360 DigiTech Annual Report 2023

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 20-F(Mark One)☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934OR☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2023.OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934OR☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company reportFor the transition period from toCommission file number: 001-38752Qifu Technology, Inc.(Exact Name of Registrant as Specified in Its Charter)N/A(Translation of Registrant’s Name Into English)Cayman Islands(Jurisdiction of Incorporation or Organization)7/F Lujiazui Finance PlazaNo. 1217 Dongfang RoadPudong New Area, Shanghai 200122People’s Republic of China(Address of Principal Executive Offices)Alex Xu, Chief Financial Officer7/F Lujiazui Finance PlazaNo. 1217 Dongfang RoadPudong New Area, Shanghai 200122People’s Republic of ChinaPhone: +86 21 5835-7668Email: ir@360shuke.com(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class Trading Symbol (s) Name of each exchange on which registeredAmerican depositary shares, each representing two Class A ordinary shares, par valueUS$0.00001 per shareQFINThe Nasdaq Global Select MarketClass A ordinary shares, par value US$0.00001 per share3660The Stock Exchange of Hong Kong LimitedSecurities registered or to be registered pursuant to Section 12(g) of the Act:None(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None (Title of Class)Table of ContentsIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:As of December 31, 2023, there were 315,226,128 class A ordinary shares issued and outstanding, par value US$0.00001 per share.Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ☒ No ☐If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934.Yes ☐ No ☒Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligationsunder those Sections.Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “largeaccelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Emerging growth company☐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 use the extendedtransition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification afterApril 5, 2012.Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reportingunder Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of anerror to previously issued financial statements. ☐Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’sexecutive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). ☐Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP ☒International Financial Reporting Standards as issued by the International Accounting Standards Board ☐Other ☐If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.☐ Item 17 ☐ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent tothe distribution of securities under a plan confirmed by a court.Yes ☐ No ☐Table of ContentsTABLE OF CONTENTSPageINTRODUCTION1FORWARD-LOOKING STATEMENTS3PART I.4ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS4ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE4ITEM 3 KEY INFORMATION4ITEM 4 INFORMATION ON THE COMPANY76ITEM 4A UNRESOLVED STAFF COMMENTS121ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS121ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES142ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS153ITEM 8 FINANCIAL INFORMATION156ITEM 9 THE OFFER AND LISTING157ITEM 10 ADDITIONAL INFORMATION158ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK172ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES172PART II.177ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES177ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS177ITEM 15 CONTROLS AND PROCEDURES177ITEM 16 [RESERVED]178ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT178ITEM 16B CODE OF ETHICS178ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES178ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES178ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS179ITEM 16F CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT179ITEM 16G CORPORATE GOVERNANCE180ITEM 16H MINE SAFETY DISCLOSURE180ITEM 16I DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS180ITEM 16J INSIDER TRADING POLICIES180ITEM 16K CYBERSECURITY180PART III.182ITEM 17 FINANCIAL STATEMENTS182ITEM 18 FINANCIAL STATEMENTS182ITEM 19 EXHIBITS182SIGNATURES184Table of Contents1INTRODUCTIONUnless otherwise indicated and except where the context otherwise requires, references in this annual report to:●“Qifu Technology,” “we,” “us,” “our” and “our company” are to Qifu Technology, Inc. and its subsidiaries, and, in the context ofdescribing our operations and consolidated financial information, the VIEs in China and their respective subsidiaries;●“360 Group” are to 360 Security Technology Inc. and its controlled affiliates and predecessors;●“ADSs” are to American depositary shares, each of which represents two of our class A ordinary shares;●“China” or “the PRC” are to the People’s Republic of China. Unless otherwise indicated, the policies, laws, regulations andinterpretations adopted by the government of mainland China, which are specifically referenced in this annual report, are notapplicable to Hong Kong, Macau or Taiwan. To the extent that mainland China laws and regulations are applied in Hong Kong, thelegal and operational risks associated with operating in mainland China may also apply to our operations in Hong Kong;●“class A ordinary shares” are to our class A ordinary shares, par value US$0.00001 per share;●“Fuzhou Financing Guarantee” are to Fuzhou 360 Financing Guarantee Co., Ltd.;●“Fuzhou Microcredit” are to Fuzhou 360 Online Microcredit Co., Ltd.;●“HK$” or “Hong Kong dollars” are to the legal currency of Hong Kong;●“shares,” or “ordinary shares” are to our class A ordinary shares, and in the context of describing our share capital before March 31,2023, also include our class B ordinary shares, par value US$0.00001 per share, as the context requires and as applicable;●“RMB” or “Renminbi” are to Renminbi, the legal currency of the PRC;●“Shanghai Financing Guarantee” are to Shanghai 360 Financing Guarantee Co., Ltd. (now known as Shanghai Qiyaoxin TechnologyCo., Ltd.);●“Shanghai Qibutianxia” are to Shanghai Qibutianxia Information Technology Co., Ltd. (formerly known as Beijing QibutianxiaTechnology Co., Ltd.);●“Shanghai Qiyu” are to Shanghai Qiyu Information & Technology Co., Ltd.;●“US$” or “U.S. dollars” are to United States dollars, the lawful currency of the United States;●“U.S. GAAP” are to accounting principles generally accepted in the United States;●“variable interest entities,” “VIE” or “VIEs” are to Shanghai Qiyu, Fuzhou Financing Guarantee and Shanghai Financing Guarantee;and●“WFOE” or “Shanghai Qiyue” are to Shanghai Qiyue Information & Technology Co., Ltd.Table of Contents2Unless otherwise stated, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report were made at a rateof RMB7.0999 to US$1.00, the exchange rate on December 29, 2023 set forth in the H.10 statistical release of the U.S. Federal Reserve Board.In addition, unless the context indicates otherwise, for the discussion of our business references to:●“180 day+ vintage delinquency rate” are to a percentage that is equal to (i) the total amount of principal for all loans we facilitated ina fiscal quarter that become delinquent for more than 180 days, less the total amount of recovered past due principal for all loans wefacilitated that were delinquent for more than 180 days in the same fiscal quarter, divided by (ii) the total initial principal amount ofloans we facilitated in such fiscal quarter; loans under Intelligent Credit Engine and other technology solutions are not included in thedelinquency rate calculation;●“30 day collection rate” are to a percentage that is equal to (i) the amount of principal that is repaid in one month among the totalamount of principal that is overdue as of a specified date, divided by (ii) the total amount of principal that is overdue as of suchspecified date;●“90 day+ delinquency rate” are to a percentage that is equal to (i) the outstanding loan balance of on- and off-balance sheet loans wefacilitated that are 91 to 180 calendar days past due, divided by (ii) the total outstanding loan balance of on- and off-balance sheetloans we facilitated across our platform as of a specific date; loans that are charged-off and loans under Intelligent Credit Engine andother technology solutions are not included in the delinquency rate calculation;●“capital-light model” are to a comprehensive suite of technology-enabled loan facilitation services spanning the loan lifecycle, fromborrower acquisition, technology empowerment in credit assessment to post-facilitation services, under which we do not take anycredit risk;●“capital-heavy loans” are to loans under which we bear credit risks;●“Credit-Tech” are to credit technology services, which refer to services using technology solutions to empower and enhance creditservices;●“loan facilitation volume” are to the total principal amount of loans facilitated or originated by, as the context mandates, a Credit-Tech platform, a traditional financial institution or other market players in the credit industry; in the context of the volume of loanswe facilitated or originated, the total principal amount of loans we facilitated or originated during the given period, including loanvolume facilitated through Intelligence Credit Engine (ICE) and other technology solutions;●“outstanding loan balance” are to the total amount of principal outstanding for loans facilitated or originated by a Credit-Techplatform, as the context mandates, a traditional financial institution or other market players in the credit industry at the end of eachperiod; in the context of the outstanding balance of loans we facilitated or originated, the total amount of principal outstanding forloans we facilitated or originated at the end of each period, including loan balance for ICE and other technology solutions excludingloans delinquent for more than 180 days;●“repeat borrower contribution” or “loan origination contributed by repeat borrowers” are to a percentage, the numerator of which isthe principal amount of loans borrowed during that period by borrowers who had historically made at least one successful drawdown,and the denominator of which is the total loan facilitation volume through our platform during that period;●“SME” are to small- and micro-enterprises and owners of small- and micro-enterprises; and●“users with approved credit lines” are to users who have submitted their credit applications and are approved with a credit line at theend of each period.Table of Contents3FORWARD-LOOKING STATEMENTSThis annual report contains forward-looking statements that relate to our current expectations and views of future events. These statementsinvolve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materiallydifferent from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of theU.S. Private Securities Litigations Reform Act of 1995.You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,”“estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition,results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:●our goals and strategies;●our future business development, financial conditions and results of operations;●the expected growth of the Credit-Tech industry in China;●our expectations regarding demand for and market acceptance of our Credit-Tech products;●our expectations regarding keeping and strengthening our relationships with borrowers, financial institution partners, data partnersand other parties we collaborate with;●competition in our industry; and●government policies and regulations relating to our industry.You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual reportcompletely and with the understanding that our actual future results may be materially different from what we expect. Other sections of this annualreport discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment.New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of allfactors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from thosecontained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annualreport relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, weundertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events orotherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.Table of Contents4PART I.ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3 KEY INFORMATIONOur Holding Company Structure and Contractual Arrangements with the VIEs and VIEs’ subsidiariesQifu Technology, Inc. is not a Chinese operating company but rather a Cayman Islands holding company that does not conduct businessdirectly and has no equity ownership in the VIEs and VIEs’ subsidiaries. We conduct our operations in China through (i) our PRC subsidiaries and(ii) the VIEs with which we have maintained contractual arrangements. PRC laws and regulations restrict and impose conditions on foreigninvestment in internet-based businesses, such as the distribution of online information. For example, foreign investors are generally not allowed toown more than 50% of the equity interests in a value-added telecommunications service provider in accordance with the Special ManagementMeasures for the Access of Foreign Investment (Negative List) and other applicable laws and regulations. We are a Cayman Islands company andour PRC subsidiaries are considered foreign-invested enterprises. Accordingly, we operate certain of our businesses in China through the VIEs, andrely on contractual arrangements among our PRC subsidiaries, the VIEs and the nominee shareholders of the VIEs to control the businessoperations of the VIEs. Revenues contributed by the VIEs accounted for 92%, 92% and 94% of our total net revenue for the years of 2021, 2022and 2023, respectively. As used in this annual report, “we,” “us,” “our company,” “our” or “Qifu Technology,” refers to Qifu Technology, Inc., itssubsidiaries, and, in the context of describing our operations and consolidated financial information, the VIEs and their subsidiaries in China,including, but not limited to Shanghai Qiyu, Fuzhou Financing Guarantee, Shanghai Financing Guarantee and Fuzhou Microcredit. Investors in ourADSs are not purchasing equity interest in the VIEs in China but instead are purchasing equity interest in a holding company incorporated in theCayman Islands.A series of contractual agreements, including (i) voting proxy agreements, equity interest pledge agreements and loan agreements, whichprovide us with effective control over the VIEs in China, (ii) exclusive business cooperation agreements, which allow us to receive economicbenefits from the VIEs in China, and (iii) exclusive option agreements, which provide us with the option to purchase the equity interests in, andassets of, the VIEs (collectively, “contractual arrangements”). Terms contained in each set of contractual arrangements with the VIEs and theirrespective shareholders are substantially similar. For more details of these contractual arrangements, see “Item 4. Information on the Company—C.Organizational Structure—Contractual Arrangements with the VIEs and Their Shareholders.”However, the contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs and we mayincur substantial costs to enforce the terms of the arrangements. All of these contractual arrangements are governed by and interpreted inaccordance with PRC law, and disputes arising from these contractual arrangements between us and the VIEs will be resolved through arbitrationin China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes arising from these contracts would beresolved in accordance with PRC legal procedures. These arrangements have not been tested in arbitral tribunals or courts. The legal system in thePRC is different from the legal system of some other jurisdictions, and the uncertainties involved in it could limit our ability to enforce thesecontractual arrangements. Further, there are very few precedents and little formal guidance as to how contractual arrangements in the context of aVIE should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate outcome of such arbitrationshould legal action become necessary. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely oncontractual arrangements with the VIEs and the shareholders of the VIEs for all of our business operations, which may not be as effective as directownership in providing operational control” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Anyfailure by the VIEs or the shareholders of the VIEs to perform their obligations under our contractual arrangements with them would have amaterial adverse effect on our business.”Table of Contents5There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rulesregarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the VIEs and itsnominee shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or ifadopted, what they would provide. If we or any of the VIEs is found to be in violation of any existing or future PRC laws or regulations, or fail toobtain or maintain any of the required permits or approvals, the PRC regulatory authorities would have broad discretion to take action in dealingwith such violations or failures. If the PRC government deems that our contractual arrangements with the VIEs do not comply with PRC regulatoryrestrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or areinterpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holdingcompany, our PRC subsidiaries and VIEs, and investors of our company face uncertainty about potential future actions by the PRC government thatcould affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of theVIEs and VIEs’ subsidiaries and our company as a whole. For a detailed description of the risks associated with our corporate structure, pleaserefer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”We face various risks and uncertainties related to doing business in China. Our business operations are primarily conducted in China, andwe are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshoreofferings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, as well as the lack of inspection by the PublicCompany Accounting Oversight Board, or the PCAOB, on our auditors, which may impact our ability to conduct certain businesses, accept foreigninvestments, or list on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and thevalue of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of suchsecurities to significantly decline. Pursuant to the Holding Foreign Companies Accountable Act, if the SEC determines that we have filed auditreports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SECwill prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the UnitedStates. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect orinvestigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor. In May 2022,the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of this annual report on Form 20-F for thefiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination andremoved mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered publicaccounting firms. For this reason, we were not identified as a Commission-Identified Issuer under the HFCAA after we filed our annual report onForm 20-F for the fiscal year ended December 31, 2022 and do not expect to be identified so after we file this annual report on Form 20-F. Eachyear, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among otherjurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainlandChina and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on ourfinancial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following thefiling of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition ontrading under the HFCAA. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB hadhistorically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOBto conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Our ADSs may be prohibited from trading in the United States under the HFCAA inthe future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of theirbeing delisted, may materially and adversely affect the value of your investment.”PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted offshore by,and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities toinvestors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline or becomeworthless. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’ssignificant oversight and discretion over our business operation and any failure to comply with PRC laws and regulations could result in a materialadverse change in our operations and the value of the ADSs.”Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws andquickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For moredetails, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation andenforcement of PRC laws and regulations could limit the legal protections available to us.”Table of Contents6Permissions Required from the PRC Government Authorities for Our OperationsWe conduct our business primarily through our subsidiaries, the VIEs and their subsidiaries in China. Our operations in China aregoverned by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries, the VIEs or their subsidiaries have obtained therequisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company, our PRCsubsidiaries and the VIEs in China, including, among others, financing guarantee business license owned by Fuzhou Financing Guarantee, value-added telecommunications license owned by Shanghai Qiyu, and the incorporation approval of and the value-added telecommunications licenseowned by Fuzhou Microcredit. Given the uncertainties of interpretation and implementation of the laws and regulations and the enforcementpractice by government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services ofour platform in the future. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business inChina—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses andcompanies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our businessand results of operations.”Furthermore, we and the VIEs will be required to obtain permissions from or complete the filing procedures with the China SecuritiesRegulatory Commission, or the CSRC, and may be required to go through cybersecurity review by the Cyberspace Administration of China, or theCAC, in case of any future issuance of securities to foreign investors. Any failure to obtain or delay in obtaining such approval or completing suchprocedures would subject us to sanctions by the CSRC, CAC or other PRC regulatory authorities. These regulatory authorities may impose finesand penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay orrestrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect ourbusiness, financial condition, results of operations, and prospects, as well as the trading price of our ADSs. See “Item 3. Key Information—D. RiskFactors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation andany failure to comply with PRC laws and regulations could result in a material adverse change in our operations and the value of the ADSs” and“Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of and filing with the CSRC or other PRCgovernment authorities will be required if we conduct offshore offerings in the future, and we cannot predict whether or for how long we will beable to obtain such approval or complete such filing.”Cash and Asset Flows through Our OrganizationQifu Technology, Inc. is a holding company with no material operations of its own. We conduct our operations in China primarily throughour subsidiaries and VIEs in China. As a result, although other means are available for us to obtain financing at the holding company level, QifuTechnology, Inc.’s ability to pay dividends to the shareholders and to service any debt it may incur may depend upon dividends paid by our PRCsubsidiaries and service fees paid by the VIEs.If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to paydividends to Qifu Technology, Inc. In addition, our PRC subsidiaries are permitted to pay dividends to Qifu Technology, Inc. only out of theirretained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, our PRC subsidiaries and the VIEsare required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are notdistributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5. Operating and FinancialReview and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” For risks relating to the fund flows of our operationsin China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and otherdistributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability ofour PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.”Under PRC laws and regulations, our PRC subsidiaries and the VIEs are subject to certain restrictions with respect to paying dividends orotherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject toexamination by the banks designated by the State Administration of Foreign Exchange, or SAFE, and payment of withholding tax. As a result ofthese PRC laws and regulations, amounts restricted include paid-in capital, capital reserve and statutory reserves of our PRC subsidiaries and theVIEs totaled RMB8,283.6 million, RMB14,436.1 million and RMB16,233.7 million (US$2,286.5 million) as of December 31, 2021, 2022 and2023, respectively.Table of Contents7Our PRC subsidiaries, the VIEs and their subsidiaries generate their revenue primarily in Renminbi, which is not freely convertible intoother currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to pay dividends to us. In addition,under the Enterprise Income Tax Law of the PRC and its implementation rules, profits of a foreign investment enterprise generated in or after 2008that are distributed to its immediate holding company outside mainland China are subject to withholding tax at a rate of 10%, unless the foreignholding company’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax. For example, aholding company in Hong Kong, subject to approval of the PRC local tax authority, will be eligible to a 5% withholding tax rate under theArrangement Between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of FiscalEvasion with Respect to Taxes on Income and Capital if such holding company is considered to be a non-PRC resident enterprise and holds at least25% of the equity interests in the PRC foreign investment enterprise distributing the dividends. However, if the Hong Kong holding company is notconsidered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to withholding taxat a rate of 10%. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Governmental control ofcurrency conversion may limit our ability to utilize our net revenue effectively and affect the value of your investment” and “Item 5. Operating andFinancial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” In 2023, our WFOE made dividendpayments of RMB940.0 million (US$132.4 million) to our Hong Kong subsidiaries and paid related withholding income tax of RMB94.0 million(US$13.2 million) accordingly. As of December 31, 2023, we recorded a deferred tax liability of RMB112.7 million (US$15.9 million) associatedwith all of our earnings expected to be distributed from mainland China subsidiaries to overseas for dividend distribution and share repurchase. Theremaining undistributed profits of mainland China subsidiaries as of December 31, 2023 would be indefinitely reinvested with unrecognizeddeferred tax liabilities of approximately RMB2,005.0 million (US$282.4 million). In 2023, our Hong Kong subsidiaries made dividend paymentsof RMB790.0 million (US$111.3 million) to our holding company, Qifu Technology, Inc.For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid within mainlandChina, assuming that we determine to pay a dividend from mainland China subsidiaries to overseas entities in the future: Taxation Scenario(1) (Statutory Tax and Standard Rates) Hypothetical pre-tax earnings(2) 100%Tax on earnings at statutory rate of 25%(3) (25)%Net earnings available for distribution 75%Withholding tax at standard rate of 10% (7.5)%Net distribution to Parent/Shareholders 67.5%Notes:(1)For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount, not considering book totax adjustment, is assumed to equal taxable income in China.(2)Assume all the profits of VIEs could be distributed to the mainland China subsidiaries in a tax free manner.(3)Certain of our subsidiaries and VIEs and their subsidiaries qualifies for a 15% preferential income tax rate in China. However, such rate issubject to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For purposes of thishypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective.Under PRC law, Qifu Technology, Inc. may provide funding to our mainland China subsidiaries only through capital contributions orloans, and to the VIEs only through loans, subject to satisfaction of applicable government registration and approval requirements.The VIEs may transfer cash to our relevant WFOE by paying service fees according to the exclusive business cooperation agreements.The VIEs agree to pay our WFOE service fees, the amount of which are subject to adjustment at our WFOE’s sole discretion taking intoconsideration of the complexity of the services, the actual cost that may be incurred for providing such services, as well as the value andcomparable price on the market of the service provided, among others. Our WFOE would have the exclusive ownership of all the intellectualproperty rights created as a result of the performance of the exclusive business cooperation agreement, to the extent permitted by applicable PRClaws.Table of Contents8The following table sets forth the amount of the transfers for the years presented.Years Ended December 31, 2021 2022 2023(RMB in thousands)Funds from Qifu Technology Inc. to our subsidiaries / (repayment by our subsidiaries to Qifu TechnologyInc.) (51,706) 7,698 (31,815)Funds from Qifu Technology Inc. to the VIEs / (repayment by the VIEs to Qifu Technology Inc.) 205,484 (1,588,312) (274,627)Funds from our subsidiaries to the VIEs / (repayment by the VIEs to our subsidiaries) 3,658,491 859,935 628,014Dividend from WOFE to our subsidiaries — — (940,000)Dividend from our subsidiaries to Qifu Technology Inc. — — (790,000)Service fees paid by our subsidiaries to the VIEs 258,246 103,094 209,033Service fees paid by the VIEs to WFOE 5,001,870 420,290 1,306,173Service fees paid by the VIEs to the other subsidiaries(1) 616,469 3,263 5,696Note:(1)Refers to our subsidiaries other than the WFOE.In 2021, 2022 and 2023, no assets other than cash flows discussed above were transferred through our organization.For the years ended December 31, 2021, 2022 and 2023, dividends of nil, US$146.4 million and US$131.9 million were paid toshareholders of record as of designated record dates. We intend to declare and distribute a recurring cash dividend every six-month period, startingfrom the first half of 2023, at an amount equivalent to approximately 20% to 30% of our company’s net income after tax for the previous six-monthperiod based upon our operations and financial conditions, and other factors, subject to adjustment and determination by the board of directors ofQifu Technology, Inc. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” ForPRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.”Selected Financial DataOur Selected Consolidated Financial DataThe following selected consolidated statements of operations data for the years ended December 31, 2021, 2022 and 2023, selectedconsolidated balance sheet data as of December 31, 2022 and 2023 and selected consolidated cash flow data for the years ended December 31,2021, 2022 and 2023 have been derived from our audited consolidated financial statements included elsewhere in this annual report. Our selectedconsolidated balance sheets data as of December 31, 2019, 2020 and 2021 and the selected consolidated statements of operations data and cashflow data for the years ended December 31, 2019 and 2020 have been derived from our audited combined and consolidated financial statements notincluded in this annual report. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP.Table of Contents9You should read the summary consolidated financial information in conjunction with our consolidated financial statements and relatednotes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. Our historical results are notnecessarily indicative of our results expected for future periods.Years Ended December 31,20192020202120222023 RMB RMB RMB RMB RMB US$(in thousands, except for per share data)Selected Consolidated Statements of Operations Data:Net revenue Credit driven services(1) 8,013,391 11,403,675 10,189,167 11,586,251 11,738,560 1,653,342Loan facilitation and servicing fees-capital heavy 6,273,131 4,596,555 2,326,027 2,086,414 1,667,119 234,809Financing income 1,309,616 2,184,180 2,184,128 3,487,951 5,109,921 719,717Revenue from releasing of guarantee liabilities 285,407 4,506,935 5,583,135 5,899,153 4,745,898 668,446Other services fees 145,237 116,005 95,877 112,733 215,622 30,370Platform services(1) 1,206,456 2,160,279 6,446,478 4,967,679 4,551,467 641,061Loan facilitation and servicing fees-capital light 814,581 1,826,654 5,677,941 4,124,726 3,213,955 452,676Referral services fees 375,551 265,300 620,317 561,372 950,016 133,807Other services fees 16,324 68,325 148,220 281,581 387,496 54,578Total net revenue 9,219,847 13,563,954 16,635,645 16,553,930 16,290,027 2,294,403Operating costs and expenses:(2) Facilitation, origination and servicing 1,083,372 1,600,564 2,252,157 2,373,458 2,659,912 374,641Funding costs 344,999 595,623 337,426 504,448 645,445 90,909Sales and marketing 2,851,519 1,079,494 2,090,374 2,206,948 1,939,885 273,227General and administrative 428,189 455,952 557,295 412,794 421,076 59,307Provision for loans receivable 486,991 698,701 965,419 1,580,306 2,151,046 302,968Provision for financial assets receivable 166,176 312,058 243,946 397,951 386,090 54,380Provision for accounts receivable and contract assets 230,280 237,277 324,605 238,065 175,799 24,761Provision for contingent liabilities — 4,794,127 3,078,224 4,367,776 3,053,810 430,120Expense on guarantee liabilities 734,730—————Total operating costs and expenses 6,326,256 9,773,796 9,849,446 12,081,746 11,433,063 1,610,313Income from operations 2,893,591 3,790,158 6,786,199 4,472,184 4,856,964 684,090Interest (expense) income, net (41,707) 77,169 126,256 182,301 217,307 30,607Foreign exchange (loss) gain (24,875) 101,534 35,549 (160,225) 2,356 332Investment income (loss) — — 10,115 (19,888) (30,112) (4,241)Other income, net 140,278 112,884 64,590 268,000 230,936 32,527Income before income tax benefit 2,967,287 4,081,745 7,022,709 4,742,372 5,277,451 743,315Income tax expense (465,983) (586,036) (1,258,196) (736,804) (1,008,874) (142,097)Net income 2,501,304 3,495,709 5,764,513 4,005,568 4,268,577 601,218Net loss attributable to non-controlling interests 291 897 17,212 18,605 16,759 2,360Net income attributable to ordinary shareholders of the Company 2,501,595 3,496,606 5,781,725 4,024,173 4,285,336 603,578Net income per ordinary share attributable to ordinary shareholders of QifuTechnology, Inc. Basic 8.66 11.72 18.82 12.87 13.36 1.88Diluted 8.31 11.40 17.99 12.50 13.04 1.84Net income per ADSs attributable to ordinary shareholders of QifuTechnology, Inc.Basic 17.32 23.4437.64 25.74 26.72 3.76Diluted 16.62 22.8035.98 25.00 26.08 3.68Weighted average shares used in calculating net income per ordinary share Basic 288,827,604 298,222,207 307,265,600 312,589,273 320,749,805 320,749,805Diluted 300,938,470 306,665,099 321,397,753 322,018,510 328,508,945 328,508,945Notes:(1)Starting from 2019, we report revenue streams in two categories—credit driven services and platform services, to provide more relevantinformation. We also revised the comparative period presentation to conform to current period classification.Table of Contents10(2)Share-based compensation expenses were allocated as follows:Years Ended December 31,20192020202120222023 RMB RMB RMB RMB RMB US$(in thousands)Facilitation origination and servicing 55,601 72,192 75,20973,94575,152 10,585Sales and marketing 6,805 8,164 12,340 4,328(375) (53)General and administrative 188,022 220,805 166,373 121,464110,827 15,610Total 250,428 301,161 253,922 199,737185,604 26,142The following table presents our selected consolidated balance sheet data as of the dates indicated.As of December 31,20192020202120222023 RMB RMB RMB RMB RMB US$(in thousands)Selected Consolidated Balance Sheets Data:Current assets: Cash and cash equivalents 2,108,123 4,418,416 6,116,360 7,165,584 4,177,890 588,443Restricted cash 1,727,727 2,355,850 2,643,587 3,346,779 3,381,107 476,219Security deposit prepaid to third-party guaranteecompanies 932,983 915,144 874,886 396,699 207,071 29,165Accounts receivable and contract assets, net 2,332,364 2,394,528 3,097,254 2,868,625 2,909,245 409,759Financial assets receivable, net 1,912,554 3,565,482 3,806,243 2,982,076 2,522,543 355,293Loans receivable, net 9,239,565 7,500,629 9,844,481 15,347,662 24,604,487 3,465,470Total current assets 19,503,488 21,876,042 27,757,223 34,097,466 39,796,028 5,605,154Land use rights, net — — 1,018,908 998,185 977,461 137,673Total non-current assets 852,113 2,511,263 5,747,772 6,245,704 6,022,544 848,257Total assets 20,355,601 24,387,305 33,504,995 40,343,170 45,818,572 6,453,411Current liabilities: Payable to investors of the consolidated trusts-current 4,423,717 3,117,634 2,304,518 6,099,520 8,942,291 1,259,495Guarantee liabilities-stand ready 2,212,125 4,173,497 4,818,144 4,120,346 3,949,601 556,290Guarantee liabilities-contingent 734,730 3,543,454 3,285,081 3,418,391 3,207,264 451,734Income tax payable 1,056,219 1,227,314 624,112 661,015 742,210 104,538Total current liabilities 9,667,187 13,384,508 14,143,186 16,749,918 19,899,619 2,802,803Payable to investors of the consolidated trusts-noncurrent 3,442,500 1,468,890 4,010,597 4,521,600 3,581,800 504,486Total non-current liabilities 3,473,684 1,521,707 4,145,200 4,661,955 3,909,096 550,585Total shareholder’s equity 7,214,730 9,481,090 15,216,609 18,931,297 22,009,857 3,100,023Total liabilities and equity 20,355,601 24,387,305 33,504,995 40,343,170 45,818,572 6,453,411Table of Contents11The following table presents our selected combined and consolidated cash flow data for the years ended December 31, 2019, 2020, 2021,2022 and 2023.Years Ended December 31,20192020202120222023 RMB RMB RMB RMB RMB US$(in thousands)Summary Consolidated Cash Flow Data:Net cash provided by operating activities 2,973,075 5,325,810 5,789,700 5,922,515 7,118,350 1,002,598Net cash (used in)/provided by investing activities (8,860,441) 892,770 (6,064,328) (7,355,975) (11,147,789) (1,570,134)Net cash provided by/(used in) financing activities 7,707,858 (3,282,400) 2,263,720 3,204,068 1,066,458 150,209Net increase/(decrease) in cash and cash equivalents 1,822,254 2,938,416 1,985,681 1,752,416 (2,953,366) (415,973)Cash, cash equivalents, and restricted cash at thebeginning of year 2,013,596 3,835,850 6,774,266 8,759,947 10,512,363 1,480,635Cash, cash equivalents, and restricted cash at theend of year 3,835,850 6,774,266 8,759,947 10,512,363 7,558,997 1,064,662We present our financial results in RMB. We make no representation that any RMB or U.S. dollar amounts could have been, or could be,converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The RPC government imposes control over its foreigncurrency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade.Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at a rateof RMB7.0999 to US$1.00, the noon buying rate as of December 29, 2023.Financial Information Related to Our Consolidated Variable Interest EntitiesThe following table presents the condensed consolidated schedule of financial position, results of operations and cash flow data for ourcompany, our consolidated VIEs, our primary beneficiaries of VIEs excluding our company and other subsidiaries as of the dates or for the yearspresented, as the case may be. For the Year Ended December 31, 2023PrimaryBeneficiariesof VIEsexcluding theOtherVIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total(RMB in thousands)Total net revenues 15,472,430 — 1,485,7111,051,284 (1,719,398) 16,290,027Total operating costs and expenses 12,346,061 25,517 338,912441,971 (1,719,398) 11,433,063Income (loss) from operations 3,126,369 (25,517) 1,146,799609,313 — 4,856,964Income before income tax expense 3,364,788 20,536 1,258,871633,256 — 5,277,451Investments in subsidiaries and VIEs — 4,264,800 3,395,8943,903,935 (11,564,629) —Net income (loss) 2,798,640 4,285,336 4,484,4304,264,800 (11,564,629) 4,268,577Net income (loss) attributable to ordinaryshareholders of the Company 2,815,399 4,285,336 4,484,4304,264,800 (11,564,629) 4,285,336Table of Contents12For the Year Ended December 31, 2022PrimaryBeneficiariesof VIEsexcluding theOtherVIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total (RMB in thousands)Total net revenues 15,362,636 — 893,968 1,296,242 (998,916) 16,553,930Total operating costs and expenses 11,681,635 17,468 421,181 960,378 (998,916) 12,081,746Income (loss) from operations 3,681,001 (17,468) 472,787 335,864 — 4,472,184Income (loss) before income tax expense 3,856,803 (34,045) 569,614 350,000 — 4,742,372Investments in subsidiaries and VIEs — 4,058,218 3,526,061 3,793,486 (11,377,765) —Net income (loss) 3,230,659 4,024,173 4,070,283 4,058,218 (11,377,765) 4,005,568Net income (loss) attributable to ordinaryshareholders of the Company 3,249,264 4,024,173 4,070,283 4,058,218 (11,377,765) 4,024,173For the Year Ended December 31, 2021PrimaryBeneficiariesof VIEsexcluding theOther VIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total(RMB in thousands)Total net revenues 15,657,693 — 5,069,424 1,577,575 (5,669,047) 16,635,645Total operating costs and expenses 14,279,287 51,233 690,077 497,896 (5,669,047) 9,849,446Income (loss) from operations 1,378,406 (51,233) 4,379,347 1,079,679 — 6,786,199Income (loss) before income tax expense 1,567,515 (56,749) 4,397,700 1,114,243 — 7,022,709Investments in subsidiaries and VIEs — 5,838,474 1,849,259 4,779,980 (12,467,713) —Net income (loss) 1,060,421 5,781,725 5,551,564 5,838,516 (12,467,713) 5,764,513Net income (loss) attributable to ordinaryshareholders of the Company 1,077,675 5,781,725 5,551,564 5,838,474 (12,467,713) 5,781,725Table of Contents13Selected Condensed Consolidated Balance Sheets Information As of December 31, 2023PrimaryBeneficiariesof VIEsexcluding theOther VIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total(RMB in thousands)Cash and cash equivalents4,037,2562,636114,89723,101—4,177,890Restricted cash3,381,107————3,381,107Security deposit prepaid to third-party guaranteecompanies207,071————207,071Accounts receivable and contract assets, net2,417,490——638,750—3,056,240Financial assets receivable, net3,118,873————3,118,873Loans receivable, net27,502,492————27,502,492Land use right, net977,461————977,461Intercompany receivables2,559,164—1,571,1022,728,150 (6,858,416)—Investments in subsidiaries and VIEs—21,933,95122,921,72718,841,758 (63,697,436)—Total assets47,389,07121,952,78924,695,812 22,336,752 (70,555,852)45,818,572Payable to investors of the consolidated trusts-current8,942,291————8,942,291Guarantee liabilities-stand ready3,949,601————3,949,601Guarantee liabilities-contingent3,207,264————3,207,264Income tax payable648,893—79,80613,511—742,210Payable to investors of the consolidated trusts-noncurrent3,581,800————3,581,800Intercompany payables4,276,21814,1532,364,791203,254 (6,858,416)—Total liabilities27,597,27215,3062,651,752402,801 (6,858,416)23,808,715Total equity19,791,79921,937,48322,044,06021,933,951 (63,697,436)22,009,857Table of Contents14 As of December 31, 2022PrimaryBeneficiariesof VIEsexcluding theOther VIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total(RMB in thousands)Cash and cash equivalents 6,437,420 464,323 175,243 88,598 — 7,165,584Restricted cash 3,346,779 — —— — 3,346,779Security deposit prepaid to third-partyguarantee companies 396,699 — —— — 396,699Accounts receivable and contract assets, net 1,933,292 — — 1,196,652 — 3,129,944Financial assets receivable, net 3,670,919 — —— — 3,670,919Loans receivable, net 18,484,656 — —— — 18,484,656Land use right, net 998,185 — —— — 998,185Intercompany receivables 5,906,972 295,180 2,030,097 4,163,777 (12,396,026) —Investments in subsidiaries and VIEs— 18,275,772 19,305,251 15,692,041 (53,273,064) —Total assets 44,093,493 19,041,600 21,535,086 21,342,081 (65,669,090) 40,343,170Payable to investors of the consolidated trusts-current 6,099,520 — —— — 6,099,520Guarantee liabilities-stand ready 4,120,346 — —— — 4,120,346Guarantee liabilities-contingent 3,418,391 — —— — 3,418,391Income tax payable 614,687 — 33,295 13,033 — 661,015Payable to investors of the consolidated trusts-noncurrent 4,521,600 — —— — 4,521,600Intercompany payables 6,327,635 — 3,038,297 3,030,094 (12,396,026) —Total liabilities 27,325,894 194,444 3,221,252 3,066,309 (12,396,026) 21,411,873Total equity 16,767,599 18,847,156 18,313,834 18,275,772 (53,273,064) 18,931,297Table of Contents15 As of December 31, 2021PrimaryBeneficiariesof VIEsexcluding theOtherVIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total (RMB in thousands)Cash and cash equivalents 4,605,851 7,117 1,012,466 490,926 — 6,116,360Restricted cash 2,643,587 — —— — 2,643,587Security deposit prepaid to third-partyguarantee companies 874,886 — —— — 874,886Accounts receivable and contract assets, net 2,350,775 — — 969,953 — 3,320,728Financial assets receivable, net 4,404,208 — —— — 4,404,208Loans receivable, net 12,703,830 — —— — 12,703,830Land use right, net 1,018,908 — —— — 1,018,908Intercompany receivables 2,493,660 1,711,633 3,132,657 1,911,857 (9,249,807) —Investments in subsidiaries and VIEs— 14,032,928 11,832,910 11,272,346 (37,138,184) —Total assets 33,145,997 15,761,812 15,619,129 15,366,048 (46,387,991) 33,504,995Payable to investors of the consolidated trusts-current 2,304,518 — —— — 2,304,518Guarantee liabilities-stand ready 4,818,144 — —— — 4,818,144Guarantee liabilities-contingent 3,285,081 — —— — 3,285,081Income tax payable 449,553 — 98,518 76,041 — 624,112Payable to investors of the consolidated trusts-noncurrent 4,010,597 — —— — 4,010,597Intercompany payables 6,493,367 — 1,466,073 1,290,367 (9,249,807) —Total liabilities 23,790,132 557,949 1,856,992 1,333,120 (9,249,807) 18,288,386Total equity 9,355,865 15,203,863 13,762,137 14,032,928 (37,138,184) 15,216,609Selected Condensed Consolidated Cash Flows Information For the Year Ended December 31, 2023PrimaryBeneficiariesof VIEsexcluding theOtherVIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total(RMB in thousands)Net cash provided by/(used in) operating activities5,685,945 800,998 985,396 1,376,011 (1,730,000) 7,118,350Net cash (used in)/provided by investing activities (11,065,537) 319,382 (105,735) (618,160) 322,261 (11,147,789)Net cash provided by/(used in) financing activities3,013,752 (1,593,907) (940,000) (821,126) 1,407,739 1,066,458Table of Contents16 For the Year Ended December 31, 2022PrimaryBeneficiariesof VIEsexcluding theOtherVIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total(RMB in thousands)Net cash provided by/(used in) operatingactivities 6,378,135 (66,836) 491,296 (880,080) — 5,922,515Net cash (used in)/provided by investingactivities (7,360,063) 1,583,956 (1,327,281) 468,077 (720,664) (7,355,975)Net cash provided by/(used in) financingactivities 3,516,690 (1,039,580) (1,222) 7,516 720,664 3,204,068 For the Year Ended December 31, 2021PrimaryBeneficiariesof VIEsexcluding theOtherVIEs The Company Company(1) Subsidiaries Eliminations Consolidated Total(RMB in thousands)Net cash provided by/(used in) operatingactivities 1,273,002 (25,552) 3,293,455 1,248,795 — 5,789,700Net cash (used in)/provided by investingactivities (6,047,434) (153,778) (2,342,294) (1,332,966) 3,812,144 (6,064,328)Net cash provided by/(used in) financingactivities 5,958,279 169,291 — (51,706) (3,812,144) 2,263,720Note:(1)The financial statement amounts for our consolidated subsidiaries are prepared using same accounting policies as set out in the consolidatedfinancial statements except that equity method has been used to account for investments in VIEs.A. [Reserved]B. Capitalization and IndebtednessNot applicable.C. Reasons for the Offer and Use of ProceedsNot applicable.D. Risk FactorsSummary of Risk FactorsAn investment in our ADSs involves significant risks. Below is a summary of material risks we face, organized under relevant headings.These risks are discussed more fully below in “Item 3. Key Information—D. Risk Factors.”Table of Contents17Risks Related to Our Business and IndustryRisks and uncertainties related to our business include, but not limited to, the following:●The Credit-Tech industry is rapidly evolving, which makes it difficult to effectively assess our future prospects;●We have a limited operating history and are subject to credit cycles and the risk of deterioration of credit profiles of borrowers;●We are subject to uncertainties surrounding regulations and administrative measures of the loan facilitation business. If any of ourbusiness practices are deemed to be non-compliant with applicable laws and regulations, our business, financial condition and resultsof operations would be adversely affected;●We are subject to uncertainties surrounding regulations and administrative measures of micro-lending business and financingguarantee business. If any of our business practices are deemed to be non-compliant with such laws and regulations, our business,financial condition and results of operations would be adversely affected;●We are subject to uncertainties surrounding regulations and administrative measures of credit reporting business. If any of ourbusiness practices is deemed to be non-compliant with such laws and regulations, our business, financial condition and results ofoperations would be materially and adversely affected;●The pricing of loans facilitated through our platform may be deemed to exceed interest rate limits imposed by regulations;●Our transaction process may result in misunderstanding among borrowers;●Fraudulent activity on our platform could negatively impact our operating results, brand and reputation and cause the use of loanproducts facilitated by us and our services to decrease;●We rely on our proprietary credit profiling model in assessing the creditworthiness of borrowers and the risks associated with loans.If our model is flawed or ineffective, or if we otherwise fail or are perceived to fail to manage the default risks of loans facilitatedthrough our platform, our reputation and market share would be materially and adversely affected, which would severely impact ourbusiness and results of operations;●We rely on our risk management team to establish and execute our risk management policies. If our risk management team or keymembers of such team were unable or unwilling to continue in their present positions, our business may be severely disrupted;●If we are unable to protect the private information of our users and adapt to the relevant regulatory framework as to protection ofsuch information, our business and operation may be adversely affected; and●Our business is subject to complex and evolving PRC laws and regulations regarding data privacy and cybersecurity, as suchregulations and laws as newly promulgated, many of which are subject to further interpretation. Any changes in these laws andregulations have caused and could continue to cause changes to our business practices and increase costs of operations, and anysecurity breaches or our actual or perceived failure to comply with such laws and regulations could result in claims, penalties,damages to our reputation and brand, declines in user growth or engagement, or otherwise harm our business, results of operationsand financial condition.Table of Contents18Risks Related to Our Corporate StructureRisks and uncertainties related to our corporate structure include, but not limited to, the following:●We are a Cayman Islands holding company with no equity ownership in the VIEs and we conduct our operations in China through (i)our PRC subsidiaries and (ii) the VIEs, with which we have maintained contractual arrangements. Investors in our ADSs thus are notpurchasing equity interest in the VIEs in China but instead are purchasing equity interest in a Cayman Islands holding company. Ifthe PRC government finds that the agreements that establish the structure for operating our business do not comply with PRC lawsand regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or beforced to relinquish our interests in those operations. Our holding company, our PRC subsidiaries, the VIEs, and investors of ourcompany face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractualarrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as awhole. The PRC regulatory authorities could disallow the VIEs structure pursuant to the new regulations promulgated by the PRCgovernment, which would likely result in a material adverse change in our operations, and our class A ordinary shares or our ADSsmay decline significantly in value;●We rely on contractual arrangements with the VIEs and the shareholders of the VIEs for all of our business operations, which maynot be as effective as direct ownership in providing operational control; and●Any failure by the VIEs or the shareholders of the VIEs to perform their obligations under our contractual arrangements with themwould have a material adverse effect on our business.Risks Related to Doing Business in ChinaWe are also subject to risks and uncertainties relating to doing business in China in general, including, but not limited to, the following:●The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statementsand the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of suchinspections;●Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect orinvestigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially andadversely affect the value of your investment;●The PRC government’s significant oversight and discretion over our business operation and any failure to comply with PRC laws andregulations could result in a material adverse change in our operations and the value of the ADSs; and●Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.Risks Related to the ADSs and our class A ordinary sharesIn addition to the risks described above, we are subject to general risks relating to our ADSs and class A ordinary shares, including, butnot limited to, the following:●We adopt different practices as to certain matters as compared with many other companies listed on the Hong Kong Stock Exchange;and●The trading prices for our listed securities have been and are likely to continue to be volatile.Table of Contents19Risks Related to Our Business and IndustryThe Credit-Tech industry is rapidly evolving, which makes it difficult to effectively assess our future prospects.The Credit-Tech industry in the PRC is in a developing stage. The regulatory framework for this market is also evolving and may remainuncertain for the foreseeable future. In addition, the Credit-Tech industry in China has not witnessed a full credit cycle. The market players in theindustry, including us, may not be able to respond to the change of market situations effectively and maintain steady business growth when theindustry enters a different stage. In addition, we cannot assure you that a contraction in the availability of funds will not happen at later stages ofthe credit cycle. As such, we may not be able to sustain our historical growth rate in the future.You should consider our business and prospects in light of the risks and challenges we encounter or may encounter given the rapidlyevolving market in which we operate, along with our limited operating history. These risks and challenges include our ability to, among otherthings:●offer competitive products and services;●broaden our prospective borrower base;●increase the utilization of our products by existing borrowers as well as new borrowers;●maintain and enhance our relationship and business collaboration with our partners;●maintain low delinquency rates of loans we facilitated;●develop and maintain cooperative relationships with financial institution partners to secure sufficient, diversified, cost-efficientfunding to the drawdown requests;●continue to develop, maintain and scale our platform and sustain our historical growth rates;●continue to develop and improve the effectiveness, accuracy and efficiency of our proprietary credit assessment and profilingtechnologies;●navigate through a complex and evolving regulatory environment;●improve our operational efficiency and profitability;●attract, retain and motivate talented employees to support our business growth;●enhance our technology infrastructure to support the growth of our business and maintain the security of our system and theconfidentiality of the information provided and utilized across our system;●navigate through economic conditions and fluctuations; and●defend ourselves against legal and regulatory actions, such as actions involving intellectual property or privacy claims.Table of Contents20We have a limited operating history and are subject to credit cycles and the risk of deterioration of credit profiles of borrowers.We were established in 2016 and officially launched our capital-light model in May 2018. Our business is subject to credit cyclesassociated with the volatility of the general economy and with the trends of the Credit-Tech industry in China. As we have a limited operatinghistory, we have not experienced a full credit cycle in China.As of December 31, 2021, 2022 and 2023, the 90 day+ delinquency rate for all loans facilitated through our platform, including thoseunder credit-driven services and platform services, was 1.54%, 2.03% and 2.35%, respectively. The increase in 90 day+ delinquency rates wasprimarily due to soft consumer sentiment under the challenging macroenvironment following the pandemic. For more details, see “Item 5.Operating and Financial Review and Prospects—A. Operating Results—Loan Performance Data—90 day+ delinquency rates.” To effectivelymanage credit risks, we have adopted a prudent approach to focus on improving the quality and profitability of our business through continuedupgrade of our user base and optimize our asset portfolio. We also expect to continue focusing on enhancing our technology and credit assessmentcapabilities and fine-tuning our services and solutions to address financial institution partners’ evolving needs and risk preferences. However, therecan be no assurance that we will be able to successfully manage our risk exposure in an effective manner.If economic conditions deteriorate or any event beyond our control occurs to our operation, we may face an increased risk of default ordelinquency of borrowers, which will result in lower returns or even losses. In the event that the creditworthiness of borrowers deteriorates, or wecannot track the deterioration of their creditworthiness, the criteria we use for the analysis of user credit profiles may be rendered inaccurate, andour credit profiling system may be subsequently rendered ineffective. This in turn may lead to higher default rates and adversely impact our resultsof operations.In addition, deterioration in borrowers’ creditworthiness, or increase in our delinquency rate may discourage our financial institutionpartners from cooperating with us. If our financial institution partners choose to adopt a tight credit approval and drawdown funding policy, ourability to secure funding will be materially restricted.We are subject to uncertainties surrounding regulations and administrative measures of the loan facilitation business. If any of our businesspractices are deemed to be non-compliant with applicable laws and regulations, our business, financial condition and results of operationswould be adversely affected.The laws and regulations governing the loan facilitation business are evolving, and substantial uncertainties exist with respect to theirinterpretation and implementation. In addition, pursuant to the Plan on Reforming State Council Institutions approved by the National People’sCongress on March 10, 2023, the China National Financial Regulatory Administration was officially established on May 18, 2023, replacing theChina Banking and Insurance Regulatory Commission as the new financial regulatory authority in China. As a result, the local financial regulatorysystem underwent a deep reform, with the central financial management department’s local agencies acting as the main body. This restructuringmay lead to changes and uncertainties in rules and regulations applicable to our business, which may increase our cost of operation, limit ouroptions of product offerings or even fundamentally change our business model. We have experienced, and may from time to time be required tomake adjustments to our operations in order to maintain compliance with changes in laws, regulations and policies. An example is the Notice onRegulating and Rectifying “Cash Loan” Business issued on December 1, 2017, or Circular 141, and related regulations. Circular 141 introduces theregulating guidance on cash loan businesses including online micro-lending companies, P2P platforms and banking financial institutions. If afinancial institution violates the rules and provisions in Circular 141, the regulatory authorities may pursue compulsory enforcement, suspend itsbusiness, cancel its qualifications, or supervise the rectifications. In extremely serious circumstances, such financial institution’s business licensemay be revoked. For a discussion of Circular 141, please see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulation on Online Finance Services Industry—Regulations on the business of loan facilitation.” On the basis of Circular 141, the InterimMeasures for Administration of Internet Loans Issued by Commercial Banks, among other requirements, provides that “core risk managementfunctions such as credit granting approval and contract conclusion shall be independently and effectively carried out by the commercial bank.” Fora discussion of the measures, please see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulation on OnlineFinance Services Industry—Regulations on the business of loan facilitation.”Furthermore, on October 9, 2019, nine government authorities in China promulgated the Supplementary Provisions on the Supervisionand Administration of Financing Guarantee Companies, or the Supplementary Financing Guarantee Provisions, which, as advised by our PRC legalcounsel, for the first time, explicitly require that institutions providing services such as borrower recommendation and credit assessment for variouslending institutions, including us as a Credit-Tech company, shall not provide, directly or in a disguised form, financing guarantee services withoutprior approval. For a discussion of the Supplementary Financing Guarantee Provisions, please see “Item 4. Information on the Company—B.Business Overview—Regulation—Regulations on Financing Guarantee.”Table of Contents21In response to the regulatory changes since the promulgation of Circular 141, we have made several adjustments to our collaboration model withcertain financial institution partners. However, we may still be deemed non-compliant with these regulations or other rules in the following aspects of ourbusiness:●Guarantee practice. We neither collected guarantee fees through our non-licensed subsidiaries from our financial institution partners, nortook providing guarantees as our main operating business through our non-licensed subsidiaries, while historically one of the VIEs that hadnot obtained the financing guarantee license provided guarantees or other credit enhancement services to certain financial institutionpartners. Under such model, the non-licensed VIE could be deemed as operating financing guarantee business and therefore non-compliantwith Circular 141 and the Supplementary Financing Guarantee Provisions. We have completely ceased such practice through the non-licensed VIE since September 2020. Currently, third-party guarantee companies or the licensed VIE provides guarantee or other creditenhancement services to our financial institution partners. We engage third-party guarantee companies to provide guarantee services, andwe, under certain circumstances, provide back-to-back guarantees for external guarantee companies. We currently provide back-to-backguarantees only through the licensed VIE. As advised by our PRC legal counsel, our back-to-back guarantee model is not prohibited byCircular 141, because we have not directly provided guarantee to banking financial institutions. However, in the absence of authoritativeinterpretation of Circular 141, we cannot assure you that all the PRC regulatory authorities will have the same view as our PRC legalcounsel on this issue. Moreover, given the lack of further interpretations, the exact definition and scope of “providing financing guaranteebusiness in a disguised form” under the Supplementary Financing Guarantee Provisions is unclear. Therefore, we cannot be certain that ourback-to-back guarantee model will not be determined to be in violation of the Supplementary Financing Guarantee Provisions. Foradditional information on potential risk related to compliance with the leverage ratio limits for financing guarantee business, please see “—We are subject to uncertainties surrounding regulations and administrative measures of micro-lending business and financing guaranteebusiness. If any of our business practices are deemed to be non-compliant with such laws and regulations, our business, financial conditionand results of operations would be adversely affected.”●Payment. We have adopted a payment model and applied it to our cooperation with all financial institution partners. Under our paymentmodel, we do not charge interests to borrowers for loans funded by our financial institution partners; instead, we charge service fees tofinancial institutions. In certain cases, some financial institution partners further engage us and a third-party payment system serviceprovider to together arrange payment clearance, pursuant to which borrowers first repay to a third-party payment system and we worktogether with the payment system service provider to split the total repayment amount, including principal, interest and service fees, to theportions that financial institution partners and we are each entitled to. The third-party payment service providers are engaged per ourfinancial institution partners’ request and are mainly for the purpose of general payment processing and clearance. We do not charge anyfees from borrowers under our payment model for loans funded by our financial institution partners. As advised by our PRC legal counsel,such payment model does not violate Circular 141 or the Interim Measures for Administration of Internet Loans Issued by CommercialBanks. However, in the absence of authoritative interpretation of Circular 141 and given substantial uncertainties regarding theinterpretation and application of PRC laws and regulations, we cannot assure you that PRC regulatory authorities will share this view.As advised by our PRC legal counsel, Circular 141 does not have retrospective effect on the loan facilitation business conducted prior to theissuance of Circular 141, and we believe that loans we facilitated prior to the issuance of Circular 141 or under our existing collaboration agreementsexecuted prior to the issuance of Circular 141 are not subject to its jurisdiction. However, we cannot rule out the possibility that government authoritieswould still consider our business practices to violate Circular 141. If our products or services is deemed to be non-compliant with the PRC laws andregulations, we may need to further adjust our practices and our business operations may be negatively impacted.Further, if our financial institution partners cease to fund the loans, either on a temporary basis to await more clarity on the new regulatoryenvironment, or on a permanent basis for non-compliance concerns, our operation will be adversely impacted. If fewer financial institutions are willing tofund the loans, the competition for funding may become more intense, and the cost of funding may increase, which may adversely impact our results ofoperations.Besides, in April 2021, we and 12 other major financial technology platforms were invited to meet with the People’s Bank of China, the ChinaBanking and Insurance Regulatory Commission, the CSRC, SAFE and other financial regulators to discuss the operations and compliance practice of theseplatforms’ internet financial businesses in China. We have been making rectifications and adjustments to our operations to address the issues discussedduring the meeting and results of our self-examination according to the guidance provided by the regulators. As of the date of this annual report, we havesubstantially completed the rectification measures based on our self-examination results according to the guidance provided by the relevant authorities. Theregulatory authorities have reviewed our rectification measures in general. The regulatory authorities have moved on to the regular regulatory supervisionstatus from the self-examination and rectification status with respect to regulating these major financial technology platforms, including us. Ourrectification results remain subject to the regulators’ regular supervision, and we cannot assure you that the measures we have taken and rectifications wehave made will satisfy the requirements from the regulators. If the regulators deem our rectification efforts to be insufficient or unsatisfactory, we may facefurther rectification orders or other administrative actions, in which case our business and operations may be materially and negatively affected.Table of Contents22We are subject to uncertainties surrounding regulations and administrative measures of micro-lending business and financing guaranteebusiness. If any of our business practices are deemed to be non-compliant with such laws and regulations, our business, financial conditionand results of operations would be adversely affected.A portion of loans facilitated on our platform are funded by Fuzhou Microcredit, the subsidiary of Shanghai Qiyu, one of the VIEs. Wealso provide financing guarantees to our financial institution partners through Fuzhou Financing Guarantee and Shanghai Financing Guarantee(before its financing guarantee license was canceled upon its voluntary application), for some loans we facilitate. As a result, we are subject to acomplex and evolving body of regulations in relation to these businesses.On August 2, 2017, the PRC State Council promulgated the Regulations on the Supervision and Administration of Financing GuaranteeCompanies, which became effective on October 1, 2017. The regulations set forth that the outstanding guarantee liabilities of a financing guaranteecompany shall not exceed ten times its net assets, and that the balance of outstanding guarantee liabilities for the same guaranteed party shall notexceed 10% of a financing guarantee company’s net assets, while the balance of outstanding guarantee liabilities for the same guaranteed party andits affiliated parties shall not exceed 15% of a financing guarantee company’s net assets.On September 16, 2020, the China Banking and Insurance Regulatory Commission issued the Notice on Strengthening the Supervisionand Management of Micro-Lending Companies, or Circular 86. Adopted to regulate the operations of micro-lending companies, Circular 86provides that the total funding amount obtained by a micro-lending company through bank loans, shareholder loans and other non-standardfinancing instruments shall not exceed such company’s net assets. In addition, the total funding amount obtained by a micro-lending companythrough the issuance of bonds, asset securitization products and other instruments of standardized debt assets shall not exceed four times of its netassets. Local financial regulatory authorities may further lower the leverage limits mentioned above.On November 2, 2020, the China Banking and Insurance Regulatory Commission and the People’s Bank of China published the InterimMeasures for the Administration of Online Micro-Lending Business (Draft for Comments), adding new requirements to online micro-lendingbusiness. In particular, the draft, among other things, strengthens the condition for licensing and other approvals for conducting online micro-lending business. Pursuant to the draft, to the extent a micro-lending company engages in online micro-lending business, said business shall mainlybe carried out within the provincial-level administrative region to which its place of registration belongs, and shall not operate beyond such regionwithout the approval of the banking regulator under the State Council. On December 31, 2021, the People’s Bank of China issued the Regulationson Local Financial Supervision and Administration (Draft for Comments), which reaffirm that local financial organizations (including micro-lending companies and financing guarantee companies) are required to operate business within the area approved by the local financial regulatoryauthority, and are not allowed to conduct business across provinces in principle.Fuzhou Microcredit has obtained the approval to operate micro-lending businesses from the competent supervising authority, whichallows Fuzhou Microcredit to conduct micro-lending businesses through the internet. As of the date of this annual report, Fuzhou Microcredit hadincreased its registered capital to RMB5 billion, which has been fully paid. Currently, Fuzhou Microcredit can conduct cross-province businesswith its valid license. However, if the Interim Measures for the Administration of Online Micro-Lending Business (Draft for Comments) were to beadopted in its current form, Fuzhou Microcredit may need to obtain the legal approval of the banking regulator under the State Council in order toengage in online micro-lending business across provincial-level administrative regions. The rules for licensing or approvals for cross-provinceonline micro-lending business are yet to be formulated as of the date of this annual report. We cannot assure you that, if the authorities laterpromulgate such rules for micro-lending business or other rules imposing licensing or approval requirements on financing guarantee business,Fuzhou Microcredit or Fuzhou Financing Guarantee will be qualified for such licenses or approvals in accordance with the requirementsthereunder. If we fail to obtain the regulatory approvals to further increase the registered capital or to establish additional online micro-lendingcompanies if needed, we may not be able to obtain sufficient funding to fulfill our future growth needs. From time to time, we may need additionallicenses to operate our business. Failure to obtain, renew, or retain requisite licenses, permits or approvals may adversely affect our ability toconduct or expand our business.Table of Contents23Furthermore, Fuzhou Microcredit is subject to the laws, regulations, policies and measures in Fuzhou in respect of registered capital andof loan-to-capital and other leverage ratios, among other things, and our financing guarantee companies are subject to the supervision of localfinancial authorities in Fuzhou, Shanghai (before the financing guarantee license of Shanghai Financing Guarantee was canceled upon its voluntaryapplication) and Tianjin where the branch office of Fuzhou Financing Guarantee is located. We may be subject to regulatory warnings, correctionorders, condemnation and fines and may be required to further adjust our business if any of our micro-lending and financing guarantee companiesis deemed to have violated national, provincial or local laws and regulations or regulatory orders and guidance.We are subject to uncertainties surrounding regulations and administrative measures of credit reporting business. If any of our businesspractices is deemed to be non-compliant with such laws and regulations, our business, financial condition and results of operations would bematerially and adversely affected.The PRC government has adopted several regulations governing personal and enterprise credit reporting businesses. These regulationsinclude the Regulation for the Administration of Credit Reporting Industry enacted by the State Council and effective in March 2013, and theManagement Rules on Credit Agencies issued by the People’s Bank of China, in the same year. According to the Regulation for the Administrationof Credit Reporting Industry, “credit reporting business” refers to the gathering, organizing, preserving and processing of credit information onorganizations such as enterprises and public service units and individuals, as well as distribution of such information to information users, and a“credit reporting agency” refers to credit reporting entity established in accordance with law and mainly engaged in credit reporting business.Entities engaged in personal/enterprise credit reporting business without such approval/completing filing formality may be subject to fine orcriminal liability.In addition, the Administrative Measures for Credit Reporting Business issued by the People’s Bank of China on September 27, 2021 andeffective on January 1, 2022, or the Credit Reporting Measures, define “credit information” to include “basic information, borrowing and lendinginformation and other relevant information legally collected in the offering of services of finance or other activities for purposes of identifying andjudging the credit standing of businesses and individuals, as well as result of analysis and evaluation based on the aforesaid information,” anddefine “credit reporting business” as the collection, collation, keeping and processing of credit information and provision of such information toinformation users. The Credit Reporting Measures apply to entities that carry out credit reporting business and “activities relating to creditreporting business” in China. Separately, entities providing “services of credit reporting function” in the name of “credit information service, creditservice, credit evaluation, credit rating, credit repair, among others” are also subject to the measures. The measures provide for an 18-month graceperiod from their effectiveness date for organizations that engage in credit reporting business to obtain the credit reporting business license andcomply with its other provisions. Furthermore, on July 7, 2021, the Credit Information System Bureau of the People’s Bank of China further issuedthe Notice Relating to Disconnecting Direct Connection to 13 internet platforms including us, requiring the internet platforms to achieve acomplete “disconnected direct connection” in terms of personal information with financial institutions, meaning that the direct flow of personalinformation from internet platforms that collect such information to financial institutions is prohibited.Historically, we provided credit assessment assistance directly to commercial banks which mainly depended on the evaluation ofinformation regarding personal credit status. Such practice may be deemed as engaging in credit reporting business or credit reporting functionservices by the PRC authorities. To comply with the Credit Reporting Measures and the Notice Relating to Disconnecting Direct Connection, wehave involved two licensed credit reporting institutions to ensure compliance and have substantially completed our business adjustments within the18-month grace period as of the date of this annual report. In particular, we have entered into collaboration agreements with two licensed creditreporting institutions to ensure the flow of personal information complies with the requirements of the Credit Reporting Measures and the NoticeRelating to Disconnecting Direct Connection. However, there remain uncertainties with respect to the interpretation and implementation of theCredit Reporting Measures. Therefore, we cannot rule out the possibility that some aspects of our business may subsequently be deemed asincompliant and be required to be ceased or adjusted in a way that will have a negative impact on our business and prospects. If our creditassessment assistance is prohibited, it may affect the collaboration between us and our financial institution partners. If we are prohibited fromconducting our credit assessment, our operation will be adversely affected. The lack of clear guidance under, and the uncertainty associated with,the Credit Reporting Measures may also result in substantial compliance cost incurred by us.Table of Contents24We will closely monitor the regulatory requirements, seek guidance from regulatory authorities and take applicable measures in a timelymanner to ensure our compliance with the laws and regulations applicable to us. We may incur costs and expenses to ensure compliance and tomake necessary changes to our internal policies and practices to maintain compliance with the laws and regulations applicable to us in the future.According to the Notice Relating to Disconnecting Direct Connection, the Credit Reporting Measures and other related laws and regulations, anyfailure or perceived failure by us to meet the requirements may subject us to fine or criminal liability, which could have an adverse effect on ourbusiness, financial condition and results of operations. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations On Credit Reporting Business” for details.The pricing of loans facilitated through our platform may be deemed to exceed interest rate limits imposed by regulations.Circular 141 requires online platforms, micro-lending companies and other entities to charge synthetic fund costs, including the interestand fees paid by the borrowers, in compliance with the rules provided by the Supreme People’s Court, and such costs shall be within the legallyallowed annualized interest rate for private lending. According to the Provisions of the Supreme People’s Court on Several Issues concerning theApplication of Law in the Trial of Private Lending Cases promulgated on September 1, 2015, in the event that the sum of the annualized interestthat lenders charge and the fees we and our financial institution partners charge exceeds the 24% limit, and borrowers refused to pay the portionthat exceeds the 24% limit, PRC courts would not uphold our request to demand the portion of the fees that exceeds the 24% limit from suchborrowers. If the sum of the annual interest that lenders charge and the fees we and our financial institution partners charge exceeds 36%, theportion that exceeds the 36% limit is invalid. The Supreme People’s Court issued the Several Opinions on Further Strengthening the Judicial Workin the Finance Sector in August 2017, if an online lending information intermediary and a lender intentionally collude to evade the interest rateceiling as set out by the law through disguising loan interest as loan facilitation service fees, then such arrangements shall be declared invalid. OnJuly 22, 2020, the Supreme People’s Court and the National Commission of Development and Reform jointly released the Opinions on ProvidingJudicial Services and Safeguards for Accelerating the Improvement of the Socialist Market Economic System for the New Era. The opinions setout that if the interest and fees, including interest, compound interest, penalty interest, liquidated damages and other fees, claimed by one party tothe loan contract exceed the upper limit under judicial protection, the claim will not be supported by the court, and if the parties to the loan disguisethe financing cost in an attempt to circumvent the upper limit, the rights and obligations of all parties to the loan will be determined by the actualloan relationship.On August 20, 2020, the Supreme People’s Court issued the Decision on Amending the Provisions of the Supreme People’s Court onSeveral Issues Concerning the Application of Law in the Trial of Private Lending Cases, or the Judicial Interpretation Amendment, which wasrevised on January 1, 2021 and amended the upper limit of private lending interest rates under judicial protection. According to the JudicialInterpretation Amendment, if the service fees or other fees that we charge are deemed to be loan interest or fees related to loans (inclusive of anydefault rate and default penalty and any other fee), in the event that the sum of the annualized interest that lenders charge and fees we and ourfinancial institution partners charge exceeds four times the one-year Loan Prime Rate at the time of the establishment of the agreement, which werefer to as the Quadruple LPR Limit, borrowers may refuse to pay the portion that exceeds the Quadruple LPR Limit. In that case, PRC courts willnot uphold our request to demand the payment of fees that exceed the Quadruple LPR Limit from such borrowers. If borrowers have paid the feesthat exceed the Quadruple LPR Limit, such borrowers may request us to refund the portion exceeding the Quadruple LPR Limit and the PRCcourts may uphold such requests. The aforementioned one-year Loan Prime Rate refers to the one-year loan market quoted interest rate issued bythe National Bank Interbank Funding Center on the 20th of each month starting from August 20, 2019, and the one-year loan market quotedinterest rate issued by the National Bank Interbank Funding Center on April 22, 2024 was 3.45%. We cannot assure you that the one-year loanmarket quoted interest rate and the Quadruple LPR Limit will not decrease further in the future.On December 29, 2020, the Supreme People’s Court issued the Reply to Issues Concerning the Scope of Application of the New JudicialInterpretation on Private Lending, which clarifies that seven types of local financial organizations, including micro-lending companies, financingguarantee companies, regional equity markets, pawnshops, financing lease companies, commercial factoring companies and local assetmanagement companies under the regulation of local financial regulatory authorities, are financial institutions established upon approval byfinancial regulatory authorities. The Judicial Interpretation Amendment is not applicable to disputes arising from their engagement in relevantfinancial businesses.Table of Contents25Although the Judicial Interpretation Amendment and the Reply to Issues Concerning the Scope of Application of the New JudicialInterpretation on Private Lending provide that they do not apply to licensed financial institutions, including micro-lending companies that conductloan and Credit-Tech business, there remain uncertainties in the interpretation and implementation of the amendment, including whether licensedfinancial institutions may be subject to its jurisdiction under Circular 141 or in certain circumstances, the basis of the calculation formula used todetermine 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 assure you that there will not be interpretations of the Judicial Interpretation Amendmentexpanding its jurisdiction to cover licensed financial institutions, nor can we guarantee that there will not be any changes to the detailed calculationformula used to determine the interest limit, that our future fee rates will not be lowered as a result of the Quadruple LPR Limit, or that theQuadruple LPR Limit will not be applied to our historical and legacy products where the related dispute cases are accepted by PRC courts of firstinstance on or after August 20, 2020. In such cases, we and our financial institution partners may be required to repay certain borrowers if ourhistorical and legacy loan products are deemed to have violated the applicable laws and regulations concerning the limit of lending interest and feerates. Our business, results of operations and financial condition may therefore be materially and adversely affected by the implementation of theJudicial Interpretation Amendment.In addition to rules, opinions and decisions issued by the PRC courts, we and our financial institution partners are also subject toregulatory agencies’ requirements, supervision or guidance. We have lowered the pricing on loans we facilitate and may further adjust the pricingfrom time to time as a result of changes in regulations or our business strategies. Currently, we adhere to the pricing policy that no loan should havean IRR exceeding 36%. As of December 31, 2023, the IRR for all of loans facilitated by us was under 36%. As of the same date, the outstandingbalance of loans with an IRR exceeding 24% amounted to RMB102.4 million (US$14.4 million), which represented 0.1% of all the outstandingbalance of loans1 facilitated by us, compared to RMB4.7 billion and 3.8%, respectively, as of December 31, 2022. If we are unable to keep up withthe evolvement of regulations and maintain compliance or are deemed to price loans at a rate that exceeds the regulatory limits, we could beordered to suspend, rectify or terminate our practices or operations, subject to cancelation of qualifications, or ordered to relinquish the excessiveportion of the interest income. If any of these occurs, our business, financial condition, results of operations and our cooperation with financialinstitution partners could be materially and adversely affected. See also “—We are subject to uncertainties surrounding regulations andadministrative measures of the loan facilitation business. If any of our business practices are deemed to be non-compliant with applicable laws andregulations, our business, financial condition and results of operations would be adversely affected.”Our transaction process may result in misunderstanding among borrowers.Our paperless transaction process is facilitated primarily on our mobile platform. While such transaction process is streamlined andconvenient, it involves certain inherent risks. Borrowers may not read the electronic agreements closely, which may result in misunderstanding ofcertain terms and conditions. Furthermore, information in our product promotion materials and our app may result in misunderstanding amongborrowers and be deemed misleading. For instance, we utilize the internal rate of return methodology to calculate the total interest and service feesto be paid by borrowers and to determine the pricing of loan products facilitated by us. Despite the fact that we have disclosed our fee structure inthe agreements with borrowers and display on our mobile platform how service fees are calculated using the internal rate of return, they mayoverlook or misunderstand such service fees, interest rates and other fees, and calculate the total interest and service fees utilizing a differentmethodology, which may result in misunderstanding of our fee structure. If the government authorities and the courts determine that the interestrate disclosed in our product promotion and our app is misleading, the courts may support the borrower’s request to rescind the agreement ordetermine a lower interest and service fee to be paid by the borrower, and we may be subject to fines and penalties by the courts and governmentauthorities for the misleading promotion. In addition, such misunderstanding may arouse negative publicity and complaints among borrowers, harmour brand name and reputation and in turn hurt our ability to retain and attract borrowers, which could have a material adverse effect on ourbusiness, financial condition and results of operations.Note:1The IRR does not take into account loans facilitated under “ICE” and other technology solutions. “ICE” is an open platform on our “360Jietiao” APP. We match borrowers and financial institutions through big data and cloud computing technology on “ICE,” and provide pre-loaninvestigation report of borrowers. Loans facilitated under other technology solutions are directly transacted between the financial institutionsand borrowers.Table of Contents26Fraudulent activity on our platform could negatively impact our operating results, brand and reputation and cause the use of loan productsfacilitated by us and our services to decrease.We are subject to the risk of fraudulent activity associated with prospective borrowers and parties handling information on borrowers orfinancial institution partners. Our resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent fraud. Evenif we identify fraudulent prospective borrower and reject his/her credit application, such prospective borrower may re-apply by using fraudulentinformation. We may fail to identify such behavior, despite our measures to verify personal identification information provided by prospectiveborrowers. Furthermore, we may not be able to recoup funds underlying transactions made in connection with fraudulent activities. A significantincrease in fraudulent activities could negatively impact our brands and reputation, discourage financial institution partners from collaborating withus, reduce the number of transactions facilitated from borrowers and lead us to take additional steps to reduce fraud risk, which could increase ourcosts. High profile fraudulent activity could even lead to regulatory intervention and may divert our management’s attention and cause us to incuradditional expenses and costs.We rely on our proprietary credit profiling model in assessing the creditworthiness of borrowers and the risks associated with loans. If ourmodel is flawed or ineffective, or if we otherwise fail or are perceived to fail to manage the default risks of loans facilitated through ourplatform, our reputation and market share would be materially and adversely affected, which would severely impact our business and results ofoperations.Our ability to attract users to, and build trust in, our platform is significantly dependent on our ability to effectively evaluate users’ creditprofiles and the likelihood of default based on the AI-powered Argus Engine. The AI-powered tool may be flawed or ineffective in processing theimmense data and providing an accurate report. It may not adjust itself to the changes in the data patterns or macroeconomic situations. In addition,it may be breached, manipulated or otherwise compromised.If any of the foregoing were to occur in the future, our financial institution partners may try to rescind their affected investments or decidenot to invest in loans, or borrowers may seek to revise the terms of their loans or reduce the use of our platform for financing.Meanwhile, as our Argus Engine becomes more familiar to the public and fraudulent users become better educated regarding the industrypractice, it is possible that despite the iterative development of our anti-fraud and credit-scoring algorithm, our model becomes outdated andineffective in detecting new fraud schemes or making accurate credit assessments. If that happens, our ability to control our delinquency rate willbecome substantially limited, which will adversely impact our business prospects and financial results.We rely on our risk management team to establish and execute our risk management policies. If our risk management team or key members ofsuch team were unable or unwilling to continue in their present positions, our business may be severely disrupted.We rely on our risk management team to continually iterate and train our Argus Engine, which is the center of the establishment andexecution of our credit profiling policies. Although our Argus Engine is equipped with machine learning capability and conducts self-learning andself-development all based on the data we have, we still rely on our risk management team to spot and fix potential errors and flaws in our ArgusEngine. Meanwhile, the Credit-Tech market changes quickly and we may need to adjust our credit profiling principles from time to time to controlour loss rate while maintaining the borrower base and securing satisfying returns for our financial institution partners. We rely on our riskmanagement team to closely monitor the change in the market and our business, and update our credit profiling principles accordingly, which willbe then used to train our Argus Engine. If our risk management team or key members of such team were unable or unwilling to continue in theirpresent positions, we may have to incur additional time and monetary cost to find a replacement to our risk management team that fits us, and ourresult of business operation and financial status may be adversely and severely impacted.If we are unable to protect the private information of our users and adapt to the relevant regulatory framework as to protection of suchinformation, our business and operation may be adversely affected.Our platform collects, stores and processes certain personal information and other sensitive data from users for the purpose of providingour services. We have obtained the explicit consents from users to use their personal information within the scope of authorization and we havetaken technical measures to protect the security of such personal information and prevent personal information from being divulged, damaged orlost. However, we face risks inherent in handling and protecting personal information. In particular, we face a number of challenges relating to datagenerated from transactions and other activities on our platform, including:Table of Contents27●protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior orimproper use by our employees;●addressing concerns related to privacy and sharing, safety, security and other factors; and●complying with applicable laws, rules and regulations relating to the collection, use, storage, transfer, disclosure and security ofpersonal information, which are subject to change and new interpretations, including any requests from regulatory and governmentauthorities relating to such data.We face the risk of security breaches or similar disruptions. Due to the data assets we have, our platform is an attractive target andpotentially vulnerable to cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions. Because techniques used tosabotage or obtain unauthorized access to systems evolve continually and frequently and generally are not recognized until they are launchedagainst a target, we may be unable to anticipate these techniques or to implement adequate preventative counter-measures. In addition to advancesin technology, an increased level of sophistication and diversity of our products and services, an increased level of expertise of hackers, newdiscoveries in the field of cryptography or other risks can result in the compromise or breach of our websites or our apps. If security measures arebreached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposedand exploited, user data or personal information could be stolen or misused, which could expose us to penalties or other administrative actions,time-consuming and expensive litigation and negative publicity, materially and adversely affect our business and reputation and deter potentialusers from using our products and financial institution partners from cooperating with us, any of which would have a material adverse impact onour results of operations, financial condition and business prospects.In addition, we expect that data security and data protection compliance will receive greater attention and focus from regulators, bothdomestically and globally, as well as continued or greater public scrutiny and attention going forward, which could increase our compliance costsand subject us to heightened risks and challenges associated with data security and protection. For details of risks relating to our compliance withrelevant laws and regulations, see “—Our business is subject to complex and evolving PRC laws and regulations regarding data privacy andcybersecurity, as such regulations and laws as newly promulgated, many of which are subject to further interpretation. Any changes in these lawsand regulations have caused and could continue to cause changes to our business practices and increase costs of operations, and any securitybreaches or our actual or perceived failure to comply with such laws and regulations could result in claims, penalties, damages to our reputationand brand, declines in user growth or engagement, or otherwise harm our business, results of operations and financial condition.” If we are unableto manage these risks, or if we are accused of failing to comply with such laws and regulations, we could become subject to corrective orders,penalties, including fines, suspension of business, websites, or applications, and revocation of required licenses, and our reputation and results ofoperations could be materially and adversely affected.Our business is subject to complex and evolving PRC laws and regulations regarding data privacy and cybersecurity, as such regulations andlaws as newly promulgated, many of which are subject to further interpretation. Any changes in these laws and regulations have caused andcould continue to cause changes to our business practices and increase costs of operations, and any security breaches or our actual orperceived failure to comply with such laws and regulations could result in claims, penalties, damages to our reputation and brand, declines inuser growth or engagement, or otherwise harm our business, results of operations and financial condition.Regulatory authorities in China have enhanced data protection and cybersecurity regulatory requirements and promulgated new laws andregulations, many of which are subject to further interpretation, clarification and revision. Moreover, different PRC regulatory bodies haveenforced data privacy and protections laws and regulations with varying standards and applications. See “Item 4. Information on the Company—B.Business Overview—Regulation—Regulations on Information Security and Privacy Protection.” The following are non-exhaustive examples ofcertain recent PRC regulatory activities in this area:Table of Contents28In December 2021, the CAC, together with other authorities, jointly promulgated the Measures for Cybersecurity Review (2021 Revision),which became effective on February 15, 2022 and replaces their predecessor regulation. Pursuant to the measures, critical informationinfrastructure operators that procure internet products and services or network platform operators that carry out data processing activities must besubject to a cybersecurity review if their activities affect or may affect national security. The measures further stipulate that network platformoperators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity reviewbefore any public offering at a foreign stock exchange. As of the date of this annual report, no detailed rules or implementation rules regarding therecognition of the “critical information infrastructure” have been issued by any authority, and we have not been informed that we are a “criticalinformation infrastructure operator” by any government authority. The Regulations on Protection of Critical Information Infrastructure stipulatethat the respective supervision and administration departments of the important industries and sectors as mentioned above shall be responsible forthe security protection of critical information infrastructures, and the departments shall be responsible for organizing the recognition of the “criticalinformation infrastructure” within the industries and sectors according to the recognition rules, and shall inform the recognized “criticalinformation infrastructure operator” accordingly. However, as of the date of this annual report, to our best knowledge, we are not aware of anypublished regulations for recognition for “critical information infrastructure.” Therefore, it is uncertain whether we would be deemed to be a“critical information infrastructure operator” under PRC law. If we are deemed a “critical information infrastructure operator” under the PRCcybersecurity laws and regulations, we may be subject to obligations in addition to those with which we are currently obligated to comply.In July 7, 2022, the CAC published the Outbound Data Transfer Security Assessment Measures, which took effect on September 1, 2022and specify that data processors who intend to provide important data and personal information that are collected and generated in the operationwithin the territory of the PRC to overseas shall be subject to security assessment with the CAC. Under the Outbound Data Transfer SecurityAssessment Measures, an entity must apply for a CAC security assessment if it processes personal information of over one million individuals andoutbound transfers personal information, or if it has cumulatively outbound transferred personal information of more than 100,000 individuals orsensitive personal information of more than 10,000 individuals since January 1 of the previous year or if it conducts outbound transfers ofimportant data. The Outbound Data Transfer Security Assessment Measures further stipulate the process and requirements for the securityassessment. It is also unclear what constitutes “outbound data transfer.” These bring more uncertainties with respect to the application andenforcement of the newly published measures, and we may be subject to such outbound data security assessment with the CAC. In addition, onFebruary 22, 2023, the Provisions on the Standard Contract on Cross-border Transfer of Personal Information were promulgated by the CAC andeffective on June 1, 2023. The provisions include a standard contract for cross-border transfer of personal information that could be used to satisfyone of the conditions for cross-border transfer of personal information under Article 38 of the Personal Information Protection Law. On March 22,2024, the CAC promulgated the Regulations on Promoting and Regulating Cross-border Data Flow, which further clarify the implementation andconnection of the existing data outbound security assessment, personal information cross-border standard contract and personal informationprotection certification regarding data outbound. For details, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Information Security and Privacy Protection.” However, it remains uncertain how the PRC government authorities will assessoutbound data transfers under such circumstances specifically. We will closely monitor and assess any relevant legislative and regulatorydevelopment and prepare for a security assessment when necessary.In November 2021, the CAC released the Measures of Regulations on the Network Data Security Administration (Draft for Comments)for public comments. The draft defines “data processors” as individuals or organizations that can make autonomous decisions regarding thepurpose and the manner of their data processing activities such as data collection, storage, utilization, transmission, publication and deletion. Inaccordance with draft, data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listingabroad of data processors that process the personal information of more than one million users; (ii) merger, reorganization or division of internetplatform operators that have acquired a large number of data resources related to national security, economic development or public interests affectsor may affect national security; (iii) listing in Hong Kong which affects or may affect national security; or (iv) any data processing activity thataffects or may affect national security. However, there have been no clarifications from the relevant authorities as of the date of this annual reportas to the standards for determining whether an activity is one that “affects or may affect national security.” In addition, the draft requires that dataprocessors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or authorize a data securityservice provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of Januaryeach year. As of the date of this annual report, the draft has not been formally adopted, and their respective provisions and anticipated adoption oreffective date may be subject to change with substantial uncertainty. As advised by our PRC legal counsel, Commerce & Finance Law Offices, asof the date of this annual report, we, our PRC subsidiaries and the VIEs are not required to go through a cybersecurity review by the CAC for ourprevious issuance of securities to investors.Table of Contents29We are constantly in the process of evaluating the potential impact of the laws, regulations and policies relating to cybersecurity, privacy,data protection and information security on our current business practices. As of the date of this annual report, based on the facts that (i) we are notinvolved in any investigations on cybersecurity review initiated by the CAC; (ii) we have adopted internal measures regarding data security andpersonal information protection to ensure compliance with the laws and regulations; (iii) we have not been subject to any penalties from anycompetent PRC regulatory authorities related to any effective regulations or policies issued by the CAC, our PRC legal counsel, Commerce &Finance Law Offices, is of the view and we believe that our business operations are compliant with the currently effective regulations and policiesthat have been issued by the CAC in all material respects.However, many of the data- and data privacy-related laws and regulations are relatively new and certain concepts thereunder remainsubject to interpretation by the regulators, and any further change or interpretation of such laws and regulations may impose additional obligationsand liabilities on us. The Measures for Cybersecurity Review (2021 Revision) and the Measures of Regulations on the Network Data SecurityAdministration (Draft for Comments) remain unclear on whether the requirements will be applicable to companies that, like us, are already listed inthe United States. We cannot predict the impact of these regulations, if any, at this stage, and we will closely monitor and assess any developmentsin the rule-making process. If they mandate clearance of cybersecurity review and other specific actions to be taken by issuers like us, we may faceuncertainties as to whether these additional procedures can be completed by us timely, or at all, which may subject us to government enforcementactions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from application stores, andmaterially and adversely affect our business and results of operations.In general, compliance with the existing PRC laws and regulations, as well as additional laws and regulations that PRC legislative andregulatory bodies may enact in the future, related to cybersecurity, data security and personal information protection, may be costly and result inadditional expenses to us, and subject us to negative publicity, which could harm our reputation and business operations. There are alsouncertainties with respect to how the laws and regulations will be implemented and interpreted in practice. As these laws and regulations areevolving and uncertainty remains with respect to their interpretation and implementation, we cannot guarantee that we will be able to maintain fullcompliance at all times, or that our existing user information protection system and technical measures will be considered sufficient. Any non-compliance or perceived non-compliance by us, our service providers or financial institutions partners with these laws, regulations or policies maylead to warnings, fines, investigations, lawsuits, confiscation of illegal gains, revocation of licenses, cancelation of filings or listings, closedown ofwebsites, removal of apps and suspension of downloads, price drops in our securities or even criminal liabilities against us by government agenciesor other individuals. For example, in July 2021, our 360 Jietiao app was temporarily taken offline by the CAC for the purpose of optimizingproduct design and offering enhanced user data privacy protection, during which period new downloads were suspended. Our 360 Jietiao app wasrestored to app stores for downloads in August 2021 after being tested and verified by the CAC. We believe the temporary takedown of 360 Jietiaoapp did not and will not have a material adverse impact on our business operations. However, we cannot assure you that the authorities will notrequire further system and data privacy protection enhancements in the future as technologies, standards and regulatory environments continue toevolve, in which case our operations may be interrupted or adversely affected. In addition, our launch of new products or services or other actionsthat we take in the future may subject us to additional laws, regulations, or other government scrutiny. Furthermore, even if we do not commit anyviolation or breach of effective laws and regulations related to cybersecurity, data security or personal information protection, we may also beinvolved in inspections or investigations by regulatory authorities due to any unrelated third parties’ action or inaction, or as part of the routinesupervision of the regulatory authorities. Such inspections or investigations may also have an adverse effect to our business.Table of Contents30Credit and other information that we receive from third parties about borrowers may be inaccurate or may not accurately reflect the borrower’screditworthiness, which may compromise the accuracy of our credit assessment.For the purpose of credit assessment, we obtain from prospective borrowers and third parties certain information of the prospectiveborrowers, which may not be complete, accurate or reliable. The credit score assigned to a borrower may not reflect that particular borrower’sactual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate borrower information. We currently cannotreliably determine whether borrowers have outstanding loans through other online platforms at the time they obtain a loan from us even though weadopt certain investigation measures. This creates the risk that a borrower may borrow money through our platform in order to pay off loans onother online platforms and vice versa. If a borrower incurs additional debt before fully repaying any loan such borrower takes out on our platform,the additional debt may impair the ability of that borrower to make repayments on his or her loan. In addition, the additional debt may adverselyaffect the borrower’s creditworthiness generally and could result in the financial distress or insolvency of the borrower. Meanwhile, if the price ofthe quality data on which we run our algorithms increases, we may not get access to the quality information at the same cost in the future. We maybe forced to run our algorithms on fewer quality data, iterate our algorithms or pay more for quality information in the future, any of which mayadversely affect our results of operations.If we are unable to maintain or increase the volume of loans facilitated through our platform in the long run, our business and results ofoperations will be adversely affected.The loan facilitation volume through our platform has grown rapidly since our inception. As of December 31, 2023, we had cumulativelyfacilitated loans amounting to approximately RMB1,818.5 billion (US$256.1 billion). In 2024, we expect to maintain a prudent approach inunderwriting loans and focus our efforts on enhancing efficiency and profitability. However, we plan to continue our efforts to capture long-termgrowth opportunities. To maintain the growth momentum of our platform in the long run, we must continually increase the loan facilitation volumeby retaining current borrowers and attracting more borrowers, which in turn depends on our ability to acquire users and to offer a diversified loanproduct portfolio at reasonable costs that address the capital needs of consumers and SMEs in consumption and other life and business settings. Weintend to continue to invest resources to our user acquisition efforts in the long run, and develop and refine loan products facilitated by us. If thereare insufficient qualified loan requests, the loan facilitation volume through our platform may decrease, which may in turn negatively affect thegrowth of our business and our relationships with our financial institution partners.The overall volume may be affected by several factors, including our brand recognition and reputation, the interest rates offered toborrowers relative to the market rates, the efficiency of our credit assessment process, availability of our financial institution partners, themacroeconomic environment and other factors. In connection with the introduction of new products or response to general economic conditions,we may also impose more stringent borrower qualifications to ensure the quality of loans on our platform, which may negatively affect the growthof our loan facilitation volume. If we are unable to attract qualified borrowers or if borrowers do not continue to participate in our platform at thecurrent rates, we might be unable to increase our loan facilitation volume and revenue as we expect, and our business and results of operations maybe adversely affected.If our collaboration with 360 Group is terminated or otherwise becomes limited, restricted, curtailed, less effective or more expensive in any way, or ifwe cannot benefit from the brand recognition or business ecosystem of 360 Group as we do, our business may be adversely affected.We have established a strategic partnership with 360 Group, one of our affiliates, and we collaborate across multiple areas of our business. Thisstrategic partnership has contributed to the growth of our revenue, particularly in the early stage of our business, and we believe that it will continue tocontribute to our growth. We have entered into a framework collaboration agreement with 360 Group, setting out the terms of collaboration, especiallythose related to cloud service and security, user traffic support, and trademark licensing. