMARYThe following summary is qualified in its entirety by,and should be read in conjunction with,the more detailed information and financialstatements appearing elsewhere in this prospectus.In addition to this summary,we urge you to read the entire prospec
34、tus carefully,especially therisks of investing in our ADSs discussed under“Risk Factors,”before deciding whether to buy our ADSs.This prospectus contains informationfrom a report commissioned by us and prepared by Oliver Wyman,an independent industry research firm,to provide information on the retai
35、lcredit and wealth management industries in China.Our BusinessWe are a leading technology-empowered personal financial services platform in China.Our mission is to make retail borrowing and wealthmanagement easier,safer and more efficient.We primarily address the large unmet demand for personal lend
36、ing among small business owners aswell as salaried workers in China,and we provide tailor-made wealth management solutions to Chinas fast growing middle class and affluentpopulation.As of June 30,2020,our total balance of retail credit facilitated reached RMB519.4 billion(US$73.5 billion),and the to
37、tal client assetsgenerated through our online wealth management platform reached RMB374.7 billion(US$53.0 billion),ranking us number two and number three,respectively,among non-traditional financial service providers in China such as fintech companies,online-only TechFin companies and onlinelending
38、platforms,according to Oliver Wyman.China has the second largest financial system globally,both by retail credit lending volume in 2019 and by the total amount of investableassets as of December 31,2019.The estimated demand for small business financing in China was RMB89.7 trillion(US$12.7 trillion)
39、in 2019,ofwhich RMB46.6 trillion(US$6.6 trillion)was unmet.In addition,the current outstanding balance of consumer loans in China is estimated to beRMB12.7 trillion(US$1.8 trillion)as of December 31,2019.As of the same date,Chinas personal investable assets reached RMB192 trillion(US$27 trillion),ma
40、king it the second largest personal wealth management market globally,and only RMB49 trillion(US$7 trillion)or 26%hasbeen placed in wealth management products.For more details,including sources,see“Market Opportunities.”We are well positioned to capture markets which have been underserved by traditi
41、onal financial institutions and online-only TechFinplatforms backed by major internet companies,such as Ant Financial,WeBank and Tencent Licaitong.Many traditional financial institutions donot have the necessary skills,data and technology to fully address these customer needs,while online-only TechF
42、in platforms,which providefinancial services but are operated by tech companies rather than financial institutions,generally lack the financial data and financial servicescapability to price credit risk appropriately for borrowers and provide suitable products to investors.Our business is built on:U
43、nique capital-light,hub-and-spoke business model:We operate a scalable capital-light business model focusing on large,underserved,yet highly attractive segments.Our platform has two“hubs”,connecting hundreds of financial institution“spokes,”tofacilitate lending and wealth management products tailore
44、d to individual customers needs and risk appetites.Our hubs are tied to anintegrated account which accumulates users data to drive ongoing personalization of services.Proven technology applications:Our distinctiveness is founded on our ability to develop purpose-built technology,combine it withour f
45、inancial expertise,and embed these solutions throughout our business.With proprietary data accumulated over 15 years,we havecreated cutting-edge capabilities in know your product(KYP),know your business(KYB),and know your customer(KYC)toeffectively assess risk and facilitate products to customers.Th
46、ese three areas leverage extensive data,AI applications,machinelearning,and blockchain solutions to price credit and manage suitability-related risks effectively,and to deliver sophisticated digitalcustomer services efficiently.Our strong 1Table of Contents cooperation with the Ping An ecosystem all
47、ows us early access to ongoing investment in technology innovation in financial services,including through Ping An Groups 8 research institutes and more than 21,000 patents and patent applications.Deep financial services expertise:Our relationship with Ping An Group,a top 2 Fortune Global 500 financ
48、ial institution by 2019revenue,provides us with valuable access to its ecosystem.Through commercial relationships across the Ping An ecosystem,webenefit from potential access to Ping An Groups approximately 210 million financial services customers,a proportion of which aresmall business owners and m
49、iddle class and affluent investors.We also have collaboration with Ping An businesses,distributionchannels,and product capabilities spanning insurance,investment,banking,and analytics.Strong offline-to-online channel integration:Our deep integration across channels allows us to better meet the borro
50、wing andwealth management needs of small business owners and middle class and affluent investors through a superior online customerexperience complemented with the option of offline assistance.Combining our large direct salesforce of over 56,000 members andonline telemarketing team of over 4,000 per
51、sonnel,with our collaboration across the Ping An ecosystem,empowers us to providemore sophisticated services to small business owners and middle class and affluent investors more effectively than online-onlyTechFin platforms.Through-the-cycle track record:Our strong performance through credit cycles
52、 demonstrates the benefit of our superior financialdata and our ability to price and manage risk effectively relative to our online-only peers,as well as our ability to respond quickly andadjust our business effectively to regulatory changes.Moreover,we have delivered stable operating results throug
53、h cycles.Over thethree years from 2017 through 2019,our total balance of loans facilitated grew at a CAGR of 26.6%,while our total wealthmanagement client assets,excluding legacy products,grew at a CAGR of 39.4%.Our stable growth,operating results,and superiorcredit quality over time highlight the c
54、aliber of our experienced management team and the clear benefits of our financial DNA.Unique Business Model:Technology-empowered Personal Financial Services“Hub&Spoke”Platform 2Table of ContentsWe have implemented a unique,capital-light,hub-and-spoke business model combining purpose-built technology
55、 applications,extensivedata and financial services expertise to effectively facilitate the right products to the right customers.In terms of the retail credit facilitation hub,as of June 30,2020,we have connected 13.4 million cumulative borrowers with more than50 banks,trusts and insurers as spokes
56、on our platform.We provide small business owners with convenient access to affordable,large-ticket-size funding,while enabling financial institution partners to tap into a fast-growing,high-quality small business segmentin a cost-effective way.We integrate our direct sales team and network of channe
57、l partners,including the Ping An ecosystem,toacquire high quality borrowers.We operate a capital-light business model.As of June 30,2020,we have credit risk exposure for only2.8%of the outstanding balance of loans we facilitated.In terms of the wealth management hub,as of June 30,2020,we have connec
58、ted with 429 institutional product providers,our spokes,to facilitate the offering of approximately 8,600 wealth management products to 12.8 million active investors.We leverage the PingAn ecosystem,our online marketing team and our member referral programs to source customers.We offer middle class
59、and affluentcustomers tailored selections of investment products and one-click portfolios that are aligned with their risk appetite and investmentobjectives.As of June 30,2020,approximately 75%of the client assets invested through our platform are from customers that investmore than RMB300,000(US$42
60、,462).Approximately 88%of these customers utilize one or more of the integrated account functions.These customers generally enjoy priority access to limited availability investments and dedicated services from online relationshipmanagers to augment information for sophisticated products.The integrat
61、ed account serves as a single interface to connect all borrowers and investors to products,transactions,and servicesoffered through the platform.Its real time processing allows us to continually develop,deepen,and retain customer relationships.Upon registering,new customers link an existing bank acc
62、ount to initiate investments and loans to be automatically funded and repaidthrough smart functionality.The integrated account allows customers to track all transactions,view performance,and automaticallysweep balances into investments.Upon first purchase,AI verification tools deploy facial and voic
63、e recognition to confirm customeridentification,undertake KYC processing,and screen for fraud,and subsequently leverage this data via voice bots to confirmcustomer understanding of risks when purchasing more sophisticated products.Through the integrated account,we provide a steadystream of recommend
64、ations,product alerts,and portfolio allocation analysis to help customers realize their long-term goals.Servicessuch as our integrated account functions contributed to a 93.3%retention rate among wealth management customers in 2019.Retail Credit FacilitationHuge small business owner market with unme
65、t needs.The unmet financing demand of small businesses in China was approximatelyRMB47 trillion(US$7 trillion)as of December 31,2019.This market opportunity is huge because small business owners need larger ticketsize loans and longer tenors for their personal or operating purposes,often on short no
66、tice,and they need both highly personalized servicesand a fast and convenient application process.Similarly,when salaried workers require larger loans for flexible use,they cannot fulfill theirneeds through traditional credit card and loan products either.Current players unable to meet more complex
67、borrower needs.Traditional banks cannot serve small business owners and certain salariedworker customers effectively because they generally find it hard to provide larger ticket size loans without collateral.They may lacksophisticated data-driven risk assessment abilities and they generally do not p
68、ossess developed technology for cost-efficient onlinecapabilities.Similarly,online-only TechFin companies tend to focus on smaller size loans at shorter tenors where pricing for risk is lessimportant,as they rely more on social behavior data rather than financial data for credit 3Table of Contentsde
69、cisioning given their lack of financial services background.Online-only TechFin companies and many traditional banks outsource theircollection functions,which reduces their ability to manage risk in their portfolios,particularly at larger ticket sizes or at challenging points inthe credit cycle.Uniq
70、ue data and financial DNA allow us to address these needs.Our unique combination of capabilities allows us to address the needs ofsmall business owners and salaried workers:(1)Advanced risk models built on our over 15 years of proprietary credit data as well as analytics and insights derived from co
