LexinFintech Holdings Ltd.
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 20-F (Mark One) ooREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGEACT OF 1934 or xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018. or ooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to or ooSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 Date of event requiring this shell company report: Commission file number: 001-38328 LexinFintech Holdings Ltd.(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) 27/F CES TowerNo. 3099 Keyuan South RoadNanshan District, Shenzhen 518052The People’s Republic of China(Address of principal executive offices) Craig Yan Zeng, Chief Financial OfficerTelephone: +86 755 3637 8888Email: IR@lexin.com27/F CES TowerNo. 3099 Keyuan South RoadNanshan District, Shenzhen 518052The People’s Republic of China(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 ClassName of Each Exchange on Which RegisteredAmerican depositary shares (one American depositary share representing two Class A ordinary shares, par value US$0.0001 per share)The Nasdaq Stock Market LLC(The Nasdaq Global Market)Class A ordinary shares, par value US$0.0001 per share*The Nasdaq Stock Market LLC(The Nasdaq Global Market) * Not for trading, but only in connection with the listing on The Nasdaq Global Market of American depositary shares. Securities registered or to beregistered pursuant to Section 12(g) of the Act: Table of Contents None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None(Title of Class) Indicate 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, 2018, there were 351,237,307 ordinary shares outstanding, consisting of 243,090,108 Class A ordinary shares, par value US$0.0001 per share, and108,147,199 Class B ordinary shares, par value US$0.0001 per share. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.x Yes o 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 theSecurities Exchange Act of 1934.o Yes x No 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 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.x Yes o No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).x Yes o 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 thedefinitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. o Large accelerated filer o Accelerated filer x Non-accelerated filer o Emerging growth company o 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 notto use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of theExchange Act. o †The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its AccountingStandards Codification after April 5, 2012. Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP x International Financial Reporting Standards as issuedby the International Accounting Standards Board o Other o 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.o Item 17 o Item 18 If 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).o Yes x 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 ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmed by a court. o Yes o No Table of Contents TABLE OF CONTENTS INTRODUCTION1 FORWARD-LOOKING INFORMATION2 PART I3 Item 1.Identity of Directors, Senior Management and Advisers3Item 2.Offer Statistics and Expected Timetable3Item 3.Key Information3Item 4.Information on the Company52Item 4A.Unresolved Staff Comments89Item 5.Operating and Financial Review and Prospects89Item 6.Directors, Senior Management and Employees125Item 7.Major Shareholders and Related Party Transactions134Item 8.Financial Information136Item 9.The Offer and Listing137Item 10.Additional Information137Item 11.Quantitative and Qualitative Disclosures about Market Risk150Item 12.Description of Securities Other Than Equity Securities150 PART II152 Item 13.Defaults, Dividend Arrearages and Delinquencies152Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds152Item 15.Controls and Procedures152Item 16A.Audit Committee Financial Expert153Item 16B.Code of Ethics153Item 16C.Principal Accountant Fees and Services153Item 16D.Exemptions from the Listing Standards for Audit Committees153Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers154Item 16F.Change in Registrant’s Certifying Accountant154Item 16G.Corporate Governance154Item 16H.Mine Safety Disclosure154 PART III154 Item 17.Financial Statements154Item 18.Financial Statements154Item 19.Exhibits154 SIGNATURES158 iTable of Contents INTRODUCTION Unless otherwise indicated or the context otherwise requires, all information in this annual report reflects the following: · “ABS” refers to asset-backed securities; · “active users” refer to, for a specified period, users who made at least one transaction during that period through our platform or through ourthird-party partners’ platforms using credit line granted by us; · “ADSs” refer to our American depositary shares, each of which represents two Class A ordinary shares, par value US$0.0001 per share; · “APR” in relation to a loan refers to the annualized percentage rate of all-in interest costs and fees charged to a borrower over the net proceedsreceived by the borrower; · “China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau andTaiwan; · “users” refer to users with an approved credit line on our online consumer finance platform and shoppers on our e-commerce channel; · “delinquency rate” refers to outstanding principal balance of loans that were 1 to 29, 30 to 59, 60 to 89 and 90 to 179 calendar days past due asa percentage of the total outstanding principal balance of the loans on our platform as of a specific date; · “educated young adults” refer to (i) students enrolled in college programs or associate degree programs in colleges, or college students, and(ii) the working population with college or associate degrees and under the age of 36, or educated young professionals; · “GMV” refers to the total value of transactions completed for products or services purchased on the e-commerce channel of our platform, net ofreturns; · “institutional funding partners” refer to banks, consumer finance companies, trusts established in collaboration with trust companies and otherinstitutions which have partnered with us on our direct lending programs to fund loans originated to our users on Fenqile; · “Fenqile” or “our platform” refers to our online consumer finance platform; · “Juzi Licai” refers to our online investment platform where we match funding from individual investors with user loans; · “originations” refer to the total principal amount of the loans we originate during the relevant period. The amount borrowed by users usingflexible repayment options to finance the repayment of certain principal amount of an original loan is calculated as a new loan principalamount. We treat off-balance sheet loans as part of our originations; · “our variable interest entities” refer to Shenzhen Xinjie Investment Co., Ltd., or Shenzhen Xinjie, Shenzhen Fenqile Network TechnologyCo., Ltd., or Shenzhen Fenqile, Beijing Lejiaxin Network Technology Co., Ltd., or Beijing Lejiaxin, Shenzhen Qianhai Dingsheng AssetManagement Co., Ltd., or Qianhai Dingsheng, and Shenzhen Mengtian Technology Co., Ltd., or Mengtian Technology, collectively; · “shares” or “ordinary shares” refers to our ordinary shares, which include both Class A ordinary shares and Class B ordinary shares, par valueUS$0.0001 per share; 1Table of Contents · “RMB” or “Renminbi” refers to the legal currency of China; · “U.S. GAAP” refers to generally accepted accounting principles in the United States; · “US$,” “U.S. dollars,” “$,” or “dollars” refers to the legal currency of the United States; · “Vintage charge-off rate” refers to, with respect to on- and off-balance sheet loans originated during a specified time period, which we refer to asa vintage, the total outstanding principal balance of the loans that are charged off during a specified period divided by the total initial principalof the loans originated in such vintage; and · “we,” “us,” “our company,” “our,” or “Lexin” refers to LexinFintech Holdings Ltd., its subsidiaries, and, in the context of describing ouroperations and consolidated financial information, our variable interest entities in China. Our reporting currency is Renminbi, or RMB. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in thisannual report are made at a rate of RMB6.8755 to US$1.00, the exchange rate in effect as of the end of December 2018 as set forth in the H.10 statisticalrelease of The Board of Governors of the Federal Reserve System. We make no representation that any RMB or U.S. dollar amounts could have been, or couldbe, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. FORWARD-LOOKING INFORMATION This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. Thesestatements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-lookingstatements by terminology such as “may,” “will,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “is/are likely to” or other similarexpressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trendsthat we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, butare not limited to: · our strategies; · our future business development, financial condition and results of operations; · the expected growth of the online consumer finance market in China; · our expectations regarding demand for and market acceptance of our products and services; · our expectations regarding our relationships with funding sources and users; · competition in our industry; · general economic and business conditions in China and elsewhere; and · relevant government policies, laws and regulations relating to our industry. We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunctionwith the risk factors disclosed in “Item 3 Key Information—D. Risk Factors.” Those risks are not exhaustive. We operate in a rapidly evolving environment.New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on ourbusiness or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-lookingstatement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law. 2Table of Contents PART I Item 1. Identity of Directors, Senior Management and Advisers Not applicable. Item 2. Offer Statistics and Expected Timetable Not applicable. Item 3. Key Information A. Selected Financial Data The following selected consolidated statements of operations data for the years ended December 31, 2016, 2017 and 2018 and selected consolidatedbalance sheets data as of December 31, 2017 and 2018 have been derived from our audited consolidated financial statements, which are included in thisannual report beginning on page F-1. Our selected consolidated statements of operations data for the year ended December 31, 2015 and selectedconsolidated balance sheets data as of December 31, 2015 and 2016 have been derived from our audited consolidated financial statements not included inthis annual report. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarilyindicate results expected for any future periods. You should read this Selected Consolidated Financial Data and Selected Operating Data section togetherwith our consolidated financial statements and the related notes in conjunction with “Item 5. Operating and Financial Review and Prospects” below. 3Table of Contents For the Year Ended December 31,2015 2016 2017 2018RMB RMB RMB RMB US$(in thousands, except per share and per ADS data)Selected Consolidated Statements of Operations Data:Operating revenue:Online direct sales2,164,3932,770,6342,534,9832,396,680348,583Services and others—5,06031,950203,91429,658Online direct sales and services income2,164,3932,775,6942,566,9332,600,594378,241Interest and financial services income325,6011,373,5592,443,7612,742,643398,901Loan facilitation and servicing fees66154,201378,8922,075,817301,915Other revenue34,287135,232192,603177,84225,866Financial services income360,5491,562,9923,015,2564,996,302726,682Total operating revenue2,524,9424,338,6865,582,1897,596,8961,104,923Operating cost:Cost of sales(2,309,586)(2,894,025)(2,634,142)(2,440,613)(354,972)Funding cost(168,470)(491,695)(792,170)(898,028)(130,613)Processing and servicing cost (51,057)(114,323)(223,916)(324,005)(47,125)Provision for credit losses of financing receivables(68,287)(236,611)(611,869)(884,056)(128,581)Provision for credit losses of contract assets and servicefees receivable———(38,254)(5,564)Total operating cost(2,597,400)(3,736,654)(4,262,097)(4,584,956)(666,855)Gross profit(72,458)602,0321,320,0923,011,940438,068Operating expenses:Sales and marketing expenses (243,463)(376,313)(405,505)(589,983)(85,809)Research and development expenses(40,441)(127,317)(235,292)(320,165)(46,566)General and administrative expenses (40,962)(87,364)(203,635)(279,859)(40,704)Total operating expenses(324,866)(590,994)(844,432)(1,190,007)(173,079)Gain on guarantee liabilities, net———108,31615,754Interest expense, net(1,930)(48,343)(75,517)(23,059)(3,354)Investment-related impairment—(5,635)(932)(15,215)(2,213)Investment income———18,7532,728Change in fair value of financial guarantee derivatives,net—(5,942)47,355197,02728,656Others, net126(10,799)28,0131,773258(Loss)/income before income tax expense(399,128)(59,681)474,5792,109,528306,818Income tax benefit/(expense)88,934(58,258)(234,227)(132,222)(19,231)Net (loss)/income(310,194)(117,939)240,3521,977,306287,587Pre-IPO Preferred Shares redemption value accretion(51,524)(62,299)(82,117)——Income allocation to participating Pre-IPO PreferredShares——(132,241)——Deemed dividend to a preferred shareholder—(42,679)———Net (loss)/income attributable to ordinary shareholders(361,718)(222,917)25,9941,977,306287,587Net (loss)/income per ordinary shareBasic(3.27)(2.01)0.235.850.85Diluted(3.27)(2.01)0.185.450.79Net (loss)/income per ADS (representing two Class Aordinary shares)Basic (6.54) (4.03)0.4611.701.70Diluted (6.54) (4.03)0.3710.901.59 (1) We adopted Accounting Standards Codification, or ASC, 606, “Revenue from Contracts with Customers,” using the modified retrospective method onJanuary 1, 2018, in accordance with U.S. GAAP. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while priorperiod amounts are not adjusted and continue to be reported in accordance with our historic accounting method under ASC 605. See “Item 5. Operatingand Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Revenue Recognition.” (2) Share-based compensation expenses are allocated to processing and servicing cost and operating expense items as follows: For the Year Ended December 31,2015 2016 2017 2018RMB RMB RMB RMB US$(in thousands)Processing and servicing cost4721,0675,9168,1111,180Sales and marketing expenses3,1944,0096,61118,2232,650Research and development expenses3,7369,06817,08933,1694,824General and administrative expenses7,0869,85546,12063,1339,183 4(1)(2)(2)(2)(2)Table of Contents As of December 31,2015 2016 2017 2018RMB RMB RMB RMB US$(in thousands)Selected Consolidated Balance Sheets Data:Cash and cash equivalents135,371479,6051,126,4751,148,292167,012Restricted cash — current26,330172,870561,9921,266,536184,210Short-term financing receivables, net2,897,7916,470,8989,857,2095,140,634747,674Prepaid expenses and other current assets234,686219,981945,258923,827134,365Risk safeguard fund receivable, net — current———395,02557,454Contract assets and service fees receivable, net — current———946,293137,633Inventories, net44,295107,704101,65357,1968,319Restricted cash — non-current——46,88982,30611,971Long-term financing receivables, net320,9571,066,1481,785,0451,283,036186,610Risk safeguard fund receivable, net — non-current———116,20816,902Contract assets and service fees receivable, net — non-current———291,78442,438Total assets3,817,0828,720,13514,729,58412,470,5751,813,772Short-term funding debts3,159,1546,968,48810,525,1344,646,041*675,739*Risk safeguard fund payable———456,27666,363Accrued expenses and other current liabilities131,236602,2591,611,0292,145,689312,077Long-term funding debts31,08021,014166,629157,887*22,964*Convertible loans — non-current—698,179———Total liabilities3,623,2098,706,21613,028,0588,363,7831,216,463Total mezzanine equity608,514625,570———Total shareholders’ (deficit)/equity(414,641)(611,651)1,701,5264,106,792597,309 * We revised our unaudited consolidated balance sheet as previously announced through press release filed on Form 6-K. See note 2(a) to our auditedconsolidated financial statements included in this annual report. B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors Risks Related to Our Business and Industry We have a limited operating history in China’s online consumer finance market, an emerging and evolving industry, which makes it difficult to evaluateour future prospects. China’s online consumer finance industry is new and may not develop as rapidly as expected. The regulatory framework for this industry is alsoevolving and may remain uncertain for the foreseeable future. China’s online consumer finance industry in general remains at a relatively preliminary stageof development and may not develop at the anticipated growth rate. Online consumer finance is a new industry, and there are few established players withbusiness models that we can follow or build upon. In particular, there are a limited number of comparable online consumer finance platforms with e-commerce business. Potential users and investors may not be familiar with this new industry and may have difficulty distinguishing our services from those ofour competitors. Attracting and retaining users, investors and institutional funding partners are critical to increasing the loan originations on our platform.The emerging and evolving online consumer finance market makes it difficult to effectively assess our future prospects. In addition, our business has grownsubstantially in recent years, but our past growth rates may not be indicative of our future growth. 