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Transactions with 360 Group.” In particular, we have been authorized by 360 Group to use its brand “360,” which allowsus to benefit from 360 Group’s strong brand recognition in certain aspects of our business, such as user acquisition, at the early stage of our development.Further, as the strategic partner of 360 Group, we benefit from its business ecosystem as well. For example, our collaboration with Kincheng Bank ofTianjin Co., Ltd., or Kincheng Bank, whose largest shareholder is 360 Group, provides us with opportunity to introduce innovative cooperationarrangements with potential financial institution partners.Table of Contents31We cannot assure you that we will continue to maintain the same level of collaboration with 360 Group on the same or more favorable terms andconditions, or renew our collaboration agreements at all, upon expiration of the agreement terms, neither can we guarantee that our collaboration with 360Group will not be terminated by 360 Group or otherwise become limited, less effective or more expensive, which are subject to many factors beyond ourcontrol, such as legal requirements and 360 Group’s business condition, plans and strategies. For example, as 360 Group is a public company listed on theShanghai Stock Exchange in China, it is subject to PRC regulations and exchange rules, which may impact its ability to collaborate with us pursuant to theterms we desire. It came to our attention that, in May 2020, The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce amended theExport Administration Regulations (EAR) by adding twenty-four entities, including Qihoo 360 Technology Co., Ltd. and Qihoo 360 Technology Companyto the Entity List. As a result, exports or reexports from the U.S. and in-country transfers in the U.S. to these two entities will face additional licenserequirements, and the availability of most license exceptions is limited. Currently, the inclusion of these two entities into the Entity List has not had amaterial adverse effect on our collaboration with 360 Group or on us and we have not had any dealings with these two entities. Additionally, it came to ourattention that 360 Security Technology Inc. was named in the list of entities identified as “Chinese military companies” operating directly or indirectly inthe United States in accordance with Section 1260H of the National Defense Authorization Act for fiscal year 2021, which was released by the U.S.Department of Defense on October 5, 2022. Currently, such inclusion had not had any material adverse effect on our collaboration with 360 Group or onus. However, we cannot rule out the possibility that additional restrictions of different nature may be imposed on 360 Group or its affiliates in light of thechanges in international trade policies and rising political tensions between the U.S. and China in the past few years. See also “—Risks Related to DoingBusiness in China—Changes in international trade policies and rising political tensions, particularly between the U.S. and China, may adversely impact ourbusiness and operating results.” If we are unable to maintain the same level of collaboration with 360 Group, or if we cannot benefit from the brandrecognition or business ecosystem of 360 Group as we do, our business may be adversely affected, especially in the aspects of cost and efficiency of useracquisition.Our access to sufficient and sustainable funding at reasonable costs cannot be assured. If we fail to maintain collaboration with our financialinstitution partners or to maintain sufficient capacity to facilitate loans to borrowers, our reputation, results of operations and financial condition maybe materially and adversely affected.The growth and success of our future operations depend on the availability of adequate funding to meet borrowers’ demands for loans on ourplatform. To maintain sufficient and sustainable funding to meet borrower demands, we need to keep expanding the network and securing a stable streamof funds from our financial institution partners.The availability of funding from our financial institutional partners depends on many factors, some of which are beyond our control. Changes inthe macroeconomic environment may impact the funding costs and the terms of our agreements with financial institution partners, and we may not be ableto obtain sufficient and sustainable funding from them if the funding cost increases significantly. In addition, our competitors in the Credit-Tech industrymay offer better terms to attract financial institutions away from us. We may not be able to maintain long-term business relationships with financialinstitution partners in this evolving market. For the year ended December 31, 2023, our top five direct financial institution partners contributed around30.7% of total funding for the loans we originated and facilitated2. Our financial institution partners typically agree to provide funding to borrowers whomeet their predetermined criteria, subject to their credit approval process. These agreements have fixed terms of typically one year. In addition, while ourusers’ loan requests are usually approved if they fall within the parameters set agreed upon by us and our financial institution partners, our financialinstitution partners may implement additional requirements in their approval process outside of our control. Thus, there is no assurance that our financialinstitution partners could provide reliable, sustainable and adequate funding, because they could either decline to fund loans facilitated on our platform ordecline to renew or renegotiate their participation in the funding programs.Note:2Does not include loans facilitated under ICE or other technology solutions.Table of Contents32In addition, if PRC laws and regulations impose more restrictions on our collaboration with financial institution partners, these financialinstitution partners will become more selective in choosing collaboration partners, which may drive up the funding costs and the competitionamong online lending platforms to collaborate with a limited number of financial institution partners. Pursuant to the Interim Measures forAdministration of Internet Loans Issued by Commercial Banks and the Circular of the General Office of the China Banking and InsuranceRegulatory Commission on Further Standardizing the Internet Loans Business of Commercial Banks, regional banks that carry out online lendingbusiness shall serve local customers, and are not allowed to conduct the online lending business beyond the local administrative area of theirregistered place, except those who have no physical business branch, conduct business primarily online as well as meet the other conditionsprescribed by the China Banking and Insurance Regulatory Commission. If we fail to effectively match regional banks with sufficient localborrowers, we may lose them as funding sources, in which case our results of operations and profitability could be materially and adverselyimpacted. Furthermore, if the PRC government issues any laws and regulations that restrict or prohibit our collaboration with our financialinstitution partners, our collaboration with our financial institution partners may have to be terminated or suspended, which may materially andadversely affect our business, financial condition and results of operations.For example, on December 31, 2021, the People’s Bank of China and six other departments jointly issued the Measures for Administrationof Online Marketing of Financial Products (Draft for comments), which regulate online marketing of financial products by financial institutions orinternet platform operators entrusted by such financial institutions. The draft measures prohibit third-party online platform operators from beinginvolved in the sale process of financial products in a disguised way without the approval of financial regulatory authorities, including, but notlimited to interactive consultation with consumers on financial products, suitability assessment of consumers of financial products, signing of salecontracts, transfer of funds and participation in the income sharing of financial business. Our PRC legal counsel is of the view that these measureshave not been formally adopted and currently do not affect our business and operations. If these measures were to be adopted in the current form,we may no longer be able to display financial products in current format on our mobile app to conduct online marketing, which may have amaterial adverse impact on our business, results of operations and future prospects. We will closely monitor the regulatory development and adjustour business operations from time to time to ensure our compliance.We cannot assure you that our efforts to diversify funding sources would be successful or funding sources for the loans we facilitate willremain or become increasingly diversified in the future. If we become dependent on a small number of financial institution partners and any ofthem decide to not collaborate with us, change the commercial terms to the extent unacceptable to borrowers or limit the funding available on ourplatform, such constraints may materially limit our ability to facilitate loans and adversely affect borrower experience. Any of these occurrencescould materially and adversely affect our business, financial condition, results of operations and cash flows.Furthermore, we partner with Kincheng Bank, whose largest shareholder is 360 Group, across a full spectrum of services. Ourcollaboration with Kincheng Bank provides us the opportunities to explore and introduce innovative cooperation arrangements with potentialfinancial institution partners. As of December 31, 2023, Kincheng Bank was our largest financial institution partner by outstanding balance of loansfacilitated through our platform. If Kincheng Bank is acquired by a third party not affiliated with us, or if its business, financial conditions orreputation deteriorates, we may not be able to maintain our current collaboration with it on reasonable terms or at all.If our business arrangements with certain financial institution partners were deemed to violate PRC laws and regulations, our business andresults of operations could be materially and adversely affected.We have secured certain funding from financial institution partners through the channel of trusts and asset management plans incollaboration with certain trust companies and asset management companies.According to our cooperative arrangement with trust companies and asset management companies, each trust and asset management planhad a specified term. Financial institution partners invested in such trusts or asset management plans in the form of trust or asset management units,which entitled the financial institution partner to the return on investment with each unit. We were designated as the service provider for the trustsand asset management plans. If a credit application was approved, credit drawdown would be funded by the trusts or asset management plans toborrowers directly subject to the independent credit review of such trust companies or asset management companies. These trusts and assetmanagement plans were identified as the lender under the loan agreements with borrowers. The trust and asset management plan remitted to thefinancial institution partners investment returns pursuant to the terms of the trust and plan that reflected funds initially provided by the financialinstitution partners. The investment gains would be distributed to the trust or asset management plan based on the actual loan interest. The trustcompany or asset management company, as appropriate, was responsible for administering the trust and was paid a service fee.Table of Contents33In 2023, trusts and assets management plans with total assets of RMB13.8 billion (US$1.9 billion) were set up to invest solely in loans onour platform. For the majority of the trusts, we are considered the primary beneficiary and thus consolidate such trusts’ assets, liabilities, results ofoperations and cash flows. Although we have not been part of the fund-raising process by the trusts, we cannot assure you that our provision ofservices to the trusts will not be viewed by the PRC regulators as violating any laws or regulations. If we are prohibited from cooperating with trustcompanies, our access to sustainable funding may be adversely impacted, which may further increase the funding cost of loans facilitated by us andaffect our results of operations.If our attempts to explore alternative funding initiatives were deemed to violate PRC laws and regulations, our business could be materially andadversely affected.We have and expect to continue exploring alternative funding initiatives, including through standardized capital instruments such as theissuance of asset-backed securities, or ABSs. As of December 31, 2023, we had cumulatively issued ABSs of RMB31.0 billion (US$4.4 billion). Inaddition, our shelf registration of ABSs with a total value of issuance amounting to RMB14.8 billion has been approved by the Shanghai StockExchange and Shenzhen Stock Exchange as of December 31, 2023. Pursuant to the Administrative Provisions on the Asset Securitization Businessof Securities Companies and the Subsidiaries of Fund Management Companies and its supporting rules and other laws and regulations, aninstitution is entitled to establish an ABS plan as an originator for such scheme on the condition that it has legitimate ownership to the underlyingtransferred assets that are able to generate independent and predictable cash flows in compliance with the laws and regulations. However, theissuance of ABSs is subject to a variety of requirements under these provisions, such as managers are required to be a securities company or asubsidiary of fund management company and the assets of the ABS plan shall be placed under custody of a commercial bank with the appropriatebusiness qualifications, or an asset custodian organization recognized by the CSRC. The laws and regulations applicable to ABS are stilldeveloping, and it remains uncertain as to the application and interpretation of such laws and regulations, particularly relating to the rapidlyevolving Credit-Tech industry in which we operate. In addition, we rely on trust companies and other parties we collaborate with to secure thesuccessful issuance of the ABSs. If our collaboration with such parties is interrupted or affected, our ability to utilize the remaining approved quotaof issuing such ABS may be materially limited. If our attempts to issue ABSs under the current quota is limited, or our attempts to seek furtherapproval on additional quota in ABS is rejected, our capability to secure funding with lower comprehensive cost may be limited, and our businessand financial condition may be adversely impacted. During the validity period of the ABS plan, if we cannot maintain reasonable support fornormal business activities, and provide the requisite assurance for generation of independent and predictable cash flows for the underlyingtransferred assets, it may have substantial impact on the investment value or price of ABSs.If we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.The Credit-Tech industry is still new to borrowers in China. Prospective borrowers may not be familiar with this market and may havedifficulty distinguishing our products from those of our competitors. Convincing prospective borrowers of the value of our products is critical toincreasing the number of transactions for borrowers and to the success of our business. We believe that developing and maintaining awareness ofour brand effectively is critical to attracting and retaining prospective borrowers. This, in turn, depends largely on the effectiveness of our useracquisition strategy, our marketing efforts, our collaboration with financial institution partners and the success of the channels we use to promoteour platform. If any of our current borrower acquisition strategies or marketing channels become less effective, more costly or no longer feasible,we may not be able to attract new borrowers in a cost-effective manner or convert prospective borrowers into active borrowers. Our collaborationwith market-leading channel partners is essential to our user acquisition efforts. If such collaboration ceases or becomes less effective, for reasonsattributable either to us or to our channel partners, we may face instant user acquisition pressure, and may need to incur additional costs to replacesuch partners for user acquisition, if we could replace them at all. Besides, if some of our channel partners were acquired or controlled by thecompetitors of 360 Group, our collaboration with such channel partners may be limited or severely and adversely impacted. We may not find newpartners to replace our original ones.Our efforts to build our brand have caused us to incur expenses, and it is likely that our future marketing efforts will require us to incuradditional expenses. These efforts may not result in increased operating revenue in the immediate future or any increases at all, and even if they do,any increases in operating revenue may not offset the expenses incurred. If we fail to successfully promote and maintain our brand cost-effectively,our results of operations and financial condition would be adversely affected, and our ability to grow our business may be impaired.Table of Contents34If our financial institution partners fail to comply with applicable anti-money laundering and anti-terrorist financing laws and regulations, ourbusiness and results of operations could be materially and adversely affected.In collaboration with our financial institution partners and payment companies, we have adopted various policies and procedures, such asinternal controls and “know-your-customer” procedures, for anti-money laundering purposes. The Guidelines on Promoting the Healthy Growth ofInternet Finance purport, among other things, to require internet financial service providers, including us, to comply with certain anti-moneylaundering requirements, including:●the establishment of a borrower identification program;●the monitoring and reporting of the suspicious transaction;●the preservation of borrower information and transaction records; and●the provision of assistance to the public security department and judicial authority in investigations and proceedings in relation toanti-money laundering matters. There is no assurance that our anti-money laundering policies and procedures will protect us frombeing exploited for money laundering purposes or that we will be deemed to be in compliance with applicable anti-money launderingimplementing rules, if and when adopted, in light of the anti-money laundering obligations proposed to be imposed on us by theguidelines. Any new requirement under anti-money laundering laws could increase our costs and may expose us to potentialsanctions if we fail to comply.In addition, we rely on our third-party service providers, in particular, payment companies that handle the transfer of the repayment, tohave their own appropriate anti-money laundering policies and procedures. If any of our third-party service providers fails to comply withapplicable anti-money laundering laws and regulations, our reputation could suffer and we could become subject to regulatory intervention, whichcould have a material adverse effect on our business, financial condition and results of operations.Our policies and procedures may not be completely effective in preventing other parties from using us, any of our financial institutionpartners or payment processors as a conduit for money laundering (including illegal cash operations) or terrorist financing without our knowledge.If we were to be associated with money laundering (including illegal cash operations) or terrorist financing, our reputation could suffer and wecould become subject to regulatory fines, sanctions or legal enforcement, including being added to any “blacklists” that would prohibit certainparties from engaging in transactions with us, all of which could have a material adverse effect on our financial condition and results of operations.Even if we, our financial institution partners and payment processors comply with the applicable anti-money laundering laws and regulations, we,our financial institution partners and payment processors may not be able to fully eliminate money laundering and other illegal or improperactivities in light of the complexity and the secrecy of these activities. Any negative perception of the industry, such as that arises from any failureof other Credit-Tech service providers to detect or prevent money laundering activities, even if factually incorrect or based on isolated incidents,could compromise our image, undermine the trust and credibility we have established and negatively impact our financial condition and results ofoperations.Table of Contents35We need to engage guarantee companies to provide credit enhancement or additional comfort to our financial institution partners, and werecognize guarantee liabilities for accounting purposes. If we fail to source and engage a guarantee company to our financial institutionpartners’ satisfaction at a reasonable price, our collaboration with our financial institution partners will deteriorate, and our results ofoperations may be adversely and severely impacted. If our guarantee liability recognition fails to address our current status, we may faceunexpected changes to our financial conditions.To comply with Circular 141 and the Supplementary Provisions on the Supervision and Administration of Financing GuaranteeCompanies, we have engaged guarantee companies to provide credit enhancement to our financial institution partners upon their request, and twoof the VIEs, Fuzhou Financing Guarantee and Shanghai Financing Guarantee, obtained the license of conducting guarantee services in 2018 and2019, respectively. In order to streamline and consolidate the operation of our financing guarantee business, we are phasing out financingguarantees provided by Shanghai Financing Guarantee, which has applied for and was approved by the PRC authority to cancel of its financingguarantee certificate. Even though we use licensed guarantee company controlled by us to provide service to our financial institution partners, wemay continue to engage third-party insurance companies or guarantee companies to satisfy the needs of our business. We cannot, however, assureyou that the licensed guarantee company under our control could provide satisfactory service to our financial institution partners from time to time,or that we will always be able to source and engage guarantee companies to our financial institution partners’ satisfaction. If we fail to source andengage guarantee companies to our financial institution partners’ satisfaction at a reasonable price, our collaboration with our financial institutionpartners will deteriorate or even be suspended, and our results of operations will be materially and adversely affected. It is also possible that wehave to pay a service fee to the third-party guarantee company that exceeds the reasonable market price, which will materially and adversely affectour results of operations.As we provide guarantee services through the licensed VIEs, Fuzhou Financing Guarantee and Shanghai Financing Guarantee (before itsfinancing guarantee license was canceled upon its voluntary application), to our financial institution partners, or back-to-back guarantee to thethird-party guarantee companies, we recognize guarantee liabilities at fair value from accounting perspective, which incorporates the expectation ofpotential future payments under the guarantee and take into both non-contingent and contingent aspects of the guarantee. As of December 31, 2021,2022 and 2023, we recorded guarantee liabilities-stand ready of RMB4,818 million, RMB4,120 million and RMB3,950 million (US$556 million),respectively. As of December 31, 2021, 2022 and 2023, we recorded guarantee liabilities-contingent of RMB3,285 million, RMB3,418 million andRMB3,207 million (US$452 million), respectively. We have established an evaluation process designed to determine the adequacy of ourimpairment allowances and guarantee liabilities. While this evaluation process uses historical and other objective information and we have engageda third-party independent valuer for the task, it is also dependent on our subjective assessment based upon our estimates and judgment. Actuallosses are difficult to forecast, especially if such losses stem from factors beyond our historical experience. Given that the Credit-Tech industry israpidly evolving, and is subject to various factors beyond our control, such as shifting trends in the market, regulatory framework, and overalleconomic conditions, we may not be able to accurately forecast the delinquency rate of our current target user base due to the lack of sufficientdata. Therefore, our actual delinquency rate may be higher than we expected. If our credit assessment and expectations differ from actualcircumstances or if the quality of the loans facilitated by us deteriorates, our guarantee liabilities may be insufficient to absorb actual credit lossesand we may need to set aside additional provisions, which could have a material adverse effect on our business, financial condition and results ofoperations.Table of Contents36We are subject to credit risks associated with our accounts receivable, contract assets, financial assets receivables and loans receivable.We have a large balance of accounts receivable and contract assets as well as financial assets receivable and loans receivable. As ofDecember 31, 2021, 2022 and 2023, the current portion of our accounts receivable and contract assets, net was RMB3,097 million, RMB2,869million and RMB2,909 million (US$410 million), respectively, and the non-current portion was RMB223 million, RMB261 million and RMB147million (US$21 million), respectively. As of the same dates, the current portion of our financial assets receivable, net was RMB3,806 million,RMB2,982 million and RMB2,523 million (US$355 million), respectively, and the non-current portion was RMB598 million, RMB689 millionand RMB596 million (US$84 million), respectively. Also, as of the same dates, the current portion of our loans receivable, net was RMB9,844million, RMB15,348 million and RMB24,604 million (US$3,465 million), respectively, and the non-current portion was RMB2,859 million,RMB3,137 million and RMB2,898 million (US$408 million), respectively. Such receivables and contract assets mainly arise from our on-balancesheet loans and off-balance sheet loans. See “Item 5. Operating and Financial Review and Prospects—On- and Off-balance Sheet Treatment ofLoans” for details of the risk taking arrangements for on- and off-balance sheet loans. We have established an allowance for uncollectiblereceivables and contract assets based on estimates, which incorporates historical delinquency rate by vintage and other factors surrounding thecredit risk of specific underlying loan portfolio. We evaluate and adjust our allowance for uncollectible receivable and contract assets on a quarterlybasis or more often as necessary. The related expenses are recorded as “provision for accounts receivable and contract assets,” “provision forfinancial assets receivable” and “provision for loans receivable.” While our allowance and provision take into account historical and other objectiveinformation, it is also dependent on our subjective assessment based upon our estimates and judgment. Actual credit risk is difficult to forecast,especially if such risks stem from factors beyond our historical experience, especially unforeseen risk with no historical comparable. If there is asignificant rise in delinquency rate, which was impacted by a number of factors some of which are beyond our control, including themacroeconomic condition of China and the development of the Credit-Tech industry, or our provisions or allowances are insufficient to cover thecredit loss, our business, results of operations and financial condition would be materially and adversely impacted.If loan products facilitated by us do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.We have devoted significant resources to and will continue to put an emphasis on upgrading and marketing our existing loan products andenhancing their market awareness. We may also incur expenses and expend resources up front to develop and market new loan products andfinancial services that incorporate additional features, improve functionality or otherwise make our platform more attractive to borrowers. Newloan products and financial services must achieve high levels of market acceptance in order for us to recoup our investments in developing andmarketing them. To achieve market acceptance, it is essential for us to maintain and enhance our ability to match and recommend suitable financialproducts for prospective borrowers, the effectiveness of our curation process and our ability to provide relevant and timely content to meetchanging borrower needs. If we are unable to respond to changes in borrower preference and deliver satisfactory and distinguishable borrowerexperience, borrowers and prospective borrowers may switch to competing platforms or obtain financial products directly from their providers. Asa result, borrower access to and borrower activity on our platform will decline, our services and solutions will be less attractive to financial serviceproviders and our business, financial performance and prospects will be materially and adversely affected.Our existing and new loan products and financial services could fail to attain sufficient market acceptance for many reasons, including:●prospective borrowers may not find the features of loan products facilitated by us, such as the prices and credit limits, competitive orappealing;●we may fail to predict market demand accurately and provide products and services that meet this demand in a timely fashion;●borrowers and financial institution partners using our platforms may not like, find useful or agree with the changes we make;●there may be defects, errors or failures on our platforms;●there may be negative publicity about loan products facilitated by us, or our platform’s performance or effectiveness;●regulatory authorities may take the view that the new products or platform changes do not comply with PRC laws, regulations orrules applicable to us; andTable of Contents37●there may be competing products or services introduced or anticipated to be introduced by our competitors. If our existing and newloan products do not maintain or achieve adequate acceptance in the market, our competitive position, results of operations andfinancial condition could be materially and adversely affected.The AI-powered tools that we deploy may not generate accurate results and thereby may affect our collaboration with financial institutionpartners. Our deployment of the AI-powered tools is also subject to evolving PRC laws and regulations, and any noncompliance or perceivednon-compliance of which may affect our brand, operations and financial positions.We deploy AI-powered tools, such as Argus Engine, in our loan facilitation and post-loan facilitation services. Any inaccuracies in ourcredit scoring or risk modeling process due to the deployment of AI-powered tools may cause us not able to recommend prospective borrowers thatbest fit the financial institution partners’ risk preferences, which, as a result, may be used as a factor for the financial institution partners to evaluatethe quality of our services. If that happens, our collaboration with financial institution partners and our business prospects and financial results maybe adversely affected. Moreover, our deployment of AI-powered tools is subject to evolving PRC laws and regulations on data security, privacy andcybersecurity, among others. Any non-compliance or perceived non-compliance with the laws and regulations, including any potentially biased orinappropriate decisions made by our AI-powered tools, may subject us to negative publicity, lawsuits or administrative penalties that may adverselyaffect our brand, operations and financial positions.We face increasing competition, and if we do not compete effectively, our operating results could be harmed.The Credit-Tech industry in China is highly competitive and evolving. We primarily face competition from Credit-Tech platforms thattarget the consumer Credit-Tech market. Our competitors operate with different business models, have different cost structures or participateselectively in different market segments. They may ultimately prove more successful or more adaptable to new regulatory, technological and otherdevelopments. Some of our current and potential competitors have significantly more financial, technical, marketing and other resources than wedo, and may be able to devote greater resources to the development, promotion, sale and support of their platforms. Our competitors may also havelonger operating histories, more extensive user base, larger amounts of data, greater brand recognition and loyalty, and broader partner relationshipsthan we do. For example, traditional financial institutions may invest in technology and enter into the consumer Credit-Tech market. Experiencedin financial product development and risk management, and being able to devote greater resource to the development, promotion, sale and technicalsupport, they may gain an edge in the competition against us. Additionally, a current or potential competitor may acquire one or more of ourexisting competitors or form a strategic alliance with one or more of our competitors. Any of the foregoing could adversely affect our business,results of operations, financial condition and future growth.Our competitors may be better at developing new products, responding to new technologies, charging lower fees on loans and undertakingmore extensive marketing campaigns. When new competitors seek to enter our target market, or when existing market participants seek to increasetheir market share, they sometimes undercut the pricing or terms prevalent in that market, which could adversely affect our market share or abilityto exploit new market opportunities. Also, since the Credit-Tech industry in China is fast evolving, prospective borrowers may not fully understandhow our platform works. Our pricing and terms could deteriorate if we fail to act to meet these competitive challenges.Furthermore, in response to more stringent PRC laws and regulations regarding cash loans, more Credit-Tech platforms may expand theirservices and products to scenario-based lending, including partnering with e-commerce platforms, which may drive up the competition amongCredit-Tech platforms. Such intensified competition may increase our operating costs and adversely affect our results of operations andprofitability. To the extent that our competitors are able to offer more attractive terms to our business partners, such business partners may chooseto terminate their relationships with us or request us to accept terms matching our competitors’.In addition, our competitors may implement certain procedures to reduce their fees in response to the current or potential PRC regulationson interest rates and fees charged by Credit-Tech platforms. Borrowers are generally interest sensitive with less brand loyalty. We may not succeedin maintaining user stickiness if we fail to provide products with competitive prices. If we apply prices below the commercially reasonable level,our results of operations and financial conditions may be adversely impacted. If we are unable to compete with our competitors, or if we are forcedto charge lower fees due to competitive pressures, we could experience reduced revenues or our platforms could fail to achieve market acceptance,any of which could materially and adversely affect our business and results of operations.Table of Contents38If our ability to collect delinquent loans is impaired, or if there is actual or perceived misconduct in our collection efforts, our business andresults of operations might be materially and adversely affected.Our post-facilitation services primarily include collection services for our financial institution partners. We deploy a combination ofmeasures to collect loan repayments, including text messages, mobile app push notices, AI initiated collection calls, human collection calls, emailsor legal letters. We also engage certain third-party collection service providers from time to time, particularly after 60 days of delinquency. If eitherour or our third-party service providers’ collection methods, such as phone calls and text messages, are not effective or experience interruptions orfailures technically or otherwise, and we fail to respond quickly and improve our collection methods, our delinquent loan collection rate maydecrease.While we have implemented and enforced policies and procedures relating to collection activities by us and third-party service providers,if those collection methods were to be viewed by the borrowers or regulatory authorities as harassments, threats or as other illegal conducts, wemay be subject to lawsuits initiated by the borrowers or prohibited by the regulatory authorities from using certain collection methods. If this wereto happen and we fail to adopt alternative collection methods in a timely manner or the alternative collection methods are proven to be ineffective,we might not be able to maintain our delinquent loan collection rate, and the financial institution partners’ confidence in our platform may benegatively impacted. If any of the foregoing takes place and impairs our ability to collect delinquent loans, the loan facilitation volume on ourplatform will decrease, and our business and the results of operations could be materially and adversely affected.If we cannot respond or adapt to the rapid technological development, our business, financial condition and results of operations would bematerially and adversely affected.The business environment in which we operate is characterized by rapidly changing technology, evolving industry standards andregulations, new mobile applications and protocols, new products and services, and changing user demands and trends. Our success will depend, inpart, on our ability to identify, develop, acquire or license leading technologies useful for our business, and respond to technological developmentand evolving industry standards and regulations in a cost-effective and timely manner. As a result, we must continue to invest significant resourcesin technology infrastructure, and research and development to enhance our technology capabilities. We cannot assure you that we will be successfulin adopting and implementing new technologies. If we are unable to respond or adapt in a cost-effective and timely manner to technologicaldevelopment, our business, financial condition and results of operations could be materially and adversely affected.Any harm to our brand or reputation or any damage to the reputation of the Credit-Tech industry may materially and adversely affect ourbusiness and results of operations.Enhancing the recognition and reputation of our brand is critical to our business and competitiveness. Factors that are vital to thisobjective include but are not limited to our ability to:●maintain the quality and reliability of our platform;●provide users with a superior experience on our platform;●enhance and improve our Argus Engine;●effectively manage and resolve users complaints; and●effectively protect personal information and privacy of users.Any negative allegation made by the media or other parties about our company, including, but not limited to our management, business,compliance with law, financial condition or prospects, whether meritless or not, could severely hurt our reputation and harm our business andoperating results. As China’s Credit-Tech industry is developing and the regulatory framework for this market is also evolving, negative publicityabout this industry may arise from time to time. Negative publicity about China’s Credit-Tech industry in general may also have a negative impacton our reputation, regardless of whether we have engaged in any inappropriate activities.Table of Contents39In addition, certain factors that may adversely affect our reputation are beyond our control. Negative publicity about our partners,outsourced service providers or other counterparties, such as negative publicity about their debt collection practices and any failure by them toadequately protect the information of borrowers, to comply with applicable laws and regulations or to otherwise meet required quality and servicestandards could harm our reputation. Furthermore, any negative development in the Credit-Tech industry, such as bankruptcies or failures of otherplatforms, and especially when such bankruptcies or failures affect a large number of businesses, or negative perception of the industry as a whole,such as that arises from the alleged failure of other platforms to detect or prevent money laundering or other illegal activities, even if factuallyincorrect or based on isolated incidents, could compromise our image, undermine the trust and credibility we have established and negativelyimpact our ability to attract new borrowers. For instance, on March 15, 2019, CCTV’s “315 Night,” a show on consumer rights protection, reportedthat certain financial products offered by third-party financial service providers on a financing platform allegedly infringed consumers’ rights. Themedia report may have affected consumers’ perception of the whole Credit-Tech industry, and this perception may, in turn, adversely affect ourbusiness and results of operations. Negative developments in the Credit-Tech industry, such as widespread borrower defaults, fraudulent behavioror the closure of other online platforms, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible businessactivities that may be conducted by online platforms like ours. As we are the strategic partner of 360 Group, any negative allegation about 360Group may also have an adverse impact on us. For example, on March 15, 2021, CCTV’s “315 Night” reported certain allegedly false medicaladvertising that appeared on the 360 Browser that were posted onto the platform by 360 Browser’s advertising agents. As 360 Browser is operatedby our affiliate and we share the 360 brand, such an event and its follow-on consequences may negatively impact our reputation and the public’sperception of us. Furthermore, our products may be deemed by regulators or consumers as infringing upon consumer rights, which may expose usto unfavorable risks such as administrative penalties, user complaints, and potential civil disputes. Any of the foregoing occurrences couldsignificantly damage our brand and reputation, negatively impact the marketability of the relevant products or services, and materially andadversely affect our business and results of operations.Misconduct by third-party collection service providers may adversely impact our brand, reputation and results of operations.We adopt different collection channels, including text messages, mobile app push notices, AI-initiated collection calls, human collectioncalls, emails or legal letters during the collection process. We also outsource our collection to third-party collection service providers from time totime, particularly after 60 days of delinquency. To fulfill the compliance requirements, we have adopted and enforced comprehensive collectionpolicies and procedures, including close monitoring our third-party service providers, to ensure that all our collection practices are in compliancewith current laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Credit Assessment—Collection” for moredetails. However, we cannot assure you that we will be able to identify and deter misconduct by the third-party collection service providers at alltimes. If any of the third-party collection service providers with which we collaborate commit inappropriate conducts during the collection process,we could be liable for damages or subject to regulatory actions or penalties. Additionally, any misconduct or perceived misconduct in the collectionactivities by the third-party collection service providers, such as the perception that the collection activities are aggressive, may have a negativeimpact on our brand and reputation and thereby affect our results of operations.Table of Contents40Misconduct, errors and failure to function by our employees, third-party service providers or borrowers could harm our businessand reputation.We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees and third-party serviceproviders. Our business depends on our employees and third-party service providers to interact with prospective borrowers, process large numbersof transactions and support the loan collection process, all of which involve the use and disclosure of personal information. We could be materiallyand adversely affected if transactions were redirected, misappropriated or otherwise improperly executed, if personal information was disclosed tounintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of human error,purposeful sabotage or fraudulent manipulation of our operations or systems. We could also be materially and adversely affected if our employeesmisappropriate or otherwise improperly utilize work products, sensitive data or confidential information that they received while they wereworking for other employers. In addition, it is not always possible to identify and deter misconduct or errors by employees or third-party serviceproviders, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses.If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow protocol when interactingwith borrowers, such as during the collection process, we could be liable for damages and subject to regulatory actions and penalties. We could alsobe perceived to have originated or participated in the illegal misappropriation of funds, documents or data, or the failure to follow protocol, andtherefore be subject to civil or criminal liability. See also “—If we are unable to protect the confidential information of our users and adapt to therelevant regulatory framework as to protection of such information, our business and operation may be adversely affected” and “—Our business issubject to complex and evolving PRC laws and regulations regarding data privacy and cybersecurity, as such regulations and laws as newlypromulgated, many of which are subject to further interpretation. Any changes in these laws and regulations have caused and could continue tocause changes to our business practices and increase costs of operations, and any security breaches or our actual or perceived failure to complywith such laws and regulations could result in claims, penalties, damages to our reputation and brand, declines in user growth or engagement, orotherwise harm our business, results of operations and financial condition.”In addition, the current regulatory regime for debt collection in the PRC remains unclear. We cannot assure you that the collectionpersonnel that we employ or collaborate with will not engage in any misconduct as part of their collection efforts. Any such misconduct by ourcollection personnel or the perception that our collection practices are considered to be aggressive and not compliant with the PRC laws andregulations may result in harm to our reputation and business, which could further reduce our ability to collect payments from borrowers, lead to adecrease in the willingness of prospective borrowers to apply for and utilize our credit or fines, penalties, administrative investigations or evencriminal liabilities, any of which may have a material adverse effect on our results of operations. See also “—Misconduct by third-party collectionservice providers may adversely impact our brand, reputation and results of operations.”Furthermore, we rely on certain third-party service providers, such as user acquisition partners, marketing and brand promotion agencies,third-party payment platforms and collection service providers, to conduct our business. We enter into collaboration contracts with fixed terms withsuch service providers. However, we cannot assure you that we can renew such collaboration agreements once they expire, or that we can renewsuch agreements with the terms we desire. Such service providers may also be demanded by their investors not to work with us, or form alliances toseek better terms dealing with us. In addition, if these service providers failed to function properly or terminated the cooperation, we cannot assureyou that we could find an alternative in a timely and cost-efficient manner, or at all. Any of these occurrences could result in our diminished abilityto operate our business, potential liability to borrowers, inability to attract borrowers, reputational damage, regulatory intervention and financialharm, which could negatively impact our business, financial condition and results of operations. In the meanwhile, we cannot assure you that third-party service providers would comply with our compliance requirements at all times and would not commit wrongdoings or misconduct especiallyin carrying out offline marketing and promotions, failure of which may result in us facing user complaints, suffering brand and reputation damagesand being subject to administrative actions. Neither can we guarantee that borrowers would not commit wrongdoings or misconduct, which, ifoccurs, could cause harm to our brand and reputation.Fluctuations in interest rates could negatively affect our loan facilitation volume and profitability.Most of the loans facilitated through our platform are issued with fixed interest rates. Fluctuations in the interest rate environment maydiscourage financial institution partners to fund loan products facilitated through our platform, which may adversely affect our business.Meanwhile, if we fail to respond to the fluctuations in interest rates in a timely manner and reprice loan products facilitated by us, these loanproducts may become less attractive to borrowers. Additionally, if we reprice loan products facilitated by us to align with the market rate, ourresults of operations may be adversely affected.Table of Contents41We are subject to risk of recoverability of deferred tax assets.As of December 31, 2021, 2022 and 2023, our deferred tax assets amounted to RMB835 million, RMB1,019 million and RMB1,068million (US$150 million), respectively. We periodically assess the probability of the realization of deferred tax assets, using accounting judgmentsand estimates with respect to, among other things, historical operating results, expectations of future earnings and tax planning strategies. Inparticular, these deferred tax assets can only be recognized to the extent that it is probably that future taxable profits will be available, againstwhich the deferred tax assets can be utilized. However, we cannot assure you that our expectation of future earnings will materialize, due to factorsbeyond our control such as general economic conditions, or, negative development of the regulatory environment, in which case we may not beable to recover our deferred tax assets, which in turn could have a material adverse effect on our financial condition and results of operations.If we fail to complete, obtain or maintain the value-added telecommunications license, other requisite license, or approvals or filings in China,our business, financial condition and results of operations may be materially and adversely affected.PRC regulations impose sanctions for engaging in internet information services of a commercial nature without an internet contentprovider license, or the ICP License. PRC regulations also impose sanctions for engaging in the operation of online data processing and transactionprocessing without an online data processing and transaction processing license (ICP License and online data processing and transaction processinglicense are both sub-sets of value-added telecommunications service license, or VATS License). These sanctions include corrective orders andwarnings from the PRC telecommunication administration authority, fines and confiscation of illegal gains and, in the case of significantinfringements, the suspension of business and website and mobile app operations. Nevertheless, the interpretation of such regulations and PRCregulatory authorities’ enforcement of such regulations in the context of the Credit-Tech industry remains uncertain; it is unclear whether Credit-Tech service providers like us are required to obtain the ICP License, or any other kind of VATS Licenses. Shanghai Qiyu obtained its ICP Licensein April 2021 and Fuzhou Microcredit obtained its ICP License in April 2023. If our past practice were deemed to be internet telecommunicationsbusiness operations without VATS Licenses or we were to be required to obtain additional such licenses, the governmental authorities may levyfines up to five times of the illegal income or RMB1 million, confiscate our income, revoke our business licenses, or require us to discontinue ourrelevant business, and our business, results of operations, financial condition, and prospects may be materially and adversely affected. Given theevolving regulatory environment of the Credit-Tech industry and value-added telecommunications business, we cannot rule out the possibility thatthe PRC government authorities will explicitly require any of the VIEs or subsidiaries of the VIEs to obtain additional ICP Licenses, online dataprocessing and transaction processing licenses or other VATS Licenses, or issue new regulatory requirements to institute a new licensing regime forour industry.Furthermore, companies engaging in distribution of publicly-offered funds must obtain a license from the CSRC, and one of oursubsidiaries has obtained a fund sales license. We must comply with regulatory requirements regarding fund sales activities, such as marketing anddistribution of funds. These requirements include, but are not limited to, prohibition of any false records, misleading statements, materialomissions, illegal earnings commitment, and exaggeration or other false advertising. Due to the evolving regulatory environment and significantuncertainties around the interpretation and specific enforcement of current and future PRC laws and regulations applicable to the fund salesindustry, regulators may adopt new laws and regulations. If regulatory authorities impose more stringent requirements on fund sales activities,require additional licenses and permits for fund sales activities, or further scrutinize fund sales marketing activities on Internet platforms, ourbusiness, results of operations, financial condition and prospects may be materially and adversely affected.We could be found in violation of any future laws and regulations, or of the laws and regulations currently in effect due to changes in therelevant authorities, or interpretation of these laws and regulations. We cannot assure you that we would be able to obtain or maintain any requiredlicense, regulatory approvals or filings in a timely manner, or at all, which would subject us to sanctions, such as the imposition of fines and thediscontinuation or restriction of our operations or other sanctions as stipulated in the new regulatory rules, and materially and adversely affect ourbusiness and impede our ability to continue our operations.Any significant disruption in service on our platform or in our computer systems, including events beyond our control, could prevent us fromprocessing loans on our platform, reduce the attractiveness of our platform and result in a loss of borrowers.In the event of a platform outage and physical data loss, the performance of our platform and solutions would be materially and adverselyaffected. The satisfactory performance, reliability and availability of our platform, solutions and underlying technology infrastructure are critical toour operations and reputation and our ability to retain existing and attract new users and financial service providers. Much of our system hardwareis hosted in a leased facility located in Beijing. We also maintain a real-time backup system in the same facility and a remote backup system in aseparate facility. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power ortelecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts, andsimilar events. If there is a lapse in service or damage to our leased facilities, we could experience interruptions and delays in our service and mayincur additional expense in arranging new facilities.Table of Contents42Any interruptions or delays in the availability of our platform or solutions, whether as a result of a third-party or our error, naturaldisasters or security breaches, whether accidental or willful, could harm our reputation and our relationships with users and financial serviceproviders. Additionally, in the event of damage or interruption, we have no insurance policy to adequately compensate us for any losses that wemay incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover alldata and services in the event of an outage. These factors could damage our brand and reputation, divert our employees’ attention and subject us toliability, any of which could adversely affect our business, financial condition and results of operations.Our platform and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adverselyaffected.Our platform and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systemsdepend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely contained,and may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for externalor internal use. Errors or other design defects within the software on which we rely may result in a negative experience for borrowers and financialinstitution partners, delay introductions of new features or enhancements, result in errors or compromise our ability to protect user data or ourintellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss ofborrowers or financial institution partners, loss of revenue or liability for damages, any of which could adversely affect our business and financialresults.We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitiveposition.We regard our trademarks, domain names, software copyrights, know-how, proprietary technologies and similar intellectual property ascritical to our success, and we rely on trademark and trade secret law and confidentiality, invention assignment and non-compete agreements withour employees and others to protect our proprietary rights. See “Item 4. Information on the Company—B. Business Overview—IntellectualProperties” and “Item 4. Information on the Company—B. Business Overview—Regulation—Laws and Regulations relating to IntellectualProperty.” However, we cannot assure you that any of our intellectual property rights would not be challenged, invalidated or circumvented, or suchintellectual property will be sufficient to provide us with competitive advantages. In addition, other parties may misappropriate our intellectualproperty rights, which would cause us to suffer economic or reputational damages. Because of the rapid pace of technological change, we cannotassure you that all of our proprietary technologies and similar intellectual property will be patented in a timely or cost-effective manner, or at all.Furthermore, parts of our business rely on technologies developed or licensed by other parties, or co-developed with other parties, and we may notbe able to obtain or continue to obtain licenses and technologies from these other parties on reasonable terms, or at all.It is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject tojudicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation.Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remediesavailable to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce ourcontractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly, and the steps we take may beinadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual propertyrights, such litigation could result in substantial costs and in a diversion of our managerial and financial resources. We can provide no assurancethat we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discoveredby, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes mayarise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual property rights could have amaterial adverse effect on our business, financial condition and results of operations.Table of Contents43Some aspects of our platform include open source software, and any failure to comply with the terms of one or more of these open sourcelicenses could negatively affect our business.Aspects of our platform include software covered by open source licenses. Open source license terms are often ambiguous, and there islittle or no legal precedent governing the interpretation of many of the terms of certain of these licenses. Therefore, the potential impact of suchterms on our business is somewhat unknown. If portions of our proprietary software are determined to be subject to an open source license, wecould be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies or otherwise belimited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and loan products. There can beno assurance that efforts we take to monitor the use of open source software to avoid uses in a manner that would require us to disclose or grantlicenses under our proprietary source code will be successful, and such use could inadvertently occur. This could harm our intellectual propertyposition and have a material adverse effect on our business, results of operations, cash flows and financial condition. In addition to risks related tolicense requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensorsgenerally do not provide warranties or controls on the origin of the software. Many of the risks associated with the use of open source softwarecannot be eliminated, and could adversely affect our business.We may be subject to intellectual property infringement claims, which may be costly to defend and may disrupt our business and operations.We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks,copyrights, know-how, proprietary technologies or other intellectual property rights held by other parties. We may from time to time in the futurebecome subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be other parties’trademarks, copyrights, know-how, proprietary technologies or other intellectual property rights that are infringed by our products or other aspectsof our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against usin China, the United States or other jurisdictions. If any infringement claims are brought against us, we may be forced to divert management’s timeand other resources from our business and operations to defend against these claims, regardless of their merits. If we are ruled against in any ofthese cases, we may be required to redesign or suspend our services, liable for substantial royalty or licensing fees or incur substantial amounts tosatisfy judgments or settle claims or lawsuits. Any of the foregoing occurrences could materially and adversely affect our business, results ofoperations, financial condition, cash flows, reputation and the price of our securities. For example, the trademarks and trade names we use, “360,”was being challenged by a third party, which claimed that our use of the “360” trademark infringed its rights. In addition, the owner of the “360”trademarks, which is a wholly owned subsidiary of 360 Group, was involved in several legal proceedings, in which the effectiveness of the 360trademarks was challenged. As of the date of this annual report, the case disputing our right to use the “360” trademarks and trade names has beensettled by the parties involved, and the effectiveness of the “360” trademarks registered by 360 Group has been upheld in courts. To prevent thepotential disruptive impact these and similar disputes may have on our business and operations, 360 Group has also registered several new 360trademarks for our use. However, we cannot guarantee that we or 360 Group will not face other proceedings or disputes in connection with the“360” trademarks and trade names and their use in the future.Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for grantingtrademarks, copyrights, know-how, proprietary technologies or other intellectual property rights in China are still evolving and are uncertain, andwe cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectualproperty rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property,and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may bematerially and adversely affected.Any failure to comply with PRC property laws and regulations regarding certain of our leased premises may negatively affect our business,results of operations and financial condition.We have not registered our lease agreements with government authorities. Under PRC laws and regulations, we may be required toregister and file with the government authority executed lease agreements. The failure to register the lease agreements for our leased properties willnot affect the validity of these lease agreements, but the competent housing authorities may order us to register the lease agreements in a prescribedperiod of time and impose a fine ranging from RMB1,000 to RMB10,000 for each non-registered lease if we fail to complete the registration withinthe prescribed timeframe.Table of Contents44Failure to comply with the PRC Social Insurance Law and the Regulation on the Administration of Housing Provident Funds may subject usto fines and other legal or administrative sanctions.Companies registered and operating in China are required under the PRC Social Insurance Law (latest amended in 2018) and theRegulations on the Administration of Housing Funds (latest amended in 2019) to, apply for social insurance registration and housing fund depositregistration within 30 days of their establishment, and to pay for their employees different social insurance including pension insurance, medicalinsurance, work-related injury insurance, unemployment insurance and maternity insurance to the extent required by law. Historically, one of ourPRC subsidiaries did not complete the housing provident fund registration in a timely manner and engaged a third-party human resources agency topay social insurance premium and housing provident funds for certain of our employees. In August 2022, we completed the housing provident fundregistration for such subsidiary. As the interpretation and implementation of labor-related laws and regulations are still evolving, our employmentpractices may be deemed to be noncompliant with such laws and regulations in China, which, if occurs, may subject us to obligations to provideadditional compensation to our employees, labor disputes or government investigations. As a result, our business, financial condition and results ofoperations could be adversely affected. There is no assurance that we will not be ordered by the competent labor authorities for rectification andfailure to comply with such orders may subject us to administrative fines.Some of the loans facilitated through our platform are funded by and disbursed indirectly through trusts under trust arrangements amongfinancial institution partners, trust companies and us. If all or part of the funds in the trusts are not disbursed to borrowers as loans and thefunds in the trusts do not generate the expected returns to the financial institution partners within a specified time frame, we could be obligatedto make up the difference between the expected return and the actual return. As a result, our financial conditions may be adversely affected.As mutually agreed upon by us and a small number of financial institution partners pursuant to their internal business requirements andprocedures, some of the loans facilitated through our platform are funded by and disbursed indirectly through trusts, which also provide us withmore flexibility to utilize the funds from the trusts for loan facilitation within the specified time frame and are in line with the industry norms. Forsuch trust arrangements, we assume variable economic benefits or losses of the trusts. Because the financial institutions partners are typicallyentitled to receive repayment of the funds initially provided plus return from the trusts under the trust arrangements, if all or part of the funds in thetrusts are not disbursed to borrowers as loans and do not generate the expected return to the financial institution partners within a specified timeframe, we could be obligated to make up the difference between the expected return and the actual return to the financial institution partners. Forthe years ended December 31, 2021, 2022 and 2023, there had been no such cases. However, we cannot assure you that we will not be obligated tomake up any such difference in the future. If the foregoing occurs in the future, our financial conditions may be adversely affected.Our business depends on the continued efforts of our management. If one or more of our key executives were unable or unwilling to continuein their present positions, our business may be severely disrupted.Our business operations depend on the continued services of our management, particularly the executive officers named in this annualreport and teams in charge of our risk management and product development, as well as collaboration with financial institution partners. While wehave provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of ourmanagement were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growthmay be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adverselyaffected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered intoconfidentiality and non-competition agreements with our management, there is no assurance that no member of our management team will join ourcompetitors or form a competing business, or disclose confidential information to the public. If any dispute arises between our current or formerofficers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforcethem at all.From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significantmanagement attention, disrupt our business and adversely affect our financial results.We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our platform.These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriatebusiness opportunity, we may not be able to successfully consummate the transaction, and even if we do consummate such a transaction, we maybe unable to realize the envisaged benefits or avoid the difficulties and risks of such a transaction.Table of Contents45Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:●difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, rights, platforms, products andservices of the acquired business;●the inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity orother benefits;●difficulties in retaining, training, motivating and integrating key personnel;●the diversion of management’s time and resources from our daily operations;●difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations;●difficulties in retaining relationships with borrowers, employees and suppliers of the acquired business;●risks of entering markets in which we have limited or no prior experience;●regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;●the assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectualproperty rights or increase our risk of liability;●the failure to successfully further develop the acquired technology;●liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violationsof laws, commercial disputes, tax liabilities and other known and unknown liabilities;●potential disruptions to our ongoing businesses; and●unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions.We may not make any investments or acquisitions. Even if we do, any such future investments or acquisitions may not be successful, maynot benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in theintended benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to thesuccessful development of new or enhanced loan products and services or that any new or enhanced loan products and services, if developed, willachieve market acceptance or prove to be profitable.If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report ourfinancial results or prevent fraud.The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include amanagement report on the company’s internal control over financial reporting in its annual report, which contains management’s assessment of theeffectiveness of the company’s internal control over financial reporting. Our management has concluded that our internal control over financialreporting was effective as of December 31, 2023. Our independent registered public accounting firm has issued an attestation report, which hasconcluded that our internal control over financial reporting was effective in all material aspects as of December 31, 2023. However, if we fail tomaintain effective internal control over financial reporting in the future, our management and our independent registered public accounting firmmay not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level. This could in turn resultin loss of investor confidence in the reliability of our financial statements and negatively impact the trading price of our class A ordinary sharesand/or ADSs. Furthermore, we have incurred and anticipate that we will continue to incur considerable costs, management time and other resourcesin an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.Table of Contents46Our quarterly results may fluctuate and may not fully reflect the underlying performance of our business.Our quarterly results of operations, including the levels of our net revenue, operating cost and expenses, net (loss)/income and other keymetrics may vary in the future due to a variety of factors, some of which are beyond our control, and period-to-period comparisons of our operatingresults may not be meaningful, especially given our limited operating history. Accordingly, the results for any one quarter are not necessarily anindication of future performance. Fluctuations in quarterly results may adversely affect the price of our class A ordinary shares and/or ADSs.In addition, we may experience seasonality in our business, reflecting seasonal fluctuations in internet usage and traditional consumerborrowing patterns, as borrowers typically use their borrowing proceeds to finance their personal consumption needs. While our rapid growth hassomewhat masked this seasonality, our results of operations could be affected by such seasonality in the future.Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to supportour business.We believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financialand marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilledemployees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire andretain such personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which wecompete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek torecruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and our ability tooperate our platform could diminish, resulting in a material adverse effect to our business.Increases in labor costs in the PRC may adversely affect our business and results of operations.The economy in China has experienced increases in labor costs in recent years. As a result, we expect the average wages in the PRC tocontinue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension,housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated governmentagencies for the benefit of our employees. Government agencies may examine whether an employer has made adequate payments to the statutoryemployee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines or other penalties. Weexpect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or passon these increased labor costs to our users or financial institution partners by increasing the fees for our services, our financial condition and resultsof operations may be adversely affected.We may not have sufficient business insurance coverage.Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in moredeveloped economies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that thecosts of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impracticalfor us to have such insurance. Any uninsured business disruptions may result in our incurrence of substantial costs and the diversion of resources,which could have an adverse effect on business, our results of operations and financial condition.Table of Contents47We and certain of our current and former directors or officers were, and in the future may be, named as defendants in putative shareholderclass action lawsuits that could have a material adverse impact on our business, financial condition, results of operation, cash flows andreputation.We and certain of our current and former directors or officers were named as defendants in a putative shareholder class action filed infederal court, captioned In re 360 DigiTech, Inc. Securities Litigation, No. 1:21-cv-06013 (U.S. District Court for the Southern District of NewYork, amended complaint filed on January 14, 2022). This case was purportedly brought on behalf of a class of persons who purchased oursecurities between April 30, 2020 and July 8, 2021 and who allegedly suffered damages as a result of alleged misstatements and omissions in ourpublic disclosure documents in connection with our compliance and data collection practices. On January 14, 2022, Lead Plaintiff filed anAmended Complaint. On March 15, 2022, we filed a motion to dismiss the Amended Complaint. Briefing on the motion to dismiss was completedon May 31, 2022. In July 2022, the Court granted our motion to dismiss the Amended Complaint without prejudice, and granted Plaintiffs leave toreplead by September 26, 2022. On September 26, 2022, Lead Plaintiff notified the Court that he does not intend to file a Second AmendedComplaint. The court entered an order of judgment in favor of Defendants in September 2022, and Plaintiff’s deadline to appeal the judgment hasnow lapsed. We consider the case to effectively be closed. We may also face new legal proceedings, claims and investigations in the future. Theexistence of such cases and any adverse outcome of these cases, including any plaintiff’s appeal of a judgment, could have a material adverse effecton our business, reputation, financial condition, results of operations, cash flows as well as the trading price of our class A ordinary shares and/orADSs. Resolution of these matters may utilize a significant portion of our cash resources and divert management’s attention from the day-to-dayoperations of our company, all of which could harm our business. We also may be subject to claims for indemnification related to these matters,and we cannot predict the impact that indemnification claims may have on our business or financial results.Our investments in and capital supports to the joint venture company that we established for the construction of our regional headquarter andaffiliated industrial park may occupy a portion of our working capital.In October 2020, we established Shanghai 360 Changfeng Technology, Co., Ltd., or 360 Changfeng, a joint venture company in Shanghai,China through Shanghai Qiyu, to build our regional headquarters and the affiliated industrial park for our future operations. Currently, we hold 70%of the equity interests in 360 Changfeng and are the controlling shareholder, with the remaining 30% held by an independent third party. We haveconsolidated the financial condition and results of operations of 360 Changfeng on our financial statements beginning in the fiscal year of 2021 andit became our consolidated subsidiary. The construction project that the joint venture company operates is capital intensive. Pursuant to the jointventure agreement, the shareholders of the joint venture company will contribute initial funding for the acquisition of land use rights, while fundsrequired for subsequent developments will be mainly supplied through external financings with any remaining shortfall funded by the shareholdersratably in proportion to their respective equity interest ownership. As of December 31, 2023, a total of RMB1.0 billion were provided by theshareholders to acquire land use rights, of which RMB0.3 billion was funded by the independent third party. Additionally, 360 Changfeng hasentered into a facility agreement with a commercial bank in China to finance its operations and the construction project, pursuant to which thecommercial bank agreed to extend a loan facility in an aggregate amount of up to RMB1.0 billion, and required the subsidiary’s registered capitalto be paid in the same proportion of the total facility used. Currently, our investments in and capital supports to 360 Changfeng have not had amaterial adverse impact on our working capital. However, if 360 Changfeng requires further capital contributions or funding from us in the future,our working capital position could be negatively impacted. In addition, if 360 Changfeng defaults in its repayment obligations in any debtfinancings, it may incur additional liabilities or be involved in legal proceedings, which may adversely affect our results of operations, cash flowpositions and reputations.Table of Contents48Increasing focus with respect to environmental, social and governance matters may impose additional costs on us or expose us to additionalrisks. Failure to adapt to or comply with the evolving expectations and standards on environmental, social and governance matters frominvestors and the PRC government may adversely affect our business, financial condition and results of operation.The PRC government and public advocacy groups have been increasingly focused on environment, social and governance, or ESG, issuesin recent years, making our business more sensitive to ESG issues and changes in governmental policies and laws and regulations associated withenvironment protection and other ESG-related matters. Investor advocacy groups, certain institutional investors, investment funds, and otherinfluential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the implications andsocial cost of their investments. Regardless of the industry, increased focus from investors and the PRC government on ESG and similar mattersmay hinder access to capital, as investors may decide to reallocate capital or to not commit capital as a result of their assessment of a company’sESG practices. Any ESG concern or issue could increase our regulatory compliance costs. If we do not adapt to or comply with the evolvingexpectations and standards on ESG matters from investors and the PRC government or are perceived to have not responded appropriately to thegrowing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and thebusiness, financial condition, and the price of the ADSs could be adversely effected.We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.Our business could be adversely affected by epidemics, including COVID-19, the Ebola virus disease, Zika virus disease, H1N1 flu,H7N9 flu, avian flu, Severe Acute Respiratory Syndrome, or SARS, and other epidemics. Our business operations could be disrupted if any of ouremployees are suspected of having contracted the any of the foregoing diseases, since it could require our employees to be quarantined or ouroffices to be disinfected. In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms theChinese economy and the Credit-Tech industry in general. In recent years, there have been outbreaks of epidemics in China and globally. TheCOVID-19 pandemic adversely impacted the economic condition of small and micro-sized businesses, especially offline businesses, and to agreater or lesser extent resulted in reduced spending, especially on discretionary consumption. We derive revenue from loan products facilitatedthrough our platform. A reduction in discretionary consumption may adversely affect demand for consumer and SME loan products. In addition,downturn in the economy and previous suspension of business activities across various sectors might cause an increase in default of the loansfacilitated through our platform as they are likely to lead to a rise in unemployment and may weaken borrowers’ willingness and ability to repaytheir debts. The increased defaults could in turn result in elevated risks and financial losses to our financial institution partners and us. See also “—We have a limited operating history and are subject to credit cycles and the risk of deterioration of credit profiles of borrowers.”Whether and to what extent to which COVID-19 may impact our results of operations going forward will depend on future developmentswhich are highly uncertain and unpredictable, including the frequency, duration and extent of future outbreaks of COVID-19, the appearance ofnew variants with different characteristics, the effectiveness of efforts to contain or treat cases, and future actions that may be taken in response tothese developments.We are also vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power losses, telecommunicationsfailures, break-ins, wars, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technologyplatform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adverselyaffecting our ability to provide products and services on our platform.Our headquarters are located in Shanghai and many of our senior management reside in Beijing. Most of our system hardware and back-up systems are hosted in leased facilities located in Shanghai, Beijing and Luoyang. Consequently, we are highly susceptible to factors adverselyaffecting Shanghai and Beijing. If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur or aggravate inShanghai and Beijing, our operation may experience material disruptions, such as temporary closure of our offices and suspension of services,which may materially and adversely affect our business, financial condition and results of operations.Table of Contents49Risks Related to Our Corporate StructureIf the PRC government deems that the contractual arrangements in relation to the VIEs do not comply with PRC regulatory restrictions onforeign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we couldbe subject to severe penalties or be forced to relinquish our interests in those operations.Foreign ownership of internet-based businesses, such as the distribution of online information, is subject to restrictions under current PRClaws and regulations. Although the Administrative Rules on the Foreign-invested Telecommunications Enterprises promulgated by the StateCouncil in May 2022 lifted the prior requirement that the primary foreign investor in a foreign invested value-added telecommunications enterprisemust have a good track record and operational experience in the value-added telecommunications industry, there remain restrictions on foreigninvestments in value-added telecommunication businesses. For example, foreign investors are generally not allowed to own more than 50% of theequity interests in a value-added telecommunications service provider in accordance with the Negative List (2021), which became effective onJanuary 1, 2022 and replaced the negative list in the Special Management Measures for the Access of Foreign Investment (2020 version), and otherapplicable laws and regulations.We are a Cayman Islands holding company and our PRC subsidiaries are considered foreign-invested enterprises. Therefore, we operateour Credit-Tech businesses in China through the VIEs and their subsidiaries, in which we have no ownership interest. Our PRC subsidiaries haveentered into a series of contractual arrangements with the VIEs and their respective shareholders, which enable us to (i) exercise effective controlover the VIEs, (ii) receive substantially all of the economic benefits of the VIEs, and (iii) have an exclusive option to purchase all or part of theequity interests and assets in the VIEs when and to the extent permitted by PRC law. As a result of these contractual arrangements, we have controlover and are the primary beneficiary of the VIEs and hence consolidate their financial results into our consolidated financial statements under U.S.GAAP. For a detailed description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” TheVIEs have been operating our Credit-Tech business, including, among others, operations of our 360 Jietiao, since its incorporation and haveobtained and held the ICP License according to PRC laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Investment Restrictions—Regulations on value-added telecommunications services.” The subsidiary ofShanghai Qiyu, Fuzhou Microcredit, which also provides loans through 360 Jietiao, has obtained a micro-lending license from the relevantcompetent local authorities and an ICP License.Investors in our class A ordinary shares or ADSs thus are not purchasing equity interest in the VIEs in China but instead are purchasingequity interest in our Cayman Islands holding company. Our holding company in the Cayman Islands, the VIEs and their subsidiaries, andinvestments in our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of thecontractual arrangements with the VIEs and, consequently, the business, financial condition, and results of operations of the VIEs and our companyas a group.In the opinion of our PRC legal counsel, the Contractual Arrangements are in compliance with PRC laws and regulations currently ineffect. However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application ofcurrent or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistentwith the opinion of our PRC legal counsel.It is uncertain whether any new PRC laws, regulations or rules relating to the “variable interest entity” structure will be adopted or ifadopted, what they would provide. If the ownership structure, contractual arrangements and business of our company, our PRC subsidiaries or theVIEs are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits orapprovals, the government authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our incomeor the income of the VIEs, revoking the business licenses or operating licenses of our WFOE or the VIEs, shutting down our servers or blockingour online platform, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptiverestructuring, restricting or prohibiting our use of proceeds from our offshore offering to finance our business and operations in China, and takingother regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to ourbusiness operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition andresults of operations. If any of these occurrences result in our inability to direct the activities of the VIEs, or our failure to receive economicbenefits from the VIEs, we may not be able to consolidate their results into our consolidated financial statements in accordance with U.S. GAAP,and our class A ordinary shares or ADSs may decline in value or become worthless if we are unable to assert our contractual control rights over theassets of the VIEs, which contributed 92%, 92% and 94% of our total net revenue in 2021, 2022 and 2023, respectively.Table of Contents50We rely on contractual arrangements with the VIEs and the shareholders of the VIEs for all of our business operations, which may not be aseffective as direct ownership in providing operational control.We have relied and expect to continue to rely on contractual arrangements with the VIEs and the shareholders of the VIEs, to operate ourCredit-Tech businesses, including, among others, the operation of 360 Jietiao, as well as certain other complementary businesses. For a descriptionof these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” These contractual arrangements maynot be as effective as direct ownership in providing us with control over the VIEs. For example, the VIEs or the shareholders of the VIEs may failto fulfill their contractual obligations with us, such as failure to maintain our platform and use the domain names and trademarks in a manner asstipulated in the contractual arrangements, or taking other actions that are detrimental to our interests.If we had direct ownership of the VIEs, we would be able to exercise our rights as a shareholder to effect changes in the board of directorsof the VIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level.However, under the current contractual arrangements, we rely on the performance by the VIEs and their shareholders of their obligations under thecontractual arrangements to exercise control over the VIEs. The shareholders of the VIEs may not act in the best interests of our company or maynot perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through thecontractual arrangements with the VIEs and the shareholders of the VIEs. Although we have the right, subject to a registration process with PRCgovernment authorities, to replace Shanghai Qibutianxia as the registered shareholders of the VIEs under the contractual arrangements, if itbecomes uncooperative or any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contractsthrough the operations of PRC laws and arbitration, litigation and other legal proceedings, the outcome of which will be subject to uncertainties.See “—Any failure by the VIEs or the shareholders of the VIEs to perform their obligations under our contractual arrangements with them wouldhave a material adverse effect on our business.” Therefore, our contractual arrangements with the VIEs and the shareholders of the VIEs may notbe as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.Any failure by the VIEs or the shareholders of the VIEs to perform their obligations under our contractual arrangements with them wouldhave a material adverse effect on our business.We have entered into a series of contractual arrangements with the VIEs, and the shareholders of the VIEs. For a description of thesecontractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” If the VIEs or the shareholders of the VIEs failto perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend additional resources toenforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctiverelief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of the VIEs were torefuse to transfer their equity interests in the VIEs to us or our designee when we exercise the purchase option pursuant to these contractualarrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform theircontractual obligations.Table of Contents51All of these contractual arrangements are governed by and interpreted in accordance with PRC law, and disputes arising from thesecontractual arrangements between us and the VIEs will be resolved through arbitration in China. For the sake of clarity, the arbitration provisionshere relate to the claims arising from the contractual relationship created by the VIE agreements, rather than claims under the US federal securitieslaws, and they do not prevent our shareholders or ADS holders from pursuing claims under the US federal securities laws in the United States. Thelegal system in the PRC is evolving rapidly. The interpretations of many laws, regulations, and rules may exhibit inconsistencies, and theenforcement of these laws, regulations, and rules may also involve uncertainties. As a result, uncertainties in the PRC legal system could limit ourability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractualarrangements in the context of a variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertaintiesregarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators arefinal and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If thelosing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards inPRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unableto enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractualarrangements, we may not be able to exert effective control over the VIEs, and our ability to conduct our business may be negatively affected. See“—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit thelegal protections available to us.”The registered shareholders of the VIEs may have potential conflicts of interest with us, which may materially and adversely affect our businessand financial condition.The registered shareholders of the VIEs are beneficially owned by some of our shareholders. However, as we raise additional capital, andour shareholders sell the shares they hold in our company in the future, the interests of such registered shareholders of the VIEs might becomedifferent from the interests of our company as a whole. Under the influence of its shareholders, such registered shareholders of the VIEs maybreach, or cause the VIEs to breach, the existing contractual arrangements we have with them, which would have a material adverse effect on ourability to effectively control the VIEs and receive economic benefits from them. For example, the registered shareholders of the VIEs may be ableto cause our agreements with the VIEs to be performed in a manner adverse to us by, among other things, failing to remit payments due under thecontractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, the registered shareholders of the VIEswill act in the best interests of our company or such conflicts will be resolved in our favor.Currently, we do not have any arrangements to address potential conflicts of interest between the VIEs’ shareholders and our company,except that we could exercise our purchase option under the option agreement with such shareholders to request that they transfer all of their equityinterests in the VIEs to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict ofinterest or dispute between us and the shareholders of the VIEs, we would have to rely on legal proceedings, which could result in the disruption ofour business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.Table of Contents52Contractual arrangements in relation to the VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that we or theVIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment.Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRCtax authorities. The Enterprise Income Tax Law requires every enterprise in China to submit its annual enterprise income tax return together with areport on transactions with its related parties to the tax authorities. The tax authorities may impose reasonable adjustments on taxation if they haveidentified any related party transactions that are inconsistent with arm’s length principles. We may face material and adverse tax consequences ifthe PRC tax authorities determine that the contractual arrangements between our WFOE, the VIEs, and the shareholders of the VIEs were notentered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, regulations andrules, and adjust the VIEs’ income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in areduction of expense deductions recorded by the VIEs for PRC tax purposes, which could in turn increase their tax liabilities. In addition, if ourWFOE requests the shareholders of the VIEs to transfer their equity interests in the VIEs at nominal or no value pursuant to these contractualarrangements, such transfer could be viewed as a gift and subject our WFOE to PRC income tax. Furthermore, the PRC tax authorities may imposelate payment fees and other penalties on the VIEs for the adjusted but unpaid taxes according to the applicable regulations. Our financial positioncould be materially and adversely affected if the VIEs’ tax liabilities increase or if they are required to pay late payment fees and other penalties.We may lose the ability to use and enjoy assets held by the VIEs that are material to the operation of our business if the entity goes bankrupt orbecomes subject to a dissolution or liquidation proceeding.The VIEs hold substantially all of our assets, some of which are material to our operation, including, among others, intellectual properties,hardware and software. Under contractual arrangements, the VIEs may not, and the shareholders of the VIEs may not cause them to, in anymanner, sell, transfer, mortgage or dispose of their assets or their legal or beneficial interests in the business without our prior consent. However, inthe event the VIEs’ shareholders breach these contractual arrangements and voluntarily liquidate the VIEs, or the VIEs declare bankruptcy and allor part of their assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unableto continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results ofoperations. If the VIEs undergo a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or allof these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial conditionand results of operations.Divestitures of businesses and assets may have a material and adverse effect on our business and financial condition.We may undertake in the future, partial or complete divestitures or other disposal transactions in connection with certain of our businessesand assets, particularly ones that are not closely related to our core focus areas or might require excessive resources or financial capital, to help ourcompany meet its objectives. These decisions are largely based on our management’s assessment of the business models and likelihood of successof these businesses. However, our judgment could be inaccurate, and we may not achieve the desired strategic and financial benefits from thesetransactions. Our financial results could be adversely affected by the impact from the loss of earnings and corporate overheadcontribution/allocation associated with divested businesses.Dispositions may also involve continued financial involvement in the divested business, such as through guarantees, indemnities or otherfinancial obligations. Under these arrangements, performance by the divested businesses or other conditions outside of our control could affect ourfuture financial results. We may also be exposed to negative publicity as a result of the potential misconception that the divested business is stillpart of our consolidated group. On the other hand, we cannot assure you that the divesting business would not pursue opportunities to provideservices to our competitors or other opportunities that would conflict with our interests. If any conflicts of interest that may arise between thedivesting business and us cannot be resolved in our favor, our business, financial condition, results of operations could be materially and adverselyaffected.Furthermore, reducing or eliminating our ownership interests in these businesses might negatively affect our operations, prospects, orlong-term value. We may lose access to resources or know-how that would have been useful in the development of our own business. Our ability todiversify or expand our existing businesses or to move into new areas of business may be reduced, and we may have to modify our businessstrategy to focus more exclusively on areas of business where we already possess the necessary expertise. We may sell our interests too early, andthus forego gains that we otherwise would have received had we not sold. Selecting businesses to dispose of or spin off, finding buyers for them (orthe equity interests in them to be sold) and negotiating prices for what may be relatively illiquid ownership interests with no easily ascertainablefair market value will also require significant attention from our management and may divert resources from our existing business, which in turncould have an adverse effect on our business operations.Table of Contents53The Hong Kong Stock Exchange has granted us a waiver from strict compliance with the requirements in Paragraph 3(b) of Practice Note15 to the Hong Kong Listing Rules such that we are able to list a subsidiary entity on the Hong Kong Stock Exchange within three years of thelisting. While we currently do not have any plan with respect to any spin-off listing on the Hong Kong Stock Exchange, we may consider a spin-offlisting on the Hong Kong Stock Exchange for one or more of our businesses within the three-year period subsequent to the listing on the HongKong Stock Exchange.Risks Related to Doing Business in ChinaThe PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and theinability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as anauditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United Statespursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. The auditor islocated in mainland China, a jurisdiction where the PCAOB was historically unable to conduct inspections and investigations completely before2022. As a result, we and investors in the ADSs were deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conductinspections of auditors in China in the past has made it more difficult to evaluate the effectiveness of our independent registered public accountingfirm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections. OnDecember 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kongfrom the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. However, if the PCAOBdetermines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong,and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with theSecurities and Exchange Commission, we and investors in our ADSs would be deprived of the benefits of such PCAOB inspections again, whichcould cause investors and potential investors in the ADSs to lose confidence in our audit procedures and reported financial information and thequality of our financial statements.Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigatecompletely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect thevalue of your investment.Pursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has notbeen subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a nationalsecurities exchange or in the over-the-counter trading market in the United States.On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect orinvestigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our auditor was subject to thatdetermination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annualreport on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB removed mainland China and Hong Kongfrom the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. For this reason, we were notidentified as a Commission-Identified Issuer under the HFCAA after we filed our annual report on Form 20-F for the fiscal year ended December31, 2022 and do not expect to be identified so after we file this annual report on Form 20-F for the fiscal year ended December 31, 2023.Table of Contents54Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong,among other jurisdictions. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accountingfirms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on ourfinancial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following thefiling of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCAA, our securities would be prohibited from beingtraded on a national securities exchange or in the over-the-counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future. Although our class A ordinary shares have been listed on the Hong Kong Stock Exchangeand the ADSs and class A ordinary shares are fully fungible, we cannot assure your that an active trading market for our class A ordinary shares onthe Hong Kong Stock Exchange will be sustained or that the ADSs can be converted and traded with sufficient market recognition and liquidity, ifour shares and ADSs are prohibited from trading in the United States. A prohibition of being able to trade in the United States would substantiallyimpair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have anegative impact on the price of the ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us,or at all, which would have a material adverse impact on our business, financial condition, and prospects.The PRC government’s significant oversight and discretion over our business operation and any failure to comply with PRC laws andregulations could result in a material adverse change in our operations and the value of the ADSs.We conduct our business primarily in China. Our operations in China are governed by PRC laws and regulations. In accordance withapplicable laws and regulations, the PRC government has significant oversight and discretion over the conduct of our business, and may interveneor influence our operations as the government deems appropriate to advance regulatory and societal goals and policy positions. The PRCgovernment has recently published new policies that significantly affected certain industries and we cannot rule out the possibility that it will in thefuture release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to continue ouroperations, which could result in a material adverse change in our operation and/or the value of our class A ordinary shares and ADSs. Our class Aordinary shares and ADSs may significantly decline in value as a result. Also, the PRC government may promulgate certain regulations and rules toexert more oversight over offerings that are conducted overseas and foreign investment in mainland China-based issuers. In the event that we fail tocomply with any legal and regulatory requirements of mainland China in relation to overseas securities issuance or foreign investment, our abilityto continue to offer securities to investors could be significantly limited or completely hindered and the value of such securities could significantlydecline.Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. The PRC legal system isevolving rapidly and PRC laws, regulations, and rules may change quickly with little advance notice. The interpretations of many PRC laws,regulations, and rules may contain inconsistencies, the enforcement of which involves uncertainties. For example, the PRC Foreign InvestmentLaw, which took effect on January 1, 2020, replaced the trio of existing laws regulating foreign investment in China, together with theirimplementation rules and ancillary regulations. This PRC Foreign Investment Law embodies an expected PRC regulatory trend to rationalize itsforeign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legalrequirements for both foreign and domestic investments. However, substantial uncertainties exist with respect to the interpretation andimplementation of the PRC Foreign Investment Law, its implementation rules and ancillary regulations, which may materially impact the viabilityof our current corporate structure, corporate governance and business operations. In addition, pursuant to the Plan on Reforming State CouncilInstitutions approved by the National People’s Congress on March 10, 2023, the China National Financial Regulatory Administration was officiallyestablished on May 18, 2023, replacing the China Banking and Insurance Regulatory Commission as the new financial regulatory authority inChina. As a result, the local financial regulatory system underwent a deep reform, with the central financial management department’s localagencies acting as the main body. This restructuring may lead to changes and uncertainties in rules and regulations applicable to our business.Uncertainties and changes in regulatory environment may increase our cost of operation, limit our service offerings or even cause us tofundamentally change our business model. We cannot assure you that we will remain fully compliant with all new regulatory requirements or anyfuture implementation rules on a timely basis, or at all. Any failure of us to fully comply with new regulatory requirements may significantly limitor completely hinder our ability to offer or continue to offer the class A ordinary shares and ADSs, cause significant disruption to our businessoperations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations andcause the class A ordinary shares and ADSs to significantly decline in value or become worthless.Table of Contents55From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRCadministrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be difficultto evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. Furthermore, the PRC legal system isbased in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactiveeffect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, includinguncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially andadversely affect our business and impede our ability to continue our operations.Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business andresults of operations.Substantially all of our operations are located in mainland China. Accordingly, our business, prospects, financial condition and results ofoperations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economicgrowth in China as a whole.While the Chinese economy has experienced significant growth over the past decades, there can be no assurance that the growth would bemaintained or equitable across sectors. The Chinese government has implemented various measures to encourage economic growth and guide theallocation of resources. Some of these measures may benefit the overall Chinese economy, but may not have the same effect on us. For example,our financial condition and results of operations may be adversely affected by government control over capital investments or changes in taxregulations.A downturn in the Chinese or global economy could reduce the demand for consumer loans or increase the default risk, which could materiallyand adversely affect our business and financial condition.COVID-19 had a severe and negative impact on both the Chinese and the global economy from 2020 through 2022, and the globalmacroeconomic environment still faces numerous challenges. The growth rate of the Chinese economy has been slowing since 2010 and theChinese population began to decline in 2022. The Federal Reserve and other central banks outside of China have raised interest rates. The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. Theimpact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally.There have also been concerns about the relationship between China and other countries, including the surrounding Asian countries, which maypotentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and Chinawith respect to trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive to global economicconditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Inaddition, our consumers and SMEs are vulnerable to changes in macroeconomic conditions. If macroeconomic conditions deteriorate, ourconsumers and SMEs may be directly hit, which in turn may lead to higher default rates or decreasing borrowings. As a result, any severe orprolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations and financialcondition. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meetliquidity needs.Table of Contents56Changes in international trade policies and rising political tensions, particularly between the U.S. and China, may adversely impact ourbusiness and operating results.There have been changes in international trade policies and rising political tensions, particularly between the U.S. and China, but also as aresult of the conflict in Ukraine and sanctions on Russia. The U.S. government has made statements and taken certain actions that may lead topotential changes to U.S. and international trade policies towards many countries, including China. For example, export controls, economic andtrade sanctions have been threatened and/or imposed by the U.S. government on a number of Chinese technology companies. The United States hasalso threatened to impose further export controls, sanctions, trade embargoes, and other heightened regulatory requirements on China and Chinesecompanies for alleged activities both inside and outside of China. Against this backdrop, China has implemented, and may further implement,measures in response to the changing trade policies, treaties, tariffs and sanctions and restrictions against Chinese companies initiated by the U.S.government. For example, the Ministry of Commerce of China published Rules on Counteracting Unjustified Extra-Territorial Application ofForeign Legislation and Other Measures in January 2021 to counter restrictions imposed by foreign countries on Chinese citizens and companies.We are monitoring policies in the United States that are aimed at restriction U.S. persons from investing in certain Chinese companiesand/or imposing sanctions on Chinese entities. The United States and various foreign governments have imposed controls, license requirements andrestrictions on the import or export of technologies and products (or voiced the intention to do so). For instance, in October 2022, the Bureau ofIndustry and Security (BIS) of the U.S. Department of Commerce issued rules aimed at restricting China’s ability to obtain advanced computingchips, develop and maintain supercomputers and manufacture advanced semiconductors. On August 9, 2023, the Biden administration released anexecutive order directing the Department of the Treasury to create an outbound FDI review program that will require reporting on or (in morenarrow circumstances) will prohibit investments by U.S. persons involving “covered national security technologies and products,” which is definedto include “sensitive technologies and products in the semiconductors and microelectronics, quantum information technologies, and artificialintelligence (AI) sectors that are critical for the military, intelligence, surveillance, or cyber-enabled capabilities” of China (to include Hong Kongand Macau). On the same day, the Department of Treasury issued an advance notice of proposed rulemaking (ANPRM), which provided aconceptual framework for outbound investment controls focused on China. As of the date of this annual report, the final rules implementing thisexecutive order has not become effective yet, and the scope of the outbound FDI review program may be materially different from what is currentlycontemplated by the ANPRM. Therefore, there are substantial uncertainties on whether the outbound FDI review program will have a materialimpact on our business, results of operations, financial condition, and prospects.Rising trade and political tensions could reduce levels of trade, investments, technological exchanges and other economic activitiesbetween China and other countries, which would have an adverse effect on global economic conditions, the stability of global financial markets,and international trade policies. While cross-border business currently may not be an area of our focus, if we plan to expand our businessinternationally in the future, any unfavorable government policies on international trade or any restriction on Chinese companies may affectconsumer demand for our products and service, impact our competitive position, or prevent us from being able to conduct business in certaincountries. In addition, our results of operations could be adversely affected if any such tensions or unfavorable government trade policies harm theChinese economy or the global economy in general.Table of Contents57The approval of and filing with the CSRC or other PRC government authorities will be required if we conduct offshore offerings in the future,and we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRCregulatory agencies in 2006 and amended in 2009 require an overseas special purpose vehicle formed for listing purposes through acquisitions ofPRC domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of suchspecial purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and ouroffshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long itwill take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay inobtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would subject us to sanctionsimposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions orlimitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business,financial condition, and results of operations.On July 6, 2021, PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance withthe Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseaslistings by China-based companies and proposed to take effective measures, such as promoting the construction of regulatory systems to deal withthe risks and incidents faced by China-based overseas-listed companies. As a follow-up, on February 17, 2023, the CSRC issued theAdministration Trial Measures of Overseas Securities Offering and Listing by Domestic Companies.The measures propose to establish a new filing-based regime to regulate overseas offerings and listings by domestic companies.According to the measures, an overseas offering of equity shares, depository receipts, convertible corporate bond and the listing by a domesticcompany, whether directly or indirectly, shall be filed with the CSRC. Specifically, the examination and determination of an indirect offering andlisting will be conducted on a substance-over-form basis, and an offering and listing shall be considered as an indirect overseas offering and listingby a domestic company if the issuer meets the following conditions: (i) the operating income, gross profit, total assets, or net assets of the domesticenterprise in the most recent fiscal year, any of which was more than 50% of the relevant line item in the issuer’s audited consolidated financialstatement for that year; and (ii) the principle elements of operations are conducted within or the main places of operations are within the PRC, orsenior management personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in the PRC.According to these measures, the issuer or its affiliated material domestic company, as the case may be, shall file with the CSRC and report therelevant information for its initial public offering, follow-on offshore offering and other equivalent offshore offering activities. Particularly, theissuer or its affiliated material domestic company shall submit the filing with respect to its initial public offering and listing within three businessdays after its initial filing of the listing application, and submit the filing with respect to its follow-on offshore offering on the same overseasmarket within three business days after completion of the follow-on offering. Failure to comply with the filing requirements may result in fines tothe domestic companies and fines on the directly responsible person in charge and other responsible persons. The controlling shareholder or actualcontrollers of domestic company organize or instruct to engage in the illegal act or conceals relevant matters failing to comply with the filingrequirements will be subject to fines. The measures also set forth certain regulatory circumstances where offshore offerings and listings bydomestic enterprises are prohibited. The measures also come with five guidelines on the interpretation and application of the filing requirementsand procedures.In a Q&A released on its official website, the respondent CSRC official indicated that the proposed new filing requirement will start withnew companies and the existing companies seeking to carry out activities like follow-on offshore financing. Existing companies are not required tofiled immediately, and the subsequent filing matters such as refinancing shall be filed as required. The Q&A also addressed the contractualarrangements and pointed out that the filing management will adhere to the principles of marketization and legalization, and strengthen regulatorycoordination, and the CSRC will seek the opinions of the relevant competent authorities for the overseas listing of VIE-structured enterprises thatmeet the compliance requirements to file, and support the development and growth of enterprises using two markets and two resources.Nevertheless, it does not specify what qualify as compliant VIE structures and what domestic laws and regulations are required to be compliedwith. There are uncertainties with respect to the application and enforcement of the newly published measures. We will closely monitor and assessany legislative and regulatory development and prepare for filing when necessary.Furthermore, on February 24, 2023, the CSRC released the Provisions on Strengthening Confidentiality and Archives Administration ofOverseas Securities Offering and Listing by Domestic Companies, which came into effect on March 31, 2023. Pursuant to the provisions, anyfuture inspection or investigation conducted by overseas securities regulator or the relevant competent authorities on our PRC domestic companieswith respect to our overseas issuance and offering shall be carried out in the manner in compliance with PRC laws and regulations.Table of Contents58Relatedly, on December 27, 2021, the National Commission of Development and Reform and the Ministry of Finance jointly issued theNegative List (2021), which became effective on January 1, 2022. Pursuant to such Special Administrative Measures, if a domestic companyengaging in the prohibited business stipulated in the Negative List (2021) seeks an overseas offering and listing, it shall obtain the approval fromthe competent government authorities. Besides, the foreign investors of the company shall not be involved in the company’s operation andmanagement, and their shareholding percentage shall be subject, mutatis mutandis, to the regulations on the domestic securities investments byforeign investors. As the Negative List (2021) is relatively new, there remain substantial uncertainties as to the interpretation and implementation ofthese new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements. If weare required to comply with these requirements and fail to do so on a timely basis, if at all, our business operation, financial conditions and businessprospect may be adversely and materially affected.In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements onus. If it is determined in the future that approval from and filing with the CSRC or other regulatory authorities or other procedures, including thecybersecurity review under the Measures for Cybersecurity Review (2021 Revision), the Measures of Regulations on the Network Data SecurityAdministration (Draft for Comments), and the filing requirements under the Administration Trial Measures of Overseas Securities Offering andListing by Domestic Companies, are required for our offshore offerings, it is uncertain whether we can or how long it will take us to obtain suchapproval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay inobtaining such approval or completing such filing procedures for our offshore offerings, or a rescission of any such approval or filing if obtained byus, would subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory authorities may impose fines and penalties onour operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriationof the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financialcondition, results of operations, and prospects, as well as the trading price of our class A ordinary shares and ADSs. The CSRC or other PRCregulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and deliveryof the class A ordinary shares offered. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiringthat we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable toobtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negativepublicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and thetrading price of our class A ordinary shares and ADSs.It may be difficult for overseas regulators to conduct investigation or collect evidence within China.Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law orpracticality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatoryinvestigations or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with thesecurities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with thesecurities regulatory authorities in the United States may not be efficient in the absence of mutual and practical cooperation mechanism.Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator isallowed to directly conduct an investigation or evidence collection activities within the PRC territory. While detailed interpretation of orimplementation rules under Article 177 have yet to be promulgated, the inability of an overseas securities regulator to directly conduct aninvestigation or evidence collection activities within China may further increase the difficulties you face in protecting your interests. See also “—Risks Related to the ADSs and Our Class A Ordinary Shares—You may face difficulties in protecting your interests, and your ability to protectyour rights through U.S. courts or Hong Kong courts may be limited, because we are incorporated under Cayman Islands law” for risks associatedwith investing in us as a Cayman Islands company.Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law and how itmay impact the viability of our current corporate structure, corporate governance and business operations.On March 15, 2019, the PRC National People’s Congress approved the Foreign Investment Law, which came into effect on January 1,2020 and replaces the trio of existing laws regulating foreign investment in the PRC, namely, the Sino-Foreign Equity Joint Venture EnterpriseLaw, the Sino-Foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-Invested Enterprise Law, and has become the legalfoundation for foreign investment in the PRC.Table of Contents59The Foreign Investment Law sets out the basic regulatory framework for foreign investments and proposes to implement a system of pre-entry national treatment with a negative list for foreign investments, pursuant to which (i) foreign entities and individuals are prohibited frominvesting in certain areas that are not open to foreign investments, (ii) foreign investments in the restricted industries must satisfy certainrequirements under the law, and (iii) foreign investments in business sectors outside of the negative list will be treated equally with domesticinvestments. The Foreign Investment Law also sets forth necessary mechanisms to facilitate, protect and manage foreign investments and proposesto establish a foreign investment information reporting system, through which foreign investors are required to submit information relating to theirinvestments to the Ministry of Commerce of the PRC or its local branches.However, since the Foreign Investment Law is relatively new, uncertainties still exist in relation to its interpretation and implementation.For instance, under the Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreignindividuals, enterprises or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign investment,there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activityunder the definition in the future. In addition, the definition contains a catch-all provision which includes investments made by foreign investorsthrough means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leewayfor future laws, administrative regulations or provisions promulgated by the State Council to provide for contractual arrangements as a form offoreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the marketaccess requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations orprovisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, wemay face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriatemeasures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporatestructure, corporate governance and business operations.We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies,and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business andresults of operations.The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permitrequirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, andtheir interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine whatactions or omissions may be deemed to be in violation of applicable laws and regulations.We only have contractual control over our website and mobile app platform. We do not directly own the website and mobile app platformdue to the restriction on foreign investment in businesses providing value-added telecommunications services in China, including internetinformation provision services. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of relatedcontractual arrangements, or have other harmful effects on us.The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, inMay 2011, the State Council announced the establishment of a new department, the CAC (with the involvement of the State Council InformationOffice, the Ministry of Industry and Information Technology, and the Ministry of Public Security). The primary role of this new agency is tofacilitate policy-making and legislative developments in this field, to direct and coordinate with departments in connection with online contentadministration and to deal with cross-ministry regulatory matters in relation to the internet industry.According to PRC laws and regulations, an enterprise must obtain a value-added telecommunication business license to operate a value-added telecommunication business. The VIEs have obtained the required ICP License to operate our online platform, 360 Jietiao. Nevertheless, it isuncertain if we or the VIEs may be required to obtain additional value-added telecommunications business licenses. See also “—If we fail tocomplete, obtain or maintain the value-added telecommunications license, other requisite license, or approvals or filings in China, our business,financial condition and results of operations may be materially and adversely affected.”Table of Contents60The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating tothe internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businessesand activities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licensesrequired for conducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government considersthat we were operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvalsor licenses or imposes additional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines,confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affectedportion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.We face uncertainties with respect to the interpretation and implementation of the Anti-monopoly Law.According to the Anti-monopoly Law of the PRC, business operators that hold dominant market position shall not abuse their dominantmarket position to restrict trading counterparts to transact only with such business operators or only with designated business operators without ajustifiable reason. Where a business operator has violated the Anti-monopoly Law of the PRC in abusing its dominant market position, the anti-monopoly enforcement agency may order the business operator to stop the illegal act and confiscate the illegal income. A fine of 1% to 10% of thesales amount of the preceding year shall be imposed.We do not believe our business is in violation of the Anti-monopoly Law of the PRC, and as of the date of this annual report, we had notbeen subject to any administrative penalties or regulatory actions in connection with anti-monopoly. The SAMR imposed administrative penaltiesin a number of anti-monopoly cases in the internet industry, and the regulatory environment of anti-monopoly is tightening. Due to the uncertaintiesassociated with the evolving legislative activities and varied local implementation practices of competition laws and regulations in China, wecannot assure you that we will not be required to adjust our business practice in order to comply with these laws, regulations, rules, guidelines andimplementations, or be able to maintain full compliance. Any incompliance or associated inquiries, investigations and other governmental actionsmay divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrativepenalties, and materially and adversely affect our financial condition, operations and business prospects.We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we mayhave, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability toconduct our business.We are a holding company, and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash andfinancing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt wemay incur. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability topay dividends or make other distributions to us. In addition, the PRC tax authorities may require our PRC subsidiaries to adjust its taxable incomeunder the contractual arrangements it currently has in place with the VIEs in a manner that would materially and adversely affect their ability to paydividends and other distributions to us. See “—Risks Related to Our Corporate Structure—Contractual arrangements in relation to the VIEs may besubject to scrutiny by the PRC tax authorities and they may determine that we or the VIEs owe additional taxes, which could negatively affect ourfinancial condition and the value of your investment.”Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of itsaccumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-ownedenterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until theaggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion ofits after-tax profits based on PRC accounting standards to employee benefits and bonus funds. These reserve funds and employee benefits andbonus funds are not distributable as cash dividends.Table of Contents61SAFE issued the Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting the Policy for ForeignExchange Control of Capital Accounts, or Circular 2, on January 10, 2014, which provides that offshore Renminbi loans provided by a domesticenterprise to offshore enterprises that it holds equity interests in shall not exceed 30% of such equity interests. Circular 2 may constrain our PRCsubsidiaries’ ability to provide offshore loans to us. In addition, the People’s Bank of China and SAFE, have implemented a series of capital controlmeasures, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend paymentsand shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends andother distributions may be subject to tighter scrutiny in the future. Any limitation on the ability of our PRC subsidiaries to pay dividends or makeother distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to ourbusiness, pay dividends, or otherwise fund and conduct our business. See also “—We may not be able to obtain certain benefits under the relevanttax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiary.”PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currencyconversion may delay or prevent us from using the proceeds of our securities offerings to make loans to or make additional capitalcontributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expandour business.Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approvalby or registration with government authorities in China. According to the PRC regulations on foreign-invested enterprises in China, capitalcontributions to our PRC subsidiaries are subject to the requirement of making necessary filings in the Foreign Investment ComprehensiveManagement Information System, or FICMIS, and registration with other government authorities in China. In addition, (a) any foreign loanprocured by our PRC subsidiaries is required to be registered with SAFE, or its local branches, and (b) our PRC subsidiaries may not procure loanswhich exceed the difference between its registered capital and its total investment amount as recorded in FICMIS. Any medium or long-term loanto be provided by us to a variable interest entity of our company must be recorded and registered by the National Commission of Development andReform and SAFE or its local branches. We may not complete such recording or registrations on a timely basis, if at all, with respect to futurecapital contributions or foreign loans by us to our PRC subsidiaries. If we fail to complete such recording or registration, our ability to use theproceeds of our securities offerings and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity andour ability to fund and expand our business.The Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-InvestedEnterprises, or SAFE Circular 19, and the Circular on Reforming and Standardizing the Administrative Provisions on Capital Account ForeignExchange, or SAFE Circular 16, prohibit a foreign-invested enterprise from, among other things, using Renminbi funds converted from its foreignexchange capital for expenditure beyond its business scope, investment and financing (except for security investment or guarantee products issuedby a bank), providing loans to non-affiliated enterprises, or constructing or purchasing real estate not for its own use. This restriction was relaxed,however, in October 2019 since which time non-investment foreign-funded enterprises can make domestic equity investments by converting theirforeign exchange capital, provided that such investments should be in compliance with the Negative List (2021) and other PRC laws andregulations.SAFE Circular 19, SAFE Circular 16 and other rules and regulations may significantly limit our ability to transfer to and use in China thenet proceeds from our securities offerings, which may adversely affect our business, financial condition and results of operations.Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our class A ordinary sharesand ADSs.The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. Renminbihas fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies isaffected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assureyou that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how marketforces or PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.Table of Contents62Any significant appreciation or depreciation of Renminbi may materially and adversely affect our revenues, earnings and financialposition, and the value of, and any dividends payable on, our class A ordinary shares and ADSs in U.S. dollars. For example, to the extent that weneed to convert U.S. dollars we receive into Renminbi to pay our operating expenses, appreciation of Renminbi against the U.S. dollar would havean adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of Renminbi against the U.S.dollar may significantly reduce the U.S. dollar equivalent of our earnings, dividends and share repurchase amount, which in turn could adverselyaffect the price of our class A ordinary shares and ADSs.Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered intoany hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedgingtransactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge ourexposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability toconvert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.Governmental control of currency conversion may limit our ability to utilize our net revenue effectively and affect the value of your investment.The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance ofcurrency out of China. We receive substantially all of our net revenue in Renminbi. Under our current corporate structure, our company in theCayman Islands relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existingPRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchangetransactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore,our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that theremittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseasinvestment registrations by the shareholders of our company who are PRC residents. But approval from or registration with appropriategovernment authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses suchas the repayment of loans denominated in foreign currencies.In recent years, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outboundcapital movement. More restrictions and substantial vetting process were put in place by SAFE to regulate cross-border transactions falling underthe capital account. The PRC government may at its discretion further restrict access in the future to foreign currencies for current accounttransactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currencydemands, we may not be able to execute our share repurchase plan or pay dividends in foreign currencies to our shareholders, including holders ofthe ADSs.Failure to make adequate contributions to various employee benefit plans and withhold individual income tax on employees’ salaries asrequired by PRC regulations may subject us to penalties.Companies operating in China are required to participate in various government sponsored employee benefit plans, including certainsocial insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentagesof salaries of our employees up to a maximum amount specified by the local government from time to time at locations where we operate ourbusinesses. The requirement of employee benefit plans has not been implemented consistently by local governments in China given the differentlevels of economic development in different locations. Companies operating in China are also required to withhold individual income tax onemployees’ salaries based on the actual salary of each employee upon payment. If we do not make adequate employee benefit payments, we maybe required to make up the contributions for these plans as well as to pay late fees and fines; with respect to the underwithheld individual incometax, we may be required to make up sufficient withholding and pay late fees and fines. If we are subject to late fees or fines in relation to theunderpaid employee benefits and underwithheld individual income tax, our financial condition and results of operations may be adversely affected.Table of Contents63The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreigninvestors, which could make it more difficult for us to pursue growth through acquisitions in China.The M&A Rules and some other regulations and rules concerning mergers and acquisitions established additional procedures andrequirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements insome instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes controlof a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the Ministry of Commerce shall be notified in advance of anyconcentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the Ministry of Commerce thatbecame effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concernsand mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security”concerns are subject to strict review by the ministry, and the rules prohibit any activities attempting to bypass a security review, including bystructuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiringcomplementary businesses. Complying with the requirements of the above-mentioned regulations and other rules to complete such transactionscould be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its localcounterparts, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain ourmarket share.PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registeredcapital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.SAFE promulgated SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch inconnection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition,such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating toany change of basic information (including change of such PRC residents or entities, name and operation term), increases or decreases ininvestment amount, transfers or exchanges of shares, or mergers or divisions.SAFE Circular 37 was issued to replace the Circular on Relevant Issues Concerning Foreign Exchange Administration for PRC ResidentsEngaging in Financing and Roundtrip Investments through Overseas Special Purpose Vehicles.If our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRCsubsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and wemay be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with SAFE registrationdescribed above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company,nor can we compel our shareholders to comply with the requirements of SAFE Circular 37. As a result, we cannot assure you that all of ourshareholders who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvalsrequired by SAFE Circular 37. Failure by such shareholders to comply with SAFE Circular 37, or failure by us to amend the foreign exchangeregistrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limitour PRC subsidiaries’ ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect ourbusiness and prospects.Table of Contents64Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRCplan participants or us to fines and other legal or administrative sanctions.Pursuant to SAFE Circular 37, PRC residents who participate in stock incentive plans in overseas non-publicly listed companies maysubmit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose vehicles. In themeantime, our directors, executive officers and other employees who are PRC citizens, subject to limited exceptions, and who have been grantedstock options by us, may follow the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating inStock Incentive Plan of Overseas Publicly Listed Company, promulgated by SAFE in 2012. Pursuant to the notices, PRC citizens and non-PRCcitizens who reside in China for a continuous period of not less than one year are required to register with SAFE through a domestic qualifiedagent, which could be the PRC subsidiaries of such overseas listed company, and complete certain other procedures if they participate in any stockincentive plan of an overseas publicly traded company, unless certain exceptions are available. In addition, an overseas entrusted institution must beretained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and ourdirectors, executive officers and other employees who are PRC citizens or non-PRC citizens living in the PRC for a continuous period of not lessthan one year and have been granted stock options are subject to these regulations. Failure to complete SAFE registrations may subject them tofines and legal sanctions, and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for ourdirectors, executive officers and employees under PRC law. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on stock incentive plans.”The State Taxation Administration of the PRC has issued certain circulars concerning employee stock options and restricted shares. Underthese circulars, our employees working in China who exercise stock options or are granted restricted shares will be subject to PRC individualincome tax. Our PRC subsidiaries have obligations to file documents related to employee stock options or restricted shares with tax authorities andto withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold theirincome taxes according to PRC laws and regulations, we may face sanctions imposed by the tax authorities or other PRC government authorities.See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on stockincentive plans.”If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequencesto us and our non-PRC shareholders or ADS holders.Under the Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de factomanagement body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at therate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over andoverall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State TaxationAdministration issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto managementbody” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprisescontrolled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in thecircular may reflect the STA’s general position on how the “de facto management body” test should be applied in determining the tax resident statusof all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise groupwill be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise incometax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day management is in the PRC, andoperation management performs its duties in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made orare subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, companyseals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or seniorexecutives habitually reside in the PRC.Table of Contents65We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation.” However, the tax resident status of an enterprise is subject to determination by the PRC taxauthorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” As substantially all of ourmanagement members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determinethat we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then we or suchsubsidiaries could be subject to PRC tax at a rate of 25% on its worldwide income, which could materially reduce our net income. In addition, wewill also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRCresident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of the ADSs or ordinary shares may be subjectto PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisionsof any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company wouldbe able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRCresident enterprise. Any such tax may reduce the returns on your investment in the ADSs or ordinary shares.We may not be able to obtain certain benefits under the relevant tax treaty on dividends paid by our PRC subsidiaries to us through our HongKong subsidiary.We are a holding company incorporated under the laws of the Cayman Islands and as such rely on dividends and other distributions onequity from our PRC subsidiaries to satisfy part of our liquidity requirements. Pursuant to the Enterprise Income Tax Law, a withholding tax rate of10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’sjurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to the Arrangement between theMainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or theDouble Tax Avoidance Arrangement, and Circular 81 issued by the Statement Taxation Administration, such withholding tax rate may be loweredto 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least 12 consecutive months prior to distribution of the dividendsand is determined by the PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement andother applicable PRC laws. Furthermore, under the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Treaties,which became effective in January 2020, the non-resident enterprises shall determine whether they are qualified to enjoy the preferential taxtreatment under the tax treaties and file reports and materials with the tax authorities. There are also other conditions for enjoying the reducedwithholding tax rate according to other tax rules and regulations. See “Item 10. Additional Information—E. Taxation—People’s Republic of ChinaTaxation.” We cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged bythe PRC tax authority or we will be able to complete the necessary filings with the PRC tax authority and enjoy the preferential withholding taxrate of 5% under the Double Tax Avoidance Arrangement with respect to dividends to be paid by our PRC subsidiaries to our Hong Kongsubsidiary.We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.We face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transferand exchange of shares in our company by non-resident investors.Table of Contents66In February 2015, the State Taxation Administration issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assetsby Non-PRC Resident Enterprises, or the STA Bulletin 7, as amended in 2017. Pursuant to this bulletin, an “indirect transfer” of assets, includingequity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRCtaxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment ofPRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to theSTA Bulletin 7, “PRC taxable assets” include assets attributed to an establishment in China, immovable properties located in China, and equityinvestments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise,would be subject to PRC enterprise income tax. When determining whether there is a “reasonable commercial purpose” of the transactionarrangement, features to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprisederives from PRC taxable assets; whether the assets of the offshore enterprise mainly consist of direct or indirect investment in China or if itsincome mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have a realcommercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model andorganizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transferand applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain isto be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently besubject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in China or toequity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, aPRC enterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements,and the party who is obligated to make the transfer payments has the withholding obligation. The STA Bulletin 7 does not apply to transactions ofsale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.There is uncertainty as to the application of the STA Bulletin 7. We face uncertainties as to the reporting and other implications of certainpast and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries orinvestments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject towithholding obligations if our company is transferee in such transactions under the STA Bulletin 7. For transfer of shares in our company byinvestors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under the STA Bulletin 7. As a result,we may be required to expend valuable resources to comply with the STA Bulletin 7 or to request the transferors from whom we purchase taxableassets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverseeffect on our financial condition and results of operations.Risks Related to the ADSs and Our Class A Ordinary SharesWe adopt different practices as to certain matters as compared with many other companies listed on the Hong Kong Stock Exchange.We completed our global offering in Hong Kong in November 2022 and the trading of our class A ordinary shares on the Hong KongStock Exchange commenced on November 29, 2022 under the stock code “3660.” As a company listed on the Hong Kong Stock Exchangepursuant to Chapter 19C of the Hong Kong Listing Rules, we are subject to certain provisions of the Hong Kong Listing Rules pursuant to Rule19C.11, including, among others, rules on notifiable transactions, connected transactions, share option schemes, content of financial statements aswell as certain other continuing obligations. In addition, in connection with the listing on the Hong Kong Stock Exchange, we have applied for anumber of waivers and/or exemptions from strict compliance with the Hong Kong Listing Rules, the Companies (Winding Up and MiscellaneousProvisions) Ordinance, the Codes on Takeovers and Mergers and Share Buybacks issued by the Securities and Futures Commission of Hong Kongand the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). As a result, we currently adopt different practices as to thosematters as compared with other companies listed on the Hong Kong Stock Exchange that do not enjoy those exemptions or waivers.Furthermore, if 55% or more of the total worldwide trading volume, by dollar value, of our class A ordinary shares and ADSs over ourmost recent fiscal year takes place on the Hong Kong Stock Exchange, the Hong Kong Stock Exchange will regard us as having a dual primarylisting in Hong Kong and we will no longer enjoy certain of the exemptions or waivers mentioned above, which could result in us having to amendour corporate structure and memorandum and articles of association and our incurring of incremental compliance costs.Table of Contents67The trading prices for our listed securities have been and are likely to continue to be volatile.The trading prices of our listed securities have been and are likely to continue to be volatile and could fluctuate widely due to factorsbeyond our control. In 2023, the trading prices of the ADSs ranged from US$13.12 to US$25.49 per ADS and the trading price of our class Aordinary shares has ranged from HK$50.65 to HK$98.35 per share. This may happen because of broad market and industry factors, like theperformance and fluctuation in the market prices or the underperformance or deteriorating financial results of other listed internet or othercompanies based in China that have listed their securities in the United States and/or in Hong Kong in recent years. The securities of some of thesecompanies have experienced significant volatility since their initial public offerings, including, in some cases, substantial declines in their tradingprices. The trading performances of other Chinese companies’ securities after their offerings, including internet and e-commerce companies, mayaffect the attitudes of investors toward Chinese companies listed in the United States and/or Hong Kong in general, which consequently mayimpact the trading performance of our class A ordinary shares and/or ADSs, regardless of our actual operating performance. In addition, anynegative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters ofother Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless ofwhether we have conducted any inappropriate activities. In addition, securities markets may from time to time experience significant price andvolume fluctuations that are not related to our operating performance, which may have a material adverse effect on the market price of our class Aordinary shares and/or ADSs.In addition to the above factors, the price and trading volume of our listed securities may be highly volatile due to multiple factors,including the following:●regulatory developments affecting us, our users, or our industry;●any deterioration in our collaborative relationship with 360 Group;●conditions in the Credit-Tech industry;●announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors;●changes in the economic performance or market valuations of other Credit-Tech platforms;●actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;●changes in financial estimates by securities research analysts;●announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures orcapital commitments;●additions to or departures of our senior management;●detrimental negative publicity about us, our management or our industry;●announcement, update or execution of our dividend policy and share repurchase plan;●fluctuations of exchange rates between Renminbi, the Hong Kong dollar and the U.S. dollar;●release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and●sales or perceived potential sales of additional ordinary shares or ADSs.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price forour class A ordinary shares and/or ADSs and trading volume could decline.The trading market for our class A ordinary shares and/or ADSs will depend in part on the research and reports that securities or industryanalysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of theanalysts who cover us downgrade our class A ordinary shares and/or ADSs or publish inaccurate or unfavorable research about our business, themarket price for our class A ordinary shares and/or ADSs would likely decline. If one or more of these analysts cease coverage of our company orfail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or tradingvolume for our class A ordinary shares and/or ADSs to decline.Table of Contents68Techniques employed by short sellers may drive down the market price of our class A ordinary shares or ADSs.Short selling is the practice of selling securities that a seller does not own but rather has borrowed from a third party with the intention ofbuying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securitiesbetween the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase thanit received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for thepublication of, negative opinions regarding the issuers and their business prospects in order to create negative market sentiment or momentum andgenerate profits for themselves after selling securities short.Public companies listed in the United States that have substantially all of their operations in China have been the subject of short selling.Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting infinancial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases,allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in theinterim, are subject to shareholder lawsuits or SEC enforcement actions.It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations,whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegationsor defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we canproceed against short sellers by principles of freedom of speech, applicable state law, or issues of commercial confidentiality. Such a situationcould be costly and time-consuming and could distract our management from growing our business. Even if such allegations are ultimately provento be groundless, allegations against us could severely impact our business operations and shareholders’ equity, and any investment in our class Aordinary shares or ADSs could be greatly reduced or rendered worthless.The different characteristics of the capital markets in Hong Kong and the United States may negatively affect the trading prices of our class Aordinary shares and/or ADSs.We are subject to Hong Kong and United States regulatory requirements concurrently. The Hong Kong Stock Exchange and Nasdaq havedifferent trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and investor bases (includingdifferent levels of retail and institutional participation). As a result of these differences, the trading prices of our class A ordinary shares and theADSs may not be the same, even allowing for currency differences. Fluctuations in the price of the ADSs due to circumstances peculiar to the U.S.capital markets could materially and adversely affect the price of our class A ordinary shares, or vice versa. Certain events having significantnegative impact specifically on the U.S. capital markets may result in a decline in the trading price of our class A ordinary shares notwithstandingthat such event may not impact the trading prices of securities listed in Hong Kong generally or to the same extent, or vice versa. Because of thedifferent characteristics of the U.S. and Hong Kong capital markets, the historical market prices of the ADSs may not be indicative of the tradingperformance of our class A ordinary shares.Exchange between our class A ordinary shares and the ADSs may adversely affect the liquidity and/or trading price of each other.The ADSs are currently traded on Nasdaq. Subject to compliance with U.S. securities law and the terms of the Deposit Agreement,holders of our class A ordinary shares may deposit class A ordinary shares with the depositary in exchange for the issuance of the ADSs. Anyholder of ADSs may also surrender ADSs and withdraw the underlying class A ordinary shares represented by the ADSs pursuant to the terms ofthe Deposit Agreement for trading on the Hong Kong Stock Exchange. In the event that a substantial number of class A ordinary shares aredeposited with the depositary in exchange for ADSs or vice versa, the liquidity and trading price of our class A ordinary shares on the Hong KongStock Exchange and the ADSs on Nasdaq may be adversely affected.The time required for the exchange between our class A ordinary shares and ADSs might be longer than expected and investors might not beable to settle or effect any sale of their securities during this period, and the exchange of class A ordinary shares into ADSs involves costs.There is no direct trading or settlement between Nasdaq and the Hong Kong Stock Exchange on which the ADSs and the class A ordinaryshares are respectively traded. In addition, the time differences between Hong Kong and New York and unforeseen market circumstances or otherfactors may delay the deposit of class A ordinary shares in exchange for ADSs or the withdrawal of class A ordinary shares underlying the ADSs.Investors will be prevented from settling or effecting the sale of their securities during such periods of delay. In addition, there is no assurance thatany exchange of class A ordinary shares into ADSs (and vice versa) will be completed in accordance with the timelines investors may anticipate.Table of Contents69Furthermore, the depositary for the ADSs is entitled to charge holders fees for various services including for the issuance of ADSs upondeposit of class A ordinary shares, cancelation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs pursuantto share dividends or other free share distributions, distributions of securities other than ADSs and annual service fees. As a result, shareholderswho exchange class A ordinary shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may anticipate.Although we have adopted a semi-annual cash dividend policy since May 2023, we cannot assure you that our existing dividend policy or theamount of dividends that you may receive will not change in the future, neither can we guarantee that we will have sufficient profits, reservesset aside from profits or otherwise funds to justify and enable dividend declaration and payment in compliance with laws for any fiscal quarterand, therefore, you may need to rely on price appreciation of our class A ordinary shares and/or ADSs as the sole source for return on yourinvestment.On May 18, 2023, our board of directors approved the adoption of a semi-annual cash dividend policy to replace our previously approvedquarterly cash dividend policy in its entirety, with immediate effect. Under the semi-annual cash dividend policy, we intend to declare anddistribute a recurring cash dividend on a semi-annual basis, starting from the first half of 2023, at an amount equivalent to approximately 20% to30% of our net income after tax for the previous six-month period. The determination to make dividend distributions and the exact amount of suchdistributions in any particular six-month period will be based upon our operations and financial conditions, and other factors, and subject toadjustment and determination by our board of directors.Despite a regular dividend policy being in place, before any dividend is declared and paid for any semi-annual period, we need to haveenough profits to justify such declaration and payment, or we need to have sufficient reserves set aside from profits previously generated that ourboard of directors determines are no longer needed. In addition, we must be able to pay our debts as they fall due in the ordinary course of businessimmediately following the dividend payment. We cannot assure you that we will be able to meet all of such conditions to enable dividenddeclaration and payment in compliance with laws. Even if our board of directors decides to declare and pay dividends, the timing and amount offuture dividends, if any, will depend on, among other things, our future results of operations and cash flows, our capital requirements and surplus,the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemedrelevant by our board of directors. Therefore, the amount of dividends that you may receive is uncertain and subject to change.Furthermore, our regular dividend policy is subject to change at any time at the discretion of our board of directors, and there can be noassurance that we will not adjust or terminate our dividend policy in the future. Accordingly, you should not rely on your investment in our class Aordinary shares and/or ADSs as a source for any future dividend income and the future return on your investment in our class A ordinary sharesand/or ADSs will likely depend entirely upon any future price appreciation of our class A ordinary shares and/or ADSs. There is no guarantee thatour class A ordinary shares and/or ADSs will appreciate in value or even maintain the price at which you purchased the class A ordinary sharesand/or ADSs. You may not realize a return on your investment in our class A ordinary shares and/or ADSs and you may even lose your entireinvestment in our class A ordinary shares and/or ADSs.Table of Contents70Holders of ADSs are limited by the terms of the deposit agreement in terms of voting rights, and may not be able to exercise their right to directthe voting of the underlying class A ordinary shares which are represented by their ADSs.Holders of ADSs will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings, andwill only be able to exercise the voting rights which attach to the underlying class A ordinary shares which are represented by the ADSs indirectlyby giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions fromthe holders of ADSs, if we asked the depositary to solicit such instructions, the depositary will endeavor to vote the underlying class A ordinaryshares represented by the ADSs in accordance with such instructions. If we do not instruct the depositary to solicit, the holders of ADSs can stillsend voting instructions to the depositary and the depositary may, but it is not required, to endeavor to carry out those instructions. The holders ofADSs will not be able to directly exercise any right to vote with respect to the underlying class A ordinary shares unless they withdraw the sharesand become the registered holder of such shares prior to the record date for the general meeting. If we ask the depositary to solicit ADS holders’voting instructions in connection with a shareholders’ meeting, we have agreed to give the depositary notice of that meeting and details of thematters to be voted upon at least thirty (30) days prior to the meeting. Under our memorandum and articles of association, the minimum noticeperiod required to be given by our company to our registered shareholders for convening an annual general meeting is not less than 21 days and 14days for any other general meeting (including an extraordinary general meeting). When a general meeting is convened, there may not be asufficient advance notice to enable the holders of ADSs to withdraw the underlying class A ordinary shares which are represented by the ADSs andbecome the registered holder of such shares prior to the record date for the general meeting to allow them to attend the general meeting or to votedirectly with respect to any specific matter or resolution which is to be considered and voted upon at the general meeting. In addition, under ourmemorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any generalmeeting, our directors may close our register of members or fix in advance a record date for such meeting, and such closure of our register ofmembers or the setting of such a record date may prevent the holders of ADSs from withdrawing the underlying class A ordinary shares which arerepresented by their ADSs and becoming the registered holder of such class A ordinary shares prior to the record date, so that the holders of ADSswould not be able to attend the general meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will,if we request, and subject to the terms of the deposit agreement, endeavor to notify the holders of ADSs of the upcoming vote and to deliver ourvoting materials to the holders of ADSs. We cannot assure that the holders of ADSs will receive the voting materials in time to ensure that they caninstruct the depositary to vote the underlying class A ordinary shares which are represented by their ADSs. In addition, the depositary and its agentsare not responsible for failing to carry out voting instructions or for their manner of carrying out voting instructions. This means that the holders ofADSs may not be able to exercise the right to direct the voting of the underlying class A ordinary shares which are represented by the ADSs, andthe holders of ADSs may have no legal remedy if the underlying class A ordinary shares are not voted as requested.The depositary for the ADSs may give us a discretionary proxy to vote our class A ordinary shares represented by the ADSs if the holders ofADSs do not instruct the depositary how to vote such shares, which could adversely affect their interests.Under the deposit agreement for the ADSs, the depositary will give us (or our nominee) a discretionary proxy to vote the underlying classA ordinary shares represented by the ADSs at shareholders’ meetings if the holders of ADSs do not give voting instructions to the depositary as tohow to vote the underlying class A ordinary shares represented by their ADSs at a meeting and as to a matter, if:●we gave the depositary timely notice of the meeting and related voting materials;●we confirmed to the depositary that we wish a discretionary proxy to be given;●we confirmed to the depositary that we reasonably do not know of any substantial opposition as to a matter to be voted on atthe meeting; and●we have confirmed to the depositary that the matter voted will not have material adverse impact on shareholders.The effect of this discretionary proxy is that, if the holders of ADSs fail to give voting instructions to the depositary as to how to vote theunderlying class A ordinary shares represented by their ADSs at any particular shareholders’ meeting, they cannot prevent such underlyingordinary shares represented by their ADSs from being voted at that meeting, provided the other conditions described above are satisfied, and it maymake it more difficult for shareholders to influence our management. Holders of our ordinary shares are not subject to this discretionary proxy.Table of Contents71The deposit agreement may be amended or terminated without the consent from the holders of ADSs.We and the depositary may agree to amend the deposit agreement without the consent from the holders of ADSs. If the holders of ADSscontinue to hold their ADSs after an amendment to the deposit agreement, they agree to be bound by the deposit agreement as amended.The right of ADS holders to participate in any future rights offerings may be limited, which may cause dilution to their holdings.We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make suchrights available to ADS holders in the United States unless we register both the rights and the securities to which the rights relate under theSecurities Act or an exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rightsavailable to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are either registered under theSecurities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to anysuch rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish anecessary exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to participate in our rights offerings inthe future and may experience dilution in their holdings.Holders of ADSs may not receive dividends or other distributions on our ordinary shares and may not receive any value for them if it is illegalor impractical to make them available to them.The depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on our ordinaryshares or other deposited securities underlying the ADSs, after deducting its fees and expenses. ADS holders will receive these distributions inproportion to the number of ordinary shares the ADSs represent. However, the depositary is not responsible if it decides that it is unlawful orimpractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSsif it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicableexemption from registration. The depositary may also determine that it is not feasible to distribute certain property. Additionally, the value ofcertain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. Wehave no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions.We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs.This means that ADS holders may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical forus to make them available to them. These restrictions may cause a material decline in the value of the ADSs.Holders of the ADSs may be subject to limitations on transfer of their ADSs.The ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from timeto time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer orregister transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems itadvisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement,or for any other reason.Certain judgments obtained against us by our shareholders may not be enforceable.We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. We conduct substantially all of ouroperations in China and substantially all of our assets are located in China. In addition, a majority of our directors and executive officers residewithin China, and most of the assets of these persons are located within China. As a result, it may be difficult or impossible for you to effect serviceof process within the United States or Hong Kong upon these individuals, or to bring an action against us or against these individuals in the UnitedStates or Hong Kong in the event that you believe your rights have been infringed under the U.S. federal securities laws, Hong Kong laws orotherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable toenforce a judgment against our assets or the assets of our directors and officers.ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement or relating to our ordinary shares orthe ADSs, which could result in less favorable outcomes to the plaintiff(s) in any such action.The deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by law, ADSholders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs orthe deposit agreement, including any claim under the U.S. federal securities laws.Table of Contents72If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceablebased on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of acontractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by theUnited States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, includingunder the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which hasnonexclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trialwaiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believethat this is the case with respect to the deposit agreement and the ADSs. It is advisable that holders of ADSs consult legal counsel regarding thejury waiver provision before entering into the deposit agreement.If any holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the depositagreement or the ADSs, including claims under federal securities laws, such holder or beneficial owner may not be entitled to a jury trial withrespect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is brought againstus or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conductedaccording to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be lessfavorable to the plaintiff(s) in any such action.Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the depositagreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficialowner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules andregulations promulgated thereunder.You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts or Hong Kong courts may belimited, because we are incorporated under Cayman Islands law.We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governedby our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands (the “Companies Act”) and the commonlaw of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary dutiesof our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of theCayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law ofEngland, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of ourshareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes orjudicial precedent in some jurisdictions in the United States or Hong Kong. In particular, the Cayman Islands has a less developed body ofsecurities laws than the United States or Hong Kong. Some U.S. states, such as Delaware, have more fully developed and judicially interpretedbodies of corporate law than the Cayman Islands. In addition, with respect to Cayman Islands companies, plaintiffs may face special obstacles,including but not limited to those relating to jurisdiction and standing, in attempting to assert derivative claims in state or federal courts of theUnited States.Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporaterecords (apart from our memorandum and articles of association, our register of mortgages and charges and special resolutions of our shareholders)or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our memorandum and articles of association, todetermine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to makethem available to our shareholders. Our memorandum and articles of association also provides that any register of members held in Hong Kongshall during normal business hours (subject to such reasonable restrictions as the Board may impose) be open for inspection by a shareholderwithout charge, provided that we may be permitted to close the register of members in terms equivalent to section 632 of the Companies Ordinanceof Hong Kong. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholderresolution or to solicit proxies from other shareholders in connection with a proxy contest.As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken bymanagement, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated inthe United States or Hong Kong.Table of Contents73Provisions of our rights agreement could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to ourshareholders.In June 2022, we implemented a defense mechanism against potential hostile takeovers through a shareholder rights plan pursuant to arights agreement. The shareholder rights plan will be accounted as dividend in our financial statements. Although the rights plan will not prevent atakeover, it is intended to encourage anyone seeking to acquire our company to negotiate with our board of directors prior to attempting a takeoverby potentially significantly diluting an acquirer’s ownership interest in our outstanding shares. As the shareholder rights plan generally allowsshareholders, except for the acquirer who triggers the exercise of Rights, to purchase additional shares at significantly discounted market price, thepotential dilution effect is dependent on the number of shares purchased by the acquirer and other factors related to the acquisition, and may not beestimated at this time. In addition, the existence of the rights plan may also discourage transactions that otherwise could involve payment of apremium over prevailing market prices for the class A ordinary shares or ADSs.Our memorandum and articles of association contains anti-takeover provisions that could discourage a third party from acquiring us andadversely affect the rights of holders of our class A ordinary shares and/or ADSs.Our memorandum and articles of association contains certain provisions that could limit the ability of others to acquire control of ourcompany, including a provision that, subject to compliance with the Hong Kong Listing Rules, and provided that for as long as the prevailing HongKong Listing Rules restrict us from having a weight voting rights structure, no new class of shares with voting rights superior to those of class Aordinary shares shall be created, grants authority to our board of directors to issue from time to time one or more series of preferred shares withoutaction by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisionscould have the effect of depriving our shareholders and ADS holders of the opportunity to sell their shares or ADSs at a premium over theprevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction.We cannot guarantee that any share repurchase plan will be fully consummated or that any share repurchase plan will enhance long-termshareholder value, and share repurchases could increase the volatility of the price of our securities and could diminish our cash reserves.On June 20, 2023, our board of directors approved a share repurchase plan whereby we are authorized to repurchase our company’s classA ordinary shares or ADSs with an aggregate value of up to US$150 million over the next 12-month period through June 19, 2024. We refer to thisplan as the 2023 Share Repurchase Plan. On March 12, 2024, our board of directors approved a share repurchase plan whereby we are authorized torepurchase our company’s class A ordinary shares or ADSs with an aggregate value of up to US$350 million starting from April 1, 2024 over thenext 12-month period through March 31, 2025. We refer to this plan as the 2024 Share Repurchase Plan. The share repurchases may be made fromtime to time through legally permissible means, depending on market conditions and in accordance with applicable rules and regulations.From June 20, 2023 to March 31, 2024, we purchased in aggregate approximately 9,348,543 ADSs in the open market for a total cost ofapproximately US$150 million (inclusive of commissions) at an average price of US$16.02 per ADS pursuant to the 2023 Share Repurchase Plan.We have commenced execution of the 2024 Share Repurchase Plan since April 1, 2024.Our board of directors also has the discretion to authorize additional share repurchase plans in the future. The share repurchase plans donot obligate us to repurchase any specific dollar amount or to acquire any specific number of ADSs. We cannot guarantee that any share repurchaseplan will enhance long-term shareholder value. The share repurchase plans could affect the price of our securities and increase volatility and maybe suspended or terminated at any time, which may result in a decrease in the trading price of our securities. Furthermore, share repurchases coulddiminish our cash reserves.Table of Contents74We have granted, and may continue to grant, share incentive awards, which may cause shareholding dilution to our existing shareholders andresult in increased share-based compensation expenses.In May 2018 and November 2019, we adopted our 2018 Share Incentive Plan and 2019 Share Incentive Plan, respectively, for purposes ofgranting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests withours. The 2018 Share Incentive Plan was later amended in November 2019, and the 2019 Share Incentive Plan was later amended in August 2020.We account for compensation costs for all share options using a fair-value based method and recognize expenses in our consolidated statements ofcomprehensive income in accordance with U.S. GAAP. Under the 2018 Share Incentive Plan and 2019 Share Incentive Plan, we are authorized togrant options to purchase ordinary shares of our company, restricted shares and restricted share units. The maximum aggregate number of ordinaryshares that may be issued under the 2018 Share Incentive Plan is 25,336,096. The maximum aggregate number of ordinary shares that may beissued under the 2019 Share Incentive Plan is 17,547,567, and may increase annually by an amount up to 1.0% of the total number of ordinaryshares then issued and outstanding commencing with the first fiscal year beginning January 1, 2021 for four consecutive fiscal years or such lesseramount as determined by our board of directors. As of February 29, 2024, class A ordinary shares underlying the options that have been grantedand are outstanding under the 2018 Share Incentive Plan totaled 1,275,436 and class A ordinary shares underlying the options and restricted shareunits that have been granted and are outstanding under the 2019 Share Incentive Plan amounted to 8,402,556. For the years ended December 31,2021, 2022 and 2023, we incurred share-based compensation expenses of RMB254 million, RMB200 million and RMB186 million (US$26million), respectively. We believe the granting of share incentive awards is of significant importance to our ability to attract and retain employees,and we will continue to grant share incentive awards to employees in the future. Issuance of class A ordinary shares with respect to such share-based payment may dilute the shareholding percentage of our existing shareholders. Expenses incurred with respect to such share-based paymentmay also increase our operating expenses and therefore have a material and adverse effect on our financial performance.The sale or availability for sale of substantial amounts of our class A ordinary shares and/or ADSs could adversely affect their market price.Sales of substantial amounts of our class A ordinary shares and/or ADSs in the public market, or the perception that these sales couldoccur, could adversely affect the market price of our class A ordinary shares and/or ADSs and could materially impair our ability to raise capitalthrough equity offerings in the future. The ADSs or shares effectively registered with the SEC will be freely tradable without restriction or furtherregistration under the Securities Act, and shares held by our existing shareholders or investors may also be sold in the public market in the futuresubject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lockup agreements. In particular, a majority of ouroutstanding shares are held by institutional investors that are not our affiliates. These shareholders may have varying investment horizons, cashneeds and repayment obligations under certain financing arrangements, including one entered into by certain beneficial owners of our shares, whowere originally organized and capitalized for the purpose of the privatization transaction of Qihoo 360 Technology Co. Ltd., and may sell theirclass A ordinary shares in reliance on Rule 144 without volume limitation.Certain holders of our ordinary shares may cause us to register under the Securities Act the sale of their shares. Registration of theseshares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the SecuritiesAct immediately upon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the public market could causethe price of the ADSs to decline, which in turn may drive down the price of our class A ordinary shares.We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisionsapplicable to U.S. domestic public companies.Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules andregulations in the United States that are applicable to U.S. domestic issuers, including:●the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;●the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registeredunder the Exchange Act;●the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liabilityfor insiders who profit from trades made in a short period of time; andTable of Contents75●the selective disclosure rules by issuers of material nonpublic information under Regulation FD.We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our resultson a quarterly basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq Stock Market. Press releases relating tofinancial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with orfurnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result,you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation tocorporate governance matters that differ significantly from the Nasdaq listing standards; these practices may afford less protection toshareholders than they would enjoy if we complied fully with such corporate governance listing standards.As a Cayman Islands exempted company listed on the Nasdaq Stock Market, we are subject to the Nasdaq listing standards. However, theNasdaq Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certaincorporate governance practices in the Cayman Islands, which is our home country, may differ significantly from Nasdaq corporate governancelisting standards. For example, neither the Companies Act nor our memorandum and articles of association requires a majority of our directors tobe independent and we could include non-independent directors as members of our compensation committee and nominating committee, and ourindependent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present. Currently, we relyon home country practice with respect to certain aspects of our corporate governance, including (i) the independence requirements forcompensation committee and nomination committee, (ii) the requirement that a majority of the board must be independent, and (iii) therequirement to obtain shareholder approval prior to a plan or other equity compensation arrangement is established or materially amended. Butgiven the other home country practice we follow, our shareholders may be afforded less protection than they otherwise would under the Nasdaqcorporate governance listing standards applicable to U.S. domestic issuers.We believe we were a passive foreign investment company, or PFIC, for United States federal income tax purposes for the taxable year endedDecember 31, 2023, which could subject U.S. holders of our ADSs or class A ordinary shares to significant adverse United States federalincome tax consequences.We will be classified as a PFIC for United States federal income tax purposes for any taxable year if either (a) 75% or more of our grossincome for such year consists of certain types of “passive” income or (b) 50% or more of the value of our assets (generally determined on the basisof a quarterly average) during such year produce or are held for the production of passive income (the “asset test”). Although the law in this regardis unclear, we intend to treat the VIEs (including their respective subsidiaries, if any) as being owned by us for United States federal income taxpurposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all oftheir economic benefits, and, as a result, we consolidate their results of operations in our combined and consolidated financial statements.Based upon the nature and composition of our assets (in particular, the retention of substantial amounts of cash and other passive assets),and the market price of our ADSs, we believe that we were a PFIC for U.S. federal income tax purposes for the taxable year ended December 31,2023, and we will likely be a PFIC for our current taxable year unless the market price of our ADSs increases and/or we invest a substantial amountof the cash and other passive assets we hold in assets that produce or are held for the production of active income.If we are a PFIC in any taxable year, a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States FederalIncome Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of theclass A ordinary shares or ADSs and on the receipt of distributions on the class A ordinary shares or ADSs to the extent such gain or distribution istreated as an “excess distribution” under the United States federal income tax rules, and such holder may be subject to burdensome reportingrequirements. Further, if we are a PFIC for any year during which a U.S. Holder holds our class A ordinary shares or ADSs, we generally willcontinue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our class A ordinary shares or ADSs, unless we wereto cease to be a PFIC and the U.S. Holder were to make a “deemed sale” election with respect to the class A ordinary shares or ADSs. See “Item10. Additional Information—E. Taxation—United States Federal Income Tax Considerations—Passive foreign investment companyconsiderations” and “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations—Passive foreigninvestment company rules.”Table of Contents76ITEM 4 INFORMATION ON THE COMPANYA. History and Development of the CompanySince inception, our company has been operating the Credit-Tech platform in China which enables an effective match between creditdemand and supply by offering Credit-Tech services. As a spin-off from the 360 Group, we started operating independently in July 2016, whenShanghai Qibutianxia (formerly known as Beijing Qibutianxia Technology Co., Ltd.) incorporated Shanghai Qiyu.In March 2017, Fuzhou Microcredit was founded and obtained the approval to conduct online micro-lending business. In June 2018,Fuzhou Financing Guarantee was founded and obtained the license to provide financing guarantee services.In April 2018, we were incorporated in the Cayman Islands as an offshore holding company under our former name, 360 Finance, Inc., tofacilitate our financing and offshore listing on Nasdaq. In May 2018, all shareholders of Shanghai Qibutianxia adopted a unanimous resolution toreorganize for offshore listing and determine to spin off the Credit-Tech service, micro-lending as well as related financing guarantee businesses,which were operated by Shanghai Qiyu, Fuzhou Microcredit and Fuzhou Financing Guarantee, all of which are VIEs. We conduct our business inthe PRC through our subsidiaries and variable interest entities.During the reorganization process we issued ordinary shares and preferred shares to the beneficial owners of Shanghai Qibutianxia inexchange for the contribution of Shanghai Qiyu, Fuzhou Microcredit and Fuzhou Financing Guarantee. In addition, we have incorporated a whollyowned subsidiary, HK Qirui International Technology Company Limited, as our offshore holding company in Hong Kong and further incorporateda wholly owned subsidiary in China, Shanghai Qiyue, which is also referred to as our WFOE in this annual report. Our WFOE has entered into aseries of contractual arrangements with Shanghai Qiyu, Fuzhou Microcredit, and Fuzhou Financing Guarantee and their respective recordshareholders. These contractual arrangements enable us to exercise effective control over the VIEs; receive substantially all of the economicbenefits of the VIEs; and have an exclusive option to purchase all or part of the equity interests in and assets of them when and to the extentpermitted by PRC law. For risks and uncertainties associated with this structure, please see “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Corporate Structure.”As a result of our direct ownership in our WFOE and the contractual arrangements with the VIEs, we will be regarded as the primarybeneficiary of the VIEs, and may treat them as our consolidated affiliated entities under U.S. GAAP. Accordingly, we will be able to consolidatethe financial results of the VIEs in our combined and consolidated financial statements in accordance with U.S. GAAP.In May 2018, we officially launched our capital-light model.In June 2018, Fuzhou Financing Guarantee was established and later obtained the license to provide financing guarantee services.In September 2018, we issued an aggregate of 24,937,695 series B preferred shares to several investors in a private placement transactionand raised US$203.5 million.In December 2018, our ADSs commenced trading on the Nasdaq Global Market under the symbol “QFIN.” We raised from our initialpublic offering approximately US$43.3 million in net proceeds after deducting underwriting commissions and discounts and the offering expensespayable by us.In January 2019, Shanghai Financing Guarantee obtained the license to conduct financing guarantee business. In order to streamline andconsolidate the operation of our financing guarantee business, we plan to conduct all of our financing guarantee business through Fuzhou FinancingGuarantee and are phasing out financing guarantees provided by Shanghai Financing Guarantee. Shanghai Financing Guarantee has been approvedby the PRC authority to cancel its financing guarantee certificate, and such certificate has been returned to the PRC authority for cancellation.In May 2019, we won the Achievement in Credit Risk Management Award given by the Asian Banker.Table of Contents77In July 2019, we completed a follow-on public offering of ADSs by certain selling shareholders. Through the follow-on offering theselling shareholders sold an aggregate of 9,609,000 ADSs at the price of US$10.00 per ADS. Net proceeds to the selling shareholders, afterdeducting underwriting commissions and before expenses, amounted to approximately US$92.7 million. We did not receive any proceeds from thesale of the ADSs by the selling shareholders.In August 2019, we launched the Intelligence Credit Engine (ICE), an open platform that offers financial institution partners intelligentmarketing services.In September 2019, we were approved by the People’s Bank of China to access the Credit Reference Center.In October 2019, we were the first group to join the anti-fraud alert platform led by the Ministry of Public Security.In June 2020, we were among the first group to pass the filing with National Internet Finance Association of China for mobile finance app.In June 2020, we launched our innovative “embedded finance” model.In August 2020, we changed our name to 360 DigiTech, to better reflect our focus on technology empowerment.In November 2020, the ADSs were transferred from the Nasdaq Global Market to begin trading on the Nasdaq Global Select Market.In February 2021, we obtained the ISO/IEC 27001:2013 certificate in recognition of our information security management system.In July 2021, we were awarded “China’s Best Credit-Tech Services,” “China’s Best Implementation in Anti-Fraud Technology of theYear” and “China’s Best Technological Implementation in Risk Data and Analysis of the Year” at the China Country Awards 2021 by The AsianBanker.In November 2021, we were awarded “New Champions 2021 – Excellence in agile business governance” by the World Economic Forum,being Asia’s only award-winning corporation at the New Champion Awards 2021.In January 2022, we obtained the ISO/IEC 27701:2019 certificate in recognition of our privacy information management system.In November 2022, we completed our public offering in Hong Kong and the trading of our class A ordinary shares on the Hong KongStock Exchange commenced on November 29, 2022 under the stock code “3660.” Immediately upon the completion of our secondary listing on theHong Kong Stock Exchange, all the then-outstanding class B ordinary shares converted into class A ordinary shares on a one-for-one basispursuant to the conversion notice delivered by Aerovane Company Limited to the company. No class B ordinary shares remained outstanding uponthat conversion and we have not issued any further ones.Table of Contents78On March 31, 2023, we held an extraordinary general meeting and (i) varied and amended our authorized share capital by (a) re-designating and re-classifying all authorized Class B ordinary shares as Class A ordinary shares each on a one-for-one basis and (b) re-designatingand re-classifying all authorized and unissued shares of a par value of US$0.00001 each of such class or classes (however designated) as the boardof directors of our company may determine in accordance with the memorandum of association and articles of association of our company as ClassA ordinary shares each on a one-for-one basis, (ii) adopted the third amended and restated memorandum and articles of association, and (iii)changed our English name from “360 DigiTech, Inc.” to “Qifu Technology, Inc.” and adopted “奇富科技股份有限公司” as our dual foreign name.Previously, under our dual class voting structure, our share capital comprises class A ordinary shares and class B ordinary shares. Each class Bordinary share is entitled to 20 votes, and each class A ordinary share is entitled to one vote on all matters subject to vote at a general meeting of us.As a result of our varied and amended authorized share capital, we unwound our dual-class shareholding structure and all the issued shares of ourcompany (including the class B ordinary shares with super-voting rights) were redesignated and reclassified into class A ordinary shares whichentitle holders to one vote for each share.In July 2023, we were awarded “Best Lending Implementation in China” at the China Awards Program 2023 by the Asian Banker.In September 2023, the national standards for financial large language models in China were officially released, and we were one of theleading entities in collaboration with the China Academy of Information and Communications Technology for the formulation of these standards.Our principal executive offices are located at 7/F Lujiazui Finance Plaza, No. 1217 Dongfang Road, Pudong New Area, Shanghai 200122,People’s Republic of China. Our telephone number at this address is +86 21 5835-7668. Our registered office in the Cayman Islands is located atPO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is Cogency GlobalInc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.The information that we have filed electronically with the SEC can be accessed at http://www.sec.gov. Our annual reports, quarterlyresults, press release and other SEC filings can also be accessed via our investor relationship website at https://ir.qifu.tech.B. Business OverviewEstablished in 2016, we are a Credit-Tech platform in China that provides a comprehensive suite of technology services to assist financialinstitutions and consumers and SMEs in the loan lifecycle, ranging from borrower acquisition, preliminary credit assessment, fund matching andpost-facilitation services, with 360 Jietiao app as our primary user interface. We are dedicated to making credit services more accessible andpersonalized to consumers and SMEs through Credit-Tech services to financial institutions, whereby we deploy our technology solutions to helpfinancial institutions identify the diversified needs of consumers and SMEs, effectively access prospective borrowers that are creditworthy throughmulti-channels, enhance credit assessment on prospective borrowers, and manage credit risks and improve collection strategies and efficiency,among others. With user insights distilled from long-term engagement with users across life and business scenarios enabled by AI and dataanalytics, our technology solutions empower financial institutions across different stages of the loan lifecycle, enabling them to extend the reach ofservices and satisfy the financing needs of consumers and SMEs, and deliver to users more accessible credit services. In turn, we primarily deriveservice fees from our technology solutions to financial institutions. As of December 31, 2023, we had cumulatively facilitated approximatelyRMB1,818.5 billion (US$256.1 billion) of loans to 30.4 million borrowers. As of the same date, we had 50.9 million users with approved creditlines, accumulatively. We currently focus our operation on consumer Credit-Tech market while take a cautious view of expanding our services tothe SME Credit-Tech market.Our ServicesWe match underserved and unserved users with credit demand to a diversified pool of financial institutions with credit to supply, throughboth credit-driven services and platform services.Table of Contents79The following table presents our operating data related to credit-driven services and platform services for the years ended or as ofDecember 31, 2021, 2022 and 2023:For the year ended/ As of December 31, 202120222023Loan Loan Loan facilitationEndingfacilitationEndingfacilitationEndingvolume%balance%volume%balance%volume%balance% (in RMB millions, except for percentages)Credit-driven services 162,878 45.6 64,720 45.6 181,230 43.9 66,907 40.9 204,811 43.0 72,002 38.6Platform services 194,225 54.4 77,268 54.4 231,131 56.1 96,558 59.1 271,020 57.0 114,476 61.4Total 357,103 100.0 141,987 100.0 412,361 100.0 163,465 100.0 475,831 100.0 186,478 100.0Credit-driven servicesUnder the credit-driven services category, we match prospective borrowers with financial institutions and empower financial institutionsin borrower acquisition, credit assessment, fund matching and post-facilitation services. Loan products offered under this line of services areprimarily funded by our financial institution partners, with the remainder extended by Fuzhou Microcredit, which is licensed to conduct micro-lending business in China. In both cases, we bear credit risks of the loans. For loans extended by our financial institution partners, we provideguarantees against potential defaults. Such contractual guarantee arrangement is underwritten either by the licensed VIEs, or third-party licensedguarantee companies or insurance companies, to which we may provide back-to-back guarantee at their request. With respect to loan facilitationservices for loans funded by financial institution partners, we charge service fees directly from our financial institutional partners pursuant to pre-negotiated terms based on the contractual agreements that vary from case to case. Our service fee rate is typically the difference between the loanpricing rate, which is set by the financial institutions, and a fixed rate negotiated between us and the respective financial institutions. For loansfunded by Fuzhou Microcredit, we charge borrowers interest fees, which reflects a number of factors including the credit profile of the borrowers,the availability of funding and the associated funding cost, and the tenor of loan products, among others.Platform servicesOur platform services include loan facilitation and post-facilitation services through our capital-light model, intelligent marketing servicesto financial institution partners under Intelligence Credit Engine, referral services and other technology solutions. We currently do not take creditrisk under platform services. For the years ended December 31, 2021, 2022 and 2023, loans facilitated under our platform services accounted forapproximately 54.4%, 56.1% and 57.0% of our total loan facilitation volume respectively.Capital-light modelWe launched our capital-light model in 2018 with the focus on implementing our strategic transition from a traditional risk bearing loanfacilitator to a technology enabler. Under our capital-light model, we facilitate transactions between prospective borrowers and our financialinstitution partners through a suite of technology-enabled services spanning across the loan lifecycle, including borrower acquisition, technologyempowerment in credit assessment, and post-facilitation services such as loan performance monitoring and loan collection. Under our capital-lightmodel, we currently provide limited guarantee to certain collaborating insurance companies in the event of bankruptcy and certain financialinstitution partners pursuant to their internal requirements. Given the nature of such guarantee arrangements and our assessment that the likelihoodof bankruptcy to occur with respect to the insurance companies is remote, we believe that such credit risks that we may take under the platformservices are negligible. For loans facilitated under our capital-light model, we generate income through service fees charged to financial institutionpartners according to pre-negotiated terms that vary from case to case. Our service fee rate is typically a certain percentage of the pricing rate thatis set by the financial institution partners on the loans to borrowers.Intelligence Credit Engine (ICE)ICE is an open platform that offers financial institution partners and other lending platforms intelligent marketing services. For loansfacilitated through ICE, we match prospective borrowers with financial institution partners based on comprehensive data analysis and cloudcomputing technologies, and assist financial institution partners with preliminary credit screening of borrowers, but do not provide advanced creditassessment. We earn pre-negotiated service fees from financial institution partners and do not bear credit risks. Our service fee rate is typically acertain percentage of the pricing rate that is set by the financial institution partners on the loans to borrowers, and the service fee rate is subject tonegotiations with the financial institution partners and varies from case to case.Table of Contents80Referral servicesBecause different financial institution partners prescribe different metrics assigned with various values in granting credit line approvals toprospective borrowers, some users fail to match the criteria of our financial institution partners and are rejected by them. However, such borrowersmay still be within the target borrower group of other online lending companies. To offer better user experience to our users and maximize thevalue of user traffic on our platform, we provide referral services primarily to other online lending companies in line with industry practice andearn referral fees. We consider referral services to be supplemental in nature to our loan facilitation services. The scale of this line of services isrelatively small, and referral fees generated from it fluctuates significantly from period to period.Other technology solutionsIn 2020, we began to offer financial institutions on-premise deployed, modular risk management SaaS. Since 2023, we started to offerend-to-end technology solutions to financial institutions based on on-premise deployment, SaaS or hybrid model. Integrated with our creditassessment insights and algorithms as well as other proprietary technologies, our technology solutions help financial institution partners acquireborrowers and improve credit assessment results. Under this model, we typically take technology service fees or consulting fees for thecorresponding technology solutions elected by the financial institutions.In terms of accounting treatments, under credit-driven services, we either provide guarantees for loans funded by financial institutionpartners, which are recorded as off-balance sheet loans, or fund loans through trusts and ABSs or Fuzhou Microcredit, which are record as on-balance sheet loans. Under platform services, all loans facilitated through our platform are recorded as off-balance sheet loans. We have a largebalance of guarantee liabilities during the years ended December 31, 2021, 2022 and 2023, as we provide guarantees under credit-driven services.We also have a large balance of accounts receivable and contract assets as well as financial assets receivable during the same period, mainly arisingfrom off-balance sheet loans, as well as loans receivable, mainly arising from on-balance sheet loans. We have established an evaluation processdesigned to determine the adequacy of our impairment allowances and guarantee liabilities, and an allowance for uncollectible receivables andcontract assets based on estimates that incorporate historical delinquency rate by vintage and other factors surrounding the credit risk of specificunderlying loan portfolio. However, actual losses and credit risks are difficult to forecast. For more details, see “Item 3. Key Information—D. RiskFactors—Risks Related to Our Business and Industry—We need to engage guarantee companies to provide credit enhancement or additionalcomfort to our financial institution partners, and we recognize guarantee liabilities for accounting purposes. If we fail to source and engage aguarantee company to our financial institution partners’ satisfaction at a reasonable price, our collaboration with our financial institution partnerswill deteriorate, and our results of operations may be adversely and severely impacted. If our guarantee liability recognition fails to address ourcurrent status, we may face unexpected changes to our financial conditions,” “Item 3. Key Information—D. Risk Factors—Risks Related to OurBusiness and Industry—We are subject to credit risks associated with our accounts receivable, contract assets, financial assets receivables and loansreceivable” and “Item 5. Operating and Financial Review and Prospects—On- and Off-balance Sheet Treatment of Loans.” In terms of revenuerecognition, we recognize financing income from on-balance sheet loans over the lifetime of the loans using effective interest method. For the off-balance sheet loans funded by financial institution partners, we recognize revenue from loan facilitation services, revenue from post-facilitationservices and revenue from guarantee services (only applicable to off-balance sheet loans facilitated under credit-driven services). Please refer to“Item 5. Operating and Financial Review and Prospects—On- and Off-Balance Sheet Treatment of Loans” and “Item 5. Operating and FinancialReview and Prospects—Key Line Items And Specific Factors Affecting Our Results of Operations—Net revenue” for details.Products offered to usersOur core product offered to users is an affordable, digital revolving line of credit allowing multiple loan drawdowns, with a convenientapplication process and flexible loan tenors. Our products are provided under the 360 Jietiao brand.Table of Contents81Our engagement with prospective consumer borrowers begins with a credit application which typically takes a few minutes. Onceapproved by our financial institution partners, a prospective borrower is granted a line of credit, typically with a principal amount ranging fromRMB1,000 to RMB200,000, for drawdowns based on specific needs with an amount typically between RMB500 and RMB200,000. Prospectiveborrowers with good credit standing may be granted a higher credit line of up to RMB300,000 for different consumption needs. The average singledrawdown amount in 2023 was RMB8,790 (US$1,238). When an approved borrower makes a drawdown request, we perform preliminary creditassessment on such borrower to ensure his or her continued qualification for drawdown before the request is transmitted to our financial institutionpartners for independent final risk assessment and loan disbursement approval. Once a drawdown is approved, a borrower may elect a loan tenorbest suited for his or her financial needs, in fixed terms of one month, three months, six months, twelve months, eighteen months, twenty-fourmonths or thirty-six months, to be repaid in monthly installments. The average amount of approved credit line for each borrower in 2023 wasapproximately RMB14,248 (US$2,007). In the instance where we provide guarantee services, the guarantee services are provided throughout theloan tenor. We are also offering other payment terms such as repayment at any time with a fixed daily interest. There is no interest-free period, butwe may offer interest-free coupon in certain limited cases as promotional activities to promote borrowers’ interactions with our platform.Aiming to serve credit needs of SMEs and address their unique risk profiles, we introduced 360 SME (“小微貸”) under the 360 Jietiaobrand in late 2020. Currently, our 360 SME portfolio consists of invoice loans and tax loans, among others, which offer a line of unsecured creditwith high limit and flexible loan tenors targeting credit demands of SMEs in different business settings and at different stages of businessdevelopment. Once a drawdown is approved, a borrower may elect a loan tenor in fixed terms of one month, three months, six months, twelvemonths, eighteen months, twenty-four months or thirty-six months, to be repaid in monthly installments. In the instance where we provideguarantee services, the guarantee services are provided throughout the loan tenor. We are also offering other payment terms such as repayment atany time with a fixed daily interest. There is no interest-free period, but we may offer interest-free coupon in certain limited cases as promotionalactivities to promote borrowers’ interactions with our platform.Total loan facilitation volume made through our platform in 2021, 2022 and 2023 was RMB357.1 billion, RMB412.4 billion andRMB475.8 billion (US$67.0 billion), respectively. The outstanding balance of all loans made through our platform as of December 31, 2023 wasRMB186.5 billion (US$26.3 billion). The weighted average contractual tenor of loans we facilitated in 2021, 2022 and 2023 was 10.62 months,11.69 months and 11.21 months, respectively.Our Service Process and Operation FlowWith the focus on empowering financial institution partners and serving consumers and SMEs, our platform offers services covering theentire loan lifecycle. In particular, we set forth below the service process and operation flow for our end-to-end loan facilitation services undercredit-driven services, as well as our capital-light model and ICE under platform services, which are the three primary models of services we offer.Credit-driven services and our capital-light model follow the same service process and operational flow from credit line approval to loandrawdown, and differ only in the post-facilitation stage, where under credit-driven services in which we bear credit risks, we make guaranteerepayments to our financial institution partners if needed. For ICE, as we provide financial institution partners intelligent marketing services, wemainly conduct preliminary credit screening of prospective borrowers during the credit line approval stage, therefore participating in fewer steps inthe loan lifecycle than we do under credit-driven services and our capital-light model.Stage 1: Credit line approvalStep 1: Paperless credit application. For new users, our service journey begins with such users’ registration of an account on our platformby providing us with certain basic information and authorization to collect other information for fraud detection and credit assessment, amongothers. The credit application process typically takes a few minutes, after which we initiate a user portrait profiling, fraud detection and creditassessment process.Step 2: Portrait profiling, fraud detection and credit assessment. We deploy the Argus Engine to build a prospective borrower profile forfraud detection and credit assessment. Drawing on our database, AI-enabled credit assessment system, Argus Engine, and understanding throughinteractions with a broad user base, we are able to develop a more accurate and comprehensive prospective borrower portrait. Once an applicantpasses the fraud detection test, we initiate a comprehensive credit assessment and generate a proprietary credit score for the applicant under credit-driven services and our capital-light model, or conduct only preliminary credit screening under ICE. Under credit-driven services and our capital-light model, following credit assessment, our Cosmic Cube Pricing Model formulates initial pricing recommendation to be provided to financialinstitution partners based on the overall credit profile of prospective borrowers and other market factors. See “—Credit Assessment” for details ofthe credit assessment process.Table of Contents82Step 3: Recommendation and matching. Through our workflow system CloudBank, under both credit-driven services and our capital-lightmodel, we then recommend the prospective borrower’s profile along with pricing recommendation to our financial institution partners and sharethe results of our preliminary credit assessment with them to facilitate their final risk management and credit decision making including loan tenor,approved credit line, and other key terms of a loan product. For ICE, we only recommend prospective borrowers to financial institution partnersbased on the results of preliminary credit screening, and do not provide pricing recommendations.Step 4: Final risk management and credit decision by financial institutions. The financial institution partners conduct final riskmanagement and make their credit decisions based on their respective credit process and regulatory guidelines.Step 5: Notice on credit line approval. Following their final risk management, each financial institution partner will respond to ourworkflow system indicating approval or rejection, and in the case of approval, their maximum level of credit exposure. Upon receiving the creditapproval decision from financial institution partners, we pass such information to prospective borrowers through our platform.The diagram below illustrates the step-by-step workflow and transaction process at the stage of credit line approval under the credit-drivenservice and our capital-light model.For ICE, as we only recommend prospective borrowers to financial institutions after preliminary credit screening, we do not participate inthe credit line approval step, and financial institutions offer their own loan products and directly notify the borrowers of their credit approvaldecision. The diagram below illustrates the step-by-step workflow and transaction process at the stage of credit line approval under ICE.Stage 2: Loan drawdownOnce a credit line is granted, a prospective borrower may request a drawdown at any time, subject to the credit limit approved by thefinancial institution partner. Upon receipt of a drawdown request, the Argus Engine conducts a streamlined credit assessment to ensure theprospective borrower’s continued qualification for drawdown and notifies our financial institution partners of the drawdown request, whichcomplete their final risk management and reach a drawdown decision. We undertake to notify the borrower the drawdown decision and thefinancial institution partner that is matched with the borrower will disburse loan to the borrower. Once the principal of the loan is transferred to theborrower, we recognize revenue from loan facilitation services for services provided to the financial institution partner.Table of Contents83The diagram below illustrates the step-by-step workflow and transaction process at the stage of loan drawdown under the credit-drivenservice and our capital-light model.For ICE, although the prospective borrower’s drawdown application is made through our platform, the application is directly sent to ourfinancial institution partner through the application programming interface (API) without us processing of the information in any way. The diagrambelow illustrates the step-by-step workflow and transaction process at the stage of loan drawdown under ICE.Stage 3: Post-facilitation services: continual credit profile monitoring and collectionRobust data analytics technologies have enabled us to continuously monitor the credit profiles of borrowers. After a borrower makes aloan drawdown, our Argus Engine tracks his or her borrowing and repayment activities, and automatically adjusts such borrower’s credit profile onan ongoing basis. Borrowers typically make repayments to our financial institution partners through third-party payment platforms rather thanthrough our platform. We recognize revenues from post-facilitation services on a straight-line basis over the term of the underlying loans. Wetypically collect pre-negotiated service fees (inclusive of fees for loan facilitation services, post-facilitation services and guarantee service fees, ifapplicable) from financial institution partners on a monthly basis as borrowers make repayments over the term of the underlying loans. Thediagram below illustrates the step-by-step workflow and transaction process at the stage of our post-facilitation services under credit-drivenservices and our capital-light model under platform services for cases where repayment is made on time.Table of Contents84If a loan is overdue, the Argus Engine, together with other robust data analytical algorithms, will automatically prescribe an initialcollection approach based on borrower profiles. Based on the analysis results, we will first initiate an AI-driven, automated process, including AI-initiated calls and text messages, for collection of the outstanding amount. Thereafter, in-house human collection calls are typically made, alongwith other automated collection techniques, subject to adjustments. For details of our collection efforts, see “—Credit Assessment—Collection.”For loans under credit-driven services where we take credit risks, we will make guarantee repayments to the financial institution partners if a loanis past due for a certain period subject to the terms of the relevant agreements, after which we will retain any repayment made by the borrower. Inthe meantime, we will deploy continuous collection efforts, including outsourcing the collection to third-party collection service providers, tocollect the delinquent amount, particularly after an extended period of loan delinquency. After notifying the borrower that fails to make repaymentover a certain time frame, the financial institution partners would assign their claims to Fuzhou Financing Guarantee or Shanghai FinancingGuarantee (before its financing guarantee license was canceled upon its voluntary application), and Fuzhou Financing Guarantee or ShanghaiFinancing Guarantee, as obligee, shall acquire the rights related to the claims. For loans under our capital-light model where we do not take creditrisks, we, or the third-party collection service providers which are involved at a later stage, will continue to make collection efforts in accordancewith agreements with the financial institution partners up to a predetermined point in time. Because we take credit risks and provide guaranteeservices under credit-driven services and currently do not take credit risks under platform services, the gross fees charged under credit-drivenservices are generally higher than the fees charged under platform services.The following diagrams display the step-by-step workflow and transaction process of loan collection under the credit-driven services andour capital-light model.For loans facilitated under ICE, we also provided limited collection services to a small portion of financial institution partners based ontheir special requests.Credit DemandTarget userIn consumer Credit-Tech market, we target the large and growing Chinese population of users who typically has stable income withpromising growth potentials and has greater user lifetime values, but are underserved or unserved by the traditional financial institutions.Prospective borrowers are generally drawn to our platform for supplemental credit solutions.In the SME Credit-Tech market, our products mainly aim to serve SMEs with an annual operating revenue below RMB5 million, whichare typically granted with credit line below RMB1 million. We believe this group of SMEs are unserved or underserved by traditional financialinstitutions, which typically focus on enterprises with large-scale operations.We believe we are chosen by our users because of our reputation as a trusted and reliable platform and the convenient, fast, intuitive andtransparent user experience that we offer through our platform. We have established a large base of loyal creditworthy users. As of December 31,2023, we had 50.9 million cumulative users with approved credit lines in the aggregate, among which 62.0% had credit cards, mortgage loans orauto loans and 46.5% were between 25 to 35 years old. Our repeat borrower contribution was 91.6% for the year ended December 31, 2023.Table of Contents85User acquisitionWe strive to diversify the network for user acquisition, which currently comprises online advertising on channels operated by leadinginternet companies, “embedded finance” cooperation with online platforms with heavy user traffic, 360 Group, offline promotions and referralprograms with other platforms.Online advertisingWe partner with leading internet traffic platforms to acquire borrowers via online advertising. We are improving our targeted marketingcapabilities by leveraging data analytics so that we can place advertisements to intended users who fit into our target borrower profile moreeffectively. We have also developed analytics algorithms in collaboration with channel partners based on the anonymous user informationaggregated from such channel partners so that users of the channel partners with credit needs can be directed to our platform with improvedprecision and efficiency. We intend to continue optimizing our proprietary AI and data analytics systems and expand the network of channelpartners to improve user acquisition efficiency.Embedded finance modelIn 2020, we started cooperating with leading online platforms with heavy user traffic under “embedded finance” model. These platformpartners include, among others, leading short-form video platform, e-commerce platforms, ride-hailing companies and smart phone companies.Under this model, we embed our credit assessment, data analytics and other proprietary technology solutions within the partnering internetplatforms. Therefore, credit services used by end users of our partnering platforms will be ultimately provided by us. Through “embedded finance,”we are able to reach more users effectively while empowering our partnering platforms to improve user experience and further unleash themonetization value of their user base. We have become the Credit-Tech service partner of many leading online platforms, gaining access to a largenumber of internet users across consumption scenarios for potential conversion into borrowers. As of December 31, 2023, we had partnered with38 leading online platforms cumulatively and embedded finance has become an important user acquisition channel to us.360 Group channelsHistorically, we collaborated with 360 Group in several aspects of user acquisition. Benefiting from the collaboration, which enables ourmobile app to be showcased on 360 Group’s products’ user interfaces, we have been able to connect with 360 Group’s user base. In recent years,however, prospective borrowers acquired from 360 Group has contributed significantly less to our business, as our user acquisition channelscontinue to diversify.Offline promotion and borrower referral programsIn the meantime, we conduct offline sales and marketing activities to promote our products and services in specific regions and forspecific products. In addition, we continue to acquire new users through borrower referral programs.Credit SupplyWe have a stable and diversified base of funding partners. We primarily rely on our financial institution partners, including national andregional banks and consumer finance companies, to fund our credit products. From time to time, we also fund a small percentage of loans throughFuzhou Microcredit. With sufficient and strong funding commitment from our financial institution partners, we have the flexibility to recommendsuitable products to borrowers with different combinations of funding sources depending on market conditions. For the year of 2023, financialinstitutions including Fuzhou Microcredit accounted for 100% of our total funding.Financial institutionsOur financial institution partners are mainly national and regional commercial banks and consumer finance companies. The value we addto our financial institution partners includes efficient borrower acquisition through online and offline channels, credit assessment technologyempowerment, post-facilitation services and risk-adjusted returns throughout economic cycles, among others. Our technology infrastructure helpsenhance financial institution partners’ risk management, providing them with a more seamless and real-time risk management experience.Table of Contents86In certain special cases and as mutually agreed upon by us and a small number of financial institution partners pursuant to their internalbusiness requirements and procedures, some of the loans facilitated through our platform are funded by and disbursed indirectly through trusts,which also provide us with more flexibility to utilize the funds from the trusts for loan facilitation within the specified time frame and are in linewith the industry norms.As of December 31, 2023, we had established partner relationship with a total of 157 financial institutions cumulatively, includingnational and regional banks and consumer finance companies, across 26 provinces and autonomous regions of provincial level and 68 cities inChina.Fuzhou MicrocreditIn March 2017, Fuzhou Microcredit was established, which has obtained the regulatory approval and micro-lending license to originateloans. The sources of funding for the loans funded by Fuzhou Microcredit include its registered capital, profits from its operations, shareholderloans and bank loans. In 2023, RMB46.4 billion (US$6.5 billion) of credit drawdowns on our platform were initially funded by FuzhouMicrocredit, representing approximately 9.7% of our total funding during such period. All loans funded by Fuzhou Microcredit were recorded onour balance sheet. Currently, Fuzhou Microcredit has a registered capital of RMB5 billion, which has been fully paid.Alternative funding initiativesWe have explored and expect to continue exploring alternative funding initiatives, which include standardized capital instruments such asthe issuance of ABSs. The type of underlying assets in the asset backed special plans includes beneficial rights in trusts and loans receivable. As ofDecember 31, 2023, we had cumulatively issued ABSs of RMB31.0 billion (US$4.4 billion) with a comprehensive cost of funding ofapproximately 5%. In addition, our shelf registration of ABSs with a total value of issuance amounting to RMB14.8 billion has been approved bythe Shanghai Stock Exchange and Shenzhen Stock Exchange as of December 31, 2023.Credit AssessmentWe believe our industry-leading credit assessment capabilities are a key competitive advantage allowing us to expand our business whilemaintaining consistently solid asset quality of the loan portfolios. Our credit assessment technology solutions are built upon a comprehensivedatabase, a sophisticated credit profiling engine, and an efficient post-facilitation service process. With our technology empowerment, financialinstitutions conduct core risk management and credit approval independently to achieve better risk management.Comprehensive databaseLarge volume of high-quality data is a key factor differentiating Credit-Tech platforms. With users’ consent to our use of their data, wehave developed a comprehensive database comprising a large volume of reliable information including, among others, a user’s credit history, creditlines granted by banks, consumption pattern and past repayment behavior, that are relevant to the assessment of a given user’s credit risk againstfuture borrowing. We develop our database and build user profile primarily with our first-hand and proprietary data. Meanwhile, we also partnerwith third-party data providers to enrich our database of credit information. For example, we have access to the People’s Bank of China’s creditreporting system, which allows us to retrieve and submit data on borrowers’ credit profiles.Table of Contents87Credit assessment engineThe success of our business relies on the effectiveness of our credit profiling systems. The “brain” of our credit profiling systems is ourArgus Engine. Our Argus Engine integrates user database, AI-powered data analytics, and expert experience based on AI technologies, such asmachine learning and deep learning, into comprehensive models. It allows us to effectively recognize and infer the patterns and relationshipsbetween information nodes and develop user profiles more accurately without substantial human intervention. For example, our Argus Engine iscapable of automatically and continually training its algorithms with data in real life, and iterating and refining the precision of its profiling anddecision making across the lifecycle of a loan. In addition, we have equipped the Argus Engine with a number of cutting-edge technologies in thearea of AI, including machine learning and deep learning, which enable a more effective screening of fraudulent application and a more preciseprofile buildup. For example, integrated with visual risk technology under deep learning, our Argus Engine is able to verify the identity of aprospective borrower, denying those applications completed with what it believes to be a false identify, allowing for another layer of effectiveprotection from frauds. For another instance, we have programed large-scale social network (knowledge graph) into our Argus Engine for frauddetection, which empowers us to comprehensively map and reason about connections between our users, and therefore more effectively identifyorganizational fraudulent behaviors. Leveraging its three core functions of anti-fraud, credit assessment and risk alert, Argus Engine helps useffectively build user profile, conduct overall credit assessment for each prospective borrower and detect frauds, thereby lowering the possibility ofloan delinquency.Behavior analysis and fraud detectionThe Argus Engine is deployed to conduct fraud detection and initial credit screening of a prospective borrower, generating an F-Scorewhich is a proprietary metric quantifying potential fraud risks of the borrower. Through our Argus Engine, we seamlessly combine dataaggregation with fraud detection capabilities as follows.●Identity authentication. We use facial recognition technology and other tools and processes to verify the identity of a prospectiveborrower, denying those applications with what we believe to be false identities.●Blacklist filtering. We maintain a real-time list of suspicious devices and accounts referred to as a blacklist and to which we haveautomated access. We refer to the blacklist as well as fraud records provided by third-party institutions to filter prospective borrowerswith high fraud risks.●Telecommunication fraud prevention. Our anti-telecommunication fraud system integrates black or gray list, AI powered sourcetracking technologies, as well as real time transaction and risk monitoring models. This system enables fraud prevention across theentire lending process, from pre-facilitation borrower acquisition to post-facilitation services. Its telecommunication fraud preventionmechanism features fraud risk alert, fraud interception and post-fraud feedback.●Anti-fraud algorithms. We filter prospective borrowers through the use of anti-fraud algorithms based on machine learning:●we utilize supervised machine learning processes to learn from known fraud behavior patterns, training our algorithms to developrules to identify similar patterns and deny suspicious applications;●we utilize unsupervised machine learning to run anomaly detection to detect individual and aggregated abnormal patterns for thepurpose of identifying unknown fraud behaviors; and●we conduct a social network analysis, connecting seemingly unrelated factors to often detected fraud schemes. For example, when anew user uses the same mobile device as that of users A and B to access our services, our social network analysis algorithm is able toautomatically catch the high correlations that may exist between the new user and the existing users A and B. If users A and B havebeen flagged by our system due to previous collaborative fraudulent loan applications, and the same mobile device has beenidentified as owned by the leader of this fraudulent organization, the social network analysis algorithm is able to conclude that thenew user is likely to be a member of the fraudulent organization and subsequently direct the new user for manual verification.Table of Contents88Proprietary credit scoring and risk modelsWhen a credit application is deemed to not represent a fraud risk, it is then subjected to the credit assessment module of our Argus Engine.This module will select and analyze variables associated with a given credit application. The variables that the Argus Engine analyzes are selectedbased on the perceived risk profiles of the applicants. The Argus Engine ultimately generates an A-Score to quantify an applicant’s credit profile.Prospective borrowers with higher A-Scores typically receive recommendation for higher credit limits. The A-Score is then directed to the CosmicCube Pricing Model for pricing.We conduct credit assessment each time a new borrower requests a drawdown. A-Score is the result of the initial credit assessmentperformed on an applicant based on his/her credit profile, considering various factors such as financial condition, education, past credit history andsocial behaviors. Different from A-Score, B-Score is applied to existing borrowers on our platform with more than three months of borrowinghistory, by monitoring borrower behaviors, such as account, drawdown, repayment, among others. The B-Score replaces the A-Score for thepurpose of future credit assessment and re-evaluation. The B-Score is reevaluated each time the borrower applies for a drawdown and at the end ofeach month. Given that we have high repeat borrower contribution, B-Score, reflecting the latest borrower behavior, plays a relatively moreprominent role in our overall credit assessment process.Based on the B-Score assigned to borrowers, the system adjusts recommendation of their credit line both proactively and in response tothe requests made by them. For a given borrower, the request for credit line adjustment can be done no more than once every three months. Atypical 15% to 25% increase will be given to the credit line of the borrower if the underlying adjustment is approved.Real-time risk events monitoringLeveraging the expansive and complicated relational network of a borrower’s financial connections, Argus Engine can extract the mostimportant information from the massive dataset and determine the borrower’s credit profile. When a borrower makes an online credit drawdown orapplication, we need to conduct real-time credit assessment, which necessitates the support of a powerful credit profiling engine. As of December31, 2023, the real-time graph engine was in the fourth generation with more than 2.4 billion nodes and 164 billion edges. It provides more than 110million times online calculations daily, mapping first-degree connections in an average of 5 milliseconds, and second-degree connections in anaverage of 40 milliseconds. Backed by powerful computation, our real-time screening net can accurately identify risks from group fraud, multipleplatform borrowing and default, among others.Table of Contents89CollectionWe believe we optimize the collection process for delinquent loans based on the use of a C-Score we assign to each borrower in defaultusing the Argus Engine. The C-Score processes data from historical collection efforts to automatically identify the most efficient channel forcollection, including text messages, mobile app push notices, AI-initiated collection calls, human collection calls, emails or legal letters. We alsooutsource our collection to third-party collection service providers, particularly after 60 days of delinquency. To fulfill the compliancerequirements, we have adopted and enforced comprehensive collection policies and procedures, including close monitoring of our third-partyservice providers, to ensure that all our collection practices, including in-house and third-party practices, are in compliance with current laws andregulations. First of all, all collection operations, either conducted by our in-house collection team or through third-party agencies, must beprocessed on our proprietarily developed online operation platform and call-out platform so that we are able to track and perform full-angleinspection on the collection practices. Secondly, all borrower data are subject to a desensitization procedure before they are used for collection. Oursystem enables a close-loop monitoring over the process of the collection exercise, from case categorization and the desensitization of delinquentborrowers’ information to the dispatch of delinquency information to the collection team or third-party collection agencies, as the case may be, andthe collection call initiation. It ensures that only the necessary and minimum amount of desensitized data are being used for collection and that nodata are able to be saved locally. Thirdly, all manual collection calls, either initiated by our in-house collection team or by third-party agents, arerecorded and transmitted to our inspection system for an “AI + manual” dual inspection procedure, where our AI models will perform automatic,preliminary analysis on the content of the collection conversation against the rules that we set, identifying the expressions that are suspected to bedeviating from our rules, and our inspection team will then further investigate the cases and provide improvement advice. Fourthly, we maintainreal-time inspection on all collection operations. Our system constantly analyzes the real-time recording of the collection calls for potential defectsor violations. Once a defect or violation is identified, a notice will be promptly sent to the on-site collection supervisor for intervention, so that weare able to proactively de-escalate the situation, prevent violative collections and deliver better user experience. Last but not least, we stipulate intoeach service agreements with our third-party agencies obligations of such agencies to abide by our policies, comply with laws and regulations,preserve confidentiality, refrain from using excessive or otherwise inappropriate measures.We have built an AI-powered collection and borrower service system based on automatic speech recognition, text-to-speech and naturallanguage processing technologies. In 2023, the application of our AI-powered collection had handled 70% of our total collection volume. Ourcollection system can conduct automatic outbound calls in batches and interact with borrowers. We assess the appropriateness of AI-drivencommunication, and will adjust the approach and tone of the system, based on the risk level and the type of collection. This assessment isconducted automatically and we leverage the capability for all early-stage notification, contact confirmation and basic collection negotiations,while focusing our collection team on complicated collection cases, or other challenging interactions as identified by our system, to increase ouroperational efficiency and reduce our collection costs. In 2023, we maintained a 30 day collection rate of approximately 86%.Data And Privacy ProtectionWe are dedicated to protecting users’ privacy, and we have implemented a data privacy and security system to ensure the security,confidentiality and integrity of data. We adopt policies to make sure we obtain users’ consent in collecting and using their data. We havepromulgated a user privacy policy on our platform, setting forth our data use practices and privacy protection protocols. When a user registers anaccount via our app, he or she must read through and agree to the privacy agreement before the registration can be completed. Besides, in certainphases of the loan application process that involve data collection or usage, such as activating facial recognition function to facilitate creditassessment and transaction security, our users will be prompted again to read through and agree to separate authorization agreements on our datacollection and use practices before they can proceed. We only use the data for the stated purpose as authorized by the user of our app in connectionwith credit assessment and as otherwise required by applicable laws and regulations. All data which we collected and generated from ouroperations in the PRC are stored in the PRC territory and the data which we recognize as sensitive data are encrypted with the double encryptionapproach of data encryption and database encryption. We store user data in accordance with applicable laws and regulations, and we have adoptedand implemented internal controls system and protocols focused on data security and personal information protection. Our core systems have allpassed and been certified as the Level III Protection of the National Information System. We require all of our employees to comply with theprotocols, respect the privacy of users, and protect their information. In addition, we limit our employees’ access to de-identified information andthe output of such credit analysis only (except for key data security personnel whose access is subject to stringent internal approval) for purposes ofmitigating the possibility of data leakage and avoiding unnecessary privacy invasion as much as possible.Table of Contents90With rigorous data privacy and security system, in June 2020, our fintech service application, 360 Jietiao, received both the app securitycertification and the app information security certification from the National Computer Virus Emergency Response Center, which is the officialagency for anti-virus internet security and designated testing body for the “Special Crackdown on the Illegal Collection and Misuse of PersonalInformation by Apps” initiative by the Ministry of Public Security. In particular, 360 Jietiao received a level 3 rating for both app privacy and datasecurity, the highest level granted by the center. Given the ongoing regulatory environment, the certifications granted to us recognize our corecompetency in privacy protection and security technology and further solidify our competitive advantage in terms of regulatory compliance.Our commitment to protecting users’ privacy also shapes the way we collaborate with others on data insight enhancement for the purposeof credit assessment. For example, we obtain consent from users to use their data insights obtained from third-party sources for credit assessmentpurposes at the registration stage.Technology & SecurityWe are a technology-driven company. The success of our business is dependent upon our technological capabilities, which deliver asuperior user experience, protect information on our platform, increase operational efficiency and facilitate continued innovation. Our innovationefforts are driven by strong research and development and risk management teams, which accounted for 36% of our total employees, as ofDecember 31, 2023.Principal components of our technology infrastructure include:●Data science. Data science contributes to many elements of our business and operations, extending across an entire loan lifecycle.Our Argus Engine allows us to aggregate and assess thousands of data points to build a comprehensive profile for each user whichguides fraud detection, credit assessment and general borrower behavior, useful in anticipating borrowers’ needs. Our Cosmic CubePricing Model then applies similar data science strategies in establishing pricing. Our workflow system CloudBank is capable ofprocessing millions of transactions every day and integrates with our financial institution partners’ systems in loan disbursements,credit decisions, and payment clearances. We have also developed our network relationship database with tens of billions ofconnecting points for fraud detection purpose. The algorithms powering the majority of our decision systems iterate in real-timethrough machine learning, allowing us to promptly identify and correct operational issues.