71、operationwith other members of the Ping An ecosystem;(2)Cutting-edge data analytics and AI technologies to automate and digitize the entire loan facilitation process including AI-drivencustomer targeting,loan underwriting leveraging micro facial expression technologies,and smart robot-based customer
72、 service andcollection processes;(3)Integrated offline-to-online distribution channels including a large nationwide direct salesforce of over 56,000 members,variouschannel partners,including the Ping An ecosystem,and online telemarketing;(4)An experienced and focused in-house collection team of more
73、 than 9,500 members;and (5)A long and consistent operating track record of close cooperation with more than 50 funding and credit enhancement partners.We target high quality borrowers with larger ticket sizes.Our target customers are high quality borrowers who have financial assets,realestate,or som
74、e access to commercial bank credit and yet are underserved by online-only TechFin companies and traditional financialinstitutions in China.Among the borrowers we served in the first six months of 2020,approximately 92%of them have credit cards and atleast 57%of them own residential real estate,while
75、 57%of them do not have unsecured bank loans outstanding.These customers typicallyneed larger loans for operating or consumptions purposes.Larger ticket size loans generally offer greater economies of scale and moreattractive customer lifetime value,which makes these customers an attractive segment
76、for us.Medium to large ticket size loans generateapproximately 77%of total pre-tax profit of the retail credit market.In the first six months of 2020,our average loan size was RMB146,513(US$20,738)for general unsecured loans and RMB422,398(US$59,787)for secured loans,compared to an estimated average
77、 ticket size ofonly approximately RMB5,000(US$708)for the other top 5 lenders among non-traditional financial service providers,according to OliverWyman.Due to the high entry barriers surrounding the large ticket size,small business owner lending space,we enjoy market leadership,high profitability a
78、nd limited direct competition.We have delivered stable through-the-cycle results.The balance of loans we facilitated grew at a CAGR of 26.6%from 2017 to 2019,whilethe DPD 30+delinquency rate remained at less than 0.7%for secured loans we facilitated and less than 1.9%for general unsecured loans wefa
79、cilitated as of December 31,2017,2018 and 2019,demonstrating the appeal of our target customer segments and our ability to effectivelyprice for risk.DPD stands for days past due,and we define DPD 30+delinquency rate as the outstanding balance of loans for which anypayment is 30 to 179 calendar days
80、past due divided by the outstanding balance of loans.See“COVID-19 Impact”below for the impact ofthe pandemic on delinquency rates in the first six months of 2020.Wealth ManagementLarge,fast growing wealth management market.Driven by the fast growth and high savings rate of the middle class and afflu
81、ent populationin China and their increasing demand for personalized investment and wealth management,the assets under management for the wealthmanagement market reached RMB49 trillion(US$7 trillion)in 2019.The wealth management market is expected to grow to RMB118 trillionby the end of 2024,represen
82、ting a CAGR of 19%.4Table of ContentsCurrent players are not able to meet middle class and affluent investors needs.With the recent introduction of the New Asset ManagementGuidelines,the wealth management industry is moving from being product-centric to customer-centric,creating opportunities for te
83、chnology-and data-driven personalized service offerings.However,the wealth management needs of the middle class and affluent are significantlyunderserved because these customers generally do not qualify for more comprehensive private banking services at traditional banks.Theyseek an increasingly sop
84、histicated range of options but they may have difficulty selecting suitable solutions without assistance.Commercialbanks offer limited products,mainly through higher-cost offline account managers who have limited wealth management expertise and lackspecialized suitability management tools.Similarly,
85、online-only TechFin companies seldom offer much beyond the most basic wealthmanagement products with their focus to date mostly on smaller ticket cash management products linked to their ecommerce,social andpayment platforms.We uniquely address sophisticated needs by tailoring through technology.Wit
86、h nearly 10 years of accumulated data and experience,we areable to provide a full suite of wealth management services tailored to address more sophisticated investor needs:(1)Comprehensive KYP and KYC data,leveraging underlying AI models,enables accurate facilitation of suitable products andportfoli
87、os to customers on a real-time basis with ongoing post investment monitoring;(2)Broad partnerships with 429 financial institutions,facilitating the offering of approximately 8,600 products across asset categories,support dynamic portfolio creation and performance-based product selection for changing
88、 market conditions;(3)Integrated offline-to-online marketing allows us to source and personalize services for high quality investors;(4)A robust integrated account with automated sweep,investment,and alert functions,supported by online relationship managers forhigh value customers,empowers investors
89、 to fulfill increasingly dynamic and sophisticated investment needs;and (5)Real-time recording of account verification data,customer risk tolerance information,product attribute disclosures,productpurchasing clicks,and post-order risk comprehension verification calls on blockchain supports suitable
90、selling regulatoryrequirements commensurate with more sophisticated products,with high efficiency.We target large,profitable segments.The middle class and affluent customer segments are increasingly seeking diversification of assets andservices including dynamic adjustment of their portfolios to mee
91、t their goals.As of June 30,2020,we served 44.7 million registered usersand 12.8 million active investors,and 75.4%of our total client assets were contributed by higher value investors with client assets aboveRMB300,000(US$42,462).As of June 30,2020,our average wealth management client assets were a
92、pproximately RMB29,330(US$4,151),more than three times higher than the average client assets of the other top 5 non-traditional financial service providers which is estimated toaverage around RMB8,000(US$1,132).Our target investors tend to demand sophisticated product offerings,representing addition
93、al revenuepotential.These features make them an attractive target customer base.COVID-19 ImpactThe resilience and fundamental strengths of our business model have been further proven during COVID-19.Although the DPD 30+delinquency rate for general unsecured loans increased from 1.8%as of December 31
94、,2019 to 3.3%as of June 30,2020 and the DPD 30+delinquency rate for secured loans increased from 0.6%to 1.4%as of the same dates,we swiftly resumed the operation of our business and flowrate,which is an early indicator for delinquency,began to improve.In response to nationwide lockdowns in China at
95、the end of 5Table of ContentsJanuary 2020,we made remote working arrangements for our collections staff,extended the usage of AI collection technology,and accelerated thelaunch of AI underwriting robots.As a result of these measures,we have seen recovery in early delinquency indicators in the second
96、 quarter of2020,to levels around those that prevailed for most of 2019.The 1-to-89-day general unsecured loans flow rate improved to 0.6%in May,0.5%inJune and 0.5%in July after reaching a peak of 1.0%in February 2020 and the secured loans flow rate likewise improved to 0.2%in May,0.2%inJune and 0.1%
97、in July after reaching a peak of 0.7%in February 2020.See“BusinessRetail Credit FacilitationRisk Management for RetailCreditCOVID-19 Impact”for the flow rate charts.Since we take limited credit risk under our capital-light business model,the increase indelinquencies had less impact on our financial
98、results than those of our peers who bear higher credit risk than we do.Critical aspects of our business model have been reinforced during COVID-19.Although we source customers through offline-to-onlinechannels,our ability to serve customers entirely online has allowed our businesses to benefit from
99、changing consumer behaviors and,as a result,maintain growth in the initial COVID-19 lockdown period.In a bid to drive economic recovery,Chinese government policies have furtheremphasized the importance of small businesses in reigniting growth and employment.Our ability to serve small business owners
100、 in cooperationwith financial institutions is squarely in line with policy priorities.Our success in controlling credit risks through the COVID-19 crisis isreinforcing long-standing relationships with our institutional funding partners.Capital market volatility accompanying COVID-19 is acceleratingi
101、ndividual investor understanding of the need to invest in a more diversified manner,further underpinning the importance of our data-drivenmatching engines to guide investors to more sustainable investing.The new policy priorities,increased online customer behavior,and greateropenness by traditional
102、financial institutions to seek new forms of business collaboration resulting from the pandemic are,together,likely toreinforce our competitive advantages.Solid Performance and Growth TrajectoryOur platform has demonstrated significant growth and profitability in the last three years.Over the three y
103、ears from 2017 through 2019,ourtotal balance of loans facilitated grew at a CAGR of 26.6%,while our total wealth management client assets,excluding legacy products,grew at aCAGR of 39.4%.Our total income increased from RMB27.8 billion to RMB47.8 billion(US$6.8 billion),representing a CAGR of 31.1%,a
104、nd ournet profit increased from RMB6.0 billion to RMB13.3 billion(US$1.9 billion),representing a CAGR of 48.6%,during the same period.We hadtotal income of RMB25.7 billion(US$3.6 billion)and net profit of RMB7.3 billion(US$1.0 billion)for the first six months of 2020.As we havebecome increasingly ca
105、pital-light,our income contribution from technology platform services grew from 61.9%in 2017 to 87.7%in 2019,whileour net margin increased from 21.7%to 27.8%during the same period.For the first six months of 2020,our income contribution from technologyplatform services was 83.5%and our net margin wa
106、s 28.3%.Our StrengthsWe believe that the following competitive strengths contribute to our success and differentiate us from our competitors:Leading platform in a sizable and attractive market.We ranked number 2 in retail credit facilitation and number 3 in wealthmanagement,in each case among non-tr
107、aditional financial service providers in China as of June 30,2020,according to OliverWyman.Customer-centric product offerings and offline-to-online channels.Our purpose-built end-to-end technology platform integrateswith offline-to-online capabilities,combining elegance,scalability and flexibility w