5Table of Contents It is also possible that the PRC laws and regulations may change in ways that do not favor our development. In particular, the PRC laws andregulations may impose more stringent requirements and regulatory burdens relating to certain of our target users. If that happens, there may not be adequateloans originated on our platform. We launched our online consumer finance platform Fenqile in 2013 and our online investment platform Juzi Licai in 2014, and have a limitedoperating history. As our business develops, or in response to competition, we may continue to introduce new products or make adjustments to our existingproducts, or make adjustments to our business model. In connection with the introduction of new products or in response to general economic conditions, wemay impose more stringent user qualifications to ensure the quality of loans on Fenqile, which may negatively affect the growth of our business. It istherefore difficult to effectively assess our future prospects. You should consider our business and prospects in light of the risks and challenges we encounteror may encounter in this developing and rapidly evolving market. These risks and challenges include our ability to, among other things: · navigate an evolving regulatory environment; · expand our user base on Fenqile; · enhance our risk management capabilities; · diversify our funding sources; · maintain and enhance our relationships with our other business partners, including merchandise suppliers, data providers and financial serviceproviders that participate on our platforms; · improve our operational efficiency; · continue to scale our technology infrastructure to support the growth of our platforms and higher transaction volume; · broaden our product and service offerings; · operate without being adversely affected by the negative publicity about the industry in general and our company in particular, if any; · maintain the security of our platforms and the confidentiality of the information provided and utilized across our platforms; · cultivate a vibrant consumer finance ecosystem; · attract, retain and motivate talented employees to support our business growth; · navigate microeconomic conditions and fluctuations; and · defend ourselves in litigation, and against regulatory, intellectual property, privacy or other claims. If our market does not develop as we expect, if we fail to educate potential users and funding sources about the value of our platforms and services,or if we fail to address the needs of our target users, our reputation, business and results of operations will be materially and adversely affected. If we are unable to retain existing users or attract new users, or if we fail to meet the financial needs of our users as they evolve and are therefore unable tocapture their long-term growth potential, our business and results of operations will be materially and adversely affected. The volume of loans we originate has grown rapidly over the past few years. From our inception in August 2013 through December 31, 2018, wecumulatively originated RMB143 billion (US$20.7 billion) in loans. In 2016, 2017 and 2018, we originated RMB22.2 billion, RMB47.7 billion andRMB66.1 billion (US$9.6 billion) in loans, respectively, for approximately 3.0 million, 4.1 million and 4.9 million active users. We strategically focus onserving educated young adults and seek to capture their long-term growth potential. To maintain the high growth momentum of our platform, we mustcontinuously increase loan originations by retaining current users and attracting more users. If there is insufficient demand for our loan products, investorsand institutional funding partners may not be able to deploy their funds in a timely or efficient manner, and may seek alternative investment opportunities. Ifthere are insufficient commitments from investors or institutional funding partners, users may not be able to obtain capital through our platform and may turnto other sources for their borrowing needs. If we are unable to attract qualified users and sufficient commitments from investors or institutional fundingpartners, we might not be able to increase our loan originations and operating revenue as we expect, and our business and results of operations may beadversely affected. 6Table of Contents In addition, the success of our business depends on our ability to continue to serve our users’ growing credit needs as their consumptionrequirements change and their ability to repay loans increases with their increasing income. Moreover, we depend on repeat borrowing to cultivate userloyalty, accumulate user data and credit history, grow with our users and offer them better products and services. Of all active users on our platform in 2016,2017 and 2018, approximately 74%, 80% and 80%, respectively, were repeat users who had made at least one transaction on our platform before in the sameyear or in the previous year. If we fail to retain our existing users as they enter the workforce, or if we fail to retain these users by offering products andservices that cater to their evolving consumption needs, or if we fail to maintain or increase repeat borrowing on our platform, we may not be able to capturetheir long-term growth potential, and our business and results of operations may be adversely affected. The laws and regulations governing the online consumer finance industry and microcredit companies in China are developing and evolving rapidly. If wefail to obtain and maintain requisite approvals, licenses or permits applicable to our business, financial condition and results of operations would bematerially and adversely affected. Before any industry-specific regulations were introduced in mid-2015, the PRC government relied on general and basic laws and regulations forgoverning the online consumer finance industry, including the General Principles of the Civil Law of the PRC, the PRC Contract Law and related judicialinterpretations promulgated by the Supreme People’s Court. Since mid-2015, the PRC government and relevant regulatory authorities have issued variouslaws and regulations governing the online consumer finance industry, including, among others, the Guidelines on Promoting the Healthy Development of theOnline Finance Industry, or the Guidelines, the Interim Measures on Administration of Business Activities of Online Lending Information Intermediaries, orthe Interim Measures, the Guidelines on Online Lending Funds Custodian Business, or the Custodian Guidelines, the Guidelines on Information Disclosureof Business Activities of Online Lending Information Intermediaries, or the Information Disclosure Guideline, the Notice on Regulating and Rectifying“Cash Loan” Business jointly issued by the National Internet Finance Rectification Office, or the Internet Finance Rectification Office, and the NationalInternet Finance Rectification Office, or the Online Lending Rectification Office, in December 2017, or the Circular 141, and the Notice on the Rectificationand Inspection Acceptance of Risk of Online Lending Intermediaries issued by the Online Lending Rectification Office on December 8, 2017, or the Circular57. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Online Consumer Finance Services.” The Interim Measures introduced a record-filing and registration regime, which requires online lending information intermediaries to register withthe local financial regulatory authority, and to obtain a telecommunication business license from the relevant telecommunication regulatory authority. Ouronline investment platform, Juzi Licai, operated by Shenzhen Qianhai Juzi Information Technology Co., Ltd., or Qianhai Juzi, a subsidiary of one of ourvariable interest entities, would be required to obtain certain telecommunications service licenses in accordance with the Interim Measures and the relevantprovisions of telecommunications authorities after completing record-filing with a local financial regulator. Several rectification and inspection acceptancerequirements are set forth in the laws and regulations issued by the PRC government and relevant regulatory authorities, including, among other things,(i) the self-inspection conducted by the online lending information intermediary itself, (ii) the self-discipline inspection conducted by local internet financeassociations or other local organizations, and (iii) the administrative inspection conducted by the local online lending rectification offices, see “Item 4.Information on the Company—B. Business Overview—Regulations—Regulations Relating to Record-filings of Online Lending Information IntermediaryService Agency.” As of the date of this annual report, all three types of inspection of Juzi Licai have been completed; however, we have not been informedabout the result of the administrative inspection conducted by Shenzhen Finance Development Service Office, or the SFO. Further, local financial regulatoryauthorities are still in the process of drafting detailed implementation rules regarding the filing procedures, and to our knowledge, none of the onlineinformation intermediaries, including us, have been permitted to submit such application for record-filing in Shenzhen. We are uncertain as to when we willbe allowed to submit such application for record-filing and to obtain a license, and we cannot assure you that once submitted, our application will beaccepted by the relevant government authorities. Failure to register as an online lending information intermediary, if deemed as a violation of the InterimMeasures or any other relevant regulations or rules, may result in, among others, regulatory warning, correction order, condemnation, fines or criminalliability to us, or may cause us not to be able to conduct our current business on Juzi Licai in the future. If such situations were to occur, our business,financial condition, results of operations and prospects would be materially and adversely affected. 