●Artificial intelligence. We have identified specific applications for AI across our platform, notably around precision marketing, rapidunderwriting and post-facilitation services. We consistently upgrade our capabilities through machine learning. For instance, ourfraud detection and credit assessment capabilities are based on the self-learning of the Argus Engine, which consistently re-evaluatesstatistically significant variables and re-develops policies around borrower credit assessment. A key benefit of AI is the automationof many of our processes. We can generally process a credit application from submission through drawdown approval withoutmaterial human intervention, and our internal preliminary credit assessment mostly only takes less than a minute in accordance withrecent IT records, achieving massive operational efficiency. For instance, our AI-powered voice system, which we apply to thecollection of delinquent loans, has reduced our collections staff significantly and empowered the remaining staff to be more efficientand effective.●Security. We are committed to maintaining a secure online platform. Our platform benefits from 360 Group’s expertise in the area ofinternet security. Our focus on security provides operational benefits because we believe borrowers are more willing to sharesensitive information with us due to our security reputation. Key features of our security system are as follows:●Our firewall monitors and controls incoming and outgoing traffic 24 hours per day, and the firewall is updated and trainedperiodically with mimic attacks from hackers to spot potential loopholes and protect our platform from malware, computer virus andhackings;●Our servers are managed by 360 Group’s private cloud service and as such are both physically and virtually isolated with intensivesecurity protocols; and●All transmission of borrower information is encrypted.Table of Contents91We have also adopted a series of policies on internal controls over information systems and network access management. We maintainredundancy through a real-time multi-layer data backup system to prevent loss of data resulting from unforeseen circumstances. We conductperiodic reviews of our technology platform, identifying and correcting problems that may undermine our system security.●Stability. We operate on 360 Group’s private cloud. Our system infrastructure is hosted in data centers at three separate locations inBeijing and Shanghai. We maintain redundancy through a real-time multi-layer data backup system to ensure the reliability of ournetwork. Our platform adopts a modular architecture that consists of multiple connected components, each of which can beseparately upgraded and replaced without compromising the functioning of other components. This makes our platform both highlyreliable and scalable.●Scalability. With a modular architecture, our platform can be easily expanded as data storage requirements and user visits increase. Inaddition, load balancing technology helps us improve the distribution of workloads across multiple computing components,optimizing resource utilization and minimizing response time. Meanwhile, we have built our system in a partner-friendly approach aswe provide flexible options to our partners regarding the scope of the data to be provided as well as how the data is provided. Withsuch flexibility, we can cut a considerable amount of time and monetary cost in synchronizing the systems of ours and our partners’.For instance, it typically takes one to two weeks for us to develop our system access to a new partner’s system, which is a key sellingpoint when prospective financial institution partners evaluate joining our platform.Marketing And Brand AwarenessWe primarily employ and implement variable online sales and marketing methods, supplemented with traditional promotional activitiesand general brand and awareness building. We focus on building brand awareness through online marketing campaigns, including cooperating withleading online platforms for directing user traffic to our business and boosting public relations as well as other offline advertising. We invest in aseries of marketing activities to further solidify our brand image and continue to grow our user base, including collaborating with leading socialmedia, video and live streaming platforms to extend our brand to a broader potential user group.SeasonalityWe experience seasonality in our business, mainly correlating to the seasonal fluctuations in internet usage and traditional personalbehavior patterns in China. For example, individual borrowers generally reduce their borrowings during national holidays in China, particularlyduring the Chinese New Year holiday season in the first quarter of each year. Furthermore, when e-commerce platforms hold special promotionalcampaigns, for example, on November 11 and December 12 each year, we typically observe an increase in borrowing proceeds immediatelyfollowing these campaigns. However, the seasonal trends that we have experienced in the past may not apply to, or be indicative of, our futureoperating results.CompetitionWe currently primarily target the consumer Credit-Tech market, and compete for borrowers, financial institution partners and other third-party services with other Credit-Tech platforms with the similar market focus, which mainly include Credit-Tech platforms backed by large internetcompanies, and independent Credit-Tech platforms that operate standalone platforms without support from traditional financial institutions or largeinternet companies. As the macro and regulatory environment evolve in recent years, we have observed dynamic changes in the market landscape.As regulatory compliance becomes increasingly important, smaller and weaker Credit-Tech platforms that lack capabilities to achieve profitabilitywhile maintaining compliance are expected to gradually withdraw from the market, which in turn creates opportunities for us to further strengthenour market position.In addition, many leading internet and technology companies that possess large user bases, substantial financial resources and highfrequency consumption platform entered the consumer Credit-Tech market in the past few years. However, many of them have since scaled backtheir effort in developing Credit-Tech business by themselves to optimize their strategic priorities. Instead, some leading internet and technologycompanies choose to partner with leading Credit-Tech platforms like us to help them better monetize their user base with comprehensive financingsolutions. Such partnerships are the basis for “embedded finance.”Table of Contents92We believe that our deep understanding of users, robust credit assessment systems, effective user acquisition channels, user-friendlyproduct designs, and broad and diversified funding sources form a substantial competitive advantage over many of our peers. Such competitiveadvantage, along with our consistent track record of solid execution, also in turn helps us gain trust from financial institutions and strengthen ourrelationship with business partners. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We faceincreasing competition, and if we do not compete effectively, our operating results could be harmed” for more information about the market wherewe operate and the competition we face.Intellectual PropertiesWe regard our trademarks, domain names, software copyrights, know-how, proprietary technologies and similar intellectual property ascritical to our success, and we rely on a combination of patent, copyright, trademark and trade secret laws in China, as well as licensing agreementsand other contractual protections, to protect our proprietary technology.As of December 31, 2023, we had 194 registered trademarks and 168 trademarks pending approval in China, 265 registered patents and713 patents pending approval in China. As of December 31, 2023, we had 86 registered software copyrights and seven copyrights of works inChina. We are also the registered holder of 65 domain names in China.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology.Monitoring unauthorized use of our technology is difficult and costly, and we cannot be certain that the steps we have taken will preventmisappropriation of our technology. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which couldresult in substantial costs and diversion of our resources. In addition, third parties may initiate litigation against us alleging infringement of theirproprietary rights or declaring their non-infringement of our intellectual property rights. In the event of a successful claim of infringement and ourfailure or inability to develop non-infringing technology or license the infringed or similar technology on a timely basis, our business could beharmed. Even if we are able to license the infringed or similar technology, license fees could be substantial and may adversely affect our results ofoperations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may not be able to prevent othersfrom unauthorized use of our intellectual property, which could harm our business and competitive position” and “Item 3. Key Information—D.Risk Factors—Risks Related to Our Business and Industry—We may be subject to intellectual property infringement claims, which may be costlyto defend and may disrupt our business and operations.”RegulationThis section sets forth a summary of the most significant rules and regulations that affect our business activities in China or ourshareholders’ rights to receive dividends and other distributions from us.Regulations on Foreign Investment RestrictionsThe Company Law and The PRC Foreign Investment LawCompanies established and operating in the PRC shall be subject to the Company Law of the PRC, which was promulgated by the SCNPCon December 29, 1993, came into effect on July 1, 1994, and last revised on December 29, 2023 and will be effective on July 1, 2024. TheCompany Law provides for the establishment, corporate structure and corporate management of companies, which also applies to foreign-investedenterprises in the PRC. Unless otherwise provided in the PRC foreign investment laws, the provisions in the Company Law shall prevail. The mainamendments in the PRC Company Law involve improving the company’s establishment and exit system, optimizing the company’s organizationalstructure, detailing exercise of shareholder rights, perfecting the company’s capital system and strengthening the responsibilities of controllingshareholders and management personnel, among others. The PRC Company Law provides for the establishment, corporate structure and corporatemanagement of companies, which also applies to foreign-invested enterprises.On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020,replaces the trio of existing laws regulating foreign investment in the PRC, namely, the Sino-Foreign Equity Joint Venture Enterprise Law, theSino-Foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-Invested Enterprise Law, and has become the legal foundation forforeign investment in the PRC.Table of Contents93The Foreign Investment Law sets out the basic regulatory framework for foreign investments and proposes to implement a system of pre-entry national treatment with a negative list for foreign investments, pursuant to which (i) foreign entities and individuals are prohibited frominvesting in the areas that are not open to foreign investments, (ii) foreign investments in the restricted industries must satisfy certain requirementsunder the law, and (iii) foreign investments in business sectors outside of the negative list will be treated equally with domestic investments. TheForeign Investment Law also sets forth necessary mechanisms to facilitate, protect and manage foreign investments and proposes to establish aforeign investment information report system, through which foreign investors are required to submit information relating to their investments tothe Ministry of Commerce or its local branches.The Implementing Regulation for the Foreign Investment Law of the PRC (Decree No. 723 of the State Council), adopted at the 74thexecutive meeting of the State Council on December 12, 2019 and effective on January 1, 2020, provides implementing measures and detailedrules to ensure the effective implementation of the Foreign Investment Law.Regulations on foreign investment industriesThe National Commission of Development and Reform and the Ministry of Commerce issued the Guiding Catalog for Foreign InvestmentIndustries (2017 Revision) in June 2017. In accordance with this catalog, foreign investment industries are divided into three categories: the“encouraged category,” the “restricted category” and the “prohibited category.” The latter two categories were repealed pursuant to the NegativeList (2021) promulgated by the commission and the ministry on December 27, 2021 and effective on January 1, 2022. Foreign investments inindustries that are not mentioned under the foregoing categories are generally deemed permitted.On December 30, 2019, the Ministry of Commerce and the SAMR jointly issued the Measures on Reporting of Foreign InvestmentInformation, which replaced the existing filing and approval procedures regarding the establishment and change of foreign-invested companieswith new procedures. On December 31, 2019, the Ministry of Commerce issued the Announcement on Matters Relating to Foreign InvestmentInformation Reporting which emphasizes the information reporting requirements provided by the Measures on Reporting of Foreign InvestmentInformation, and stipulates the forms for information reporting.Regulations on value-added telecommunications servicesThe Telecommunications Regulations of the PRC issued by the PRC State Council in September 2000, as amended in February 2016, setout a regulatory framework for telecommunications service providers in the PRC. Under these regulations, telecommunications service providersare required to procure operating licenses for basic telecommunications services and licenses for value-added telecommunications services. In July2017, the Ministry of Industry and Information Technology issued the Administrative Measures for the Telecommunications Business OperatingPermit which took effect in September 2017 and invalidated the prior telecommunications permit measures issued in 2009. The AdministrativeMeasures for the Telecommunications Business Operating Permit regulate that a commercial operator of value-added telecommunications servicesmust first obtain the VATS License and conduct its business in accordance with the specifications listed in the license, thereby providing moredetailed requirements and procedures for the value-added telecommunications services industry. In September 2000, the PRC State Councilpromulgated the Administrative Measures on Internet Information Services, which was amended in January 2011 and effective immediately. TheAdministrative Measures on Internet Information Services define “internet information services” as the services providing information through theinternet to online users and further divide such services into “commercial internet information services” and “non-commercial internet informationservices.” internet content provider is considered as a sub-set of value-added telecommunications business. In accordance with the AdministrativeMeasures on Internet Information Services, commercial internet information services operators must obtain a VATS License with the businessscope of Internet information service, namely, the ICP License from competent government authorities before engaging in any commercial internetinformation services business in the PRC.The Provisions on the Administration of Foreign-Invested Telecommunications Enterprises, issued by the PRC State Council in December2001 and amended in September 2008, February 2016 and March 2022, respectively, and the Circular on Lifting Restrictions on the Proportion ofForeign Equity in Online Data Processing and Transaction Processing Business (Operating E-commerce) issued by the Ministry of Industry andInformation Technology on June 19, 2015, clarify that foreign-invested value-added telecommunications enterprises may only be Sino-foreignequity joint ventures, whose foreign equity ownership may not exceed 50%, except for online data processing and transaction processingbusinesses (operating e-commerce businesses) which may be wholly owned by foreign investors. Historically, foreign investors having equityownership in those foreign-invested value-added telecommunications enterprises are required to have a good track record and operationalexperience in value-added telecommunications businesses. On March 29, 2022, the State Council promulgated the Decision of the State Council onAmending or Abolishing Certain Administrative Regulations, effective on May 1, 2022, which stipulate that the requirements of theaforementioned operational experience and good track record on foreign investors of a value-added telecommunications service provider are nolonger required.Table of Contents94Additionally, in July 2006, the Ministry of Industry and Information Technology issued the Circular on Strengthening the Administrationof Foreign Investment in and Operation of Value-added Telecommunications Businesses, which stipulates that foreign investors can only operatetelecommunications businesses in China through telecommunications enterprises with valid telecommunications business operation licenses andprohibits a domestic company that holds a VATS License from leasing, transferring or selling such license to foreign investors in any form, andfrom providing any assistance, including providing resources, sites or facilities to foreign investors that conduct a value-added telecommunicationsbusiness illegally in China.We provide Credit-Tech services for which a VATS License is required. Shanghai Qiyu, one of the VIEs, obtained its ICP License, a typeof VATS License, in April 2021. The subsidiary of Shanghai Qiyu, Fuzhou Microcredit, obtained an ICP License in April 2023.Regulation on Online Finance Services IndustryGeneral regulations on internet finance serviceIn July 2015, the Guidelines on Promoting the Healthy Growth of Internet Finance, were promulgated by ten PRC regulatory agencies,including the People’s Bank of China, the Ministry of Industry and Information Technology and the China Banking Regulatory Commission, orthe CBRC, and provide the definition of “online lending.” Online lending under the guidelines includes peer-to-peer online lending, meaning thedirect loans transacted through the internet between individual lenders and borrowers, and online micro-lending, meaning the small-sum loanstransacted through the internet and offered by online micro-lending companies.In April 2016, the General Office of the PRC State Council issued the Implementing Proposal for the Special Rectification of InternetFinancial Risk, which emphasizes the goal to ensure legitimacy and compliance of the internet finance service industry and specifies therectification measures for non-compliance regarding the operations of internet finance business and by institutions engaged in the internet financebusiness.Regulations on private lendingAccording to the PRC Civil Code, promulgated in May 2020 and effective on January 1, 2021, the interest rates charged under a loanagreement must not violate applicable provisions of the PRC laws and regulations. The PRC Civil Code also provides that the interest on a loanshall not be deducted from the principal in advance, and if the interest is deducted from the principal in advance, the loan shall be repaid and theinterest shall be calculated according to the actual amount of loan provided.In August 2015, the Supreme People’s Court issued the Provisions on Several Issues Concerning Laws Applicable to Trials of PrivateLending Cases, which took effect in September 2015 and most recently revised on December 29, 2020. The provisions define private lending asfinancing between and among individuals, legal entities and other organizations. They establish that private lending contracts are to be upheld asvalid in the absence of (i) relending of funds to a borrower who knew or should have known that the funds were fraudulently obtained from afinancial institution; (ii) relending of funds to a borrower who knew or should have known that the funds were borrowed from other enterprises orraised by the company’s employees; (iii) lending of funds to a borrower wherein the investor knew or should have known that the borrowerintended to use the borrowed funds for illegal or criminal purposes; (iv) violations of public orders or good morals; or (v) violations of mandatoryprovisions of laws or administrative regulations. In addition, pursuant to the provisions, lending agreements between private lenders and borrowerswith annual interest rates below 24% are valid and enforceable. As to the loans with annual interest rates between 24% (exclusive) and 36%(inclusive), if the interest on the loans has already been paid to the lender voluntarily, and so long as such payments have not damaged the interestof the state, the community and any third party, the People’s Court will turn down the borrower’s request to demand the return of the excess interestpayments. If the annual interest rate of a private loan is higher than 36%, the agreement on the excess part of the interest is invalid, and if theborrower requests the lender to return the part of interest exceeding 36% of the annual interest that has been paid, the People’s Court will supportsuch requests.In addition, on August 4, 2017, the Supreme People’s Court issued the Circular of Several Suggestions on Further Strengthening theJudicial Practice Regarding Financial Cases, which provides that (i) the claim of the borrower under a financial loan agreement to adjust or cutdown the part of interest exceeding 24% per annum on the basis that the aggregate amount of interest, compound interest, default interest,liquidated damages and other fees collectively claimed by the lender is obviously high shall be supported by the PRC courts and (ii) in the contextof internet finance disputes, if the online lending information intermediaries and the lender evade the maximum interest rate protected under thelaw by charging an intermediary fee, the lender’s claim shall be held as invalid.Table of Contents95On August 20, 2020, the Supreme People’s Court issued the Decision on Amending the Provisions of the Supreme People’s Court onSeveral Issues the Application of Law in the Trial of Private Lending Cases, or the Judicial Interpretation Amendment, which was revised onJanuary 1, 2021 and amended several provisions of the 2015 Judicial Interpretation including the upper limit of judicial protection for privatelending interest rates. The Judicial Interpretation Amendment provides that where the lender requests the borrower to pay interest in accordancewith the interest rate agreed upon in the agreement, the People’s Court shall support such request, except where the interest rate agreed by bothparties exceeds four times of the one-year Loan Prime Rate at the time of the establishment of the agreement, or the Quadruple LPR Limit. Theone-year Loan Prime Rate refers to the one-year loan market quoted interest rate issued by the National Bank Interbank Funding Center, aninstitution authorized by the People’s Bank of China, on the 20th of each month since August 20, 2019. According to the amendment, the upperlimits of interest rates of 24% and 36% provided in the 2015 Judicial Interpretation, are replaced by the Quadruple LPR Limit. Moreover, if thelender and the borrower agree on both the overdue interest rate and the liquidated damages or other fees, the lender may choose to claim any or allof them, but the excess of the aggregate amount over the Quadruple LPR Limit shall not be supported by the People’s Court. The JudicialInterpretation Amendment applies to new first-instance cases of private lending disputes received by the People’s Court after its implementation onAugust 20, 2020. If the lending activity occurred before August 20, 2019, the upper limit of the protected interest rate equals four times of the one-year Loan Prime Rate at the time of the plaintiff’s filing of lawsuit.On December 29, 2020, the Supreme People’s Court issued the Reply to Issues Concerning the Scope of Application of the New JudicialInterpretation on Private Lending, which clarifies that seven types of local financial organizations, including micro-lending companies, financingguarantee companies, regional equity markets, pawnshops, financing lease companies, commercial factoring companies and local assetmanagement companies under the regulation of local financial regulatory authorities, are financial institutions established upon approval byfinancial regulatory authorities. The Judicial Interpretation Amendment is not applicable to disputes arising from foregoing organizations’engagements in financial service businesses.Although the Judicial Interpretation Amendment and the Reply to Issues Concerning the Scope of Application of the New JudicialInterpretation on Private Lending provide that they do not apply to licensed financial institutions including micro-lending companies that conductloan and Credit-Tech businesses, there are uncertainties in the interpretation and implementation of the Judicial Interpretation Amendment,including whether licensed financial institutions may be subject to it pursuant to under Circular 141 or in certain circumstances, the basis of theformula used to determine the interest rate limit, the scope of inclusion of related fees and insurance premiums and inconsistencies in the standardapplied and enforcement actions taken by different PRC courts.We conduct loan facilitation services through our Credit-Tech platform. We charge service fees from financial institution partners for loansfunded by them, and charge borrowers interest fees through Fuzhou Microcredit, which is a subsidiary of the VIEs and is licensed to conductmicro-lending business in China, for loans funded by it. Our financial institution partners and Fuzhou Microcredit are permitted to charge interestsfor the loans they fund pursuant to PRC laws and regulations.Regulations on illegal fund-raisingOn January 26, 2021, the State Council promulgated the Regulation on the Prevention and Disposition of Illegal Fund-raising Practiceswhich came into effect on May 1, 2021 and replaces the Measure for the Banning of Illegal Financial Institution and Illegal Financial BusinessOperations promulgated by PRC State Council in July 1998 and amended in 2011, and the Circular on Relevant Issues Concerning the Penalty onIllegal Fund-Raising issued by the General Office of PRC State Council in July 2007, which explicitly prohibits illegal public fund-raising. Inaccordance with the aforementioned regulations, the following description is deemed to detail the key features of illegal public fund-raising: (i)soliciting and raising funds from the general public by means of issuing stocks, bonds, lotteries or other securities without the required approval,(ii) promising or guaranteeing a return of interest or profits or investment returns in cash, properties or other forms, or (iii) using a legitimate formto disguise the unlawful purpose. In December 2010, the Supreme People’s Court promulgated the Judicial Interpretations to Issues ConcerningApplications of Laws for Trial of Criminal Cases on Illegal Fund-Raising which was amended on March 1, 2022 and sets forth the criteria, criminalcharges and the punishment on illegal fund-raising.We operate a Credit-Tech platform to facilitate loans between borrowers and our financial institution partners, and we do not fund theloans facilitated through our platform, other than the loans funded by Fuzhou Microcredit, a subsidiary of the VIEs licensed to conduct micro-lending business in China. We do not raise funds from our financial institution partners to provide loans to borrowers.Table of Contents96Regulations on the business of loan facilitationIn April 2017, the P2P Online Lending Working Group issued the Notices on Cash Loans. The Notices on Cash Loans require the localbranches of the P2P Online Lending Working Group to conduct a comprehensive review and inspection of the cash loan business on online lendingplatforms and require such platforms to take necessary improvements and remediation measures within a specific period of time to comply with therequirements under applicable PRC laws and regulations. The Notices on Cash Loans aim to eliminate non-compliance in the operations of onlinelending platforms, including fraudulent activities, loans with excessive interest rates, and forced loan collection practices.Circular 141 issued by the Special Rectification of Internet Financial Risks Working Group and the P2P Credit Risks RectificationWorking Group on December 1, 2017, introduces the regulating guidance on cash loan businesses including online micro-lending companies, P2Pplatforms and banking financial institutions. According to Circular 141, activities offering cash loans, which are characterized by the lack ofspecific consumption scenarios, designated purposes, targeted users or mortgages, are subject to inspections and rectifications to prohibit excessiveborrowing and granting credits repeatedly to individual borrowers, collecting interests at abnormally high interest rates and violating privacy.Circular 141 clarifies that no organization or individual shall start a loan business without the required qualifications and approved licenses. Thesynthetic fund cost charged by various institutions on borrowers in the form of interest rates and other fees must comply with the requirements ofprivate lending by the Supreme People’s Court. The loan shall not be collected through violence, intimidation or insult. Circular 141 also sets outrequirements and limitations for various entities involved in internet finance services and banking financial institutions involved in cash loanoperations.Circular 141 further requires P2P lending information intermediaries not to outsource their core operations such as borrower informationcollection, borrower selection, credit evaluation and accounts opening. The banking financial institutions, in addition to observing the requirementsset forth in the Interim Measures on Administration of Personal Loans issued by the CBRC in February 2010, shall also comply with theregulations relating to cash loans, including: (i) not extending loan funded by its own capital and funding from unqualified institutions; (ii) notoutsourcing credit review and approval, risk management or other core operations in the provision of credit services to third-party collaborators;including not accepting credit enhancement services, loss-bearing commitments or other credit enhancement services provided in a disguised formby any third party that does not have the qualifications to provide guarantees; (iii) making sure that the third party with which it cooperates will notcharge any interests or fees from borrowers; and (iv) not directly investing or investing in a disguised form in asset-backed securitization productsor other products backed by cash loans, campus loans or down payment loans. In addition, according to Circular 141, all the relevant localauthorities should submit the regulation plan and monthly working progress to the Special Rectification of Internet Financial Risks Working Groupand the P2P Credit Risks Rectification Working Group, which indicates gradual rectification for compliance with Circular 141 is allowed.The Interim Measures for Administration of Internet Loans Issued by Commercial Banks, promulgated by the China Banking andInsurance Regulatory Commission, came into effect on July 12, 2020 and was amended on June 21, 2021, which apply to the institutionscooperating with commercial banks to develop internet loan businesses and their existing business models. Pursuant to these measures, commercialbanks shall evaluate their cooperating institutions and implement processes to manage these institutions. Commercial banks shall not accept directand disguised credit enhancement services from unqualified cooperation agencies, nor entrust third-party agencies with records of violentcollection or other illegal records to collect loans. The measures also provide that, except for cooperating institutions that contribute funding to theloans, commercial banks shall not completely delegate the cooperating institutions to perform core operations, such as loan disbursement, principaland interest collection, and stop payment. Pursuant to the measures, commercial banks shall independently carry out risk assessment and creditapproval for the loans they fund, and shall bear primary responsibility for post-loan management. Regional banks that carry out Internet lendingbusiness shall mainly serve local customers, prudently conduct business across administrative regions of registration, and effectively identify andmonitor the development of business across administrative regions of registration. As we operate a Credit-Tech platform and collaborate withfinancial institution partners in the loan lifecycle, pursuant to the measures, we shall not participate in the independent risk management and creditapproval processes for the loans funded by commercial banks. We are not involved in financial institutions’ independent credit review and approvaland risk management operations. We assist in financial institutions’ post-loan management as instructed or delegated by them and the financialinstitutions still bear the primary responsibility, among others, in compliance with the measures.Table of Contents97In accordance with the above measures, the Circular of the General Office of the China Banking and Insurance Regulatory Commissionon Further Standardizing the Internet Loans Business of Commercial Banks was issued and took effect on February 19, 2021, setting detailed ruleson strengthening risk management of the banking financial institutions and strictly controlling cross-regional operations. Furthermore, on July 12,2022, the China Banking and Insurance Regulatory Commission issued the Notice on Strengthening the Management of Commercial Banks’Internet Loan Business and Improving the Quality and Efficiency of Financial Services, which further requires commercial banks to: (i) effectivelyconduct security assessments on the cooperating institutions which provide and process personal information; (ii) strengthen loan fundmanagement, take effective measures to monitor loan usage, ensure safety of the loan funds, and prevent cooperating institutions from intercepting,pooling, or misappropriating fund; (iii) standardize the Internet loan cooperation business with third-party institutions, and restrict or refuse tocooperate with those that are in violation of the regulations on Internet loans; and (iv) strengthen the protection of consumer rights and interests,strengthen the compliance management of the marketing and publicity behaviors of cooperating institutions, and clearly stipulate prohibitedbehaviors in the cooperation agreement.The Notice on Strengthening the Management of Commercial Banks’ Internet Loan Business and Improving the Quality and Efficiency ofFinancial Services mainly regulates the conducts of commercial banks. We will closely monitor the regulatory requirements, seek guidance fromregulatory authorities and take applicable measures in a timely manner to maintain our cooperation with the commercial banks and ensurecompliance with laws and regulations applicable to us.On February 2, 2024, the China National Financial Regulatory Administration issued the Administrative Measures for Fixed Asset Loans,the Administrative Measures for Working Capital Loans, and the Administrative Measures for Personal Loans, which will come into effect on July1, 2024. The Administrative Measures for Personal Loans further require banks and other financial institutions to strengthen their own channelconstruction and independent risk control: (i) the lender shall not entrust the core matters of risk control in the loan investigation involving theborrower’s true intention, income level, debt situation, source of own funds and access to external evaluation institutions to a third party; (ii) thelender can interview the borrower through video according to business needs (excluding loans for personal housing purposes). The video interviewshall be conducted on the lender’s own platform, and the image shall be recorded and saved; (iii) the lender shall require the borrower to sign theloan contract and other documents in person, or sign contracts and documents through electronic banking channels (excluding loans for personalhousing purposes). The Administrative Measures for Personal Loans also regulate that where the China Banking and Insurance RegulatoryCommission stipulates otherwise on other special types of loans such as Internet loans, such provisions shall prevail. As of the date of this annualreport, the above three measures have not formally taken effect and it is uncertain how they will be enacted, interpreted and implemented.In addition, we have taken various measures to comply with Circular 141, the Interim Measures for Administration of Internet LoansIssued by Commercial Banks and other laws and regulations that are applicable to our loan facilitation business operations. For details about thevarious measures we have taken to comply with Circular 141, please refer to “Item 3. Key Information—D. Risk Factors—Risks Related to OurBusiness and Industry—We are subject to uncertainties surrounding regulations and administrative measures of the loan facilitation business. If anyof our business practices are deemed to be non-compliant with applicable laws and regulations, our business, financial condition and results ofoperations would be adversely affected.”Given that the laws and regulations governing the loan facilitation business are evolving, and substantial uncertainties exist with respect totheir interpretation and implementation, we cannot assure you that our existing practices would not be challenged by governmental authoritiesunder any existing or future rules, laws and regulations. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business andIndustry—We are subject to uncertainties surrounding regulations and administrative measures of the loan facilitation business. If any of ourbusiness practices are deemed to be non-compliant with applicable laws and regulations, our business, financial condition and results of operationswould be adversely affected.”If institutions violate the aforementioned provisions, the regulatory authorities may impose business suspensions, compulsoryenforcements or cancelation of business qualifications, or supervise the rectifications. If the circumstances are extremely serious, the businesslicenses of such institutions may be revoked.Regulations on online lending information intermediariesIn August 2016, the CBRC, the Ministry of Industry and Information Technology, the Ministry of Public Security and the State InternetInformation Office jointly issued the Interim Lending Measures on Administration of Business Activities of Online Lending InformationIntermediaries, which introduced online lending information intermediaries as financing information enterprises specifically engaged in thebusiness of lending information intermediation services connecting investors and borrowers. Pursuant to that, online lending information serviceproviders must complete registration with local financial regulatory departments, apply for appropriate telecommunication business licenses inaccordance with the rules issued by competent telecommunication authorities and specify the “online lending information intermediary” in itsbusiness scope.Table of Contents98In accordance with these measures, the CBRC, the Ministry of Industry and Information Technology and the State Administration forIndustry and Commerce jointly issued the Circular on Printing and Distribution the Guidelines on the Filing-based Administration of the OnlineLending Information Intermediaries in October 2016, setting forth the rules on the filing-based administrative regime of online lending informationintermediaries which requires local financial regulators to register, publicize and archive the basic information of online lending informationintermediaries within their respective jurisdictions.In November 2019, the Special Rectification of Internet Financial Risks Working Group and the P2P Credit Risks Rectification WorkingGroup issued the Guiding Opinions on the Transformation of Online Lending Information Intermediaries into Pilot Micro-Lending Companies, orCircular 83. Circular 83 allows qualified online lending information intermediaries to transform into micro-lending companies in order toproactively deal with and resolve the existing business risks of online lending information intermediaries industry. The online lending informationintermediaries to be transformed must comply with certain requirements including strong shareholder backgrounds and a registered capital ofRMB50 million.Regulations on online marketing of financial productsOn December 31, 2021, the People’s Bank of China and six other departments jointly issued the Measures for Administration of OnlineMarketing of Financial Products (Draft for Comments), which regulate online marketing of financial products by financial institutions or internetplatform operators entrusted by such financial institutions. The draft measures prohibit third-party online platform operators from being involved inthe sales process of financial products in a disguised way without the approval of financial regulatory authorities, including, but not limited tointeractive consultation with consumers on financial products, suitability evaluation of consumers of financial products, signing of sale contracts,transfer of funds and participation in the income sharing of financial business. Suitability evaluation of consumers of financial products means,according to the Guiding Opinions of General Office of the State Council on Strengthening the Protection of Rights and Interests of FinancialConsumers promulgated on November 4, 2015, the system for evaluating the preference, cognition and tolerance of risks for consumers of financialproduct in order to provide financial products and services that fit such consumers. We do not conduct suitability evaluation of consumers offinancial products. Instead, we utilize technologies to conduct preliminary credit assessment on prospective borrowers and match such prospectiveborrowers with financial institution partners. As of the date of this annual report, the above draft measures have not been formally adopted and it isuncertain when the final regulations will be issued and take effect, and how they will be interpreted and implemented.As advised by our PRC legal counsel, considering the draft measures specifically provide that (i) third-party online platforms shall use theonline marketing and publicity content reviewed and determined by financial institutions in promoting and recommending financial products toprospective borrowers, and (ii) financial institutions that entrust operators of third-party online platforms to carry out online marketing of financialproducts shall assume management responsibilities, the draft measures do not forbid third-party online platform operators entrusted by suchfinancial institutions to carry out internet marketing activities of financial products. Therefore, as advised by our PRC legal counsel, under the draftmeasures, our online platform entrusted by financial institutions is allowed to conduct online marketing under our embedded financial model,intelligent marketing services or other platform services provided to financial institutions as long as (i) we are not involved in the aforementionedsale process of financial product and (ii) the operations of our online platform continue to be entrusted by financial institutions pursuant to the lawsand regulations. Nevertheless, certain service fees we charge from financial institution partners are based on loan volume and interest rate, whichmay be recognized as participating in the income sharing of financial business in a disguised way. According to the draft measures, we may berequired to adjust the way we charge financial institutions. If the draft measures take effect in its current form, we will consult and negotiate withour financial institution partners to make the necessary adjustments on cooperation agreements as required by the authorities and our financialinstitution partners to ensure compliance. Meanwhile, the draft measures provide a six-month grace period from its effectiveness date forcompanies to make adjustments and become compliant with the provisions therein. If they are adopted in their current form, we believe theadjustment of the service fee arrangement will not have a material adverse effect on the cooperation between the financial institutions and us or ourrevenues.Based on our current assessment, we are of the view that such measures we may take will not cause any adverse impact on our businessoperation and financial condition. In addition, since the draft measures do not prohibit third-party online platform operators entrusted by financialinstitutions from carrying out internet marketing activities of financial products, we are allowed to use the proceeds to conduct further onlinemarketing and collaborate with other online platform operators to the extent permitted by the laws and regulations. We will closely monitor theregulatory development and adjust our business operations from time to time to comply with laws and regulations applicable to us. See also “Item3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our access to sufficient and sustainable funding at reasonablecosts cannot be assured. If we fail to maintain collaboration with our financial institution partners or to maintain sufficient capacity to facilitateloans to borrowers, our reputation, results of operations and financial condition may be materially and adversely affected.”Table of Contents99Regulations on microcredit businessIn May 2008, Guidance on the Pilot Establishment of Micro-Lending Companies was jointly promulgated by the CBRC and the People’sBank of China, authorizing provincial governments to approve the establishment of micro-lending companies on a test basis. The establishment ofa micro-lending company is subject to the approval of the competent government authority at the provincial level. The major sources of funds for amicro-lending company are limited to capital paid by shareholders, donated capital and capital borrowed from up to two financial institutions.Furthermore, the balance of the capital borrowed by a micro-lending company from financial institutions must not exceed 50% of the net capital ofsuch micro-lending company. The interest rate and terms of the borrowed capital is required to be determined by the company with the bankingfinancial institutions upon consultation, and the interest rate must be determined by using the Shanghai Inter-bank Offered Rate as the base rate.With respect to the grant of credit, micro-lending companies are required to adhere to the principle of “small sum and decentralization.” Theoutstanding balance of the loans granted by a micro-lending company to one borrower cannot exceed 5% of the net capital of such company. Theinterest ceiling used by a micro-lending company may be determined by such companies but in no circumstance shall they exceed the restrictionsprescribed by the judicatory authority. The interest floor is 0.9 times the base interest rate published by the People’s Bank of China. Micro-lendingcompanies have the flexibility to determine the specific interest rate within the range depending on certain market conditions. In addition,according to the aforementioned guidance, micro-lending companies are required to establish and improve their corporate governance structures,the loan management systems, the financial accounting systems, the asset classification systems, the provision systems for accurate assetclassification and their information disclosure systems, and such companies are required to make adequate provisions for impairment losses.Micro-lending companies are also required to accept public scrutiny supervision and are prohibited from carrying out illegal fund-raising in anyform.Based on this guidance, many provincial governments, including that of Fujian Province, promulgated local implementing rules on theadministration of micro-lending companies. In March 2012, Fujian Provincial People’s Government issued the Interim Administrative Measures onMicro-Lending Companies of Fujian, imposing the management duties upon the regulatory authorities and specifies more detailed requirements onthe micro-lending companies. We operate online micro-lending business through one of the subsidiaries of the VIEs, Fuzhou Microcredit, which isapproved by the local government authority to conduct micro-lending business in China.In November 2017, the Online Finance Working Group issued the Notice on the Immediate Suspension of Approvals for theEstablishment of Online Micro-Lending Companies, requiring all relevant regulatory authorities of micro-lending companies to suspend theapproval of the establishment of any online micro-lending companies and the approval of any micro-lending business conducted across provinces.Circular 141 further confirms to suspend the approval of the establishment of online micro-lending companies and the approval of any micro-lending business across provinces and enhances the regulation of online micro-lending companies by stipulating that (i) the relevant regulatoryauthorities must suspend the approval for the establishment of any new online micro-lending companies and the conduct of offline business of anymicro-lending companies across provinces (districts or cities); (ii) online micro-lending companies must not extend loans to any borrowers withoutincome, such as students; (iii) online micro-lending companies must suspend the funding of online micro-lending with no specific consumptionscenarios or specified uses of loan proceeds, and gradually reduce the volume of the existing business relating to such loans and take rectificationmeasures in a period to be specified by authorities.Table of Contents100On December 8, 2017, the P2P Credit Risks Rectification Working Group promulgated the Implementation Plan of Specific Rectificationfor Risks in Micro-Lending Companies Conducting Online Micro-Lending Business, or Circular 56. Pursuant to Circular 56, “online micro-lending” is defined as micro-lending provided through the internet by online micro-lending companies. Circular 56 emphasizes several materialaspects subject to inspection and rectification, which include but not limited to (i) online micro-lending companies must be approved by thecompetent authorities in accordance with the applicable regulations promulgated by the State Council, and approved online micro-lendingcompanies that operate in violation of any regulatory requirements must be re-examined; (ii) whether the qualification and funding source of theshareholders of online micro-lending companies are in compliance with the applicable laws and regulations; (iii) whether the “integrated actualinterest” (namely, the aggregated costs of borrowing charged to borrowers in the form of interest and various fees) are annualized and subject to thelimit on interest rates of private lending set forth in the Provisions on Several Issues Concerning Laws Applicable to Trials of Private LendingCases and, whether any interest, handling fee, management fee or deposit are deducted from the principal of loans provided to the borrowers inadvance; (iv) whether campus loans, or online micro-lending with no specific scenario or designated use of loan proceeds are granted; (v) withrespect to the loan business conducted in collaboration with third-party institutions, whether micro-lending companies cooperate with internetplatform without website filing or telecommunications business license to provide online micro-lending, whether the online micro-lendingcompanies outsource their core business (including the credit assessment and risk management), or accept any credit enhancement service providedby any third-party institutions with no guarantee qualification; or whether any applicable third-party institution collects any interest or fee from theborrowers; and (vi) whether there are any entities conducting online micro-lending business without the approval or license for lending business.On September 7, 2020, the China Banking and Insurance Regulatory Commission issued the Notice on Strengthening the Supervision andManagement of Micro-Lending Companies, or Circular 86. Circular 86 aims to regulate the operation of micro-lending companies, prevent andresolve relevant risks and promote the healthy growth of the micro-lending industry. Circular 86 provides the following requirements with respectto micro-lending companies, including. without limitation: (i) the financing balance of the micro-lending company funding by bank loans,shareholder loans and other nonstandard financing instruments shall not exceed such company’s net assets; (ii) the financing balance of the micro-lending company funding by issuance of bonds, asset securitization products and other instruments of standardized debt assets shall not exceed fourtimes of its net assets; (iii) the balance of loans offered to one borrower shall not exceed 10% of the net assets of the micro-lending company, andthe balance of loans offered to one borrower and such borrower’s related parties shall not exceed 15% of the net assets of the micro-lendingcompany; (iv) micro-lending companies are prohibited from upfront deduction of interest, commission fees, management fees or deposits fromloans by micro-lending companies before they are released to the borrowers, and if micro-lending companies have deducted any upfront fees inviolation of relevant rules and regulations, the borrower will only need to repay the actual loan amount after the exclusion of the interests and feesdeducted, and the loan’s interest rate shall be calculated accordingly; (v) micro-lending companies shall conduct business in the administrative areaat the county level where the company is domiciled in principle, except as otherwise provided for the operation of online micro-lending business;and (vi) the micro-lending companies and third-party loan collection agencies entrusted shall not collect loans by violence, threats of violence, orother ways that intentionally cause harm, infringe personal freedom, illegally occupy property, or interfere with day-to-day life through insulting,slandering, harassing, or disseminating private personal information, or other illegal methods. The local financial regulatory authorities may furtherlower the ratio caps in (i) and (ii) in accordance with regulatory requirements.On November 2, 2020, the China Banking and Insurance Regulatory Commission and the People’s Bank of China published the InterimMeasures for the Administration of Online Micro-Lending Business (Draft for Comments), adding new requirements on Online Micro-LendingBusiness. In particular, the draft interim measures, among other things, strengthens the legal approval, license and access conditions of onlinemicro-lending business. Pursuant to the draft interim measures, to the extent a micro-lending company engages in online micro-lending business,the said business shall mainly be carried out within the provincial-level administrative region to which its place of registration belongs, and shall benot operated beyond such region without the approval of the banking regulator under the State Council. The draft interim measures provide thefollowing requirements with respect to micro-lending companies that engage in online micro-lending business, including, without limitation; theregistered capital of a micro-lending company which engages in online micro-lending business shall not be less than RMB1 billion and shall bepaid in lump-sum in the form of cash; the registered capital of a micro-lending company which engages in online micro-lending business acrossprovincial-level administrative regions shall not be less than RMB5 billion and shall be paid in lump-sum in the form of cash; and the capitalcontribution of a micro-lending company’s controlling shareholder shall not be higher than 35% of its net assets in the previous fiscal year. Thedraft interim measures also provide that the controlling shareholder of a micro-lending company which engages in online micro-lending businessshall have a good financial position and be profitable consecutively in the last two fiscal years while having cumulative tax liabilities of not lessthan RMB12 million (as per the standard of consolidated accounting statement). In addition, an investor, its related parties and persons acting inconcert shall not be the major shareholders of more than two micro-lending companies that engage in online micro-lending business acrossprovincial level administrative regions, or hold controlling interests in more than one micro-lending company that engage in online micro-lendingbusiness across provincial-level administrative regions. Fuzhou Microcredit complies with such requirement.Table of Contents101Fuzhou Microcredit has obtained the approval from a competent supervising authority to operate online micro-lending business. Currently,Fuzhou Microcredit can conduct cross-province business with its valid license. As of the date of this annual report, the draft interim measures areyet to be formally promulgated and adopted and it is uncertain when the final regulations will be issued and take effect and how they will beenacted, interpreted and implemented. If the draft interim measures take effect in its current form, Fuzhou Microcredit may need to obtain the legalapproval of the banking regulator under the State Council in order to engage in online micro-lending business across provincial-level administrativeregions. As of the date of this annual report, Fuzhou Microcredit has increased its registered capital to RMB5 billion, which has been fully paid, tomeet the requirements as stated in the draft interim measures and would proactively apply for the license to engage in online micro-lendingbusiness across provincial-level administrative regions when the relevant rules are officially formulated. If we fail to obtain the license to engage inonline micro-lending business across provincial-level administrative regions, we may not be able to obtain sufficient funding to fulfill our futuregrowth needs. As the regulatory regime and practice with respect to online micro-lending companies are evolving, there is uncertainty as to howthe requirements in the above rules will be interpreted and implemented and whether there will be new rules issued which would establish furtherrequirements and restrictions on online micro-lending companies. We will closely monitor the regulatory development and adjust our businessoperations from time to time to comply with laws and regulations applicable to us. See also “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Business and Industry—We are subject to uncertainties surrounding regulations and administrative measures of micro-lendingbusiness and financing guarantee business. If any of our business practices are deemed to be non-compliant with such laws and regulations, ourbusiness, financial condition and results of operations would be adversely affected.”Regulations on Financing GuaranteeIn March 2010, seven government authorities, including the CBRC, the Ministry of Commerce and the Ministry of Finance, promulgatedthe Interim Administrative Measures for Financing Guarantee Companies which require an entity or individual to obtain a prior approval from thegovernment authorities before engaging in the financing guarantee business. Financing guarantee is defined as an activity whereby the guarantorand the creditor, such as a financial institution in the banking sector, agree that the guarantor shall bear the guarantee obligations in the event thatthe secured party fails to perform its financing debt owed to the creditor.On August 2, 2017, the PRC State Council promulgated the Regulations on the Supervision and Administration of Financing GuaranteeCompanies, which became effective on October 1, 2017. The Regulations on the Supervision and Administration of Financing GuaranteeCompanies define “financing guarantee” as a guarantee provided for the debt financing, including, but not limited to the extension of loans orissuance of bonds, and set out that the establishment of a financing guarantee company or engagement in the financing guarantee business withoutapproval may result in several penalties, including, but not limited to an order to cease business operation, confiscation of illegal gains, fines of upto RMB1,000,000 and criminal liabilities. The Regulations on the Supervision and Administration of Financing Guarantee Companies also providethat the outstanding guarantee liabilities of a financing guarantee company shall not exceed ten times of its net assets, and that the ratio of thebalance amount of outstanding guarantee liabilities of a financing guarantee company for the same guaranteed party shall not exceed 10%, whilethe ratio of the balance amount of outstanding guarantee liabilities of a financing guarantee company for the same guaranteed party and itsaffiliated parties shall not exceed 15%.On October 9, 2019, nine government authorities including the China Banking and Insurance Regulatory Commission, the NationalCommission of Development and Reform and the Ministry of Industry and Information Technology promulgated the Supplementary Provisions onthe Supervision and Administration of Financing Guarantee Companies, which, as advised by our PRC legal counsel, for the first time, explicitlyrequire that institutions providing services of customer recommendation and credit assessment to various lending institutions, including us as aCredit-Tech company, shall not provide, directly or in a disguised form, financing guarantee services without the approvals of relevant governmentauthorities. For the companies that do not have the financing guarantee licenses but engage in the financing guarantee business, the regulatoryauthorities shall suspend such operations and cause these companies to properly settle the existing business contracts.On July 14, 2020, the China Banking and Insurance Regulatory Commission issued the Guidelines for Off-Site Supervision of FinancingGuarantee Companies, which took effect on September 1, 2020. The guidelines stipulate the guidelines for the competent regulatory authorities tocontinually analyze and evaluate the risk of financing guarantee companies and the financing guarantee industry, by way of collecting report dataand other internal and external data of the financing guarantee companies and by carrying out corresponding measures. Pursuant to theseguidelines, financing guarantee companies shall establish and implement an off-site supervision information report system and submit related dataand non-data information in accordance with the requirements of the competent regulatory authorities. The guidelines note that the corporategovernance, internal control, risk management capabilities, guarantee business, associated guarantee risks, asset quality, liquidity indicators andinvestment conditions of financing guarantee companies shall be the key areas subject to off-site supervisions.Table of Contents102On December 31, 2021, the People’s Bank of China issued the Regulations on Local Financial Supervision and Administration (Draft forComments), which regulate all types of local financial organizations including financing guarantee companies. Pursuant to the regulations, localfinancial organizations are required to operate business within the area approved by the local financial regulatory authority, and are not allowed toconduct business across provinces in principle. The rules for cross-province business carried out by local financial organizations shall beformulated by the State Council or by the financial regulatory department of the State Council as authorized by the State Council. The financialregulatory department of the State Council will specify a transition period for local financial organizations that have carried out businesses acrossprovincial administrative regions to maintain compliance.Fuzhou Financing Guarantee, through which we provide guarantee services to our financial institution partners, has obtained the financingguarantee certificate granted by competent government authorities to conduct financing guarantee business in June 2018. Shanghai FinancingGuarantee (before its financing guarantee license was canceled upon its voluntary application), through which we provide guarantee services to ourfinancial institution partners, obtained the financing guarantee certificate granted by competent government authorities to conduct financingguarantee business in January 2019. Shanghai Financing Guarantee has applied, and permission has been granted by the PRC authority, to have itsfinancing guarantee certificate canceled, and such certificate has been returned to the PRC authority for cancellation.If the Regulations on Local Financial Supervision and Administration (Draft for Comments) were to be adopted in its current form,Fuzhou Financing Guarantee may need to obtain the legal approval of the financial regulatory department of the State Council in order to engage inFinancing Guarantee business across provincial-level administrative regions. However, given the Regulations on Local Financial Supervision andAdministration (Draft for Comments) have not come into effect as of the date of this annual report, there are uncertainties as to their interpretation,application and enforcement. We will closely monitor the legislative process, seek guidance from regulatory authorities and take applicablemeasures in a timely manner to ensure our compliance with laws and regulations applicable to us. See also “Item 3. Key Information—D. RiskFactors—Risks Related to Our Business and Industry—We are subject to uncertainties surrounding regulations and administrative measures ofmicro-lending business and financing guarantee business. If any of our business practices are deemed to be non-compliant with such laws andregulations, our business, financial condition and results of operations would be adversely affected.”Table of Contents103Regulations On Credit Reporting BusinessThe PRC government has adopted several regulations governing personal and enterprise credit reporting businesses. These regulationsinclude the Regulation for the Administration of Credit Reporting Industry, enacted by the State Council and effective in March 2013, and theManagement Rules on Credit Agencies, issued by the People’s Bank of China, in the same year.The Regulation for the Administration of Credit Reporting Industry defines “credit reporting business” and “credit reporting agency” forthe first time. According to the Regulation for the Administration of Credit Reporting Industry, “credit reporting business” means the activities ofcollecting, organizing, storing and processing “credit-related information” of individuals and enterprises, as well as providing such information toothers, and a “credit reporting agency” refers to a duly established agency whose primary business is credit reporting. Besides, the Regulation forthe Administration of Credit Reporting Industry and the Management Rules on Credit Agencies stipulate that the establishment of a credit reportingagency to engage in individual credit reporting business shall be subject to the approval of the People’s Bank of China, and the requirements forsuch establishment. Such requirements include: (i) the credit reporting agency’s major shareholders shall have a good reputation and do not haveany record of major violation of law or non-compliance in the past three years; (ii) the credit reporting agency’s registered capital shall not be lessthan RMB50 million; (iii) the credit reporting agency shall have facilities, equipment, systems and measures in place for the protection ofinformation security which comply with the provisions of the People’s Bank of China; (iv) the candidates for the credit reporting agency’s director,supervisor and senior management positions shall be familiar with laws and regulations relating to credit reporting business, shall possess the workexperience and management capabilities in the credit reporting business required for performance of their duties, shall not have any record of majorviolation or non-compliance during the past three years, and shall have obtained the appointment qualifications approved by the People’s Bank ofChina; (v) the credit reporting agency shall have a proper organizational structure; (vi) the credit reporting agency shall have proper internal controlsystems for, among others, business operation, information security management and compliance management; (vii) the credit reporting agency’sindividual credit information system shall satisfy the standard of National Information System Security Level Protection Level 2 or above; and(viii) the credit reporting agency shall satisfy any other prudential requirements of the People’s Bank of China. Establishment of a credit reportingagency to engage in enterprise credit reporting business shall complete filing with the responsible branch of the People’s Bank of China. Tocomplete the filing, a company must submit to the People’s Bank of China (i) its business license; (ii) an explanation on equity structure andorganization structure; (iii) a description of its scope of business, business rules and basic information on business system; and (iv) its informationsecurity and risk prevention measures. Entities engaged in individual/enterprise credit reporting business without such approval/completing filingformality may be subject to fine or criminal liabilities.Given that the People’s Bank of China is a subordinate authority under the State Council, the Management Rules on Credit Agenciesenacted by the People’s Bank of China is based on the Regulation for the Administration of Credit Reporting Industry, and further details the ruleswith respect to the administration for credit reporting agencies, including rules to establish, change and deregister a credit reporting agency and therules for the daily operation of a credit reporting agency.On September 27, 2021, the People’s Bank of China issued the Administrative Measures for Credit Reporting Business, or the CreditReporting Measures, effective on January 1, 2022. The measures define “credit information” to include “basic information, borrowing and lendinginformation and other relevant information collected pursuant to the law to provide services for financial and other activities for identifying andjudging the credit standing of businesses and individuals, as well as analysis and evaluation formed based on the aforesaid information.” Theyapply to entities that carry out credit reporting business and “activities relating to credit reporting business” in China. Separately, entities providing“services with credit reporting function” in the name of “credit information service, credit service, credit evaluation, credit rating, credit repair andother services” are also subject to the Credit Reporting Measures. The measures require that whoever engages in personal credit reporting businessshall obtain permit from the People’s Bank of China’s personal credit reporting agency and whoever engages in enterprise credit reporting businessshall complete filing formalities pursuant to the law; and whoever engages in credit rating business shall complete filings as a credit rating agencypursuant to the law. The Credit Reporting Measures provide rules on credit reporting business and credit reporting agencies, including that (i) thecredit reporting agencies shall collect credit information following the “minimum and necessary” principle and must not collect, compile, store andprocess credit information by unlawful means, and must not alter original data, (ii) information user shall not abuse credit information, and thecredit reporting agencies shall comply with business rules when they provide credit information for credit inquiry, credit evaluation, credit ratingand anti-fraud services, (iii) credit reporting agencies shall take measures to ensure the credit information security, and establish an emergency andreport system for incidents, and (iv) credit reporting agencies shall comply with related laws and regulations when providing credit information tooverseas. The measures provide an 18-month grace period from their effectiveness date for organizations that engage in credit reporting business toobtain the credit reporting business license and comply with its other provisions.Table of Contents104In addition, on July 7, 2021, the Credit Information System Bureau of People’s Bank of China further issued the Notice Relating toDisconnecting Direct Connection to 13 internet platforms including us, requiring the internet platforms to achieve a complete “disconnected directconnection” in terms of personal information with financial institutions, meaning that the direct flow of personal information from internetplatforms that collect such information to financial institutions is prohibited.Historically, in order to serve our users, after users’ authorizations, we collected certain basic information and other necessary informationof users for preliminary fraud detection and user credit assessment, and then recommended the prospective borrowers’ profiles to our financialinstitution partners to assist them to make their final risk assessment and credit decision independently. Pursuant to the Credit Reporting Measuresand the Notice Relating to Disconnecting Direct Connection, the abovementioned operations may be deemed as operations of credit reportingbusiness. To ensure compliance, we have involved two licensed credit reporting institutions and have substantially completed our businessadjustments with respect to disconnecting direct connection for credit reporting as of the date of this annual report. In particular, we have enteredinto collaboration agreements with two licensed credit reporting institutions to ensure the flow of personal information complies with therequirements of the Credit Reporting Measures and the Notice Relating to Disconnecting Direct Connection. We will closely monitor the regulatoryrequirements, seek guidance from regulatory authorities and take applicable measures in a timely manner to ensure our compliance with laws andregulations applicable to us.Regulations on Consumer ProtectionsThe Law on Protection of Consumers’ Rights and Interests of the PRC, or the Consumer Protection Law, which was promulgated by theStanding Committee of the National People’s Congress on October 31, 1993 and last amended on October 25, 2013 and effective from March 15,2014, sets out the obligations of business operators and the rights and interests of the consumers. Business operators must guarantee the quality,function, usage and term of validity of the goods or services they sell or provide. The consumers whose interests have been damaged due to theirpurchase of goods or acceptance of services on online platforms may claim damages from the sellers or service providers. Online platformoperators may be subject to liabilities if the lawful rights and interests of consumers are infringed in connection with consumers’ purchase of goodsor acceptance of services on online platforms, and the platform operators fail to provide consumers with authentic contact information of the sellersor service providers. In addition, platform operators may be jointly and severally liable with the sellers and service providers if they are aware orshould be aware that the sellers or the service providers are using the online platform to infringe upon the lawful rights and interests of consumersand fail to take measures necessary to prevent or stop this activity. The Consumer Protection Law also provides principles of legality,appropriateness and necessity for collecting or using consumers’ personal data. In particular, businesses operators should disclose the purposes,methods and scopes of collecting and using personal data and obtain consumers’ consent. Business operators should also disclose the terms for itsdata collection and use and should not collect or use information in violation of laws, regulations or agreements with consumers. Businessesoperators should maintain confidentiality of the personal data collected from consumers and should not leak or sell personal data and should notprovide personal data in violation of laws to third parties. They should also adopt technical and other necessary measures to ensure security ofpersonal data, and to safeguard against information leak and loss. In case of information leak or loss, remedial measures should be taken by thebusiness operators.On December 26, 2022, the China Banking and Insurance Regulatory Commission issued the Measures for the Administration of theProtection of Consumer Rights and Interests by Banking and Insurance Institutions, which came into effect on March 1, 2023. These measuresmainly require banking and insurance institutions to establish and improve systems and mechanisms for the protection of consumers’ rights andinterests, including mechanisms for review, disclosure, consumer appropriateness management, traceability of sales practices, protection ofconsumers’ information, list-based management of partners and complaint processing, among others. These measures further require banking andinsurance institutions: (i) to establish a list-based management mechanism for their partners, set the access and exit standards for partners forcooperation matters involving consumers’ rights and interests, and strengthen the continuous management of partners. The cooperation agreementshall specify the responsibilities and obligations of both parties concerning the protection of consumers’ rights and interests, including, but notlimited to information security control, service price management, service continuity, information disclosure, dispute resolution mechanism,assumption of liability for breaches of contract and emergency response; (ii) not to allow a third-party partner to promote or sell products andservices to consumers in the name of the banking or insurance institution at its business outlets or on the network platforms that it operates itself;(iii) to handle the personal information of consumers together with their partners on the basis of the authorization and consent of consumers, andthe cooperation agreement shall stipulate clauses on data protection responsibility, confidentiality obligation, default liability, contract terminationand emergency response; and (iv) to urge and regulate the Internet platform enterprises cooperating with them to protect the personal informationof consumers effectively, and the personal information of consumers shall not be transmitted between different platforms without the consent ofconsumers, unless otherwise stipulated by laws and regulations. There are uncertainties with respect to the application and enforcement of thenewly published measures. We will closely monitor the regulatory development and adjust our business operations from time to time to complywith the regulations over the course of our cooperation with banking institutions.Table of Contents105On March 15, 2024, the State Council promulgated the Implementation Regulations on the PRC Consumer Rights and Interests ProtectionLaw, which will take effect on July 1, 2024. These implementation regulations refine and supplement the provisions on operator obligations, andimprove the provisions related to the online consumption. For example, (i) operators shall not use standard clauses to unreasonably exempt orreduce their liabilities, aggravate consumers’ liabilities, or restrict consumers’ rights to change or terminate contracts in accordance with the law,choose litigation or arbitration to resolve disputes, or choose goods or services from other operators; (ii) operators shall not excessively collectconsumers’ personal information, and shall not force or covertly force consumers to consent to the collection and use of personal information thatis not directly related to business activities by means of a general authorization, default authorization, or other methods; (iii) without the consent ofconsumers, operators shall not send commercial information or make commercial phone calls to consumers; if consumers agree to receive suchinformation or calls, operators shall provide clear and convenient cancellation methods; if consumers choose to cancel, operators shall immediatelystop sending such information or making such calls; and (iv) operators shall use an easy-to-understand method to provide consumers withinformation related to goods or services truly and comprehensively, and shall not set different prices or charging standards for the same goods orservices under the same conditions without the knowledge of consumers.Regulations on Issuances of Asset-Backed SecuritiesAccording to the Administrative Measures on Asset Securitization of Securities Companies and Subsidiaries of Fund ManagementCompanies and their supportive documents, Guidelines for Securities Companies and Subsidiaries of Fund Management Companies on AssetSecuritization and Guidelines for Securities Companies and Subsidiaries of Fund Management Companies on Due Diligence for AssetSecuritization all of which were adopted by the CSRC on November 19, 2014, asset securitization shall mean business activities of issuance ofasset-backed securities paid and supported by cash flows generated by the underlying assets, and credit enhancement through structuring, amongothers. Underlying assets broadly refer to property rights such as an enterprise’s accounts receivable, creditor’s rights under a lease, credit assetsand beneficial rights to a trust, immovable property or usufruct such as infrastructure and commercial properties, and other properties or propertyrights recognized by the CSRC. The assets of the ABS plan shall be placed under custody of a commercial bank with the appropriate businessqualifications, or an asset custodian organization recognized by the CSRC. The issuer (originator) shall not encroach upon or cause damage to theunderlying assets, and shall perform the following duties: (i) transfer underlying assets pursuant to the provisions of laws, administrativeregulations, the company’s articles of association and the relevant agreement; (ii) cooperate with and support performance of duties by themanager, custodian and any other organization providing services for asset securitization; and (iii) any other duties agreed in the legal documents ofthe ABS plan.Regulations on Anti-Money LaunderingThe PRC Anti-Money Laundering Law, which was issued by the Standing Committee of the National People’s Congress, in October, 2006and became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well asnon-financial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, theestablishment of various systems for client identification, the retention of clients’ identification information and transactions records, and thereporting obligation on material transactions and suspicious transactions. The People’s Bank of China and other government authorities issued aseries of administrative rules and regulations to specify the anti-money laundering obligations of financial institutions and certain non-financialinstitutions. However, PRC State Council has not promulgated the list of the non-financial institutions with anti-money laundering obligations.The Guidelines on Promoting the Healthy Growth of Internet Finance clarify, among other things, internet financial service providerrequirements to comply with certain anti-money laundering provisions, including the establishment of a customer identification program, themonitoring and reporting of suspicious transactions, the preservation of customer information and transaction records, and the provision ofassistance to the public security department and judicial authority in investigations and proceedings in relation to anti-money laundering matters.The People’s Bank of China will formulate implementing rules to further specify the anti-money laundering obligations of internet financial serviceproviders. On October 10, 2018, the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the CSRC jointlypromulgated the Administrative Measures for Anti-money Laundering and Counter-terrorism Financing by Internet Finance Service Agencies (forTrial Implementation), effective as of January 1, 2019, which specify the anti-money laundering obligations of internet finance service agenciesand regulate that the internet finance service agencies (i) shall adopt continuous customer identification measures; (ii) shall implement the systemfor reporting large-value or suspicious transactions; (iii) shall conduct real-time monitoring of the lists of terrorist organizations and terrorists; and(iv) shall properly keep the information, data and materials such as customer identification and transaction reports, among others.Table of Contents106Pursuant with the aforementioned regulations, we have implemented various policies and procedures, such as internal controls and “know-your-customer” procedures, for anti-money laundering purposes. However, our policies and procedures may not be completely effective inpreventing other parties from using us for money laundering without our knowledge. See “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Business and Industry—If our financial institution partners fail to comply with applicable anti-money laundering and anti-terroristfinancing laws and regulations, our business and results of operations could be materially and adversely affected.”Regulations on Anti-monopolyThe Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress on August 30, 2007, which becameeffective on August 1, 2008 and was amended on June 24, 2022, and the Provisions on the Review of Concentrations of Undertakings promulgatedby the SAMR on March 10, 2023, which became effective on April 15, 2023 require that transactions which are deemed concentrations and involveparties with specified turnover thresholds must be cleared by the SAMR before they can be completed. Where the participation in concentration ofundertakings by way of foreign-funded merger and acquisition of domestic enterprises or any other method which involves national security, theexamination of concentration of undertakings shall be carried out pursuant to the provisions of this law and examination of national security shallbe carried out pursuant to the provisions of the State. The revised Anti-monopoly Law provides, among others, that business operators shall not usedata, algorithms, technology, capital advantages and platform rules to exclude or limit competition, and also requires government authorities tostrengthen the examination of concentration of undertakings in areas related to national welfare and people’s well-being, and enhances penalties forviolation of the regulations regarding concentration of undertakings.On February 7, 2021, the Anti-monopoly Commission of the State Council issued the Anti-Monopoly Guidelines for the Internet PlatformEconomy Sector, which specifies that any concentration of undertakings involving variable interest entities (VIE structure) shall fall within thescope of anti-monopoly review. If a concentration of undertakings meets the criteria for declaration as stipulated by the State Council, an operatorshall report such concentration of undertakings to the anti-monopoly law enforcement agency under the State Council in advance.Regulations on Information Security and Privacy ProtectionIn recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from anyunauthorized disclosure. Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the Ministry ofIndustry and Information Technology in December 2011 and effective as of March 2012, an internet information service provider may not collectany user personal information or provide any such information to third parties without the specific consent of the user. An internet informationservice provider must expressly inform the users of the method, content and purpose of the collection and processing of such user personalinformation, and may only collect such information necessary for the provision of its services.In addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the Standing Committee of theNational People’s Congress in December 2012, which seeks to enhance the legal protection of information security and privacy on the internet, andthe Order for the Protection of Telecommunication and Internet User Personal Information issued by the Ministry of Industry and InformationTechnology in July 2013, which regulates the collection and use of users’ personal information in the provision of telecommunications services andinternet information services in China, any collection and use of user personal information must be subject to the consent of the user, abide by theprinciples of legality, rationality and necessity and be within the specified purposes, methods and scopes.The State Internet Information Office issued the Administrative Provisions on Mobile Internet App Information Services in June 2016,effective on August 2016 and amended on June 14, 2022, to implement the regulations of the mobile app information services. The provisionsregulate the APP information service providers and the Internet application store service providers, while the CAC and local offices of cyberspaceadministration shall be responsible for the supervision and administration of nationwide or local APP information respectively. The APPinformation service providers shall acquire qualifications required by laws and regulations and implement the information security managementresponsibilities strictly and fulfill their obligations provided by the provisions.In addition, the Guidelines on Promoting the Healthy Growth of Internet Finance require internet financial service providers, includingCredit-Tech service providers, among other things, to improve technology security standards, and safeguard customer and transaction information.They also prohibit Credit-Tech service providers from illegally selling or disclosing customers’ personal information. The People’s Bank of Chinaand other regulatory authorities will jointly adopt the implementing rules and technology security standards.Table of Contents107Pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress, effective asof November 2015, any internet service provider that fails to fulfill the obligations related to internet information security administration asrequired by applicable laws and refuses to rectify upon administrative orders is subject to criminal penalty as a result of (i) any dissemination ofillegal information on a large scale; (ii) any severe effect due to the leakage of customers’ information; (iii) any serious loss of criminal evidence;or (iv) other severe situation. Moreover, any individual or entity that (i) sells or provides personal information to others in a way that violatesapplicable law, or (ii) steals or illegally obtains any personal information, is subject to criminal liabilities in severe situations.The Network Security Law is formulated to maintain network security, safeguard cyberspace sovereignty, national security and publicinterest, protect the lawful rights and interests of citizens, legal persons and other organizations, and requires a network operator, which includes,among others, Internet information services providers, to take technical measures and other necessary measures in accordance with the provisionsof applicable laws and regulations as well as the compulsory requirements of the national and industrial standards to safeguard the safe and stableoperation of the networks, effectively respond to the network security incidents, prevent illegal and criminal activities, and maintain the integrity,confidentiality and availability of network data. The Network Security Law emphasizes that any individual and organization that uses networks isrequired to comply with the PRC Constitution and laws, abide by public order and cannot endanger network security or make use of networks toengage in unlawful activities such as endangering national security, economic order and social order, and infringing the reputation, privacy,intellectual property rights and other lawful rights and interests of other people. The Network Security Law reaffirms the basic principles andrequirements as specified in other existing laws and regulations on personal information protections, such as the requirements on the collection,use, processing, storage and disclosure of personal information, and internet service providers being required to take technical and other necessarymeasures to ensure the security of the personal information they have collected and prevent personal information from being divulged, damaged orlost. Any violation of the provisions and requirements under the Network Security Law may subject the Internet service provider to warnings,fines, confiscation of illegal gains, revocation of licenses, cancelation of filings, closedown of websites or even criminal liabilities.On December 29, 2017, the Information Security Technology Personal Information Security Specification (GB/T 35273-2017) was issuedby the General Administration of Quality Supervision, Inspection and Quarantine of the PRC and the Standardization Administration and isreplaced by the 2020 Specification issued by the SAMR and the Standardization Administration jointly, which came into effect on October 1, 2020.Pursuant to the specification, product and service providers should take technical and other necessary measures to ensure the safety of personalinformation, clearly demonstrate the purpose, approaches and scope of processing of the personal information to the individual and obtain therequisite authorization. In addition, according to the 2020 Specification, the original personal biometric information should not, in principle, bestored and, in any event, should be stored separately from personal identity information. It further requires that the privacy policy disclose thescope and rules of personal information collection and use by the personal information controller, which should not be regarded as a contractsigned by the subject of personal information.On January 23, 2019, the Office of the Central Cyberspace Affairs Commission, the Ministry of Public Security, the SAMR and theMinistry of Industry and Information Technology jointly issued the Announcement of Launching Special Crackdown Against Illegal Collectionand Use of Personal Information by Apps. According to the announcement, from January to December 2019, the four aforementioned authoritieswould conduct a nationwide crackdown on the illegal collection and use of personal information. App operators shall strictly fulfill theirobligations pursuant to the Cybersecurity Law of the PRC when collecting and using personal information, and shall be responsible for the securityof personal information obtained and take effective measures to strengthen personal information protection. The App operators shall follow theprinciples of lawfulness, legitimacy and necessity, refrain from collecting personal information that is not related to the services provided; whencollecting personal information, shall display the rules for the collection and use of personal information in an easy-to-understand, simple and clearmanner, and personal information subjects shall independently choose consents; app operators shall not force users to provide authorizationthrough the use of default setting, bundling and stopping installation and use, among others, and may not collect personal information in violationof laws and regulations or against the agreements with users. App operators are asked to provide users with the options of refusing to receivetargeted pushes when app operators push news, current affairs and advertisements to targeted users.On March 13, 2019, the SAMR and the Office of the Central Cyberspace Affairs Commission jointly issued the Announcement onLaunching the Security Certification of Apps, which encourages app operators to voluntarily pass the security certification of apps, and encouragesoperators of search engines and app stores to clearly identify and give priority to recommending those certified Apps. On November 28, 2019, theCAC and other three authorities jointly issued the Announcement on Identification Method of App Collecting and Using Personal Information inViolation of Laws and Regulations, which provides further guidance for determining conduct that qualifies as the unlawful collection and usage ofpersonal information via Apps.Table of Contents108On April 10, 2019, the Ministry of Public Security issued the Guide for Internet Personal Information Security Protection, which sets outthe management mechanism, security technical measures and business processes for personal information security protection. This Guide isapplicable to personal information holders in carrying out their security protection work during personal information life cycle processing. It isapplicable to enterprises that provide services through the Internet, as well as to organizations or individuals who use a private or non-networkedenvironment to control and process personal information.On February 13, 2020, the People’s Bank of China issued the Personal Financial Information Protection Technical Specification, which isan industry standard, specifying the security protection requirements for all aspects of personal financial information life cycle processing,including collection, transmission, storage, use, deletion and destruction. This standard is applicable to institutions in the financial industry in theprovision of financial products and services, and also provides guidance for security assessment agencies in conducting security inspections andassessments. Based on the potential impact caused by unauthorized viewing or unauthorized change of financial information, this standardclassifies personal financial information into three categories of C3, C2, and C1 from high to low sensitivity, and different requirements apply toinformation classified under different categories.On March 12, 2021, the CAC, Ministry of Industry and Information Technology, the Ministry of Public Security and the SAMRpromulgated the Provisions on the Scope of Necessary Personal Information Required for Common Types of Mobile Internet Applications, whichbecame effective on May 1, 2021. The Provisions on the Scope of Necessary Personal Information Required for Common Types of Mobile InternetApplications clarify the scope of necessary information required for certain common types of mobile apps and stipulate that mobile app operatorsshall not deny users’ access to basic functions and services of the app in the event that the users disagree with collection of unnecessary personalinformation.On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law of the PRC, whichcame into effect on September 1, 2021. The law introduces a data classification and hierarchical protection system based on the materiality of datain economic and social development, as well as the degree of harm to national security, public interests, or legitimate rights and interests of personsor entities if such data is tampered with, destroyed, divulged, or illegally acquired or used. It also provides for a security review procedure for thedata activities that may affect national security. Violation of the law may subject entities or individuals to warnings, fines, suspension of operations,revocation of permits or business licenses, or even criminal liabilities.On August 20, 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law ofthe PRC, which became effective on November 1, 2021. The Personal Information Protection Law stipulates certain important concepts withrespect to personal information processing, including that: (i) “personal information” refers to all kinds of information relating to identified oridentifiable natural persons recorded by electronic or other channel and methods, excluding information processed anonymously; (ii) “processingof personal information” includes the collection, storage, use, processing, transmission, provision, disclosure and deletion of personal information;and (iii) “personal information processor” refers to an organization or individual that independently determines the purpose and method ofprocessing personal information. Except as otherwise provided in the Personal Information Protection Law, a personal information processor mayonly process personal information under the circumstances where the individuals’ consents have been obtained or where certain contractualarrangements, employment relationships, public emergencies, performance of statutory duties or obligations or publishing of press release forpublic interests so require.Table of Contents109On September 17, 2021, the CAC, together with eight other government authorities, jointly issued the Guidelines on Strengthening theComprehensive Regulation of Algorithms for Internet Information Services. On December 31, 2021, the CAC, the Ministry of Industry andInformation Technology , the Ministry of Public Security and the SAMR jointly promulgated the Administrative Provisions on Internet InformationService Algorithm-Based Recommendation, which took effect on March 1, 2022. The Administrative Provisions on Internet Information ServiceAlgorithm-Based Recommendation, among others, (i) implement classification and hierarchical management for algorithm-based recommendationservice providers based on various criteria, (ii) require algorithm-based recommendation service providers to inform users of their provision ofalgorithm-based recommendation services in a conspicuous manner, and publicize the basic principles, purpose intentions, and main operatingmechanisms of algorithm-based recommendation services in an appropriate manner, and (iii) require such service providers to provide users withoptions that are not specific to their personal profiles, or convenient options to cancel algorithmic recommendation services. On November 25,2022, the CAC passed the Provisions on the Administration of Deep Synthesis of Internet-based Information Services, which were released afterbeing approved by the Ministry of Industry and Information Technology and the Ministry of Public Security, and came into force on January 10,2023. The provisions require deep synthesis service providers to fulfill their principal responsibilities for information security, establish andimprove management systems for, among other things, user registration, algorithm mechanism review, scientific and technological ethics review,information release review, data security, personal information protection, combating telecom and online fraud, and emergency response, and havesafe and controllable technical support measures. The provisions enumerate the obligations of many deep synthesis service providers, such asformulating and disclosing management rules and platform conventions, authenticating deep synthesis service users’ real identity information,adopting technical or manual methods to examine the input data and synthesizing results of deep synthesis service users, establishing andimproving a rumor-refuting mechanism, setting up convenient portals for user complaints and public complaints, and taking technical measures toadd signs that do not affect users’ use to information generated or edited using their services. On July 10, 2023, the CAC, the National Commissionof Development and Reform, the Ministry of Education, the Ministry of Science and Technology, the Ministry of Industry and InformationTechnology , the Ministry of Public Security and the National Radio and Television Administration issued the Provisional Measures for theAdministration of Generative Artificial Intelligence Services, which became effective on August 15, 2023. The provisional measures define thegenerative artificial intelligence technologies as the models and related technologies that can generate text, pictures, audio, video and othercontents. Pursuant to the provisional measures, generative AI service providers shall (i) carry out pre-training, optimization training, and othertraining data processing activities in accordance with the law; (ii) use data and underlying models sourced from legitimate sources; (iii) not infringeupon the intellectual property rights involved that are owned by others in accordance with the law; (iv) where personal information is involved,obtain the consent of the personal information subject or take other actions in reliance on other laws or administrative regulations; (v) employeffective measures to improve the quality of training data and to enhance the authenticity, accuracy, objectivity, and diversity of training data; and(vi) comply with other relevant provisions of laws and administrative regulations such as the Cybersecurity Law of the PRC, the Data Security Lawof the PRC and the Personal Information Protection Law of the PRC, as well as the regulatory requirements of relevant authorities. In addition, forthe provision of generative artificial intelligence services that have public opinion attributes or social mobilization capabilities, safety evaluationshall be carried out in accordance with the regulations, and the procedures for algorithm filing, or modification or cancellation of filing shall beperformed in accordance with the Provisions on the Administration of Algorithmic Recommendations for Internet Information Services.On April 13, 2020, the Measures on Cybersecurity Review were issued, which took effect on June 1, 2020. They provide detailed rulesregarding cyber security review, and further provide that any operator found in violation of the measures will be penalized in accordance withArticle 65 of the Cybersecurity Law of the PRC. The measures for Cybersecurity Review (2021 Revision), which came into effect on February 15,2022, provide that, to ensure the security of the supply chain of critical information infrastructure and safeguard national security, a cybersecurityreview is required when national security has been or may be affected where critical information infrastructure operators purchase network productor service and network platform operators process data. When an operator in possession of personal information of over one million users appliesfor a listing abroad, it must apply to the CAC for a cybersecurity review. These measures further elaborate the factors to be considered whenassessing national security risks, including, among others, (i) the risks of illegal control, interference or destruction of critical informationinfrastructure brought about by the use of products and services; (ii) the harm caused by supply interruption of products and services to the businesscontinuity of critical information infrastructure; (iii) security, openness, transparency and diversity of sources of products and services, reliability ofsupply channels, and risks of supply interruption due to political, diplomatic, trade or other factors; (iv) information on compliance with Chineselaws, administrative regulations and departmental rules by product and service providers; (v) risks of theft, disclosure, damage, illegal use or cross-border transfer of core data, important data or large amounts of personal information; (vi) risks of influence, control or malicious use of criticalinformation infrastructure, core data, important data or large amounts of personal information by foreign governments after listing on a foreignstock exchange; and (vii) other factors that may endanger critical information infrastructure security and national data security.Table of Contents110On July 7, 2022, the CAC published Outbound Data Transfer Security Assessment Measures that took effect on September 1, 2022 andoutline the potential security assessment process for outbound data transfer. Under the Outbound Data Transfer Security Assessment Measures,data processors that provide important data and personal information outbound that are collected or produced through operations within theterritory of the PRC, where a security assessment shall be conducted according to the law, shall apply to the provisions of these Measures. Underthe Outbound Data Transfer Security Assessment Measures, data processors providing outbound data shall apply for outbound data transfersecurity assessment with the CAC in any of the following circumstances: (i) where a data processor provides important data abroad; (ii) where acritical information infrastructure operator or a data processor processing the personal information of more than one million individuals providespersonal information abroad; (iii) where a data processor has provided personal information of 100,000 individuals or sensitive personalinformation of 10,000 individuals in total abroad since January 1 of the previous year; and (iv) other circumstances prescribed by the CAC forwhich declaration for security assessment for outbound data transfers is required. The Outbound Data Transfer Security Assessment Measures alsoprovide procedures for security assessment and submissions, important factors to be considered in conducting assessment, and legal liabilities of adata processor for failure to apply for assessment. In addition, on February 22, 2023, the CAC promulgated Measures for the Standard Contract forOutbound Transfer of Personal Information, which came into effect on June 1, 2023. Pursuant to the measures, personal information processortransferring personal information abroad shall conclude a standard contract if all the following conditions are met: (i) the data processor whointends to transfer personal information abroad is not a critical information infrastructure operator; (ii) the data processor processes personalinformation of less than one million individuals; (iii) the data processor has cumulatively transferred abroad the personal information of less than100,000 individuals since January 1 of the previous year; and (iv) the data processor has cumulatively transferred abroad the sensitive personalinformation of less than 10,000 individuals since January 1 of the previous year. On March 22, 2024, the CAC promulgated the Regulations onPromoting and Regulating Cross-border Data Flow, which further clarified the implementation and connection of the existing data outboundsecurity assessment, personal information cross-border standard contract and personal information protection certification regarding data outboundactivities. The regulations, among other things, provide relaxed conditions for cross-border data flow and narrowed scope of security assessmentfor data outbound activities. Among them, the two types of data outbound activity conditions that should be reported for data outbound securityassessment are (i) the operator of critical information infrastructure provides personal information or important data overseas and (ii) dataprocessors other than critical information infrastructure operators provide important data overseas, or provide personal information of more than 1million people (excluding sensitive personal information) or more than 10,000 sensitive personal information overseas since January 1 of the year.On November 14, 2021, the CAC released the Measures of Regulations on the Network Data Security Administration (Draft forComments). The draft measures defines “data processors” as individuals or organizations that autonomously determine the purpose and the mannerof data processing. The draft sets forth general guidelines, protection of personal information, security of important data, security management ofcross-border data transfer, obligations of internet platform operators, supervision and management, and legal liabilities. Pursuant to the draft, acybersecurity review will be imposed on a data processor that (i) processes personal information of one million or more users and applies for listingin a foreign country; (ii) merger, reorganization or division of internet platform operators that have acquired a large number of data resourcesrelated to national security, economic development or public interests affects or may affect national security; (iii) applies for listing in Hong Kongand may impact national security, or (iv) engages in activities or transactions that may impact national security. Moreover, under such draftregulations, data processors dealing with important data or listing offshore should carry out an annual data security assessment and data securityservices before January 31 of each year. Under this draft, data security assessment reports for the previous year shall be submitted to the municipal-level cyberspace administration department by January 31 of the following year.On February 6, 2023, the Ministry of Industry and Information Technology promulgated the Notice on Further Improving the ServiceCapabilities of Mobile Internet Applications, effective on the same date. The notice stipulates that users shall be informed of personal informationprocessing rules in a concise, clear and easy-to-understand way, and in case of changes, users shall be informed of the latest development in time.The data processors shall highlight the purpose, method and scope of sensitive personal information processing activities, and establish a list ofpersonal information that has been collected, and should not induce users to agree to personal information processing rules with default check,small prints or lengthy texts.On July 21, 2023, the Ministry of Industry and Information Technology issued the Notice on Carrying out the Filing of Mobile InternetApplications, requiring App operators engaging in Internet information services within the territory of the PRC to complete filing procedures inaccordance with the Anti-Telecommunications Network Fraud Law of the PRC and the Measures for the Administration of Internet InformationServices. App operators shall complete filing procedures with the provincial-level communications administration bureau where they aredomiciled, and their network access service providers and app distribution platforms (including the distribution platforms of mini programs, quickapplications and others) shall submit such applications online for inspection and review through the “National Internet Basic ResourcesManagement System.”Table of Contents111In addition, the Ministry of Industry and Information Technology promulgated the Measures for Data Security Management in theIndustrial and Information Technology Sector (Trial) on December 8, 2022, which came into effect on January 1, 2023. The measures stipulate thatindustrial and telecoms data processors shall implement hierarchical management of industrial and telecoms data, which will be classified intothree levels: general data, important data and core data. The measures also stipulate certain obligations of industrial and telecoms data processors inrelation to the implementation of data security systems, key management, data collection, data storage, data usage, data transmission, dataprovision, data disclosure, data destruction, security audits and contingency planning. Industrial and telecoms data processors shall file theircatalogues of important data and core data with the local industrial regulatory authorities for the record.To ensure compliance with the above laws and regulations, in providing our Credit-Tech service, we collect certain personal informationfrom our consumers and SMEs, and also are required to share the information with our financial institution partners for the purpose of facilitatingcredit to our borrowers. We have obtained consent from borrowers for us to collect, use and share their personal information, and have alsoestablished information security systems to protect user information and to abide by other network security requirements under such laws andregulations. However, there is uncertainty as to the interpretation application and enforcement of such laws which may be interpreted and appliedin a manner inconsistent with our current policies and practices or require changes to the features of our system. Any non-compliance or perceivednon-compliance with these laws, regulations or policies may lead to warnings, fines, investigations, lawsuits, confiscation of illegal gains,revocation of licenses, cancelation of filings, closedown of websites or apps or even criminal liabilities against us by government agencies or otherindividuals.While we have taken measures to protect the personal information to which we have access, our security measures could be breached,resulting in leaks of such confidential personal information. Security breaches or unauthorized access to confidential information could also exposeus to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity.Regulations on Foreign ExchangePursuant to the Foreign Exchange Administration Regulations, as issued in January 1996 and amended in January 1997 and August 2008,Renminbi is freely convertible for current account items, including the trade and service-related foreign exchange transactions, the distribution ofdividends, interest payments but not for capital account items, such as direct investments, loans, repatriation of investments and investments insecurities outside of China, unless prior approval from SAFE is obtained and prior registration with SAFE is made.In June 2015, SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration ofForeign Exchange Settlement of Capital of Foreign-invested Enterprises, or SAFE Circular 19. SAFE further promulgated the Notice of the StateAdministration of Foreign Exchange on Reforming and SAFE Circular 16 on June 9, 2016, which, among other things, amends certain provisionsof SAFE Circular 19. Pursuant to SAFE Circular 19 and SAFE Circular 16, the flow and use of Renminbi capital converted from foreign currencydenominated registered capital of a foreign-invested company shall not be used for business beyond its business scope, or to provide loans topersons other than affiliates unless otherwise permitted under its business scope. Violations of SAFE Circular 19 or SAFE Circular 16 could resultin administrative penalties.In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Foreign Exchange Management Policies forDirect Investment, or SAFE Circular 13, which took effect in June 2015. SAFE Circular 13 delegates the power to enforce the foreign exchangeregistration in connection with inbound and outbound direct investments under the SAFE rules from local branches of SAFE to banks, therebyfurther simplifying the foreign exchange registration procedures for inbound and outbound direct investments.Regulations on dividend distributionThe principal regulations governing distribution of dividends of foreign-invested enterprises include PRC Company Law, PRC WhollyForeign-owned Enterprise Law, and Implementation Rules of the PRC Wholly Foreign-owned Enterprise Law, of which the Wholly Foreign-invested Enterprise Law together with its implementation regulations is replaced by 2019 PRC Foreign Investment Law from January 1, 2020.Under these laws and regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, ifany, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are requiredto allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50%of the registered capital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profitsbased on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.Table of Contents112Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from Shanghai QiyueInformation & Technology Co., Ltd., which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financingrequirements we may have. Limitation on the ability of the VIEs to make remittance to our wholly foreign owned enterprise and on the ability ofour wholly foreign owned enterprise to pay dividends to us could limit our ability to access cash generated by the operations of those entities. See“Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions onequity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRCsubsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.”Regulations on foreign exchange registration of overseas investment by PRC residentsIn July 2014, SAFE promulgated SAFE Circular 37 in the replacement of Notice on Issues relating to Foreign Exchange Administrationfor Financing and Roundtrip Investments by Domestic Residents through Overseas Special-purpose Companies in October 2005, requiring PRCresidents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established forthe purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshorespecial purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents,name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.SAFE further enacted SAFE Circular 13, which allows PRC residents or entities to register with qualified banks in connection with theirestablishment or control of an offshore entity established for the purpose of overseas investment or financing. In the event that a PRC shareholderholding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehiclemay be prohibited from distributing profits to the offshore parent and from carrying out subsequent cross-border foreign exchange activities. Inaddition, the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiaries. Moreover, failure tocomply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchangecontrols.These aforementioned regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshoreacquisitions and share transfer that we make in the future if our shares are issued to PRC residents. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—PRC regulations relating to offshore investment activities by PRC residents may limit our PRCsubsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners toliability and penalties under PRC law.”Regulations on stock incentive plansIn February 2012, SAFE promulgated the Notice on Foreign Exchange Administration of PRC Residents Participating in Share IncentivePlans of Offshore Listed Companies, replacing the previous rules issued by SAFE in March 2007 and in January 2008. Under such stock optionrules and other rules and regulations, PRC residents who participate in a stock incentive plan in an overseas publicly listed company are required toregister with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents mustretain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected bythe PRC subsidiary, to conduct SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Theparticipants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase andsale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend SAFE registration with respect to thestock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other materialchanges. The PRC agents must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or itslocal branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee shareoptions. The foreign exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted anddividends distributed by the overseas listed companies must be remitted into the bank accounts in the PRC opened by the PRC agents beforedistribution to such PRC residents.Table of Contents113In addition, SAFE Circular 37 provides that PRC residents who participate in a share incentive plan of an overseas unlisted specialpurpose company may register with SAFE or its local branches before exercising rights. If the PRC optionees fail to comply with the IndividualForeign Exchange Rule and the Stock Option Rules, we and our PRC optionees may be subject to fines and other legal sanctions. In May 2018 andNovember 2019, we adopted the 2018 Share Incentive Plan and the 2019 Share Incentive Plan, respectively, to attract and retain the best availablepersonnel, provide additional incentives to employees, directors and consultants and promote the success of our business. We will also advise therecipients of awards under our 2018 Share Incentive Plan to handle foreign exchange matters in accordance with the Notices on Issues Concerningthe Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company.However, we cannot guarantee that all employee awarded equity-based incentives can successfully register with SAFE in full compliance with thenotices. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Any failure to comply with PRC regulationsregarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal oradministrative sanctions” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—PRC regulations relatingto offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits tous or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.”Laws and Regulations relating to Intellectual PropertyCopyright and software productsThe Standing Committee of the National People’s Congress adopted PRC Copyright Law in 1990 and most recently amended in 2020,with its implementing rules adopted in 1991 and most recently amended in 2013 by PRC State Council, and the Regulations for the Protection ofComputer Software promulgated by the PRC State Council in 2001 and most recently amended in 2013. These rules and regulations extendcopyright protection to internet activities, products disseminated over the internet and software products. In addition, there is a voluntaryregistration system administered by the China Copyright Protection Center. According to the aforementioned laws and regulation, the term ofprotection for copyrighted software is fifty years.TrademarksPRC Trademark Law was promulgated by the Standing Committee of the National People’s Congress in August 1982 and most recentlyamended in April 2019, and the Implementation Regulations on the PRC Trademark Law was promulgated by PRC State Council in August 2002and amended in April 2014. These laws and regulations provide the basic legal framework for the regulations of trademarks in the PRC. In thePRC, registered trademarks include commodity trademarks, service trademarks, collective trademarks and certificate trademarks. The IntellectualProperty Office under the SAMR is responsible for the registration and administration of trademarks throughout the country. Trademarks aregranted on a term of ten years. Applicants may apply for an extension 12 months prior to the expiration of the 10-year term.Domain namesInternet domain name registration and related matters are primarily regulated by the Measures on Administration of Internet DomainNames, which replaced the Measures on Administration of Domain Names for the Chinese Internet in November 2004, issued by Ministry ofIndustry and Information Technology and effective as of November 1, 2017, and the Implementing Rules on Registration of Domain Names issuedby China Internet Network Information Center in May 2012. Domain name registrations are handled through domain name service agencies, andthe applicants become domain name holders upon successful registration.We have adopted necessary mechanisms to register, maintain and enforce intellectual property rights in China. However, we cannot assureyou that we can prevent our intellectual property from all the unauthorized use by any third party, neither can we promise that none of ourintellectual property rights would be challenged by any third party. See “Item 3. Key Information—D. Risk Factors—Risks Related to OurBusiness and Industry—We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our businessand competitive position” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may be subject tointellectual property infringement claims, which may be costly to defend and may disrupt our business and operations.”Table of Contents114M&A RulesIn August 2006, six PRC governmental agencies jointly promulgated the M&A Rules as most recently amended in 2009. The M&A Rulesestablish procedures and requirements that could make certain acquisitions of PRC companies by foreign investors more time-consuming andcomplex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction inwhich a foreign investor takes control of a PRC domestic enterprise.According to the Provisional Measures on Administration of Filing for Establishment and Change of Foreign Investment Enterprises, themerger and acquisition of domestic non-foreign-invested enterprises by foreign investors shall, if not involving special access administrativemeasures and affiliated mergers and acquisitions, be subject to the record filing measures.Furthermore, the Ministry of Commerce and the State Administration of Market Regulation issued the Measures for the Reporting ofForeign Investment Information on December 30, 2019, which came into effect on January 1, 2020 and replaced Provisional Measures onAdministration of Filing for Establishment and Change of Foreign Investment Enterprises. Since January 1, 2020, for foreign investors carrying outinvestment activities directly or indirectly in China, the foreign investors or foreign-invested enterprises shall submit investment information to thecommerce authorities pursuant to such measures.For detailed analysis, see “Risk Factors—Risks Related to Doing Business in China—The M&A Rules and certain other PRC regulationsestablish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursuegrowth through acquisitions in China.”Overseas ListingsOn July 6, 2021, PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance withthe Law. These opinions emphasize the need to strengthen the administration over illegal securities activities and the supervision on offshorelistings by China-based companies and proposed to take effective measures, such as promoting the construction of regulatory systems, to deal withthe risks and incidents faced by China-based offshore-listed companies.On February 17, 2023, the CSRC released the Trial Administration Measures of Overseas Securities Offering and Listing by DomesticCompanies, and five supporting guidelines, which came into effect on March 31, 2023. The measures regulate both direct and indirect overseasoffering and listing of PRC domestic companies’ securities by adopting a filing-based regulatory regime. According to the measures, companies inChina will be required to submit the filing with respect to its overseas initial public offering and listing with the CSRC within 3 working days aftersubmitting listing application materials to overseas regulators, and such filing shall be completed before the companies are permitted to be listedand offering securities overseas.In addition, pursuant to these measures, an overseas offering and listing of a PRC company is prohibited under any of the followingcircumstances, if (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and state rules; (ii)the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the StateCouncil in accordance with law; (iii) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s)and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the orderof the socialist market economy during the latest three years; (iv) the domestic company intending to make the securities offering and listing iscurrently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been madethereof; or (v) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by othershareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.At a press conference held for these new regulations, officials from the CSRC clarified that the domestic companies that have already beenlisted overseas on or before the effective date of the measures (i.e., March 31, 2023) shall be deemed as existing issuers. Existing issuers are notrequired to complete the filling procedures immediately, and they shall be required to file with the CSRC when subsequent matters such asrefinancing are involved.Table of Contents115On February 24, 2023, the CSRC published the revised Provisions on Strengthening Confidentiality and Archives Administration ofOverseas Securities Offering and Listing by Domestic Companies. The provisions require that, in relation to the overseas listing activities ofdomestic enterprises, such domestic enterprises, as well as securities companies and securities service institutions providing securities services, arerequired to strictly comply with the requirements on confidentiality and archives management, establish a sound confidentiality and archivessystem, and take necessary measures to implement their confidentiality and archives management responsibilities. According to the provisions, ifduring the course of an overseas offering and listing, if a PRC company needs to publicly disclose or provide to securities companies, accountingfirms or other securities service providers and overseas regulators, any materials that contain state secrets or that have a sensitive impact, the PRCcompany should complete the relevant approval/filing and other regulatory procedures. However, there remain uncertainties regarding the furtherinterpretation and implementation of the rules.Laws and Regulations Relating to LaborPursuant to PRC Labor Law, promulgated by the Standing Committee of the National People’s Congress in July 1994 and revised inAugust 2009 and December 2018, and the Labor Contract Law of PRC, promulgated by the Standing Committee of the National People’s Congressin June 2007 and amended in December 2012, and the Implementing Regulations of the Labor Contract Law, employers must execute writtenemployment contracts with full-time employees. All employers must compensate their employees with wages equal to at least the local minimumwage. Violations of the Labor Law and the Labor Contract Law may result in fines and other administrative sanctions, and serious violations mayresult in criminal liabilities.Under PRC laws, rules and regulations, including the PRC Social Insurance Law promulgated by the Standing Committee of the NationalPeople’s Congress in October 2010, which became effective in July 2011 and amended in December 2018, the Interim Measures on the Collectionand Payment of Social Security Funds in January 1999 and amended in March 2019, the Regulations on Work Injury Insurance issued by PRCState Council in April 2003, and amended in December 2010, the Regulations on Unemployment Insurance promulgated by PRC State Council inJanuary 1999 and the Regulations on the Administration of Housing Accumulation Funds released by PRC State Council in April 1999 and lastamended in March 2019, employers are required to contribute, on behalf of their employees, to a number of social security funds and implementcertain employee benefit plans, including funds for basic pension insurance, unemployment insurance, basic medical insurance, occupational injuryinsurance, maternity leave insurance and housing accumulation funds. These payments are made to local administrative authorities and anyemployer who fails to contribute may be fined and ordered to pay the deficit amount. According to the PRC Social Insurance Law, an employerthat fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within astipulated deadline and be subject to a late fee of 0.05% per day, as the case may be. If the employer still fails to rectify the failure to make socialinsurance contributions within the deadline, it may be subject to a fine ranging from one to three times the amount overdue. According to theRegulations on the Administration of Housing Accumulation Funds, an enterprise that fails to make housing fund contributions may be ordered torectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, an application may be made to a local courtfor compulsory enforcement.We have caused all of our full-time employees to enter into written employment contracts with us and have provided and currently provideour employees with proper welfare and employee benefits as required by the PRC laws and regulations.Regulations related to TaxEnterprise income taxUnder the Enterprise Income Tax Law, effective in January 2008 and amended in February 2017 and December 2018, and itsimplementing rules, enterprises are classified as resident enterprises and non-resident enterprises. PRC resident enterprises typically pay anenterprise income tax at the rate of 25% while non-PRC resident enterprises without any branches in the PRC should pay an enterprise income taxin connection with their income from the PRC at the tax rate of 10%. An enterprise established outside of the PRC with its “de facto managementbodies” located within the PRC is considered a “resident enterprise,” which means that it can be treated in a manner similar to a PRC domesticenterprise for enterprise income tax purposes. The implementing rules of the law define a de facto management body as a managing body that inpractice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” ofthe enterprise.Table of Contents116The Enterprise Income Tax Law and the implementation rules provide that an income tax rate of 10% will normally be applicable todividends payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (i) do not have an establishment orplace of business in the PRC or (ii) have an establishment or place of business in the PRC, but the income is not effectively connected with theestablishment or place of business to the extent such dividends and gains are derived from sources within the PRC. Such income tax on thedividends may be reduced pursuant to a tax treaty between China and other jurisdictions. Pursuant to the Arrangement between the Mainland Chinaand the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income and other applicable PRClaws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the conditions and requirements undersuch Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprisereceives from a PRC resident enterprise may be reduced to 5% upon receiving approval from in-charge tax authority.However, based on the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, issued inFebruary 2009 by the State Taxation Administration if the PRC tax authorities determine, in their discretion, that a company benefits from suchreduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential taxtreatment; and the Announcement on Issues concerning “Beneficial Owners” in Tax Treaties issued on February 3, 2018 by the State TaxationAdministration, when determining the status of “beneficial owners,” a comprehensive analysis may be conducted through materials such as articlesof association, financial statements, records of capital flows, minutes of board of directors, resolutions of board of directors, allocation ofmanpower and material resources, the relevant expenses, functions and risk assumption, loan contracts, royalty contracts or transfer contracts,patent registration certificates and copyright certificates, among others. However, even if an applicant has the status as a “beneficiary owner,” thecompetent tax authority finds necessity to apply the principal purpose test clause in the tax treaties or the general anti-tax avoidance rules stipulatedin domestic tax laws, the general anti-tax avoidance provisions shall apply.The Enterprise Income Tax Law and its Implementation Rules permit certain “high and new technology enterprises strongly supported bythe state” that hold independent ownership of core intellectual property and simultaneously meet a list of other criteria, financial or non-financial,as stipulated in the Implementation Rules and other regulations, to enjoy a reduced 15% enterprise income tax rate. The State TaxationAdministration, the Ministry of Science and Technology and the Ministry of Finance jointly issued the Administrative Measures on theRecognition for High and New Technology Enterprise delineating the specific criteria and procedures for the “high and new technologyenterprises” certification in April 2008, which was amended in January 2016. Shanghai Qiyu was accredited as a “high and new technologyenterprises” in 2018 and renewed in 2021, therefore it was entitled to a reduced 15% enterprise income tax rate from 2018 to 2023. In 2020, ourWFOE obtained “high and new technology enterprises” status and was entitled to a reduced enterprise income tax rate of 15% from 2020 to 2023.We believe that we should not be treated as a “resident enterprise” for PRC tax purposes even if the standards for “de facto managementbody” are applicable to us. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertaintiesremain with respect to the interpretation of the term “de facto management body.” If our holding company in the Cayman Islands or any of oursubsidiaries outside of China were deemed to be a “resident enterprise” under the Enterprise Income Tax Law, it would be subject to enterpriseincome tax on its worldwide income at a rate of 25%, which could materially reduce our net income. See “Item 3. Key Information—D. RiskFactors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, suchclassification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.”Value-added taxAccording to the Interim Regulations on Value-added Tax, which was promulgated by PRC State Council in December 1993 and mostrecently amended in 2017, and the Implementing Rules of the Interim Regulations on Value-added Tax, promulgated by the Ministry of Finance inDecember 2008 and most recently amended in October 2011 all taxpayers selling goods, providing processing, repairing or replacement services orimporting goods within the PRC shall pay value-added tax.Table of Contents117Since January 1, 2012, the Ministry of Finance and the State Taxation Administration have implemented the Pilot Plan for Imposition ofValue-Added Tax to Replace Business Tax, or the VAT Pilot Plan, which imposes VAT in lieu of business tax for certain “modern serviceindustries” in certain regions and eventually expanded to nation-wide application. According to the implementation circulars released by theMinistry of Finance and the State Taxation Administration on the VAT Pilot Plan, the “modern service industries” include research, developmentand technology services, information technology services, cultural innovation services, logistics support, lease of corporeal properties, attestationand consulting services. According to the Notice of the Ministry of Finance and the State Administration of Taxation on Implementing the PilotProgram of Replacing Business Tax with Value-Added Tax in an All-round Manner which was issued in March 2016 and effective in May 2016and most recently amended in March 2019, entities and individuals engaging in the sale of services, intangible assets or fixed assets within theterritory of the PRC are required to pay value-added tax instead of business tax. Following the implementation of the VAT Pilot Plan, all of ourPRC subsidiaries and affiliates have been subject to VAT, at a rate of 6% instead of business tax.C. Organizational StructureThe following diagram illustrates our corporate structure, including our significant subsidiaries and consolidated variable interest entitiesof our company as of December 31, 2023:(1)Each of Shanghai Qiyu and Fuzhou Financing Guarantee is wholly owned by Shanghai Qibutianxia, which is a related party of our company.Table of Contents118Contractual Arrangements with the VIEs and Their ShareholdersAgreements that provide us with effective control over the VIEsVoting Proxy Agreements. Pursuant to the voting proxy agreement entered into among our WFOE, Shanghai Qiyu and ShanghaiQibutianxia, Shanghai Qibutianxia would irrevocably authorize our WFOE or any person designated by our WFOE (including any director of itsdirect or indirect offshore parent company and liquidators exercising such directors’ powers or other successors) to act as its attorney-in-fact toexercise all of its rights as a shareholder of Shanghai Qiyu, including, but not limited to the right (i) to convene and participate in shareholders’meetings pursuant to the constitutional documents of Shanghai Qiyu in the capacity of a proxy of Shanghai Qibutianxia, and to sign any and allwritten resolutions and meeting minutes for and on behalf of Shanghai Qibutianxia; (ii) to exercise the voting rights pursuant to the PRC laws andregulations and the articles of Shanghai Qiyu, on behalf of Shanghai Qibutianxia, and adopt resolutions, including, but not limited to dividendrights, sale or transfer or pledge or disposal of part or all of Shanghai Qiyu’s equity, and the right to appoint directors; (iii) to sign or submit anyrequired document to any company registry or other authorities; (iv) to nominate, designate or appoint and remove the legal representative,directors, supervisors and other senior management of Shanghai Qiyu pursuant to the constitutional documents of Shanghai Qiyu; and (v) to raiselawsuits or other legal proceedings against the directors, supervisors and senior management of Shanghai Qiyu when their behaviors harm theinterest of Shanghai Qiyu or its shareholder; and to instruct the directors and senior officers to act in accordance with our attention.Equity Interest Pledge Agreements. Pursuant to the equity interest pledge agreement entered into among our WFOE, Shanghai Qiyu andShanghai Qibutianxia, Shanghai Qibutianxia agreed to pledge all of its equity interests in Shanghai Qiyu to our WFOE as a security interest toguarantee the performance of contractual obligations and the payment of outstanding debts under the Contractual Arrangements. Under the equityinterest pledge agreement, Shanghai Qiyu and Shanghai Qibutianxia represent and warrant to our WFOE that appropriate arrangements have beenmade to protect our WFOE’s interests in the event of bankruptcy or any other event which causes Shanghai Qibutianxia’s inability to exercise itsrights as a shareholder of Shanghai Qiyu to avoid any practical difficulties in enforcing the equity pledge agreement and shall procure or use itsreasonable efforts to procure any successors of Shanghai Qibutianxia to comply with the same undertakings as if they were parties to the equityinterest pledge agreement. In the event of a breach by Shanghai Qiyu or Shanghai Qibutianxia of contractual obligations under the ContractualArrangements, our WFOE, as pledgee, will have the right to dispose of the pledged equity interests in Shanghai Qiyu. Shanghai Qibutianxia hasundertaken to our WFOE, among other things, not to transfer its equity interests in Shanghai Qiyu and not to create or allow any pledge thereonthat may affect the rights and interest of our WFOE without its prior written consent.We are in the process of registering the equity interest pledges described above with the competent office of the State Administration forIndustry and Commerce in accordance with the PRC laws.Loan Agreements. Pursuant to the loan agreement among our WFOE, Shanghai Qiyu and Shanghai Qibutianxia, the shareholder ofShanghai Qiyu, our WFOE is entitled to provide interest-free loans, to the extent permitted by laws, regulations and industry policies of PRC, fromtime to time at such time and amount as it deems appropriate to Shanghai Qibutianxia for the purpose of Shanghai Qiyu’s business operation anddevelopment, including, but not limited to directly injecting such funds to the registered capital of Shanghai Qiyu. Each of the loans made underthis loan agreement has no fixed term, and unless otherwise agreed, our WFOE shall unilaterally decide when to withdraw the loans, provided thatour WFOE shall notify Shanghai Qibutianxia in writing one month in advance. The loan agreement shall remain in effect during Shanghai Qiyu’sterm and the renewable period stipulated by the laws of the PRC, and shall automatically terminate after our WFOE and/or other entities designatedby our WFOE fully exercise all their rights under the exclusive option agreement.Table of Contents119Agreement that allows us to receive economic benefits from the VIEsExclusive Business Cooperation Agreements. Pursuant to the exclusive business cooperation agreement entered into between ourWFOE and Shanghai Qiyu, our WFOE will have the exclusive right to provide Shanghai Qiyu with the consulting and technical services requiredby Shanghai Qiyu’s business. Without our WFOE’s prior written consent, during the term of the exclusive business cooperation agreement, withrespect to the services subject to the exclusive business cooperation agreement and other matters, Shanghai Qiyu and its subsidiaries shall notaccept the same or any similar services provided by any third party and shall not establish cooperation relationships similar to that formed by theexclusive business cooperation agreement with any third party. Our WFOE may appoint other parties, who may enter into certain agreements withShanghai Qiyu, to provide Shanghai Qiyu with the services under the exclusive business cooperation agreement. Pursuant to the exclusive businesscooperation agreement, in consideration of the services provided by our WFOE, Shanghai Qiyu shall pay services fees to our WFOE. The servicefees, without contravening PRC laws, are equal to the entirety of the total consolidated net profit of the Shanghai Qiyu and its subsidiaries, after thededuction of any accumulated deficit in respect of the preceding financial year(s) (if applicable), operating costs, expenses, taxes and otherpayments required by the laws and regulations to be reserved or withheld. Notwithstanding the foregoing, our WFOE may adjust the scope andamount of services fees in its discretion taking into account, among other things, the complexity of the services, the exact content and businessvalue of the services, as well as the market price of services of similar types. Unless otherwise agreed upon, the service fee shall be payable byShanghai Qiyu within five working days after receiving the payment notice sent out by our WFOE. The exclusive business cooperation agreementalso provides that our WFOE will have the exclusive ownership of all the intellectual property rights created as a result of the performance of theexclusive business cooperation agreement to the extent permitted by applicable PRC laws.Agreements that provide us with the option to purchase the equity interests in and assets of the VIEsExclusive Option Agreements. Pursuant to the exclusive option agreement entered into among our WFOE, Shanghai Qiyu and ShanghaiQibutianxia, Shanghai Qibutianxia will irrevocably grant our WFOE an exclusive option to purchase or designate one or more persons to purchase,all or part of its equity interests in Shanghai Qiyu. Further, Shanghai Qiyu will irrevocably grant our WFOE an exclusive option to purchase all orpart of its assets, subject to applicable PRC laws. Our WFOE or its designated person may exercise such options at the lowest price permitted underapplicable PRC laws.Pursuant to the Exclusive Option Agreement, Shanghai Qibutianxia and Shanghai Qiyu have undertaken, amongst other things, that:(i)without our WFOE’s prior written consent, they shall not in any manner supplement, change or amend the constitutionaldocuments of Shanghai Qiyu, increase or decrease their registered capital, or change the structure of their registered capital in other manner;(ii)they shall maintain Shanghai Qiyu’s corporate existence in accordance with good financial and business standards and practices,prudently and effectively operate its business and handle its affairs, procure Shanghai Qiyu to perform its obligations under the exclusive businesscooperation agreement, and procure Shanghai Qiyu to obtain and/or maintain all necessary licenses and permits;(iii)without the prior written consent of our WFOE, they shall not at any time following the signing of the exclusive optionagreement, sell, transfer, pledge or dispose of in any manner any assets of Shanghai Qiyu or interest in the business or revenues of Shanghai Qiyu,or allow the encumbrance thereon of any security interest;(iv)unless otherwise mandatorily required by PRC laws, Shanghai Qiyu shall not be dissolved or liquidated without prior writtenconsent by our WFOE;(v)without the prior written consent of our WFOE, Shanghai Qiyu shall not incur, inherit, guarantee or assume any debt, except for(i) debts incurred in the ordinary course of business other than payables incurred by a loan and (ii) debts that have been disclosed to and consentedto by our WFOE in writing;(vi)they shall operate all of Shanghai Qiyu’s businesses during the ordinary course of business to maintain its asset value and refrainfrom any action/omission that may adversely affect Shanghai Qiyu’s operating status and asset value;Table of Contents120(vii)without the prior written consent of our WFOE, they shall not cause Shanghai Qiyu to execute any material contract, except thecontracts executed in the ordinary course of business or with our WFOE, its direct or indirect offshore parent companies or their direct or indirectsubsidiaries;(viii)without the prior written consent of our WFOE, they shall not cause Shanghai Qiyu to provide any person with any loan,financial assistance, security, pledge or any other form of security, or permit any form of security to be created on its assets or equity interests,except those contracts executed in the ordinary and usual course of business;(ix)they shall provide our WFOE with information on Shanghai Qiyu’s business operations and financial condition within 10 daysafter the end of each quarter or at the request of our WFOE;(x)they shall procure and maintain insurance in respect of Shanghai Qiyu’s assets and business from an insurance carrier acceptableto our WFOE, at an amount and type of coverage typical for companies that operate similar businesses;(xi)without the prior written consent of our WFOE, they shall not cause or permit Shanghai Qiyu to merge, consolidate with, acquireor invest in any person;(xii)they shall immediately notify our WFOE of the occurrence or possible occurrence of any litigation, arbitration or administrativeproceedings relating to Shanghai Qiyu’s assets, business or revenue, shall take all necessary actions pursuant to reasonable requests of our WFOEand shall only reach settlement in respect of such proceedings with the prior written consent of WFOE;(xiii)to maintain the ownership by Shanghai Qiyu of all of its assets, they shall execute all necessary or appropriate documents, takeall necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;(xiv)without the prior written consent of our WFOE, Shanghai Qiyu shall not in any manner distribute dividends to its shareholder,provided that upon the written request of our WFOE, Shanghai Qiyu shall immediately distribute all distributable profits to its shareholders;(xv)at the request of our WFOE, they shall appoint any persons designated by our WFOE as the directors, supervisors and/or seniormanagement of Shanghai Qiyu or terminate existing directors, supervisors and/or senior management of Shanghai Qiyu, and perform all relevantresolutions and filing procedures; and(xvi)if Shanghai Qiyu or its shareholder fails to perform the tax obligations under applicable laws, and hence obstructs our WFOE inexercising its exclusive option right, Shanghai Qiyu or its shareholder shall pay the taxes or pay the same amount to our WFOE so our WFOE maypay the taxes on behalf of Shanghai Qiyu or its shareholder.All our two other VIEs, namely Fuzhou Financing Guarantee and Shanghai Financing Guarantee, and their respective nomineeshareholders, have each entered into a set of contractual arrangements, including the voting proxy agreement, equity interest pledge agreement,loan agreement, exclusive business cooperation agreement, exclusive option agreement, with our WFOE, in terms that are substantially similar tothe agreements described above.On April 29, 2021, Shanghai Qibutianxia, the sole shareholder of Fuzhou Microcredit, transferred all of its equity interest in FuzhouMicrocredit to Shanghai Qiyu, and Shanghai Qiyu became the sole shareholder of Fuzhou Microcredit. On April 30, 2021, our WFOE, FuzhouMicrocredit and Shanghai Qibutianxia entered into a termination agreement, which terminated the contractual arrangements entered into among ourWFOE, Fuzhou Microcredit and Shanghai Qibutianxia. Therefore, Fuzhou Microcredit ceased to be the VIE, but a subsidiary of Shanghai Qiyu.In the opinion of our PRC legal counsel, Commerce & Finance Law Offices:●the ownership structures of the VIEs in China and our WFOE are not in violation of applicable PRC laws and regulations currently ineffect; and●the proposed contractual arrangements between our company, our WFOE, the VIEs and their shareholders governed by PRC law arevalid, binding and enforceable under PRC law, and will not result in any violation of applicable PRC laws currently in effect.Table of Contents121However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application ofcurrent and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion ofour PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or ifadopted, what they would provide. If we or the VIEs are found to be in violation of any existing or future PRC laws or regulations, or fail to obtainor maintain any of the required permits or approvals, the PRC regulatory authorities would have broad discretion to take action in dealing with suchviolations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government deemsthat the contractual arrangements in relation to the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevantindustries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or beforced to relinquish our interests in those operations” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.”D. Property, Plants and EquipmentOur corporate headquarters is located in Shanghai, where we lease office space with an area of 11,726 square meters as of December 31,2023. We also lease an area of 3,596 square meters in Hefei, an area of 1,410 square meters in Fuzhou, an area of 2,762 square meters in Shenzhen,an area of 1,000 square meters in Xi’an, an area of 1,855 square meters in Chengdu, an area of 797 square meters in Haikou, an area of 170 squaremeters in Hong Kong and an area of 4,731 square meters in Beijing as of December 31, 2023. The lease term varies from one year to three years.Our servers are primarily hosted at internet data centers owned by 360 Group and located in Beijing, Shanghai and Luoyang. We expect to seekadditional office space as needed to accommodate future growth.In October 2020, we established 360 Changfeng, a joint venture company in Shanghai, China, through Shanghai Qiyu, together withShanghai Changfeng Investment (Group) Co., Ltd., or Changfeng, an independent third party, and Shanghai Jiehu Internet Technology Co., Ltd., orShanghai Jiehu, a 360 Group entity, to develop and build our 360 East-China regional headquarters and the affiliated industrial park for our futureoperations. Once completed, the regional headquarters and industrial park will enable us to host all our facilities and employees across departmentsthat currently work on premises in Shanghai to join in the same office space, which we believe will help us further save administrative costs andimprove operating efficiency. Changfeng, Shanghai Jiehu and we held 30%, 30% and 40% of the equity interests of the entity, respectively. InDecember 2021, we, through Shanghai Qiyu, entered into an equity transfer agreement with Shanghai Jiehu, pursuant to which Shanghai Qiyuacquired all the 30% equity interests owned by Shanghai Jiehu in 360 Changfeng. Following the transfer, we and Changfeng hold 70% and 30%,respectively, of the equity interests in 360 Changfeng. As of December 31, 2023, shareholders of 360 Changfeng have provided a total of RMB1.0billion to acquire land use rights of the parcel of land on which our regional headquarters and affiliated industrial park stand and support the jointventure company’s operations, of which RMB0.3 billion was funded by Changfeng.ITEM 4A UNRESOLVED STAFF COMMENTSNone.ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTSYou should read the following discussion and analysis of our financial condition and results of operations in conjunction with ourconsolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may containforward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from thoseanticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. RiskFactors” or in other parts of this annual report on Form 20-F.A. Operating ResultsKey Factors Affecting Our Results of OperationsOur results of operations and financial condition are affected by the general factors driving China’s economy and China’s Credit-Techindustry. These factors include per capita disposable income, consumer spending, SME business activities, the emergence of new technologies andother general economic conditions in China that affect consumption and business activities in general. In addition, we are affected by governmentpolicies and regulations that address all aspects of our operations, including data security and protection, among others.Table of Contents122In particular, we believe our results of operations are more directly affected by the following major factors:Ability to attract and retain borrowersIn 2023, we facilitated RMB475.8 billion (US$67.0 billion) of loans, representing an increase from RMB412.4 billion in 2022 andRMB357.1 billion in 2021. Growth in our loan facilitation volume has been primarily driven by the expansion of our user base, as well as theincrease in borrowing activities on our platform over the years ended December 31, 2022 and 2023. The number of users with approved credit linesgrew from 38.5 million as of December 31, 2021, to 44.5 million as of December 31, 2022, and further to 50.9 million as of December 31, 2023,respectively. We anticipate that, in the longer term, our future growth will continue to depend on our ability to increase our existing users’engagement with our platform and attract new users to our platform.We believe repeat borrowings by existing borrowers are important to our future growth. As we provide our users with revolving creditlines, we use repeat borrower contribution to monitor stickiness and loyalty of our users. Repeat borrower contribution was 91.6% for the yearended December 31, 2023. We believe this high repeat borrower contribution is primarily due to our ability to address the credit needs of ourtargeted user cohort, the superior user experience on our platform and the competitiveness of product offerings.Ability to effectively manage risksOur ability to effectively analyze user risk profiles impacts our ability to attract prospective borrowers and retain existing borrowers, aswell as our ability to empower financial institution partners to receive attractive risk-adjusted returns. We have developed and deployed the ArgusEngine to conduct fraud detection and credit assessment and to create personalized profiling strategy, which will scrutinize the data related to aprospective borrower in a highly automated approach and output credit scores to our Cosmic Cube Pricing Model to price each drawdown.Benefiting from the strong machine learning and analyzing capability of our Argus Engine, we can draw credit profiles of prospective borrowersand effectively prevent potential credit losses.Since late 2021, we started to optimize our user base aiming for lower overall credit risks, which was substantially completed by the endof 2022. In light of the industry-wide negative impact of the COVID-19 pandemic, we implemented a prudent credit assessment strategy andenhanced our efforts in loan collection-related regulatory compliance in 2022, which enabled us to navigate through the challengingmacroeconomic environment relatively smoothly and consistently deliver solid operating and financial results.In 2023, as macroeconomic recovery momentum was weaker than expected, borrowers’ confidence and ability to repay on time wasnegatively impacted, leading to fluctuations in our risk metrics in the second half of the year. The 90 day+ delinquency rate for all our loansoutstanding was approximately 2.35% as of December 31, 2023. Please see “—Loan Performance Data” below for details of our credit profilingperformance. However, we promptly made adjustments to our risk management by tightening credit standards, improving user risk identificationand enhancing our collection strategies. With these measures, we strengthened our ability to effectively manage risks and stabilized our riskperformance.We intend to continue optimizing our fraud detection capabilities, improving the accuracy of our credit assessment models and enhancingour collection effectiveness through the combination of our data analytical capabilities and deepened insights into users.Ability to maintain collaboration with quality financial institution partners and diversify funding sourcesMaintaining a healthy collaborative relationship with institutional funding partners is critical to our business. Within all types of fundingpartners, financial institutions are currently our main funding source. In 2023, all loans facilitated through our platform were funded by financialinstitutions, including Fuzhou Microcredit. In addition, our ability to collaborate with quality financial institution partners also impacts ourprofitability and our ability to provide reasonably priced financing solutions to users.We have established cooperative relationships with a wide array of financial institution partners, and are further diversifying the financialinstitution partner pool. As of December 31, 2023, we have collaborated with 157 financial institutional partners, cumulatively.Accumulatively, we had issued ABSs of RMB31.0 billion (US$4.4 billion) as of December 31, 2023 to further diversify our fundingsources. The ABSs are listed and traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.Table of Contents123Ability to optimize our cost structureOur ability to optimize our cost structure will impact future profitability. We incurred significant expenses following inception as we grewour business. In particular, we have invested significantly in user acquisition, IT infrastructure, and research and development, particularly aroundadvanced analytics tools and models. We also adjusted our cost structure from time to time to reflect changing macro environment and ourpreferred risk exposure.Continued optimization of our cost structure will depend on our ability to continue improving operational efficiency and maintainingconsistent asset quality of the loan portfolios, while driving solid growth in overall scale.Loan Performance DataWe primarily monitor the cumulative performance of loans facilitated by us as of a given measurement date via 90 day+ delinquency rates,and evaluate the healthiness of loans facilitated by us in each fiscal quarter through 180 day+ vintage delinquency rates.90 day+ delinquency rates90 day+ delinquency rate refers to the principal balance of on- and off-balance sheet loans we facilitated that are 91 to 180 calendar dayspast due as a percentage of the total outstanding loan balance of on- and off-balance sheet loans we facilitated across our platform as of a specificdate. Loans that are charged-off and loans under Intelligent Credit Engine (ICE) and other technology solutions are not included in the delinquencyrate calculation. The following table provides our 90 day+ delinquency rates as of December 31, 2021, 2022 and 2023: 90 day+ delinquency rate December 31, 20211.54%December 31, 2022 2.03%December 31, 2023 2.35%The overall 90 day+ delinquency rate increased from 1.54% as of December 31, 2021 to 2.03% as of December 31, 2022, and further to2.35% as of December 31, 2023, primarily due to the soft macro economy in 2022 and 2023 that negatively impacted some borrowers’ ability torepay loans on time. The 90 day+ delinquency rate is a backward looking indicator as it reflects asset quality trend 90 days before.180 day + vintage delinquency ratesWe refer to loans facilitated during a specified time period as a vintage, which in our case represents a given fiscal quarter, and definevintage delinquency rate as (i) the total amount of principal for all loans facilitated by us in a vintage that become delinquent, less the total amountof recovered past due principal for all loans facilitated by us in the same vintage, divided by (ii) the total initial principal amount of loans facilitatedby us in such vintage. Loans under Intelligent Credit Engine and other technology solutions are not included in the vintage delinquency ratecalculation. Our 180 day+ vintage delinquency rate data includes loans delinquent for more than 180 days.Table of Contents124The following chart displays the historical cumulative 180 day+ delinquency rates by vintage for all loans facilitated through our platform:180 day+ Delinquency Rates by VintageOn-and Off-Balance Sheet Treatment of LoansWe have established cooperative relationships with various financial institution partners. Some of our financial institution partners fundand disburse loan principal to borrowers through their own accounts, while the others choose to fund and disburse loan principal to borrowersindirectly through trusts. In addition, we fund a portion of loans facilitated on our platform through Fuzhou Microcredit, a subsidiary of the VIEthat is licensed to conduct micro-lending business in China. The accounting treatment of assets, liabilities and revenues arising from the loansfacilitated on our platform varies:On-balance sheet loansFor loans disbursed indirectly through trusts per request of our financial institution partners, we have determined that we are the primarybeneficiary of the majority of such trusts. We therefore consolidate these trusts and record the loans funded through these trusts, along with thosedirectly by our own funds through Fuzhou Microcredit, on our balance sheet. On-balance sheet loans are recorded at amortized costs. Revenuesfrom these loans are accounted as financing income, and we recorded allowance for loan loss. Services provided in connection with our on-balancesheet loans are categorized under credit-driven services.Table of Contents125Off-balance sheet loansOff-balance sheet loans refer to loans funded and disbursed directly by our financial institution partners and not consolidated on ourbalance sheet. For a portion of off-balance sheet loans, we only provide platform services to financial institutions, and earn service fees. For theother portion, we not only provide loan facilitation and post-facilitation services but also guarantee the repayment either through the VIEs withfinancing guarantee license or third-party guarantee companies or insurance companies. As a result, we incur guarantee liabilities and take creditrisks. Services provided in connection with this portion of loans are categorized under credit-driven services. For the years ended December 31,2021, 2022 and 2023, the total balance of outstanding off-balance sheet loans (excluding loans delinquent for more than 180 days) facilitated undercredit-driven services amounted to RMB51.4 billion, RMB47.4 billion and RMB42.7 billion (US$6.0 billion), respectively. The table below setsforth details of the balance of outstanding on-balance sheet loans and off-balance sheet loans as of the dates indicated.As of December 31,202120222023OutstandingOutstandingOutstanding Loan Balance % Loan Balance % Loan Balance %(RMB in millions, except for percentages)On-balance sheet loan 13,349 9.4 19,512 11.9 29,257 15.7through trusts and ABSs(1) 10,802 7.6 13,545 8.3 19,414 10.4through Fuzhou Microcredit 2,547 1.8 5,967 3.7 9,843 5.3Off-balance sheet loan 128,639 90.6 143,953 88.1 157,221 84.3Total 141,987 100.0 163,465 100.0 186,478 100Note:(1)Including loans originated by Fuzhou Microcredit and subsequently transferred to the ABS plans as of December 31, 2021, 2022 and 2023,respectively.The outstanding loan balance of on-balance sheet loans increased from RMB13,349 million as of December 31, 2021 to RMB19,512million as of December 31, 2022, and further to RMB29,257 million (US$4,121 million), primarily due to the increase in the loan facilitationvolume of on-balance sheet loans.Table of Contents126Key Line Items and Specific Factors Affecting Our Results of OperationsNet revenueWe generate revenue mainly from providing Credit-Tech services through matching the credit demand of unserved and underservedborrowers with credit supply from our financial institution partners. The following table sets forth the principal components of our net revenues inabsolute amounts and as percentages of our total net revenues for the years presented:For the Year Ended December 31,202120222023 RMB % RMB % RMB US$ %(in thousands, except for percentages)Net revenue: Credit-driven services 10,189,167 61.2 11,586,251 70.0 11,738,560 1,653,342 72.0Loan facilitation and servicing fees-capital heavy 2,326,027 14.0 2,086,414 12.6 1,667,119 234,809 10.2Revenue from loan facilitation services 1,399,310 8.4 1,442,100 8.7 1,081,699 152,354 6.6Revenue from post-facilitation services 926,717 5.6 644,314 3.9 585,420 82,455 3.6Financing income 2,184,128 13.1 3,487,951 21.1 5,109,921 719,717 31.4Revenue from releasing of guarantee liabilities 5,583,135 33.6 5,899,153 35.6 4,745,898 668,446 29.1Other services fees 95,877 0.5 112,733 0.7 215,622 30,370 1.3Platform services 6,446,478 38.8 4,967,679 30.0 4,551,467 641,061 28.0Loan facilitation and servicing fees-capital light 5,677,941 34.2 4,124,726 24.9 3,213,955 452,676 19.8Revenue from loan facilitation services 4,484,632 27.0 2,656,511 16.0 2,096,085 295,227 12.9Revenue from post-facilitation services 1,193,309 7.2 1,468,215 8.9 1,117,870 157,449 6.9Referral service fees 620,317 3.7 561,372 3.4 950,016 133,807 5.8Other services fees 148,220 0.9 281,581 1.7 387,496 54,578 2.4Total net revenue 16,635,645 100.0 16,553,930 100.0 16,290,027 2,294,403 100.0We divide loans facilitated on our platform into two categories, namely credit-driven services and platform services.In providing credit-driven services, we either fund on-balance sheet loans or provide guarantee to financial institution partners for off-balance sheet loans through the VIEs with financing guarantee license or third-party guarantee companies or insurance companies. Consequently,we take credit risk because of the on-balance sheet lending or the guarantee arrangement. By revenue nature, revenue from facilitation and post-facilitation services for such off-balance sheet loans is recorded as loan facilitation and servicing fees-capital heavy, revenue from guaranteeservices provided to financial institution partners for such off-balance sheet loans is recorded as revenue from releasing of guarantee liabilities, andrevenue from our on-balance sheet lending is recorded as financing income.On the other hand, in providing platform services, we provide customized technology solutions at different stages of the loan lifecycle,such as borrower acquisition, credit assessment, fund matching and post-facilitation services. Specifically, we (i) provide to financial institutionscomprehensive facilitation and post-facilitation services under our capital-light model, and charge them service fees based on pre-negotiated terms,which service fees are recorded as loan facilitation and servicing fees - capital light; (ii) provide intelligent marketing services to financialinstitutions and other lending platforms under ICE and earn pre-negotiated service fees, which are recorded under referral service fees; (iii) providereferral services to other online lending companies and earn referral fees, which are recorded under referral service fees; and (iv) offer financialinstitutions risk management SaaS or other technology solutions and take technology service fees or consulting fees for the correspondingtechnology solutions elected by the financial institutions, which service fees are recorded under other services fees, and as such service wasintroduced in 2020, it contributed a small fraction to our total net revenue in 2021, 2022 and 2023. We currently do not take credit risk underplatform services.Table of Contents127Set forth below is an elaboration on the nature of each of our revenue streams.Loan facilitation and servicing fees. We generate loan facilitation and servicing fees from financial institution partners in consideration ofour facilitation and post-facilitation services for off-balance sheet loans. For each off-balance sheet loan facilitated through our platform, we chargeservice fees from our financial institution partners based on pre-negotiated terms. Loan facilitation and servicing fees for off-balance sheet loansunder credit-driven services are recorded as loan facilitation and servicing fees – capital heavy, and loan facilitation and servicing fees for off-balance sheet loans through our capital-light model under platform services are recorded as loan facilitation and servicing fees – capital light. See“—E. Critical Accounting Estimates—Revenue recognition.”Financing income. We generate financing income from on-balance sheet loans, which include loans from our financial institutionpartners but disbursed indirectly to borrowers through our consolidated trusts, as well as loans funded by Fuzhou Microcredit.Revenue from releasing of guarantee liabilities. We provide guarantee services to our financial institution partners on the off-balancesheet loans facilitated under the credit-driven services. We recognized the stand-ready guarantee liabilities on a gross basis and amortize the entireamount into “revenue from releasing of guarantee liabilities” over the term of the guarantee. See “—E. Critical Accounting Estimates—Guaranteeliabilities” for more details.Referral service fees. We provide referral services to other platforms by referring to them the borrowers who do not fit our financialinstitution partners’ risk preference. We also provide referral services to the financial institution partners through our ICE model, by matchingborrowers and financial institution partners.Costs and expensesThe table below sets forth our operating costs and expenses in absolute amounts and as a percentage of our total revenue for the yearsindicated.For the Year Ended December 31,202120222023 RMB % RMB % RMB US$ %(in thousands, except for percentages)Operating costs and expenses: Facilitation, origination and servicing 2,252,157 13.5 2,373,458 14.3 2,659,912 374,641 16.3Funding costs 337,426 2.0 504,448 3.0 645,445 90,909 4.0Sales and marketing 2,090,374 12.6 2,206,948 13.3 1,939,885 273,227 11.9General and administrative 557,295 3.4 412,794 2.5 421,076 59,307 2.6Provision for loans receivable 965,419 5.8 1,580,306 9.5 2,151,046 302,968 13.2Provision for financial assets receivable 243,946 1.5 397,951 2.4 386,090 54,380 2.4Provision for accounts receivable and contract assets 324,605 2.0 238,065 1.4 175,799 24,761 1.1Provision for contingent liabilities 3,078,224 18.5 4,367,776 26.4 3,053,810 430,120 18.7Total cost of revenues 9,849,446 59.3 12,081,746 72.8 11,433,063 1,610,313 70.2Set forth below is an elaboration on the nature of each item of our costs and expenses.Facilitation, origination and servicing. Facilitation, origination and servicing expenses represent the costs incurred to facilitate,originate and service loans through our platform, including both off-balance sheet loans where we earn loan facilitation service fees and post-facilitation service fees, as well as on-balance sheet loans where we earn financing income.It mainly includes (i) salary and benefit expenses for personnel working in facilitation and post-facilitation servicing functions, (ii) creditsearch expenses, (iii) collection expenses, (iv) payment transaction expenses and (v) expenses related to communications with users.As a general trend, expenses related to credit search, collection, and payment transaction all change in proportion to the change of loanfacilitation volume or the number of loan applications on our platform; expenses related to communications with users were primarily driven by thenumber of users with approved credit lines.Table of Contents128Funding costs. Funding costs consist of interest expenses that we pay to financial institutions of our consolidated trusts and the investorsof our asset backed securities, as well as costs relating to the set-up and operation of our consolidated trusts.Sales and marketing. Sales and marketing expenses include advertising and marketing related expenses to promote our brands and attractusers to our platform, as well as salary and benefit expenses related to our sales and marketing personnel.Advertising and marketing related expenses, particularly those used to attract users to our platform, are largely a discretionary cost item. Itis adjusted in light of our overall growth strategy and prediction of the overall credit environment in the market based on our judgment on ourcredit assessment ability, and funding capacity from our financial institution partners. We consider it as an investment for future business growth.General and administrative. General and administrative expenses consist of payroll and related expenses for employees engaged ingeneral corporate functions, professional services, costs associated with the use of facilities and equipment, such as rental and other generalcorporate related expenses.Share-based compensation. In 2021, 2022 and 2023, we granted options and restricted share units to our employees to reward theirhistorical contribution to our development. Share-based compensation expenses are non-cash in nature. Share-based compensation expenses wereallocated to our expense items for the years indicated as follows:For the Year Ended December 31,202120222023RMB % RMB % RMB US$ %(in thousands, except for percentages)Facilitation, origination and servicing 75,209 29.6 73,945 37.0 75,152 10,585 40.5Sales and marketing 12,340 4.9 4,328 2.2 (375) (53) (0.2)General and administrative 166,373 65.5 121,464 60.8 110,827 15,610 59.7Total 253,922 100.0 199,737 100.0 185,604 26,142 100.0ProvisionsWe record the below four types of provisions related to loan products facilitated by us. Provision for loans receivable relates to loans onour balance sheet, provision for accounts receivable and contract assets relates to our facilitation services for our off-balance sheet loans, andprovision for financial assets receivable and provision for contingent liabilities relate to guarantee services for our off-balance sheet loans undercredit-driven services.Provision for loans receivable. We evaluate the creditworthiness and collectability of loans on our balance sheet on a pooled basis. Theprovision for loans receivable is an assessment performed on a portfolio basis and factors such as delinquency rate, size, and other riskcharacteristics of the portfolio.Provision for financial assets receivable. We recognize financial assets receivable at the inception of the off-balance sheet loansfacilitated through our platform if we provide guarantee of repayments to our financial institution partners. We recognize financial assets receivableequal to the stand-ready guarantee liabilities recorded at fair value and consider what premium would be required by us to issue the same guaranteeservice in a standalone arm’s length transaction. The financial assets receivable is accounted for as a financial asset, and reduced upon the receipt ofthe service fee payment from our financial institution partners. At each reporting date, we estimate the future cash flows and assesses whether thereis any indicator of impairment. If the carrying amount of the financial assets receivable exceeds the expected cash to be received, an impairmentloss is recorded for the financial assets receivable that is not recoverable.Provision for accounts receivable and contract assets. We recognize accounts receivable and contract assets after we complete ourfacilitation services to financial institution partners for the off-balance sheet loans. We establish an allowance for uncollectible accounts receivableand contract assets based on estimates, which incorporate historical experience and other factors surrounding the credit risk of specific types ofborrowers, which is essentially the expected net default rate used in determining the fair value of guarantee liabilities. We evaluate and adjust ourallowance for uncollectible accounts receivable and contract assets on a quarterly basis or more often as necessary.Table of Contents129Provision for contingent liabilities. We recognize a contingent guarantee liability with an allowance for credit losses under the currentexpected credit loss model, or the CECL model, at the inception of the guarantee due to our adoption of ASC 326, Financial Instruments-CreditLosses. See “—E. Critical Accounting Estimates—Guarantee liabilities” for details. The contingent guarantee is reduced by payouts made by us tocompensate the financial institution partners upon borrowers’ default. We evaluate and adjust allowance for credit losses on a quarterly basis ormore often as necessary.TaxationCayman IslandsWe are an exempted company incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on corporations basedupon profits, income, gains or appreciation.There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may beapplicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands.Hong KongOur subsidiary incorporated in Hong Kong is subject to Hong Kong profit tax at a rate of 16.5%. No Hong Kong profit tax has been leviedas we did not have an assessable profit that was earned in or derived from the Hong Kong subsidiary during the periods presented. Hong Kong doesnot impose a withholding tax on dividends.Mainland ChinaGenerally, our PRC subsidiaries, variable interest entities and their subsidiaries, which are considered PRC resident enterprises undermainland China tax law, are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accountingstandards at a rate of 25%.The consolidated trusts are subject to VAT at the rate of 3%, while our other entities are subject to VAT at the rate of 6% as generaltaxpayers, and related surcharges on revenue generated from providing services. The Enterprise Income Tax Law and its implementation rulespermit certain “high and new technology enterprises strongly supported by the state” that hold independent ownership of core intellectual propertyand simultaneously meet a list of other criteria, financial or non-financial, as stipulated in the Implementation Rules and other regulations, to enjoya reduced 15% enterprise income tax rate. The STA, the Ministry of Science and Technology and the Ministry of Finance jointly issued theAdministrative Measures on the Recognition for High and New Technology Enterprise delineating the specific criteria and procedures for the “highand new technology enterprises” certification in April 2008, which was amended in January 2016. Shanghai Qiyu was accredited as a “high andnew technology enterprises” in 2018, which was renewed in 2021. Therefore, it was entitled to a reduced 15% enterprise income tax rate from 2018to 2023. Our WFOE obtained “high and new technology enterprises” status in 2020 and renewed it in 2023, and was entitled to a reducedenterprise income tax rate of 15% from 2020 to 2025. Beihai Qicheng Information & Technology Co., Ltd., Beihai Qi’ang Information &Technology Co., Ltd. and another subsidiary benefit from a preferential tax rate of 15% as their operation falls within the encouraged industriescatalogue in western China. The 40% of the enterprise income tax payables could be further reduced as they are located in an autonomous region ofChina. Therefore, Beihai Qicheng Information & Technology Co., Ltd. applied a preferential income tax rate of 9% from 2019 to 2023. BeihaiQi’ang Information & Technology Co., Ltd. and another subsidiary applied a preferential income tax rate of 9% from 2023 to 2027. Since 2021,two of our subsidiaries have benefited from a preferential tax rate of 15% as they are registered in Hainan and engaged in encouraged businessactivities. Since 2022, Beihai Borui Credit Service Co., Ltd. has benefitted from a preferential tax rate of 15% as it falls within the encouragedindustries catalogue in western China.Table of Contents130Dividends paid by our wholly foreign-owned subsidiaries in mainland China to our intermediary holding company in Hong Kong will besubject to a withholding tax rate of 10%, unless the Hong Kong entity satisfies all the requirements under the Arrangement between MainlandChina and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income with respect to Taxeson Income and Capital and receives approval from the tax authority. If our Hong Kong subsidiary satisfies all the requirements under the taxarrangement and receives approval from the tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding taxat the standard rate of 5%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividendsand other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on theability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.”If our holding company in the Cayman Islands or any of our subsidiaries outside of mainland China were deemed to be a “residententerprise” under the Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRCincome tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.”In 2023, our WFOE made dividend payments of RMB940.0 million (US$132.4 million) to our Hong Kong subsidiaries and paid relatedwithholding income tax of RMB94.0 million (US$13.2 million) accordingly. As of December 31, 2023, we recorded a deferred tax liability ofRMB112.7 million associated with all of our earnings expected to be distributed from mainland China subsidiaries to overseas for dividenddistribution and share repurchase. The remaining undistributed profits of mainland China subsidiaries as of December 31, 2023 would beindefinitely reinvested with unrecognized deferred tax liabilities of approximately RMB2,005.0 million (US$282.4 million).Recent Accounting PronouncementsA list of recently issued accounting pronouncements that are relevant to us is included in Note 2 “Summary of Significant AccountingPolicies—Recent accounting pronouncements” to our consolidated financial statements included elsewhere in this annual report.Table of Contents131Results of OperationsThe following table sets forth a summary of our consolidated results of operations for the years presented, both in absolute amounts and asa percentage of our total net revenue for the years presented. This information should be read together with our consolidated financial statementsand related notes included elsewhere in this annual report. Period-to-period comparisons of historical results of operations should not be reliedupon as indicative of future performance.For the Year Ended December 31,202120222023RMB % RMB % RMB US$ %(in thousands, except for percentages)Net revenue Credit-driven services 10,189,167 61.2 11,586,251 70.0 11,738,560 1,653,342 72.0Loan facilitation and servicing fees-capital heavy 2,326,027 14.0 2,086,414 12.6 1,667,119 234,809 10.2Financing income 2,184,128 13.1 3,487,951 21.1 5,109,921 719,717 31.4Revenue from releasing of guarantee liabilities 5,583,135 33.6 5,899,153 35.6 4,745,898 668,446 29.1Other services fees 95,877 0.5 112,733 0.7 215,622 30,370 1.3Platform services 6,446,478 38.8 4,967,679 30.0 4,551,467 641,061 28.0Loan facilitation and servicing fees-capital light 5,677,941 34.2 4,124,726 24.9 3,213,955 452,676 19.8Referral services fees 620,317 3.7 561,372 3.4 950,016 133,807 5.8Other services fees 148,220 0.9 281,581 1.7 387,496 54,578 2.4Total net revenue 16,635,645 100.0 16,553,930 100.0 16,290,027 2,294,403 100.0Operating costs and expenses(1)Facilitation, origination and servicing 2,252,157 13.5 2,373,458 14.3 2,659,912 374,641 16.3Funding costs 337,426 2.0 504,448 3.0 645,445 90,909 4.0Sales and marketing 2,090,374 12.6 2,206,948 13.3 1,939,885 273,227 11.9General and administrative 557,295 3.4 412,794 2.5 421,076 59,307 2.6Provision for loans receivable 965,419 5.8 1,580,306 9.5 2,151,046 302,968 13.2Provision for financial assets receivable 243,946 1.5 397,951 2.4 386,090 54,380 2.4Provision for accounts receivable and contractassets 324,605 2.0 238,065 1.4 175,799 24,761 1.1Provision for contingent liabilities 3,078,224 18.5 4,367,776 26.4 3,053,810 430,120 18.7Total operating costs and expenses 9,849,446 59.3 12,081,746 72.8 11,433,063 1,610,313 70.2Income from operations 6,786,199 40.7 4,472,184 27.2 4,856,964 684,090 29.8Interest income, net 126,256 0.8 182,301 1.1 217,307 30,607 1.30Foreign exchange gain (loss) 35,549 0.2 (160,225) (1.0) 2,356 332 0.0Investment income (loss) 10,115 0.1 (19,888) (0.1) (30,112) (4,241) (0.20)Other income, net 64,590 0.4 268,000 1.6 230,936 32,527 1.40Income before income tax expense 7,022,709 42.2 4,742,372 28.8 5,277,451 743,315 32.30Income tax expense (1,258,196) (7.6) (736,804) (4.5) (1,008,874) (142,097) (6.20)Net income 5,764,513 34.6 4,005,568 24.3 4,268,577 601,218 26.10Net loss attributable to non-controlling interests 17,212 0.1 18,605 0.1 16,759 2,360 0.10Net income attributable to ordinaryshareholders of the Company 5,781,725 34.7 4,024,173 24.4 4,285,336 603,578 26.20Note:(1)Share-based compensation expenses were allocated as follows:Table of Contents132For the Year Ended December 31,2021 2022 2023 RMB RMB RMB US$(in thousands)Facilitation, origination and servicing 75,209 73,945 75,152 10,585Sales and marketing 12,340 4,328 (375) (53)General and administrative 166,373 121,464 110,827 15,610Total 253,922 199,737 185,604 26,142Share-based compensation expenses are non-cash in nature.Year Ended December 31, 2023 Compared to Year Ended December 31, 2022Net revenueOur total net revenue decreased by 1.6% from RMB16,554 million in 2022 to RMB16,290 million (US$2,294 million) in 2023, primarilydue to the decline in off-balance-sheet capital-heavy and capital-light loan facilitation volume and shorter effective loan tenor. Within our totalrevenue, the amount derived from credit-driven services increased by 1.3% from RMB11,586 million in 2022 to RMB11,739 million (US$1,653million) in 2023, and the amount derived from platform services decreased by 8.4% from RMB4,968 million in 2022 to RMB4,551 million(US$641 million) in 2023.●Loan facilitation and servicing fees. Loan facilitation and servicing fees decreased under the credit-driven services from RMB2,086million in 2022 to RMB1,667 million (US$235 million) in 2023, primarily due to a decline in capital-heavy loan facilitation volumeand shorter effective loan tenor. Loan facilitation and servicing fees decreased under the platform services from RMB4,125 million in2022 to RMB3,214 million (US$453 million) in 2023, primarily due to a decline in loan facilitation volume under our capital-lightmodel and shorter effective loan tenor.●Financing income. Financing income increased from RMB3,488 million in 2022 to RMB5,110 million (US$720 million) in 2023,primarily due to the growth in average outstanding on-balance-sheet loan balance.●Revenue from releasing of guarantee liabilities. Revenue from releasing of guarantee liabilities decreased from RMB5,899 million in2022 to RMB4,746 million (US$668 million) in 2023. This decrease reflected the change in average outstanding balance of off-balance-sheet capital-heavy loans during the period.●Referral services fees. Referral services fees increased from RMB561 million in 2022 to RMB950 million (US$134 million) in 2023,primarily due to an increase in the loan facilitation volume through ICE.Operating costs and expensesOperating costs and expenses decreased from RMB12,082 million in 2022 to RMB11,433 million (US$1,610 million) in 2023, primarilydue to the decrease in provision for contingent liabilities.●Facilitation, origination and servicing. Facilitation, origination and servicing costs increased from RMB2,373 million in 2022 toRMB2,660 million (US$375 million) in 2023, primarily due to an increase of collection fee of RMB125 million (US$18 million) as aresult of the growth in loan facilitation volume and balance and credit search fees of RMB68 million (US$10 million).●Sales and marketing. Sales and marketing expenses decreased from RMB2,207 million in 2022 to RMB1,940 million (US$273million) in 2023, primarily due to a decrease of RMB236 million (US$33 million) in advertising and marketing-related expenses as aresult of the improvement in marketing efficiency.●General and administrative. General and administrative expenses increased from RMB413 million in 2022 to RMB421 million(US$59 million) in 2023, primarily due to increase of RMB12 million (US$2 million) in professional service fees.Table of Contents133●Funding costs. Funding costs increased from RMB504 million in 2022 to RMB645 million (US$91 million) in 2023, mainly due tothe growth in funding from ABSs as a result of the continued growth in on-balance-sheet loan balance, partially offset by the loweraverage cost of ABSs.●Provision for loans receivable. Provision for loans receivable increased from RMB1,580 million in 2022 to RMB2,151 million(US$303 million) in 2023, which was primarily due to the growth in loan origination volume of on-balance-sheet loans.●Provision for financial assets receivable. Provision for financial assets receivable decreased from RMB398 million in 2022 toRMB386 million (US$54 million) in 2023. The decrease reflected our consistent approach in assessing provisions commensuratewith our underlying loan profile and the decline in capital-heavy loan facilitation volume.●Provision for accounts receivable and contract assets. Provision for accounts receivable and contract assets decreased from RMB238million in 2022 to RMB176 million (US$25 million) in 2023. The decrease reflected our consistent approach in assessing provisionscommensurate with our underlying loan profile and decreases in capital-heavy and capital-light loan facilitation volume.●Provision for contingent liabilities. Provision for contingent liabilities decreased from RMB4,368 million in 2022 to RMB3,054million (US$430 million) in 2023, which reflected our consistent approach in assessing provisions commensurate with ourunderlying loan profile as well as a decline in capital-heavy loan facilitation volume.Interest income, netInterest income, net was RMB217 million (US$31 million) in 2023, compared to RMB182 million in 2022, mainly due to the increase ininterest earned from bank deposits.Other income, netOther income decreased from RMB268 million in 2022 to RMB231 million (US$33 million) in 2023, mainly due to the decrease ofgovernment grants.Income tax expenseIncome tax expense was RMB1,009 million (US$142 million) in 2023, compared to RMB737 million in 2022. Excluding share-basedcompensation expense which is not tax deductible in China, the effective tax rate was 18.5% in 2023, compared to 14.9% in 2022. The increase ineffective tax rate was mainly due to withholding taxes related to our company’s dividend and share repurchase plan.Net incomeNet income was RMB4,269 million (US$601 million) in 2023, compared to RMB4,006 million in 2022.Year Ended December 31, 2022 Compared to Year Ended December 31, 2021Net revenueOur total net revenue decreased by 0.5% from RMB16,636 million in 2021 to RMB16,554 million in 2022, primarily due to the decline inloan facilitation volume under our capital-light model. Within our total revenue, the amount derived from credit-driven services increased by 13.7%from RMB10,189 million in 2021 to RMB11,586 million in 2022, and the amount derived from platform services decreased by 22.9% fromRMB6,446 million in 2021 to RMB4,968 million in 2022.●Loan facilitation and servicing fees. Loan facilitation and servicing fees decreased under the credit-driven services from RMB2,326million in 2021 to RMB2,086 million in 2022, primarily due to a lower take rate as a result of a decline in average IRR of the loans.Loan facilitation and servicing fees decreased under the platform services from RMB5,678 million in 2021 to RMB4,125 million in2022, primarily due to a decline in loan facilitation volume under our capital-light model as well as a decline in average IRR of theloans.Table of Contents134●Financing income. Financing income increased from RMB2,184 million in 2021 to RMB3,488 million in 2022, primarily due to thegrowth in average outstanding on-balance-sheet loan balance.●Revenue from releasing of guarantee liabilities. Revenue from releasing of guarantee liabilities increased from RMB5,583 million in2021 to RMB5,899 million in 2022. This increase reflected the change in average outstanding balance of off-balance-sheet capital-heavy loans during the period.●Referral services fees. Referral services fees decreased from RMB620 million in 2021 to RMB561 million in 2022, primarily due tothe decline in traffic from the referral services.Operating costs and expensesOperating costs and expenses increased from RMB9,849 million in 2021 to RMB12,082 million in 2022, primarily due to the increase inprovision for contingent liabilities.●Facilitation, origination and servicing. Facilitation, origination and servicing costs increased from RMB2,252 million in 2021 toRMB2,373 million in 2022, primarily due to an increase of collection fee of RMB156 million as a result of the growth in loanfacilitation volume and balance.●Sales and marketing. Sales and marketing expenses increased substantially from RMB2,090 million in 2021 to RMB2,207 million in2022, primarily due to an increase of RMB126 million in advertising and marketing-related expenses as a result of a higher averagetraffic cost throughout the challenging macro environment during 2022.●General and administrative. General and administrative expenses decreased from RMB557 million in 2021 to RMB413 million in2022, primarily due to a decrease of RMB72 million in professional service fees and our continued effort to improve operationalefficiency.●Funding costs. Funding costs increased from RMB337 million in 2021 to RMB504 million in 2022, mainly due to the growth infunding from ABSs and trusts.●Provision for loans receivable. Provision for loans receivable increased from RMB965 million in 2021 to RMB1,580 million in 2022,which was primarily due to the growth in outstanding on-balance sheet loans.●Provision for financial assets receivable. Provision for financial assets receivable increased from RMB244 million in 2021 toRMB398 million in 2022. The increase reflected challenging macro environment factors which are consistently applied in theestimation of default rate made as of December 31, 2022 for those vintages of loans in prior periods and at the inception of suchloans.●Provision for accounts receivable and contract assets. Provision for accounts receivable and contract assets decreased from RMB325million in 2021 to RMB238 million in 2022, primarily attributable to the decrease in loan facilitation volume under our capital-lightmodel.●Provision for contingent liabilities. Provision for contingent liabilities increased from RMB3,078 million in 2021 to RMB4,368million in 2022, which reflected challenging macro environment factors which are consistently applied in the estimation of defaultrate made as of December 31, 2022 for those vintages of loans in prior periods and at the inception of such loans.Interest income, netInterest income, net was RMB182 million in 2022, compared to RMB126 million in 2021, mainly due to the increase in net interest earnedfrom bank deposits.Table of Contents135Other income, netOther income increased from RMB65 million in 2021 to RMB268 million in 2022, mainly due to the increase of government grants.Income tax expenseIncome tax expense was RMB737 million in 2022, compared to RMB1,258 million in 2021. Excluding share-based compensationexpense which is not tax deductible in China, the effective tax rate was 14.9% in 2022, compared to 17.3% in 2021.Net incomeNet income was RMB4,006 million in 2022, compared to RMB5,765 million in 2021.Changes in Financial PositionThe following table sets forth selected information from our consolidated balance sheets as of December 31, 2021, 2022 and 2023. Thisinformation should be read together with our consolidated financial statements and related notes included elsewhere in this annual report.As of December 31,2021 2022 2023 RMB RMB RMB US$(in thousands)Current assets: Cash and cash equivalents 6,116,360 7,165,584 4,177,890 588,443Restricted cash 2,643,587 3,346,779 3,381,107 476,219Security deposit prepaid to third-party guarantee companies 874,886 396,699 207,071 29,165Accounts receivable and contract assets, net 3,097,254 2,868,625 2,909,245 409,759Financial assets receivable, net 3,806,243 2,982,076 2,522,543 355,293Loans receivable, net 9,844,481 15,347,662 24,604,487 3,465,470Non-current assets:Accounts receivable and contract assets, net-noncurrent 223,474 261,319 146,995 20,704Financial assets receivable, net-noncurrent 597,965 688,843 596,330 83,991Loans receivable, net-noncurrent 2,859,349 3,136,994 2,898,005 408,175Land use rights, net 1,018,908 998,185 977,461 137,673Current liabilities:Payable to investors of the consolidated trusts-current 2,304,518 6,099,520 8,942,291 1,259,495Guarantee liabilities-stand ready 4,818,144 4,120,346 3,949,601 556,290Guarantee liabilities-contingent 3,285,081 3,418,391 3,207,264 451,734Non-current liabilities:Payable to investors of the consolidated trusts-noncurrent 4,010,597 4,521,600 3,581,800 504,486Cash and cash equivalentsCash and cash equivalents consist of funds in banks, which are highly liquid and are unrestricted as to withdrawal or use.Our cash and cash equivalents decreased from RMB7,166 million as of December 31, 2022 to RMB4,178 million (US$588 million) as ofDecember 31, 2023, due to the increased cash usage in our on-balance sheet lending.Restricted cashRestricted cash mainly represents security deposits related to our loan facilitation services and cash held by our consolidated trusts andasset management plans through segregated bank accounts which can only be used to invest in loans or other securities as stipulated in the trustagreements. The trusts have a maximum operating period of three years. The cash in the trusts is not available to fund our general liquidity needs.Table of Contents136Our restricted cash increased from RMB3,347 million as of December 31, 2022 to RMB3,381 million (US$476 million) as of December31, 2023, primarily due to the increase of cash held by our consolidated trusts and asset management plans as a result of the growth in funding fromABSs and trusts.Security deposits prepaid to third-party guarantee companiesWe have engaged third-party licensed guarantee companies to provide guarantee to some financial institution partners since 2019, andsometimes we prepay an amount as back-to-back guarantee to these guarantee companies. Such prepayment in the deposit account under theguarantee company’s name is recorded under this account. Our security deposit prepaid to third-party guarantee companies amounted to RMB207million (US$29 million) as of December 31, 2023.Accounts receivable and contract assets, netAccounts receivable and contract assets decreased from RMB3,130 million as of December 31, 2022 to RMB3,056 million (US$430million) as of December 31, 2023, net of allowance of RMB315 million and RMB321 million (US$45 million), respectively, mainly due to thedecrease in outstanding balance of off-balance sheet loans.Financial assets receivable, netFinancial assets receivable decreased from RMB3,671 million as of December 31, 2022 to RMB3,119 million (US$439 million) as ofDecember 31, 2023, net of allowance of RMB554 million and RMB575 million (US$81 million), respectively, mainly due to a decrease in our loanfacilitation volume of off balance sheet loans under credit-driven services during the period.Loans receivable, netLoans receivable represents loans on our balance sheet facilitated through our consolidated trusts, as well as loans facilitated by FuzhouMicrocredit.Loans receivable increased from RMB18,485 million as of December 31, 2022 to RMB27,502 million (US$3,874 million) as ofDecember 31, 2023, mainly due to the increase in our outstanding on-balance sheet loans balance.Land use rights, netLand use rights represent lease prepayments to the local government authorities and are recorded at cost less accumulated amortization.In March 2021, our consolidated subsidiary, 360 Changfeng obtained the land use rights from local authorities to develop and build theregional headquarters and the affiliated industrial park for our future operations. As of December 31, 2023, a total of RMB1.0 billion werecontributed by its shareholders to acquire the land use rights, of which RMB0.7 billion was funded by Shanghai Qiyu and RMB0.3 billion wasfunded by 360 Changfeng, respectively.Payable to investors of the consolidated trustsSome financial institution partners require us to disburse loans indirectly to borrowers through our consolidated trusts. Some beneficialrights in trusts and loans receivables are further transferred into asset backed special plans for the issuance of ABSs. Payable to investors of theconsolidated trusts without recourse to us represents the investment returns of these trusts and ABS plans, and it increased from RMB10,621million as of December 31, 2022 to RMB12,524 million (US$1,764 million) as of December 31, 2023, mainly due to the increase in our on-balancesheet loan volume.Guarantee liabilities-stand readyGuarantee liabilities-stand ready decreased from RMB4,120 million as of December 31, 2022 to RMB3,950 million (US$556 million) asof December 31, 2023. We recognize a stand-ready guarantee liability at the inception of an off-balance sheet loan for which we provide guaranteeservices. Stand-ready guarantee is released into guarantee revenue on a straight-line basis over the term of the guarantee.Table of Contents137Guarantee liabilities-contingentGuarantee liabilities-contingent decreased from RMB3,418 million as of December 31, 2022 to RMB3,207 million (US$452 million) as ofDecember 31, 2023, mainly due to the provision of contingent liabilities of RMB3,054 million (US$430 million), which was partially offset by thepayout of RMB3,265 million (US$460 million). At the inception of an off-balance sheet loan, we also recognize a separate contingent guaranteeliability with an allowance for credit losses following the CECL model. The contingent guarantee is reduced by the payouts made by us tocompensate the financial institutions upon borrowers’ default. Allowance for credit losses under CECL model was included in “provision forcontingent liabilities” and revalued at each period end to reflect updated estimation for future net pay-out.B. Liquidity and Capital ResourcesTo date, we have financed our operations primarily through cash generated by operating activities and historical equity financingactivities. As of December 31, 2021, 2022 and 2023, we had cash and cash equivalents and restricted cash of RMB8.8 billion, RMB10.5 billion andRMB7.6 billion (US$1.1 billion), respectively. Our cash and cash equivalents primarily consist of funds in banks, which are highly liquid and areunrestricted as to withdrawal or use. We believe that our cash and cash equivalents and our anticipated cash flows from operations will be sufficientto meet our current and anticipated needs for general corporate purposes for at least the next 12 months.Cash FlowsThe following table sets forth a summary of our cash flows for the years indicated:Years Ended December 31,2021 2022 2023 RMB RMB RMB US$(in thousands)Summary Consolidated Cash Flow Data Net cash provided by operating activities 5,789,700 5,922,515 7,118,350 1,002,598Net cash used in investing activities (6,064,328) (7,355,975) (11,147,789) (1,570,134)Net cash provided by financing activities 2,263,720 3,204,068 1,066,458 150,209Net increase/(decrease) in cash and cash equivalents 1,985,681 1,752,416 (2,953,366) (415,973)Cash, cash equivalents, and restricted cash at the beginning of year 6,774,266 8,759,947 10,512,363 1,480,635Cash, cash equivalents, and restricted cash at the end of year 8,759,947 10,512,363 7,558,997 1,064,662Operating activitiesNet cash provided by operating activities was RMB7,118 million (US$1,003 million) in 2023. The difference between net cash providedby operating activities and the net income of RMB4,269 million (US$601 million) mainly resulted from (i) adding back non-cash item share-basedcompensation of RMB186 million (US$26 million), (ii) adding back non-cash item provision for loan principal, financial assets receivables andother receivables of RMB2,713 million (US$382 million), and (iii) adding back non-cash item provision for contingent liabilities of RMB3,054million (US$430 million), partially offset by additional RMB3,209 million (US$452 million) used for working capital. The change in cash used forworking capital was mainly a result of a RMB3,436 million (US$484 million) decrease in guarantee liabilities. The change of these working capitalitems was in line with our business growth.Net cash provided by operating activities was RMB5,923 million in 2022. The difference between net cash provided by operatingactivities and the net income of RMB4,006 million mainly resulted from (i) adding back non-cash item share-based compensation of RMB200million, (ii) adding back non-cash item provision for loan principal, financial assets receivables and other receivables of RMB2,216 million, and(iii) adding back non-cash item provision for contingent liabilities of RMB4,368 million, partially offset by additional RMB5,119 million used forworking capital. The change in cash used for working capital was mainly a result of a RMB4,932 million decrease in guarantee liabilities. Thechange of these working capital items was in line with our business growth.Table of Contents138Net cash provided by operating activities was RMB5,790 million in 2021. The difference between net cash provided by operatingactivities and the net income of RMB5,765 million mainly resulted from (i) adding back non-cash item share-based compensation of RMB254million, (ii) adding back non-cash item provision for loan principal, financial assets receivables and other receivables of RMB1,554 million and(iii) adding back non-cash item provision for contingent liabilities of RMB3,078 million, partially offset by additional RMB4,881 million used forworking capital. The change in cash used in working capital was mainly a result of a RMB820 million increase in accounts receivable and contractassets, a RMB437 million increase in financial assets receivables, a RMB2,691 million decrease in guarantee liabilities, and a RMB1,036 millionincrease in land use rights, which was partially offset by RMB898 million increase in accrued expenses and other current liabilities. The change ofthese working capital items was the result of our rapid expansion of business.Investing activitiesNet cash used in investing activities was RMB11,148 million (US$1,570 million) in 2023, which was primarily attributable to investmentin loans receivable of RMB92,203 million (US$12,986 million), partially offset by the collection of investment in loans receivable of RMB81,132million (US$11,427 million). The net outflow of loans investment mainly resulted from the growth of on-balance sheet lending.Net cash used in investing activities was RMB7,356 million in 2022, which was primarily attributable to investment in loans receivable ofRMB59,826 million, partially offset by the collection of investment in loans receivable of RMB52,557 million. The net outflow of loansinvestment mainly resulted from the growth of on-balance sheet lending.Net cash used in investing activities was RMB6,064 million in 2021, which was primarily attributable to investment in loans receivable ofRMB40,169 million, partially offset by the collection of investment in loans receivable of RMB34,131 million. The net outflow of loansinvestment mainly resulted from the growth of on-balance sheet lending.Financing activitiesNet cash provided by financing activities was RMB1,066 million (US$150 million) in 2023, which was primarily attributable toRMB10,410 million (US$1,466 million) cash received from investors of the consolidated trusts and RMB825 million (US$116 million) receivedfrom short-term loans, partially offset by cash paid to investors of the consolidated trusts of RMB8,471 million (US$1,193 million), dividend paidto shareholders of RMB942 million (US$133 million) and ADSs repurchased in the open market of RMB636 million (US$90 million).Net cash provided by financing activities was RMB3,204 million in 2022, which was primarily attributable to RMB8,571 million cashreceived from investors of the consolidated trusts, and RMB340 million received from short-term loans, and RMB239 million received from ourGlobal Offering of class A ordinary shares in connection with the secondary listing on the Main Board of the Hong Kong Stock Exchange, partiallyoffset by cash paid to investors of the consolidated trusts of RMB4,325 million and dividend paid to shareholders of RMB989 million.Net cash provided by financing activities was RMB2,264 million in 2021, which was primarily attributable to RMB5,929 million cashreceived from investors of the consolidated trusts, and RMB364 million received from short-term loans, partially offset by cash paid to investors ofthe consolidated trusts of RMB4,193 million and RMB150 million repaid for short-term loans.Material Cash RequirementOur material cash requirements as of December 31, 2023 and any subsequent interim period primarily include our capital expendituresand contractual obligations.Capital ExpendituresFor the years ended December 2021, 2022 and 2023, our capital expenditures were mainly used for purchases of property, equipment andsoftware. We incurred capital expenditures of RMB25.3 million, RMB27.0 million and RMB84.6 million (US$11.9 million) in 2021, 2022 and2023, respectively. Our capital expenditures for 2023 consist primarily of expenditures related to the expansion and enhancement of ourinformation technology infrastructure and the construction of our new office buildings in Shanghai. We will continue to incur capital expendituresto meet the expected growth of our business.Table of Contents139We intend to fund our existing and future capital expenditures with our existing cash and cash equivalents, restricted cash, short-terminvestments and other financing alternatives. We will continue to make cash commitments, including capital expenditures, to support the growth ofour business.Contractual ObligationsOur contractual obligations mainly represent operating lease obligations, which relate to our leases of office premises and our land userights over the parcel of land that 360 Changfeng acquired to construct our regional headquarters and the affiliated industrial park for our futureoperations. We lease our office premises under non-cancelable operating lease arrangements. Expenses under operating leases for 2021, 2022 and2023 were RMB51.6 million, RMB63.7 million and RMB61.0 million (US$8.6 million), respectively, which include amortization expenses of landuse rights for 2021, 2022 and 2023 amounting to RMB17.3 million, RMB20.7 million and RMB20.7 million (US$2.9 million), respectively.Our short-term loans obligations relate to bank borrowings obtained from domestic commercial banks. Our short-term loans obligationswere RMB397.6 million, RMB150.0 million and RMB798.6 million (US$112.5 million) as of December 31, 2021, 2022 and 2023, respectively.Our long-term loans obligations relate to mortgage loans for the specific use of construction of the regional headquarters and the affiliatedindustrial park, which were nil, RMB17.9 million and RMB90.6 million (US$12.8 million) as of December 31, 2021, 2022 and 2023, respectively.The following table sets forth our contractual obligations and loans obligations as of December 31, 2023:Less than1 – 33 – 5More than Total 1 year Years Years 5 years(RMB in thousands)Operating Leases Obligations 42,188 29,671 12,517 — —Short-term Loans Obligations 798,586 798,586 — — —Long-term Loans Obligations 90,620 — — — 90,620As of December 31, 2023, we had the outstanding amount of short-term loans of RMB798.6 million (US$112.5 million), with the amountof RMB50.0 million (US$7.0 million) pledged with bank deposit of RMB15.0 million. As of the same date, we had outstanding amount of long-term mortgage loans of RMB90.6 million (US$12.8 million), which were secured by the land use right owned by Shanghai 360 ChangfengTechnology, Co., Ltd. and were unguaranteed. As of December 31, 2023, we also had operating lease liabilities amounting to RMB42.2 million(US$5.9 million), all of which were secured by the rental deposits and unguaranteed. As of the same date, we had payable to shareholder of non-controlling interests of RMB230.9 million (US$32.5 million), which was unguaranteed and unsecured.As of December 31, 2023, we have certain capital commitments primarily related to commitments for the construction of our regionalheadquarters and the affiliated industrial park. The total capital commitments agreed in the purchase contract for land use rights was not less thanRMB500.0 million (US$70.4 million), and RMB204.0 million (US$28.7 million) has been invested and reflected as construction in progress under“Property and equipment, net” in our consolidated financial statements as of December 31, 2023. All of the remaining capital commitments will befulfilled in the future according to the construction progress.Other than those shown above, the obligations from on-balance sheet loans (presented as “payable to investors of the consolidated trusts-current and -noncurrent” in the consolidated balance sheets), which were unguaranteed and unsecured, and guarantees related to the loans wefacilitated, we did not have any significant capital and other commitments and long-term obligations as of December 31, 2023.Table of Contents140Holding Company StructureQifu Technology, Inc. is a holding company with no material operations of its own. We conduct our operations primarily through oursubsidiaries, our variable interest entities and their subsidiaries in China. As a result, Qifu Technology, Inc.’s ability to pay dividends may dependupon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in thefuture, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries inChina are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards andregulations. Under PRC law, each of our subsidiaries, our variable interest entities and their subsidiaries in China is required to set aside at least10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. Inaddition, our wholly foreign-owned subsidiaries in China may allocate a portion of its after-tax profits based on PRC accounting standards toenterprise expansion funds and staff bonus and welfare funds at its discretion, and our variable interest entity may allocate a portion of its after-taxprofits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary fundsare not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by thebanks designated by SAFE.C. Research and Development, Patents and Licenses, Etc.See “Item 4. Information on the Company—B. Business Overview—Intellectual Properties.”D. Trend InformationOther than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events forthe period since January 1, 2024 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity orcapital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financialconditions.E. Critical Accounting EstimatesCritical accounting estimates are those that are both most important to the portrayal of our financial condition and results, and that requirethe management’s most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters thatare inherently uncertain. Our management’s discussion and analysis of our financial condition and results of operations is based on ourconsolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financialstatements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and thedisclosure of contingent assets and liabilities in our consolidated financial statements and the accompanying notes. We base our estimates onhistorical experience, known trends and events, and our beliefs of what could occur in the future considering available information. Actual resultsmay differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in lightof changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, are reflected in the consolidated financialstatements prospectively from the date of change in estimates.While our significant accounting policies are described in more detail in Note 2 – Summary of Significant Accounting Policies to ourconsolidated financial statements appearing in Item 8 of this Annual Report, we believe the following critical accounting estimates used in thepreparation of our consolidated financial statements require the most difficult, subjective and complex judgments and estimates and have had, orare reasonably likely to have a material impact on our financial condition or results of operations.Revenue recognitionIn accounting for revenue from facilitation of off-balance sheet loans, we considered the loan facilitation service, post-facilitation serviceand guarantee service (not applicable for certain capital light loans where we do not provide guarantee service) as three separate services. Revenuesfrom loan facilitation services are recognized at the time a loan is originated and revenues from post-facilitation services are recognized on astraight-line basis over the term of the underlying loans. Revenues from guarantee services are recognized over the guarantee term.Significant management judgment is applied to the determination and allocation of the transaction price, including (i) estimation ofvariable consideration, and (ii) determination of standalone selling price of each performance obligation.Table of Contents141We determined the total transaction price to be the service fees chargeable from the borrowers or the partner financial institutions, whichincludes variable considerations in the form of prepayment risk of borrowers and service fee rate based on future default rate of underlying loansfacilitated under certain agreements under the capital light model. We estimate the prepayment risk of borrowers using an expected value approachon the basis of historical information and current trends of the early payment from borrowers. We use the service fee rate applicable to theestimated default rate of the underlying loans. See “Allowance for credit losses” for estimation of default rate.The transaction price is allocated amongst the guarantee service, if any, and the other two performance obligations. We first allocate thetransaction price to the guarantee liabilities, if any, in accordance with ASC Topic 460, Guarantees, which requires the guarantee to be measuredinitially at fair value based on the stand-ready obligation (See “Guarantee liabilities” for estimates and judgments involved therein). We useexpected cost plus margin approach to estimate the standalone selling prices of loan facilitation services and post-facilitation services as the basisof revenue allocation. In estimating our standalone selling price for the loan facilitation services and post-facilitation services, we consider the costincurred to deliver such services, profit margin for similar arrangements, customer demand, effect of competitors on our services, and other marketfactors.The estimate of prepayment risk of borrowers is subject to changes in our estimate of borrowers’ future repayment pattern. A decrease inthe amount of loans to be repaid in advance or an increase in tenure of early repayment would result in a greater amount of total transaction pricethan initially expected and vice versa. Further, if the default rate of underlying loans decreases beyond a certain level, the service fee rates enjoyedby us so as the total transaction price would increase than initially expected and vice versa. Revenue adjustment for the year ended December 31,2023 to performance obligations satisfied (or partially satisfied) in prior periods pertaining to changes in variable consideration was not significant.We estimate the standalone selling prices of loan facilitation services and post-facilitation services based on historical cost data adjustedby current service patterns such as tenure, which could change when our cost pattern and business mode changes. If our estimates change with onepercentage point increase/decrease in the portion of total transaction price allocated to our loan facilitation services, our loan facilitation servicerevenue would increase/decrease by approximately RMB52.3 million (US$7.4 million) for loans facilitated during the year ended December 31,2023.Allowance for credit lossesWe recognize an allowance for our financial assets, mainly loans receivable based on estimate of the expected credit losses over thecontractual term of these financial assets. For loans facilitated with guarantee service provided, we recognize a separate contingent guaranteeliability with an allowance for credit losses, which is an estimate of future net-payout by us upon borrowers’ default after the adoption of ASC 326on January 1, 2020.Allowances for the above-mentioned financial assets and contingent guarantee liability are driven by estimated default rate of respectiveunderlying loans. We estimate the default rate based on historical net default rate of loans on a pool basis grouped by vintage of origination withsimilar risk profiles. Internal and external correlation factors, such as CPI, money supply and delinquent loan collection rate are identified based onregular review of historical data and updated on a timely basis once we become aware of any new patterns. Future trend of the abovementionedcorrelation factors are then fed into our model to predict default rate for each loan portfolios. For external factors, we use projections commonlyused within the industry. For internal factors, we make projections based on historical data adjusted by our current risk and business strategieswhich we think could have potential impacts into the future periods.As of December 31, 2023, allowance for loans receivable is RMB1,871.4 million (US$263.6 million) and outstanding balance forcontingent guarantee liability is RMB3,207.3 million (US$451.7 million). If change in various factors constituting the estimate of default rate resultin 0.5 percentage point increase/decrease in the overall estimate default rate, it would result in an increase/decrease of RMB315.6 million (US$44.4million) and RMB569.5 million (US$80.2 million) for allowance for loans receivable and contingent guarantee liability respectively.Guarantee liabilitiesFor off-balance sheet loans facilitated where we effectively take on the credit risk of the borrowers through providing guarantee directly orcooperating with third-party licensed vendors including financing guarantee companies and insurance companies to provide guarantee, werecognize a stand ready guarantee liability at fair value. The fair value of stand ready guarantee liability is estimated using discounted cash flowmodel based on expected net payouts by incorporating a markup margin. After the adoption of ASC 326 on January 1, 2020, the contingentguarantee liability is recognized separately based on estimate of future net-payout by us upon borrowers’ default, which is ultimately determined bythe estimated default rate of underlying loans subject to guarantee.Table of Contents142For detailed judgments made in making the estimate of default rate of underlying loans subject to guarantee, please refer to the precedingpart “Allowance for credit losses.”In addition to the various factors considered in estimating default rate, we use discount rate and service margin commonly used withinsimilar industry. We believe the estimate is based on reasonable assumptions, which are inherently uncertain. The fair value of stand readyguarantee liabilities could also impact the amount of revenue to be recognized for guarantee service and those for loan facilitation and post-facilitation services by impacting the amount of total transaction price allocated to such services as discussed in the part of “Revenue recognition”discussed above.ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA. Directors and Senior ManagementThe following table sets forth information regarding our directors and executive officers as of the date of this annual report.Directors and Executive Officers Age Position/Title Hongyi Zhou53Chairman of the Board of DirectorsHaisheng Wu41Chief Executive Officer and DirectorAlex Xu55Chief Financial Officer and DirectorDan Zhao44DirectorJiao Jiao43DirectorEric Xiaohuan Chen42Independent DirectorGang Xiao48Independent DirectorAndrew Y Yan66Independent DirectorFan Zhao69Independent DirectorZhiqiang He41Senior Vice PresidentYan Zheng36Chief Risk OfficerMr. Hongyi Zhou has served as our director from our inception and in addition as our chairman of the Board since September 2018. Mr.Zhou has over 20 years of managerial and operational experience in China’s internet industry. Mr. Zhou founded Qihoo 360 Technology Co. Ltd.(previously listed on the New York Stock Exchange), and has served as its chairman of the board and Chief Executive Officer, from its inception toJuly 2016. Since February 2018, Mr. Zhou has been serving as the chairman of the board of directors and Chief Executive Officer of 360 SecurityTechnology Inc. (Shanghai Stock Exchange: 601360). Prior to founding Qihoo 360 Technology Co. Ltd., Mr. Zhou was a partner at IDG VenturesCapital. In more than thirty years, Mr. Zhou demonstrated his strong leadership both in venture capital investment and corporate management. Mr.Zhou received his bachelor’s degree in computer software and his master’s degree in system engineering from Xi’an Jiaotong University in 1992and 1995, respectively.Mr. Haisheng Wu has served as our chief executive officer and our director since August 2019. Before that, Mr. Wu had served as ourpresident since our inception. Mr. Wu has also been a director of Shanghai Qibutianxia from April 2020 to April 2021. Before working on theestablishment of our business, Mr. Wu worked as a product director at the 360 Group start page department from March 2011, in charge of 360Start Page, 360kan and 360 Mobile Browser. Prior to that, Mr. Wu worked with the user product department of Baidu, Inc. (NASDAQ: BIDU;HKEX: 9888), as a product manager from July 2008. Mr. Wu received his bachelor’s degree in economics (media economics management) fromCommunication University of China and master’s degree in communication studies from Peking University in 2005 and 2008, respectively.Mr. Alex Xu has served as our director since March 2021, as our chief financial officer since July 2020 and as our senior advisor sinceOctober 2019. Mr. Xu has extensive experiences in capital market, corporate finance and business management. Prior to joining us, Mr. Xu servedas the Chief Financial Officer of Shenzhen Qianhai Dashu Financial Services Co., Ltd. from September 2018 and a director of Qihoo 360Technology Co. Ltd. from September 2017 to April 2019. He was a Co-Chief Financial Officer of Qihoo 360 (previously listed on the New YorkStock Exchange) from February 2011 to August 2016. Prior to that, Mr. Xu was a Managing Director at Cowen & Company, LLC. He also servedas the Chief Financial Officer of Yeecare Holdings in 2010, and from May 2008 to March 2010, as the Chief Strategy Officer of China FinanceOnline Co., Ltd. Mr. Xu was a Senior Vice President at Brean Murray, Carret & Co from 2007 to 2008. He was an associate at Bank of AmericaSecurities, LLC from 2003 to 2007, and worked at investment research department of UBS AG from 2002 to 2003. Mr. Xu received his bachelor’sdegree in Applied Physics from Beijing University of Posts and Telecommunications and an M.B.A. degree from Cornell University. Mr. Xu is aCFA charter holder.Table of Contents143Mr. Dan Zhao has served as our director since May 2020 and is currently the vice president of 360 Group. Mr. Zhao has also been a non-executive director of 360 Ludashi Holdings Limited (HKEX: 3601) since June 2020, and a director of Beijing Huafang Technology Co., Ltd.,Beijing Mijing Hefeng Technology Co., Ltd., Huafang Group Inc. and Kincheng Bank of Tianjin Co., Ltd. since August 2020, September 2020,July 2021 and February 2022, respectively. Before joining 360 Group in January 2013, Mr. Zhao served as a senior manager in Alibaba Group(NYSE: BABA; HKEX: 9988) from November 2007. From September 2006 to November 2007, Mr. Zhao worked for KPMG Huazhen LLP as anassociate manager. Mr. Zhao received his bachelor’s degree in international enterprise management from the University of Shanghai for Scienceand Technology in 2002, and his master’s degree in international business economics from the University of Konstanz in 2004. Mr. Zhao wasaccredited as a certified internal auditor by the Institute of Internal Auditors in November 2008.Ms. Jiao Jiao has served as our director since November 2022. Ms. Jiao has been serving as a director of 360 Group since May 2022,where she has also been serving as a vice president and the head of the legal department since September 2021. From July 2019 to August 2021,Ms. Jiao served as the general counsel of Future VIPKID Limited. Ms. Jiao served as a vice president and the head of the legal department ofJD.com, Inc. (NASDAQ: JD; HKEX: 9618) from June 2014 to April 2019. Prior to that, she was a lawyer at JunHe LLP from June 2005 to May2014. Ms. Jiao received her bachelor of laws and master of laws in 2002 and 2005, respectively, from Peking University.Mr. Eric Xiaohuan Chen has served as our director since November 2019 and has been redesignated as our independent director since2024. Mr. Chen also serves as a director of several privately owned companies based in China. Mr. Chen is currently a partner at Twin PeaksCapital. Prior to co-founding Twin Peaks Capital, Mr. Chen served as the managing director and head of business and financial services atFountainVest Partners, where he has worked from 2008 to 2021. Before joining FountainVest Partners, Mr. Chen had worked in the investmentbanking department of Lehman Brothers and Citigroup since 2006. From 2004 to 2006, Mr. Chen worked at Micron Technology. Mr. Chenreceived his Bachelor’s degree in electrical engineering from National University of Singapore in 2004 and his EMBA degree from China EuropeInternational Business School in 2018.Mr. Gang Xiao has served as our independent director since September 2018. Mr. Xiao served as the general manager of ZhongcaiFinancial Holding Investment Ltd. from its inception to September 2022. Prior to that, Mr. Xiao worked at China Financial & Economic PublishingHouse Accounting Branch as an editor from August 2006 to December 2010, during which he served as a deputy county mayor of SuichuanCounty of Jiangxi Province from December 2007 to December 2008. Prior to that, Mr. Xiao worked at the then Tianjin Government ProcurementCenter, which was later merged into Tianjin Public Resource Exchange Center in December 2019, from March 2000 to February 2004. Mr. Xiaoreceived his bachelor’s degree in electronic data processing accounting from Dongbei University of Finance and Economics, his master’s degree inChinese literature from Yanbian University and his doctoral degree in public finance from Dongbei University of Finance and Economics in 1999,2003 and 2008, respectively.Mr. Andrew Y Yan has served as our independent director since July 2019. Mr. Yan is the founding managing partner of SAIF Partners IVsince 2001. Prior to that, he was a managing director and head of the Hong Kong office of Emerging Markets Partnership, the managementcompany of AIG Asian Infrastructure Funds. Mr. Yan is currently an independent director of ATA Creativity Global (NASDAQ: AACG) andGuoyuan Securities Co., Ltd (Shenzhen Stock Exchange: 000728). He is also a member of the Investment Committee of Peking UniversityEducation Foundation and the vice chairman of the Asset Management Association of China. In addition, Mr. Yan previously served as a directorof Shenzhen Appotronics Corporation Ltd. (STAR Market of the Shanghai Stock Exchange: 688007), Shanghai Welltech Automation Co., Ltd(Shenzhen Stock Exchange: 002058), Haier Smart Home Co., Ltd (HKEX: 6690), Huize Holding Limited (NASDAQ: HUIZ) and Zhejiang MeritInteractive Network Technology Co., Ltd (Shenzhen Stock Exchange: 300766). Mr. Yan also previously served as a non-executive director atGuodian Technology & Environment Group Corporation Limited, a company previously listed on the Hong Kong Stock Exchange (HKEX: 1296)and privatized in May 2022, an independent director at TCL Corporation (Shenzhen Stock Exchange: 000100) and BlueFocus IntelligentCommunications Group Co., Ltd. (Shenzhen Stock Exchange: 300058), and an independent non-executive director of China Southern AirlinesCompany Limited (HKEX: 1055; Shanghai Stock Exchange: 600029) and China Resources Land (HKEX: 1109). Mr. Yan received a master ofArts degree from Princeton University in 1989, and a bachelor’s degree in engineering from the Nanjing University of Aeronautics andAstronautics, formerly known as Nanjing Aeronautic Institute, in 1982.Mr. Fan Zhao has served as our independent director since January 2023. Mr. Zhao founded and has served as the chairman of the boardof directors of Beijing Fengye Fanda Investment Advisory Co., Ltd. since 2000. He has served as a director of Heintzman Piano Company Limitedsince 2004. He founded and served as a director of Sunbridge International Holdings Limited from 2002 to 2018. From 2000 to 2004, Mr. Zhaowas an independent director of www.3721.com. Mr. Fan Zhao was the president of Hebei Bada Group from 1993 to 1999. Mr. Fan Zhao received abachelor’s degree in engineering from Beijing University of Civil Engineering and Architecture in 1982 and an MBA degree from LawrenceTechnological University in 2002, respectively.Table of Contents144Mr. Zhiqiang He has served as our senior vice president since July 2020. Prior to that, Mr. He served as our vice president. Mr. He was theco-founder of Ningbo Siyinjia Investment Management Co. Ltd. Prior to establishing Ningbo Siyinjia Investment Management Co. Ltd., Mr. Heworked in the financial industry department at McKinsey & Company from July 2013 to July 2015. Mr. He received his bachelor’s degree inthermal and power engineering and master’s degree in business administration from Tsinghua University in 2003 and 2007, respectively. Mr. Hereceived his MBA degree from Sloan Business School of Massachusetts Institute of Technology in 2013.Mr. Yan Zheng has served as our chief risk officer since July 2020. Prior to that, Mr. Zheng served as our vice president from February2017. Mr. Zheng has 13 years of experience in consumer finance risk management. Before joining us, Mr. Zheng co-founded Shenzhen SamoyedInternet Finance Service Co. Ltd. in May 2015, and was in charge of its product risk management. Prior to that, Mr. Zheng worked at the riskdivision of Merchants Union Consumer Finance Company Limited from April to May 2015, and the risk management department at theheadquarter of China Merchants Bank (Shanghai Stock Exchange: 600036) from November 2014 to April 2015. Prior to that, Mr. Zheng worked atthe risk management department of the Credit Card Center of China Merchants Bank from July 2008 to October 2014, primarily responsible for thecredit policies of corporate businesses and credit limits. Mr. Zheng received his bachelor’s degree in quantitative economics (Chinese-foreign) fromShanghai University of Finance and Economics in 2008.Employment Agreements and Indemnification AgreementsWe have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officersis employed for a specified time period. We may terminate employment for cause, for certain acts of the executive officer, such as continued failureto satisfactorily perform his or her duties, willful misconduct or gross negligence in the performance of his or her duties, conviction or entry of aguilty or nolo contendere plea for any felony or any misdemeanor involving moral turpitude, or dishonest acts to our detriment. We may alsoterminate an executive officer’s employment without cause upon 30 days’ advance written notice. In such case of termination by us, we willprovide severance payments to the executive officer as may be agreed between the executive officers and us. The executive officer may resign atany time with 30 days’ advance written notice.Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strictconfidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicablelaw, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or theconfidential or proprietary information of any third party received by us and for which we have confidential obligations. The executive officershave also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice duringthe executive officer’s employment with us and to assign all rights, title and interest in them to us, and assist us in obtaining and enforcing patents,copyrights and other legal rights for these inventions, designs and trade secrets.In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his orher employment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to (i)approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as arepresentative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons orentities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise,any of our competitors, without our express consent; (iii) seek, directly or indirectly, to solicit the services of, or hire or engage, any person who isknown to be employed or engaged by us; or (iv) otherwise interfere with our business.We have also entered into indemnification agreements with each of our directors. Under these agreements, we agree to indemnify ourdirectors against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director of ourcompany.B. CompensationFor the fiscal year ended December 31, 2023, we paid an aggregate of approximately RMB18.9 million (US$2.7 million) in cash to ourdirectors and executive officers. Our PRC subsidiaries and VIEs are required by law to make contributions equal to certain percentages of eachemployee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housingprovident fund. Other than the above-mentioned statutory contributions mandated by applicable PRC laws and regulations, we have not set aside oraccrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.Table of Contents1452018 Share Incentive PlanWe adopted the 2018 Share Incentive Plan in May 2018 and amended it in November 2019. Under the amended plan, the maximumaggregate number of ordinary shares that may be issued pursuant to all awards under the 2018 Share Incentive Plan is 25,336,096 ordinary shares.As of February 29, 2024, class A ordinary shares underlying options and restricted share units that have been granted and are outstanding under the2018 Share Incentive Plan totaled 1,275,436, excluding awards that were forfeited or canceled after the relevant grant dates. The followingparagraphs summarize the terms of the 2018 Share Incentive Plan.Types of awards. The 2018 Share Incentive Plan permits the awards of options, restricted shares and restricted share units or other rightsor benefits.Plan administration. The board of directors or a committee designated by the board of directors acts as the plan administrator. The planadministrator will determine the participants who are to receive awards, the type or types of awards to be granted, the number of awards to begranted, and the terms and conditions of each award grant. The plan administrator can amend outstanding awards and interpret the terms of the2018 Share Incentive Plan and any award agreement.Award agreement. Awards granted under the 2018 Share Incentive Plan are evidenced by an award agreement that sets forth the termsand conditions for each grant.Exercise price. The exercise price of an award will be determined by the plan administrator. In certain circumstances, such as arecapitalization, a spin-off, reorganization, merger, separation and split-up, the plan administrator may adjust the exercise price of outstandingoptions and share appreciation rights.Eligibility. We may grant awards to our employees, consultants, and all members of our board of directors.Term of the awards. The term of each share award granted under the 2018 Share Incentive Plan may not exceed ten years after the dateof grant.Vesting schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement.Transfer restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent anddistribution, except as otherwise provided by the plan administrator.Termination. The plan shall terminate in May 2028, provided that our board of directors may terminate the plan at any time and for anyreason.2019 Share Incentive PlanWe adopted the 2019 Share Incentive Plan in November, 2019 and amended it in August 2020 to attract and retain the best availablepersonnel, provide additional incentives to employees, directors and consultants and promote the success of our business. Under the amended plan,the maximum aggregate number of ordinary shares that may be issued pursuant to all awards under the 2019 Share Incentive Plan is 17,547,567ordinary shares, and an annual increase on the first day of each of the four consecutive fiscal years of the company commencing with the fiscal yearbeginning January 1, 2021, by (i) an amount equal to 1.0% of the total number of the then issued and outstanding shares or (ii) such fewer numberof class A ordinary shares as may be determined by our board of directors. As of February 29, 2024, options and restricted share units representing8,402,556 class A ordinary shares have been granted and are outstanding under the 2019 Share Incentive Plan, as amended, excluding awards thatwere forfeited or canceled after the relevant grant dates.The following paragraphs summarize the terms of the 2019 Share Incentive Plan.Types of awards. The 2019 Share Incentive Plan permits the awards of options, restricted shares and restricted share units or other rightsor benefits.Table of Contents146Plan administration. The board of directors or a committee designated by the board of directors acts as the plan administrator. The planadministrator will determine the participants who are to receive awards, the type or types of awards to be granted, the number of awards to begranted, and the terms and conditions of each award grant. The plan administrator can amend outstanding awards and interpret the terms of the2019 Share Incentive Plan and any award agreement.Award agreement. Awards granted under the 2019 Share Incentive Plan are evidenced by an award agreement that sets forth the termsand conditions for each grant.Exercise price. The exercise price of an award will be determined by the plan administrator. In certain circumstances, such as arecapitalization, a spin-off, reorganization, merger, separation and split-up, the plan administrator may adjust the exercise price of outstandingoptions and share appreciation rights.Eligibility. We may grant awards to our employees, consultants, and all members of our board of directors.Term of the awards. The term of each share award granted under the 2019 Share Incentive Plan may not exceed ten years after the dateof grant.Vesting schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement.Transfer restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent anddistribution, except as otherwise provided by the plan administrator.Termination. The plan shall terminate in November 2029, provided that our board of directors may terminate the plan at any time andfor any reason.The following table summarizes, as of February 29, 2024, the awards granted under the 2018 Share Incentive Plan and 2019 ShareIncentive Plan to several of our existing directors and executive officers, excluding awards that were forfeited or canceled after the relevant grantdates. Ordinary Shares Exercise Price Underlying Awards(US$/Share)Date of GrantDate of ExpirationHaisheng Wu 3,766,862 0.00001 May 20, 2018 May 19, 2028Haisheng Wu* — February 20, 2020 February 19, 2030Haisheng Wu 3,520,000 0.00001 November 20,2020 November 19,2030Zhiqiang He* 0.00001 May 20, 2018 May 19, 2028Zhiqiang He* 0.00001 November 20,2020 November 19,2030Yan Zheng* 0.00001 May 20, 2018 May 19, 2028Yan Zheng* 0.00001November 20,2020November 19,2030Alex Xu* —November 20,2019November 19,2029Alex Xu* —November 20,2021November 19,2031*Less than one percent of our total outstanding shares.As of February 29, 2024, other employees as a group held outstanding options and restricted share units representing 5,477,778 class Aordinary shares of our company under the 2018 Share Incentive Plan and 2019 Share Incentive Plan.Table of Contents147C. Board PracticesOur board of directors consists of nine directors. A director is not required to hold any shares in our company by way of qualification. Adirector who is in any way, whether directly or indirectly, interested in a contract or transaction or proposed contract or transaction with thecompany shall declare the nature of his interest at a meeting of the directors. A general notice given to the directors by any director to the effect thathe is a member of any specified company or firm and is to be regarded as interested in any contract or transaction which may thereafter be madewith that company or firm shall be deemed a sufficient declaration of interest in regard to any contract so made or transaction so consummated.Subject to Nasdaq Stock Market Rules and disqualification by the chairman of the relevant meeting of the directors, a director may vote in respectof any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein and if he does so his vote shallbe counted and he may be counted in the quorum at any meeting of the directors at which any such contract or transaction or proposed contract ortransaction shall come before the meeting for consideration. The directors may exercise all the powers of the company to raise or borrow moneyand to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof, and to issue debentures,debenture stock, bonds, and other securities whether outright or as collateral security for any debt, liability or obligation of the company or of anythird party. None of our non-executive directors have a service contract with us that provides for benefits upon termination of service.We have established three committees under the board of directors: an audit committee, a compensation committee and a nominating andcorporate governance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions aredescribed below.Audit Committee. Our audit committee consists of Gang Xiao, Andrew Y Yan and Fan Zhao. Gang Xiao is the chairman of our auditcommittee. We have determined that Gang Xiao, Andrew Y Yan and Fan Zhao satisfy the “independence” requirements of Rule 5605(c)(2) of theNasdaq Stock Market Rules and Rule 10A-3 under the Exchange Act. We have determined that Gang Xiao qualifies as an “audit committeefinancial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of ourcompany. The audit committee is responsible for, among other things:●appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by theindependent auditors;●reviewing with the independent auditors any audit problems or difficulties and management’s response;●discussing the annual audited financial statements with management and the independent auditors;●reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken tomonitor and control major financial risk exposures;●reviewing and approving all proposed related party transactions;●meeting separately and periodically with management and the independent auditors; and●monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of ourprocedures to ensure proper compliance.Compensation Committee. Our compensation committee consists of Andrew Y Yan, Hongyi Zhou and Haisheng Wu. Andrew Y Yan isthe chairman of our compensation committee. We have determined that Andrew Y Yan satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The compensation committee assists the board in reviewing and approving the compensation structure,including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at anycommittee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:●reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and otherexecutive officers;●reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;Table of Contents148●reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and●selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to thatperson’s independence from management.Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Hongyi Zhou,Andrew Y Yan and Jiao Jiao. Hongyi Zhou is the chairperson of our nominating and corporate governance committee. Andrew Y Yan satisfies the“independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The nominating and corporate governance committee assiststhe board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.The nominating and corporate governance committee is responsible for, among other things:●selecting and recommending to the board nominees for election by the shareholders or appointment by the board;●reviewing annually with the board the current composition of the board with regards to characteristics such as independence,knowledge, skills, experience and diversity;●making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of theboard; and●advising the board periodically with regards to significant developments in the law and practice of corporate governance as well asour compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporategovernance and on any remedial action to be taken.Duties of DirectorsUnder Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and aduty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose.Our directors also owe to our company a duty to exercise skills they actually possess and such care and diligence that a reasonably prudent personwould exercise in comparable circumstances. It was previously considered that a director need not exhibit in the performance of his duties a greaterdegree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courtshave moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the CaymanIslands. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amendedand restated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached. In certain limitedexceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functionsand powers of our board of directors include, among others:●convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings;●declaring dividends and distributions;●appointing officers and determining the term of office of the officers;●exercising the borrowing powers of our company and mortgaging the property of our company; and●approving the transfer of shares in our company, including the registration of such shares in our share register.Table of Contents149Terms of Directors and OfficersOur officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office, unlessexpressly specified in a written agreement between the company and the director or otherwise, and hold office until such time as they are removedfrom office by ordinary resolution of the shareholders or by the board. A director will be removed from office automatically if, the director (i)becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found to be or becomes of unsound mind; (iii) resignshis office by notice in writing to the company; (iv) without special leave of absence from the board of directors, is absent from meetings of theboard of directors for three consecutive meetings and the board of directors resolves that his office be vacated; or (v) is removed from officepursuant to any other provision of the company’s memorandum and articles of association.Board Diversity MatrixThe board diversity matrix below sets forth the information on each director’s voluntary self-identified characteristics pursuant to Rule5606 of the Listing Rules of Nasdaq.Board Diversity MatrixAs of February 29, 2024Country of Principal Executive Offices:PRCForeign Private IssuerYesDisclosure Prohibited Under Home Country LawNoTotal Number of Directors9FemaleMaleNon-BinaryDid Not Disclose GenderPart I: Gender Identity18——Part II: Demographic BackgroundUnderrepresented Individual in Home Country Jurisdiction—LGBTQ+—Did Not Disclose Demographic Background1D. EmployeesWe had 2,129 employees as of December 31, 2021, 2,199 as of December 31, 2022 and 3,121 as of December 31, 2023. The followingtable sets forth the number of our employees categorized by function as of December 31, 2023: As of December 31, 2023Function: General and administrative 244Operations 899Products 124Research and development 680Risk management 447Sales and marketing 256Offline sales and promotion 471Total 3,121As of December 31, 2023, we had 1,021 employees in Shanghai, 378 employees in Beijing, 305 employees in Shenzhen and the rest inother cities and special administrative region in China.As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal andprovincial governments, including housing funds, pension, medical insurance and unemployment insurance. We are required under Chinese law tomake contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to amaximum amount specified by the local government from time to time.Table of Contents150We enter into standard confidentiality and employment agreements with our employees. The contracts with our key personnel typicallyinclude a standard non-compete covenant that prohibits the employee from competing with us, directly or indirectly, during his or her employmentand for typically two years after the termination of his or her employment. In consideration of our employees’ non-compete covenant, we paycompensation to our employees at a rate of not less than 20% of the average monthly compensation of the 12 months prior to the termination oftheir employment, provided that, to the extent our rate becomes lower than the minimum standard required by the local government, we will pay inaccordance with such standard.We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes.None of our employees are represented by labor unions.E. Share OwnershipExcept as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares asof February 29, 2024 by:●each of our directors and executive officers; and●each of our principal shareholders who beneficially own 5% or more of our total outstanding shares.The calculations in the table below are based on 310,508,950 class A ordinary shares as of February 29, 2024 (excluding 4,340,936 classA ordinary shares that were issued to our depositary bank and reserved for future grants under our share incentive plans). No class B ordinaryshares were issued and outstanding as of February 29, 2024. As a result, no shareholder had different voting rights from other shareholders.Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of sharesbeneficially owned by a person and the percentage ownership and voting power of that person, we have included shares that the person has theright to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. Theseshares, however, are not included in the computation of the percentage ownership of any other person.Ordinary Shares Beneficially OwnedTotal ordinaryPercentage of total shares ordinary sharesDirectors and Executive Officers:** Hongyi Zhou(1) 42,990,384 13.8%Haisheng Wu(2)* * Alex Xu(3)* *Dan Zhao — —Jiao Jiao — — Gang Xiao — —Andrew Y Yan(4)* * Eric Xiaohuan Chen(5)* * Fan Zhao — — Zhiqiang He(6)* * Yan Zheng(7)* * All Directors and Executive Officers as a Group 49,842,532 16.1%Principal Shareholders Aerovane Company Limited(8)42,990,384 13.8%OLP Capital Management Limited(9) 25,838,814 8.3%Aspex Management(10) 17,261,530 5.6%Notes:*Less than 1% of our total outstanding shares.**Except as indicated otherwise below, the business address of our directors and executive officers is Building A, Building 2, Yard 6 (electronicscity) Jiuxianqiao Road, Chaoyang District, Beijing 100015, People’s Republic of China.Table of Contents151(1)Represents 42,990,384 class A ordinary shares to the company’s knowledge that are beneficially owned by Mr. Hongyi Zhou, the chairman ofour board of directors, including 39,820,586 class A ordinary shares and 3,169,798 class A ordinary shares in the form of ADSs directly heldby Aerovane Company Limited, a British Virgin Islands company, which is in turn wholly owned by Mr. Henry Zhiheng Zhou and Ms. RisaRuoshan Zhou, children of Mr. Hongyi Zhou. Because of the immediate family relationship, the amended and restated memorandum andassociation & articles of association of Aerovane Company Limited, and a letter agreement among Mr. Henry Zhiheng Zhou, Ms. RisaRuoshan Zhou and Mr. Hongyi Zhou, Mr. Hongyi Zhou is entitled to shared voting and dispositive power together with his children relating tothe 39,820,586 class A ordinary shares and 3,169,798 class A ordinary shares in the form of ADSs held by Aerovane Company Limited, andtherefore may be deemed to beneficially own these shares according to Rule 13d-3 under the Securities Exchange Act of 1934, as amended.The registered address of Aerovane Company Limited is Start Chambers, Wickham’s Cay II, P. O. Box 2221, Road Town, Tortola, BritishVirgin Islands.(2)Represents the class A ordinary shares in the form of ADSs collectively held by Mr. Haisheng Wu and Holy Vanguard Limited, a BritishVirgin Islands company wholly owned by a trust established for the benefit of Mr. Haisheng Wu and his family, to which Mr. Wu is also thesettlor.(3)Represents the class A ordinary shares in the form of ADSs held by Mr. Alex Xu.(4)Represents the class A ordinary shares in the form of ADSs held by Morning Star Resources Ltd. Morning Star Resources Ltd is a BritishVirgin Islands company wholly owned by a trust established for the benefit of Mr. Andrew Y Yan, to which Mr. Yan is also the settlor.(5)Represents the class A ordinary shares in the form of ADSs held by Mr. Eric Xiaohuan Chen.(6)Represents class A ordinary shares in the form of ADSs held by Mr. Zhiqiang He.(7)Represents class A ordinary shares in the form of ADSs collectively held by Mr. Yan Zheng and Smart Defender Limited, a British VirginIslands company wholly owned by a trust established for the benefit of Mr. Yan Zheng and his family, to which Mr. Zheng is also the settlor.(8)Aerovane Company Limited is described in footnote 1 above.(9)Represents 25,838,814 class A ordinary shares in the form of ADSs held by various investment vehicles for which OLP Capital ManagementLimited serves as investment manager. The number of class A ordinary shares is as reported in a Schedule 13G jointly filed by OLP CapitalManagement Limited, Richard Li and Di Fan Shen on February 14, 2024. OLP Capital Management Limited is a private company organizedunder the laws of Hong Kong. As reported in a Schedule 13G filed by OceanLink Partners Fund LP on February 14, 2024, OceanLink PartnersFund LP, a limited partnership organized under the laws of Delaware, beneficially owned 16,750,222 class A ordinary shares in the forms ofADS. According to the shareholder disclosures on the Hong Kong Stock Exchange made by OLP Capital Management Limited on March 7,2024, OceanLink Partners Fund LP is controlled by OLP Capital Management Limited.(10)Represents 17,261,530 class A ordinary shares in the form of ADSs beneficially owned by Aspex Management (HK) Ltd, a Hong Kongcompany, Aspex Master Fund, a Cayman Islands company, and Li, Ho Kei, a Hong Kong citizen. The number of class A ordinary shares is asreported in a Schedule 13G/A jointly filed by Aspex Management (HK) Ltd, Aspex Master Fund and Li, Ho Kei on March 4, 2024.To our knowledge, as of February 29, 2024, 285,915,558 of our class A ordinary shares were held by one record holder in the UnitedStates, which is the depositary of our ADS program. Such class A ordinary shares included shares issued for bulk issuance of ADSs reserved forfuture issuances upon the exercise or vesting of awards granted under our share incentive plans and the class A ordinary shares held in our HongKong register of members.The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of recordholders of our ordinary shares in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change ofcontrol of our company.Table of Contents152On March 31, 2023, we held an extraordinary general meeting and, among other things, varied and amended our authorized share capitalby (a) re-designating and re-classifying all authorized Class B ordinary shares as Class A ordinary shares each on a one-for-one basis and (b) re-designating and re-classifying all authorized and unissued shares of a par value of US$0.00001 each of such class or classes (however designated)as the board of directors of our company may determine in accordance with the memorandum of association and articles of association of ourcompany as Class A ordinary shares each on a one-for-one basis. As a result, we unwound our dual-class shareholding structure and all the issuedshares of our company (including the class B ordinary shares with super-voting rights) were redesignated and reclassified into class A ordinaryshares which entitle holders to one vote for each share. As of the date of this annual report, our authorized share capital is US$50,000 divided into5,000,000,000 class A ordinary shares, which entitle holders to one vote for each share.Enforceability of Civil LiabilitiesOur business operations are primarily conducted in mainland China, and substantially all of our assets are located in mainland China. Amajority of our directors and executive officers reside within China for a significant portion of the time and most of them are PRC nationals as ofthe date of this annual report. As a result, it may be difficult for a shareholder to effect service of process within the United States upon theseindividuals, to bring an action against us or these individuals in the United States, or to enforce against us or them judgments obtained in UnitedStates courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the UnitedStates.We have been informed by Maples and Calder (Hong Kong) LLP, our Cayman Islands counsel, that the United States and the CaymanIslands do not have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters andthe courts of the Cayman Islands and that the courts of the Cayman Islands are unlikely (i) to recognize and enforce judgments of U.S. courtsobtained against us or our directors or officers that are predicated upon the civil liability provisions of the federal securities laws of the UnitedStates or the securities laws of any state in the United States, and (ii) in original actions brought in the Cayman Islands to impose liabilities againstus or our directors or officers that are predicated upon the civil liability provisions of federal securities laws of the United States or the securitieslaws of any state in the United States so far as the liabilities imposed by those provisions are penal in nature.We have also been advised by our Cayman Islands counsel that, notwithstanding the above, a final and conclusive judgment obtained inU.S. federal or state courts under which a definite sum of money is payable as compensatory damages and not in respect of laws that are penal innature (i.e., not being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a government authority, or in respect ofa fine or penalty or multiple or punitive damages) will be recognized and enforced in the courts of the Cayman Islands at common law, without anyre-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the CaymanIslands, provided that:●the court that gave the judgment was competent to hear the action in accordance with private international law principles as appliedby the courts in the Cayman Islands and the parties subject to such judgment either submitted to such jurisdiction or were resident orcarrying on business within such jurisdiction and were duly served with process;●the judgment given by the foreign court was not in respect of penalties, taxes, fines or similar fiscal or revenue obligations;●the judgment was final and conclusive and for a liquidated sum;●the judgment was not obtained by fraud; and●the judgment was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or publicpolicy in the Cayman Islands.Table of Contents153Our PRC legal counsel, Commerce & Finance Law Offices, has advised us that the recognition and enforcement of foreign judgments areprovided for under the PRC Civil Procedures Law. The courts of mainland China may recognize and enforce foreign judgments in accordance withthe requirements of the PRC Civil Procedures Law and other applicable laws and regulations based either on treaties between mainland China andthe country where the judgment is made or on principles of reciprocity between jurisdictions. Mainland China does not have any treaties or otherform of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments.As such, the courts of mainland China will review and determine the applicability of the reciprocity principle on a case-by-case basis. In addition,according to the PRC Civil Procedures Law, the courts of mainland China will not enforce a foreign judgment against us or our directors andofficers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. Under the PRCCivil Procedures Law, foreign shareholders may originate actions based on PRC law against a company in mainland China for disputes if they canestablish sufficient nexus to mainland China for a court of mainland China to have jurisdiction and meet other procedural requirements. It will be,however, difficult for U.S. shareholders to originate actions against us in mainland China in accordance with PRC laws because we areincorporated under the laws of the Cayman Islands and it will be difficult for U.S. shareholders, by virtue only of holding the ADSs or ordinaryshares, to establish a connection with mainland China for a court of mainland China to have the jurisdiction required under the PRC CivilProcedures Law.Furthermore, the United States and Hong Kong do not have a bilateral treaty or multilateral convention in force on reciprocal recognitionand enforcement of judgments, and the statutory registration scheme for foreign judgments in Hong Kong does not extend to United Statesjudgments. As a result, any United States judgment is enforceable in Hong Kong pursuant to the common law regime in Hong Kong forrecognizing and enforcing foreign judgments, which provides that a foreign judgment is enforceable if the judgment (i) is final and conclusive onthe merits, (ii) has been rendered by a court of competent jurisdiction, and (iii) is for a fixed sum of money, unless the relevant proceeding in theUnited States offends against natural justice, the judgment was obtained by fraud or the enforcement of the judgment is contrary to public policy.F. Disclosure of A Registrant’s Action to Recover Erroneously Awarded CompensationNot applicable.ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA. Major ShareholdersPlease refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”B. Related Party TransactionsContractual Arrangements with our Variable Interest Entity and its ShareholdersSee “Item 4. Information on the Company—C. Organizational Structure.”Employment Agreements and Indemnification AgreementsSee “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements andIndemnification Agreements.”Share Incentive PlanSee “Item 6. Directors, Senior Management and Employees—B. Compensation—2018 Share Incentive Plan” and “Item 6. Directors,Senior Management and Employees—B. Compensation—2019 Share Incentive Plan.”Table of Contents154Transactions with 360 Group360 Group is our important business partner. It is considered our related party as it is controlled by Mr. Hongyi Zhou, the chairman of ourboard of directors and principal shareholder. We transacted with several entities of 360 Group during the fiscal years of 2021, 2022 and 2023. 360Group authorizes us to use its brand “360” and has historically provided advertising services to promote our products through its matrix of mobileapplications and services, such as 360 Browser and 360 Mobile Assistant. Advertising services are calculated and charged to us under differentformula depending on the form of advertisements, including cost per action (CPA) and cost per sale (CPS).In 2023, services provided by 360 Group entities were RMB236.3 million (US$33.3 million). As of December 31, 2023, RMB77.3million (US$10.9 million) was due to 360 Group entities, and RMB2.2 million (US$0.3 million) was due from them.In 2022, services provided by 360 Group entities were RMB196.4 million. As of December 31, 2022, RMB110.6 million was due to 360Group entities, and RMB1.8 million was due from them.In 2021, services provided by 360 Group entities were RMB168.4 million. As of December 31, 2021, RMB163.1 million was due to 360Group entities, and RMB1.8 million was due from them.In September 2020, one 360 Group entity transferred to us part of its equity interest in Hangzhou Qifei Huachuang Technology Co., Ltd.,a joint venture company it established with an independent third party. After the equity transfer, we and the 360 Group entity hold 25% and 26% ofthe equity interest in the joint venture entity, respectively. As part of the arrangement, we are responsible for assisting the joint venture entity inachieving certain performance targets. We accounted for the equity investment using alternative measurement. We provided capital contribution ofnil, RMB9.0 million and RMB20.3 million to Hangzhou Qifei for the years ended December 31, 2021, 2022 and 2023, respectively. In addition, wehave accrued RMB20.7 million (US$2.9 million) for the remaining unpaid share of registered capital. Considering the business forecast of theinvestee as of December 31, 2023, we fully impaired the investment. In February 2024, we sold the entirety of our equity interest in the jointventure company to an independent third party.In October 2020, we established a joint venture company in Shanghai, China through Shanghai Qiyu together with one of 360 Group entities andan independent third party, to develop and build the regional headquarters and the affiliated industrial park for 360 Group. The 360 Group entityand we hold 30% and 40% of the equity interests of the joint venture, respectively. In December 2021, we, through Shanghai Qiyu, entered into anequity transfer agreement with the 360 Group entity, pursuant to which Shanghai Qiyu acquired all the 30% equity interests owned by the 360Group entity in the joint venture entity. Following the completion of the transactions, we hold 70% of the equity interests in the joint venture entityand became its controlling shareholder. Pursuant to the joint venture agreement, the shareholders will contribute initial funding for acquisition ofland use rights and funds required for subsequent developments will be mainly financed by external financings with any remaining shortfall fundedby the shareholders ratably in proportion to their respective equity interest ownership. We accounted for the investment using equity method. As ofDecember 31, 2023, a total of RMB1.0 billion (US$0.1 billion) was provided by the shareholders to acquire land use rights, of which RMB0.3billion (US$42.3 million) was funded by non-controlling shareholder.Framework Collaboration AgreementWe have entered into a framework collaboration agreement with 360 Group in July 2018, pursuant to which:●we and 360 Group collaborate in depth on research and development of cloud computing and artificial intelligence, as well as bigdata analysis and application.●we and 360 Group collaborate on user traffic.●360 Group licenses certain trademarks to us. We and 360 Group entered into a Trademark Licensing Agreement in January 2023 togovern the license of certain trademarks by 360 Group to us, with a licensing term of one year from January 1, 2023 to December 31,2023. In addition, we and 360 Group entered into a Trademark Licensing Agreement in December 2023 to govern the license ofcertain trademarks by 360 Group to us, with a licensing term of three years from January 1, 2024 to December 31, 2026.●360 Group agrees not to conduct any credit underwriting or loan origination services that directly or indirectly compete with us.Table of Contents155The framework collaboration agreement has an initial term of five years with automatic extensions for successive one year unless 360 Group or wedecide to terminate the collaboration.Transactions with Shanghai QibutianxiaShanghai Qibutianxia and its subsidiaries are related parties to us, as Shanghai Qibutianxia is an affiliate of Mr. Hongyi Zhou, thechairman of our board of directors.We transacted with Shanghai Qibutianxia and its subsidiaries during the fiscal years 2021, 2022 and 2023, including receiving loans fromShanghai Qibutianxia, allocating expenses for certain corporate functions historically provided by Shanghai Qibutianxia, and providing borrowerreferral services to Beijing Qicaitianxia Technology Co., Ltd.In September 2023, we acquired from Shanghai Qibutianxia the equity interests in certain of its subsidiaries that provide wealthmanagement services and offline sales and promotion services with a total consideration of RMB81.8 million.The following table sets forth the transaction amounts and outstanding balances for the transactions between Shanghai Qibutianxia and usfor the years presented.For the year ended/As of December 31,202120222023 RMB RMB RMB US$ (in millions)For services provided by Shanghai Qibutianxia and its subsidiaries to us 354.7 355.8 119.7 16.9For services provided by us to Shanghai Qibutianxia and its subsidiaries 1.4 — 0.1 0.0Amounts due from Shanghai Qibutianxia and its subsidiaries to us 0.2 24.3 0.2 0.0Amounts due from us to Shanghai Qibutianxia and its subsidiaries 40.7 3.1 3.1 0.4Outstanding loan under joint back-to-back guarantee arrangement with ShanghaiQibutianxia 11,803.5 3,575.9 5,239.0 737.9Transactions with Jinshang Consumer Finance Co., Ltd.Jinshang Consumer Finance Co., Ltd., or Jinshang, was a related party of ours, as Jinshang was an affiliate of Mr. Hongyi Zhou, thechairman of our board of directors, for the fiscal years 2021 and 2022. In January 2023, Mr. Hongyi Zhou ceased to directly or indirectly haveequity interests in Jinshang and as a result, Jinshang subsequently ceased to be a related party of ours.We transacted with Jinshang during the fiscal years 2021 and 2022 as we provide loan facilitation services and post-facilitation services toJinshang and charge service fees. Historically, we directly collected payments from borrowers. Starting in 2018, we contractually changed ourpayment flow model by collecting service fee payments from Jinshang directly.The following table sets forth the transaction amounts and outstanding balances for the transactions between Jinshang and us for the yearspresented.For the year ended/As of December 31, 2021 2022 2023RMBRMBRMB US$ (in millions)For services provided by us to Jinshang 288.9 205.1 — —Amounts due from Jinshang to us 194.1(1) 162.8(2) — —Notes:(1)Among which the amounts due from Jinshang related to loan facilitation and post-facilitation services were RMB135.4 million, net ofallowance of RMB15.7 million.(2)Among which the amounts due from Jinshang related to loan facilitation and post-facilitation services were RMB121.6 million, net ofallowance of RMB22.7 million.Table of Contents156Transactions with Kincheng Bank of Tianjin Co., Ltd.Kincheng Bank is a related party of ours, as Kincheng Bank is an affiliate of Mr. Hongyi Zhou, the chairman of our board of directors.We transacted with Kincheng Bank during the fiscal years 2021, 2022 and 2023 as we provide credit-driven services and platform servicesto Kincheng Bank and charge service fees.The following table sets forth the transaction amounts and outstanding balances for the transactions between Kincheng Bank and us forthe years presented.For the year ended/As of December 31, 2021 2022 2023 RMBRMBRMB US$ (in millions)For services provided by us to Kincheng Bank 1,880.5 991.7 301.6 42.5Amounts due from Kincheng Bank to us 771.3(1) 239.3(2) 47.2(3) 6.6(3)Notes:(1)Among which the amounts of loan facilitation and post-facilitation services of RMB823.6 million, net of allowance of RMB106.3 million.(2)Among which the amounts of loan facilitation and post-facilitation services of RMB271.1 million, net of allowance of RMB81.7 million.(3)Among which the amounts of loan facilitation and post-facilitation services of RMB61.0 million (US$8.6 million), net of allowance ofRMB25.8 million (US$3.6 million).*We have held bank deposit with Kincheng Bank, which amounted to RMB3,020.2 million and RMB3,006.4 million (US$423.4 million) as ofDecember 31, 2022 and 2023, respectively. The related interest income was RMB98.9 million and RMB145.7 million (US$20.5 million) forthe year ended December 31, 2022 and 2023, respectively, and interest receivable as of December 31, 2022 and 2023 was RMB11.3 millionand RMB15.3 million (US$2.2 million), respectively.C. Interests of Experts and CounselNot applicable.ITEM 8 FINANCIAL INFORMATIONA.Consolidated Statements and Other Financial InformationWe have appended consolidated financial statements filed as part of this annual report.Legal ProceedingsWe have been and may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinarycourse of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost anddiversion of our resources, including our management’s time and attention.For risks and uncertainties relating to past and future lawsuits against us, please see “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Business and Industry—We and certain of our current and former directors or officers were, and in the future may be, named asdefendants in putative shareholder class action lawsuits that could have a material adverse impact on our business, financial condition, results ofoperation, cash flows and reputation.”Table of Contents157Dividend PolicyOn May 18, 2023, our board of directors approved a semi-annual cash dividend policy to replace the previously approved quarterly cashdividend policy in its entirety, with immediate effect. Under the policy, we intend to declare and distribute a recurring cash dividend semi-annuallyat an amount equivalent to approximately 20% to 30% of our net income after tax for the previous six-month period. As of the date of this annualreport, we have paid a dividend for the first half of 2023 and declared a dividend for the second half of 2024 under this policy. Despite having adividend policy in place, our determination whether to make dividend distributions and the exact amount of such distributions in any particular six-month period will be based upon our operations and financial conditions, and other factors, and subject to adjustment and determination by theboard of directors.We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cashrequirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to paydividends to us. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and otherdistributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability ofour PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.” See also “Item 3. KeyInformation—B. Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on dividend distribution.”For ADS holders, if we pay any dividends on our class A ordinary shares, we will pay those dividends which are payable in respect of theclass A ordinary shares underlying the ADSs to the depositary, as the registered holder of such class A ordinary shares, and the depositary then willpay such amounts to the ADS holders in proportion to class A ordinary shares underlying the ADSs held by such ADS holders, subject to the termsof the deposit agreement, including the fees and expenses payable thereunder. See “Item 12. Description of Securities other than Equity Securities—D. American Depositary Shares.” Cash dividends on our class A ordinary shares, if any, will be paid in U.S. dollars.B. Significant ChangesExcept as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our auditedcombined and consolidated financial statements included in this annual report.ITEM 9 THE OFFER AND LISTINGA. Offering and Listing DetailsSee “C. Markets.”B. Plan of DistributionNot applicable.C. MarketsOur ADSs, each representing two class A ordinary shares of ours, were listed on the Nasdaq Global Market from December 14, 2018 toNovember 18, 2020, and have been listed on the Nasdaq Global Select Market since November 19, 2020. Our ADSs trade under the symbol“QFIN.”Our class A ordinary shares have been listed on the Hong Kong Stock Exchange since November 29, 2022 under the stock code “3660.”D. Selling ShareholdersNot applicable.E. DilutionNot applicable.F. Expenses of the IssueNot applicable.Table of Contents158ITEM 10 ADDITIONAL INFORMATIONA. Share CapitalNot applicable.B. Memorandum and Articles of AssociationThe following are summaries of material provisions of our amended and restated memorandum and articles of association and of theCompanies Act, insofar as they relate to the material terms of our ordinary shares.Objects of our company. Under our memorandum and articles of association, the objects of our company are unrestricted and we have thefull power and authority to carry out any object not prohibited by the Cayman Islands law.Class A ordinary shares. Our authorized share capital is US$50,000 divided into 5,000,000,000 class A ordinary shares. All of ourissued and outstanding class A ordinary shares are fully paid and non-assessable. Certificates representing the class A ordinary shares are issued inregistered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their class A ordinary shares.Dividends. The holders of our class A ordinary shares are entitled to such dividends as may be declared by our board of directors,subject to our memorandum and articles of association. In addition, our shareholders may by an ordinary resolution declare a dividend, but nodividend may exceed the amount recommended by our directors. Our memorandum and articles of association provide that our directors may,before recommending or declaring any dividend, set aside out of the funds legally available for distribution such sums as they think proper as areserve or reserves which shall, in the absolute discretion of our directors, be applicable for meeting contingencies or for equalizing dividends orfor any other purpose to which those funds may be properly applied. Under the laws of the Cayman Islands, our company may pay a dividend outof either profits or share premium account, provided that in no circumstances may a dividend be paid if this would result in our company beingunable to pay its debts as they fall due in the ordinary course of business.Voting rights. Voting at any shareholders’ meeting is by show of hands unless a poll is (on or before the declaration of the result of theshow of hands) demanded. A poll may be demanded by the chairman of such meeting or any shareholder present at the meeting. In respect of allmatters subject to a shareholders’ vote, each class A ordinary share shall, on a poll, entitle the holder thereof to one vote.An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes cast bysuch shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy or, in the case of corporations, by their dulyauthorized representatives, at such meeting. A special resolution requires the affirmative vote of no less than three-fourths of the votes cast by suchshareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy or, in the case of corporations, by their dulyauthorized representatives, at such meeting. A special resolution will be required for important matters such as a change of name or makingchanges to our memorandum and articles of association. The company may, among other things, subdivide or consolidate its share capital byordinary resolution.General meetings of shareholders. Our memorandum and articles of association provide that we shall in each financial year hold ageneral meeting as its annual general meeting and shall specify the meeting as such in the notices calling it. The annual general meeting shall beheld at such time and place as may be determined by the Directors.Shareholders’ general meetings may be convened by the chairman of the board or a majority of our directors. Advance notice of at least21 days is required for the convening of our annual general shareholders’ meeting (if any) and advance notice of at least 14 days is required for theconvening of any other general meeting of our shareholders (including extraordinary general meetings). A quorum required for any generalmeeting of shareholders consists of one or more shareholders present in person or by proxy, representing not less than one-third of all votesattaching to all of our shares in issue and entitled to vote at such general meetings.Table of Contents159The Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholderswith any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Ourmemorandum and articles of association provide that upon the requisition of shareholders representing in aggregate not less than 10% of all votes,on a one vote per share basis, attaching to all issued and outstanding shares of our company entitled to vote at general meetings as at the date of thedeposit of the requisition, our board will convene an extraordinary general meeting and put the resolutions so requisitioned to a vote at suchmeeting. However, our memorandum and articles of association do not provide our shareholders with any right to put any proposals before annualgeneral meetings or extraordinary general meetings not called by such shareholders.Transfer of ordinary shares. Subject to the restrictions set out in our memorandum and articles of association as set out below, any of ourshareholders may transfer all or any of its class A ordinary shares by an instrument of transfer in the usual or common form or any other formapproved by our board of directors.Our board of directors may, in its absolute discretion, decline to register any transfer of any class A ordinary share which is not fully paidup or on which we have a lien. Our board of directors may also decline to register any transfer of any class A ordinary share unless:●the instrument of transfer is lodged with us, accompanied by the certificate for the class A ordinary shares to which it relates and suchother evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;●the instrument of transfer is in respect of only one class of class A ordinary shares;●the instrument of transfer is properly stamped, if required;●in the case of a transfer to joint holders, the number of joint holders to whom the class A ordinary share is to be transferred does notexceed four; and●a fee of such maximum sum as the Nasdaq Stock Market may determine to be payable or such lesser sum as our directors may fromtime to time require is paid to us in respect thereof.If our directors refuse to register a transfer they shall, within three calendar months after the date on which the instrument of transfer waslodged, send to each of the transferor and the transferee notice of such refusal.The registration of transfers may, on ten calendar days’ notice being given by advertisement in such one or more newspapers, byelectronic means or by any other means in accordance with the requirements of the Nasdaq Stock Market, be suspended and the register closed atsuch times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfersshall not be suspended nor the register closed for more than 30 calendar days in any calendar year.Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more thansufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholdersin proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares inrespect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distributionamongst our shareholders are insufficient to repay the whole of the share capital, the assets will be distributed so that, as nearly as may be, thelosses are borne by our shareholders in proportion to the par value of the shares held by them. Calls on shares and forfeiture of shares. Our boardof directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders atleast 14 calendar days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid are subject toforfeiture.Redemption, repurchase and surrender of shares. We may issue shares on terms that such shares are subject to redemption, at our optionor at the option of the holders of these shares, on such terms and in such manner as may be determined by our board of directors. Our companymay also repurchase any of our shares (including redeemable shares) on such terms and in such manner as have been approved by our board ofdirectors or by an ordinary resolution of our shareholders. Under the Companies Act, the redemption or repurchase of any share may be paid out ofour company’s profits or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital(including share premium account and capital redemption reserve) if our company can, immediately following such payment, pay its debts as theyfall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it isfully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding or (c) if the company has commencedliquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.Table of Contents160Variations of rights of shares. If at any time, our share capital is divided into different classes of shares, the rights attached to any classof shares (subject to any rights or restrictions for the time being attached to any class) may only be materially adversely varied with the consent inwriting of the holders of not less than three-fourths in the nominal value of the issued shares of that class or with the sanction of a special resolutionpassed at a separate meeting of the holders of the shares of the class. The rights conferred upon the holders of the shares of any class issued shallnot, subject to any rights or restrictions for the time being attached to the shares of that class, be deemed to be materially adversely varied by, interalia, the redemption or purchase of any shares of any class by our company, the creation or issue of further shares ranking pari passu with orsubsequent to them.Issuance of additional shares. Our memorandum and articles of association authorizes our board of directors to issue additional sharesfrom time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.Subject to the Hong Kong Listing Rules and other applicable laws or regulations, on the conditions that, for as long as the prevailing HongKong Listing Rules restrict us from having a weighted voting rights structure, (i) no new class of shares with voting rights superior to those of classA ordinary shares shall be created; and (ii) any variations in the relative rights as between the different classes of shares shall not result in thecreation of a new class of shares with voting rights superior to those of class A ordinary shares, our memorandum and articles of association alsoauthorizes our board of directors to issue from time to time, out of the authorized share capital of the company (other than the authorized butunissued class A ordinary shares), one or more series of preferred shares in their absolute discretion and without approval of the shareholders,provided, however, before any preferred shares of any such series are issued, the directors shall by resolution of directors determine, with respect toany series of preferred shares, the terms and rights of that series, including, but not limited to:●the designation of the series;●the number of shares of the series;●the dividend rights, dividend rates, conversion rights, and voting rights; and●the rights and terms of redemption and liquidation preferences.Our board of directors may issue preferred shares without action by our shareholders to the extent authorized but unissued. Issuance ofthese shares may dilute the voting power of holders of class A ordinary shares.Inspection of books and records. Holders of our class A ordinary shares will have no general right under Cayman Islands law to inspect orobtain copies of our list of shareholders or our corporate records (other than our memorandum and articles of association, our register of mortgagesand charges and special resolutions of our shareholders). However, we will provide our shareholders with annual audited financial statements.Our memorandum and articles of association also provides that any register of members held in Hong Kong shall during normal businesshours (subject to such reasonable restrictions as the Board may impose) be open for inspection by a shareholder without charge, provided that wemay be permitted to close the register of members in terms equivalent to section 632 of the Companies Ordinance of Hong Kong.Anti-takeover provisions. Some provisions of our memorandum and articles of association may discourage, delay or prevent a change ofcontrol of our company or management that shareholders may consider favorable, including provisions that, subject to the Hong Kong ListingRules and other applicable laws or regulations, on the conditions that, for as long as the prevailing Hong Kong Listing Rules restrict us from havinga weighted voting rights structure, (i) no new class of shares with voting rights superior to those of class A ordinary shares shall be created; and (ii)any variations in the relative rights as between the different classes of shares shall not result in the creation of a new class of shares with votingrights superior to those of class A ordinary shares:●authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences,privileges and restrictions of such preferred shares without any further vote or action by our shareholders; and●limit the ability of shareholders to requisition and convene general meetings of shareholders.However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our memorandum andarticles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.Table of Contents161Exempted company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishesbetween ordinary resident companies and exempted companies.Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to beregistered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that anexempted company:●does not have to file an annual return of its shareholders with the Registrar of Companies;●is not required to open its register of members for inspection;●does not have to hold an annual general meeting;●may issue shares with no par value;●may obtain an undertaking against the imposition of any future taxation (such undertakings are given for up to 30 years);●may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;●may register as a limited duration company; and●may register as a segregated portfolio company.“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of thecompany (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improperpurpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).Differences in Corporate LawThe Companies Act is derived, to a large extent, from the older Companies Acts of England but does not follow recent English statutoryenactments and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition,the Companies Act differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of certain significantdifferences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United Statesand their shareholders.Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands companies andbetween Cayman Islands companies and non-Cayman Islands companies. For these purposes, (i) “merger” means the merging of two or moreconstituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (ii) a“consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking,property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of eachconstituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of theshareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles ofassociation. The written plan of merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together with adeclaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and anundertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company andthat notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court approval is not required for a merger orconsolidation which is effected in compliance with these statutory procedures.A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution ofshareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unlessthat member agrees otherwise. For this purpose a company is a “parent” of a subsidiary if it holds issued shares that together represent at leastninety percent (90%) of the votes at a general meeting of the subsidiary.The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waivedby a court in the Cayman Islands.Table of Contents162Save in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation isentitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upondissenting to the merger or consolidation, provided that the dissenting shareholder complies strictly with the procedures set out in the CompaniesAct. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwisebe entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions thatfacilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by (a)75% in value of the shareholders or class of shareholders, as the case may be, or (b) a majority in number representing 75% in value of the creditorsor each class of creditors, as the case may be, with whom the arrangement is to be made, that are, in each case, present and voting either in personor by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must besanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that thetransaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:●the statutory provisions as to the required majority vote have been met;●the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide withoutcoercion of the minority to promote interests adverse to those of the class;●the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of hisinterest; and●the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentientminority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected within four months,the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares totransfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikelyto succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.If an arrangement and reconstruction by way of scheme of arrangement is thus approved and sanctioned, or if a tender offer is made andaccepted, in accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights,which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash forthe judicially determined value of the shares.Shareholders’ Suits. In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company, and as a general rulea derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be ofpersuasive authority in the Cayman Islands, the Cayman Islands court can be expected to follow and apply the common law principles (namely therule in Foss v. Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against orderivative actions in the name of our company to challenge actions where:●a company acts or proposes to act illegally or ultra vires;●the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that hasnot been obtained; and●those who control the company are perpetrating a “fraud on the minority.”Table of Contents163Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which acompany’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any suchprovision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or theconsequences of committing a crime. Our currently effective memorandum and articles of association provide that we shall indemnify and secureharmless our officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained bysuch directors or officer, other than by reason of such person’s own dishonesty, willful default or fraud, in or about the conduct of our company’sbusiness or affairs or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality ofthe foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) anycivil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of conduct isgenerally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons withadditional indemnification beyond that provided in our currently effective memorandum and articles of association.Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controllingus under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressedin the Securities Act and is therefore unenforceable.Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporationand its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in goodfaith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himselfof, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that adirector acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personalgain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders takeprecedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general,actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in thebest interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should suchevidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that thetransaction was of fair value to the corporation.As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the companyand therefore it is considered that he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a dutynot to make a profit based on his position as director (unless the company permits him to do so), a duty not to put himself in a position where theinterests of the company conflict with his personal interest or his duty to a third-party, and a duty to exercise powers for the purpose for which suchpowers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously consideredthat a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of hisknowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the requiredskill and care and these authorities are likely to be followed in the Cayman Islands.Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right ofshareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our currently effectivememorandum and articles of association provide that our shareholders may approve corporate matters by way of a unanimous written resolutionsigned by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annualmeeting of shareholders, provided that it complies with the notice provisions in the governing documents. A special meeting may be called by theboard of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling specialmeetings.Table of Contents164The Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholderswith any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Ourcurrently effective memorandum and articles of association allow any one or more of our shareholders who together hold shares which carry inaggregate not less than 10% of all votes, on a one vote per share basis, attaching to all issued and outstanding shares of our company entitled tovote at general meetings to requisition an extraordinary general meeting of our shareholders, in which case our board of directors is obliged toconvene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting, and such shareholders may also addresolutions to the agenda of any of our general meeting. Except for the aforementioned, our currently effective memorandum and articles ofassociation do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings,save only in the circumstances that after the publication of the notice of a general meeting by our company, if a shareholder wishes to propose aperson for election as a director of our company at the general meeting, such a shareholder may deposit the Notice with the company secretary. Theperiod for lodgment of the Notice will commence no earlier than the day after the dispatch of the notice of the general meeting and end no laterthan ten (10) business days prior to the date of such meeting. As a Cayman Islands exempted company, we are not obliged by the Companies Act tocall shareholders’ annual general meetings. Our currently effective memorandum and articles of association provide that we shall in each financialyear hold a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it. The annual general meetingshall be held at such time and place as may be determined by the directors.Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless thecorporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minorityshareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a singledirector, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulativevoting under the laws of the Cayman Islands but our currently effective memorandum and articles of association do not provide for cumulativevoting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removedonly for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.Under our currently effective memorandum and articles of association, directors may be removed with or without cause, by an ordinary resolutionof our shareholders.Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable toDelaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificateof incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the datethat such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15%or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to makea two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to thedate on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or thetransaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation tonegotiate the terms of any acquisition transaction with the target’s board of directors.Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delawarebusiness combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significantshareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect ofconstituting a fraud on the minority shareholders.Restructuring. A company may present a petition to the Grand Court of the Cayman Islands for the appointment of a restructuring officeron the grounds that the company:●is or is likely to become unable to pay its debts; and●intends to present a compromise or arrangement to its creditors (or classes thereof) either pursuant to the Companies Act, the law of aforeign country or by way of a consensual restructuring.Table of Contents165The Grand Court may, among other things, make an order appointing a restructuring officer upon hearing of such petition, with suchpowers and to carry out such functions as the court may order. At any time (i) after the presentation of a petition for the appointment of arestructuring officer but before an order for the appointment of a restructuring officer has been made, and (ii) when an order for the appointment ofa restructuring officer is made, until such order has been discharged, no suit, action or other proceedings (other than criminal proceedings) shall beproceeded with or commenced against the company, no resolution to wind up the company shall be passed, and no winding up petition may bepresented against the company, except with the leave of the court. However, notwithstanding the presentation of a petition for the appointment of arestructuring officer or the appointment of a restructuring officer, a creditor who has security over the whole or part of the assets of the company isentitled to enforce the security without the leave of the court and without reference to the restructuring officer appointed.Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve,dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by theboard of directors may it be approved by a simple majority of the corporation’s outstanding shares.Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connectionwith dissolutions initiated by the board.Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolutionof its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority toorder winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares withthe approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our currentlyeffective memorandum and articles of association, whenever the capital of our company is divided into different classes, the rights attached to anysuch class may, subject to any rights or restrictions for the time being attached to any class, only be materially adversely varied with the consent inwriting of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolutionpassed at a separate meeting of the holders of the shares of that class.Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may beamended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Underthe Companies Act and our currently effective memorandum and articles of association, our memorandum and articles of association may only beamended by a special resolution of our shareholders.Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our currently effective memorandum and articles ofassociation on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisionsin our currently effective memorandum and articles of association that require our company to disclose shareholder ownership above any particularownership threshold.C. Material ContractsWe have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4.Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions,” in this “Item 10.Additional Information—C. Material Contracts” or elsewhere in this annual report on Form 20-F.D. Exchange ControlsSee “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Exchange.”E. TaxationThe following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs orclass A ordinary shares is based upon laws and interpretations thereof in effect as of the date of this annual report, all of which are subject tochange. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or class A ordinary shares, such asthe tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republicof China and the United States.Table of Contents166Cayman Islands TaxationThe Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there isno taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to holders of our ADSs or ordinary shareslevied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution,brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to anypayments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.Payments of dividends and capital in respect of our class A ordinary shares will not be subject to taxation in the Cayman Islands and nowithholding will be required on the payment of a dividend or capital to any holder of our class A ordinary shares, nor will gains derived from thedisposal of our class A ordinary shares be subject to Cayman Islands income or corporation tax.Mainland China TaxationUnder the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de factomanagement body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on itsglobal income. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control overand overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administrationof Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto managementbody” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprisescontrolled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circularmay reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determiningthe tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or aPRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of thefollowing conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to theenterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) theenterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in thePRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.We believe that Qifu Technology, Inc. is not a PRC resident enterprise for PRC tax purposes. Qifu Technology, Inc. is not controlled by aPRC enterprise or PRC enterprise group and we do not believe that Qifu Technology, Inc. meets all of the conditions above. Qifu Technology, Inc.is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assetsare located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside thePRC. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident statusof an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “defacto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us.If the PRC tax authorities determine that Qifu Technology, Inc. is a PRC resident enterprise for enterprise income tax purposes, we may berequired to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders ofour ADSs. In addition, non-PRC enterprise shareholders (including our ADS holders) may be subject to a 10% enterprise income tax on gainsrealized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. Our non-PRCindividual shareholders (including our ADS holders) may be subject to a 20% individual income tax on dividends or gains realized on the sale orother disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC unless a reduced rate is available under anapplicable tax treaty. It is unclear whether non-PRC shareholders of Qifu Technology, Inc. would be able to claim the benefits of any tax treatiesbetween their country of tax residence and the PRC in the event that Qifu Technology, Inc. is treated as a PRC resident enterprise.Table of Contents167Provided that our Cayman Islands holding company, Qifu Technology, Inc., is not deemed to be a PRC resident enterprise, holders of ourADSs and ordinary shares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains realized fromthe sale or other disposition of our shares or ADSs. However, under the State Bulletin on Issues of Enterprise Income Tax on Indirect Transfers ofAssets by Non-PRC Resident Enterprises issued by the State Taxation Administration, or the STA Bulletin 7, where a non-resident enterpriseconducts an “indirect transfer” by transferring taxable assets, including, in particular, equity interests in a PRC resident enterprise, indirectly bydisposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee or the PRCentity which directly owned such taxable assets may report to the tax authority such indirect transfer. Using a “substance over form” principle, thePRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was establishedfor the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterpriseincome tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at arate of 10% for the transfer of equity interests in a PRC resident enterprise. We and our non-PRC resident investors may be at risk of being requiredto file a return and being taxed under the STA Bulletin 7, and we may be required to expend valuable resources to comply with the STA Bulletin 7,or to establish that we should not be taxed under this circular. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business inChina—We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.”United States Federal Income Tax ConsiderationsThe following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition ofour ADSs or ordinary shares by a U.S. Holder (as defined below) that holds our ADSs or ordinary shares as “capital assets” (generally, propertyheld for investment) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing U.S. federaltax law, which is subject to differing interpretations or change, possibly with retroactive effect. There can be no assurance that the Internal RevenueService, or the IRS, or a court will not take a contrary position. This discussion, moreover, does not address the U.S. federal estate, gift, Medicare,and minimum tax considerations, any withholding or information reporting requirements, or any state, local and non-U.S. tax considerations,relating to the ownership or disposition of our ADSs or ordinary shares.The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in lightof their individual circumstances or to persons in special tax situations such as:●banks and other financial institutions;●insurance companies;●pension plans;●cooperatives;●regulated investment companies;●real estate investment trusts;●broker-dealers;●traders that elect to use a mark-to-market method of accounting;●certain former U.S. citizens or long-term residents;●tax-exempt entities (including private foundations);●persons who acquire their ADSs or ordinary shares pursuant to any employee share option or otherwise as compensation;●investors that will hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integratedtransaction for U.S. federal income tax purposes;●investors that have a functional currency other than the U.S. dollar;●persons that actually or constructively own ADSs or ordinary shares representing 10% or more of our stock (by vote or value); orTable of Contents168●partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding ADSs or ordinaryshares through such entities;all of whom may be subject to tax rules that differ significantly from those discussed below.Each U.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal taxation to its particular circumstances, andthe state, local, non-U.S. and other tax considerations of the ownership and disposition of our ADSs or ordinary shares.GeneralFor purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or ordinary shares that is, for U.S. federal incometax purposes:●an individual who is a citizen or resident of the United States;●a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under the laws ofthe United States or any state thereof or the District of Columbia;●an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or●a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. personswho have the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as aU.S. person under the Code.If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ADSs orordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of thepartnership. Partnerships holding our ADSs or ordinary shares and their partners are urged to consult their tax advisors regarding an investment inour ADSs or ordinary shares.For U.S. federal income tax purposes, a U.S. Holder of ADSs will generally be treated as the beneficial owner of the underlying sharesrepresented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated in this manner. Accordingly,deposits or withdrawals of ordinary shares for ADSs will generally not be subject to U.S. federal income tax.Passive foreign investment company considerationsA non-U.S. corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, ifeither (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets(generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production ofpassive income (the “asset test”). For this purpose, cash and assets readily convertible into cash are categorized as passive assets and the company’sgoodwill and other unbooked intangibles not reflected on its balance sheet are taken into account. Passive income generally includes, among otherthings, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share ofthe assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value)of the stock.Although the law in this regard is unclear, we treat our consolidated VIEs as being owned by us for U.S. federal income tax purposesbecause we control their management decisions and are entitled to substantially all of the economic benefits associated with them, and, as a result,we consolidate their results of operations in our consolidated U.S. GAAP financial statements.Based upon the nature and composition of our assets (in particular, the retention of substantial amounts of cash and other passive assets),and the market price of our ADSs, we believe that we were a PFIC for U.S. federal income tax purposes for the taxable year ended December 31,2023, and we will likely be a PFIC for our current taxable year unless the market price of our ADSs increases and/or we invest a substantial amountof the cash and other passive assets we hold in assets that produce or are held for the production of active income.Table of Contents169If we are a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we generally will continue to be treated as aPFIC for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares, unless we were to cease to be a PFIC and the U.S.Holder makes a “deemed sale” election with respect to the ADSs or ordinary shares. However, if we cease to be a PFIC, provided that a U.S.Holder has not made a mark-to-market election, as described below, such U.S. Holder may avoid some of the adverse effects of the PFIC regime bymaking a “deemed sale” election with respect to the ADSs or ordinary shares, as applicable. If such election is made, such U.S. Holder will bedeemed to have sold our ADSs or ordinary shares such U.S. Holder holds at their fair market value and any gain from such deemed sale would besubject to the rules described below under “Passive foreign investment company rules.” After the deemed sale election, so long as we do notbecome a PFIC in a subsequent taxable year, the ADSs or ordinary shares with respect to which such election was made will not be treated asshares in a PFIC and such U.S. Holder will not be subject to the rules described below with respect to any “excess distribution” such U.S. Holderreceives from us or any gain from an actual sale or other disposition of the ADSs or ordinary shares. The rules dealing with deemed sale electionsare very complex. Each U.S. Holder should consult its tax advisors regarding the possibility and considerations of making a deemed sale election.DividendsSubject to the discussion below under “Passive foreign investment company rules,” the gross amount of any distributions paid on ourADSs or ordinary shares (including the amount of any PRC tax withheld) out of our current or accumulated earnings and profits, as determinedunder U.S. federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actuallyor constructively received by the U.S. Holder, in the case of ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend todetermine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a“dividend” for U.S. federal income tax purposes. Dividends received on our ADSs or ordinary shares will not be eligible for the dividends receiveddeduction allowed to corporations in respect of dividends received from U.S. corporations.Individuals and other non-corporate U.S. Holders will be subject to tax on any such dividends at the lower capital gain tax rate applicableto “qualified dividend income,” provided that certain conditions are satisfied, including that (1) our ADSs or ordinary shares on which thedividends are paid are readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a PRCresident enterprise under the PRC tax law, we are eligible for the benefit of the U.S.-PRC income tax treaty (the “Treaty”), (2) we are neither aPFIC nor treated as such with respect to a U.S. Holder (as discussed below) for the taxable year in which the dividend is paid and the precedingtaxable year, and (3) certain holding period requirements are met. For this purpose, ADSs listed on the Nasdaq Stock Market will generally beconsidered to be readily tradable on an established securities market in the United States. Since we do not expect that our ordinary shares will belisted on an established securities market in the United States, we do not believe that dividends that we pay on our ordinary shares that are notrepresented by ADSs will meet the conditions required for the reduced tax rate. There can be no assurance that our ADSs will continue to beconsidered readily tradeable on an established securities market in later years. U.S. Holders are urged to consult their tax advisors regarding theavailability of the lower rate for dividends paid with respect to our ADSs or ordinary shares.In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “—People’s Republic ofChina Taxation”), we may be eligible for the benefits of the Treaty. If we are eligible for such benefits, dividends we pay on our ordinary shares,regardless of whether such shares are represented by the ADSs, and regardless of whether our ADSs are readily tradable on an establishedsecurities market in the United States, would be eligible for the reduced rates of taxation described in the preceding paragraph.For U.S. foreign tax credit purposes, dividends paid on our ADSs or ordinary shares generally will be treated as income from foreignsources and generally will constitute passive category income. In the event that we are deemed to be a PRC resident enterprise under the PRCEnterprise Income Tax Law, a U.S. Holder may be subject to PRC withholding taxes on dividends paid on our ADSs or ordinary shares (see “—People’s Republic of China Taxation”). Depending on the U.S. Holder’s particular facts and circumstances and subject to a number of complexconditions and limitations, PRC withholding taxes on dividends that are non-refundable under the Treaty may be treated as foreign taxes eligiblefor credit against a U.S. Holder’s U.S. federal income tax liability. A U.S. Holder who does not elect to claim a foreign tax credit for foreign taxwithheld may instead claim a deduction for U.S. federal income tax purposes, in respect of such withholding, but only for a year in which suchholder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and U.S. Holders are urged toconsult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.Table of Contents170As discussed above, we believe that we were a PFIC for the taxable year ended December 31, 2023, and we will likely be classified as aPFIC for our current taxable year. U.S. Holders are urged to consult their tax advisors regarding the availability of the reduced rate of taxation ondividends with respect to our ADSs or ordinary shares under their particular circumstances.Sale or other dispositionSubject to the discussion below under “Passive foreign investment company rules,” a U.S. Holder will generally recognize gain or lossupon the sale or other disposition of ADSs or ordinary shares in an amount equal to the difference between the amount realized upon thedisposition and the holder’s adjusted tax basis in such ADSs or ordinary shares. The gain or loss will generally be capital gain or loss. Any capitalgain or loss will be long-term if the ADSs or ordinary shares have been held for more than one year and will generally be eligible for reduced taxrates. The deductibility of a capital loss may be subject to limitations. Any such gain or loss that the U.S. Holder recognizes will generally betreated as U.S. source income or loss for foreign tax credit limitation purposes, which will generally limit the availability of foreign tax credits.As described in “—People’s Republic of China Taxation,” if we are deemed to be a PRC resident enterprise under the PRC EnterpriseIncome Tax Law, gains from the disposition of the ADSs or ordinary shares may be subject to PRC income tax and will generally be U.S. source,which may limit the ability to receive a foreign tax credit. If a U.S. Holder is eligible for the benefits of the Treaty, such holder may be able to electto treat such gain as PRC source income under the Treaty. Pursuant to Treasury Regulations, however, if a U.S. Holder is not eligible for thebenefits of the Treaty or does not elect to apply the Treaty, then such holder may not be able to claim a foreign tax credit arising from any PRC taximposed on the disposition of the ADSs or ordinary shares. The rules regarding foreign tax credits and deduction of foreign taxes are complex. U.S.Holders should consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or ordinaryshares, including the availability of a foreign tax credit or deduction in light of their particular circumstances, their eligibility for benefits under theTreaty, and the potential impact of the U.S. Treasury Regulations.As discussed above, we believe that we were a PFIC for the taxable year ended December 31, 2023, and we will likely be classified as aPFIC for our current taxable year. U.S. Holders are urged to consult their tax advisors regarding the tax considerations of the sale or otherdisposition of our ADSs or ordinary shares under their particular circumstances.Passive foreign investment company rulesAs discussed above, we believe that we were a PFIC for the taxable year ended December 31, 2023, and we will likely be classified as aPFIC for our current taxable year. If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinaryshares, and unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special taxrules on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S.Holder that is greater than 125 percent of the average annual distributions paid to the U.S. Holder in the three preceding taxable years or, if shorter,the U.S. Holder’s holding period for the ADSs or ordinary shares), and (ii) any gain recognized on the sale or other disposition (including, undercertain circumstances, a pledge) of ADSs or ordinary shares. Under the PFIC rules:●the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares;●the amount allocated to the taxable year of the distribution or gain and any taxable years in the U.S. Holder’s holding period prior tothe first taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income; and●the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect forindividuals or corporations, as appropriate, for that year, increased by an additional tax equal to the interest on the resulting taxdeemed deferred with respect to each such taxable year.If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares and any of our subsidiaries, the VIEsor any of the subsidiaries of the VIEs is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the sharesof the lower-tier PFIC for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors regarding the applicationof the PFIC rules to any of our subsidiaries, the VIEs or any of the subsidiaries of the VIEs.Table of Contents171As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-marketelection with respect to such stock. If a U.S. Holder makes this election with respect to our ADSs or ordinary shares, the holder will generally (i)include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of the ADSs or ordinary shares heldat the end of the taxable year over the adjusted tax basis of such ADSs or ordinary shares and (ii) deduct as an ordinary loss the excess, if any, ofthe adjusted tax basis of the ADSs or ordinary shares over the fair market value of such ADSs or ordinary shares held at the end of the taxable year,but such deduction will only be allowed to the extent of the net amount previously included in income as a result of the mark-to-market election.The U.S. Holder’s adjusted tax basis in the ADSs or ordinary shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of our ADSs or ordinary shares and we cease to be classified as aPFIC, the holder will not be required to take into account the gain or loss described above during any period that we are not classified as a PFIC. Ifa U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our ADSs or ordinaryshares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only betreated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange orother market, as defined in applicable United States Treasury Regulations. Our ADSs are listed on the Nasdaq Stock Market, which is a qualifiedexchange. We expect the Hong Kong Stock Exchange, on which our ordinary shares are listed, to be a qualified exchange but there can be noassurance in this regard because the IRS has not identified specific non-U.S. exchanges as qualified for these purposes. We anticipate that ourADSs and ordinary shares should qualify as being regularly traded, but no assurances may be given in this regard.Because a mark-to-market election cannot technically be made for any lower-tier PFICs that we may own, a U.S. Holder may continue tobe subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest ina PFIC for U.S. federal income tax purposes.We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, wouldresult in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.If a U.S. Holder owns our ADSs or ordinary shares during any taxable year that we are a PFIC, the holder must generally file an annualIRS Form 8621. You should consult your tax advisor regarding the reporting requirements that may apply and the U.S. federal income taxconsequences of owning and disposing of our ADSs or ordinary shares if we are or become a PFIC, including the possibility of making a mark-to-market election and the unavailability of the election to treat us as a qualified electing fund.F. Dividends and Paying AgentsNot applicable.G. Statement by ExpertsNot applicable.H. Documents on DisplayWe are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we arerequired to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four monthsafter the close of each fiscal year. All information we file with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov. As aforeign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxystatements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained inSection 16 of the Exchange Act.We will furnish Bank of New York Mellon, the depositary of our ADSs, with our annual reports, which will include a review of operationsand annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and otherreports and communications that are made generally available to our shareholders. The depositary will make such notices, reports andcommunications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in anynotice of a shareholders’ meeting received by the depositary from us.Table of Contents172I. Subsidiary InformationNot applicable.J. Annual Report to Security HoldersNot applicable.ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKMarket RisksForeign exchange riskSubstantially all of our revenues and expenses are denominated in Renminbi. When considered appropriate, we enter into hedgingactivities with regard to exchange rate risk, which have not had any material impact on our financial condition. Although our exposure to foreignexchange risks should be limited in general, the value of your investment in the ADSs will be affected by the exchange rate between U.S. dollarand Renminbi because the value of our business is effectively denominated in Renminbi, while the ADSs will be traded in U.S. dollars.The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. Renminbihas fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S.government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of Renminbi against the U.S. dollarwould have an adverse effect on the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S.dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S.dollar against Renminbi would have a negative effect on the U.S. dollar amounts available to us.As of December 31, 2023, we had U.S. dollar-denominated cash, cash equivalents and short-term investments of US$2.9 million.Assuming we had converted US$2.9 million into Renminbi at the exchange rate of RMB7.0999 for US$1.00 as of December 29, 2023, theRenminbi cash balance of such U.S. dollar-denominated assets would have been RMB20.6 million. If Renminbi had depreciated by 10% againstthe U.S. dollar, the Renminbi cash balance of such U.S. dollar-denominated assets would have been RMB22.7 million instead. In addition, we didnot have U.S. dollar-denominated short-term loans as of December 31, 2023.Interest rate riskWe have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financialinstruments to manage our interest risk exposure. The fluctuation of interest rates may affect the demand for loan services on our platform. Forexample, a decrease in interest rates may cause prospective borrowers to seek lower-priced loans from other channels. A high interest rateenvironment may lead to an increase in competition for investment options and dampen our financial institution partners’ desire to fund loans onour platform. We do not expect that the fluctuation of interest rates will have a material impact on our financial condition. However, we cannotprovide assurance that we will not be exposed to material risks due to changes in market interest rate in the future. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Fluctuations in interest rates could negatively affect our loan facilitation volume.”We may invest the net proceeds we receive from our securities offerings in interest-earning instruments. Investments in both fixed rate andfloating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adverselyimpacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA. Debt SecuritiesNot applicable.Table of Contents173B. Warrants and RightsNot applicable.C. Other SecuritiesNot applicable.D. American Depositary SharesCharges Our ADS Holders May Have to PayFees and ExpensesPersons depositing, withdrawing or surrendering shares or ADS holders must pay: For:US$5.00 (or less) per 100 ADSs (or portion thereof)Issuance of ADSs, including issuances resulting from a distribution ofshares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if thedeposit agreement terminatesUS$.05 (or less) per ADS (or portion thereof)Any cash distribution to ADS holdersA fee equivalent to the fee that would be payable if securitiesdistributed to ADS holders had been shares and the shares hadbeen deposited for issuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holdersUS$.05 (or less) per ADS (or portion thereof) per calendar yearDepositary servicesRegistration or transfer feesTransfer and registration of shares on our share register to or from thename of the depositary or its agent when ADS holders deposit or withdrawsharesExpenses of the depositaryCable and facsimile transmission fees (when expressly provided in thedeposit agreement)Converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or thecustodian have to pay on any ADSs or shares underlying ADSs,such as stock transfer taxes, stamp duty or withholding taxesAs necessaryAny other charges incurred by the depositary or its agents forservicing the deposited securitiesAs necessaryThe depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for thepurpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting thosefees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee fordepositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts ofparticipants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion ofsecurities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provideservices until its fees for those services are paid.Table of Contents174From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishmentand maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the feescollected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currencydealers or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and notas agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it willretain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currencyconversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for itsown account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion under the depositagreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be themost favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The methodology used to determine exchangerates used in currency conversions is available upon request.Payment of TaxesADS holders will be responsible for any taxes or other governmental charges payable on the ADSs or on the deposited securitiesrepresented by any of the ADSs. The depositary may refuse to register any transfer of the ADSs or allow ADS holders to withdraw the depositedsecurities represented by the ADSs until those taxes or other charges are paid. It may apply payments owed to ADS holders or sell depositedsecurities represented by the American depositary shares to pay any taxes owed and ADS holders will remain liable for any deficiency. If thedepositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, orsend to ADS holders any property, remaining after it has paid the taxes.Fees and Other Payments Made by the Depositary to UsOur depositary anticipates to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADRprogram upon such terms and conditions as we and the depositary may agree from time to time. The depositary may make available to us a setamount or a portion of the issuance fees, depositary servicing fees and cash dividend fees charged in respect of the ADR program or otherwiseupon such terms and conditions as we and the depositary may agree from time to time. In 2023, we received approximately US$4.6 millionreimbursement from the depositary.Dealings and Settlement of Class A Ordinary Shares in Hong KongOur class A ordinary shares will trade on the Hong Kong Stock Exchange in board lots of 50 ordinary shares. Dealings in our class Aordinary shares on the Hong Kong Stock Exchange will be conducted in Hong Kong dollars.The transaction costs of dealings in our class A ordinary shares on the Hong Kong Stock Exchange include:●Hong Kong Stock Exchange trading fee of 0.00565% of the consideration of the transaction, charged to each of the buyer and seller;●SFC transaction levy of 0.0027% of the consideration of the transaction, charged to each of the buyer and seller;●AFRC transaction levy of 0.00015% of the consideration of the transaction, charged to each of the buyer and seller;●transfer deed stamp duty of HK$5.00 per transfer deed (if applicable), payable by the seller;●ad valorem stamp duty at a total rate of 0.2% of the value of the transaction, with 0.1% payable by each of the buyer and the seller;●stock settlement fee, which is currently 0.002% of the gross transaction value, subject to a minimum fee of HK$2.00 and a maximumfee of HK$100.00 per side per trade;●brokerage commission, which is freely negotiable with the broker; andTable of Contents175●the Hong Kong share registrar will charge between HK$2.50 to HK$20, depending on the speed of service (or such higher fee as mayfrom time to time be permitted under the Hong Kong Listing Rules), for each transfer of ordinary shares from one registered ownerto another, each share certificate canceled or issued by it and any applicable fee as stated in the share transfer forms used in HongKong.Investors must settle their trades executed on the Hong Kong Stock Exchange through their brokers directly or through custodians. For aninvestor who has deposited his or her class A ordinary shares in his or her stock account or in his or her designated CCASS participant’s stockaccount maintained with CCASS, settlement will be effected in CCASS in accordance with the General Rules of CCASS and CCASS OperationalProcedures in effect from time to time. For an investor who holds the physical certificates, settlement certificates and the duly executed transferforms must be delivered to his or her broker or custodian before the settlement date.Conversion Between Class A Ordinary Shares Trading in Hong Kong and ADSsIn connection with the initial public offering of our class A ordinary shares in Hong Kong, or the Hong Kong Public Offering, we haveestablished a branch register of members in Hong Kong, or the Hong Kong share register, which are maintained by our Hong Kong share registrar,Computershare Hong Kong Investor Services Limited. Our principal register of members, or the Cayman share register, continues to be maintainedby our Principal Share Registrar, Maples Fund Services (Cayman) Limited in the Cayman Islands.All class A ordinary shares offered in the Hong Kong public offering and the international offering have been registered on the Hong Kong shareregister in order to be traded on the Hong Kong Stock Exchange. As described in further detail below, holders of class A ordinary shares registeredon the Hong Kong share register will be able to convert these shares into ADSs, and vice versa.Converting Class A Ordinary Shares Trading in Hong Kong into ADSsAn investor who holds class A ordinary shares registered in Hong Kong and who intends to deposit them for delivery of ADSs to trade onNasdaq must deposit or have his or her broker deposit the class A ordinary shares with the depositary’s Hong Kong custodian, The Hongkong andShanghai Banking Corporation Limited, or the custodian, in exchange for ADSs.A deposit of class A ordinary shares trading in Hong Kong in exchange for ADSs involves the following procedures:●If class A ordinary shares have been deposited with CCASS, the investor must transfer ordinary shares to the depositary’s accountwith the custodian within CCASS by following the CCASS procedures for transfer and submit and deliver a duly completed andsigned letter of transmittal to the custodian via his or her broker.●If class A ordinary shares are held outside CCASS, the investor must arrange to deposit his or her class A ordinary shares intoCCASS for delivery to the depositary’s account with the custodian within CCASS, submit and deliver a duly completed and signedletter of transmittal to the custodian.●Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, if applicable,and subject in all cases to the terms of the deposit agreement, the depositary will register the corresponding number of ADSs in thename(s) requested by an investor and will deliver the ADSs as instructed by the depositing investor or his or her broker.For class A ordinary shares deposited in CCASS, under normal circumstances, the above steps generally require two business days. Forclass A ordinary shares held outside CCASS in physical form, the above steps may take 14 business days, or more, to complete. Temporary delaysmay arise. For example, the transfer books of the depositary may from time to time be closed to ADS issuances. The investor will be unable totrade the ADSs until the procedures are completed.Converting ADSs into Class A Ordinary Shares Trading in Hong KongAn investor who holds ADSs and who intends to surrender his/her ADSs for delivery of class A ordinary shares to trade on the HongKong Stock Exchange must cancel the ADSs the investor holds and withdraw class A ordinary shares from the ADS program and cause his or herbroker or other financial institution to trade such class A ordinary shares on the Hong Kong Stock Exchange.Table of Contents176An investor that holds ADSs indirectly through a broker should follow the broker’s procedure and instruct the broker to arrange forcancelation of the ADSs, and transfer of the underlying class A ordinary shares from the depositary’s account with the custodian within the CCASSsystem to the investor’s Hong Kong stock account.For investors holding ADSs directly, the following steps must be taken:●To withdraw class A ordinary shares from the ADS program, an investor who holds ADSs may turn in such ADSs at the office of thedepositary (and the applicable ADR(s) if the ADSs are held in certificated form), and send an instruction to cancel such ADSs to thedepositary.●Upon payment or net of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, ifapplicable, and subject in all cases to the terms of the deposit agreement, the depositary will instruct the custodian to deliver class Aordinary shares underlying the canceled ADSs to the CCASS account designated by an investor.●If an investor prefers to receive class A ordinary shares outside CCASS, he or she must receive ordinary shares in CCASS first andthen arrange for withdrawal from CCASS. Investors can then obtain a transfer form signed by HKSCC Nominees Limited (as thetransferor) and register class A ordinary shares in their own names with the Hong Kong share registrar.For class A ordinary shares to be received in CCASS, under normal circumstances, the above steps generally require two business days.For class A ordinary shares to be received outside CCASS in physical form, the above steps may take 14 business days, or more, to complete. Theinvestor will be unable to trade the class A ordinary shares on the Hong Kong Stock Exchange until the procedures are completed.Temporary delays may arise. For example, the transfer books of the depositary may from time to time be closed to ADS cancelations. Inaddition, completion of the above steps and procedures is subject to there being a sufficient number of class A ordinary shares on the Hong Kongshare registrar to facilitate a withdrawal from the ADS program directly into the CCASS system. We are not under any obligation to maintain orincrease the number of class A ordinary shares on the Hong Kong share register to facilitate such withdrawals.Depositary RequirementsBefore the depositary delivers ADSs or permits withdrawal of class A ordinary shares, the depositary may require:●production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and●compliance with procedures it may establish, from time to time, consistent with the deposit agreement, including, but not limited to,presentation of transfer documents.The depositary may refuse to deliver, transfer, or register issuances, transfers and cancelations of ADSs generally when the transfer booksof the depositary or our Hong Kong or Cayman share registrar are closed or at any time if the depositary or we determine it advisable to do so,subject to such refusal complying with U.S. federal securities laws.All costs attributable to the transfer of ordinary shares to effect a withdrawal from or deposit of class A ordinary shares into the ADSprogram will be borne by the investor requesting the transfer. In particular, holders of ordinary shares and ADSs should note that the Hong Kongshare registrar will charge between HK$2.50 to HK$20, depending on the speed of service (or such higher fee as may from time to time bepermitted under the Hong Kong Listing Rules), for each transfer of class A ordinary shares from one registered owner to another, each sharecertificate canceled or issued by it and any applicable fee as stated in the share transfer forms used in Hong Kong. In addition, holders of ordinaryshares and ADSs must pay up to US$5.00 (or less) per 100 ADSs for each issuance of ADSs and each cancelation of ADSs, as the case may be, inconnection with the deposit of class A ordinary shares into, or withdrawal of ordinary shares from, the ADS program.Table of Contents177PART II.ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSMaterial Modifications to the Rights of Security HoldersSee “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.Use of ProceedsNot applicable.ITEM 15 CONTROLS AND PROCEDURESDisclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our chief executive officer and our chief financial officer,we carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is defined in Rules 13a-15(e) of the ExchangeAct, as of December 31, 2023. Based upon that evaluation, our management, with the participation of our chief executive officer and chief financialofficer, has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and includes those policiesand procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositionsof a company’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financialstatements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only inaccordance with authorizations of a company’s management and directors, and (iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financialstatements. Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2023 based on theframework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2023.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, any evaluationof effectiveness as to future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Attestation Report of the Independent Registered Public Accounting FirmThe effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Deloitte Touche TohmatsuCertified Public Accountants LLP, our independent registered public accounting firm, as stated in its report included on page F-4 of this annualreport.Changes in Internal Control over Financial ReportingThere were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Table of Contents178ITEM 16 [RESERVED]ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that Gang Xiao, a member of our audit committee and an independent director (under the standardsset forth in Rule 5605(c)(2) of the Nasdaq Stock Market Rules and Rule 10A-3 under the Exchange Act), is an audit committee financial expert.ITEM 16B CODE OF ETHICSOur board of directors adopted an amended and restated code of business conduct and ethics in March 2024 that applies to our directors,officers and employees. The amended and restated code of business conduct and ethics mainly clarifies that in cases where more stringent and/ordetailed policies concerning conflicts of interest have been established, those policies will supersede any less stringent and/or detailed policies. Wehave posted a copy of our code of business conduct and ethics on our website at https://ir.qifu.tech.ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICESThe following table sets forth the aggregate fees by categories specified below in connection with certain professional services renderedby Deloitte Touche Tohmatsu Certified Public Accountants LLP (PCAOB ID No. 1113), our principal external auditor, for the years indicated. Wedid not pay any other fees to our auditor during the periods indicated below.For the Years Ended December 31, 2022 2023(in thousands of RMB)Audit fees(1) 28,480.7 19,392.8Audit-related fees(2) 2,862.4 559.1Tax fees(3) 135.2 295.0Notes:(1)“Audit fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditor for theaudit or review of our annual financial statements or quarterly financial information and review of documents filed with the SEC. The auditrefers to financial statement audit and audit pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. In addition, it includes the fees billedfor the professional services provided in relation to the Global Offering in 2022.(2)“Audit-related fees” means the aggregate fees billed in each of the fiscal years for assurance and related services by our principal accountantthat are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit fees.”(3)“Tax fees” means the aggregate fees incurred in each of the fiscal years listed for professional services rendered by our principal auditors fortax compliance, tax advice, and tax planning.The policy of our audit committee is to pre-approve all audit and other service provided by Deloitte Touche Tohmatsu Certified PublicAccountants LLP as described above, other than those for de minimis services which are approved by the Audit Committee prior to the completionof the audit.ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNone.Table of Contents179ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSOn August 18, 2021, our board of directors approved a share repurchase plan whereby we are authorized to repurchase up to US$200million worth of our company’s class A ordinary shares in the form of ADSs over the next twelve-month period till August 17, 2022. The sharerepurchase plan was publicly announced on August 19, 2021. We did not purchase any ADSs under this plan.On June 20, 2023, our board of directors approved a share repurchase plan whereby we are authorized to repurchase our company’s classA ordinary shares or ADSs with aggregate value of up to US$150 million from June 20, 2023 through June 19, 2024. We refer to this plan as the2023 Share Repurchase Plan. This plan was publicly announced on June 20, 2023. From June 20, 2023 to March 31, 2024, we purchased inaggregate approximately 9,348,543 ADSs in the open market for a total cost of approximately US$150 million (inclusive of commissions) at anaverage price of US$16.02 per ADS pursuant to the 2023 Share Repurchase Plan. The table below is a summary of the ADSs we repurchased in2023 and the first three months of 2024. All ADSs were repurchased in the open market pursuant to the 2023 Share Repurchase Plan.TotalApproximateNumber ofDollar ValueADSs Purchasedof ADSsTotalAverageas Part of thethat MayNumberPrice PaidPubliclyYet Beof ADSsPerAnnouncedPurchased UnderPeriod Purchased ADS (US$) Plan the Plan* (US$)June 20, 2023-June 30, 2023 119,826 16.45 119,826 148,027,054July 1, 2023-July 31, 2023 1,040,892 18.50 1,040,892 128,746,996August 1, 2023-August 31, 2023 504,862 17.06 504,862 120,124,190September 1, 2023-September 30, 2023 1,494,624 15.40 1,494,624 97,072,678October 1, 2023-October 31, 2023 1,180,972 15.24 1,180,972 79,052,886November 1, 2023-November 30, 2023 704,909 15.66 704,909 68,002,617December 1, 2023-December 31, 2023 510,000 14.95 510,000 60,366,260January 1, 2024-January 31, 2024 1,134,128 14.64 1,134,128 43,738,648February 1, 2024-February 29, 2024 1,256,931 14.96 1,256,931 24,913,621March 1, 2024-March 31, 2024 1,401,399 17.74 1,401,399 20,196Total 9,348,543 16.02 9,348,543 20,196Note:*The dollar value in this column is based on US$150 million pursuant to the 2023 Share Repurchase Plan.On March 12, 2024, our board of directors approved a share repurchase plan whereby we are authorized to repurchase our company’sclass A ordinary shares or ADSs with aggregate value of up to US$350 million starting from April 1, 2024 through March 31, 2025. This plan waspublicly announced on March 12, 2024. We refer to this plan as the 2024 Share Repurchase Plan. We have commenced execution of the 2024 ShareRepurchase Plan since April 1, 2024.ITEM 16F CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.Table of Contents180ITEM 16G CORPORATE GOVERNANCEAs a Cayman Islands exempted company listed on the Nasdaq Stock Market, we are subject to the Nasdaq listing standards. However, theNasdaq Stock Market Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. We haveutilized the exemption afforded by Nasdaq Listing Rule 5615(a)(3) to follow home country practice in lieu of certain requirements, including (i) theindependence requirements for compensation committee and nomination committee as provided in Nasdaq Listing Rule 5605(d) and (e), (ii) therequirement that a majority of the board must be independent as provided in Nasdaq Listing Rule 5615(b)(1), and (iii) the requirement to obtainshareholder approval prior to a plan or other equity compensation arrangement is established or materially amended as provided in Nasdaq ListingRule 5635(c). Our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq listing standards applicable toU.S. domestic issuers given our reliance on the home country practice exception.See “Item 3. Key Information—D. Risk Factors—Risks Related to the ADSs and Our Class A Ordinary Shares—As an exemptedcompany incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance mattersthat differ significantly from the Nasdaq listing standards; these practices may afford less protection to shareholders than they would enjoy if wecomplied fully with such corporate governance listing standards.”ITEM 16H MINE SAFETY DISCLOSURENot applicable.ITEM 16I DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONSNot applicable.ITEM 16J INSIDER TRADING POLICIESNot applicable.ITEM 16KCYBERSECURITYRisk Management and StrategyWe have implemented comprehensive cybersecurity management and security emergency response management policies that areintegrated into our overall risk management system. These procedures aim to ensure our overall network security, protect our data transmissionsystem and prevent data leakage and other cybersecurity incidents. We have a strong in-house cybersecurity management working group, led byour cybersecurity officer, that consists of the information security department, the IT foundational service department, and the system operation andmaintenance department. Working together, these departments identify, assess, and manage cybersecurity risks on a daily basis. We haveestablished a sound responding mechanism for external security attacks and violations and safeguarded the confidentiality of information and dataof our company, employees and users. More specifically, we have established a strict data control system, taking a series of measures includingdata encryption, network firewall, network monitoring, and access control to ensure data security. In this way, we strive to ensure that informationand data can only be obtained and used when necessary. We also regularly conduct inspections, cleaning, data backup of our databases, equipment,and network supporting facilities. In order to implement cybersecurity awareness to every grassroots position, we have provided training programsto ensure that our employees have full access to the basic knowledge and principles of information security and promulgated data governancepolicies such as the QiFu Technology Cybersecurity Management System, the QiFu Technology Data Classiﬁcation and Grading ManagementSystem, and the QiFu Technology Personal Information Protection and Data Governance Basic Policy to regulate the data and network usagewithin our company.Table of Contents181To address cybersecurity emergencies, we have designed and implemented the QiFu Technology Emergency Response ManagementRegulations. Under these regulations, we established a cybersecurity emergency management team, which consists of the emergency responseleadership group, the emergency response cybersecurity assurance group, the emergency response technical process group and the emergencyresponse information notification group. Under the guidance of the regulations, these groups maintain a cybersecurity risk detection system,operate a multi-layer data protection regime, conduct regular risk assessments of our network and business infrastructures and carry out regularcybersecurity drills. These measures help us promptly identify cybersecurity risks and incidents. The QiFu Technology Emergency ResponseManagement Regulations also serve to standardize and strengthen our emergency response procedures. They form a step-by-step cybersecurityresponse plan, covering a wide range of topics, including incident notification, impact assessment, response initiation, department coordination,data restoration, case analysis and outcome disclosure. When a cybersecurity incident occurs, we evaluate the type and impact of the incident,report and notify working parties and affected individuals, and carry out appropriate plans that we prepare in advance.Besides, we engage law firms and auditors to conduct thorough due diligence of data compliance and assessments of our informationsystem annually. We also work closely with third-party service providers to ensure their compliance with our cybersecurity standards and to assessrisks arising from our engagements with them. We strive to provide the highest standards of data protection and information security for ourconsumers and SMEs and maintain and enhance the reliability, stability and scalability of our network infrastructure. In addition, we regularlyconduct IT audits. Internally, we regularly conduct security audits of network configuration changes, sensitive authority accounts and operation logaudits. Externally, we regularly accept IT audits, ISO certiﬁcation audits, equal assurance inspections and ESG assessments from third-party auditteams to fully protect our information, network, and data security. To ensure the smooth and secure operations of our business during peak traffic,we intend to continue to conduct regular maintenance of our security system, closely monitor the development of information technology andsecurity technologies used in the industry and make necessary upgrades to enhance our information technology systems.As of the date of this annual report, we have not experienced any material cybersecurity incidents or identified any material cybersecuritythreats that have affected or are reasonably likely to materially affect us, our business strategy, results of operations or financial condition.GovernanceThe cybersecurity officer of our company is responsible for coordinating our internal cybersecurity planning and construction, andassessing, identifying, managing and responding to cybersecurity incidents. The officer is also responsible for reviewing and evaluating whethercybersecurity threats create material risks and whether such risks have or are reasonably likely to have a major impact on our company. In addition,the officer is responsible for the decision-making and reporting of major cybersecurity matters. Our cybersecurity officer has over 15 years ofexperience in the field. The officer reports and provides regular updates to our Chief Executive Officer on any material cybersecurity incidents orrisks. In the event of a major cybersecurity incident, our Chief Executive Officer reports to the board of directors, which bears the ultimateresponsibility for the company’s cybersecurity risks.Table of Contents182PART III.ITEM 17 FINANCIAL STATEMENTSWe have elected to provide combined and consolidated financial statements pursuant to Item 18.ITEM 18 FINANCIAL STATEMENTSThe consolidated financial statements of Qifu Technology, Inc. are included at the end of this annual report.ITEM 19 EXHIBITSExhibitNumber Description of Document1.1Third Amended and Restated Memorandum and Articles of Association of the Registrant, effective March 31, 2023(incorporated herein by reference to Exhibit 1.1 to the Form 20-F filed on April 27, 2023 (File No. 001-38752))1.2Certificate of Incorporation on Change of Name (incorporated herein by reference to Exhibit 1.2 to the Form 20-F filed on April27, 2023 (File No. 001-38752))2.1Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3) (incorporated herein by reference to Exhibit 4.3to the Form F-1 filed on October 26, 2018 (File No. 333-228020))2.2Registrant’s Specimen Certificate for Class A Ordinary Shares (incorporated herein by reference to Exhibit 2.2 to the Form 20-Ffiled on April 27, 2023 (File No. 001-38752))2.3Deposit Agreement, among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated hereinby reference to Exhibit 4.3 to the registration statement on Form S-8 filed on June 3, 2019 (File No. 333-231892))2.4Description of Securities (incorporated herein by reference to Exhibit 2.5 to the Form 20-F filed on April 27, 2023 (File No.001-38752))4.12018 Share Incentive Plan (incorporated herein by reference to Exhibit 4.1 to the Form 20-F filed on April 30, 2020 (File No.001-38752))4.22019 Share Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Form S-8 filed on December 13, 2019 (FileNo. 