108、ith deep customer relationships and effective riskmanagement.Technology-enabled customer experience and services.We integrate cutting-edge technologies with our product and service offeringsto enable a seamless and personalized experience throughout the customer journey.6Table of Contents Cutting-ed
109、ge data-driven risk management.We embed advanced AI,big data,blockchain technology and analytics into businessprocesses resulting in a highly sophisticated,holistic and adaptable risk management system.Scalable capital-light business model.We have implemented a capital-light business model that has
110、allowed us to grow rapidly withminimal constraints from capital demands and scale rapidly with lower costs.Innovation and synergies within the Ping An ecosystem.We have benefited immensely from our relationship with Ping An Groupwhile maintaining a high degree of self-sufficiency.Experienced managem
111、ent team with proven track record of delivering growth and profitability.We have an experiencedmanagement team comprised of professionals from both financial institutions and technology market leaders,who bring abundantPRC local expertise and international experience to the table.Our StrategiesWe in
112、tend to continue to achieve our goals by pursuing the following strategies:Retail Credit Facilitation Solidify our leadership in the small business owner personal lending space Further refine our capital-light business model Deepen data advantage and further leverage technology Grow our consumer fin
113、ance businessWealth Management Lead the evolution of Chinas asset management industry Broaden customer outreach through hub-and-spoke partnerships with traditional financial institutions Invest in core data and technology Expand overseasIntegrated Account Enhance aggregation functionality Broaden fi
114、nancial and life data scenarios and analyticsOur ChallengesOur ability to execute our strategies is subject to risks and uncertainties,including those relating to:The rapid and significant evolution of our business and our industry in recent years;General economic conditions,including any credit cri
115、sis or prolonged downturn in the credit markets;Our ability to effectively manage risks related to the wealth management products displayed on our platform,including suitability-related risks;7Table of Contents Our ability to perform due diligence,detect fraud and manage credit and other risks;Our a
116、ccess to sufficient and sustainable funding at reasonable costs and on terms acceptable to us;The laws and regulations we are subject to and the supervision of our businesses by national,provincial and local governmentauthorities;Any failure to obtain,renew or retain requisite approvals,licenses or
117、permits applicable to our business;Risks related to our legacy products and historical practices;The total fees we charge for our retail credit facilitation and wealth management businesses;The impact of the outbreak of COVID-19 on Chinese and global economic conditions;Our relationships with third
118、parties that are integral to the smooth operation of our business and platform;and The influence that our principal shareholders have over our company and the possibility that their interests may not be aligned withthe interests of our other shareholders.Please see“Risk Factors”and other information
119、 included in this prospectus for a discussion of these and other risks and uncertainties that weface.Market OpportunitiesThe retail credit market in China primarily consists of small business loans and individual consumer loans.In 2019,the outstanding balanceof small business loans in China reached
120、RMB43.1 trillion(US$6.1 trillion),representing a five-year CAGR of 14.3%between 2014 and 2019,andis expected to grow to RMB76.6 trillion in 2024,at a five-year CAGR of 12.2%,according to the Oliver Wyman Report.Small businesses serve asthe backbone of the Chinese economy with significant contributio
121、ns to Chinas GDP,employment,tax revenues and innovation.The total demandfor small business loans in 2019 was estimated to be RMB89.7 trillion(US$12.7 trillion),indicating that approximately 52%of demand(orRMB46.6 trillion)remained unserved.Such unserved demand is forecast to reach RMB50.0 trillion b
122、y 2024.The funding gap is primarily due to the enormous difficulties faced by small businesses,which typically do not have an established operatinghistory or substantial assets to be used as collateral in obtaining sufficient credit at a reasonable cost.In addition,traditional financial institutions
123、and large online-only TechFin companies are often less well equipped to meet small businesses specific needs for a streamlined online applicationprocess,face-to-face collateral evaluation consultations,large ticket size and longer-tenured operating loans,choices of both secured and unsecuredloans an
124、d prompt response to urgent funding requests.In comparison,technology-enabled large fintech players with strong technology and datacapabilities and effective offline-to-online models are presented with great opportunities in addressing this unserved market.Chinas wealth management market has been gr
125、owing rapidly,driven by the fast growth of the middle class and affluent population and theirincreasing demand for personalized investment.Total assets under management of the wealth management market reached RMB49.4 trillion(US$7.0 trillion)in 2019 and are expected to grow to RMB118.0 trillion by t
126、he end of 2024,representing a five-year CAGR of 19%.In particular,wealth management players who can leverage advanced technology,offer efficient processing time and maintain low distribution costs areexperiencing significant growth.The online non-traditional financial service provider wealth managem
127、ent market had assets under management ofRMB7.6 trillion(US$1.1 trillion)in 2019,which is expected to grow at a five-year CAGR of 29%to reach RMB27.5 trillion by the end of 2024,and the online penetration rate of wealth management services in China by total assets under management was 29%in 2019,com
128、pared with 43%inthe U.S.,and is expected to reach 42%in 2024.8Table of ContentsThere have been significant changes in products offered by the wealth management industry in response to Chinas new asset managementregulations,giving rise to greater specialization between asset managers and distribution
129、 channels,and accelerating the transition from guaranteedand short-term products to net asset value-based and long-term products.As a result,the market has seen a heightened focus on suitability forwealth management products,the rising demand for portfolio diversification and increasing emphasis pla
130、ced on technology-empoweredcapabilities.Successful players must have advanced data and technologies to provide individualized investment recommendations and seamlessinvesting experiences,and a strong brand and established operating history to build credibility,and they must comply with licensing and
131、 otherregulatory requirements.Recent DevelopmentsWe have achieved solid business growth in our core business during the third quarter of 2020.As of September 30,2020,our total balance ofretail credit facilitated reached RMB535.8 billion(US$75.8 billion),compared to RMB519.4 billion as of June 30,202
132、0 and RMB441.2 billion asof September 30,2019.As of September 30,2020,the total client assets generated through our online wealth management platform reachedRMB378.3 billion(US$53.5 billion),compared to RMB374.7 billion as of June 30,2020 and RMB350.9 billion as of September 30,2019.The APR of all n
133、ew loans applied for after September 4,2020 was below 24%,which is equivalent to below 13.7%in annualized nominalborrowing cost.We facilitated RMB54.8 billion(US$7.8 billion)of new loans in September 2020,representing a year-on-year increase of 20.1%over the same month in 2019.The corresponding numb
134、ers for the previous two months in the same quarter before the change in APR wereRMB49.7 billion in July 2020 and RMB43.3 billion in August 2020.However,we have only begun to operate under the reduced APR and wecannot assure you that our performance in September 2020 is indicative of future trends.O
135、ur credit performance has largely recovered from the COVID-19 impact,as our DPD 30+delinquency rate decreased to 2.5%for generalunsecured loans and 0.9%for secured loans as of September 30,2020.The 1-to-89-day general unsecured loans flow rate was stable at 0.5%inJuly,August,and September.See“Busine
136、ssRetail Credit FacilitationRisk Management for Retail CreditCOVID-19 Impact”for flow ratecharts.On September 30,2020,we issued automatically convertible promissory notes and optionally convertible promissory notes in a totalprincipal amount of US$1,361,925,000 to certain holders of our Class C ordi
137、nary shares,in exchange for a total of 45,287,111 Class C ordinaryshares held by them.The automatically convertible promissory notes will be converted into ordinary shares automatically upon the closing of thisoffering.The optionally convertible promissory notes can be converted into an aggregate of
138、 38,493,660 ordinary shares,without giving effect toany anti-dilutive adjustments,during the period between the completion of this offering and September 30,2023.We pay 6%annual interest to theholders of both kinds of notes until the notes are fully repaid or converted.See“Description of Share Capit
139、alHistory of Securities IssuancesC-Round Restructuring Convertible Notes.”The primary purpose of this transaction was to secure the support of our Class C shareholders for capitalmarkets offerings under dynamic market conditions.We offered the notes to all of the holders of Class C ordinary shares,a
140、nd all but one of themaccepted and agreed to an extended lock-up period following this offering that is longer than the customary 6-month lock-up period.As part of thetransaction,holders of the automatically convertible promissory notes have agreed to lock-up restrictions for 6 months for half of th
141、e ordinaryshares issuable upon conversion of their notes and 12 months for the other half,and holders of the optionally convertible promissory notes haveagreed to lock-up restrictions for 12 months for the ordinary shares issuable upon conversion of their notes,in each case,from the date of thispros
142、pectus and subject to certain exceptions.See“Underwriting.”As a result of this transaction,we expect to record an one-time loss in the quarterended September 30,2020 of approximately US$200 million due to the higher aggregate fair 9Table of Contentsvalue of the C-Round Restructuring Convertible Note
143、s compared to the Class C ordinary shares.This transaction does not have a significantdilutive impact.Corporate History and StructureThe history of our retail credit facilitation business dates back to August 2005,when Ping An Group launched a consumer loan business inShenzhen,China.The history of o
144、ur wealth management business dates back to September 2011,when Ping An Group established its wealthmanagement subsidiary in Shanghai.In 2014,we underwent a series of reorganizations to further the strategic development of our business and incorporated our company in theCayman Islands in December 20