7Table of Contents Our online consumer finance platform, Fenqile, does not itself engage in direct loan facilitation between peers. Fenqile merely facilitatestransactions that are funded by our institutional funding partners and Juzi Licai. As such, we do not consider Fenqile as an “online information intermediary”regulated under the Interim Measures. However, we cannot assure you that the China Banking Regulatory Commission, or the CBRC (which was integratedinto the China Banking and Insurance Regulatory Commission, or the CBIRC, in April 2018), or other regulatory agencies would not expand theapplicability of the Interim Measures or otherwise regard Shenzhen Fenqile as an online lending information intermediary. In the event that Fenqile isdeemed as an online lending information intermediary by the PRC regulatory authorities in the future, we may be required to register with local financialregulatory authorities and our current business practices would need to be modified to adapt to the regulatory requirements as an online lending informationintermediary. If such situations were to occur, our business, financial condition and results of operations could be materially and adversely affected. The regulatory regime and practice with respect to network microcredit companies are also evolving and subject to uncertainty. In November 2017,the Internet Finance Rectification Office, issued the Notice on the Immediate Suspension of Approvals for the Establishment of Network MicrocreditCompanies, which suspends the approval of new network microcredit companies. On December 1, 2017, the Internet Finance Rectification Office and theOnline Lending Rectification Office jointly issued the Circular 141, which states the same requirement and further imposes measures to strengthen theregulation of network microcredit companies. In December 2017, the Online Lending Rectification Office issued the Implementation Plan of SpecificRectification for Risks in Microcredit Companies and Network Microcredit Companies, or the Rectification Implementation Plans of Network MicrocreditCompanies, which further details the requirements on network microcredit companies. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Microcredit.” Ji’an Fenqile Network Microcredit Co., Ltd., or Ji’an Microcredit, a subsidiary of Shenzhen Fenqileobtained a network microcredit license from the relevant local authority. The license expired in August 2018. We have submitted an application to renewsuch license and increase Ji’an Microcredit’s registered capital from RMB300 million (US$43.6 million) to RMB500 million (US$72.7 million) so that themaximum amount of loans Ji’an Microcredit may extend at a time will be increased from RMB900 million (US$131 million) to RMB1,500 million (US$218million), three times of its then in-effect registered capital. We received the approval of our application from the relevant local authority on April 29, 2019and are in the process of completing the renewal procedure. If we cannot complete the renewal procedure as we expected, our operation of networkmicrocredit companies would be materially and adversely affected. In addition, the relevant governmental authorities will continue to inspect, investigateand review the qualification and compliance of the network microcredit companies in accordance with the Rectification Implementation Plans of NetworkMicrocredit Companies. We cannot assure you that we would not be subject to any rectification requirements or administrative penalties due to any non-compliance, nor can we assure you that we will be able to satisfy rectification requirements, if any, and maintain such license or renew the license. Althoughwe believe that Ji’an Microcredit is only a supplementary funding source and we do not intend to rely on it as a major source for funding, to the extent weneed to obtain funding from Ji’an Microcredit, if we are unable to maintain or renew the microcredit license or obtain any other requisite approvals, licensesor permits applicable to our business, our business, financial condition and results of operations would be materially and adversely affected. If any of our business practices is deemed to violate any PRC laws or regulations, our business, financial condition and results of operations would bematerially and adversely affected. Pursuant to the Guidelines and the Interim Measures, intermediaries that provide online lending information services may not engage in certainactivities, including, among others, (i) fund-raising for the online lending information intermediaries themselves, (ii) holding lenders’ funds or setting upcapital pools with lenders’ funds, (iii) providing security or guarantee to lenders as to the principals and returns of the investment, (iv) issuing or selling anywealth management products, (v) splitting the terms of any financing project, (vi) securitization, (vii) promoting its financial products on physical premises,and (viii) equity crowd-funding. The Interim Measures also require the intermediaries that provide online lending information services to strengthen their riskmanagement, enhance screening and verifying efforts on the borrowers’ and lenders’ information, to set up custody accounts with qualified banks to holdborrowers’ funds, and to disclose the basic information of the borrower and the financing projects. See “Item 4. Information on the Company—B. BusinessOverview—Regulations—Regulations Relating to Online Consumer Finance Services.” 8Table of Contents To comply with existing laws, regulations, rules and governmental policies relating to the online consumer finance industry, we have implementedand will continue to implement various policies and procedures to conduct our business and operations. However, due to the lack of detailed rules and thefact that the relevant laws, regulations and rules are expected to continue to evolve, we cannot be certain that our existing practices would not be deemed toviolate any existing or future laws, regulations and rules. Below are a few examples. · Requirement to set custody account. We have entered into an agreement with China Guangfa Bank, under which the bank provides custodianservices for funds of users and investors. Although we have established the custodian mechanism in this agreement to comply with therequirement of the Custodian Guidelines and the regulatory authorities, we may need to further amend the agreement in the event any detailedimplementation rules of the Custodian Guidelines or other new laws and regulations regulating the custodian mechanism applicable to onlinelending information intermediaries are promulgated. Further, the Circular 57 requires that online lending intermediaries set up custody accountswith qualified banks that have passed certain testing and evaluation procedures run by the Online Lending Rectification Office to hold funds ofusers and investors. If China Guangfa Bank fails such testing and evaluation procedures, we may have to seek an alternative custodian bankother than China Guangfa Bank to satisfy the relevant regulatory requirement, which may materially affect our rectification progress and record-filing application, which in turn may materially and adversely our business. · Requirement on the information disclosure. We have implemented various policies and procedures to conduct our business and operations tocomply with the requirement relating to the information disclosure set forth in the Interim Measures and the Information Disclosure Guidelines,including maintaining a section on an official website for disclosing the basic information of Juzi Licai, the borrowers and the financingprojects on Juzi Licai. However, we cannot assure that we would not be subject to any further rectification requirements from the relevantauthorities. · Limit on the loan amount. The Interim Measures require that the balance of loans borrowed by the same individual must not exceedRMB200,000 (US$29,089) on a single online lending information intermediary and not exceed RMB1.0 million (US$145,444) in the aggregateon all online lending information intermediaries in the PRC. We currently do not offer loans to the same individual in an aggregate amountexceeding RMB200,000 (US$29,089). We determine whether users have outstanding loans through consumer finance platforms using externaldatabases at the time they obtain a loan from us. We also compare our user’s name with the list in the databases on a regular basis. However, dueto the lack of an industry-wide information sharing arrangement, there can be no assurance that the aggregate amount borrowed by any userthrough our platform and other online lending information intermediaries does not exceed the RMB1.0 million (US$145,444) borrowing limitset out by the Interim Measures. · Restriction on credit enhancement. For investor protection purposes, our previous quality assurance program established in July 2017 andceased in April 2018 covers loans funded by individual investors historically, and we have entered into deposit arrangements with certaininstitutional funding partners. These practices might be deemed as provision of credit enhancement services, security interest or guarantee thatis prohibited by the Interim Measures and/or the Circular 141 (if applicable). See “—If our current investor protection measures are deemed toviolate the relevant laws and regulations, our business, financial condition and results of operations would be materially and adverselyaffected.” · Restriction on funding sources. We fund loans through Ji’an Microcredit, which is a network microcredit company holding license issued bythe relevant competent local authorities, and through trusts established in collaboration with trust companies. We cannot assure you that ourexisting practice of using Ji’an Microcredit or our collaboration with trust companies will be deemed to be in full compliance with applicableexisting or future PRC laws, regulations or rules. The funding of loans by us without going through network microcredit companies or trustsmay render us to be deemed as a lender or a provider of financial services by the PRC regulatory authorities, and we may be subject tosupervision and restrictions on lending under applicable PRC laws and regulations. See “Item 4. Information on the Company—B. BusinessOverview—Regulations—Regulations Relating to Online Consumer Finance Services.” There are uncertainties as to the interpretation of therelevant PRC laws and regulations and their applicability to our business. In the event that we are subject to or be deemed to violate such PRClaws and regulations, we may be subject to certain administrative penalties, including the confiscation of illegal revenue, fines up to five timesthe amount of the illegal revenue and suspension of business operations. Furthermore, our current service fees and various other fees charged toour users might be fully or partially deemed as interest, which shall be subject to the restrictions on interest rate as specified in applicablerules on private lending. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to OnlineConsumer Finance Services—Regulations Relating to Loans Between Individuals.” 9Table of Contents · Regulations on network microcredit companies. Pursuant to the Rectification Implementation Plans of Network Microcredit Companies issuedby the Online Lending Rectification Office on December 8, 2017, the third-party institutions cooperating with microcredit companies areprohibited from collecting any interests or fees from borrowers. In light of the foregoing provision, we have modified our business model so thatthe loans are to be funded by Ji’an Microcredit and facilitated by Shenzhen Fenqile. Currently, all the fees are charged and collected by Ji’anMicrocredit as the lender. However, we cannot assure you that such modification will be able to satisfy rectification requirements. As of the date of this annual report, we have never been subject to any material fines or other penalties under any PRC laws or regulations, includingthose governing the online consumer finance industry and microcredit companies in China. However, the growth in the popularity of online consumerfinance increases the likelihood that the PRC government will seek to further regulate this industry. We are unable to predict with certainty the impact, if any,that future legislation, judicial precedents or regulations relating to the online consumer finance industry will have on our business, financial condition andresults of operations. To the extent that we are not able to fully comply with any existing or new regulations when they are promulgated, our business,financial condition and results of operations may be materially and adversely affected. Our operations have been and may need to continue to be modified to ensure full compliance with the laws and regulations governing the online consumerfinance industry, including those governing campus online lending, which may materially and adversely affect our business and results of operations. The laws, regulations, rules and governmental policies in the online consumer finance industry, including those governing campus online lending,are expected to continue to evolve. For a detailed discussion of relevant laws, regulations, rules and notices, see “Item 4. Information on the Company—B.Business Overview—Regulations—Regulations Relating to Campus Online Lending.” To ensure full compliance with evolving laws and regulations of the online consumer finance industry, we have modified certain aspects of ourbusiness operations and may need to do so again in the future. For example, in March 2017, we received two letters from the SFO, relating to regulatorycompliance of our Juzi Licai and Fenqile businesses. The letters we received identified various regulatory requirements applicable to Juzi Licai and Fenqile.These requirements include, among other things, (i) limits on the use of loans, (ii) termination of agency relationships with sales agents who are students,(iii) limits on penalties we can charge delinquent users, (iv) prohibition on splitting of any loan, (v) settlement of investors’ funds and users’ loans throughthird-party custody accounts, and (vi) prohibition on promotion activities claiming full guarantee on the principal and return of investment programs. Theletters identified certain non-compliance issues in our businesses relating to the foregoing regulatory requirements and requested us to submit rectificationplans. We submitted such plans and have been providing reports on our progress of implementation of these plans to the SFO on an ongoing basis. With respect to the non-compliance issues mentioned above, we have implemented the following measures, which were included in the rectificationplans we submitted to the SFO: (i) we require our users to select in their loan applications one of the specified permissible uses of loan proceeds and requirecollege student users to use loans only for completing education, starting business or other uses that help promote work-related skills; (ii) in 2016, weterminated our contracts with college students who were sales agents promoting our products and services; (iii) the APR charged to users for late repayments(including penalty interest charged by the funding source and service fees and collection service fees charged by us) will not exceed 36%; (iv) we have alsomodified our service terms and conditions on Juzi Licai to ensure that the transfer of investors’ rights for outstanding loan obligation at the time of investorexits are fully authorized by such investors; (v) we have entered into an agreement with China Guangfa Bank to set up separate custody accounts for thefunds of users and investors; and (vi) we ceased promotion activities claiming full guarantee on the principal and return of investment programs. We havebeen providing reports to the SFO on our progress of implementing these plans on an ongoing basis. 10Table of Contents In May 2017, the CBRC, the Ministry of Education and Ministry of Human Resources and Social Security issued the Notice on FurtherStrengthening the Regulation and Management Work of Campus Online Lending Business, or the CBRC Circular 26. See “Item 4. Information on theCompany—B. Business Overview—Regulations—Regulations Relating to Campus Online Lending.” To comply with the requirements under the CBRCCircular 26, we have immediately implemented certain rectification measures, including, among others: (i) all of the outstanding loans that were originated tocollege students underlying the investment provided to individual investors on Juzi Licai was gradually repaid; and (ii) new borrowings by college studentswill not be matched with funds from individual investors on Juzi Licai and will instead be matched with funds from our institutional funding partnersapproved by the relevant banking regulatory authority, including but not limited to, banks and consumer finance companies that are licensed by the CBRC.However, we cannot assure you that the foregoing changes to our business operations will not have any material adverse impact on our financial conditionsor results of operations. For example, we may be unable to secure sufficient funding from our institutional funding partners that are licensed by the CBRC tofund our current or future borrowings by our college student users and may incur higher funding cost, or our funding partners may interpret the CBRCCircular 26 differently from us and are thus unwilling to provide funding to our college student users. In addition, we may be unable to find alternativeinvestment opportunities for individual investors on Juzi Licai and use their funding to fund borrowings by our users other than our college student users,therefore limiting our ability to grow our online investment platform. Further, although we have implemented measures to identify college students, wecannot assure you that such measures will be sufficient to ensure that funding requests from college students will not be matched with funds from individualinvestors on Juzi Licai. If any of the foregoing were to occur, our business, financial condition and prospects would be materially and adversely affected. In December 2017, the Internet Finance Rectification Office and the Online Lending Rectification Office jointly issued the Circular 141, whichprohibits lending to borrowers without source of income. Compared to the CBRC Circular 26, which only permits financial institutions licensed by theCBRC to fund loans borrowed by college students, the requirements under the Circular 141 are more stringent. See “Item 4. Information on the Company—B.Business Overview—Regulations—Regulations Relating to Online Consumer Finance Services—Regulation Relating to Online Lending InformationIntermediary Service Agency.” Due to the lack of clarification and detailed implementation rules, it is unclear to us whether the prohibition of lending toborrowers without source of income would be applicable to the loans provided by financial institutions to college students. If the regulatory authoritiesintend to completely prohibit campus online lending, including loans funded by financial institutions, we would need to implement further rectificationmeasures, which may include, without limitation, termination of facilitating loans to college students. Such measures, if implemented, could materially andadversely affect our business, financial condition and results of operations. We have been in frequent communication with the governmental authorities to clarify the relevant regulatory