333-235488) and Exhibit 10.2 to the post-effective amendment No. 1 to Form S-8 filed on October 13, 2020 (File No. 333-235488))4.3Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated herein byreference to Exhibit 10.2 to the Form F-1 filed on October 26, 2018 (File No. 333-228020))4.4Form of Employment Agreement between the Registrant and its executive officers (incorporated herein by reference toExhibit 10.3 to the Form F-1 filed on October 26, 2018 (File No. 333-228020))4.5English translation of the executed form of Voting Proxy Agreement regarding a VIE of the Registrant, between its shareholderand the WFOE of the Registrant as currently in effect, and a schedule of all executed Voting Proxy Agreement adopting thesame form in respect of each of the VIEs of the Registrant (incorporated herein by reference to Exhibit 4.5 to the Form 20-Ffiled on April 27, 2023 (File No. 001-38752))4.6English translation of the executed form of Equity Interest Pledge Agreement among a VIE of the Registrant, its shareholder,and the WFOE of the Registrant, as currently in effect, and a schedule of all executed Equity Interest Pledge Agreementsadopting the same form in respect of each of the VIEs of the Registrant (incorporated herein by reference to Exhibit 4.6 to theForm 20-F filed on April 27, 2023 (File No. 001-38752))4.7English translation of the executed form of Exclusive Business Cooperation Agreement between a VIE and the WFOE of theRegistrant, as currently in effect, and a schedule of all executed the Exclusive Business Cooperation Agreements adopting thesame form in respect of each of the VIEs of the Registrant (incorporated herein by reference to Exhibit 4.7 to the Form 20-Ffiled on April 27, 2023 (File No. 001-38752))4.8English translation of the executed form of Exclusive Option Agreement among a VIE of the Registrant, its shareholder, and theWFOE of the Registrant, as currently in effect, and a schedule of all executed the Exclusive Option Agreements adopting thesame form in respect of each of the VIEs of the Registrant (incorporated herein by reference to Exhibit 4.8 to the Form 20-Ffiled on April 27, 2023 (File No. 001-38752))Table of Contents183ExhibitNumber Description of Document4.9English translation of the executed form of Loan Agreement among a VIE of the Registrant, its shareholder, and the WFOE ofthe Registrant, as currently in effect, and a schedule of all executed the Loan Agreements adopting the same form in respect ofeach of the VIEs of the Registrant (incorporated herein by reference to Exhibit 4.9 to the Form 20-F filed on April 27, 2023(File No. 001-38752))4.10English Translation of the Framework Collaboration Agreement between Beijing Qihu Technology Co., Ltd., wholly ownedsubsidiary of 360 Group, and Shanghai Qiyu, dated July 24, 2018 (incorporated herein by reference to Exhibit 10.9 to the FormF-1 filed on October 26, 2018 (File No. 333-228020))4.11English Translation of the Joint Venture Agreement entered into in October 2020 by and between Shanghai Qiyu, ShanghaiJiehu Internet Technology Co., Ltd. and Shanghai Changfeng Investment (Group) Co., Ltd. (incorporated herein by reference toExhibit 4.11 of the Form 20-F filed on April 21, 2021 (File No. 001-38752))4.12English Translation of the Equity Transfer Agreement entered into in December 2021 by and between Shanghai Qiyu andShanghai Jiehu Internet Technology Co., Ltd. (Filed as Exhibit 4.12 to the company’s annual report on Form 20-F, RegistrationNo. 001-38752, filed on April 28, 2022, and incorporated herein by reference)4.13English Translation of the Novation Agreement entered into in December 2021 by and between Shanghai Qiyu, Shanghai JiehuInternet Technology Co., Ltd. and Shanghai Changfeng Investment (Group) Co., Ltd. in connection with rights and obligationsof Shanghai Jiehu Internet Technology Co., Ltd. under the Joint Venture Agreement entered into in October 2020 (Filed asExhibit 4.13 to the company’s annual report on Form 20-F, Registration No. 001-38752, filed on April 28, 2022, andincorporated herein by reference)4.14English Translation of the Termination Agreement on the control documents in connection with Fuzhou Microcredit enteredinto in April 2021 by and between Fuzhou Microcredit, shareholders of Fuzhou Microcredit and our WFOE (Filed as Exhibit4.14 to the company’s annual report on Form 20-F, Registration No. 001-38752, filed on April 28, 2022, and incorporatedherein by reference)4.15English Translation of the Equity Transfer Agreement entered into in April 2021 by and between shareholders of FuzhouMicrocredit and Shanghai Qiyu (Filed as Exhibit 4.15 to the company’s annual report on Form 20-F, Registration No. 001-38752, filed on April 28, 2022, and incorporated herein by reference)4.16English translation of the executed form of Agreement on the Termination of the VIE Agreements among a VIE of theRegistrant, its shareholder, and the WFOE of the Registrant, as currently in effect, and a schedule of all executed the Agreementon the Termination of the VIE Agreements adopting the same form in respect of each of the VIEs of the Registrant(incorporated herein by reference to Exhibit 4.16 to the Form 20-F filed on April 27, 2023 (File No. 001-38752))4.17*†English translation of the Trademark Licensing Agreement between Beijing Qihu Technology Co., Ltd., wholly ownedsubsidiary of 360 Group, and Shanghai Qiyu, dated December 29, 20238.1*Significant subsidiaries and consolidated variable interest entities of the Registrant11.1*Amended and Restated Code of Business Conduct and Ethics of the Registrant12.1*CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2*CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1**CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2**CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200215.1*Consent of Commerce & Finance Law Offices15.2*Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP15.3*Consent of Maples and Calder (Hong Kong) LLP97*Clawback Policy101.INS*Inline XBRL Instance Document - this instance document does not appear on the Interactive Data File because its XBRL tagsare not embedded within the Inline XBRL document101.SCH*Inline XBRL Taxonomy Extension Scheme Document101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document104*Cover Page Interactive Data File (embedded within the Inline XBRL document)*Filed with this Annual Report on Form 20-F.**Furnished with this Annual Report on Form 20-F.†Certain portions of the exhibit have been omitted.Table of Contents184SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized theundersigned to sign this annual report on its behalf.Qifu Technology, Inc.By:/s/ Haisheng WuName:Haisheng WuTitle:Chief Executive OfficerDate: April 26, 2024Table of ContentsF-1QIFU TECHNOLOGY, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTSPAGE(S)Audited Financial Statements of Qifu Technology, Inc.Reports of Independent Registered Public Accounting Firm (PCAOB ID: 1113)F-2 - F-4Consolidated Balance Sheets as of December 31, 2022 and 2023F-5Consolidated Statements of Operations for the years ended December 31, 2021, 2022 and 2023F-6Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2022 and 2023F-7Consolidated Statements of Changes in Equity for the years ended December 31, 2021, 2022 and 2023F-8Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2022 and 2023F-9Notes to the Consolidated Financial Statements for the years ended December 31, 2021, 2022 and 2023F-10 - F-54Additional Information - Financial Statement Schedule IF-55 - F 58Table of ContentsF-2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholders and the Board of Directors of Qifu Technology, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Qifu Technology, Inc. (the “Company”) and its subsidiaries as ofDecember 31, 2022 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows, foreach of the three years in the period ended December 31, 2023, and the related notes and the financial statement listed in schedule I (collectivelyreferred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of theCompany as of December 31, 2022 and 2023, and the results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2023, in conformity with accounting principles generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 26, 2024,expressed an unqualified opinion on the Company’s internal control over financial reporting.Convenience TranslationOur audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translationhas been made in conformity with the basis stated in Note 2. Such United States dollar amounts are presented solely for the convenience of thereaders in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our auditsincluded performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for ouropinion.Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that wascommunicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to thefinancial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matterdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matterbelow, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.Table of ContentsF-3Management’s estimate of expected default rate primarily used in accounts of guarantee liabilities and allowance for loans receivableCritical Audit Matter DescriptionThe Company estimates the fair value of stand-ready guarantee liabilities using a discounted cash flow model and the fair value ofcontingent guarantee liabilities using an expected credit loss model, both of which are based on expected default rate of underlying loans subject toguarantee. The Company also applies expected credit loss model to provide allowance for loans receivable, which is ultimately based on expecteddefault rate of the underlying loans. The Company estimates the expected default rate on a pool basis according to the historical net default rate byvintage, adjusted by specific risk characteristics for loans within each vintage, correlated industrial and macro-economic factors, and other pertinentinformation in assessing future performance of the loan portfolio.We identified the estimate of expected default rate as a critical audit matter because of the significant judgment required by managementwhen developing the estimation. This required a high degree of auditor judgment and an increased extent of effort, including the need to involveour fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimate of expected default rate.How the Critical Audit Matter Was Addressed in the AuditOur audit procedures related to expected default rate included the following, among others:●We tested the effectiveness of controls over the estimation of the expected default rate, including management’s controls overaccurate capture of the historical delinquency and collection data at individual loan level that are used in the estimation process.●We evaluated the adjustments applied by management to arrive at the estimated default rate by assessing the pertinent informationused, and corroborating the adjustments with supportive operating data or industrial trend, with the assistance of our specialists,where applicable.●We tested the accuracy of the historical net default rate by vintage, delinquent loan collection rate and specific risk indicators used asan input to the model by comparing it with original data retrieved from the operating system.●With the assistance of our specialists, we evaluated the reasonableness of the (1) valuation models, (2) assumptions includingcorrelated industrial and macro-economic factors used in the model, and tested the computational accuracy of the model.●We evaluated observable data close to the report issue date to evaluate whether the assumptions used by management are appropriate./s/Deloitte Touche Tohmatsu Certified Public Accountants LLPShanghai, ChinaApril 26, 2024We have served as the Company’s auditor since 2018.Table of ContentsF-4REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholders and the Board of Directors of Qifu Technology, Inc.Opinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Qifu Technology, Inc. (the “Company”) and its subsidiaries as ofDecember 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal controlover financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued byCOSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),the financial statements as of and for the year ended December 31, 2023 of the Company and our report dated April 26, 2024 expressed anunqualified opinion on those financial statements and included an explanatory paragraph regarding the convenience translation.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control overFinancial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. Weare a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with theU.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our auditincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Acompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate./s/Deloitte Touche Tohmatsu Certified Public Accountants LLPShanghai, ChinaApril 26, 2024Table of ContentsF-5QIFU TECHNOLOGY, INC.CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)As of December 31, 2022 2023 2023RMBRMBUSD(Note 2)ASSETS Current assets: Cash and cash equivalents 7,165,584 4,177,890 588,443Restricted cash (including RMB1,018,106 and RMB 1,232,804 from the consolidated trusts as of December 31, 2022 and 2023, respectively) 3,346,779 3,381,107 476,219Short term investments57,00015,0002,113Security deposit prepaid to third-party guarantee companies396,699207,07129,165Funds receivable from third party payment service providers 1,158,781 1,603,419 225,837Accounts receivable and contract assets, net (net of allowance of RMB273,705 and RMB299,265 as of December 31, 2022 and 2023,respectively)2,868,6252,909,245409,759Financial assets receivable, net (net of allowance of RMB457,080 and RMB462,709 as of December 31, 2022 and 2023, respectively) 2,982,076 2,522,543 355,293Amounts due from related parties (net of allowance of RMB93,873 and RMB25,150 as of December 31, 2022 and 2023, respectively) 394,872 45,346 6,387Loans receivable, net (including RMB9,942,696 and RMB9,318,315 from the consolidated trusts as of December 31, 2022 and 2023,respectively) 15,347,662 24,604,487 3,465,470Prepaid expenses and other assets (including RMB117,516 and RMB 92,287 from the consolidated trusts as of December 31, 2022and 2023,respectively) 379,388 329,920 46,468Total current assets 34,097,466 39,796,028 5,605,154Non-current assets: Accounts receivable and contract assets, net-noncurrent (net of allowance of RMB41,261 and RMB21,411 as of December 31, 2022 and 2023,respectively)261,319146,99520,704Financial assets receivable, net-noncurrent (net of allowance of RMB97,015 and RMB112,687 as of December 31, 2022 and 2023, respectively)688,843596,33083,991Amounts due from related parties, non-current (net of allowance of RMB4,382 and RMB630 as of December 31, 2022 and 2023, respectively)33,2364,240597Loans receivable, net-noncurrent (including RMB511,843 and RMB268,215 from the consolidated trusts as of December 31, 2022 and 2023,respectively)3,136,9942,898,005408,175Property and equipment, net 47,602 231,221 32,567Land use rights, net998,185977,461137,673Intangible assets 4,696 13,443 1,893Goodwill—41,2105,804Deferred tax assets 1,019,171 1,067,738 150,388Other non-current assets55,65845,9016,465Total non-current assets 6,245,704 6,022,544 848,257TOTAL ASSETS 40,343,170 45,818,572 6,453,411LIABILITIES AND EQUITY LIABILITIESLiabilities including amounts of the consolidated VIEs and trusts without recourse to the Company (Note 1 and 2): Current liabilities: Payable to investors of the consolidated trusts-current 6,099,520 8,942,291 1,259,495Accrued expenses and other current liabilities 2,004,551 2,016,039 283,953Amounts due to related parties 113,697 80,376 11,321Short term loans150,000798,586112,478Guarantee liabilities-stand ready 4,120,346 3,949,601 556,290Guarantee liabilities-contingent3,418,3913,207,264451,734Income tax payable 661,015 742,210 104,538Other tax payable 182,398 163,252 22,994Total current liabilities 16,749,918 19,899,619 2,802,803Non-current liabilities:Deferred tax liabilities100,835224,82331,666Payable to investors of the consolidated trusts-noncurrent4,521,6003,581,800504,486Other long-term liabilities39,520102,47314,433Total non-current liabilities4,661,9553,909,096550,585TOTAL LIABILITIES 21,411,873 23,808,715 3,353,388Commitments and Contingencies (Note 18) SHAREHOLDERS’ EQUITY Ordinary shares (USD0.00001 par value per share 5,000,000,000 shares authorized, 325,591,776 shares issued and 322,792,063 sharesoutstanding as of December 31, 2022, and 326,552,504 shares issued and 315,226,128 shares outstanding as of December 31, 2023,respectively)22223Treasury stock — (384,637) (54,175)Additional paid-in capital6,095,2256,059,439853,454Retained earnings 12,803,684 16,297,316 2,295,429Other comprehensive loss(51,775)(34,657)(4,882)TOTAL QIFU TECHNOLOGY INC EQUITY18,847,15621,937,4833,089,829Non-controlling interests84,14172,37410,194TOTAL EQUITY 18,931,297 22,009,857 3,100,023TOTAL LIABILITIES AND EQUITY 40,343,170 45,818,572 6,453,411The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-6QIFU TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)Year endedYear endedYear endedYear endedDecember 31, December 31, December 31, December 31, 2021 2022 2023 2023RMBRMBRMBUSD(Note 2)Revenue, net of value-added tax and related surcharges: Credit driven services10,189,16711,586,25111,738,5601,653,342Loan facilitation and servicing fees-capital heavy (including revenue from related parties of RMB93, RMB13,266 andRMB5,931 for the years ended December 31, 2021, 2022 and 2023, respectively)2,326,027 2,086,414 1,667,119234,809Financing income2,184,128 3,487,951 5,109,921719,717Revenue from releasing of guarantee liabilities(including revenue from related parties of nil, RMB8,843 andRMB42,499 for the years ended December 31, 2021, 2022 and 2023, respectively)5,583,1355,899,1534,745,898668,446Other services fees95,877112,733215,62230,370Platform services6,446,4784,967,6794,551,467641,061Loan facilitation and servicing fees-capital light (including revenue from related parties of RMB2,160,856,RMB1,009,170 and RMB199,185 for the years ended December 31, 2021, 2022 and 2023, respectively)5,677,9414,124,7263,213,955452,676Referral services fees (including revenue from related parties of RMB 7,670, RMB109,469 and RMB 8,601 for theyears ended December 31, 2021, 2022 and 2023, respectively)620,317561,372950,016133,807Other services fees (including revenue from related parties of RMB8,571, RMB58,490 and RMB 45,552 for the yearsended December 31, 2021, 2022 and 2023, respectively)148,220281,581387,49654,578Total net revenue16,635,645 16,553,930 16,290,027 2,294,403Operating costs and expenses: Facilitation, origination and servicing (including costs charged by related parties of RMB142,325, RMB129,173 andRMB118,849 for the years ended December 31, 2021, 2022 and 2023, respectively)2,252,157 2,373,458 2,659,912 374,641Funding costs337,426504,448645,44590,909Sales and marketing (including expenses charged by related parties of, RMB367,320, RMB406,096 and RMB223,627for the years ended December 31, 2021, 2022 and 2023, respectively)2,090,374 2,206,948 1,939,885 273,227General and administrative (including expenses charged by related parties of RMB13,409, RMB16,937 andRMB13,610 for the years ended December 31, 2021, 2022 and 2023, respectively)557,295 412,794 421,076 59,307Provision for loans receivable965,4191,580,3062,151,046302,968Provision for financial assets receivable (including provision generated from related parties of RMB807, RMB2,662and RMB633 for the years ended December 31, 2021, 2022 and 2023, respectively)243,946 397,951 386,090 54,380Provision for accounts receivable and contract assets (including provision charged by related parties of RMB124,095,RMB14,123 and RMB (10,197) for the years ended December 31, 2021, 2022 and 2023, respectively)324,605238,065175,79924,761Provision for contingent liabilities3,078,2244,367,7763,053,810430,120Total operating costs and expenses9,849,446 12,081,746 11,433,063 1,610,313Income from operations6,786,199 4,472,184 4,856,964 684,090Interest income, net126,256 182,301 217,307 30,607Foreign exchange gain (loss)35,549(160,225)2,356332Investment income (loss)10,115(19,888)(30,112)(4,241)Other income, net64,590 268,000 230,936 32,527Income before income tax expense7,022,709 4,742,372 5,277,451 743,315Income tax expense(1,258,196) (736,804) (1,008,874) (142,097)Net income5,764,513 4,005,568 4,268,577 601,218Net loss attributable to non-controlling interests17,21218,60516,7592,360Net income attributable to ordinary shareholders of the Company5,781,725 4,024,173 4,285,336 603,578Net income per ordinary share attributable to ordinary shareholders of Qifu Technology, Inc.Basic18.82 12.87 13.36 1.88Diluted17.99 12.50 13.04 1.84Weighted average shares used in calculating net income per ordinary share Basic307,265,600 312,589,273 320,749,805 320,749,805Diluted321,397,753 322,018,510 328,508,945 328,508,945Net income per ADS attributable to ordinary shareholders of Qifu Technology, Inc.(1)Basic37.6425.7426.723.76Diluted35.9825.0026.083.68(1)Based on ADS ratio of 1 ADS to 2 ordinary shares.The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-7QIFU TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)Year endedYear endedYear endedYear endedDecember 31, December 31, December 31, December 31, 2021 2022 2023 2023RMBRMBRMBUSD(Note 2)Net income 5,764,5134,005,568 4,268,577 601,218Other comprehensive (loss) income, net of tax of nil:Foreign currency translation adjustment(36,541)59,15717,1182,411Other comprehensive (loss) income (36,541)59,157 17,118 2,411Total comprehensive income 5,727,9724,064,725 4,285,695 603,629Comprehensive loss attributable to non-controlling interests17,21218,60516,7592,360Comprehensive income attributable to ordinary shareholders 5,745,1844,083,330 4,302,454 605,989The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-8QIFU TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)AdditionalAccumulatedOtherNon-NumberOrdinaryPaid-inTreasuryRetainedComprehensivecontrollingTotal of sharessharesCapitalstockEarnings(loss)IncomeinterestsEquity RMB (1) RMB RMB RMB RMB RMB RMBBalance as of December 31, 2020304,453,780215,417,406—4,137,542(74,391)5129,481,090Issuance of ordinary shares – exercise of options and vesting ofrestricted shares6,033,2121—————1Cancellation of ordinary shares(17)———————Share-based compensation——253,922————253,922Dividends to shareholders————(276,761)——(276,761)Other comprehensive loss—————(36,541)—(36,541)Net income (loss)————5,781,725—(17,212)5,764,513Disposal of a subsidiary——939———(554)385Contribution by non-controlling interests holders to a subsidiary——————30,00030,000Balance as of December 31, 2021310,486,975225,672,267—9,642,506(110,932)12,74615,216,609Issuance of ordinary shares – exercise of options and vesting ofrestricted shares5,935,088———————Issuance of ordinary shares – global offering, net of issuance costs ofRMB31,6956,370,000—223,221————223,221Share-based compensation——199,737————199,737Dividends to shareholders————(862,995)——(862,995)Other comprehensive income—————59,157—59,157Net income (loss)————4,024,173—(18,605)4,005,568Contribution by non-controlling interests holders to a subsidiary——————90,00090,000Balance as of December 31, 2022322,792,063226,095,225—12,803,684(51,775)84,14118,931,297Issuance of ordinary shares – exercise of options and vesting ofrestricted shares3,306,235———————Repurchase and retirement of ordinary shares(10,872,170)—(221,390)(384,637)(30,152)——(636,179)Share-based compensation——185,604————185,604Dividends to shareholders————(761,552)——(761,552)Other comprehensive income—————17,118—17,118Acqusition of a subsidiary——————4,9924,992Net income (loss)————4,285,336—(16,759)4,268,577Balance as of December 31, 2023315,226,128226,059,439(384,637)16,297,316(34,657)72,37422,009,857(1)The amount less than RMB1 is rounded to zero.The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsF-9QIFU TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)Year endedYear endedYear endedYear endedDecember 31, December 31, December 31, December 31, 2021 2022 2023 2023RMBRMBRMBUSD(Note 2)Cash Flows from Operating Activities: Net income 5,764,5134,005,568 4,268,577601,218Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and reduction in right-of-use assets 65,97376,983 73,76210,389Share-based compensation253,922199,737185,60426,142Gain on disposal of investment (10,115)— ——Investment loss—19,88830,1124,241Provision for loan principal, financial assets receivables and other receivables1,553,9702,216,3222,712,936382,109Provision for contingent liabilities3,078,2254,367,7763,053,810430,120Foreign exchange (gain) loss (35,550)160,225 (2,356)(332)Fair value change of foreign exchange options—(4,704)4,527638Changes in operating assets and liabilities Funds receivable from third party payment service providers(21,687)(1,005,630)(444,638)(62,626)Accounts receivable and contract assets (819,931)(33,157) (123,379)(17,378)Financial assets receivable (436,538)338,000 143,46320,206Prepaid expenses and other assets11,37898758,2658,206Security deposit prepaid to third-party guarantee companies 40,258478,187 189,62826,709Deferred tax647,429(205,044)78,09711,000Other non-current assets (27,846)(53,002) (28,011)(3,945)Amounts due (from) to related parties (776,431)443,103 355,26250,038Guarantee liabilities (2,691,248)(4,932,263) (3,435,682)(483,906)Income tax payable (603,202)36,903 76,33310,751Other tax payable (13,117)(58,971) 13,0381,836Land use rights, net(1,036,178)———Accrued expenses and other current liabilities897,670(105,634)52,6267,412Other long-term liabilities (1,799)8,556 (7,269)(1,024)Interest receivable/ payable (49,996)(31,315) (136,355) (19,206)Net cash provided by operating activities 5,789,7005,922,515 7,118,350 1,002,598Cash Flows from Investing Activities: Purchase of property and equipment and intangible assets (25,307)(26,973)(84,554)(11,909)Loans provided to related parties (50,000)———Repayment of loans provided to related parties 50,000———Investment in loans receivable(40,168,794)(59,826,361)(92,202,671)(12,986,475)Collection of investment in loans receivable34,131,23152,556,85181,131,58011,427,144Capital injection to investees—(9,182)(20,845)(2,936)Purchase of short-term investments—(57,000)(248,361)(34,981)Purchase of foreign exchange options—(14,549)——Proceeds from disposal of short-term investments—17,890303,30142,719Acquisition of subsidiaries, net of cash received——(26,239)(3,696)Disposal of subsidiaries and other business units, net of cash received (1,458)3,349——Net cash used in investing activities(6,064,328)(7,355,975)(11,147,789)(1,570,134)Cash Flows from Financing Activities: Proceeds from issuance of ordinary share upon Secondary Listing net of issuance cost of RMB31,695—254,916——Payment of Secondary Listing costs—(15,791)(16,023)(2,257)Repayment of short term loans(150,000)(642,952)(176,000)(24,789)Proceeds from short-term loans364,053340,179824,586116,141Proceeds from long-term loans—17,85472,76710,249Cash received from investors of the consolidated trusts 5,928,7738,570,920 10,410,300 1,466,261Cash paid to investors of the consolidated trusts (4,193,425)(4,325,292) (8,471,288) (1,193,156)Contribution from non-controlling interests30,00090,000——Stock repurchase——(636,179)(89,604)Dividend to shareholders—(988,586)(941,705)(132,636)Loans received from non-controlling interests344,4873,000——Loans payment to non-controlling interests (60,168)(90,000) — —Cash received from a related party for investment354,667———Cash repayment to a related party (354,667)(10,180) — —Net cash from provided by financing activities 2,263,7203,204,068 1,066,458 150,209Effect of foreign exchange rate changes (3,411)(18,192) 9,615 1,354Net increase (decrease) in cash and cash equivalents1,985,6811,752,416(2,953,366)(415,973)Cash, cash equivalents, and restricted cash, beginning of year6,774,2668,759,94710,512,3631,480,635Cash, cash equivalents, and restricted cash, end of year8,759,94710,512,3637,558,9971,064,662Supplemental disclosures of cash flow information:Income taxes paid(1,213,913)(904,947)(852,562)(120,081)Interest paid (not including interest paid to investors of consolidated trusts) (13,757)(10,862) (12,868) (1,812)Supplemental disclosure of significant non-cash investing and financing activities:Payables for dividends:177,518177,518——Payables for capitalized issuance costs—15,904——Reconciliation to amounts on consolidated balance sheets:Cash and cash equivalents 6,116,3607,165,584 4,177,890 588,443Restricted cash 2,643,5873,346,779 3,381,107 476,219Total cash, cash equivalents, and restricted cash8,759,94710,512,363 7,558,997 1,064,662The accompanying notes are an integral part of these consolidated financial statements.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-101.ORGANIZATION AND PRINCIPAL ACTIVITIESQifu Technology, Inc. (the “Company”) was incorporated in Cayman Islands with limited liability on April 27, 2018. The Company, itssubsidiaries, its consolidated variable interest entities (“VIEs”) (together, the “Group”) are engaged in matching individual borrowers with creditdemand to a diversified pool of financial institutions with credit to supply through a financial technology platform.The Company’s significant subsidiaries and its consolidated Variable Interest Entities as of December 31, 2023 are as follows: Date of Place ofIncorporationIncorporationSubsidiariesHK Qirui International Technology Company Limited (“HK Qirui”) June 14, 2018 Hong KongShanghai Qiyue Information & Technology Co., Ltd. (“Qiyue”) August 7, 2018 PRCShanghai Qidi Information Technology Co., Ltd. (“Qidi”)June 27, 2019PRCBeihai Qi’ang Information & Technology Co., Ltd. (“Qi’ang”)December 27, 2022PRCVIEs and VIEs’ Subsidiaries Shanghai Qiyu Information & Technology Co., Ltd. (“Qiyu”) July 25, 2016 PRCFuzhou 360 Online Microcredit Co., Ltd. (“Fuzhou Microcredit”) March 30, 2017 PRCFuzhou 360 Financing Guarantee Co., Ltd. (“Fuzhou Guarantee”) June 29, 2018 PRCHistory of the GroupThe Group started its business in 2016 through Qiyu, a limited liability company in the People’s Republic of China (“PRC”). In 2018, theCompany undertook a series of transactions to redomicile its business from the PRC to the Cayman Islands and established intermediary companiesof HK Qirui and Qiyue (“WFOE”) for the purpose of establishing a VIE structure of the Group. The WFOE entered into VIE agreements whicheffectively provided control to the WFOE over the operations of the VIEs.The VIE arrangementPRC laws and regulations prohibit or restrict foreign control of companies involved in provision of internet content and certain financebusiness. To comply with these foreign ownership restrictions, the Company operates substantially all of its service through its VIEs in the PRC.The VIEs hold leases and other assets necessary to provide services and generate the majority of the Company’s revenues. To provide theCompany effective control over the VIEs and the ability to receive substantially all of the economic benefits of the VIEs, a series of contractualarrangements were entered into amongst Qiyue (“WFOE”), VIEs and their beneficial shareholders. In June 2022, the set of VIE agreements wereterminated and replaced by a set of new VIE agreements signed by the same parties, with no material changes to the major terms.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-111.ORGANIZATION AND PRINCIPAL ACTIVITIES – continuedThe VIE arrangement – continuedVoting Proxy AgreementPursuant to the voting proxy agreement entered into among WFOE, Qiyu and Shanghai Qibutianxia Information Technology Co., Ltd.(formerly known as Beijing Qibutianxia Technology Co., Ltd. “Qibutianxia”), the sole Registered Shareholder of Qiyu, Qibutianxia wouldirrevocably authorize the WFOE or any person designates by the WFOE to act as its attorney-in-fact to exercise all of its rights as a shareholder ofQiyu, including, but not limited to, the right: (i) to convene and participate in shareholders’ meetings pursuant to the constitutional documents ofQiyu in the capacity of a proxy of Qibutianxia; (ii) to exercise the voting rights pursuant to the relevant PRC laws and regulations and the articlesof Qiyu, on behalf of Qibutianxia, and adopt resolutions, including but not limited to dividend rights, sale or transfer or pledge or disposal of part orall of Qiyu’s equity; (iii) to nominate, designate or appoint and remove the legal representative, directors, supervisors and other senior managementof Qiyu pursuant to the constitutional documents of Qiyu.The Voting Proxy Agreement has an indefinite term and will be terminated in the event that (i) it is unilaterally terminated by the WFOE,or (ii) it is legally permissible for the WFOE, the Company or any of the subsidiaries to hold equity interests directly or indirectly in Qiyu and theWFOE or its designated person is registered to be the sole shareholder of Qiyu.Equity Interest Pledge AgreementPursuant to the equity interest pledge agreement, Qibutianxia agreed to pledge all of its equity interests in Qiyu to the WFOE as a securityinterest to guarantee the performance of contractual obligations and the payment of outstanding debts under the VIE arrangements. In the event of abreach by Qiyu or Qibutianxia of contractual obligations under the VIE Agreements, the WFOE, as pledgee, will have the right to dispose of thepledged equity interests in Qiyu. Qibutianxia has undertaken to the WFOE, among other things, not to transfer its equity interests in Qiyu and notto create or allow any pledge thereon that may affect the rights and interest of the WFOE without its prior written consent.Exclusive Option AgreementPursuant to the exclusive option agreement entered into among WFOE, Qiyu and Qibutianxia, Qibutianxia irrevocably grants the WFOEan exclusive option to purchase or designate one or more persons to purchase, all or part of its equity interests in Qiyu, and Qiyu irrevocably grantsthe WFOE an exclusive option to purchase all or part of its assets, subject to applicable PRC laws. The WFOE or its designated person mayexercise such options at the lowest price permitted under applicable PRC laws. Qibutianxia and Qiyu have undertaken that, among other things,without the WFOE’s prior written consent, including but not limited to:(i) they shall not in any manner supplement, change or amend theconstitutional documents of Qiyu, increase or decrease their registered capital, or change the structure of their registered capital in other manner;(ii) they shall not at any time following the signing of the Exclusive Option Agreement, sell, transfer, pledge or dispose of in any manner any assetsof Qiyu or interest in the business or revenues of Qiyu, or allow the encumbrance thereon of any security interest; (iii) they shall not cause orpermit Qiyu to merge, consolidate with, acquire or invest in any person; (iv) Qiyu shall not in any manner distribute dividends to its shareholder,provided that upon the written request of the WFOE, Qiyu shall immediately distribute all distributable profits to its shareholders; (v) at the requestof the WFOE, they shall appoint any persons designated by the WFOE as the directors, supervisors and/or senior management of Qiyu or terminateexisting directors, supervisors and/or senior management of Shanghai Qiyu, and perform all relevant resolutions and filing procedures.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-121.ORGANIZATION AND PRINCIPAL ACTIVITIES – continuedThe VIE arrangement – continuedExclusive Option Agreement – continuedThe Exclusive Option Agreement has an indefinite term commencing from its date of signing unless and until all the equity interests andassets subject to the agreement have been transferred to the WFOE and/or its designated person and the WFOE and its subsidiaries or affiliates canlegally operate the business of Qiyu, whereby the exclusive option agreement shall terminate. WFOE is entitled to unilaterally terminate theExclusive Option Agreement while other parties to the Exclusive Option Agreement may not terminate the Exclusive Option Agreementunilaterally, unless otherwise provided under PRC laws.Exclusive Business Cooperation AgreementPursuant to the exclusive business cooperation agreement between the WFOE and Qiyu, the WFOE will have the exclusive right toprovide Qiyu with the consulting and technical services required by Qiyu’s business. In consideration of the services provided by the WFOE, Qiyushall pay services fees to the WFOE without contravening PRC laws, equal to the entirety of the total consolidated net profit of the Qiyu and itssubsidiaries, after the deduction of any accumulated deficit in respect of the preceding financial year(s) (if applicable), operating costs, expenses,taxes and other payments required by the relevant laws and regulations to be reserved or withheld. The WFOE may also adjust the scope andamount of services fees in its discretion taking into account factors including but not limited to: (i) the complexity of the services provided by theWFOE; (ii) the exact content and business value of the services; and (iii) the market price of services of similar types. In addition, absent the priorwritten consent of the WFOE, during the term of the exclusive business cooperation agreement, with respect to the services subject to the exclusivebusiness cooperation agreement and other matters, Qiyu and its subsidiaries shall not accept the same or any similar services provided by any thirdparty and shall not establish cooperation relationships similar to that formed by the exclusive business cooperation agreement with any third party.The WFOE would have the exclusive ownership of all the intellectual property rights created as a result of the performance of the exclusivebusiness cooperation agreement to the extent permitted by applicable PRC laws. The Company considers that the arrangement will ensure theeconomic benefits generated from the operations of the consolidated affiliated entities flow to the WFOE and hence, the Group as a whole.The exclusive business cooperation agreement has an indefinite term. The exclusive business cooperation agreement may be terminatedby the WFOE: (i) when Qiyu becomes insolvent, bankrupt or subject to liquidation or dissolution procedures; (ii) upon the transfer of the entireequity interests in and the transfer of all assets of Qiyu to the WFOE or its designated person pursuant to the exclusive option agreement enteredinto between the WFOE, Qiyu and Qibutianxia; (iii) when it is legally permissible for the WFOE to hold equity interests directly or indirectly inQiyu and the WFOE or its designated person is registered to be the shareholder of Qiyu; (iv) when relevant government authorities refuse to renewthe expired operating period of Qiyu or the WFOE; (v) by giving Qiyu a 30 days’ prior written notice of termination; or (vi) Qiyu breaches theexclusive business cooperation agreement. Qiyu is not contractually entitled to unilaterally terminate the exclusive business cooperation agreementwith the WFOE.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-131.ORGANIZATION AND PRINCIPAL ACTIVITIES – continuedThe VIE arrangement – continuedLoan AgreementPursuant to the loan agreement among the WFOE, Qiyu and Qibutianxia, the WFOE is entitled to provide interest-free loans, to the extentpermitted by laws, regulations and industry policies of the PRC from time to time at such time and amount as it deems appropriate to Qibutianxiafor the purpose of Qiyu’s business operation and development, including but not limited to directly injecting such funds to the registered capital ofQiyu. Each of the loans made under this loan agreement has no fixed term, and unless otherwise agreed, the WFOE shall unilaterally decide whento withdraw the loans, provided that the WFOE shall notify Qibutianxia in writing one month in advance. The loan agreement shall remain in effectduring Qiyu’s term (and the renewable period stipulated by the laws of the PRC), and shall automatically terminate after the WFOE and/or otherentities designated by the WFOE fully exercise all their rights under the exclusive option agreement.The Company also has some other sets of VIE contractual arrangements. The arrangements with its significant VIEs include thearrangement among the WFOE, Fuzhou Guarantee and Qibutianxia, which are substantially similar to the set with Qiyu as described above. InApril 2021, the contractual arrangements amongst WFOE, Fuzhou Microcredit and Qibutianxia were terminated and Qibutianxia transferred all ofits equity interest in Fuzhou Microcredit to Qiyu. As a result, Fuzhou Microcredit became a wholly-owned subsidiary of Qiyu. This transaction hadno impact to the consolidated financial statements.Risks in relation to VIE structureThe Company believes that the contractual arrangements with Qiyu, Fuzhou Guarantee and their shareholders, Qibutianxia, are incompliance with existing PRC laws and regulations and are valid, binding and enforceable and will not result in any violation of applicable PRClaws or regulations. However, the PRC regulatory authorities may take a contrary view. If the ownership structure and contractual arrangementswere found to be in violation of any existing PRC laws and regulations, the regulatory authorities may exercise their discretion and:●revoke the business and operating licenses of WFOE or consolidated affiliated entities;●restrict the rights to collect revenues from any of the Company’s PRC subsidiaries;●discontinue or restrict the operations of the Company’s PRC subsidiaries or consolidated affiliated entities;●require the Company’s PRC subsidiaries or consolidated affiliated entities to restructure the relevant ownership structure oroperations;●restrict or prohibit the use of proceeds from offshore offering to finance business and operations in PRC;●take other regulatory or enforcement action including levying fines that could be harmful to the Company’s business; or●impose additional conditions or requirements with which the Company may not be able to comply.The imposition of any of these penalties may result in a material adverse effect on the Company’s ability to conduct its business. Inaddition, if the imposition of any of these penalties causes the Company to lose the rights to direct the activities of the VIEs or the right to receivesubstantially all of their economic benefits, the Company would no longer be able to consolidate the financial results of the VIEs.These contractual arrangements allow the Company to effectively control Qiyu, Fuzhou Guarantee, and to derive substantially all of theeconomic benefits from them. Accordingly, the Company treats Qiyu, Fuzhou Guarantee as VIEs. Because the Company is the primary beneficiary,the Company has consolidated the financial results of the VIEs.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-141.ORGANIZATION AND PRINCIPAL ACTIVITIES – continuedThe VIE arrangement – continuedRisks in relation to VIE structure – continuedThe following financial statement amounts and balances of the VIEs were included in the accompanying consolidated financial statementsafter elimination of intercompany transactions and balances. The table below does not include the financial information of the consolidated trusts(see note 2 “Consolidated Trusts”): December 31, December 31, 20222023RMBRMBASSETS Cash and cash equivalents 6,437,420 4,037,256Restricted cash 2,328,673 2,148,303Short term investments57,00015,000Security deposit prepaid to third-party guarantee companies396,699207,071Funds receivable from third party payment service providers 1,158,781 1,603,419Accounts receivable and contract assets, net1,672,2322,282,190Financial assets receivable, net 2,982,076 2,522,543Amounts due from related parties 280,199 13,056Loans receivable, net 5,404,966 15,286,172Prepaid expenses and other assets 239,522 216,087Accounts receivable and contract assets, net-noncurrent261,060135,300Financial assets receivable, net-non current688,843596,330Amounts due from related parties, non-current32,5294,178Loans receivable, net-noncurrent2,625,1502,629,790Property and equipment, net 39,840 211,041Land use rights, net998,185977,461Intangible assets 4,087 4,096Deferred tax assets 951,258 1,005,666Other non-current assets37,83923,327Total Assets 26,596,359 33,918,286LIABILITIES Accrued expenses and other current liabilities 1,655,653 1,805,929Amounts due to related parties 113,697 80,376Short term loans150,000798,586Guarantee liabilities-stand ready 4,120,346 3,949,601Guarantee liabilities-contingent3,418,3913,207,264Income tax payable614,687648,893Other tax payable149,570126,765Deferred tax liabilities77,94269,477Other long-term liabilities32,70895,638Total liabilities 10,332,994 10,782,529Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-151.ORGANIZATION AND PRINCIPAL ACTIVITIES – continuedThe VIE arrangement – continuedRisks in relation to VIE structure – continuedYear endedYear endedYear ended December 31, 2021 December 31, 2022 December 31, 2023RMBRMBRMBNet revenue 13,674,22312,983,458 12,902,396Net income 5,462,1502,443,983 3,178,907 Year endedYear endedYear endedDecember 31, 2021December 31, 2022 December 31, 2023RMBRMBRMBNet cash provided by operating activities 5,431,6543,891,528 4,406,482Net cash used in investing activities (1,427,958)(6,750,277) (11,176,472)Net cash provided by (used in) financing activities 359,082(578) 721,352The consolidated VIEs contributed 82%, 78% and 79% of the Group’s consolidated revenue for the years ended December 31, 2021, 2022and 2023, respectively. As of December 31, 2022 and 2023, the consolidated VIEs accounted for an aggregate of 66% and 74%, respectively, of theconsolidated total assets, and 48% and 45%, respectively, of the consolidated total liabilities.There are no assets of the VIEs that are collateral for the obligations of the VIEs and their subsidiaries and can only be used to settle theobligations of the VIEs and their subsidiaries. There are no terms in any arrangements, considering both explicit arrangements and implicit variableinterests that require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, theCompany or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to its VIEs through loans tothe shareholder of the VIEs.Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of itsstatutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentationThe accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the UnitedStates of America (“U.S. GAAP”).Basis of consolidationThe accompanying financial statements include the financial statements of the Company, its subsidiaries, and consolidated VIEs. All inter-company transactions and balances have been eliminated.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-162.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedConsolidated TrustsLoans funded by the financial institution partners in the Group’s loan facilitation business are typically disbursed to the borrowers directlyfrom such partners. Upon the need of certain financial institution partners, loans from such financial institution partners are funded and disbursedindirectly through trusts. Some trusts were specifically set up for the purpose of assets backed securities (“ABS”) issuance to the asset backedspecial plans (the “ABS plans”). The Group also transferred part of the loans receivable funded by Fuzhou Microcredit to the ABS plans. Theconsolidated trusts and ABS plans are referred to as “the consolidated trusts” collectively.The trusts fund loans facilitated by the Group using the funds received from its beneficiaries to the borrowers. The trusts provide thereturns to its beneficiaries through interest payments made by the borrowers. The borrowers are charged with the interests by the trusts. For themajority of trusts, the Group is either entitled to the residual profit in the trusts or the Group has provided guarantee to the trusts by agreeing torepurchase any loans that are delinquent for 30 to 90 days from which the Group absorbs the credit risk of the trusts resulting from borrowers’delinquencies,or both. The Group determined that the residual profit or the guarantee represents a variable interest in the trusts through which theGroup has the right to receive benefits or the obligation to absorb losses from the trusts that could potentially be significant to the trusts. Since thetrusts only invest in the loans facilitated by the Group and the Group continues to service the loans through a service agreement post originationand has the ability to direct default mitigation activities, the Group has the power to direct the activities of the trusts that most significantly impactthe economic performance of the trusts. As a result, the Group is considered the primary beneficiary of the trusts and consolidated the trusts’ assets,liabilities, results of operations and cash flows. For the ABS plans set up to invest in the loans funded by Fuzhou Microcredit, the Group held thewhole subordinated tranche securities to provide credit enhancement. Such subordinate rights represented a variable interest in the ABS plansthrough which the Group has the right to receive benefits or the obligation to absorb losses that could potentially be significant to the ABS plans.As Fuzhou Microcredit continues to service the loans and has the ability to direct default mitigation activities, it has the power to direct theactivities of the the ABS plans that most significantly impact the economic performance. As a result, the Group is considered the primarybeneficiary of the ABS plans and consolidated the the ABS plans’ assets, liabilities, results of operations and cash flows.In 2021, the Group received letter of approval for listing and transferring ABS on Shanghai Stock Exchange and Shenzhen StockExchange within the issue scale of RMB8 billion and RMB4 billion, respectively. In 2022, the Group also received letter of approval for listing andtransferring ABS on Shanghai Stock Exchange and Shenzhen Stock Exchange within the issue scale of RMB2.9 billion and RMB2.5 billion,respectively. In 2023, the Group also received letter of approval for listing and transferring ABS on Shanghai Stock Exchange and Shenzhen StockExchange within the issue scale of RMB 7.0 billion and RMB 5.5 billion, respectively. After proceeds are collected from ABS issuances, the trustbeneficial rights, or the loans receivable, were transferred, as underlying assets, to the ABS plans. The beneficial rights and loans receivable ofRMB6.5 billion,RMB5.4 billion and RMB 6.9 billion in trusts were transferred to the ABS plans for the years ended December 31, 2021, 2022 and2023, respectively. The loans receivable of RMB0.3 billion, RMB2.6 billion and RMB 5.6 billion in Fuzhou Microcredit were transferred to theABS plans for the years ended December 31, 2021, 2022 and 2023, respectively. The ABS plans were securitized and listed on Shanghai StockExchange and Shenzhen Stock Exchange, with terms of one or two years. As of December 31, 2023, the Group held the whole subordinatedtranche securities to provide credit enhancement. The underlying trusts were continued to be consolidated by the Group and senior tranchesecurities held by external financial institution partners were recorded as “payable to investors of the consolidated trusts – current” with the balanceof RMB4,603,886 and RMB5,043,700 as of December 31, 2022 and 2023, respectively and “payable to investors of the consolidated trusts –noncurrent” with the balance of RMB2,519,600 and RMB1,403,800 as of December 31, 2022 and 2023, respectively on the consolidated balancesheet. Loans receivable remains on balance sheet of Fuzhou Microcredit and the senior tranche securities of the ABS plans held by externalfinancial institution partners were recorded as “payable to investors of the consolidated trusts – current” with the balance of RMB445,000 andRMB3,838,800 as of December 31, 2022 and 2023, respectively and “payable to investors of the consolidated trusts – noncurrent” with the balanceof RMB1,802,000 and RMB2,178,000 as of December 31, 2022 and 2023, respectively on the consolidated balance sheet.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-172.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedConsolidated Trusts – continuedAs of December 31, 2022 and 2023, the balance of delinquent loans repurchased by the Group from the consolidated trusts areRMB1,498,233 and RMB 1,161,868, respectively. As of December 31, 2022 and 2023, the balance of performing loans upon liquidation of certainconsolidated trusts repurchased by the Group from the consolidated trusts per the contracts agreed with the counterparty are RMB52,104 and RMB11,914, respectively.For the years ended December 31, 2021, 2022 and 2023, the provision for loan losses of RMB661,402, RMB673,382 and RMB 766,551were charged to the consolidated statements of operations, respectively. Loans receivable of RMB267,322, RMB714,630 and RMB759,223 of arewritten off for the years ended December 31, 2021, 2022 and 2023, respectively.Interest on loans receivable is accrued and credited to income as earned. The Group determines a loan’s past due status by the numberof days that have elapsed since a borrower has failed to make a contractual loan payment. Accrual of interest is generally discontinued when theloan principal and interest are deemed to be uncollectible. In general, loans receivable is identified as uncollectible when it is determined to be notprobable that the balance can be collected.The following financial statement amounts and balances of the consolidated trusts were included in the accompanying consolidatedfinancial statements after elimination of intercompany transactions and balances: December 31, 2022 December 31, 2023RMBRMBASSETS Restricted cash 1,018,106 1,232,804Loans receivable, net 9,942,696 9,318,315Prepaid expenses and other assets117,51692,287Loans receivable, net-noncurrent511,843268,215Total Assets 11,590,161 10,911,621 December 31, 2022 December 31, 2023RMBRMBLIABILITIES Payable to investors of the consolidated trusts-current 6,099,520 8,942,291Accrued expenses and other current liabilities 8,378 10,120Other tax payable35,7664,314Payable to investors of the consolidated trusts-noncurrent4,521,6003,581,800Total liabilities 10,665,264 12,538,525Year endedYear endedYear endedDecember 31, December 31, December 31, 2021 2022 2023RMBRMBRMBNet revenue 1,704,2672,275,833 2,350,404Net income 708,9081,101,477 948,139Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-182.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedConsolidated Trusts – continuedYear endedYear endedYear endedDecember 31, December 31, December 31, 2021 2022 2023RMBRMBRMBNet cash provided by operating activities 1,329,5541,784,344 1,664,700Net cash (used in)/ provided by investing activities (4,619,696)(609,509) 110,926Net cash provided by financing activities 1,735,3484,245,628 1,939,011The consolidated trusts contributed 10%, 14% and 14% of the Group’s consolidated revenue for the years ended December 31, 2021, 2022and 2023 respectively. As of December 31, 2022 and December 31, 2023, the consolidated trusts accounted for an aggregate of 29% and 24%,respectively, of the consolidated total assets, and 50% and 53% respectively, of the consolidated total liabilities.There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company toprovide financial support to the consolidated trusts.The Group believes that the assets of the consolidated trusts could only be used to settle the obligations of the consolidated trusts.Use of estimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions thataffect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates. Significant accountingestimates reflected in the Group’s financial statements include revenue recognition, financial assets receivable, guarantee liabilities, allowance forloans receivable, allowance for uncollectible accounts receivable and contract assets, allowance for financial assets receivable, and valuationallowance for deferred tax assets.Revenue recognitionThrough cooperating with channel partners to direct users with credit needs to its app, the Group provides services through its facilitationof loan transactions between the borrowers and the financial institution partners through the use of two business models.The first business model involves the Group providing credit driven services through facilitating loans that are guaranteed by the Groupdirectly or through third-party guarantee companies and insurance companies (referred to as “off-balance capital heavy loans” hereafter), orproviding loans through the Consolidated Trusts and Fuzhou Microcredit. In either cases, the Group ultimately bears all the credit risks when theborrowers default.The second business model involves the Group providing platform services through facilitating loans with no or partial guaranteeprovided by the Group (referred to as “capital light loans” hereafter) and referral services. In these cases, the Group bears limited credit risks whenthe borrowers default.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-192.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedRevenue recognition – continuedLoan facilitation and servicing feesThe Group earns loan facilitation and servicing fees from both off-balance capital heavy loans and capital light loans. The Group’sservices mainly consist of:1)Performing customer acquisition, initial and credit screening and advanced risk assessment on the borrowers on its mobile platformand matching the financial institution partners to potential qualified borrowers and facilitating the execution of loan agreementsbetween the parties, referred to as “Loan Facilitation Services” and;2)Providing collection and other repayment processing services for the financial institution partners over the loan term, referred to as“Post Facilitation Services”;Based on the agreements entered into between the Group’s financial institution partners and borrowers, the Group determined that it is notthe legal lender or borrower in the loan origination and repayment process. Accordingly, the Group does not record loans receivable and payablearising from the loan between the financial institution partners and the borrowers.The Group charges service fees directly from financial institution partners based on the contractual agreements. The Group cooperateswith insurance companies and financing guarantee companies to provide guarantee for the loans between the borrowers and financial institutionpartners. Under this cooperation, the Group charges guarantee fees from the borrower, including insurance premium collected on behalf of theinsurance company.For the loans the Group is entitled to the full service fee regardless of whether the borrowers choose to early repay or not, the Group hasthe unconditional right to the consideration. For the loans facilitated with borrowers who have the option of early repayment and upon terminationthey do not have the obligation to pay the remaining monthly service fees or not have to pay the excessive portion if the total fees are more than24% of the origination principal on an annualized basis, the Group’s right to consideration for the service fees is conditional on whether or not theborrowers repay in advance.For off-balance capital heavy loans, the Group enjoys a fixed rate of service fees. For capital light loans, the Group enjoys a fixed rate ofservice fees, while in certain cases, the service fee rate the Group entitled to is subject to adjustment based on the actual default rate of theunderlying loans.Under the off-balance capital heavy loans, the Group also provides a guarantee service to its financial institution partners whereas in theevent of default, the financial institution partners are entitled to receive unpaid interest and principal from the Group. Given that the Groupeffectively takes on all of the credit risk of the borrowers and are compensated by the service fees charged, the guarantee is deemed as a service andthe guarantee exposure is recognized as a stand-ready obligation in accordance with ASC Topic 460, Guarantees (see accounting policy forGuarantee Liabilities). Under the capital light model, the Group either provides no guarantee or partial guarantee service. Under the partialguarantee scenario, the Group agrees with each financial institution partner a fixed upper limit of guarantee amount the Group is liable of. If theaccumulated defaulted loan amount exceeds the agreed upper limit, the excess portion is borne by the financial institution partners. The Companyceased to provide guarantee for the capital light model in 2023.The Group recognize revenue to depict the transfer of promised services to customers in an amount that reflects the consideration to whichthe Group expects to be entitled in exchange for those services. To achieve that core principle, the Group applies the following steps:●Step 1: Identify the contract (s) with a customer●Step 2: Identify the performance obligations in the contract●Step 3: Determine the transaction price●Step 4: Allocate the transaction price to the performance obligations in the contract●Step 5: Recognize revenue when (or as) the entity satisfies a performance obligationTable of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-202.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedRevenue recognition – continuedLoan facilitation and servicing fees – continuedThe Group determines that both the financial institution partners and the borrowers are its customers because they both receive servicesprovided by the Group pursuant to the contractual terms among the Group, the borrowers and the financial institution partners. For each loanfacilitated on the platform, the Group considers the loan facilitation service, post facilitation service and guarantee service (not applicable forarrangements where the Group does not provide guarantee service) as three separate services. Of which, the guarantee service is accounted for inaccordance with ASC Topic 460, Guarantees, at fair value. Revenue from the guarantee services is recognized once the Group is released from theunderlying risk. The Group recognized the stand-ready guarantee liability at the inception of each loan, and it was amortized to “revenue fromreleasing of guarantee liabilities” over the term of the guarantee (see accounting policy for Guarantee Liabilities).While the post-origination serviceis within the scope of ASC Topic 860, the ASC Topic 606 revenue recognition model is applied due to the lack of definitive guidance in ASC Topic860. The loan facilitation service and post-origination service are two separate performance obligations under ASC 606, as these two deliverablesare distinct in that customers can benefit from each service on its own and the Group’s promises to deliver the services are separately identifiablefrom each other in the contract.The Group determines the total transaction price to be the service fees chargeable from the borrowers or the financial institution partners.The Group’s transaction price includes variable considerations in the form of prepayment risk of the borrowers and service fee allocation rate undercapital light model under certain agreements. The Group estimates the prepayment risk of borrowers using the expected value approach on thebasis of historical information and current trends of the collection percentage of the borrowers. The service fee allocated to the Group under capitallight model would be fluctuated along with the actual default rate of the loans facilitated. The Group uses the service fee allocation rate applicableto the estimated default rate of the underlying loans. The transaction price is allocated amongst the guarantee service, if any, and the other twoperformance obligations.The Group first allocates the transaction price to the guarantee liabilities, if any, in accordance with ASC Topic 460, Guarantees whichrequires the guarantee to be measured initially at fair value based on the stand-ready obligation. Then the remaining considerations are allocated tothe loan facilitation services and post facilitation services using their relative standalone selling prices consistent with the guidance in ASC 606.The Group does not have observable standalone selling price information for the loan facilitation services or post facilitation services because itdoes not provide loan facilitation services or post facilitation services on a standalone basis. There is no direct observable standalone selling pricefor similar services in the market reasonably available to the Group. As a result, the estimation of standalone selling price involves significantjudgment. The Group uses expected cost plus margin approach to estimate the standalone selling prices of loan facilitation services and postfacilitation services as the basis of revenue allocation. In estimating its standalone selling price for the loan facilitation services and post facilitationservices, the Group considers the cost incurred to deliver such services, profit margin for similar arrangements, customer demand, effect ofcompetitors on the Group’s services, and other market factors.For each type of service, the Group recognizes revenue when (or as) the entity satisfies the service/ performance obligation by transferringthe promised service (that is, an asset) to customers. Revenues from loan facilitation services are recognized at the time a loan is originatedbetween the financial institution partners and the borrowers and the principal loan balance is transferred to the borrowers, at which time thefacilitation service is considered completed. Revenues from post facilitation services are recognized on a straight-line basis over the term of theunderlying loans as the post- facilitation services are a series of distinct services that are substantially the same and that have the same pattern oftransfer to the financial institution partners.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-212.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedRevenue recognition – continuedRevenue from releasing of guarantee liabilitiesFor the years ended December 31, 2021, 2022 and 2023, revenue from guarantee liabilities were RMB5,583,135, RMB5,899,153 andRMB 4,745,898, respectively.IncentivesThe Group provides incentives to the borrowers by providing coupons which can only be used as a reduction of repayment and ultimatelyreduced the service fees received by the Group. Because the borrower does not enter into any enforceable commitment by picking up the coupons,no contract arises from the coupons. Therefore the Group records the incentives as a deduction to revenue upon redemption.Financing incomeThe Group provides loans through the Consolidated Trusts and Fuzhou Microcredit. The interest rate charged to the borrowers are fixed.The Group recognized revenue under “financing income” the fees and interests charged to the borrowers over the lifetime of the loans using theeffective interest method.Referral service feesThe Group provides the referral services to other platforms, by referring to them the borrowers who have not passed the credit assessment.Specifically, the Group receives a fixed rate of referral fee from the platforms once the borrowers are accepted by the other funding providers onthose platforms. The revenue is recognized once the referral is completed as confirmed by those platforms.The Group provides the referral services to the financial institution partner and other lending companies also through the Group’sIntelligence Credit Engine platform, by matching the borrowers and the financial institution partner and other lending companies. For loansoriginated through the platform, the Group typically charges the financial institution partner and other lending companies mainly a fixed rate ofservice fees. The revenue is recognized upon receipt of confirmation by the financial institution partner and other lending companies of loanfacilitation at which time the referral service is deemed completed.For the years ended December 31, 2021, 2022 and 2023, RMB620,317, RMB561,372 and RMB950,016 were generated from the referralservice, respectively.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-222.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedRevenue recognition – continuedOther service feesOther service fees mainly pertain to the revenue from late fees from borrowers under off-balance capital heavy loans and capital lightloans.The following table presents the disaggregation of revenue for the years ended December 31, 2021, 2022 and 2023:Year endedYear endedYear endedDecemberDecemberDecember 31, 2021 31, 2022 31, 2023RMBRMBRMBCredit driven services 10,189,167 11,586,251 11,738,560Loan facilitation and servicing fees-capital heavy 2,326,027 2,086,414 1,667,119Revenue from loan facilitation servicesAt a point in time1,399,3101,442,1001,081,699Revenue from post-facilitation servicesOvertime926,717644,314585,420Financing incomeOvertime 2,184,128 3,487,951 5,109,921Revenue from releasing of guarantee liabilitiesOvertime5,583,1355,899,1534,745,898Other services feesAt a point in time95,877112,733215,622Platform services6,446,4784,967,6794,551,467Loan facilitation and servicing fees-capital light 5,677,941 4,124,726 3,213,955Revenue from loan facilitation servicesAt a point in time4,484,6322,656,5112,096,085Revenue from post-facilitation servicesOvertime1,193,3091,468,2151,117,870Referral services feesAt a point in time620,317561,372950,016Other services feesAt a point intime/Overtime 148,220 281,581 387,496Total net revenue 16,635,645 16,553,930 16,290,027Total revenue recognized at a point in time is RMB6,688 million, RMB4,940 million and RMB4,485 million for the years endedDecember 31, 2021, 2022 and 2023. Total revenue recognized over time is RMB9,947 million, RMB11,614 million and RMB11,805 million forthe years ended December 31, 2021, 2022 and 2023.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-232.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedRevenue recognition – continuedAccounts receivable and Contract Assets, netFor the loans the Group is entitled to the full service fee regardless of whether the borrowers choose to early repay or not, the Group hasthe unconditional right to the consideration and an accounts receivable is recorded for the monthly service fees allocated to loan facilitation servicethat have already been delivered in relation to loans facilitated on the Group’s platform when recognizing revenue from loan facilitation service.For the loans facilitated with borrowers who have the option of early repayment and upon termination they do not have the obligation to pay theremaining monthly service fees or do not have to pay the excessive portion if the total fees are more than 24% of the origination principal on anannualized basis, the Group’s right to consideration for the service fees of facilitation service is conditional on whether or not the borrowers repayin advance. In these instances, the Group records a corresponding contract asset when recognizing revenue from loan facilitation service.Accounts receivable and contract assets are stated at the historical carrying amount net of write-offs and allowance for collectability inaccordance with ASC Topic 326. The Group established an allowance for uncollectible accounts receivable and contract assets based on estimates,which incorporate historical experience and other factors surrounding the credit risk of specific type of customers which is essentially the expectednet default rates used in determining the fair value of guarantee liabilities. The Group evaluates and adjusts its allowance for uncollectible accountsreceivable and contract assets on a quarterly basis or more often as necessary.Uncollectible accounts receivable and contract assets are written off when the consideration entitled to be received by the Group is dueand a settlement is reached for an amount that is less than the outstanding historical balance or when the Group has determined the balance will notbe collected. Contract assets and accounts receivable are identified as uncollectible when the underlying loan is determined to be not probable thatthe balance can be collected. The Group will write off contract assets and accounts receivable and the corresponding provisions if the underlyingloan is deemed uncollectible.The Group did not recognize any contract liabilities during the periods presented. The amount of the transaction price allocated toperformance obligations that are unsatisfied as of December 31, 2022 and 2023 are RMB1,525,972 and RMB1,138,557, respectively, all of whichpertain to post- origination service. Remaining unsatisfied performance obligations that will be recognized as revenue by the Group within thefollowing 12 months are 80% and 87% of the remaining performance obligations as of December 31, 2022 and 2023 respectively, with theremainder recognized thereafter.The Group determines that acquisition cost paid for financial institution partners based on the amount of loans facilitated represents coststo obtain a contract qualifying for capitalization since these payments are directly related to sales achieved during a period. Such cost was notmaterial during the periods presented.Revenue adjustments to performance obligations satisfied (or partially satisfied) in prior periods primarily due to changes in variableconsideration were RMB210,818 and RMB330,351 for the years ended December 31, 2021 and 2022, respectively. There is no significantadjustment related to this aspect for the year ended December 31, 2023.The Group is subject to value-added tax and other surcharges including education surtax and urban maintenance and construction tax, onthe services provided in the PRC. The Group has made an accounting policy election to exclude from the measurement of the transaction price alltaxes assessed by the governmental authority. Such taxes excluded from revenues are RMB795,388, RMB653,023 and RMB991,176, respectively,for the years ended December 31, 2021, 2022 and 2023.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-242.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedAllowance for credit lossesOn January 1, 2020, the Group adopted ASC 326, Financial Instruments—Credit Losses, which requires recognition of allowances uponorigination or acquisition of financial assets at an estimate of expected credit losses over the contractual term of the financial assets (the currentexpected credit loss or the “CECL” model).The Group’s financial assets subject to the CECL model mainly include: loans receivable, accounts receivable, contract assets andfinancial assets receivable, and the allowance for these financial assets is driven by estimated default rate of underlying loans. The Group does notassign internal risk ratings to loans facilitated as they are of small balance and homogeneous. The Group estimates the default rate of loans on apool basis by taking into consideration the historical delinquency rate by vintage, adjusted by specific risks for loans within each vintage, correlatedindustrial and macro-economic factors, and other pertinent information such as CPI and delinquent loan collection rate in assessing futureperformance of the loan portfolio. The Group monitors the delinquency status by vintage of origination and write off delinquent loans timely whenthe loans become uncollectible.The adoption of CECL model does not change the Group’s method used to estimate loan losses. The allowance for loans receivable iscalculated based on estimated default rate of loans facilitated through the Consolidated Trusts or Fuzhou Microcredit. The allowance for accountsreceivable, contract assets, financial assets receivable and accounts receivable, contract assets and financial assets receivables from related parties(recorded as “amounts due from related parties”) is assessed in accordance with the estimated default rate of the underlying off-balance loansfacilitated. Since the allowance is recorded at loan inception based on the estimated collectability over the entire loan tenure and adjusted in eachsubsequent reporting period based on update of relevant information, the adoption of the CECL model does not have material impact on the timingand amount of allowance recognized for these financial assets.Other financial receivables subject to the CECL model mainly include security deposit prepaid to third party guarantee companies, fundsreceivable from third party payment service providers, other receivables from related parties (recorded as “amounts due from related parties”) andother security deposit (recorded as “prepaid expenses and other assets”), which are of short term and shows no historical default record. The Groupdetermines no allowance is needed for these receivables, except for receivables from related parties as financial institution partners, which arebased on the estimated default rate of underlying loans as discussed above.The adoption of ASC 326 also requires the Group to record financial guarantee on a gross basis. As such, the Group recognized a separatecontingent guarantee liability with an allowance for credit losses following the CECL model at the inception of loans facilitated with guaranteeservices provided (see accounting policy for Guarantee Liabilities). The allowance is an estimate of future net-payout by the Group uponborrowers’ default, which is ultimately based on the same estimated default rate of loans facilitated as discussed above.Cash and cash equivalentsCash and cash equivalents mainly consist of funds in banks, which are highly liquid and are unrestricted as to withdrawal or use.Restricted cashRestricted cash represents:(i)Deposit to funding banks which is used to secure timely loan repayment. As of December 31, 2022 and 2023, the amount ofrestricted cash related to deposit to the funding banks is RMB2,328,673 and RMB2,148,303, respectively.(ii)Cash held by the trusts and ABS plans through segregated bank accounts which can only be used to invest in loans or other securitiesas stipulated in the trust agreement and ABS plan. Substantially all trusts and ABS plans have a maximum operating period of threeyears. The cash in the trusts and ABS plans is not available to fund the general liquidity needs of the Group.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-252.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedSecurity deposit prepaid to third-party guarantee companiesSecurity deposit prepaid to third-party guarantee companies mainly represents deposit prepaid to licensed third-party vendors the Groupcooperates with to provide guarantee to secure timely loan repayment for financial institution partners.Funds receivable from third party payment service providersThe Group opened accounts with third party online payment service providers to collect and transfer the loan funds and interest tofinancial institution partners or borrowers. The Group also uses such accounts to collect the transaction fee and service fee, and repay and collectthe default loan principal and interest. The balance of funds receivable from third party payment service providers mainly includes:(a)Funds provided by Fuzhou Microcredit but not yet transferred to the borrowers by third party payment service providers due to thesettlement time lag;(b)Repayment of loan principal and interest amounts received from the borrowers but not yet transferred to the investors by third partypayment service providers due to the settlement time lag; and(c)Accumulated amounts of transaction fee, service fee received, payment and collection of default loan and interest at the balance sheetdate.Fair valueFair value is considered to be the price that would be received from selling an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permittedto be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptionsthat market participants would use when pricing the asset or liability.Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value intothree broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of inputthat is significant to the fair value measurement as follows:Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable forthe asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in marketswith insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable orcan be derived principally from, or corroborated by, observable market data.Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to themeasurement of the fair value of the assets or liabilities.The carrying values of financial instruments, which consist of cash and cash equivalents, restricted cash, short-term investments, securitydeposits, accounts receivable and contract assets, financial assets receivable, funds receivable from third party payment service providers, loansreceivable, short-term loans, payable to investors of the consolidated trusts, and amounts due from/to related parties are recorded at cost whichapproximates their fair value due to the short-term nature of these instruments.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-262.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedFair value – continuedAs of December 31, 2022 and 2023, the Group’s long-term financial instruments that are not reported at fair value on balance sheetinclude loans receivable, payable to investors of the consolidated trusts, accounts receivable and contract assets and financial assets receivable. Fairvalues of these financial instruments are estimated using a discounted cash flow model based on contractual cash flows. The fair values of loansreceivable, accounts receivable and contract assets, financial assets receivable are classified as Level 3 fair value measurement due to thesignificant unobservable inputs concerning the estimation of default rate. The fair value of payable to investors of the consolidated trusts isclassified as Level 2 fair value measurement.As of December 31, 2022 and 2023, the differences between fair values and carrying amount for loans receivable and payable to investorsare due to the discount factor or interests in future periods, and the fair value approximates the carrying amount. For accounts receivable andcontract assets, financial assets receivable, the differences are due to the discount factor solely and the fair value approximates the carrying amount.As of December 31, 2022, the Group has foreign exchange options that are recorded at fair value subsequent to initial recognition on arecurring basis. The fair value of such options amount to RMB4,758, which is estimated based on interbank market quoted price and is classified asLevel 2 in the fair value hierarchy. As of December 31, 2023, the Group has no financial instruments that are recorded at fair value subsequent toinitial recognition on a recurring basis. Fair value measurement on a nonrecurring basis for the years ended December 31, 2022 and 2023 includedthat used in impairment of an equity investment which was classified as a Level 3 fair value measurement.Loans receivableLoans receivable represents loans facilitated through the consolidated trusts and Fuzhou Microcredit. Loans receivable are recorded asreceivable, reduced by a valuation allowance estimated as of the balance sheet date.The allowance for loan losses is determined at a level believed to be reasonable to absorb probable losses inherent in the portfolio as ofeach balance sheet date in accordance with ASC 326 (see accounting policy of “Allowance for credit losses”).The Group charges off loans receivable as a reduction to the allowance for loans receivable when the loan principal and interest aredeemed to be uncollectible. In general, loans receivable is identified as uncollectible when it is determined to be not probable that the balance canbe collected.Property and equipment, netProperty and equipment are recorded at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over thefollowing estimated useful lives:Leasehold improvements Over the shorter of the lease term or expected useful livesElectronic equipment and software 3-10 yearsFurniture and office equipment and others 3-5 yearsGains and losses from the disposal of furniture and equipment are recognized in the consolidated statements of operations.Construction in progress represents property under construction and is stated at cost. Cost comprises original cost of property andequipment, installation, construction and other direct costs. Construction in progress is transferred to buildings and depreciation commences whenthe asset is ready for its intended use.Depreciation expense on property and equipment for the years ended December 31, 2021, 2022 and 2023 were RMB13,483, RMB14,256and RMB15,426, respectively.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-272.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedLand use rights, netLand use rights represent lease prepayments to the local government authorities and are recorded at cost less accumulated amortization.Amortization is provided on a straight-line basis over the term of the agreement, which is 50 years. Under ASC 842, land use rights were identifiedas operating lease right-of-use assets, which is separately disclosed as “Land use rights, net” in the Group’s consolidated balance sheets.GoodwillGoodwill represents the excess of the purchase consideration over the acquisition date amounts of the identifiable tangible and intangibleassets acquired and liabilities assumed from the acquired entity as a result of the Company’s business acquisitions. Goodwill is not amortized but istested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. In accordancewith ASC 350, the Company first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairmenttest. In the qualitative assessment, the Company considers factors such as macroeconomic conditions, industry and market considerations, overallfinancial performance of the reporting unit, and other specific information related to the operations. Based on the qualitative assessment, if it ismore likely than not that the fair value of a reporting unit is less than the carrying amount, the quantitative impairment test is performed. As ofDecember 31, 2023, goodwill related to the reporting unit was not impaired and therefore no impairment loss was recognized.Guarantee liabilitiesFor the loans facilitated through the loan facilitation business, the Group provides a guarantee service to its financial institution partnerswhereas in the event of default, the financial institution partners are entitled to receive unpaid interest and principal from the Group. In general, anyunpaid interest and principal are paid when the borrower does not repay as scheduled.From February 2018, to follow the recent regulation change, particularly the Circular 141 which came into effect in December 2017, theGroup began to involve third-party licensed vendors including financing guarantee companies and insurance companies to provide guarantee fornew loans facilitated for certain financial institution partners. Under the cooperation with financing guarantee companies, these guaranteecompanies initially reimburses the loan principal and interest to the financial institution partners upon borrower’s default. Although the Group doesnot have direct contractual obligation to the financial institution partners for defaulted principal and interest, the Group provides back to backguarantee to the licensed guarantee companies. As agreed in the back to back guarantee contract, the Group would pay the licensed guaranteecompanies for actual losses incurred based on defaulted principal and interest. Under the cooperation with insurance companies, the Group isobligated to provide funding in the form of security deposit with the insurance companies which is used to compensate the financial institutionpartners for borrowers’ default. Given that the Group effectively takes on all of the credit risk of the borrowers, the Group recognizes a stand readyobligation for its guarantee exposure in accordance with ASC Topic 460.Under capital light model, in the condition of no guarantee service provided, the Group does not take any credit risk and not record anyguarantee liabilities associated with those loans. Besides, in the condition of partial guarantee, the amount of guarantee exposure is immaterial forthe years ended December 31, 2022 and 2023.At inception of the guarantee, the Group recognize both a stand-ready guarantee liability under ASC 460 with an associated financialassets receivable, and a contingent guarantee liability with an allowance for credit losses under Current expected credit loss (“CECL”) model.Subsequent to the initial recognition, the ASC 460 stand-ready guarantee is released into guarantee revenue on a straight-line basis over the term ofthe guarantee, while the contingent guarantee is reduced by the payouts made by the Group to compensate the investors upon borrowers’ default.Allowance for credit losses under CECL model was included in “Provision for contingent liabilities” and revalued at each period end to reflectupdated estimation for future net pay-out.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-282.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedFinancial assets receivableFinancial assets receivable is recognized at loan inception which is equal to the stand-ready liability recorded at fair value in accordancewith ASC 460-10-30-2(b) and considers what premium would be required by the Group to issue the same guarantee service in a standalone arm’s-length transaction.The fair value recognized at loan inception is estimated using a discounted cash flow model based on the expected net payouts byincorporating a markup margin. The Group estimates its expected net payouts according to the product mix, default rates, loan terms and discountrate. The financial assets receivable is accounted for as a financial asset, and reduced upon the receipt of the service fee payment from theborrowers. At each reporting date, the Group estimates the future cash flows and assesses whether there is any indicator of impairment. If thecarrying amounts of the financial assets receivable exceed the expected cash to be received, an impairment loss is recorded for the financial assetsreceivable not recoverable and is recorded in the consolidated statements of operations (see accounting policy of “Allowance for credit losses”).Impairment losses of RMB243,139, RMB395,289 and RMB408,585 were recorded in the consolidated statements of operations during the yearsended December 31, 2021, 2022 and 2023, respectively.Facilitation, origination and servicingFacilitation, origination and servicing expense represents cost of services which consists primarily of various expenses and vendor costsrelated to risk management, credit assessment, borrower and system support, payment processing services and third-party collection agencies withfacilitating and servicing loans.Facilitation and origination expense includes expense related to the Group’s borrower referral program under which the Group providescash incentives to existing borrowers who have successfully referred a new borrower/borrowers to the Group. Such cash reward is offered when thenew borrower makes a drawdown. As the cash reward is directly associated with the new borrower acquisition, the Group accounted for it asorigination expense to facilitate the loans. The Group recorded RMB23.9 million, RMB19.9 million and RMB 12.2 million of cash reward for theyears ended December 31, 2021, 2022 and 2023, respectively.Sales and marketing expensesSales and marketing expenses primarily consist of various marketing and promotional expenses and general brand and awareness building,including fees paid to channel partners for directing user traffic to the Group. Salaries and benefits expenses related to the Group’s sales andmarketing personnel and other expenses related to the Group’s sales and marketing team are also included in the sales and marketing expenses. Forthe years ended December 31, 2021, 2022 and 2023, the advertising and marketing related expenses were RMB1,803,243, RMB1,929,186 andRMB 1,693,585, respectively.Funding costsFunding cost consists of interest expense the Group pays to financial institution partners of the consolidated trusts, and issuance costsincurred by the consolidated trusts.Government grantGovernment grants are primarily referred to the amounts received from various levels of local governments from time to time which aregranted for general corporate purposes and to support its ongoing operations in the region. The grants are determined at the discretion of therelevant government authority and there are no restrictions on their use. The government subsidies are recorded as other income in the period thecash is received and it is probable that the underlying requirements if any, will be met. The government grants received by the Group isRMB17,783, RMB231,568 and RMB189,930 for the years ended December 31, 2021, 2022 and 2023, respectively.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-292.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedIncome taxesCurrent income taxes are provided on the basis of net profit (loss) for financial reporting purposes, adjusted for income and expenseswhich are not assessable or deductible for income tax purposes, in accordance with the laws of the relevant tax jurisdictions.Deferred income taxes are provided using assets and liabilities method, which requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets andliabilities are determined on the basis of the differences between financial statements and tax basis of assets and liabilities using enacted tax rates ineffect for the year in which the differences are expected to reverse.Deferred tax assets are recognized to the extent that these assets are more likely than not to be realized. In making such a determination,the management consider all positive and negative evidence, including future reversals of projected future taxable income and results of recentoperation.In order to assess uncertain tax positions, the Group applies a more likely than not threshold and a two-step approach for the tax positionmeasurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition bydetermining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution ofrelated appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely ofbeing realized upon settlement. The Group recognizes interest and penalties, if any, under accrued expenses and other current liabilities on itsconsolidated balance sheets and under other expenses in its consolidated statements of operations. The Group did not have any significantunrecognized uncertain tax positions as of and for the years ended December 31, 2022 and 2023.Value added taxes (“VAT”)The consolidated trusts are subject to VAT at the rate of 3%, while the other entities under the Group are subject to VAT at the rate of 6%as general taxpayers, and related surcharges on revenue generated from providing services. Entities that are VAT general taxpayers are allowed tooffset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded inthe line item of other tax payable on the consolidated balance sheets.Certain risks and concentrationsAs of December 31, 2021, 2022 and 2023, substantially all of the Group’s cash and cash equivalents as well as restricted cash were held inmajor financial institutions located in the PRC, which management considers to be of high credit quality.For the year ended December 31, 2021, financial institution partner A and B funded loans generated greater than 10% of the totalrevenues. For the year ended December 31, 2022, there was no financial institution partner funded loans which generated greater than 10% of thetotal revenues. For the year ended December 31, 2023, financial institution partner C funded loans which generated greater than 10% of the totalrevenues.Share-based compensationShare-based payment transactions with employees, such as stock options and restricted shares are measured based on the grant date fairvalue of the awards, with the resulting expense generally recognized on a straight-line basis in the consolidated statements of operations over theperiod during which the employee is required to perform service in exchange for the award. The Group has elected to account for forfeitures asthey occur.The share-based compensation expense related to the award which contains both service-based and performance-based vesting conditionwill be recognized when it is probable that the performance-based condition will be met, using the graded vesting method. The probability of theperformance condition to be met is not reflected when determining the fair value of the award.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-302.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedForeign currency translationThe reporting currency of the Group is the Renminbi (“RMB”).The Group’s operations are principally conducted through the companieslocated in the PRC where the RMB is the functional currency. The functional currency of the other major entities incorporated outside of PRC isthe United States dollar (“USD”).Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on thetransaction dates. Monetary assets and liabilities denominated in currencies other than functional currency are translated into functional currency atthe exchange rates prevailing at the balance sheet date. Transactions in currencies other than functional currency during the year are converted intothe functional currency at the applicable rates of exchange prevailing on the transaction date. Transaction gains and losses are included in earningsas foreign exchange gains (loss).The Financial Statements of the Group are translated from the functional currency into reporting currency. Assets and liabilitiesdenominated in foreign currencies are translated using the applicable exchange rates at the balance sheet date. Equity accounts other than earningsgenerated in current period are translated at the appropriate historical rates. Revenues, expenses, gains and losses are translated using the periodicaverage exchange rates. The resulting foreign currency translation adjustment are recorded in other comprehensive income (loss).Convenience translationThe Group’s business is primarily conducted in China and all of the revenues are denominated in RMB. The financial statements of theGroup are stated in RMB. Translations of balances in the consolidated balance sheets, and the related consolidated statements of operations,changes in equity and cash flows from RMB into US dollars as of and for the year ended December 31, 2023 are solely for the convenience of thereaders and were calculated at the rate of USD1.00=RMB7.0999, representing the noon buying rate set forth in the H.10 statistical release of theU.S. Federal Reserve Board on December 29, 2023. No representation is made that the RMB amounts could have been, or could be, converted,realized or settled into USD at that rate or at any other rate.Employee defined contribution planFull time employees of the Group in the PRC participate in a government mandated multi-employer defined contribution plan pursuant towhich certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided toemployees. Chinese labor regulations require that the Group makes contributions to the government for these benefits based on a certain percentageof the employee’s salaries. The Group has no legal obligation for the benefits beyond the contributions, and the Group cannot utilize thecontributed amount for future obligations if employee left the Group. The total amount that was expensed as incurred was RMB146,426,RMB179,859 and RMB 198,459 for the years ended December 31, 2021, 2022 and 2023, respectively.Income per shareBasic income per ordinary share is computed by dividing net income attributable to the ordinary shareholders by the weighted averagenumber of ordinary shares outstanding during the period assuming the ordinary shares were issued and outstanding from the earliest periodpresented.Diluted income per ordinary share reflects the potential dilution that could occur if securities were exercised or converted into ordinaryshares. Ordinary share equivalents are excluded from the computation in income periods should their effects be anti-dilutive. The Group hadrestricted shares and share options, which could potentially dilute basic earnings per share in the future.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-312.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedDividendsDividends of the Company are recognized when declared.Treasury stockThe Company accounts for treasury stock using the cost method. Under this method, the cost incurred to purchase the shares is recorded inthe treasury stock account on the consolidated balance sheets. At retirement of the treasury stock, the ordinary shares account is charged only forthe aggregate par value of the shares. The excess of the acquisition cost of treasury stock over the aggregate par value is allocated first to thecorresponding additional paid-in capital of the repurchased shares with the remaining to retained earnings.Segment reportingThe Group uses management approach to determine operation segment. The management approach considers the internal organization andreporting used by the Group’s chief operating decision maker (“CODM”) for making decisions, allocation of resource and assessing performance.The Group’s CODM has been identified as the Chief Executive Officer who reviews the consolidated results of operations when makingdecisions about allocating resources and assessing performance of the Group. The Group operates and manages its business as a single operatingsegment.Substantially all of the Group’s long-lived assets are located in the PRC and substantially all of the Group’s revenues are derived fromwithin the PRC. Therefore, no geographical segments are presented.Operating leasesThe Group determines if a contract contains a lease based on whether it has the right to obtain substantially all of the economic benefitsfrom the use of an identified asset and whether it has the right to direct the use of an identified asset in exchange for consideration, which relates toan asset the Group does not own. As part of the lease agreements, the Group may include options to extend or terminate the lease when it isreasonably certain that the Group will exercise those options. Right of use (“ROU”) assets represent the Group’s right to use an underlying asset forthe lease term and lease liabilities represent the Group’s obligation to make lease payments arising from the lease. ROU assets are initiallymeasured based on the lease liability, adjusted for any initial direct costs, any lease payments made prior to lease commencement and for any leaseincentives, and are included in other assets (long term) on the Group’s consolidated balance sheets. Lease liabilities are recognized at the presentvalue of the future lease payments at the lease commencement date, and are included in accrued expenses and other current liabilities (short term)and other long-term liabilities on the Group’s consolidated balance sheets. The discount rate used to determine the present value of the future leasepayments is the Group’s incremental borrowing rate, because the interest rate implicit in most of the Group’s leases is not readily determinable. TheGroup’s incremental borrowing rate represents the rate would be incurred to borrow on a collateralized basis over a similar term for an amountequal to the lease payments in a similar economic environment. Operating lease expense is recorded on a straight-line basis over the lease term.The Company does not possess any leases that have variable lease payments or residual value guarantees.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-322.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continuedRecent accounting pronouncementsRecent Accounting Guidance Not Yet AdoptedIn November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”(“ASU 2023-07”). ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements andprovide new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginningafter December 15, 2023, and for interim periods with fiscal years beginning after December 15, 2024. ASU 2023-07 is to be adoptedretrospectively to all prior periods presented. The Company is currently assessing the impact this guidance will have on the Group’s consolidatedfinancial statements.In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 intendsto improve the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to beadopted on a prospective basis with the option to apply retrospectively. The Company is assessing the impact of this guidance, however, it is notexpected to have a material impact to the Group’s consolidated financial statements.3.ACCOUNTS RECEIVABLE AND CONTRACT ASSETS, NETThe Group’s accounts receivable as of December 31, 2022 and 2023 are as follows: Allowance for AccountsuncollectibleAccountsAs of December 31, 2022receivableAccounts receivablereceivable, netAccounts receivable from referral services9,176—9,176Total 9,176— 9,176Allowance forAccountsuncollectibleAccountsAs of December 31, 2023 receivable Accounts receivable receivable, netAccounts receivable from referral services10,754—10,754Total 10,754 — 10,754The movement of allowance for uncollectible accounts receivables for the years ended December 31, 2021, 2022 and 2023 are as follows:OpeningCurrentEndingbalance as ofyear netWrite off inbalance as ofJanuary 1,(reverse)the currentDecember 31, 2021 provision year 2021Accounts receivable from loan facilitation service 17,462 (11,309)(5,778)375Accounts receivable from post facilitation service3,9581,732(4,007)1,683Accounts receivable from referral services 1,836 —(1,836)—Total 23,256 (9,577)(11,621)2,058Opening Ending balance as ofCurrentWrite off inbalance as ofJanuary 1,year netthe currentDecember 31, 2022 provision year 2022Accounts receivable from loan facilitation service 375 — (375) —Accounts receivable from post facilitation service1,683—(1,683)—Total 2,058 — (2,058) —Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-333.ACCOUNTS RECEIVABLE AND CONTRACT ASSETS, NET – continuedOpeningEndingbalance as ofCurrentWrite off inbalance as ofJanuary 1,year netthe currentDecember 31, 2023 provision year 2023Accounts receivable from loan facilitation service — — — —Accounts receivable from post facilitation service — — — —Total — — — —The Group’s contract assets as of December 31, 2022 and 2023 are as follows:Allowance forUncollectibleContract assets,As of December 31, 2022 Contract assets Contract assets netContract assets from loan facilitation service 2,951,326 (288,365) 2,662,961Contract assets from post facilitation service 321,477 (26,601) 294,876Contract assets from referral services162,931—162,931Total 3,435,734 (314,966) 3,120,768Allowance forUncollectibleContract assets,As of December 31, 2023 Contract assets Contract assets netContract assets from loan facilitation service 2,561,082 (276,307) 2,284,775Contract assets from post facilitation service 312,438 (44,369) 268,069Contract assets from referral services492,642—492,642Total 3,366,162 (320,676) 3,045,486The movement of allowance for uncollectible contract assets for the years ended December 31, 2021, 2022 and 2023 are as follows: Opening Endingbalance as ofCurrentWrite off inbalance as ofJanuary 1,year netthe currentDecember 31, 2021provisionyear2021Contract assets from loan facilitation service 222,526157,708(92,837)287,397Contract assets from post facilitation service 10,04552,379(35,967)26,457Total 232,571210,087(128,804)313,854 Opening Endingbalance as ofCurrentWrite off inbalance as ofJanuary 1,year netthe currentDecember 31, 2022provisionyear2022Contract assets from loan facilitation service 287,397158,696(157,728)288,365Contract assets from post facilitation service 26,45765,247(65,103)26,601Total 313,854223,943(222,831)314,966OpeningEndingbalance as ofCurrentWrite off inbalance as of January 1, year net the current December 31, 2023 Reclassification(1) provision year 2023Contract assets from loan facilitation service288,36519,619123,001(154,678)276,307Contract assets from post facilitation service26,6013,12374,155(59,510)44,369Total314,96622,742197,156(214,188)320,676Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-343.ACCOUNTS RECEIVABLE AND CONTRACT ASSETS, NET – continuedThe Group’s contract assets generated from related parties and recorded in amounts due from related parties as of December 31, 2022 and2023 are as follows: Accounts Allowance for Accountsreceivableuncollectiblereceivableand contractaccounts receivableand contractAs of December 31, 2022assetsand contract assetsAssets, netContract assets from loan facilitation service 331,457(88,348)243,109Contract assets from post facilitation service 20,907(7,259)13,648Contract assets from referral services(8,555)—(8,555)Total 343,809(95,607)248,202 Accounts Allowance for Accountsreceivableuncollectiblereceivableand contractaccounts receivableand contractAs of December 31, 2023assetsand contract assetsAssets, netContract assets from loan facilitation service 41,809(18,542)23,267Contract assets from post facilitation service6,428(4,326)2,102Contract assets from referral services (1,360)—(1,360)Total 46,877(22,868)24,009The movement of allowance for uncollectible accounts receivables and contract assets generated from related parties and recorded inamounts due from related parties for the years ended December 31, 2021, 2022 and 2023 are as follows: Opening Endingbalance as ofCurrentWrite off inbalance as ofJanuary 1,year netthe currentDecember 31, 2021provisionyear2021Contract assets from loan facilitation service 8,072 117,613 (5,477) 120,208Contract assets from post facilitation service 227 6,482 (4,900) 1,809Total 8,299 124,095 (10,377) 122,017 Opening Current Endingbalance as ofyear netWrite off inbalance as ofJanuary 1,(reverse)the currentDecember 31, 2022provisionyear2022Contract assets from loan facilitation service 120,208 (4,334) (27,526) 88,348Contract assets from post facilitation service 1,809 18,457 (13,007) 7,259Total 122,017 14,123 (40,533) 95,607 Opening Current Endingbalance as ofyear netWrite off inbalance as ofJanuary 1,(reverse)the currentDecember 31,2023Reclassification(1)provisionyear2023Contract assets from loan facilitation service 88,348(19,619)(22,554)(27,633)18,542Contract assets from post facilitation service 7,259(3,123)11,745(11,555)4,326Total 95,607(22,742)(10,809)(39,188)22,868Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-353.ACCOUNTS RECEIVABLE AND CONTRACT ASSETS, NET – continuedThe principal of accounts receivable and contract assets by year of origination: 2022 2021 2020 TotalAs of December 31, 2022 Loan facilitation service 2,723,311223,2334,7812,951,325Post facilitation service 299,19718,1704,110321,477Referral Service 172,108——172,108Total 3,194,616241,4038,8913,444,910 2023 2022 2021 TotalAs of December 31, 2023 Loan facilitation service 2,260,534300,4051432,561,082Post facilitation service 273,75338,6841312,438Referral Service 502,516880—503,396Total 3,036,803339,9691443,376,916(1)Jinshang ceased to be a related party of the Company in 2023 and therefore outstanding balance with Jinshang is reclassified from amountdue from related parties into accounts receivable and contract assets. See Note 11 Related party balances and transactions.4.FINANCIAL ASSETS RECEIVABLE, NETThe Group’s financial assets receivable as of December 31, 2022 and 2023 are as follows: December 31, December 31, 20222023RMBRMBFinancial assets receivable 4,225,014 3,694,269Allowance for uncollectible receivables (554,095) (575,396)Financial assets receivable, net 3,670,919 3,118,873The movement of financial assets receivable for the years ended December 31, 2021, 2022 and 2023 is as follows:Year endedYear endedYear ended December 31, 2021 December 31, 2022 December 31, 2023RMBRMBRMBBalance at beginning of year 4,601,6424,897,854 4,225,014Addition in the current year 6,626,3225,582,287 4,906,586Collection in the current year(6,189,783)(5,920,287)(5,050,047)Write-off (140,327)(334,840) (387,284)Balance at end of year 4,897,8544,225,014 3,694,269Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-364.FINANCIAL ASSETS RECEIVABLE, NET – continuedThe movement of allowance for uncollectible receivables for the years ended December 31, 2021, 2022 and 2023 is as follows:Year endedYear endedYear ended December 31, 2021 December 31, 2022 December 31, 2023RMB RMB RMBBalance at beginning of year 390,834 493,646 554,095Current year net provision 243,139 395,289 408,585Write-off (140,327) (334,840) (387,284)Balance at end of year 493,646 554,095 575,396The Group’s financial assets receivable generated from related parties and recorded in amounts due from related parties as of December31, 2022 and 2023 are as follows: December 31, December 31, 20222023RMBRMBFinancial assets receivable 42,724 12,717Allowance for uncollectible receivables (2,648) (2,912)Financial assets receivable, net 40,076 9,805The movement of financial assets receivable generated from related parties and recorded in amounts due from related parties for the yearsended December 31, 2021,2022 and 2023 is as follows: Year endedYear ended Year endedDecember 31, December 31, December 31, 2021 20222023RMBRMBRMBBalance at beginning of year 3,149— 42,724Addition in the current year —51,417 19,981Collection in the current year (309)(8,679) (49,581)Write-off (2,840)(14) (407)Balance at end of year —42,724 12,717Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-374.FINANCIAL ASSETS RECEIVABLE, NET – continuedThe movement of allowance for uncollectible receivables generated from related parties and recorded in amounts due from related partiesfor the years ended December 31, 2021,2022 and 2023 is as follows: Year endedYear ended Year endedDecember 31, December 31, December 31, 2021 2022 2023RMBRMBRMBBalance at beginning of year 2,033— 2,648Current year net provision 8072,662 671Write-off (2,840)(14) (407)Balance at end of year —2,648 2,912The following table summarizes the aging of the Group’s financial assets receivable.31-60over 60Total0-30 daysdaysdaysfinancial past past past assets due due due Current receivableDecember 31, 202232,964 38,059 — 4,153,991 4,225,014December 31, 2023 43,37045,332—3,605,5673,694,269The principal of financial assets receivable by year of origination: 2022 2021 Total December 31, 20223,304,756920,2584,225,014 2023 2022 2021 TotalDecember 31, 2023 3,021,956 636,652 35,661 3,694,2695.LOANS RECEIVABLE, NETLoans receivable consists of the following: December 31, December 31, 20222023RMBRMBLoans receivable 19,942,075 29,373,923Less allowance for loan losses (1,457,419) (1,871,431)Loans receivable, net 18,484,656 27,502,492Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-385.LOANS RECEIVABLE, NET - continuedAs of December 31, 2022 and 2023, the accrued interest receivables are RMB177,767 and RMB 275,557 (net of allowance RMB12,992and RMB 17,556, respectively), which is recorded under loans receivable.The following table presents the aging of loans as of December 31, 2022 and 2023: 0-30 days 31-60 days over 60 days Total amount past duepast due past duepast dueCurrentTotal loansDecember 31, 2022 (RMB) 171,636126,801 —298,437 19,643,638 19,942,075December 31, 2023 (RMB) 271,957221,148 —493,105 28,880,818 29,373,923The Group has not recorded any financing income on an accrual basis for the loans that are past due for more than 60 days in 2023 (60days in 2022). Loans are returned to accrual status if they are brought to non-delinquent status or have performed in accordance with thecontractual terms for a reasonable period of time and, in the Group’s judgment, will continue to make periodic principal and interest payments asscheduled. For the years ended December 31, 2021, 2022 and 2023, the Group has charged off loans receivable of RMB475,352, RMB1,102,422and RMB1,844,349, respectively.Movement of allowance for loan losses is as follows:Year endedYear endedYear endedDecember 31, December 31, December 31, 2021 2022 2023RMBRMBRMBBalance at beginning of year 421,767948,893 1,457,419Provision for loan losses 965,4191,580,306 2,151,046Gross write-off (475,352)(1,102,422) (1,844,349)Recoveries37,05930,642107,315Balance at end of year 948,8931,457,419 1,871,431The principal of loans receivable as of December 31, 2023 by year of origination is as follows: 2023 2022 2021 Total loansLoans receivable 28,701,071 672,425 427 29,373,923The principal of loans receivable as of December 31, 2022 by year of origination is as follows: 2022 2021 2020 Total loansLoans receivable 19,062,058 879,975 4219,942,075Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-396.LAND USE RIGHTS, NETLand use rights represent acquired right to use the parcel of land on which the Group’s regional headquarters and affiliated industrial parkstand. In 2021, the Group acquired the land use rights in Shanghai from the local authorities. Amortization of the land use right is made over theremaining term of the land use right period from the date when the land was made available for use by the Group. The land use rights aresummarized as follows: Year ended Year endedDecember 31, December 31, 2022 2023 RMB RMBCost 1,036,178 1,036,178Accumulated amortization (37,993) (58,717)Land use rights, net 998,185 977,461The total amortization expense for the years ended December 31, 2022 and 2023 amounted to RMB20,723 and RMB20,724 respectively.7.SHORT-TERM LOANSShort-term loans as of December 31, 2022 represents bank borrowings of RMB150,000 obtained from domestic commercial banks. Theweighted average interest rate for the outstanding borrowings as of December 31, 2022 was 3.30%, respectively. There is one financial covenantstipulating that Qiyu shall not make dividend distribution before the loans, interest and other payable due under the contract are paid.Short-term loans as of December 31, 2023 represents bank borrowings of RMB 798,586 obtained from domestic commercial banks. Theweighted average interest rate for the outstanding borrowings as of December 31, 2023 was 3.21%, respectively. Loan amount of RMB50,000 ispledged with bank deposit of RMB15,000.The unused lines of credit for general loans per contractual arrangements are RMB374,106 as of December 31, 2023 which are revolvingand effective within one year from their respective grant dates.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-408.LONG-TERM LOANSIn June 2022, Shanghai 360 Changfeng Technology, Co., Ltd. (“360 Changfeng”), one of the Group’s subsidiary, signed a mortgage loanagreement of RMB1 billion with tenure of 25 years. The interest rate is based on prevailing market price quote for loans with tenure of more thanfive years at the time of drawdown minus 136bps (“basepoints”). The loan is guaranteed by the land use rights owned by 360 Changfeng and is forthe specific use of construction of the regional headquarters and the affiliated industrial park. The mortgage loan agreement requires the 360Changfeng’s registered capital to be paid in the same proportion of the total facility used. In September, the registered capital was fully paid. As ofDecember 31, 2022 and 2023, the outstanding balance of the mortgage loan was RMB17,854 and RMB90,620, which is included in other long-term liabilities.9.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES December 31, December 31, 20222023RMBRMBUser traffic direction fees 269,446348,629Payable to financial institution partners (1) 475,203248,251Accrued payroll and welfare 402,647464,699Payable for third-party service fee298,019307,501Payable to shareholder of non-controlling interests (2)221,323230,881Dividend payable 177,518—Lease liability30,70429,143Accruals for purchase of property and equipment9,901118,144Others119,790268,791Total2,004,5512,016,039(1)Payable to financial institution partners mainly include amounts collected from the borrowers but have not been transferred to thefinancial institution partners due to holiday breaks.