145、14 as a holding company.In May 2016,we acquired our retail credit facilitation business from Ping An Group.We currently carry out our wealth management business primarily through Weikun(Shanghai)Technology Service Co.,Ltd.,Lufax Holding(Shenzhen)Technology Service Co.,Ltd.and our consolidated affili
146、ated entities,including Shanghai Lujiazui International Financial AssetExchange Co.,Ltd.,or Shanghai Lufax.Since 2017,we have also expanded internationally with operations in Singapore and Hong Kong.We conduct our retail credit facilitation business primarily through Ping An Puhui Enterprises Manage
147、ment Co.,Ltd.and its subsidiaries aswell as Ping An Puhui Financing Guarantee Co.,Ltd.and Chongqing Jin An Microloan Limited.These entities are collectively known as Puhui.Shenzhen Ping An Puhui Microloan Co.,Ltd.,Hunan Ping An Puhui Microloan Co.,Ltd.and Chongqing Jin An Microloan Limited have rece
148、ivedregulatory approvals to provide microloan services.Ping An Puhui Financing Guarantee Co.,Ltd.and Ping An Financing Guarantee(Tianjin)Co.,Ltd.hold licenses for providing financing guarantee services.Ping An Consumer Finance Co.,Ltd.is licensed to provide consumer financeservices.We intend to acqu
149、ire majority interest in an affiliated company that is licensed to distribute wealth management products such as assetmanagement plans,mutual funds and private investment funds in China.We have cooperated with this entity by facilitating its distribution of fundproducts on our wealth management plat
150、form.The transaction will be subject to regulatory approvals and customary closing conditions.Theincome and assets of the target company are not material compared to our total income and assets.10Table of ContentsThe following diagram illustrates our corporate structure as of the date of this prospe
151、ctus,including our principal subsidiaries and ourprincipal consolidated affiliated entities:Notes:(1)Shenzhen Ping An Financial Technology Consulting Co.,Ltd,Xinjiang Tongjun Equity Investment Limited Partnership,Shanghai Lanbang InvestmentLimited Liability Company and Linzhi Jinsheng Investment Man
152、agement Limited Partnership each holds 49.99%,29.55%,18.29%and 2.17%of the equityinterests,respectively,in Shanghai Xiongguo Corporation Management Co.,Ltd.and Shenzhen Lufax Holding Enterprise Management Co.,Ltd.(2)Shanghai Xiongguo Corporation Management Co.,Ltd.and Shanghai Huikang Information Te
153、chnology Co.,Ltd.each holds 99.995%and 0.005%of theequity interests in Shanghai Lujiazui International Financial Asset Exchange Co.,Ltd.(3)Harmonious Splendor Limited and Ping An Puhui Enterprises Management Co.,Ltd.each holds 90.625%and 9.375%of the equity interests in ChongqingJin An Microloan Lim
154、ited.(4)Ping An Insurance(Group)Company of China,Ltd.,Harmonious Splendor Limited,Weikun(Shanghai)Technology Service Co.,Ltd.,Jinjiong(Shenzhen)Technology Service Limited each holds 30%,28%,27%and 15%of the equity interests in Ping An Consumer Finance Co.,Ltd.,respectively.Corporate InformationOur p
155、rincipal executive offices are located at No.1333 Lujiazui Ring Road 15/F,Shanghai,Peoples Republic of China.Our telephonenumber at this address is+86 21-38632121.Our registered office in the Cayman Islands is located at Conyers Trust Company(Cayman)Limited,Cricket Square,Hutchins Drive,PO Box 2681,
156、Grand Cayman,KY1-1111,Cayman Islands.Our agent for service of process in the United States isCogency Global Inc.,located at 122 East 42nd Street,18th Floor,New York,NY 10168.11Table of ContentsInvestors should contact us for any inquiries through the address and telephone number of our principal exe
157、cutive offices.Conventions Which Apply to this ProspectusExcept where the context otherwise requires and for purposes of this prospectus only:“active investors”refer to investors who have made at least one investment through our wealth management platform or have hadclient assets with us above zero
158、in the past twelve months;“ADSs”refer to our American depositary shares,with every two ADSs representing one ordinary share;“AI”refers to artificial intelligence;“APR”or“annualized percent rate”refers to the monthly all-in borrowing cost as a percentage of the outstanding balance annualizedby a fact
159、or of 12,where all-in borrowing cost comprises the actual amount of(a)interest,(b)insurance premiums or guarantee feesand(c)retail credit facilitation service fees;“China”or the“PRC”refers to the Peoples Republic of China,excluding,for the purposes of this prospectus only,Hong Kong,Macau and Taiwan;
160、“client assets”refer to the outstanding balance of client assets generated through our platforms,where an asset is counted towards theoutstanding balance for so long as it continues to be held by the investor who acquired it through our platform;“cumulative borrowers”refer to the cumulative number o
161、f borrowers who had submitted their loan application request andsuccessfully made drawdowns since our inception;“IFRS”refers to International Financial Reporting Standards as issued by the International Accounting Standards Board;“legacy products”mainly include a category of unsecured revolving cred
162、it lines in our retail credit facilitation business and peer-to-peer products and certain types of structured alternative products originated by financial institutions for individual investors,which werefer to as business-to-consumer or B2C products,in our wealth management business;“Lufax,”“we,”“us
163、,”“our company”and“our”refer to Lufax Holding Ltd,a Cayman Islands exempted company,and its subsidiariesand,in the context of describing our operations and consolidated financial information,also include our consolidated affiliated entitiesand its subsidiaries;“non-traditional financial service prov
164、iders”refers to fintech companies,online-only TechFin companies and online lendingplatforms;“Oliver Wyman Report”refers to a report commissioned by us and prepared by Oliver Wyman,an independent industry research firm,to provide information on the retail credit and wealth management industries in Ch
165、ina;“ordinary shares”refer to our ordinary shares of par value US$0.00001 per share;“outstanding balance of loans facilitated”refers to the total principal amount outstanding at the end of the given period for loans wefacilitated;“Ping An ecosystem”refers to Ping An Group and its subsidiaries,affili
166、ates and associates,including but not limited to OneConnectFinancial Technology Co.,Ltd.(NYSE:OCFT),or OneConnect;“Ping An Group”refers to Ping An Insurance and its subsidiaries;“Ping An Insurance”refers to Ping An Insurance(Group)Company of China,Ltd.;12Table of Contents “Ping An P&C”refers to Ping
167、 An Property&Casualty Insurance Company of China,Ltd.;“registered users”refer to individuals who have registered on our platform using their mobile phone number,without regard towhether they subsequently engage in any transactions on our platform;“RMB”and“Renminbi”refer to the legal currency of Chin
168、a;and “volume of new loans facilitated”refers to the principal amount of new loans we facilitated during the given period.Our reporting currency is the Renminbi.This prospectus also contains translations of certain foreign currency amounts into U.S.dollars forthe convenience of the reader.Unless oth
169、erwise stated,all translations of Renminbi into U.S.dollars were made at RMB7.0651 to US$1.00,theexchange rate set forth in the H.10 statistical release of the Federal Reserve Board on June 30,2020.We make no representation that the Renminbior U.S.dollars amounts referred to in this prospectus could
170、 have been or could be converted into U.S.dollars or Renminbi,as the case may be,atany particular rate or at all.On October 16,2020,the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board wasRMB6.6962 to US$1.00.This prospectus contains information derived from vario
171、us public sources and certain information from an industry report in July 2020commissioned by us and prepared by Oliver Wyman,an independent industry research firm,to provide information regarding our industry andmarket position.Such information involves a number of assumptions and limitations,and y
172、ou are cautioned not to give undue weight to theseestimates.We have not independently verified the accuracy or completeness of the data contained in this report.The industry in which we operateis subject to a high degree of uncertainty and risk due to variety of factors,including those described in
173、the“Risk Factors”section.These and otherfactors could cause results to differ materially from those expressed in this report.Due to rounding,numbers presented throughout this prospectus may not add up precisely to the totals provided and percentages may notprecisely reflect the absolute figures.13Ta
174、ble of ContentsTHE OFFERINGThe following assumes that the underwriters will not exercise their option to purchase additional ADSs in the offering,unless otherwiseindicated.Offering PriceWe expect that the initial public offering price will be between US$11.50 and US$13.50per ADS.ADSs Offered by us17
175、5,000,000 ADSs(or 201,250,000 ADSs if the underwriters exercise their over-allotmentoption in full).ADSs Outstanding Immediately After This Offering175,000,000 ADSs(or 201,250,000 ADSs if the underwriters exercise their option topurchase additional ADSs in full).Ordinary Shares Outstanding Immediate
176、ly After ThisOffering1,219,678,331 ordinary shares(or 1,232,803,331 ordinary shares if the underwritersexercise their option to purchase additional ADSs in full),taking into account theconversion of all outstanding Automatically Convertible Notes upon the closing of thisoffering at an assumed initia
177、l offering price of US$12.50 per ADS(or US$25.00 perordinary share),which is the midpoint of the estimated range of the initial public offeringprice shown on the front cover page of this prospectus,but excluding any ordinary sharesthat may be issued upon the conversion of any outstanding Optionally
178、Convertible Notes asdescribed in“Description of Share CapitalHistory of Securities Issuances.”NYSE symbolLU The ADSsTwo ADSs represent one ordinary share.The ADSs may be evidenced by ADRs.The depositary will hold the ordinary shares underlying your ADSs and you will haverights as provided in the dep
179、osit agreement among us,the depositary and all holders andbeneficial owners of ADSs issued thereunder.We do not expect to pay dividends in the foreseeable future.If,however,we declaredividends on ordinary shares,the depositary will pay you the cash dividends and otherdistributions it receives on our
180、 ordinary shares,after deducting its fees and expenses inaccordance with the terms set forth in the deposit agreement.You may surrender your ADSs to the depositary in exchange for our ordinary shares.Thedepositary will charge you fees for any exchange.We and the depositary may amend orterminate the
181、deposit agreement without your consent.If an amendment becomes effectiveand you continue to hold your ADSs,you agree to be bound by the deposit agreement asamended.To better understand the terms of the ADSs,you should carefully read the“Description ofAmerican Depositary Shares”section of this prospe
182、ctus.You should also read the depositagreement,which is filed as an exhibit to the registration statement that includes thisprospectus.14Table of ContentsOption to purchase additional ADSsWe have granted to the underwriters an option,exercisable within 30 days from the date ofthis prospectus,to purc