requirements and to ensure our fullcompliance with the laws and regulations. However, it is possible that new laws and regulations may be adopted, or existing laws and regulations may beinterpreted in new ways, which, along with any possible changes needed to fully comply with any existing or newly released regulations, could require us tofurther modify our business or operations. The cost to comply with such laws or regulations would increase our operating expenses, and modifications of ourbusiness may have a material and adverse impact on our business, financial condition and results of operations. In addition, despite the rectification measures we have implemented or will implement, we cannot assure you that such measures will be sufficient toensure our compliance with the regulatory requirements under the relevant laws and regulations as their implementation and interpretation continue toevolve and there lack of detailed interpretation and implementation rules. We may be required to make further rectifications by the competent authorities. Ifwe are unable to fully satisfy the regulatory requirement, our application for registering Juzi Licai as an online lending information intermediary may bedelayed or even denied. Failure to register as an online lending information intermediary, if deemed as a violation of the Interim Measures or any otherrelevant regulations or rules, may result in, among others, regulatory warning, correction order, condemnation, fines or criminal liability to us, or may causeus not to be able to conduct our current business on Juzi Licai in the future. If such situations were to occur, our business, financial condition, results ofoperations and prospects would be materially and adversely affected. 11Table of Contents If our current investor protection measures are deemed to violate the relevant laws and regulations, our business, financial condition and results ofoperations would be materially and adversely affected. We established a quality assurance program in July 2017, which covers loans funded by individual investors and have entered into depositarrangements with certain institutional funding partners. Since April 2018, to ensure our compliance with new regulations (including the Circular 57, see“Item 4. Information on the Company—B. Business Overview—Regulations—Regulations relating to Online Consumer Finance Services—RegulationsRelating to Record-filings of Online Lending Information Intermediary Service Agency.”), we have ceased offering this quality assurance program, andinstead, we cooperate with an independent guarantee company to set up risk safeguard scheme, which is managed by the guarantee company and ourborrowers are required to contribute to the risk safeguard scheme to protect our investors. See “Item 4. Information on the Company—B. Business Overview—Our Investors and Funding Partners —Protection of investors and funding partners” for more details about the risk safeguard scheme. With respect to the quality assurance program operated between July 2017 and April 2018, as set forth in the agreement relating to the qualityassurance program between Juzi Licai and the individual investors, the purpose of the quality assurance program operated by Juzi Licai is to provide make-up payments to individual investors on Juzi Licai when users fail to satisfy their principal or interest repayment obligations, and is not to provide individualinvestors with guarantees on repayment of the loan principal and interest. The amount to be transferred from each user’s monthly repayment to our qualityassurance funds is limited to a certain percentage, of the outstanding principal balance at the beginning of the relevant monthly period. The investors haveacknowledged that Juzi Licai reserves the final right of interpretation on the rules for establishing and using the quality assurance funds. For the abovereasons, we believe that the past quality assurance program does not constitute providing any security interest or guarantee to investors on the principal orreturn of their investments, which is prohibitive under the Interim Measures. However, we cannot assure you that our previous quality assurance program willnot be deemed as a form of security interest or guarantee to investors. Furthermore, we cannot assure you that the alternative risk safeguard scheme managedby the guarantee company will not cause a material and adverse impact to our business and results of operations. With respect to our cooperation with certain institutional funding partners, we provide them a deposit in our direct lending programs using our ownfunds at an amount equal to a percentage of the total loans funded by the institutional funding partners and are required to replenish such deposit from timeto time, in order to compensate them for the principal and interest repayment of loans in the event of a user default. In light of the joint issuance of theCircular 141 by the Internet Finance Rectification Office and Online Lending Rectification Office in December 2017, the foregoing practices are regarded ascredit enhancement services which are prohibited. The Circular 141 requires financial institutions that participate in the “cash loan” business not to acceptany credit enhancement services or other similar services from third parties without qualification to provide guarantee and to ensure that no third parties willcharge borrowers any interest or fees to borrowers. The Circular 141 specifies the features of “cash loans” as not relying on consumption scenarios, with nospecified use of loan proceeds, no qualification requirement on the part of users and no security to the loans, etc. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Online Consumer Finance Services.” It is unclear whether our personal installment loanswould be viewed as the “cash loans” specified in the Circular 141 and thus be subject to the provisions thereunder. Nevertheless, to comply with this newrequirement, we have proactively made an adjustment to our cooperation model with institutional funding partners. We have adjusted our cooperation modelwith institutional funding partners through Shenzhen Lexin Financing Guarantee Co., Ltd., a subsidiary of Shenzhen Fenqile, which is qualified to providefunding guarantee for the users on our platform and to charge fees for the relevant guarantee services. For personal installment loans funded by bankingfinancial institutions and network microcredit companies, Shenzhen Fenqile has discontinued to charge any fees to users. Instead, Shenzhen Lexin FinancingGuarantee Co., Ltd. has started to charge users fees for the guarantee services it provides to users in favor of our institutional funding partners. We havefurther adjusted our cooperation model with certain institutional funding partners by having them charge fees directly to borrowers and pay certain fees to us.However, we cannot assure you that our interpretation of the relevant regulations will be the same as the view of authorities, or our solutions, including theways the fees are charged, will be viable. First, it is uncertain whether the adjusted cooperation model would be accepted by our institutional funding partnersat reasonable commercial terms. As of the date of this annual report, certain institutional funding partners require us to provide them with a deposit tocompensate them in the event of a user default, as they believe our personal installment loans would not be deemed as “cash loans” specified in Circular 141and thus would be subject to the requirements thereunder. As required, we may also cooperate with other third-party financing guarantee companies orcommercial insurance companies, which provide guarantee or insurance services for the borrowers on our platform. Second, due to the restriction on theoutstanding guarantee liabilities and the assets ratio of a financing guarantee company set forth in the applicable PRC laws and regulations (see “Item 4.Information on the Company—B. Business Overview—Regulations—Regulations Relating to Financing Guarantee”), we may need to take necessarymeasures as our business grows, such as increasing the registered capital of Shenzhen Lexin Financing Guarantee Co., Ltd. from time to time, or cooperatingwith other financing guarantee companies or insurance companies, which may have an impact on our financial condition. Third, due to the lack ofinterpretation and implementation rules and the fact that the laws and regulations are rapidly evolving, even if we implement such measures, we cannotassure you that the adjusted business model will be in full compliance with existing and future laws and regulations, nor can we assure you that we would notbe required to make further change to our business in the future. If any of the foregoing were to occur, our business, financial condition and results ofoperations would be materially and adversely affected. See “Item 4. Information on the Company—B. Business Overview—Regulations—RegulationsRelating to Financing Guarantee.” 