(2)Payable to shareholder of non-controlling interests mainly includes loans from non-controlling shareholder Shanghai ChangfengInvestment (Group) Co., Ltd.( “Changfeng”) to acquire land use right.10.GUARANTEE LIABILITIESThe movement of guarantee liabilities during 2022 and 2023 is as follows:Guarantee liabilities-stand ready RMBAs of January 1, 2022 4,818,144Provision at the inception of new loans 5,633,704Released into revenue (6,331,502)As of December 31, 2022 4,120,346As of January 1, 2023 4,120,346Provision at the inception of new loans 4,926,567Released into revenue(5,097,312)As of December 31, 2023 3,949,601Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4110.GUARANTEE LIABILITIES – continuedGuarantee liabilities-contingent RMBAs of January 1, 2022 3,285,081Provision for contingent liabilities 4,367,776Net payout (1)(4,234,466)As of December 31, 2022 3,418,391As of January 1, 2023 3,418,391Provision for contingent liabilities 3,053,810Net payout (1)(3,264,937)As of December 31, 2023 3,207,264(1)Net payout represents the amount paid upon borrowers’ default net of subsequent recoveries from the borrowers during a given period.The following table summarizes the aging of the Group’s contractual amounts of the outstanding loans subject to guarantee:31-6061-90Over 900-30 daysdaysdaysdayspastpastpastpast due due due due Current Total loans December 31, 2022 (RMB):491,648254,92719,294—44,900,311 45,666,180December 31, 2023 (RMB):468,704231,46419,366—40,423,83341,143,367As of December 31, 2022 and 2023, the contractual amounts of the outstanding loans subject to guarantee by the Group is estimated to beRMB45,666,180 and RMB41,143,367, respectively. The approximate term of guarantee compensation service ranged from 1 month to 36 monthsas of December 31, 2022 and 2023, respectively. As of December 31, 2022 and 2023, the contractual amounts of the outstanding loans (excludingloans that are written off) that have been compensated by the Group and therefore no longer subject to guarantee were estimated to beRMB4,018,140 and RMB3,981,711, respectively.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4211.RELATED PARTY BALANCES AND TRANSACTIONSThe table below sets forth the major related parties and their relationships with the Group, with which the Group entered into transactionsduring the years ended December 31, 2021, 2022 and 2023:Name of related parties Relationship with the group360 Security Technology Inc. (“360 Group”)Entity controlled by Mr. Zhou, the Chairman of the GroupShanghai Qibutianxia Information Technology Co., Ltd.(“Qibutianxia”)Entity controlled by Mr. Zhou, the Chairman of the GroupBeijing Qicaitianxia Technology Co., Ltd. (“Qicaitianxia”)Entity controlled by Mr. Zhou, the Chairman of the GroupBeijing Qihu Technology Co., Ltd. (“Qihu”)Entity controlled by Mr. Zhou, the Chairman of the GroupJinshang Consumer Finance Co.,Ltd. (“Jinshang”) (1)An affiliate of an entity controlled by Mr. Zhou, the Chairman of theGroupBeijing Zixuan Information Technology Co., Ltd. (“Beijing Zixuan”)Entity controlled by Mr. Zhou, the Chairman of the GroupBeijing Qifei Xiangyi Consultation Co., Ltd (“ Beijing Qifei”)Entity controlled by Mr. Zhou, the Chairman of the GroupHangzhou Qifei Huachuang Technology Co, Ltd (“Hangzhou Qifei”)Investee of the GroupShanghai Jiehu Internet Technology Co., Ltd. (“Shanghai Jiehu”)An affiliate of 360 Group, ultimately controlled by Mr. Zhou, theChairman of the GroupKincheng Bank of Tianjin Co., Ltd. (“Kincheng Bank”)An affiliate of an entity controlled by Mr. Zhou, the Chairman of theGroupTianjin Yujie Technology Co., Ltd. (“Yujie”) (2)Entity controlled by Mr. Zhou, the Chairman of the GroupBeijing Hongying Information Technology Co., Ltd. (“Hongying”)An affiliate of 360 Group, ultimately controlled by Mr. Zhou, theChairman of the GroupShareholdersShareholders of the GroupOthersEntities controlled by Mr. Zhou, the Chairman of the Group(1)In January 2023, Mr. Zhou ceased to directly or indirectly have equity interests in Jinshang and as a result, Jinshang subsequently ceasedto be a related party to the Company.(2)In September 2023, the Company acquired 100% equity interest in Yujie, and Yujie became a consolidated subsidiary of the Company.The Group entered into the following transactions with its related parties:For the years ended December 31, 2021, 2022 and 2023, services provided by the related parties were RMB523,054, RMB552,206 andRMB356,086, respectively.Year endedYear endedYear endedDecember 31, December 31, December 31, 2021 2022 2023RMBRMBRMBReferral service fee charged by Yujie347,585355,803119,737Bandwidth service fee charged by Qihu108,743128,607117,983Brand fees charged by Qihu23,58547,16894,340Referral service fee charged by Qihu19,7892,4239,550Rental expenses charged by Beijing Qifei———Rental expenses charged by Hongying11,89913,65511,815Corporate expenses allocated from Qibutianxia7,075——Others 4,3784,550 2,661Total 523,054552,206 356,086Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4311.RELATED PARTY BALANCES AND TRANSACTIONS – continuedFor the years ended December 31, 2021, 2022 and 2023, services provided to the related parties were RMB2,178,561, RMB1,199,238 andRMB301,768, respectively.Year endedYear endedYear endedDecember 31, December 31, December 31, 2021 2022 2023RMBRMBRMBReferral service fee charged from Kincheng Bank—109,4698,601Loan facilitation services fee charged from Kincheng Bank1,574,456382,49665,903Loan facilitation services fee charged from Jinshang219,513137,118—Loan facilitation services fee charged from Beijing Zixuan37——Post-facilitation services fee charged from Kincheng Bank297,489434,886139,213Post-facilitation services fee charged from Jinshang69,39867,936—Post-facilitation services fee charged from Beijing Zixuan56——Revenue from releasing of guarantee liabilities from Kincheng Bank—8,84342,499Others 17,61258,490 45,552Total 2,178,5611,199,238 301,768Jinshang is an affiliate of an entity controlled by Mr. Zhou and provides funds to the borrowers through the Group’s platform. KinchengBank is an affiliate of an entity controlled by Mr. Zhou and provides funds to the borrowers through the Group’s platform. The Group collectedservice fees from Jinshang and Kincheng Bank.As of December 31, 2022 and 2023, amounts due from related parties were RMB428,108 and RMB49,586 respectively, and details are asfollows: December 31, December 31, 20222023RMBRMBKincheng Bank 239,270 47,172Jinshang162,784—Others 26,054 2,414Total 428,108 49,586As of December 31, 2022 and 2023, amounts due to related parties were RMB113,697 and RMB80,376 respectively, and details are asfollows: December 31, December 31, 20222023RMBRMBQibutianxia 1,656 1,656Qihu103,86863,562Others 8,173 15,158Total 113,697 80,376Other than the transactions disclosed above, the Company has held bank deposit with Kincheng Bank which amounted to RMB3,020,245and RMB3,006,400 as of December 31, 2022 and December 31, 2023. The related interest income was RMB98,856 and RMB145,731 for the yearsended December 31, 2022 and 2023, respectively and interest receivable as of December 31, 2022 and December 31, 2023 was RMB11,318 andRMB15,265, respectively.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4411.RELATED PARTY BALANCES AND TRANSACTIONS – continuedIn September 2023, the Company has acquired 100% equity interest in Yujie for nil consideration based on the fair value of the assetsacquired and the liabilities assumed. In addition, the Company also acquired the equity interest of certain related parties that engage in wealthmanagement business with a total consideration of RMB81,780, which was fully paid in 2023. Upon the completion of the transactions, theCompany consolidated financial statements of such related party entities and recognized goodwill of RMB41,210 in total in the its consolidatedbalance sheets.Qibutianxia provided joint back to back guarantee to certain third party guarantee companies for the loans facilitated by the Group. Theamounts of loans under such arrangement are RMB3,575,884 and RMB5,239,031 as of December 31, 2022 and 2023 respectively.In September 2020, Beijing Qifei transferred to the Group part of its interest in Hangzhou Qifei, a joint venture company established byBeijing Qifei and an independent third party. After the transfer, Beijing Qifei and the Group hold 26% and 25% of the equity interest in theinvestee, respectively. The Group accounted for the equity investment using alternative measurement. The Company provided capital contributionof nil, RMB8,996 and RMB20,349 to Hangzhou Qifei for the years ended December 31, 2021, 2022 and 2023, respectively. In addition, theCompany has accrued RMB20,655 for the remaining unpaid share of registered capital. Considering the business forecast of the investee as ofDecember 31, 2023, the Group fully impaired this investment.In December 2021, the Company acquired the 30% equity interest of 360 Changfeng held by Shanghai Jiehu and owned 70% of 360Changfeng’s equity interest in total.12.INCOME TAXESPRCUnder the Law of the People’s Republic of China on Enterprise Income Tax (“EIT Law”), domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. Qiyu received its “high and new technology enterprises” status in 2018 and renewed itin 2021 and was entitled for a preferential income tax rate of 15% from 2018 to 2023. In November 2020, Qiyue received its “high and newtechnology enterprises” status in 2020 and renewed it in 2023 and was entitled to a reduced EIT rate of 15% from 2020 to 2025. Beihai QichengInformation & Technology Co., Ltd. (“Qicheng”), Qi’ang and a certain other subsidiary benefited from a preferential tax rate of 15% as theiroperation falls within the encouraged industries catalogue in western China. The 40% of the enterprise income tax payables could be furtherreduced as they are located in an autonomous region of China. Therefore, Qicheng applied a preferential income tax rate of 9% from 2019 to 2023.Qi’ang and the certain other subsidiary applied a preferential income tax rate of 9% from 2023 to 2027. From 2021, two of the Company’ssubsidiaries benefited from a preferential tax rate of 15% as they are registered in Hainan and engaged in encouraged business activities. From2022, Beihai Borui Credit Service Co., Ltd. benefited from a preferential tax rate of 15% as it falls within the encouraged industries catalogue inwestern China.Cayman IslandsUnder the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, the CaymanIslands do not impose withholding tax on dividend payments.Hong KongUnder the current Hong Kong Inland Revenue Ordinance, the Company’s subsidiaries domiciled in Hong Kong has introduced a two-tiered profits tax rate regime which is applicable to any year of assessment commencing on or after April 1, 2018. The profits tax rate for the firstHK$2 million of profits of corporations will be lowered to 8.25%, while profits above that amount will continue to be subject to the tax rate of16.5%. Additionally, payments of dividends by the subsidiary incorporated in Hong Kong to the Company are not subject to any Hong Kongwithholding tax.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4512.INCOME TAXES – continuedThe current and deferred portion of income tax expenses included in the consolidated statements of operations, which were all attributableto the Group is as follows:Year endedYear endedYear endedDecember 31, December 31, December 31, 2021 2022 2023RMBRMBRMBCurrent tax 1,053,979945,305 935,897Deferred tax 204,217(208,501) 72,977Total 1,258,196736,804 1,008,874Reconciliation between the income tax at PRC statutory tax rate and income tax expense is as follows:Year endedYear endedYear ended December 31, December 31, December 31, 2021 2022 2023 RMBRMB RMB Income before income tax expenses 7,022,7094,742,372 5,277,451Statutory tax rate in the PRC 25%25%25%Income tax at statutory tax rate 1,755,6771,185,593 1,319,363Effect of different tax rate of subsidiary operation in other jurisdiction11,7087,236(4,016)Effect of non-deductible expenses 64,84157,364 47,467Effect of preferential tax rate and tax exemption(487,655)(418,997)(488,462)Effect of enacted tax rate change of deferred tax assets/liabilities1,125——Effect of research and development super-deduction (106,515)(115,374) (98,914)Effect of withholding income tax——206,721Effect of valuation allowance movement of deferred tax assets19,01520,98226,715Income tax expense 1,258,196736,804 1,008,874The effect of the preferential tax rates on the income per share is as follows: Year Ended December 31, (Amounts in Thousands Except Per Share Data) 2021 20222023 RMB RMB RMBTax saving amount due to preferential tax rates 486,530 418,997 488,462Income per share effect-basic 1.581.341.52Income per share effect-diluted 1.511.301.49Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4612.INCOME TAXES – continuedDeferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes. The components of the deferred tax assets and deferred tax liabilitiesare as follows:December 31, December 31, 2022 2023RMBRMBDeferred tax assetsGuarantee liabilities1,909,3612,111,910Provision for accounts receivable and contract assets and financial assets receivable34,88929,255Provision for loan losses678,6361,132,843Depreciation of land use rights29,31742,417Net operating loss carry forwards 33,237 76,638Others—17,500Gross deferred tax assets 2,685,440 3,410,563Valuation allowance on deferred tax assets(49,780)(107,302)Total deferred tax assets2,635,6603,303,261Uncollected revenues (1,717,324) (2,345,550)Withholding income tax—(112,721)Others—(2,075)Total deferred tax liabilities(1,717,324)(2,460,346)Net deferred tax assets 918,336 842,915Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated toutilize the existing deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of recent losses,forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with tax attributes expiring unused andtax planning alternatives. Considering all the above factors, as of December 31, 2022 and 2023, the Group recorded an allowance of RMB49,780and RMB107,302 respectively for deferred tax assets which are not more likely than not to be realized.As of December 31, 2023, the Group had net operating loss carryforwards in PRC entities of RMB253,054, which will expire from 2024to 2028.The authoritative guidance requires that the Group recognizes the impact of a tax position in the financial statements if that position ismore likely than not of being sustained upon audit by the tax authority, based on the technical merits of the position. Under PRC laws andregulations, arrangements and transactions among related parties may be subject to examination by the PRC tax authorities. If the PRC taxauthorities determine that the contractual arrangements among related companies do not represent a price under normal commercial terms, theymay make adjustments to the companies’ income and expenses. A transfer pricing adjustment could result in additional tax liabilities.According to PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due tocomputational errors made by the taxpayer or withholding agent. The statute of limitations will be extended five years under special circumstances,which are not clearly defined (but an underpayment of tax liability exceeding RMB0.1 million is specifically listed as a special circumstance). Inthe case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4712.INCOME TAXES – continuedIn accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008,are subject to a 10% withholding income tax. In addition, under tax treaty between the PRC and Hong Kong, if the foreign investor is incorporatedin Hong Kong and qualifies as the beneficial owner, the applicable withholding tax rate is reduced to 5%, if the investor holds at least 25% in theFIE, or 10%, if the investor holds less than 25% in the FIE.For the year ended December 31, 2023, the Group has repatriated a portion of its earnings from its PRC subsidiaries to overseas fordividend distribution and share repurchase and paid related withholding income tax of RMB94,000 accordingly. The Company recorded a deferredtax liability of RMB112,721 as of December 31, 2023 associated with all of its earnings expected to be distributed from its PRC subsidiaries tooverseas. The remaining undistributed profits of the Company’s PRC subsidiaries as of December 31, 2023 would be indefinitely reinvested withunrecognized deferred tax liabilities of approximately RMB2,005,048 if calculated at the tax rate of 10%.Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to theexcess of financial reporting basis over tax basis in a domestic subsidiary. However, recognition is not required in situations where the tax lawprovides a means by which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately usethat means. The Group completed its feasibility analysis on a method, which the Group will ultimately execute if necessary to repatriate theundistributed earnings of the VIE without significant tax costs. As such, the Group does not accrue deferred tax liabilities on the earnings of theVIE given that the Group will ultimately use the means.13.SHARE-BASED COMPENSATIONShare incentive planIn May 2018, the shareholders and board of directors of the Company adopted the Share Incentive Plan (the “2018 plan”) for the grantingof share options and restricted shares to employees, directors and consultants to reward them for services to the Company and to provide incentivesfor future service, and the 2018 plan was later amended in November 2019. Under the 2018 plan, the maximum aggregate number of shares whichmay be issued is 25,336,096 ordinary shares. Those share options expired 10 years from the grant date.The Company’s board of directors and shareholders approved the 2019 Share Incentive Plan (the “2019 Plan”) and amended it in August2020, for the granting of share options and restricted shares to employees, directors and consultants to reward them for services to the Companyand to provide incentives for future service. Under the 2019 plan, the maximum aggregate number of shares which may be issued is 17,547,567ordinary shares, and may increase annually by an amount up to 1.0% of the total number of ordinary shares then issued and outstandingcommencing with the first fiscal year beginning January 1, 2021 or such fewer amount as determined by the board of directors. The share optionsand restricted shares expire 10 years from the date of grant.Stock optionsOn November 20, 2021, the Company granted 2,400 stock options with an exercises price of US$0.00001 per share to certain employees,directors and officers. The grant date fair value per option was RMB64.46. The stock options shall vest over a period from immediate to four years.On February 20, 2023, the Company granted 47,300 stock options with an exercises price of US$0.00001 per share, which contains contractualschedules within three years and vesting condition related to the grantee’s individual performance. The weighted average grant date fair value peroption was RMB 54.93.On November 2021 and August 2022, the compensation committee of the board of directors of the Company approved to convert the formof 10,264,366 and 2,816,000 outstanding restricted shares respectively into stock options to purchase the same number of shares as represented bythe restricted share with an exercises price of US$0.00001 per share. This conversion did not affect the fair value of the awards immediately beforeand after the modification as the exercise price is nominal. In addition, there were no other changes to the awards including the vesting conditionsand classification. Accordingly, modification accounting is not required and the cost will continue to be recognized based on the grant-date fair-value-based measure.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4813.SHARE-BASED COMPENSATION – continuedShare incentive plan - continuedStock options - continuedThe Company used the Black-Scholes model to estimate the fair value of the options granted in 2021 and 2023 using the closing salesprice of the shares on the grant date.The fair value per option was estimated at the date of grant using the following assumptions: Year ended ,December 31, 2023RMBRisk-free rate of interest 4.13%Estimated volatility rate 76.20%Dividend yield 4.70%Expected life (years) 5.78Exercise price USD 0.00001The risk-free rate of interest is based on the yield to maturity of of US Treasury Strip Bond as of the valuation date. The expectedvolatility of the underlying ordinary shares during the life of the options was estimated based on the historical share price volatility of comparablecompanies over a period comparable to the expected term of the options. The dividend yield was estimated by the Group based on its expecteddividend policy over the expected term of the options.A summary of option activity during period from January 1, 2023 to December 31, 2023 was as follows:Weighted Weighted Weighted Average AverageNumber of Average RemainingAggregate Grant-date Options Exercise Price Contract Life Intrinsic Value Fair value USD YearsRMB RMBOptions outstanding at December 31, 2022 10,164,9310.000017.34736,65342.51Options granted in 202347,3000.000019.152,65654.93Options exercised in 2023 (2,210,001) 0.00001 6.56(124,114) 41.16Options forfeited in 2023(94,400)0.000016.82(5,302)41.01Options outstanding at December 31, 2023 7,907,830 0.00001 6.29444,104 42.98Options exercisable at December 31, 2023 2,953,360 0.00001 5.89226,345 44.93Options vested or expected to be vested at December 31, 2023 7,907,830 0.00001 6.29444,104 42.98For the years ended December 31, 2021, 2022 and 2023, the Company recognized share-based compensation expense related to shareoptions of RMB90,812, RMB108,526 and RMB123,981, respectively. For the years ended December 31, 2021, 2022 and 2023, the total fair valuesof options vested on their respective vesting dates were RMB206,174, RMB136,955 and RMB157,879, respectively The aggregate intrinsic valueof options exercised and converted during the years ended December 31, 2021, 2022 and 2023 was RMB414,966, RMB145,549 and RMB124,114respectively. Total outstanding options not yet exercisable as of December 31, 2023 includes 3,846,510 which will become exercisable based solelyon fulfilling a service condition and 30,960 for which an additional performance condition must be met to become exercisable. As of December 31,2023, there was RMB84,039 of unrecognized compensation cost related to share options that are expected to be recognized over a weighted-average vesting period of 0.49 years.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-4913.SHARE-BASED COMPENSATION - continuedShare incentive plan - continuedRestricted SharesA summary of the restricted shares for the year ended December 31, 2023 was stated below:Weighted-AverageNumber ofGrant-Date Restricted Shares Fair ValueOutstanding at December 31, 20223,155,59456.99Granted 579,24051.43Vested (1,089,684)55.41Forfeited (659,182)61.91Outstanding at December 31, 2023 1,985,96854.62The restricted shares granted shall vest in accordance with contractual schedules over a period from three to four years. In 2022 and 2023,the Company granted 388,900 and 579,240 restricted shares to its employees with the contractual life of 10 years, which contains contractualschedules within four years and vesting condition related to the grantee’s individual performance. The fair value of the restricted shares wasdetermined by the closing sales price of the shares on the grant date, adjusted by the present value of expected dividends to be paid during thevesting period. The weighted-average grant-date fair value per restricted share was RMB68.45, RMB42.73 and RMB 51.43 for the year endedDecember 31, 2021, 2022 and 2023, respectively. The total fair value of the restricted shares vested was RMB53,686, RMB63,974 andRMB60,376 for the years ended December 31, 2021, 2022 and 2023. For the years ended December 31, 2021, 2022 and 2023, the Companyrecognized share-based compensation expense related to restricted shares of RMB163,110, RMB91,211 and RMB61,622, respectively. Totaloutstanding restricted shares as of December 31, 2023 includes 1,112,196 which will become exercisable based solely on fulfilling a servicecondition and 873,772 for which an addtional performance condition must be met to become exercisable. As of December 31, 2023, there wasRMB81,313 of unrecognized compensation cost related to restricted shares that are expected to be recognized over a weighted-average vestingperiod of 1.35 years.The Company recognizes the compensation costs on a straight-line basis over the requisite service period of the award, which is generallythe vesting period. Total share-based compensation expense of share-based awards granted to employees and directors was as follows: Year ended, Year ended, Year ended,December 31, 2021December 31, 2022December 31, 2023RMBRMBRMBFacilitation, origination and servicing expenses75,20973,945 75,152Sales and marketing expenses12,3404,328 (375)General and administrative expenses166,373121,464 110,827Total253,922199,737 185,604Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-5014.ORDINARY SHARES5,000,000,000 shares was authorized at par value of USD0.00001 per share. The ordinary shares include Class A ordinary shares andClass B ordinary shares. Each Class A ordinary share is entitled to one vote and each Class B ordinary share is entitled to twenty votes on allmatters that are subject to shareholder vote. All classes of ordinary shares are entitled to the same dividend right. Class B ordinary shares could beconverted into Class A ordinary shares, at the option of the holders, on one-for-one basis. All Class B ordinary shares are beneficially owned byMr. Zhou, the Chairman of the Company.As of December 31, 2021, there were 310,486,975 ordinary shares outstanding, with par value of USD0.00001 per share, consisting of270,666,389 Class A ordinary shares and 39,820,586 Class B ordinary shares.On November 29, 2022, the Company completed its global offering of 5,540,000 Class A ordinary shares, which comprises a Hong Kongpublic offering of initially 560,000 Class A ordinary shares and an international offering of initially 4,980,000 Class A ordinary shares, and listingof the Company’s Class A ordinary shares on the Main Board of The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”).On December 6, 2022, the Company sell another 830,000 Class A ordinary shares under the over-allotment option to international underwriters.Upon the completion of the secondary listing on the Hong Kong Stock Exchange, all the class B ordinary shares were converted into classA ordinary shares on a one-for-one basis. As a result, no class B ordinary shares of the Company was issued or outstanding. As of December 31,2022, there were 322,792,063 ordinary shares outstanding, with par value of USD0.00001 per share.In June 2023, the Company announced that its board of directors had approved a share repurchase plan, under which the Company mayrepurchase up to US$150 million worth of its American depositary shares or Class A ordinary shares over the next 12 months starting from June20, 2023 (the “2023 Share Repurchase Plan”). From the launch of the share repurchase plan to December 31, 2023, the Company in aggregatepurchased 10,872,170 ordinary shares in the open market at an aggregate cost of RMB636,179. The repurchased shares were recorded at theirhistorical cost and 3,961,160 ordinary shares were retired in 2023, resulting a decrease of RMB221,390 in additional paid-in capital andRMB30,152 in retained earnings.The Company’s proposed repurchases may be made from time to time in the open market at prevailing market prices, in privatelynegotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance withapplicable rules and regulations.15.STATUTORY RESERVES AND RESTRICTED NET ASSETSIn accordance with the PRC laws and regulations, the PRC entities of the Group are required to make appropriation to certain statutoryreserves, namely general reserve, industry specific reserve, enterprise expansion reserve, and staff welfare and bonus reserve, all of which areappropriated from net profit as reported in their PRC statutory accounts. The PRC entities of the Group are required to appropriate at least 10% oftheir after-tax profits to the general reserve until such reserve has reached 50% of their respective registered capital.Appropriations to the enterprise expansion reserve and the staff welfare and bonus reserve are to be made at the discretion of the board ofdirectors of the PRC entities of the Group. There are no appropriations to these reserves by the PRC entities of the Group for the years endedDecember 31, 2022 and 2023.As a result of PRC laws and regulations and the requirement that distributions by the PRC entities of the Group can only be paid out ofdistributable profits computed in accordance with the PRC GAAP, the PRC entities of the Group restricted from transferring a portion of their netassets to the Group. Amounts restricted include paid-in capital, capital reserve and statutory reserves of the PRC entities of the Group. As ofDecember 31, 2022 and 2023, the aggregated amounts of paid-in capital, capital reserve and statutory reserves represented the amount of net assetsof the relevant entity in the Group not available for distribution amounted to RMB14,436,140 and RMB16,233,665, respectively (including thestatutory reserve fund of RMB218,082 and RMB583,287 as of December 31, 2022 and 2023, respectively).Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-5116.DIVIDENDSQuarterly Dividend PolicyOn November 15, 2021, the board of directors of the Company approved a quarterly cash dividend policy. Under the policy, the Companywill declare and distribute a recurring cash dividend every fiscal quarter, starting from the third fiscal quarter of 2021, at an amount equivalent toapproximately 15% to 20% of the Company’s net income after tax for such quarter. The determination to make dividend distributions and the exactamount of such distributions in any particular quarter will be based upon the Company’s operations and financial conditions, and other relevantfactors, and subject to adjustment and determination by the board of directors.Semi-Annual Dividend PolicyOn May 18, 2023, the board of directors of the Company approved the adoption of a semi-annual cash dividend policy (the “NewDividend Policy”) to replace previous quarter cash dividend policy. Under the New Dividend Policy, the Company will declare and distribute arecurring cash dividend semi-annually, starting from the first half of 2023, at an amount equivalent to approximately 20% to 30% of the Company’snet income after tax for the previous six-month period. The determination to make dividend distributions and the exact amount of such distributionsin any particular six-month period will be based upon the Company’s operations and financial conditions, and other relevant factors, and subject toadjustment and determination by the board of directors. In light of the adoption of the New Dividend Policy, no quarterly dividend was declared bythe Board for the first fiscal quarter of 2023.In 2022, the board of directors of the Company has approved dividends for the fourth fiscal quarter of 2021 and for the first three quartersof 2022 in accordance with the Company’s dividend policy with the total amount of RMB862,995. In 2023, the board of directors of the Companyhas approved dividends for the fourth quarter of 2022 and for the first half of 2023 in accordance with the Company’s dividend policy with the totalamount of RMB761,552.17.LEASEOperating lease as lesseeThe Group enters into operating leases primarily for general office space. The Group’s leases typically have original terms not exceeding 5years. These leases have remaining lease terms of 1 year to 3 years, some of which include options to extend the leases for up to 5 years, and someof which include options to terminate the leases within 1 year.Lease costs are included in general and administrative expenses. Operating lease expenses were RMB51,608, RMB63,667 andRMB61,034 for the years ended December 31, 2021, 2022 and 2023, respectively, including amortization expenses of land use rights ofRMB17,270, RMB20,723 and RMB20,724 for the years ended December 31, 2021, 2022 and 2023, respectively. Under ASC 842, land use rightsagreements are also considered as operating lease contracts. See Note 6 for separate disclosures related to land use rights.Supplemental cash flow information related to leases was as follows: Year ended, Year ended,December 31, 2022December 31, 2023RMBRMBCash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases42,48840,107Right-of-use assets obtained in exchange for lease obligations: Operating leases56,03123,959Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-5217.LEASE – continuedOperating lease as lessee – continuedThe following table shows ROU (“Right of Use assets”) and lease liabilities as of December 31, 2022 and 2023 (except lease term anddiscount rate): Year ended, Year ended,December 31, 2022December 31, 2023RMBRMBRight-of-use assets 55,471 45,393Operating lease liabilities-current30,70429,143Operating lease liabilities-non current 21,664 11,853 Year ended, Year ended,December 31, 2022December 31, 2023RMBRMBWeighted-average remaining lease term 1.95 1.60Weighted-average discount rate 4.65%4.06%The maturities of operating lease liabilities as of December 31, 2022 and 2023 are as follows:Year ended,December 31, 2022 RMB2023 31,2122024 19,8412025 3,3062026 and thereafter—Total undiscounted lease payments54,359Imputed interest(1,991)Total lease liabilities 52,368Year ended,December 31, 2023 RMB202429,6712025 12,1642026 3532027 and thereafter—Total undiscounted lease payments42,188Imputed interest(1,192)Total lease liabilities 40,996Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-5318.COMMITMENTS AND CONTINGENCIESContingenciesIn July 2020 and in February 2021, CBIRC promulgated two regulations stating that regional banks that carry out internet lendingbusiness shall mainly serve local customers, and are not allowed to conduct the internet lending business beyond the local administrative area oftheir registered place, except those who have no physical business branch, conducting business primarily online as well as meeting the otherconditions prescribed by the CBIRC. The Company has changed its distribution strategy so that only local borrowers would be matched to regionalbanks for new loans facilitated starting from January 1, 2022. The Company believed that, as advised by its PRC legal counsel, given the lack ofexact definition regarding the regional banks in the existing laws and regulations, there are uncertainties as to how the regulation will beimplemented, therefore the impact to the Company’s current business operations cannot be reasonably estimated.In September 2021, the People’s Bank of China (“PBOC”) issued a new regulation stating that organizations that engage in creditreporting business should obtain the credit reporting business license and comply with its other provisions within an 18-month grace period fromits effectiveness date of January 1, 2022. Given that there remain uncertainties in the interpretation and implementation of the rule as advised by itsPRC legal counsel, the Company has concluded, that it is not reasonably possible to estimate its impact on the Company’s current businessoperations for credit assessment on borrowers and the potential penalties incurred by the Company thereof.CommitmentsAs of December 31, 2023, the Group has certain capital commitments that primarily related to commitments for construction of theregional headquarters and the affiliated industrial park. The total capital commitments agreed in the purchase contract for land use rightswas toinvest not less than RMB500 million and RMB204 million has been invested and reflected as construction in progress under “Property andequipment, net” in the financial statements as of December 31, 2023. All of the remaining capital commitments will be fulfilled in the futureaccording to the construction progress.19.NET INCOME PER SHAREBasic and diluted net income per share for each of the periods presented were calculated as follows:Year endedYear endedYear endedDecember 31, December 31, December 31, 202120222023 RMB RMB RMBNumerator: Net income attributable to shareholders of the Company5,781,7254,024,1734,285,336Denominator: Weighted average ordinary shares outstanding used in computing basic income perordinary share 307,265,600 312,589,273 320,749,805Plus: incremental weighted average ordinary shares from assumed exercise of stockoptions and restricted shares using the treasury stock method 14,132,153 9,429,237 7,759,140Weighted average ordinary shares outstanding used in computing diluted income perordinary share 321,397,753 322,018,510 328,508,945Basic net income per share 18.82 12.87 13.36Diluted net income per share 17.99 12.50 13.04For the years ended December 31, 2021, 2022, no options or restricted shares were excluded from the calculation of diluted net incomeper share due to the anti-dilutive effect. For the year ended December 31, 2023, 370,590 options or restricted shares were excluded from thecalculation of diluted net income per share due to the anti-dilutive effect.Table of ContentsQIFU TECHNOLOGY, INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)except for number of shares and per share data, or otherwise noted)F-5420.SUBSEQUENT EVENTSOn March 12, 2024, the board of directors of the Company (the “Board”) has approved a dividend of US$0.29 per Class A ordinary share,or US$0.58 per ADS for the second half of 2023 to holders of record of Class A ordinary shares and ADSs as of the close of business on April 15,2024 Hong Kong Time and New York Time, respectively, in accordance with the Company’s dividend policy.On March 12, 2024, the Board re-affirmed the Company’s existing semi-annual cash dividend policy, which was previously approved bythe Board on May 18, 2023.On March 12, 2024, the Board approved a new share repurchase plan, under which the Company may repurchase up to US$350 millionworth of its American depositary shares or Class A ordinary shares over the next 12 months starting from April 1, 2024.Table of ContentsF-55QIFU TECHNOLOGY, INC.ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE IThe following Schedule I has been provided pursuant to the requirements of Rules 12-04(a) and 5-04(c) of Regulation S-X, which requirecondensed financial information as to the financial position, changes in financial position and results of operations of a parent company as of thesame dates and for the same periods for which audited consolidated financial statements have been presented as the restricted net assets of theCompany’s PRC subsidiaries and VIEs which may not be transferred to the Company in the forms of loans, advances or cash dividends without theconsent of PRC government authorities as of December 31, 2023, was more than 25% of the Company’s consolidated net assets as of December31, 2023.CONDENSED BALANCE SHEETS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)) 2022 2023 2023RMBRMBUSD(Note 2)ASSETS Cash and cash equivalents 464,323 2,636 371Prepaid expenses and other assets6,32516,2022,282Amount due from subsidiaries and VIEs 295,180 — —Investments in subsidiaries and VIEs18,275,772 21,933,951 3,089,332TOTAL ASSETS 19,041,600 21,952,789 3,091,985LIABILITIES AND EQUITY LIABILITIES Accrued expenses and other current liabilities 194,444 1,153 163Amount due to a subsidiary—14,1531,993TOTAL LIABILITIES 194,444 15,306 2,156EQUITY Ordinary shares (USD0.00001 par value per share 5,000,000,000 shares authorized,325,591,776 shares issued and 322,792,063 shares outstanding as of December 31, 2022and 326,552,504 shares issued and 315,226,128 shares outstanding as of December 31,2023, respectively) 22 22 3Treasury stock—(384,637)(54,175)Additional paid-in capital 6,095,225 6,059,439 853,454Retained earnings 12,803,684 16,297,316 2,295,429Other comprehensive loss (51,775) (34,657) (4,882)TOTAL EQUITY 18,847,156 21,937,483 3,089,829TOTAL LIABILITIES AND EQUITY 19,041,600 21,952,789 3,091,985Table of ContentsF-56QIFU TECHNOLOGY, INC.ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE ICONDENSED STATEMENTS OF OPERATIONS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)) Year endedYear endedYear endedYear endedDecember 31, December 31, December 31, December 31, 2021 2022 2023 2023RMBRMBRMBUSD(Note 2)Operating costs and expenses (51,233)(17,288) (25,517) (3,594)Interest (expense) income, net(5,383)(16,258)17,3162,439Foreign exchange losses (133)(8,173) (574) (81)Other income, net—7,67429,3114,128Net loss before taxes and income from equity in subsidiaries and VIEs(56,749)(34,045)20,5362,892Equity in earnings of subsidiaries and VIEs 5,838,4744,058,218 4,264,800 600,686Net income before taxes 5,781,7254,024,173 4,285,336 603,578Income tax expenses————Net income attributable to shareholders of the Company 5,781,7254,024,173 4,285,336 603,578Net income attributable to ordinary shareholders of the Company5,781,7254,024,1734,285,336603,578Table of ContentsF-57QIFU TECHNOLOGY, INC.ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE ICONDENSED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”))Year endedYear endedYear endedYear ended December 31, December 31, December 31, December 31, 2021 2022 2023 2023 RMB RMBRMB USD (Note 2)Net income attributable to shareholders of the Company 5,781,7254,024,1734,285,336 603,578Other comprehensive (loss) income, net of tax of nil: Foreign currency translation adjustment (36,541)59,15717,118 2,411Other comprehensive (loss) income(36,541)59,15717,1182,411Total comprehensive income 5,745,1844,083,3304,302,454 605,989Comprehensive income attributable to ordinary shareholders5,745,1844,083,3304,302,454605,989Table of ContentsF-58QIFU TECHNOLOGY, INC.ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE ICONDENSED STATEMENTS OF CASH FLOWS(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”))Year endedYear endedYear endedYear ended December 31, December 31, December 31, December 31, 2021 2022 2023 2023 RMB RMBRMB USD(Note 2)Cash Flows from Operating Activities: Net income attributable to shareholders of the Company 5,781,7254,024,1734,285,336603,578Adjustments to reconcile net income to net cash used in operating activities: Equity in earnings of subsidiaries and VIEs, net of dividends (5,838,474)(4,058,218)(3,474,800)(489,417)Changes in operating assets and liabilities Accrued expenses and other current liabilities 31,197(31,896)2,282321Prepaid expenses and other assets —(6,325)(17,667)(2,488)Amounts due from related parties —10,134——Interest receivable/payable——1,320186Fair value change of foreign exchange options —(4,704)4,527638Net Cash (used in) provided by Operating Activities (25,552)(66,836)800,998112,818Cash Flows from Investing Activities: Repayment of loans provided to subsidiaries and VIEs 185,2042,672,543378,14853,261Loans provided to subsidiaries and VIEs(338,982)(1,091,928)(71,706)(10,100)Purchase of foreign exchange options—(14,549)——Proceeds from disposal of short-term investments—17,890216,30130,465Purchase of short-term investments——(203,361)(28,643)Net Cash (used in) provided by Investing Activities (153,778)1,583,956319,38244,983Cash Flows from Financing Activities: Proceeds from issuance of ordinary share upon Secondary Listing —254,916——Payment of Secondary Listing costs —(3,137)(16,023)(2,257)Dividends to shareholders—(988,586)(941,705)(132,636)Repayments of short-term loans—(492,952)——Proceeds from short-term loans 169,291190,179——Stock repurchase——(636,179)(89,604)Net Cash provided by (used in) Financing Activities 169,291(1,039,580)(1,593,907)(224,497)Effect of foreign exchange rate changes (2,404)(20,334)11,8401,668Net (decrease) increase in cash and cash equivalents (12,443)457,206(461,687)(65,028)Cash, cash equivalents, and restricted cash, beginning of year 19,5607,117464,32365,399Cash, cash equivalents, and restricted cash, end of year 7,117464,3232,636371Supplemental disclosures of cash flow information:Payables for dividends: 276,991 177,518 — —Payables for capitalized issuance costs—15,454——Notes to condensed financial statements1.The condensed financial statements of Qifu Technology, Inc. have been prepared using the same accounting policies as set out in theFinancial Statements except that the equity method has been used to account for investments in subsidiaries and VIEs. Such investment insubsidiaries and VIEs are presented on the balance sheets as interests in subsidiaries and VIEs and the profit of the subsidiaries and VIEsis presented as equity in earnings of subsidiaries and VIEs on the statement of operations.2.As of December 31, 2021, 2022 and 2023, there were no material contingencies, significant provisions of long-term obligations of theCompany, except for those which have been separately disclosed in the Financial Statements.3.Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America have been condensed or omitted. The footnote disclosure certain supplementalinformation relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to theaccompanying Financial Statements. Exhibit 4.17Certain identified information has been excluded from the exhibit because it is both not material and is the type thatthe registrant treats as private or confidential. Such excluded information has been marked with “[***]”.TRADEMARK LICENSING AGREEMENTBetweenBeijing Qihu Technology Co., Ltd.andShanghai Qiyu Information Technology Co., Ltd.Date: December 29, 2023Table of ContentsPreamble1Article 1Definitions1Article 2Grant of Rights2Article 3License Fee and its Payment3Article 4Delivery of Information3Article 5Method of Use4Article 6Filing and Assumption of Costs5Article 7Trademark Right Infringements and Warranties5Article 8Breach of Contract and Compensation for Damages6Article 9Termination6Article 10Force Majeure7Article 11Announcement8Article 12Confidentiality8Article 13Non-transferable8Article 14Further Assurance9Article 15Miscellaneous9Appendix I:13Appendix II:14Appendix III:1Trademark Licensing AgreementThis Trademark Licensing Agreement (this “Agreement”) is entered into by and between the following parties inBeijing, the People’s Republic of China (the “PRC”, for the purposes of this Agreement, including the Hong Kong SpecialAdministrative Region, the Macao Special Administrative Region and the Taiwan region) on December 29, 2023:Party A: Beijing Qihu Technology Co., Ltd.Address: 801, Floor 8, No. 104, Floors 1 to 19, Building 2, Courtyard 6, Jiuxianqiao Road, Chaoyang DistrictParty B: Shanghai Qiyu Information Technology Co., Ltd.Address: Room 1118, No. 4, Lane 800, Tongpu Road, Putuo District, Shanghai(The above parties shall be referred to individually as a “Party” and collectively as the “Parties”.)PreambleWhereas:1.Beijing Qihu Technology Co., Ltd. is a limited liability company incorporated and validly existing under the laws ofthe PRC. Party A owns the trademarks registered in the PRC or the marks under application for registration that arebeing applied for registration with the Chinese trademark authorities but have not yet obtained trademark registrationcertificates in connection with the business of Party B Group (as defined below);2.Shanghai Qiyu Information Technology Co., Ltd. is a limited liability company incorporated and validly existingunder the laws of China, mainly engaging in Internet financial services;3.Subject to the terms and conditions of this Agreement, Party A and Party B, together with Party B Group (as definedbelow) represented by Party B, intend to enter into a written agreement on the licensing arrangements of the relevanttrademarks and brands.NOW, THEREFORE, through friendly consultation, the Parties agree as follows:Article 1DefinitionsThe terms used in this Agreement shall be defined as follows:1.1“Party B Group” means Qifu Technology, Inc.(formerly known as 360 DigiTech, Inc., hereinafter referred to as“QFIN”) and all companies within the scope of its consolidated financial statements in accordance with U.S. GAAP.“Control” for the purposes of this provision means (i) any company, corporation or other entity in which a Partyowns or controls, directly or indirectly, more than 50% of the shares or voting rights; and (ii) any other company,corporation or other entity over which a Party may exercise a material influence in accordance with the applicableaccounting standards.21.2“Licensed Products and Services” means the products manufactured and sold, or services provided, under theLicensed Trademarks (as defined below) and put into the market by Party B Group to the extent permitted by theLaws.1.3“Licensed Territory” means the region of PRC, which for the purposes of this definition includes the Hong KongSpecial Administrative Region, the Macao Special Administrative Region and the Taiwan region.1.4“License Term” means the term granted by Party A to Party B Group for the use of the Licensed Trademarkspursuant to Article 2.5 hereof.1.5“Licensed Materials” means all product literature and manuals, packaging, instructions for sale, use and services,labels or other product documentation (regardless of the form or medium used) prepared by or on behalf of Party BGroup and directly relating to the Licensed Products and Services.1.6“Licensed Trademarks” means the trademarks listed in Appendix I hereto.1.7“Third Party” means a natural person, legal person, body corporate, social group or any other entity and organizationother than the Parties to this Agreement, Party A and Party B Group.1.8With respect to any Party, “Affiliate” means any person, company, partnership, trust or other entity which directly orindirectly controls, is directly or indirectly controlled by, or is under direct or indirect common control with, suchParty; for the purposes of this definition, the term “control” in this definition means (i) any company, corporation orother entity of which a Party holds or controls directly or indirectly more than 50% of the shares or voting rights; and(ii) other company, corporation or other entity over which a Party may exercise a material influence under theapplicable accounting standards.Article 2Grant of Rights2.1Party A hereby grants to Party B Group the right to use the relevant registered trademarks specified in Appendix Iattached hereto on the Licensed Products and Services and on the Licensed Materials in the Licensed Territoryduring the License Term in accordance with the terms and conditions of this Agreement, provided that the LicensedProducts and Services shall be the products manufactured and sold, or services provided, by Party B Group andcomply with the requirements of relevant laws and regulations.2.2Notwithstanding the foregoing, in consideration of the nature of the industry in which Party B Group operates andthe actual operations of Party B Group, the Parties agree that Party A shall conduct risk management on, andmonitor, supervise and guide at real time, the use of the Licensed Trademarks.2.3With respect to marks under application for trademark registration that are applying to the trademark registrationauthority for registration by Party A but have not yet obtained the trademark registration certificates, Party A shalllicense the marks to Party B Group in accordance with the provisions set forth in Appendix II hereto, provided thatthe Licensed Products and Services shall be the products manufactured and sold, or services provided, by Party BGroup, which comply with the relevant laws and regulations.32.4Party A shall have the right, but not the obligation, to cause Party A or its designated Affiliates to license to Party BGroup other intellectual property rights related to the Licensed Trademarks, and Party A or its designated Affiliatesmay terminate such license at any time without the consent of Party B Group.2.5The Parties hereto acknowledge that the term of license granted by Party A to Party B Group for the use of theLicensed Trademarks shall be from January 1, 2024 to December 31, 2026. Within three (3) months prior to theexpiration of the License Term hereunder, the Parties shall negotiate the license-related matters for the followingyear.2.6Without the prior written consent of Party A, Party B Group shall not assign the license granted to it to any ThirdParty or provide guarantee to any Third Party by such license, nor shall it sub-license or sub-authorize the use of theLicensed Trademarks to any Third Party, whether such assignment, guarantee, sub-authorization or sub-license iswith or without consideration.Article 3License Fee and its Payment3.1The Parties hereto acknowledge that Party B Group shall pay Party A the license fee in the amount of RMB TwentyFive Million (RMB25,000,000) per quarter, namely RMB One Hundred Million (RMB100,000,000) per year (the“License Fee”) from January 1, 2024 to December 31, 2024 with respect to the rights granted under Article 2 hereof.3.2The Parties hereto agree that the License Fee for the period from January 1, 2024 to March 31, 2024 shall be paidbefore March 31, 2024; the License Fee for the period from April 1, 2024 to June 30, 2024, shall be paid before June30, 2024. Similarly, the License fee for each quarter shall be paid before the last day of that quarter. Party A shallissue a special VAT invoice of equal amount to Party B’s Group before Party B’s Group makes the payment.Article 4Delivery of InformationParty A shall provide Party B Group with a copy of the title certificates of the Licensed Trademarks listed inAppendix I attached hereto within sixty (60) days from the Effective Date of this Agreement.4Article 5Method of UseDuring the term of this Agreement, any Party licensed to use the Licensed Trademarks under this Agreement (the“Licensee”) shall comply with the following provisions:5.1Use of Licensed Trademarks5.1.1Licensee shall ensure that Licensed Trademarks are used only in the Licensed Products and Services or in theadvertising, promotion or sale in connection with the Licensed Products and Services. In addition to otherrestrictions hereunder, the Licensee must specify the licensing relationship with the Licensor in a manner thatdoes not cause the public to infer that the Licensed Products and Services are products of the Licensor.5.1.2The Licensee shall completely and accurately reproduce the color, design and appearance of the LicensedTrademarks when using the Licensed Trademarks, without any modification.5.1.3Unless otherwise provided for by the laws and regulations of the PRC and confirmed in writing by theLicensor in advance, the Licensee shall not use the Licensed Trademark in combination or in parallel withany prefix, suffix or other name, word, character, letter, trademark, label, design, logo or symbol in any formor by any means as a trademark or name of business entity (such as store name, etc.).5.1.4The Licensee must abide by the laws and regulations of the Licensed Territory and other requirementsapplicable to the Licensed Products and Services with the Licensed Trademarks and shall not operate inviolation of laws.5.1.5Any advertising, promotional or display materials used by the Licensee in connection with the LicensedTrademarks shall not contain any content which may infringe the reputation, goodwill, fame or image of theLicensor, or violate applicable laws.5.1.6The Licensee may not extend the right to use the Licensed Trademarks in a disguised manner bymanufacturing or providing Licensed Products and Services in quantities significantly greater than thosenecessary for Licensee’s daily operations. Unless otherwise agreed by the Licensor in writing and subject tothe payment of additional License Fees by the Licensee at the request of the Licensor, the Licensee may notmake any further use of the Licensed Trademarks after the end of the License Term under this Agreement,including in the manufacture or sale of products or provision of services.5.2Trademarks of Third PartiesWhen the Licensee uses Licensed Trademarks together with a Third Party’s trademark on the Licensed Products andServices, the Licensed Materials or in the advertising, promotion or packaging of the Licensed Products andServices, the Licensee shall ensure that the Third Party’s trademark is clearly and visually distinguished from theLicensed Trademarks so as to avoid any association between the Licensor and such Third Party or its trademark.55.3Protection of Party A’s Goodwill5.3.1Party B shall, and shall cause Party B Group to, ensure its maintenance of sound business operations,compliance with all laws and regulations, and the quality and legal compliance of the Licensed Products andServices with the Licensed Trademarks, and be subject to the supervision of Party A or its designatedAffiliates.5.3.2In the event that any event adverse to Party A and/or the Licensed Trademarks occurs due to Party B Group,Party B or Party B Group shall notify Party A within 24 hours and take joint action and bear the costsincurred by Party A or its Affiliates therefrom and any indemnification incurred by Party A or its Affiliates toany Third Party as a result thereof.Article 6Filing and Assumption of Costs6.1The Parties shall enter into a separate trademark license agreement (if necessary) in respect of the LicensedTrademark covered by this Agreement in accordance with the relevant laws and regulations of the PRC, with theterms and conditions of such trademark license agreement consistent with this Agreement, and in case of anyinconsistency or conflict, this Agreement shall prevail; upon request by Party B and Party B Group, the Parties mayfile the execution, amendment or termination of such trademark license agreement with the competent trademarkauthority as required by law.6.2During the License Term, if the term of the Licensed Trademarks expires, the Authorizing Party shall renew theLicensed Trademarks in a timely manner in accordance with relevant laws and regulations to maintain the validity ofthe Licensed Trademarks.6.3The costs arising from such matters as license and filing of the Licensed Trademarks shall be borne by the Licensee.Article 7Trademark Right Infringements and Warranties7.1The Licensor warrants that it is the legitimate owner of the Licensed Trademarks under this Agreement, and has theright to grant the Licensee the right to use the Licensed Trademarks. If a Third Party claims compensation fordamages from the Licensor for infringement by the Licensed Trademarks during the performance of this Agreement,the Licensor shall be responsible for negotiating with the Third Party; if a Third Party claims compensation fordamages from the Licensee for infringement by the Licensed Trademarks, the Licensee shall notify the Licensorwithin 24 hours from its receipt of the relevant claim for damages from the Third Party, and the Licensor may decideto reach a settlement, file a lawsuit or take other measures with respect to the Third Party’s claim by itself or byauthorizing the Licensee. The Licensee shall not take any action that may result in loss, damage, obligation orexpense to the Licensor without the prior consent of the Licensor.67.2If the Licensee discovers that a Third Party infringes the Licensed Trademarks and the Licensor’s goodwill containedtherein, or that a Third Party uses trademarks similar to the Licensed Trademarks, the Licensee shall inform theLicensor within 24 hours of the relevant facts and available evidence to the best of its knowledge. The Licensor mayin its sole discretion, either alone or jointly with the Licensee, or authorize the Licensee to commence any action orfile any claim against any Third Party infringing the Licensed Trademarks, and reach a settlement, file a lawsuit ortake other steps with respect to the decision on such Third Party’s infringement. The Licensee shall, at the request ofthe Licensor, take such legal actions as may be necessary to prevent such infringement as agreed upon by theLicensee and the Licensor, or assist the Licensor to the extent possible in such proceedings as the Licensor deemsnecessary.7.3In the event that any of the situations set forth in Article 7.1 and/or Article 7.2 under this Agreement occurs duringthe License Term, the Licensor and the Licensee shall negotiate and determine the allocation of expenses incurred inthe light of the specific circumstances.Article 8Breach of Contract and Compensation for Damages8.1If either Party (the “Breaching Party”) breaches any provisions of this Agreement and causes damages to the otherParty (the “Non-Breaching Party”), the Non-Breaching Party may send a written notice to the Breaching Party torequire the Breaching Party to immediately remedy and rectify its breach; If the Breaching Party fails to takemeasures to the satisfaction of the Non-breaching Party to remedy and rectify its breach within fifteen (15) businessdays from the date of such written notice from the Non-breaching Party, the Non-breaching Party shall be entitled toimmediately adopt other remedies in the method stipulated herein or by legal means, including but not limited toearly termination of this Agreement.8.2Party B agrees to indemnify Party A or its Affiliates against any and all liabilities, losses, damages, claims andactions if: (i) the Licensed Trademarks and the goodwill or interests of Party A or its Affiliates contained therein areimpaired for reasons attributable to Party B and/or Party B Group; or (ii) Party B Group breaches any provision ofthis Agreement and causes losses to Party A or its Affiliates.Article 9Termination9.1Party A may terminate this Agreement by giving a written notice to Party B and Party B Group in the event of any ofthe following events:9.1.1Party B becomes insolvent, liquidated, bankrupt or ceases to operate;9.1.2Any Force Majeure event or its impact continues for more than 180 days, preventing Party B Group fromeffectively carrying out its business;9.1.3Party B fails to perform its payment obligation hereunder in accordance with the provisions;9.1.4The reputation of Party A or its Affiliates is adversely affected or the interests of Party A or its Affiliates aredamaged due to the use of the Licensed Trademarks by Party B or Party B Group;9.1.5As required by laws, regulations, policies or guidance of relevant regulators or governmental authorities;79.1.6Party B or Party B Group breaches any provisions of this Agreement (including without limitation provisionsregarding the method of use), and Party A gives a written notice specifying the breach to Party B Group, andParty B or Party B Group fails to stop the breach and take remedial measures to satisfy the requirements ofthis Agreement within ninety (90) days after the notice is given.9.2Upon termination of this Agreement, Party B shall, and shall ensure that Party B Group shall:9.2.1cease the use of the Licensed Materials comprising part or all of the Licensed Trademarks within a reasonableperiod from the date of termination of this Agreement;9.2.2cease the use of the Licensed Trademarks within thirty (30) days of the date of termination of this Agreementand the distribution or sale of the Licensed Products and Services with some or all of the LicensedTrademarks within such period.9.3Articles 8, 9, 11, 12, 15.1 and 15.6 hereof shall survive the termination of this Agreement and remain binding uponthe Parties. However, unless otherwise agreed by the Parties, such termination shall be without prejudice to theremedies and rights of either Party for any breach of this Agreement prior to the termination.9.4If this Agreement is terminated due to either Party’s breach of this Agreement or failure to perform its obligationshereunder, it shall not affect the other Party’s rights to claim compensation from such Party for damages arising fromsuch breach or failure or termination.Article 10Force Majeure10.1“Force Majeure” means any event beyond the reasonable prediction and control of a Party and unavoidablenotwithstanding the reasonable attention of the affected Party, including but not limited to acts of government, forceof nature, fire, explosion, storm, flood, earthquake, tide, lightning or war. However, inadequate credit, funds orfinancing shall not be deemed as an event beyond the reasonable control of a Party.10.2If the performance of this Agreement is delayed or hindered by either Party due to a Force Majeure event, theaffected Party shall, within seven (7) days from the occurrence of such Force Majeure event, send a noticespecifying the Force Majeure event to the other Party and informing it of the steps to be taken to complete theperformance of such liabilities.10.3Delay or failure to perform this Agreement due to Force Majeure shall not constitute a breach of contract by theParty affected by a Force Majeure event, and shall not constitute the basis for claiming damages, losses or liquidateddamages. The term of performance of this Agreement shall be extended accordingly for a period affected by theForce Majeure event. However, the affected Party shall take appropriate measures to minimize or eliminate theeffects of Force Majeure and endeavor to resume the performance of the obligations delayed or hindered due toForce Majeure. Once the Force Majeure is eliminated, the Parties agree to use their best efforts to resume theperformance of the provisions hereunder.8Article 11Announcement11.1Neither Party (nor any of their respective Affiliates) shall make any announcement or issue any circular inconnection with the existence of this Agreement or the subject matter hereof without the prior written approval ofthe other Party (which shall not be unreasonably withheld or delayed by either Party).11.2The restrictions of Article 11.1 shall not apply if the notice, announcement or circular is issued by law or pursuant tothe requirement of a securities exchange or any regulatory or other supervisory body or authority with competentjurisdiction (whether or not such requirement has legal effect). Where these exceptions apply, the Party making theannouncement or sending the circular shall use its reasonable efforts to consult with the other Party in advance as tothe form, content and timing of the announcement or circular.Article 12Confidentiality12.1Each party to this Agreement shall, and shall procure that each of its representatives shall, keep confidential allinformation, documents and records relating to any of the Parties, any proprietary rights of any of the Parties or thecontents of this Agreement (“Confidential Information”), and shall not disclose such Confidential Information toany person except (i) as permitted by Article 12 hereof; or (ii) as approved by the other Party in writing.12.2Article 12.1 shall not prevent a Party or its representatives from disclosing if and to the extent that the Party candemonstrate that:(1)The disclosure is required by law or any competent stock exchange or any regulatory, governmental or anti-trust authority (including any tax authority) (provided that the disclosing Party shall first notify the other Partyof its intention to disclose such information and take into account the reasonable opinions of the other Party);(2)The Confidential Information disclosed is lawfully in the possession of such Party or any of its representatives(as evidenced by written records in any case) without any obligation of confidentiality prior to receipt orpossession of such information;(3)The Confidential Information has become available to the public prior to the disclosure through no fault of suchParty (or its Representatives);(4)The disclosure is made as a result of any arbitration or judicial proceedings arising out of this Agreement (orany other transaction documents).Article 13Non-transferableNeither Party may assign, transfer, pledge or otherwise dispose of (collectively “Transfer”) all or any part of itsrights under this Agreement or grant, create or dispose of any right, interest or obligation therein, except in accordancewith the provisions of this Agreement or as agreed by the Parties in writing. Any Transfer contrary to this Article 13 shallbe null and void. However, this provision shall not apply to the respective Affiliates of the Parties. For the purposes of thisAgreement, the Affiliates of Party A and the Affiliates of Party B shall refer to Party A’s Affiliates and any entitiesincluded in Party B Group.9Article 14Further Assurance14.1Each of the Parties shall execute (or procure the execution of) such further documents as are required by law ornecessary to implement or effect this Agreement.14.2Each of the Parties shall cause its Affiliates to comply with all obligations expressly applicable to such Affiliates.Article 15Miscellaneous15.1NoticeNotices or other communications required to be given by any Party pursuant to this Agreement shall be written inChinese or English and may be delivered in person or sent by registered mail, postage prepaid post, courier service orfacsimile to the address of the relevant Party set forth below or such other address as may be notified by such Partyto the other Party from time to time or the address of other person designated by such Party. A notice shall bedeemed to have been effectively serviced: (i) at the date of delivery if delivered in person; (ii) ten (10) days after thedate on which pre-paid registered air mail is sent (as indicated on the postmark), or four (4) days after the delivery toa courier service if delivered by letter; and (iii) at the time of receipt as shown on the confirmation of transmission ofthe relevant document if delivered by facsimile.Party A: Beijing Qihu Technology Co., Ltd.Address: International Electronics Headquarters, Electronic City, Courtyard No. 6, Jiuxianqiao Road,Chaoyang District, BeijingAttn: QIAO MengParty B: Shanghai Qiyu Information Technology Co., Ltd.Address: Room 1118, No. 4, Lane 800, Tongpu Road, Putuo District, ShanghaiAttn: ZHANG Yue15.2Conflict with Other RightsIn the event of any conflict between the provisions of this Agreement and the provisions of any other agreement asbetween the Parties to this Agreement, this Agreement shall prevail unless (i) the other agreement expressly providesthat it shall prevail over this Agreement in relevant respect; and (ii) it is agreed by entering into a separate agreementor as otherwise agreed in writing by Party A and Party B Group that such other agreements or other writtenagreements shall prevail over this Agreement in the relevant respects.15.3Exemption, Rights and RemediesUnless otherwise expressly provided for herein, non-exercise, failure to exercise or delay in exercise by any Party ofany right, power or remedy under this Agreement or any transaction documents shall not be construed as a waiver ofsuch right, power or remedy, nor shall it preclude such Party from exercising the right, power or taking remedy atany time thereafter. No single or partial exercise of any such rights, powers or remedies shall preclude furtherexercise thereof by such Party.1015.4Effectiveness and AmendmentsThis Agreement shall become effective upon being sealed by the Parties on the date first above written. After thisAgreement comes into effect, any amendment to this Agreement (or any other transaction documents) shall not beeffective unless it has been made in writing and signed and sealed by the Parties in person or by their legalrepresentatives or authorized representatives.15.5SeverabilityThe provisions of this Agreement and other transaction documents are severable. If any such provision is deemed tobe or becomes invalid or unenforceable in any respect under the law of any jurisdiction, it shall have no effect in thatrespect and the Parties shall use their reasonable efforts to replace such provision with a substitute provision ofsimilar effect or intended effect in that respect to the greatest extent possible.15.6Governing Law and Arbitration(1)This Agreement shall be governed by the laws of China and shall be construed and performed accordingly.(2)The Parties shall seek to settle any dispute, controversy or claim (“Dispute”) arising out of or in connectionwith the construction or performance of this Agreement through friendly consultations. If no settlement can bereached through such consultations within sixty (60) days after a Party brings the matter before the other Party,the Parties may submit it to arbitration.(3)The Dispute shall be submitted to Beijing Arbitration Commission (“BAC”) for arbitration in accordance withits rules effective at the time of the arbitration. The Dispute shall be decided by three arbitrators. Each Partyshall select one arbitrator, and the third arbitrator shall be appointed by the other two arbitrators so selected,provided that if the other two arbitrators fail to make a decision on the selection of the third arbitrator, the thirdarbitrator shall be appointed by BAC.(4)The arbitration proceedings shall be conducted under the auspices of BAC as the presiding authority and shallbe conducted in Chinese unless otherwise agreed by the Parties. The arbitration proceedings shall take place inBeijing.(5)The arbitral award rendered pursuant to the above arbitration proceedings shall be final and binding upon theParties and shall be enforceable in accordance with its terms.(6)The arbitration fees shall be paid by the losing Party, unless otherwise provided for in the arbitration award.The Parties agree that, if it becomes necessary for a Party to enforce an arbitral award through any type of legalproceeding, the Party against which such legal proceeding is brought shall pay all reasonable costs, expensesand attorneys’ fees.(7)During the dispute resolution, except for the part in dispute that is subject to arbitration, the other provisions ofthis Agreement shall remain in effect and the Parties shall continue to perform this Agreement in all otherrespects.1115.7WaiverAny waiver by any Party of a breach of any obligation of the other Party under this Agreement shall be made inwriting and executed by the waiving Party and shall not be deemed to be a waiver of any other future breach by theother Party under this Agreement.15.8Entire AgreementThis Agreement constitutes the entire agreement and understanding between the Parties with respect to the subjectmatter hereof and supersedes all previous agreements, both written and oral, and all previous communicationsbetween the Parties with respect to the subject matter hereof.15.9Language and CounterpartsThis Agreement shall be executed in Chinese in three counterparts, with each Party holding one counterpart, and therest being submitted to the relevant authorities for approval and filing. All counterparts shall have equal legal effect.15.10 Commercial integrity agreementIn order to ensure that both parties abide by the code of conduct of commercial integrity and prevent commercialbribery in the process of cooperation, both parties confirm that they have fully read and commit to abide by thefollowing commercial integrity agreement:(http://www.360.cn/about/shangyechengxinxieyi.html).IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized representatives of both Parties onthe date first written.(The remainder of this page is intentionally left blank.)12(Signature page to the Trademark Licensing Agreement between Beijing Qihu Technology Co., Ltd. and Shanghai QiyuInformation Technology Co., Ltd.)Party A: Beijing Qihu Technology Co., Ltd. (Seal)Legal Representative or Authorized Representative (Signature):[The seal of Beijing Qihu Technology Co., Ltd. is affixed]Party B: Shanghai Qiyu Information Technology Co., Ltd. (Seal)[The seal of Shanghai Qiyu Information & Technology Co., Ltd. is affixed]13Appendix I:List of Licensed Trademarks[***]14Appendix II:Marks under Application for Trademark RegistrationArticle 1Definition1.1“Marks under Registration” shall mean the relevant marks set forth in the List of Licensed Trademarks in Appendix Iattached hereto and for which Party A has applied to the competent trademark registration authority for theregistration of trademarks.Article 2Use of the Marks under Registration2.1Party A hereby agrees that Party B shall use the Marks under Registration in accordance with the provisions of thisAgreement during the term provided in the Trademark Licensing Agreement dated December 29, 2023 between theParties. Accordingly, Party B Group shall be entitled to use the Marks under Registration in accordance with thisAppendix.2.2Party B Group shall not assign any of its rights or obligations under this Agreement to any Third Party or sub-licenseany Third Party to use the Marks under Registration.2.3Party A hereby agrees that once the Marks under Registration are approved for registration in accordance with law,Party A will immediately notify Party B Group and license Party B Group to use in accordance with the terms andconditions of this Agreement.15Article 3Representations, Warranties and Undertakings of Party A3.1Party A warrants that Party A is the legitimate applicant of the Marks under Registration and is actively applying forthe registration of the Marks under Registration according to relevant PRC laws and regulations.3.2Party A agrees to bear and pay all relevant fees and expenses payable by the applicant in the process of theapplication for the Marks under Registration.3.3Party A shall take appropriate measures to secure the successful registration of the Marks under Registration, andshall warrant that it will not intentionally take any action to affect the approval of registration. Party A shall not bearany responsibility if the Marks under Registration fail to be approved to be registered trademarks in accordance withthe law due to reasons not attributable to Party A.3.4Party A’s use of the Marks under Registration as well as the use by Party B Group of the Marks under Registrationwill not result in any infringement or possible infringement of the relevant rights of any Third Party.3.5The Parties agree that after the execution and effectiveness of this Agreement, the Parties shall unconditionallyexecute any additional legal documents and take any actions necessary to achieve the purposes of this Agreement.3.6If any Third Party claims that Party A has infringed the rights of any Third Party by allowing Party B Group to usethe Marks under Registration in accordance with this Agreement, Party A shall be liable for all costs and liabilitiesfor defending against such claim.3.7Party A shall defend, indemnify and hold harmless the Licensor from and against any lawsuits and claims against theLicensee arising from infringement of any Third Party rights by the Marks under Registration prior to execution ofthis Agreement. Exhibit 8.1List of Significant Subsidiaries and Consolidated Variable Interest Entities of Qifu Technology, Inc.Subsidiaries Place of IncorporationHK Qirui International Technology Company LimitedHong KongShanghai Qiyue Information Technology Co., Ltd.People’s Republic of ChinaShanghai Qidi Information Technology Co., Ltd.People’s Republic of ChinaBeihai Qi’ang Information & Technology Co., Ltd.People’s Republic of ChinaConsolidated Variable Interest Entities and Their Subsidiaries Place of IncorporationShanghai Qiyu Information Technology Co., Ltd.People’s Republic of ChinaFuzhou 360 Financing Guarantee Co., Ltd.People’s Republic of ChinaFuzhou 360 Online Microcredit Co., Ltd.People’s Republic of China Exhibit 11.1QIFU TECHNOLOGY, INC.AMENDED AND RESTATED CODE OF BUSINESS CONDUCT AND ETHICS(Adopted by the Board of Directors of Qifu Technology, Inc. on March 12, 2024)I.PURPOSEThis Code of Business Conduct and Ethics (the “Code”) contains general guidelines for conducting the business ofQifu Technology, Inc. and its subsidiaries and affiliates (collectively, the “Company”) consistent with the higheststandards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of theSarbanes-Oxley Act of 2002 and the rules promulgated thereunder. To the extent this Code requires a higher standard thanrequired by commercial practice or applicable laws, rules or regulations, the Company adheres to these higher standards.This Code is designed to deter wrongdoing and to promote:●honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest betweenpersonal and professional relationships;●full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, orsubmits to, the U.S. Securities and Exchange Commission (the “SEC”) and in other public communications madeby the Company;●compliance with applicable laws, rules and regulations;●prompt internal reporting of violations of the Code; and●accountability for adherence to the Code.II.APPLICABILITYThis Code applies to all directors, officers and employees of the Company, whether they work for the Company ona full-time, part-time, consultative or temporary basis (each, an “employee” and collectively, the “employees”). Certainprovisions of the Code apply specifically to our chief executive officer, chief financial officer, other chief officers, seniorfinancial officer, controller, senior vice presidents, vice presidents and any other persons who perform similar functions forthe Company (each, a “senior officer,” and collectively, the “senior officers”).The Board of Directors of Qifu Technology, Inc. (the “Board”) has appointed the head of the Legal Department ofQifu Technology, Inc. as the Compliance Officer for the Company (the “Compliance Officer”). If you have any questionsregarding the Code or would like to report any violation of the Code, please contact the Compliance Officer by email atJubaoxin@360shuke.com and ComplianceOfficer@360shuke.com.III.CONFLICTS OF INTERESTIdentifying Conflicts of InterestA conflict of interest occurs when an employee’s private interest interferes, or appears to interfere, in any way withthe interests of the Company as a whole. An employee should actively avoid any private interest that may impact suchemployee’s ability to act in the interests of the Company or that may make it difficult to perform the employee’s workobjectively and effectively. In general, the following are considered conflicts of interest:●Competing Business. No employee may be employed by a business that competes with the Company or deprives itof any business.●Corporate Opportunity. No employee may use corporate property, information or his/her position with theCompany to secure a business opportunity that would otherwise be available to the Company. If an employeediscovers a business opportunity that is in the Company’s line of business through the use of the Company’sproperty, information or position, the employee must first present the business opportunity to the Company beforepursuing the opportunity in his/her individual capacity.●Financial Interests.(i)No employee may have any financial interest (ownership or otherwise), either directly or indirectlythrough a spouse or other family member, in any other business or entity if such interest adverselyaffects the employee’s performance of duties or responsibilities to the Company, or requires theemployee to devote time to it during such employee’s working hours at the Company;(ii)No employee may hold any ownership interest in a privately held company that is in competition withthe Company;(iii)An employee may hold less than 5% ownership interest in a publicly traded company that is incompetition with the Company; provided that if the employee’s ownership interest in such publiclytraded company increases to 5% or more, the employee must immediately report such ownership to theCompliance Officer;(iv)Unless pre-approved by the Compliance Officer, no employee may hold any ownership interest in acompany that has a business relationship with the Company if such employee’s duties at the Companyinclude managing or supervising the Company’s business relations with that company; and(v)Notwithstanding the other provisions of this Code,(a)a director or any family member of such director (collectively, “Director Affiliates”) or a seniorofficer or any family member of such senior officer (collectively, “Officer Affiliates”) may continue tohold his/her investment or other financial interest in a business or entity (an “Interested Business”) that:(1) was made or obtained either (x) before the Company invested in or otherwise became interestedin such business or entity; or (y) before the director or senior officer joined the Company (for theavoidance of doubt, regardless of whether the Company had or had not already invested in or otherwisebecome interested in such business or entity at the time the director or senior officer joined theCompany); or(2) may in the future be made or obtained by the director or senior officer, provided that at the timesuch investment or other financial interest is made or obtained, the Company has not yet invested in orotherwise become interested in such business or entity;provided that such director or senior officer shall disclose such investment or other financial interest tothe Board;(b)an interested director or senior officer shall refrain from participating in any discussion amongsenior officers of the Company relating to an Interested Business and may not be involved in anyproposed transaction between the Company and an Interested Business; and(c)before any Director Affiliate or Officer Affiliate (i) invests, or otherwise acquires any equity orother financial interest, in a business or entity that is in competition with the Company; or (ii) entersinto any transaction with the Company, the related director or senior officer shall obtain prior approvalfrom the Audit Committee of the Board.For purposes of this Code, a company or other entity is deemed to be “in competition with the Company” if itcompetes with the Company’s financing and related services and any other business in which the Companyengages in.●Loans or Other Financial Transactions. No employee may obtain loans or guarantees of personal obligations from,or enter into any other personal financial transaction with, any company that is a material customer, supplier orcompetitor of the Company. This guideline does not prohibit arms-length transactions with recognized banks orother financial institutions.●Service on Boards and Committees. No employee may serve on a board of directors or trustees or on a committeeof any entity (whether profit or not-for-profit) whose interests could reasonably be expected to conflict with thoseof the Company. Employees must obtain prior approval from the Board before accepting any such board orcommittee position. The Company may revisit its approval of any such position at any time to determine whetheran employee’s service in such position is still appropriate.The above is in no way a complete list of situations where conflicts of interest may arise. The following questionsmight serve as a useful guide in assessing a potential conflict of interest situation not specifically addressed above:●Is the action to be taken legal?●Is it honest and fair?●Is it in the best interests of the Company?Disclosure of Conflicts of InterestThe Company requires that employees fully disclose any situations that could reasonably be expected to give riseto a conflict of interest. If an employee suspects that he/she has a conflict of interest, or a situation that others couldreasonably perceive as a conflict of interest, the employee must report it immediately to the Compliance Officer. Conflictsof interest may only be waived by the Board, or the appropriate committee of the Board, and will be promptly disclosed tothe public to the extent required by law and applicable rules of the applicable stock exchange.Family Members and WorkThe actions of family members outside the workplace may also give rise to conflicts of interest because they mayinfluence an employee’s objectivity in making decisions on behalf of the Company. If a member of an employee’s familyis interested in doing business with the Company, the criteria as to whether to enter into or continue the businessrelationship and the terms and conditions of the relationship must be no less favorable to the Company compared withthose that would apply to an unrelated party seeking to do business with the Company under similar circumstances.Employees are required to report any situation involving family members that could reasonably be expected to giverise to a conflict of interest to their supervisor or the Compliance Officer. For purposes of this Code, “family members” or“members of employee’s family” include an employee’s spouse, parents, children and siblings, whether by blood, marriageor adoption or anyone residing in such employee’s home.Other Internal PoliciesIn cases where more stringent and/or detailed policies concerning conflict of interest have been established by theCompany or any department or division within the Company, those policies will supersede any less stringent and/ordetailed policies as set forth in this Code.IV.GIFTS, MEALS AND ENTERTAINMENTAll employees are required to comply with the Anti-Corruption Compliance Policy of the Company regardinggifts, meals and entertainment. A copy of such policy is attached hereto as Annex A.VI.PROTECTION AND USE OF COMPANY ASSETSEmployees should protect the Company’s assets and ensure their efficient use for legitimate business purposesonly. Theft, carelessness and waste have a direct impact on the Company’s profitability. Any use of the funds or assets ofthe Company, whether for personal gain or not, for any unlawful or improper purpose is strictly prohibited.To ensure the protection and proper use of the Company’s assets, each employee is required to:●Exercise reasonable care to prevent theft, damage or misuse of Company property;●Promptly report any actual or suspected theft, damage or misuse of Company property;●Safeguard all electronic programs, data, communications and written materials from unauthorized access;and●Use Company property only for legitimate business purposes.Except as approved in advance by the Chief Executive Officer or Chief Financial Officer of the Company, theCompany prohibits political contributions (directly or through trade associations) by any employee on behalf of theCompany. Prohibited political contributions include:●any contributions of the Company’s funds or other assets for political purposes;●encouraging individual employees to make any such contribution; and●reimbursing an employee for any political contribution.VII.INTELLECTUAL PROPERTY AND CONFIDENTIALITYEmployees shall abide by the Company’s rules and policies in protecting the intellectual property and confidentialinformation, including the following:●All inventions, creative works, computer software, and technical or trade secrets developed by an employeein the course of performing the employee’s duties or primarily through the use of the Company’s assets orresources while working at the Company are the property of the Company.●Employees shall maintain the confidentiality of information entrusted to them by the Company or entitieswith which the Company has business relations, except when disclosure is authorized or legally mandated.Confidential information includes all non-public information that might be of use to competitors, orharmful to the company or its business associates, if disclosed.●The Company maintains a strict confidentiality policy. During an employee’s term of employment with theCompany, the employee shall comply with any and all written or unwritten rules and policies concerningconfidentiality and shall fulfill the duties and responsibilities concerning confidentiality applicable to theemployee.●In addition to fulfilling the responsibilities associated with his/her position in the Company, an employeemay not, without obtaining prior approval from the Company, disclose, announce or publish trade secrets orother confidential business information of the Company, nor may an employee use such confidentialinformation outside the course of his/her duties to the Company.●Even outside the work environment, an employee must maintain vigilance and refrain from disclosingimportant information regarding the Company or its business, business associates or employees.●An employee’s duty of confidentiality with respect to the confidential information of the Company survivesthe termination of such employee’s employment with the Company for any reason until such time as theCompany discloses such information publicly or the information otherwise becomes available in the publicsphere through no fault of the employee.●Upon termination of employment, or at such time as the Company requests, an employee must return to theCompany all of its property without exception, including all forms of medium containing confidentialinformation, and may not retain duplicate materials.VIII.ACCURACY OF FINANCIAL REPORTS AND OTHER PUBLIC COMMUNICATIONSThe Company is required to report its financial results and other material information about its business to thepublic and the SEC. It is the Company’s policy to promptly disclose accurate and complete information regarding itsbusiness, financial condition and results of operations. Employees must strictly comply with all applicable standards, laws,regulations and policies for accounting and financial reporting of transactions, estimates and forecasts. Inaccurate,incomplete or untimely reporting will not be tolerated and can severely damage the Company and result in legal liability.Employees should be on guard for, and are required to promptly report, any possibility of inaccurate or incompletefinancial reporting. Particular attention should be paid to:●Financial results that seem inconsistent with the performance of the underlying business;●Transactions that do not seem to have an obvious business purpose; and●Requests to circumvent ordinary review and approval procedures.The Company’s senior financial officers and other employees working in the finance department have a specialresponsibility to ensure that all of the Company’s financial disclosures are full, fair, accurate, timely and understandable.These individuals are required to report any practice or situation that might undermine this objective to the ComplianceOfficer.Employees are prohibited from directly or indirectly taking any action to coerce, manipulate, mislead orfraudulently influence the Company’s independent auditors for the purpose of rendering the financial statements of theCompany materially misleading. Prohibited actions include but are not limited to:●issuing or reissuing a report on the Company’s financial statements that is not warranted in thecircumstances (due to material violations of U.S. GAAP, generally accepted auditing standards or otherprofessional or regulatory standards);●not performing audit, review or other procedures required by generally accepted auditing standards or otherprofessional standards;●not withdrawing an issued report when withdrawal is warranted under the circumstances; or●not communicating matters as required to the Company’s Audit Committee.IX.COMPANY RECORDSAccurate and reliable records are crucial to the Company’s business and form the basis of its earnings statements,financial reports and other disclosures to the public. The Company’s records are a source of essential data that guidesbusiness decision-making and strategic planning. Company records include, but are not limited to, booking information,payroll, timecards, travel and expense reports, e-mails, accounting and financial data, measurement and performancerecords, electronic data files and all other records maintained in the ordinary course of business.All Company records must be complete, accurate and reliable in all material respects. There is never an acceptablereason to make false or misleading entries. Undisclosed or unrecorded funds, payments or receipts are strictly prohibited.An employee is responsible for understanding and complying with the Company’s recordkeeping policy. An employeeshould contact the Compliance Officer if he/she has any questions regarding the recordkeeping policy.X.COMPLIANCE WITH LAWS AND REGULATIONSEach employee has an obligation to comply with the laws of the cities, provinces, regions and countries in whichthe Company operates. This includes, without limitation, laws covering commercial bribery and kickbacks, patent,copyrights, trademarks and trade secrets, information privacy, insider trading, offering or receiving gratuities, employmentharassment, environmental protection, occupational health and safety, false or misleading financial information, misuse ofcorporate assets and foreign currency exchange activities. Employees are expected to understand and comply with all laws,rules and regulations that apply to their positions at the Company. If any doubt exists about whether a course of action islawful, the employee should seek advice immediately from the Compliance Officer.XI.DISCRIMINATION AND HARASSMENTThe Company is firmly committed to providing equal opportunity in all aspects of employment and will nottolerate any illegal discrimination or harassment based on race, ethnicity, religion, gender, age, national origin or any otherprotected class. For further information, employees should consult the Compliance Officer.XII.FAIR DEALINGEach employee should endeavor to deal fairly with the Company’s customers, suppliers, competitors andemployees. No employee may take unfair advantage of anyone through manipulation, concealment, abuse of privilegedinformation, misrepresentation of material facts, or any other unfair-dealing practice.XIII.HEALTH AND SAFETYThe Company strives to provide employees with a safe and healthy work environment. Each employee hasresponsibility for maintaining a safe and healthy workplace for other employees by following environmental, safety andhealth rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions. Violence orthreats of violence are not permitted.Each employee is expected to perform his/her duty to the Company in a safe manner, free of any influence ofalcohol, illegal drugs or other controlled substances. The use of illegal drugs or other controlled substances in theworkplace is prohibited.XIV.VIOLATIONS OF THE CODEAll employees have a duty to report any known or suspected violation of this Code, including any violation oflaws, rules, regulations or policies that apply to the Company. Reporting a known or suspected violation of this Code byothers will not be considered an act of disloyalty, but an action to safeguard the reputation and integrity of the Companyand its employees.If an employee knows of or suspects a violation of this Code, it is such employee’s responsibility to immediatelyreport the violation to the Compliance Officer, who will work with the employee to investigate his/her concern. Allquestions and reports of known or suspected violations of this Code will be treated with sensitivity and discretion. TheCompliance Officer and the Company will protect the employee’s confidentiality to the extent possible, consistent with thelaw and the Company’s need to investigate the employee’s concern.It is the Company’s policy that any employee who violates this Code will be subject to appropriate discipline,including termination of employment, based upon the facts and circumstances of each particular situation. An employee’sconduct, if it does not comply with the law or with this Code, can result in serious consequences for both the employee andthe Company.The Company strictly prohibits retaliation against an employee who, in good faith, seeks help or reports known orsuspected violations. An employee inflicting reprisal or retaliation against another employee for reporting a known orsuspected violation will be subject to disciplinary action, including termination of employment.XV.WAIVERS OF THE CODEWaivers of this Code will be granted on a case-by-case basis and only in extraordinary circumstances. Waivers ofthis Code may be made only by the Board, or the appropriate committee of the Board, and may be promptly disclosed tothe public if so required by applicable laws and regulations and rules of the applicable stock exchange.XVI.CONCLUSIONThis Code contains general guidelines for conducting the business of the Company consistent with the higheststandards of business ethics. If employees have any questions about these guidelines, they should contact the ComplianceOfficer. The Company expects all employees to adhere to these standards. Each employee is separately responsible forhis/her actions. Conduct that violates the law or this Code cannot be justified by claiming that it was ordered by asupervisor or someone in higher management positions. If an employee engages in conduct prohibited by the law or thisCode, such employee will be deemed to have acted outside the scope of his/her employment. The prohibited conduct willsubject the employee to disciplinary action, including termination of employment.* * * * * * * * * * * * *1Annex AAnti-Corruption Compliance Policy Exhibit 12.1Certification by the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Haisheng Wu, certify that:1.I have reviewed this annual report on Form 20-F of Qifu Technology, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a mate rial factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly pres ent in allmaterial respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the company, including its consolidated subsid iaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial re porting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during theperiod covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control overfinancial reporting; and5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal con trol overfinancial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial re‐ porting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in thecompany’s internal control over financial reporting.Date: April 26, 2024By:/s/ Haisheng WuName:Haisheng WuTitle:Chief Executive Officer Exhibit 12.2Certification by the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Alex Xu, certify that:1.I have reviewed this annual report on Form 20-F of Qifu Technology, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a mate rial factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly pres ent in allmaterial respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the company, including its consolidated subsid iaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial re porting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during theperiod covered by the annual report that has materially affected, or is reasonably likely to materially affect, the com pany’s internal control overfinancial reporting; and5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal con trol overfinancial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial re‐ porting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in thecompany’s internal control over financial reporting.Date: April 26, 2024By:/s/ Alex XuName:Alex XuTitle:Chief Financial Officer Exhibit 13.1Certification by the Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of Qifu Technology, Inc. (the “Company”) on Form 20-F for the year ended December 31, 2023 as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Haisheng Wu, Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof the Company.Date: April 26, 2024By:/s/ Haisheng WuName:Haisheng WuTitle:Chief Executive Officer Exhibit 13.2Certification by the Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of Qifu Technology, Inc. (the “Company”) on Form 20-F for the year ended December 31, 2023 as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Alex Xu, Chief Financial Officer of the Company, certify, pursuantto 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof the Company.Date: April 26, 2024By:/s/ Alex XuName:Alex XuTitle:Chief Financial Officer Exhibit 15.1中国北京建国门外大街1号国贸写字楼2座12-14层10000412-14th Floor, China World Office 2, No. 1 Jianguomenwai Avenue, Beijing 100004, China电话 Tel: +86 10 6563 7181 传真 Fax: +86 10 6569 3838电邮 Email: beijing@tongshang.com 网址 Web: www.tongshang.comApril 26, 2024To: Qifu Technology, Inc. (the “Company”)7/F Lujiazui Finance Plaza No. 1217 Dongfang Road Pudong New Area, Shanghai 200122 People’s Republic of ChinaDear Mesdames/Sirs,We consent to the references to our firm under the headings “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business andIndustry—We are subject to uncertainties surrounding regulations and administrative measures of the loan facilitation business. If any of ourbusiness practices are deemed to be non-compliant with applicable laws and regulations, our business, financial condition and results of operationswould be adversely affected”, “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business is subjectto complex and evolving PRC laws and regulations regarding data privacy and cybersecurity, as such regulations and laws as newly promulgated,many of which are subject to further interpretation. Any changes in these laws and regulations have caused and could continue to cause changes toour business practices and increase costs of operations, and any security breaches or our actual or perceived failure to comply with such laws andregulations could result in claims, penalties, damages to our reputation and brand, declines in user growth or engagement, or otherwise harm ourbusiness, results of operations and financial condition”,“Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our access to sufficient and sustainable funding at reasonable costs cannot be assured. If we fail to maintain collaboration with our financialinstitution partners or to maintain sufficient capacity to facilitate loans to borrowers, our reputation, results of operations and financial conditionmay be materially and adversely affected”, “Item 3. Key Information—D. Risk Factors—Risks Related to our Corporate Structure—If the PRCgovernment deems that the contractual arrangements in relation to the VIEs do not comply with PRC regulatory restrictions on foreign investmentin the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severepenalties or be forced to relinquish our interests in those operations”, “Item 4. Information on the Company—B. Business Overview—Regulation—Regulation on Online Finance Services Industry—Regulations on online marketing of financial products” , “Item 4. Information on theCompany—B. Business Overview—Regulation—Regulation on Online Finance Services Industry—Regulations on Financing Guarantee”, “Item4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIEs and Their Shareholders” and “Item 6.Directors, Senior Management and Employees—E. Share Ownership—Enforceability of Civil Liabilities” in Qifu Technology, Inc.’s AnnualReport on Form 20-F for the year ended December 31, 2023 (the “Annual Report”), which will be filed with the Securities and ExchangeCommission (the “SEC”) in the month of April 2024. We also consent to the filing with the SEC of this consent letter as an exhibit to the AnnualReport. We further consent to the incorporation by referenceof the summaries of our opinions under these captions into the Company’s registration statement on Form F-3 (File No. 333-268425), which wasfiled on November 17, 2022, and registration statements on Form S-8, as amended (File 333-231892 and 333-235488), which was initially filed onJune 3, 2019 and December 13, 2019, respectively.In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of theSecurities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.Yours Sincerely,/s/ Commerce & Finance Law OfficesCommerce & Finance Law Offices Exhibit 15.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement No. 333-268425 on Form F-3 and Registration Statement Nos. 333-231892and 333-235488 on Form S-8 of our reports dated April 26, 2024, relating to the financial statements of Qifu Technology, Inc. and the effectivenessof Qifu Technology, Inc.'s internal control over financial reporting appearing in this Annual Report on Form 20-F for the year ended December 31,2023./s/ Deloitte Touche Tohmatsu Certified Public Accountants LLPShanghai, ChinaApril 26, 2024 Exhibit 15.3Our ref VSL/741985-000001/29288456v1Qifu Technology, Inc.7/F Lujiazui Finance PlazaNo. 1217 Dongfang RoadPudong New Area, Shanghai 200122People’s Republic of China26 April 2024Dear SirsQifu Technology, Inc.We have acted as legal advisers as to the laws of the Cayman Islands to Qifu Technology, Inc., an exempted company incorporated in the CaymanIslands with limited liability (the “Company”), in connection with the filing by the Company with the United States Securities and ExchangeCommission (the “SEC”) of an annual report on Form 20-F for the year ended 31 December 2023 (the “Annual Report”).We hereby consent to the reference to our firm under the heading “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Enforceability of Civil Liabilities” in the Annual Report, and we further consent to the incorporation by reference of the summary of our opinionsunder this heading into the Company’s registration statement on Form F-3 (File No. 333-268425), which was filed on November 17, 2022, and theCompany’s registration statements on Form S-8, as amended (File Nos. 333-231892 and 333-235488), which was initially filed on 3 June 2019 and13 December 2019, respectively.We consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report. In giving such consent, we do not thereby admit thatwe come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities ExchangeAct of 1934, in each case, as amended, or the regulations promulgated thereunder.Yours faithfully/s/ Maples and Calder (Hong Kong) LLPMaples and Calder (Hong Kong) LLP 1Exhibit 97QIFU TECHNOLOGY, INC.CLAWBACK POLICYThe Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Qifu Technology, Inc.(the “Company”) believes that it is appropriate for the Company to adopt this Clawback Policy (the “Policy”) to be appliedto the Executive Officers of the Company and adopts this Policy to be effective as of the Effective Date.1.DefinitionsFor purposes of this Policy, the following definitions shall apply:a)“Company Group” means the Company and each of its subsidiaries or consolidated affiliated entities, asapplicable.b)“Covered Compensation” means any Incentive-Based Compensation granted, vested or paid to a person whoserved as an Executive Officer at any time during the performance period for the Incentive-BasedCompensation and that was Received (i) on or after the effective date of the Nasdaq listing standards, (ii) afterthe person became an Executive Officer and (iii) at a time that the Company had a class of securities listed on anational securities exchange or a national securities association.c)“Effective Date” means December 1, 2023.d)“Erroneously Awarded Compensation” means the amount of Covered Compensation granted, vested or paid to aperson during the fiscal period when the applicable Financial Reporting Measure relating to such CoveredCompensation was attained that exceeds the amount of Covered Compensation that otherwise would have beengranted, vested or paid to the person had such amount been determined based on the applicable Restatement,computed without regard to any taxes paid (i.e., on a pre-tax basis). For Covered Compensation based on stockprice or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject tomathematical recalculation directly from the information in a Restatement, the Committee will determine theamount of such Covered Compensation that constitutes Erroneously Awarded Compensation, if any, based on areasonable estimate of the effect of the Restatement on the stock price or total shareholder return upon whichthe Covered Compensation was granted, vested or paid and the Committee shall maintain documentation ofsuch determination and provide such documentation to the Nasdaq.e)“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.f)“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (orif there is no such accounting officer, the controller), any vice-president of the Company in charge of aprincipal business unit, division, or function (such as sales, administration, or finance), any other officer whoperforms a policy-making function, or any other person who performs similar policy-making functions for theCompany.2Executive officers of the Company’s parent(s) or subsidiaries are deemed executive officers of the Company ifthey perform such policy-making functions for the Company. “Policy-making function” does not includepolicy-making functions that are not significant. Both current and former Executive Officers are subject to thePolicy in accordance with its terms.g)“Financial Reporting Measure” means (i) any measure that is determined and presented in accordance with theaccounting principles used in preparing the Company’s financial statements, and any measures derived whollyor in part from such measures and may consist of IFRS/GAAP or non-IFRS/non-GAAP financial measures (asdefined under Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Exchange Act), (ii)stock price or (iii) total shareholder return. Financial Reporting Measures need not be presented within theCompany’s financial statements or included in a filing with the SEC.h)“Home Country” means the Company’s jurisdiction of incorporation.i)“Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or inpart upon the attainment of a Financial Reporting Measure.j)“Lookback Period” means the three completed fiscal years (plus any transition period of less than nine monthsthat is within or immediately following the three completed fiscal years and that results from a change in theCompany’s fiscal year) immediately preceding the date on which the Company is required to prepare aRestatement for a given reporting period, with such date being the earlier of: (i) the date the Board, acommittee of the Board, or the officer or officers of the Company authorized to take such action if Board actionis not required, concludes, or reasonably should have concluded, that the Company is required to prepare aRestatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to preparea Restatement. Recovery of any Erroneously Awarded Compensation under the Policy is not dependent on if orwhen the Restatement is actually filed.k)“Nasdaq” means the Nasdaq Stock Market.l)“Received”: Incentive-Based Compensation is deemed “Received” in the Company’s fiscal period during whichthe Financial Reporting Measure specified in or otherwise relating to the Incentive-Based Compensation awardis attained, even if the grant, vesting or payment of the Incentive-Based Compensation occurs after the end ofthat period.m)“Restatement” means a required accounting restatement of any Company financial statement due to the materialnoncompliance of the Company with any financial reporting requirement under the securities laws, including (i)to correct an error in previously issued financial statements that is material to the previously issued financialstatements (commonly referred to as a “Big R” restatement) or (ii) to correct an error in previously issuedfinancial statements that is not material to the previously issued financial statements but that would result in amaterial misstatement if the error were corrected in the current period or left uncorrected in the current period(commonly referred to as a “little r” restatement). Changes to the Company’s financial statements that do notrepresent error corrections under the then-current relevant accounting standards will not constituteRestatements. Recovery of any Erroneously Awarded Compensation under the Policy is not dependent on fraudor misconduct by any person in connection with the Restatement.n)“SEC” means the U.S. Securities and Exchange Commission.32.Recovery of Erroneously Awarded CompensationIn the event of a Restatement, any Erroneously Awarded Compensation Received during the Lookback Period prior tothe Restatement (a) that is then-outstanding but has not yet been paid shall be automatically and immediately forfeited and(b) that has been paid to any person shall be subject to reasonably prompt repayment to the Company Group in accordancewith Section 3 of this Policy. The Committee must pursue (and shall not have the discretion to waive) the forfeiture and/orrepayment of such Erroneously Awarded Compensation in accordance with Section 3 of this Policy, except as providedbelow.Notwithstanding the foregoing, the Committee (or, if the Committee is not a committee of the Board responsible forthe Company’s executive compensation decisions and composed entirely of independent directors, a majority of theindependent directors serving on the Board) may determine not to pursue the forfeiture and/or recovery of ErroneouslyAwarded Compensation from any person if the Committee determines that such forfeiture and/or recovery would beimpracticable due to any of the following circumstances: (i) the direct expense paid to a third party (for example,reasonable legal expenses and consulting fees) to assist in enforcing the Policy would exceed the amount to be recovered,including the costs that could be incurred if pursuing such recovery would violate local laws other than the Company’sHome Country laws (following reasonable attempts by the Company Group to recover such Erroneously AwardedCompensation, the documentation of such attempts, and the provision of such documentation to the Nasdaq), (ii) pursuingsuch recovery would violate the Company’s Home Country laws adopted prior to November 28, 2022 (provided that theCompany obtains an opinion of Home Country counsel acceptable to the Nasdaq that recovery would result in such aviolation and provides such opinion to the Nasdaq), or (iii) recovery would likely cause any otherwise tax-qualifiedretirement plan, under which benefits are broadly available to employees of Company Group, to fail to meet therequirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.3.Means of RepaymentIn the event that the Committee determines that any person shall repay any Erroneously Awarded Compensation, theCommittee shall provide written notice to such person by email or certified mail to the physical address on file with theCompany Group for such person, and the person shall satisfy such repayment in a manner and on such terms as requiredby the Committee, and the Company Group shall be entitled to set off the repayment amount against any amount owed tothe person by the Company Group, to require the forfeiture of any award granted by the Company Group to the person, orto take any and all necessary actions to reasonably promptly recoup the repayment amount from the person, in each case,to the fullest extent permitted under applicable law, including without limitation, Section 409A of the U.S. InternalRevenue Code and the regulations and guidance thereunder. If the Committee does not specify a repayment timing in thewritten notice described above, the applicable person shall be required to repay the Erroneously Awarded Compensation tothe Company Group by wire, cash or cashier’s check no later than thirty (30) days after receipt of such notice.44.No IndemnificationNo person shall be indemnified, insured or reimbursed by the Company Group in respect of any loss of compensationby such person in accordance with this Policy, nor shall any person receive any advancement of expenses for disputesrelated to any loss of compensation by such person in accordance with this Policy, and no person shall be paid orreimbursed by the Company Group for any premiums paid by such person for any third-party insurance policy coveringpotential recovery obligations under this Policy. For this purpose, “indemnification” includes any modification to currentcompensation arrangements or other means that would amount to de facto indemnification (for example, providing theperson a new cash award which would be cancelled to effect the recovery of any Erroneously Awarded Compensation). Inno event shall the Company Group be required to award any person an additional payment if any Restatement would resultin a higher incentive compensation payment.5.MiscellaneousThis Policy generally will be administered and interpreted by the Committee, provided that the Board may, from timeto time, exercise discretion to administer and interpret this Policy, in which case, all references herein to “Committee”shall be deemed to refer to the Board. Any determination by the Committee with respect to this Policy shall be final,conclusive and binding on all interested parties. Any discretionary determinations of the Committee under this Policy, ifany, need not be uniform with respect to all persons, and may be made selectively amongst persons, whether or not suchpersons are similarly situated.This Policy is intended to satisfy the requirements of Section 954 of the Dodd-Frank Wall Street Reform andConsumer Protection Act, as it may be amended from time to time, and any related rules or regulations promulgated by theSEC or the Nasdaq, including any additional or new requirements that become effective after the Effective Date whichupon effectiveness shall be deemed to automatically amend this Policy to the extent necessary to comply with suchadditional or new requirements.The provisions in this Policy are intended to be applied to the fullest extent of the law. To the extent that any provisionof this Policy is found to be unenforceable or invalid under any applicable law, such provision will be applied to themaximum extent permitted and shall automatically be deemed amended in a manner consistent with its objectives to theextent necessary to conform to applicable law. The invalidity or unenforceability of any provision of this Policy shall notaffect the validity or enforceability of any other provision of this Policy. Recoupment of Erroneously AwardedCompensation under this Policy is not dependent upon the Company Group satisfying any conditions in this Policy,including any requirements to provide applicable documentation to the Nasdaq.The rights of the Company Group under this Policy to seek forfeiture or reimbursement are in addition to, and not inlieu of, any rights of recoupment, or remedies or rights other than recoupment, that may be available to the CompanyGroup pursuant to the terms of any law, government regulation or stock exchange listing requirement or any other policy,code of conduct, employee handbook, employment agreement, equity award agreement, or other plan or agreement of theCompany Group.6.Amendment and TerminationTo the extent permitted by, and in a manner consistent with applicable law, including SEC and Nasdaq rules, theCommittee may terminate, suspend or amend this Policy at any time in its discretion.57.SuccessorsThis Policy shall be binding and enforceable against all persons and their respective beneficiaries, heirs, executors,administrators or other legal representatives with respect to any Covered Compensation granted, vested or paid to oradministered by such persons or entities.QIFU TECHNOLOGY, INC.CLAWBACK POLICYACKNOWLEDGMENT, CONSENT AND AGREEMENTI acknowledge that I have received and reviewed a copy of the Qifu Technology, Inc. Clawback Policy (as may beamended from time to time, the “Policy”) and I have been given an opportunity to ask questions about the Policy andreview it with my counsel. I knowingly, voluntarily and irrevocably consent to and agree to be bound by and subject to thePolicy’s terms and conditions, including that I will return any Erroneously Awarded Compensation that is required to berepaid in accordance with the Policy. I further acknowledge, understand and agree that (i) the compensation that I receive,have received or may become entitled to receive from the Company Group is subject to the Policy, and the Policy mayaffect such compensation and (ii) I have no right to indemnification, insurance payments or other reimbursement by orfrom the Company Group for any compensation that is subject to recoupment and / or forfeiture under the Policy.Capitalized terms used but not defined herein have the meanings set forth in the Policy.Signed:Print Name:Date:

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