183、hase up to an additional 26,250,000 ADSs.Use of ProceedsWe estimate that we will receive net proceeds of approximately US$2,109 million fromthis offering(or US$2,426 million if the underwriters exercise their option to purchaseadditional ADSs in full),after deducting the underwriting discounts,commi
184、ssions andestimated offering expenses payable by us and assuming an initial public offering price ofUS$12.50 per ADS,being the midpoint of the estimated range of the initial public offeringprice shown on the front cover of this prospectus.We plan to use the net proceeds of this offering primarily fo
185、r general corporate purposes,which may include investment in product development,sales and marketing activities,technology infrastructure,capital expenditures,global expansions and other general andadministrative matters.We may also use a portion of these proceeds for the acquisition of,or investmen
186、t in,technologies,solutions or businesses that complement our business,although we have no present commitments or agreements to enter into any acquisitions orinvestments.See“Use of Proceeds”for additional information.Lock-upWe,our directors and executive officers,and all of our existing shareholders
187、 have agreedwith the underwriters,subject to certain exceptions,not to sell,transfer or otherwisedispose of any ADSs,ordinary shares or similar securities for a period of 180 days from thedate of this prospectus.In addition,certain of our principal shareholders have agreed to besubject to additional
188、 lock-up restrictions for a period of 12 months from the date of thisprospectus,with respect to all or a portion of their ADSs,ordinary shares or similarsecurities.Furthermore,holders of the Automatically Convertible Notes and OptionallyConvertible Notes have agreed to be subject to similar lock-up
189、restrictions for a period of atleast six months from the date of this prospectus.See“Underwriting”for moreinformation.Risk FactorsSee“Risk Factors”and other information included in this prospectus for a discussion of therisks you should carefully consider before investing in the ADSs.DepositaryCitib
190、ank,N.A.The number of ordinary shares that will be outstanding immediately after this offering:is based upon 1,124,006,331 ordinary shares outstanding as of the date of this prospectus,assuming(1)all issued and outstandingClass B ordinary shares and Class C ordinary shares shall be automatically con
191、verted into Class A ordinary shares on a one-for-onebasis immediately prior to this 15Table of Contents offering and(2)the re-designation and re-classification of all the then issued and outstanding Class A ordinary shares and theremaining authorized and unissued Class A ordinary shares into ordinar
192、y shares on a one-for-one basis immediately prior to thisoffering;assumes no exercise of the underwriters option to purchase additional ADSs representing ordinary shares;assumes the conversion of all outstanding Automatically Convertible Notes upon the closing of this offering at an assumed initialo
193、ffering price of US$12.50 per ADS(or US$25.00 per ordinary share),which is the midpoint of the estimated range of the initialpublic offering price shown on the front cover page of this prospectus,but excluding any ordinary shares that may be issued upon theconversion of any outstanding Optionally Co
194、nvertible Notes as described in“Description of Share CapitalHistory of SecuritiesIssuances”;excludes 5,153,936 ordinary shares issuable upon the exercise of options outstanding as of the date of this prospectus under our 2015Plan;and excludes ordinary shares reserved for future issuances under our 2
195、015 Plan.16Table of ContentsSUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATAThe following summary consolidated statements of operations and comprehensive income data for the years ended December 31,2017,2018and 2019,summary consolidated balance sheet data as of December 31,2017,2018 and 2019 and su
196、mmary consolidated cash flow data for theyears ended December 31,2017,2018 and 2019 have been derived from our audited consolidated financial statements included elsewhere in thisprospectus.The following summary consolidated statements of operations and comprehensive income data for the six months e
197、nded June 30,2019and 2020,summary consolidated balance sheet data as of June 30,2020 and summary consolidated cash flow data for the six months ended June30,2019 and 2020 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus.Youshould
198、read this Summary Consolidated Financial and Operating Data section together with our consolidated financial statements and the relatednotes and“Managements Discussion and Analysis of Financial Condition and Results of Operations”included elsewhere in this prospectus.Ourconsolidated financial statem
199、ents are prepared and presented in accordance with IFRS.Our historical results are not necessarily indicative of resultsexpected for future periods.The following table shows our summary consolidated statements of operations and comprehensive income data for the years endedDecember 31,2017,2018 and 2
200、019 and for the six months ended June 30,2019 and 2020.For the Year Ended December 31,For the Six Months Ended June 30,2017 2018 2019 2019 2020 Actual Pro forma(1)Actual Pro forma(1)RMB RMB RMB US$RMB US$RMB RMB US$RMB US$(in millions except per share data)Technology platformbased income:Retail cred
201、it facilitation service fees 15,336 29,576 39,325 5,566 39,325 5,566 19,015 20,754 2,938 20,754 2,938 Wealth management transaction andservice fees 1,885 2,645 2,604 369 2,604 369 1,492 699 99 699 99 Total technology platformbased income 17,221 32,221 41,929 5,935 41,929 5,935 20,507 21,453 3,036 21
202、,453 3,036 Net interest income 7,256 5,894 3,909 553 3,909 553 2,172 2,998 424 2,998 424 Guarantee income 1,456 814 465 66 465 66 314 170 24 170 24 Other income 810 508 879 124 879 124 329 656 93 656 93 Investment income 1,060 1,017 579 82 579 82 100 447 63 447 63 Share of net profits of investments
203、accounted for using the equity method 16 46 73 10 73 10 25 (41)(6)(41)(6)Total income 27,819 40,500 47,834 6,770 47,834 6,770 23,446 25,684 3,635 25,684 3,635 Sales and marketing expenses (7,451)(10,767)(14,931)(2,113)(14,931)(2,113)(7,108)(8,620)(1,220)(8,620)(1,220)General and administrative expen
204、ses (2,823)(2,796)(2,853)(404)(2,853)(404)(1,519)(1,348)(191)(1,348)(191)Operation and servicing expenses (3,072)(4,367)(5,471)(774)(5,471)(774)(2,497)(2,819)(399)(2,819)(399)Technology and analytics expenses (1,302)(1,659)(1,952)(276)(1,952)(276)(864)(849)(120)(849)(120)Credit impairment losses (93
205、5)(1,863)(264)(1,863)(264)(470)(1,099)(156)(1,099)(156)Asset impairment losses (3,736)(7)(135)(19)(135)(19)0 Finance costs (1,297)(900)(1,520)(215)(2,738)(388)(830)(887)(126)(826)(117)Other gains/(losses)net 225 (420)325 46 325 46 190 46 6 46 6 Total expenses (19,455)(21,850)(28,400)(4,020)(29,618)(
206、4,192)(13,099)(15,576)(2,205)(15,514)(2,196)Profit before income tax 8,364 18,649 19,434 2,751 18,215 2,578 10,347 10,108 1,431 10,169 1,439 Less:Income tax expenses (2,337)(5,073)(6,117)(866)(6,117)(866)(2,869)(2,836)(401)(2,836)(401)Net profit 6,027 13,576 13,317 1,885 12,099 1,712 7,478 7,272 1,0
207、29 7,333 1,038 17Table of Contents(1)The consolidated statements of comprehensive income for the year ended December 31,2019 and six months ended June 30,2020 are presented on a proforma basis to reflect(i)the issuance of Optionally Convertible Notes and Automatically Convertible Notes in exchange f
208、or Class C ordinary sharesassuming all the terms and circumstances as of September 30,2020,as well as the conversion of all outstanding Automatically Convertible Notes into8,172,000 ordinary shares as described in“Description of Share CapitalHistory of Securities Issuances”;(ii)the automatic convers
209、ion of all of ouroutstanding Class B ordinary shares and Class C ordinary shares into Class A ordinary shares immediately prior to this offering on a one-for-one basis;and(iii)the re-designation and re-classification of all the then issued and outstanding Class A ordinary shares and the remaining au
210、thorized and unissued Class Aordinary shares into ordinary shares immediately prior to this offering on a one-for-one basis.The following table shows summary consolidated balance sheet data as of December 31,2017,2018 and 2019 and as of June 30,2020.As of December 31 As of June 30,2017 2018 2019 202
211、0 Actual Pro forma(1)RMB RMB RMB US$RMB US$RMB US$(in millions)ASSETS Cash at bank 18,713 18,576 7,352 1,041 15,509 2,195 14,546 2,059 Restricted cash 6,558 7,937 24,603 3,482 21,758 3,080 21,758 3,080 Financial assets at fair value through profit or loss 12,442 16,444 18,583 2,630 22,724 3,216 22,7
212、24 3,216 Financial assets at amortized cost 3,108 8,623 1,221 7,250 1,026 7,250 1,026 Accounts and other receivables and contract assets 18,467 20,095 26,296 3,722 26,524 3,754 26,524 3,754 Loans to customers 97,553 34,428 47,499 6,723 80,907 11,452 80,907 11,452 Total assets 180,358 117,919 149,534
213、 21,165 192,138 27,195 191,175 27,059 LIABILITIES Payable to platform investors 10,212 9,820 15,344 2,172 12,668 1,793 12,668 1,793 Payable to investors of consolidated structured entities 114,728 31,810 47,243 6,687 79,689 11,279 79,689 11,279 Accounts and other payables and contract liabilities 3,
214、756 6,244 4,826 683 4,983 705 4,983 705 Convertible redeemable preferred shares 8,935 10,259 1,452 10,754 1,522 Optionally convertible promissory note 8,052 1,140 Total liabilities 159,122 82,971 101,388 14,351 135,240 19,142 132,645 18,775 Share premium 10,870 14,113 14,113 1,998 14,113 1,998 15,90
215、7 2,251 Retained earnings 2,677 16,237 29,346 4,154 36,629 5,185 35,083 4,966 Other reserves 7,120 4,579 4,582 649 4,498 637 5,884 833 Total equity 21,236 34,948 48,145 6,815 56,898 8,053 58,531 8,284 (1)The selected consolidated balance sheet as of June 30,2020 are presented on a pro forma basis to
216、 reflect(i)the issuance of Optionally Convertible Notes andAutomatically Convertible Notes in exchange for Class C ordinary shares assuming all terms and circumstances as of September 30,2020,as well as theconversion of all outstanding Automatically Convertible Notes into 8,172,000 ordinary shares a
217、s described in“Description of Share CapitalHistory ofSecurities Issuances”;(ii)the automatic conversion of all of our outstanding Class B ordinary shares and Class C ordinary shares into Class A ordinaryshares immediately prior to this offering on a one-for-one basis;and(iii)the re-designation and r
218、e-classification of all the then issued and outstandingClass A ordinary shares and the remaining authorized and unissued Class A ordinary shares into ordinary shares immediately prior to this offering on aone-for-one basis.18Table of ContentsThe following table shows our summary consolidated cash fl
219、ow data for the years ended December 31,2017,2018 and 2019 and for the sixmonths ended June 30,2019 and 2020:For the Year Ended December 31,For the Six Months Ended June 30,2017 2018 2019 2019 2020 RMB RMB RMB US$RMB RMB US$(in millions)Summary Consolidated Cash Flows Data:Net cash generated from/(u