12Table of Contents We cooperate with institutional funding partners, whose compliance with PRC laws and regulations may affect our business. As we do not hold relevant permits or licenses for lending activities, we rely on our funding partners for our loan products. Our collaboration withinstitutional funding partners has exposed us to and may continue to expose us to additional regulatory uncertainties faced by such institutional fundingpartners. For example, the Circular 141 jointly issued by the Internet Finance Rectification Office and the Online Lending Rectification Office inDecember 2017 provides a series of guidance on the cash loan business of financial institutions. See “Item 4. Information on the Company—B. BusinessOverview—Regulations —Regulations Relating to Online Consumer Finance Services.” To comply with such guidance, our institutional funding partners,such as banks and consumer finance companies, may need to adopt changes to the cooperation model with their business partners, including us, whichchanges may adversely affect our business. In addition, we cannot assure you that the business operations of our institutional funding partners currently are orwill be in compliance with the relevant PRC laws and regulations, and in the event that our institutional funding partners do not operate their businesses inaccordance with the relevant PRC laws and regulations, they will be exposed to various regulatory risks and therefore, our business, financial condition andprospects would be materially and adversely affected. For example, the Circular 141 requires network microcredit companies, such as Ji’an Microcredit, to suspend the funding of microloans with nospecific consumption scenario or designated use of loan proceeds, gradually reduce the volume of the existing business relating to such loans and takerectification measures in the period to be separately specified by authorities. The Notification also prohibits online lending information intermediaries, suchas Juzi Licai, from facilitating loans with no designated use of loan proceeds. The banking financial institutions are also prohibited from providing loanswith no designated use of loan proceeds under the relevant PRC laws and regulations. For personal installment loans, we require users to select one of thespecified permissible uses of loan proceeds in their loan applications, such as education, cost of living or driving school expenses, and we track actual use ofthe loans with reasonable measures. It is unclear whether such personal installment loans would be deemed as loans with no designated use of loan proceedsand thus be subject to the foregoing requirements under the Circular 141. If such personal installment loans were deemed as loans with no designated use ofloan proceeds, Ji’an Microcredit and Juzi Licai would need to take necessary measures to track the actual use of loans, and the financial institutions wouldalso need to take necessary measures to track the actual use of loans and may require us to cooperate with them and upgrade our system, both of which couldcause us to incur substantial additional expenses. If we were unable to effectively implement the foregoing or other rectification measures, we might need toreduce or even cease the funding and facilitation of such personal installment loans. If the foregoing were to occur, our business, financial condition andresults of operations would be materially and adversely affected. 13Table of Contents If we are unable to effectively maintain the quality of our loan portfolio, our business, financial conditions and results of operations may be materially andadversely affected. Our financial condition and results of operations are affected by our ability to effectively maintain the quality of our loan portfolio. There is noassurance that the quality of our loan portfolio will remain at the current level or improve. In 2016, 2017 and 2018, we originated RMB22.2 billion,RMB47.7 billion and RMB66.1 billion (US$9.6 billion) in loans, respectively. As of December 31, 2014, 2015, 2016, 2017 and 2018, our outstandingprincipal balance of loans was approximately RMB374 million, RMB3.4 billion, RMB9.9 billion, RMB19.3 billion and RMB32.4 billion (US$4.7 billion),respectively. Our financing receivables, net amounted to RMB7,537 million, RMB11,642 million and RMB6,424 million (US$934 million) as ofDecember 31, 2016, 2017 and 2018, respectively. Our vintage charge-off rates as of December 31, 2018 were approximately 2% for each vintage of a three-month period from January 1, 2015 through December 31, 2018. The quality of our loan portfolio may be negatively affected by a variety of factors, many ofwhich are beyond our control. These factors include, among others, the slowdown and structural reform of the PRC economy, adverse development in generaleconomic conditions, an increase in unemployment rates among our target users, and natural disasters. The quality of our loan portfolio may also deteriorateif we are not able to manage credit risks. In addition, we may experience an adverse change in user credit risk as we expand our user base and offer newproduct features and higher credit lines to users. For example, while we have set certain requirements for the use of flexible repayment options, such asrequiring minimum monthly repayments and keeping the user’s credit line at the approved amount, the flexible repayment options may affect our loandelinquencies and charge-offs as the outstanding principal balance of the new loan borrowed by a user using the flexible repayment options will beconsidered as current, as long as the user meets the payment schedule of the new loan agreed to by the user and us. We may also experience an adversechange in user credit risk if our credit assessment and control process fails to effectively contain the credit exposures of higher-risk users in using our existingor new credit products. Moreover, our risk management system and policies are subject to change from time to time. We cannot assure you that our riskmanagement system and policies have been, or will be, effective in managing our credit risks and hence the asset quality of our loan portfolio. Furthermore, we use our proprietary Hawkeye engine to assess credit risks of our users. While we continually improve our risk managementcapabilities as we accumulate user data, the Hawkeye engine may inaccurately predict future credit losses under certain circumstances. For instance, afterinitial credit lines are granted, a user’s risk profile may change due to a variety of factors, such as deteriorating financial situations, and there is no assurancethat such changes will be captured by the Hawkeye engine in a timely manner. The models and algorithms used by the Hawkeye engine may contain errors,flaws or other deficiencies that may lead to inaccurate credit assessment, and the data provided by users and external data sources may be incorrect orobsolete. If any of the foregoing were to occur in the future, our loan pricing and approval process could be negatively affected, resulting in misclassifiedloans or incorrect approvals or denials of credit applications. If we are unable to effectively maintain and manage the quality of our loan portfolio due to any reason, the delinquency rates and the charge-offs ofour loan portfolio may increase. Moreover, if the quality of our loan portfolio were to deteriorate, investors may try to rescind their affected investments,institutional funding partners may decide not to continue to cooperate with us, and users may seek to revise the terms of their loans or reduce the use of ourplatform for borrowing. If any of the foregoing were to occur, our business, competitive position, financial condition and results of operations may bematerially and adversely affected. We need adequate funding at reasonable cost to successfully operate our business, and access to adequate funding at a reasonable cost cannot be assured. The growth and success of our operations depend on the availability of adequate funding to meet user demand for loans on our platform. We deriveour funding for our platform from a variety of sources and types of investors, including individual investors on Juzi Licai, our institutional funding partnersin our direct lending programs and investors of asset-backed securities. We obtained the majority of our funding from Juzi Licai in 2016 and 2017, and frominstitutional funding partners in 2018. Our ability to diversify funding sources is subject to the development of regulatory requirements. For example, theCircular 141 prohibits banking financial institutions from providing loans to persons without source of income or investing in asset-backed securities withunderlying assets consisting of “cash loans” or “campus loans.” If college students are deemed as persons without source of income, the funding of loans tocollege students provided by financial institutions may need to be terminated. Although investors of asset-backed securities were not our major source offunding in historical periods, to the extent we intend to increase funds obtained through asset-back securities, the foregoing requirement would affect theamount of funding that we could obtain through this channel. To the extent there is insufficient funding from investors or funding partners willing to acceptthe risk of default posed by potential users or the particular type of funding could be matched to only certain group of our users due to restrictions imposedby current or existing laws or regulations, our platform will be unable to fund loan originations. If adequate funds are not available to meet users’ demand forloans, loan originations on our platform may be significantly impacted. Also, to the extent that risk-adjusted return requirements of our funding sourceschange, funding sources may choose not to fund loans originated on our platform. In addition, our growth strategy involves offering our users competitivelypriced financial products and services. As the online consumer finance market is intensely competitive, we may attempt to further reduce our funding cost bymodifying the investment products offered to our investors and the terms and conditions of cooperation agreements with our funding partners. To the extentthat our funding sources find the risk-adjusted returns with us less attractive, we may not be able to obtain the requisite level of funding. If our platform isunable to provide potential users with loans or fund the loans on a timely basis due to insufficient funding or less favorable pricing compared to that of ourcompetitors, it would harm our business, financial condition and results of operations. 