220、sed in)in operating activities 2,675 (1,452)2,192 310 1,949 4,476 634 Net cash(used in)/generated from investing activities (1,630)3,494 (11,014)(1,559)1,706 (369)(52)Net cash generated from/(used in)financing activities 6,505 (2,008)(2,612)(370)(4,196)3,744 530 Effect of exchange rate changes on ca
221、sh and cash equivalents (47)(86)170 24 2 (9)(1)Net increase/(decrease)in cash and cash equivalents 7,503 (52)(11,264)(1,594)(539)7,842 1,110 Cash and cash equivalents at beginning of the year 11,125 18,628 18,576 2,629 18,576 7,312 1,035 Cash and cash equivalents at end of the year 18,628 18,576 7,3
222、12 1,035 18,038 15,154 2,145 The following table shows certain of our operating data as of the dates and for the periods indicated:As of and For the Years Ended December 31,As of and For the Six Months Ended June 30,2017 2018 2019 2020 Retail Credit Facilitation Number of cumulative borrowers(millio
223、ns)7.5 10.3 12.4 13.4 Outstanding balance of loans facilitated(RMB billions)288.4 375.0 462.2 519.4 Percentage without credit risk exposure 75.4%94.7%97.8%97.2%Percentage with credit risk exposure 24.6%5.3%2.2%2.8%Volume of new loans facilitated(RMB billions)343.8 397.0 493.7 284.5 Percentage funded
224、 by third parties 51.8%96.8%99.8%99.3%Percentage funded by us 48.2%3.2%0.2%0.7%Wealth Management Number of registered users(millions)33.8 40.4 44.0 44.7 Number of active investors(millions)9.6 11.2 12.5 12.8 Total client assets(RMB billions)461.7 369.4 346.9 374.7 Current products 27.1%49.4%70.2%87.
225、2%Legacy products 72.9%50.6%29.8%12.8%19Table of ContentsRISK FACTORSRisks Relating to Our BusinessOur industry is rapidly changing,and our business has evolved significantly in recent years,which makes it difficult to evaluate our futureprospects.We operate in Chinas retail credit and wealth manage
226、ment industries,which are rapidly changing and may not develop as we anticipate.There arefew established players and no proven business model in these new and fast growing industries.The regulatory frameworks governing the retail creditand wealth management industries continue to develop rapidly but
227、 are expected to remain uncertain for the foreseeable future.In addition,our businessand business model have evolved significantly in recent years.As these industries and our business continue to develop,we may further modify ourbusiness model or our platform,services and solutions.These modificatio
228、ns may not achieve expected results and may have a material and adverseimpact on our financial condition and results of operations.You should consider our business and future prospects in light of the risks and challenges we may encounter in these rapidly changing industries,including,among other th
229、ings,our ability to:attract,retain and develop active users for our platform and apps;navigate a complex and evolving regulatory environment;continue to develop,maintain and scale our platform and sustain our historical growth rates;convince prospective customers,users and partners of the value of p
230、roducts and services on our platform;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 so
231、urces;continue to develop and improve the effectiveness,accuracy and efficiency of our proprietary credit assessment and risk managementtechnology;improve our operational efficiency and maintain profitability;enhance our technology infrastructure to support the growth of our business,maintain the se
232、curity of our system and the confidentiality ofthe 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
233、 to our sales and collection efforts,feestructures,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,includingbaseless or ill-intentioned negati
234、ve publicity;and navigate fluctuations in economic conditions.If we fail to address any or all of these risks and challenges,our business may be materially and adversely affected.A credit crisis or a prolonged downturn in the credit markets may materially and adversely impact our reputation,business
235、,results of operations andfinancial position.Our business is subject to credit cycles associated with the volatility of the general economy.In particular,the operations of our retail creditfacilitation and wealth management businesses may be severely affected in a 20Table of Contentscredit crisis or
236、 prolong downturn in the credit markets.For example,we may face increased risk of default or delinquency of borrowers,which willresult in lower returns or losses for our funding partners,credit enhancement partners and us.In the event that the creditworthiness of our borrowersdeteriorates or we cann
237、ot accurately track the deterioration of their creditworthiness,the criteria we use for the analysis of borrower credit profiles maybe rendered inaccurate,and our risk management system may be rendered ineffective.This in turn may lead to higher default rates and an adverseimpact on our reputation,b
238、usiness,results of operations and financial position as well as our ability to retain existing or attract new funding and creditenhancement partners.Moreover,the performance of the underlying assets of the wealth management products available on our platform maybematerially and adversely affected wh
239、en during a prolonged downturn in the credit markets.If our platform investors suffer from losses in theirinvestments as a result,existing or potential investors may be discouraged from using our services and our reputation may be harmed.In addition,a credit crisis or prolonged downturn in the credi
240、t markets might cause tightening in credit guidelines,limited liquidity,deteriorationin credit performance and increased foreclosure activities.Since we predominantly generate our income from fees charged for services,a decrease inloans facilitated and total client assets invested could cause a mate
241、rial decline in our income for the duration of a crisis or downturn.In addition,we andour business partners may increase fees,including guarantee fees,when they perceive heightened credit risks,which may have a material and adverseimpact on our profitability.Moreover,a financial and credit crisis ma
242、y be coupled with or trigger a downturn in the macroeconomic environment,whichcould cause a general decrease in lending and investment activities over a prolonged period of time and materially and adversely impact the industrieswe operate in.If a credit crisis or prolonged downturn were to occur,par
243、ticularly in Chinas credit markets,our business,financial performance andprospects may be materially and adversely affected.Furthermore,a credit crisis may lead to fluctuations in interest rates.If the prevailing market interest rates rise while borrowers on our platformare unwilling to accept a cor
244、responding increase in interest rates,funding partners may be deterred from providing funding through our platform.If ourborrowers decide not to utilize our credit products because of increases in interest rates,our ability to retain existing borrowers,attract or engageprospective borrowers as well
245、as our competitive position may be severely limited.We cannot assure you that we will be able to effectively manage suchinterest risk at all times or pass on any increase in interest rates to our borrowers.If we are unable to effectively manage such an increase,our business,profitability,results of
246、operations and financial condition could be materially and adversely affected.If the prevailing market interest rates decrease andwe fail to adjust the interest rates for borrowers on our platform,prospective borrowers may choose to borrow from other platforms to take advantage ofthe lower funding c
247、ost offered by them.As a result,any fluctuation in the overall interest rate environment may discourage borrowers from makingcredit applications from us or utilize their approved credit,which may adversely affect our business.The total fees we charge for our retail credit facilitation service may be
248、 deemed to be in excess of interest rate limits imposed by laws or regulatorybodies.As a result,part of the interests and fees may not be valid or enforceable through the PRC judicial system.Our retail credit facilitation service and other fees,to the extent they are deemed to be or related to loan
249、interest,are subject to the restrictions oninterest rates as specified in applicable rules on private lending.The Notice on the Regulation and Rectification of the“Cash Loan”Business,orCircular 141,requires online platforms,microloan companies and other entities to charge synthetic fund costs,includ
250、ing the interest and fees paid by theborrowers,in compliance with the rules provided by the Supreme Peoples Court,and such costs shall be within the legally allowed annualized interestrate for private lending.According to the Provisions of the Supreme Peoples Court on Several Issues concerning the A
251、pplication of Law in the Trial ofPrivate Lending Cases promulgated on September 1,2015,in the event the sum of the annualized interest that lenders charge and the fees we and ourbusiness partners charge exceeded the 24%limit,and borrowers refused to pay the portion that exceeds the 24%limit,PRC cour
252、ts would not uphold ourrequest to demand the portion of the fees that exceeds the 24%limit from such borrowers.If the sum of the annual interest that lenders charge and thefees we and our business partners charge exceeds 36%,the portion that exceeds the 36%limit is invalid.The Supreme 21Table of Con
253、tentsPeoples Court issued the Several Opinions on Further Strengthening the Judicial Work in the Finance Sector in August 2017,which provides that in thecontext of peer-to-peer lending,if an online lending information intermediary and a lender intentionally collude to evade the interest rate ceiling
254、 as setout by the law through disguising loan interest as loan facilitation service fees,then such arrangements shall be declared invalid.On July 22,2020,theSupreme Peoples Court and the National Development and Reform Commission,or the NDRC,jointly released the Opinions on Providing JudicialService
255、s and Safeguards for Accelerating the Improvement of the Socialist Market Economic System for the New Era,or the Opinions.The Opinionsset out that if the interest and fees,including interest,compound interest,penalty interest,liquidated damages and other fees,claimed by one party to theloan contract
256、 exceed the upper limit under judicial protection,the claim will not be supported by the court,and if the parties to the loan disguise thefinancing cost in an attempt to circumvent the upper limit,the rights and obligations of all parties to the loan will be determined by the actual loanrelationship
257、.On August 20,2020,the Supreme Peoples Court issued the Decision on Amending the Provisions of the Supreme Peoples Court on SeveralIssues Concerning the Application of Law in the Trial of Private Lending Cases,or the Judicial Interpretation Amendment,which amended the upperlimit of private lending i
258、nterest rates under judicial protection.According to the Judicial Interpretation Amendment,if the service fees or other fees thatwe charge are deemed to be loan interest or fees related to loans(inclusive of any default rate and default penalty and any other fee),in the event thesum of the annualize
259、d interest that lenders charge and fees we and our business partners charge exceed four times of the one-year Loan Prime Rate at thetime of the establishment of the agreement,or the Quadruple LPR Limit,borrowers may refuse to pay the portion that exceeds the Quadruple LPRLimit.In that case,PRC court
260、s will not uphold our request to demand the payment of fees that exceed the Quadruple LPR Limit from such borrowers.Ifborrowers have paid the fees that exceed the Quadruple LPR Limit,such borrowers may request us to refund the portion exceeding the Quadruple LPRLimit and the PRC courts may uphold su
261、ch requests.The aforementioned one-year Loan Prime Rate refers to the one-year loan market quoted interestrate issued by the National Bank Interbank Funding Center on the 20th of each month starting from August 20,2019,and the one-year loan marketquoted interest rate issued by the National Bank Inte
262、rbank Funding Center on September 21,2020 was 3.85%.We cannot assure you that the one-yearloan market quoted interest rate and the Quadruple Limit will not decrease further in the future.There remain uncertainties in the interpretation andimplementation of the Judicial Interpretation Amendment,inclu
263、ding its applicability to licensed financial institutions,the basis of calculation formulaused to determine the interest limit,the scope of inclusion of related fees and insurance premiums,as well as inconsistencies between the standard andlevel of enforcement by different PRC courts.We cannot assur
264、e you that there will not be any changes to the detailed calculation formula used todetermine the interest limit,our future fee rates will not be lowered as a result of the Quadruple LPR Limit,or that the Quadruple LPR Limit will not beapplied to our historical and legacy products where the related
265、dispute cases are accepted by PRC courts of first instance on or after August 20,2020.Insuch cases,we and our business partners may be required to repay certain borrowers if our historical and legacy loan products are deemed to haveviolated the applicable laws and regulations concerning the limit of
266、 lending interest and fee rates.Our business,results of operations and financialcondition may therefore be materially and adversely affected by the implementation of the Judicial Interpretation Amendment.In addition to rules,opinions and decisions issued by the PRC courts,we and our business partner
267、s are also subject to regulatory agenciesrequirements,supervision or guidance.We have lowered the APR on loans we facilitate since early September 2020 and may further lower the APRfrom time to time as a result of changes in regulation or our business strategy.We may also reduce our outstanding loan
268、 volumes,significantly modifyour fee rate structure within a prescribed period of time or modify our business cooperation model with third-party business partners,including ourcredit enhancement partners.If we are unable to comply with such regulatory requirements,supervision or guidance or are deem
269、ed to be charging abovethe maximum interest rates permitted by the relevant laws,regulations,policies or guidance,we could be subject to orders of suspension,cessation orrectification,cancellation of qualifications,or other penalties,and our business,financial condition,results of operations and our
270、 cooperation withbusiness partners could be materially and adversely affected as a result.See also“Our business is subject to laws,regulation,and supervision bynational,provincial and local government 22Table of Contentsand judicial authorities,industry associations and other regulatory bodies.The l
271、aws,regulations and official guidance relating to our business arecomplex,evolving rapidly and may be subject to further changes.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
272、to continue to modify our business operations inresponse to changes in laws and regulations.”The wealth management products displayed on our platform involve various risks,and failure to identify or fully appreciate such risks willnegatively affect our reputation,client relationships,operations and
273、prospects.We display a broad variety of wealth management products on our platform,including asset management plans,bank products,mutual funds,private investment funds and trust products,among others.These products often have complex structures and involve various risks,including defaultrisk,interes
274、t rate risk,liquidity risk and other risks.In addition,third parties we collaborate with might be confronted with liquidity risks,which mayexpose our platform investors to the liquidity risks in the products we display on our platform.Moreover,the wealth management products available onour platform
275、are also subject to systematic risk and market volatility,which may reduce the value of the investments of our platform investors regardlessof the performance or profitability of the businesses underlying such investment products.Neither the principal nor the return of the wealth management products
276、 available on our platform is guaranteed by us.As such,we generally donot bear any liabilities for any loss to capital invested in the products.However,despite product risk warnings and platform disclaimers,our platforminvestors may attempt to hold us responsible for their losses,which could harm ou
277、r reputation and result in reduced traffic to our platform.Furthermore,we may also face pressure from regulatory authorities to share losses incurred by our platform investors in order to maintain social harmony andfinancial market stability,which can have a material and adverse impact on our busine
278、ss,results of operations and financial condition.In addition,although we have implemented strict suitability management and transparent disclosure policies,such policies and procedures maynot be fully effective in mitigating suitability-related risks in all scenarios.If we or our customer service pe
279、rsonnel are found to have engaged insuitability-related misconduct,we may be held responsible when our platform investors incur losses,and our reputation,client relationships,businessand prospects will be materially and adversely affected.For more details on risks relating to our product risk manage
280、ment,see“Information regardingindividuals to whom we provide our financial services may not be complete,and our ability to perform due diligence,detect borrower fraud or manageour risks may be compromised as a result.”Our access to sufficient and sustainable funding at reasonable costs cannot be ass
281、ured.The growth and success of our future operations depend on the availability of adequate lending capital to meet borrowers demands for loans onour platform.To maintain sufficient and sustainable funding to meet borrower demands,we need to keep expanding the funding base and securing astable strea
282、m of funds from our funding partners.The availability of funding from our funding partners depends on many factors,some of which are out of our control.Changes in the creditenvironment may impact the funding costs and the terms of our agreements with funding partners,and we may not be able to obtain
283、 sufficient andsustainable funding from our funding partners if the funding cost increases significantly.In addition,our competitors in the retail credit facilitationmarkets may offer better terms to attract institutional funding partners away from us or form exclusive partnerships with them.We may
284、not be able tomaintain long-term business relationships with institutional funding partners in this evolving market.In addition,some of our funding partners havelimited operating histories and experiences and we cannot rely on them for our funding.Our funding partners are subject to certain PRC laws
285、 andregulations,and in the event that all or some of them cease or modify their operations and cooperation with us as a result of existing or new regulatoryrequirements,the availability of our funding may be materially and adversely affected.23Table of ContentsWhile we have made efforts to diversify
286、 funding sources,we cannot assure you that such efforts would be successful or funding sources for theloans we facilitate will remain or become increasingly diversified in the future.If we become dependent on a small number of funding partners and anysuch funding partners decide not to collaborate w
287、ith us,change the commercial terms to the extent unacceptable to our borrowers or limit the fundingavailable on our platform,such constraints may materially limit our ability to facilitate loans and adversely affect our user experience.As a result,ourbusiness,financial condition,results of operation
288、s and cash flow may be materially and adversely affected.Our business is subject to laws,regulations,and supervision by national,provincial and local government and judicial authorities,industryassociations and other regulatory bodies.The laws,regulations and official guidance relating to our busine
289、ss are complex,evolving rapidly and maybe subject to further changes.Non-compliance with any existing or new regulation may result in penalties,limitations and prohibitions on ourbusiness activities,and we have been modifying and may need to continue to modify our business operations in response to
290、changes in laws andregulations.The industries in which we operate are highly regulated.Our businesses are subject to national,provincial and local laws,rules,regulations,policies and measures in China.See“RegulationPRC Regulations.”These laws,rules,regulations,policies and measures are issued by the
291、 NationalCongress of China and its standing committee,the State Council,and different central government ministries and departments as well as provincial andlocal government authorities,and are enforced by different levels of regulatory agencies and by local authorities in each province in which we
292、operate.As a result,there may be inconsistencies between the rules,regulations,policies,orders and guidance of various regulatory agencies.In order to complywith existing and new rules,regulations,policies and measures of each regulatory agency,we have modified,and may continue to modify,our busines
293、smodels from time to time,which could cause us to incur significant costs and expenses,divert resources and materially disrupt our operations,whichcould have a material adverse effect on our results of operations and financial condition.For example,in July 2020,the China Banking and InsuranceRegulat
294、ory Commission,or the CBIRC,issued the Interim Measures for the Administration of Online Loans by Commercial Banks to provide detailedrules on online loans provided by commercial banks,which may require some of our funding partners to evaluate their cooperation entities and adjusttheir cooperation w
295、ith us and thus have a potentially significant impact on our retail credit facilitation business.Our microloan companies are subject to the laws,regulations,policies and measures in Chongqing,Shenzhen and Hunan in areas of registeredcapital and of loan-to-capital and other leverage ratios,among othe
296、rs,and our financing guarantee companies are subject to the supervision of localfinancial authorities in Nanjing,Tianjin and other jurisdictions where their branch offices are located.Historically,some of our microloan companiesand financing guarantee companies maintained leverage ratios that were a
297、bove the maximum level allowed.As of the date of this prospectus,we havemodified our microloan companies and financing guarantee companies business models in order to comply with the leverage ratio requirements andother laws,regulations,policies and measures for these companies in all of these juris
298、dictions.Historically,regulators have given us verbal and writtenguidance on our business practices,and we have modified our business operations based on such guidance.While we have not been subject to anyregulatory penalties as of the date of this prospectus in connection with such microloan and fi
299、nancing guarantee companies business practices,we maybe subject to regulatory warnings,correction orders,condemnation and fines and may be required to further modify our business if any of our microloanand financing guarantee companies is deemed to have violated national,provincial or local laws and
300、 regulations or regulatory orders and guidance.Forexample,on September 16,2020,the CBIRC issued the Notice on Strengthening the Supervision and Management of Microloan Companies,or Circular86.Adopted to regulate the operations of microloan companies,Circular 86 stipulates that the financing balance
301、of a microloan companys funding bybank loans,shareholder loans and other non-standard financing instruments shall not exceed such companys net assets,and the financing balance of themicroloan company funding by issuance of bonds,asset securitization products and other instruments of standardized deb
302、t assets shall not exceed fourtimes of its net assets.Local financial regulatory authorities may further lower the leverage limits mentioned above.We are also subject to oversight bythe Ministry of Industry and Information Technology,or 24Table of Contentsthe MIIT,the Cyberspace Administration of Ch
303、ina and the National Internet Finance Association of China in connection with our mobile applications.Ifwe 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 storesincluding the iOS App Store and Android app s
304、tores may cease the distribution of our mobile apps and our business may be adversely and materiallyaffected.There are uncertainties regarding the interpretation and enforcement of PRC laws,rules and regulations.Recently enacted laws,rules andregulations may be subject to significant degrees of inte
305、rpretation by PRC regulatory authorities.Because many of the laws,rules and regulationsgoverning our businesses are relatively new,and because of the limited number of published judicial decisions and the non-binding nature of some ofsuch decisions,we have encountered uncertainties as to the judicia
306、l interpretation and application of laws,and it is possible that laws may be interpretedand applied inconsistently in different jurisdictions.Such interpretations and application may conflict with our current practices,require changes to ourbusiness model or cause disruptions to our operations.For e
307、xample,our ability to collect loans from borrowers may be hindered by uncertainties in theinterpretation of PRC laws,rules and regulations.In addition,the PRC legal system is based in part on government policies and internal rules,some ofwhich are not published on a timely basis or at all,and which
308、may have retroactive effects.As a result,we may not be aware of our violation of thesepolicies and rules until after a violation has occurred.We might also not be able to foresee what regulatory measures the national,provincial and localgovernment authorities may take and whether new regulatory meas
309、ures would adversely impact our existing business or business plans.For example,though there is currently no specific regulation pertaining to the qualifications and operations of websites such as L,which helps us facilitate thedistribution of financial products for our licensed product providers,ne
310、w laws,rules,regulations,measures,polices or interpretations may arise in thefuture.Similarly,the qualified investor requirements and minimum investment thresholds for asset management products,trust products,private fundsmay be subject to further changes in the future.New regulations may also requi
311、re us to obtain licenses for the processing and storage of borrower data,and request more detailed documentations for borrowers usage of loans,which may materially and adversely impact the flexibility and efficiency of ourretail credit facilitation services and as a result the volume of loans we fac
312、ilitate.Furthermore,there are currently few regulations on the use oftechnologies we deploy in our businesses,such as chatbots and AI,new laws,rules,regulations,measures policies or interpretations may arise in thefuture.We might not be able to be in compliance with the new requirements,and even if
313、we successfully comply with such requirements throughimprovements,corrections and rectification,the business model may no longer be profitable or commercially viable.We expect the laws,rules,regulations,policies and measures governing our business,our cooperation with third-party business partners a
314、nd theproducts we facilitate on our platform to continue to evolve.Our business activities and growth may be adversely affected if we do not respond toregulatory changes in a timely manner.Non-compliance with the applicable laws,rules,regulations,policies and measures,including as a result ofambigui
315、ties in them,may subject us to sanctions by regulatory authorities,monetary penalties,or restrictions on our business activities or new productintroduction or revocation of our licenses,all of which could have material and adverse effects on our business,financial condition and results ofoperations.
316、Any failure to obtain,renew or retain requisite approvals,licenses or permits applicable to our business may have a material adverse effect on ourbusiness,financial condition and results of operations.The PRC government extensively regulates internet-related businesses,including supervising foreign
317、ownership,and requiring licenses andpermits pertaining to the companies in internet-related businesses.These internet-related laws and regulations are relatively new and evolving,and theirinterpretation and enforcement involve significant uncertainties.As a result,in certain circumstances it may be
318、difficult to determine what actions oromissions may be deemed to be in violation of applicable laws and regulations.We are required to obtain various approvals,licenses and permits from different regulatory authorities in order to offer certain categories of ourloan product and wealth management pro
319、duct facilitation services online.25Table of ContentsWe have made efforts to obtain all the applicable approvals,licenses and permits,but due to the complexities,uncertainties and frequent changes inlaws,rules,regulations and their interpretation and implementation,we may not always be able to do so
320、,and we may be penalized by governmentalauthorities for facilitating products or providing services without proper approvals,licenses or permits.For example,we cannot assure you that we willnot be required to obtain any additional internet content service provider license,or ICP license,for our curr
321、ent business operations.Moreover,as wecontinue to increase the product and service selection on our platform,we may also become subject to new or existing laws and regulations that did notaffect us in the past.Failure to obtain,renew,or retain requisite licenses,permits or approvals may adversely af
322、fect our ability to conduct or expand ourbusiness.In March 2018,the National Internet Finance Rectification Office issued the Notice on Strengthening Rectification and Carrying Out InspectionAcceptance Work of Online Asset Management Operations,or Circular 29,which provided that without the license
323、or approval from the PRC financialregulatory authorities,no entity may issue or sell asset management products through the internet.The application and interpretation of Circular 29,including the definition of“asset management product,”are ambiguous and may be inconsistent between different governme
324、nt authorities.Although webelieve our role is only that of a platform between the providers and the purchasers of the wealth management products,which is not forbidden byCircular 29,the PRC regulatory authorities may have a different view and categorize our activities as the sale of wealth managemen
325、t products inviolation of Circular 29 and other PRC laws and regulations.If the PRC government determines that we are operating or have operated our wealthmanagement or other businesses without the proper approvals,licenses or permits or promulgates new laws and regulations that require additionalap
326、provals or licenses or permits or imposes additional restrictions on the operation of any part of our business,it has the power,among other things,tolevy fines,confiscate our income,revoke our business licenses,and require us to discontinue the relevant parts of our business or to impose restriction
327、son the affected portion of our business.While we may still be able to operate our wealth management business by cooperating with entities that hold therequired license,approval or permit,any of these actions by the PRC government may have a material adverse effect on our business and results ofoper
328、ations.In addition,we are currently in the process of upgrading and moving our wealth management platform investors balances from our platform,which we offered as an add-on service to streamline our platform investors subscription process at their consent,to bank accounts with a commercialbank.With
329、this new service,our platform investors can use their bank account balances to directly purchase wealth management products displayed onour platform.However,some platform investors have not yet made the upgrade or may not be willing to make such upgrades,and our practice ofallowing our platform inve
330、stors to top-up and transfer their balances on our platform to purchase wealth management products and withdraw the fundsto their bank accounts may be deemed to be engaging in payment services without having obtained the required licenses in violation of AdministrativeMeasures for the Payment Servic
331、es Provided by Non-financial Institutions and the Notice of the General Office of the Peoples Bank of China onFurther Strengthening the Disciplinary Action against Unlicensed Transaction of Payment Business.Although we have not been subjected to any finesor other penalties as of the date of this pro
332、spectus in connection with the practice described above,we cannot be certain that the measures or the circularwill not apply or that our existing or past practices would not be deemed to violate any existing or future laws,regulations and rules or subject us toregulatory penalties.Furthermore,we cur
333、rently cooperate with third-party channel partners for borrower and platform investor acquisition.See“BusinessRetail Credit FacilitationRetail Credit Origination”and“BusinessWealth ManagementPlatform Investor Acquisition.”If we or thesethird parties are deemed to be providing investment advisory services without the requisite approvals,licenses or permits,they may be subject toregulatory actions a