14Table of Contents Our expansion into offering our users higher credit lines, new loan products and financial services, and new product categories on our e-commercechannel, and our expansion into serving increased numbers of educated young adult users, may expose us to new challenges and more risks. We have a limited operating history and have been rapidly expanding our products and services and our user base since our inception. For example,we started to offer personal installment loans to our users in addition to installment purchase loans in 2014. In 2015, we began to offer flexible repaymentoptions, which allow users who meet our criteria to reschedule or postpone their current monthly payment. We have also expanded our product offerings onour e-commerce channel to include a wider range of products, including more apparel, cosmetics and home appliances. To serve our expanded user base andour users’ evolving credit needs, we continuously offer new credit products and offer our users higher credit lines as they obtain higher incomes with greaterability to repay. Expansion into diverse new products and service categories involves new risks and challenges. Our lack of familiarity with these newproduct and service offerings and lack of relevant user data may make it more difficult for us to anticipate user demand and preferences and manage creditrisk. We may misjudge user demand, resulting in inventory buildup and possible inventory write-down. We cannot assure you that we will be able to recoupour investments in introducing these new product and service categories. In addition, as our user base shifts to consist of more educated young professionals,it may also make it more difficult for us to accurately assess the credit risks of these new users due to our lack of credit data and experience. Higher creditlimit products may also carry more risks, and we may not be able to adequately address the default risk of our loans originated under these higher credit limitproducts due to lack of historical data. Serving a changing user base may also expose us to new challenges and more risks. If we fail to execute our growthstrategies, or if we fail to address the challenges and risks we encounter when executing our growth strategies, our business and results of operations could bematerially and adversely affected. If our existing and new loan products or financial services do not maintain or achieve sufficient market acceptance, our financial results and competitiveposition 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 also incur expenses and expend resources upfront to develop and market new loan products and financial services thatincorporate additional features, improve functionality or otherwise make our platform more attractive to users. New loan products and financial services mustachieve high levels of market acceptance in order for us to recoup our investments in developing and marketing them. Our existing and new loan products and financial services could fail to attain sufficient market acceptance for many reasons, including: 15Table of Contents · users may not find the terms of our loan products, such as the costs and credit limits, competitive or appealing; · we may fail to predict market demand accurately and provide loan products and financial services that meet this demand in a timely fashion; · users, investors and institutional funding 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 our loan products or financial services, or our platform’s performance or effectiveness; · regulatory authorities may take the view that the new products, financial services or platform changes do not comply with PRC laws,regulations or rules applicable to us; and · there may be competing products or services introduced or anticipated to be introduced by our competitors. If our existing and new loan products and services and investment products do not maintain or achieve adequate acceptance in the market, ourcompetitive position, results of operations and financial condition could be materially and adversely affected. 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. We believe that effectively developing and maintaining awareness of our brand is critical to attracting and retaining users. This in turn largelydepends on the effectiveness of our user acquisition strategy, our marketing efforts, our cooperation with institutional funding partners and the success of thechannels we use to promote our platform. If any of our current user acquisition strategies or marketing channels becomes less effective, more costly or nolonger feasible, we may not be able to attract new users in a cost-effective manner or convert potential users into active users. 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 incur additionalexpenses. 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 inoperating revenue may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring additional expenses, ourresults of operations and financial condition would be adversely affected, and our ability to grow our business may be impaired. Any negative publicity or user complaints with respect to us, the consumer finance industry in general and our third-party service providers may materiallyand adversely affect our business and results of operations. The reputation of our brands is critical to our business and competitiveness. Any malicious or negative publicity or any publicized incidents inconnection with the use of our products or services, whether or not we are negligent or at fault, including but not limited to those relating to our management,business, compliance with the law, financial conditions or prospects, whether with or without merit, could severely compromise our reputation and harm ourbusiness and operating results. As China’s consumer finance industry is new and the regulatory framework for this industry is also evolving, negative publicity about this industryand the market segment in which we operate may arise from time to time. Negative publicity about China’s consumer finance industry in general may alsohave a negative impact on our reputation, regardless of whether or not we have engaged in any inappropriate activities. The PRC government has recentlyinstituted specific rules, including the Guidelines, Interim Measures, the CBRC Circular 26 and the Circular 141, to develop a more transparent regulatoryenvironment for the online consumer finance industry. See “Item 4. Information on the Company—B. Business Overview—Regulations—RegulationsRelating to Online Consumer Finance Services.” Any players in China’s online consumer finance industry who are not in compliance with these regulationsmay adversely impact the reputation of the industry as a whole. Furthermore, any negative development or perception of the consumer finance industry as awhole, including campus lending, even if factually incorrect or based on isolated incidents or as result of conduct by other market players, could compromiseour image, undermine our trust and credibility, and negatively impact our ability to attract new users, investors and institutional funding partners. Negativedevelopments in the consumer finance industry, such as widespread user defaults, fraudulent behavior, the closure of other online consumer financeplatforms, or incidents indirectly resulting from the accumulation of large amounts of debt and inability to repay by any particular user, may also lead totightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by market players in the consumerfinance industry. For instance, since 2015, there has been a number of reports of business failures of, or accusations of fraud and unfair dealing against, certaincompanies in the consumer finance industry in China. If users, investors or institutional funding partners associate our company with these companies, theymay be less willing to engage in borrowing or funding activities on our platform. If any of the foregoing takes place, our business and results of operationscould be materially and adversely affected. 16Table of Contents We have limited experience operating our current risk safeguard scheme, which was established in April 2018. If we under- or over-fund our risksafeguard funds, or if we fail to accurately forecast the expected payouts or otherwise implement the risk safeguard program successfully, our financialresults and competitive position may be harmed. We have limited experience operating our risk safeguard scheme, which was established in April 2018 for Juzi Licai. We set aside a portion of eachrepayment equal to a certain percentage of the outstanding principal balance of the loan and transfer such amount to a custody account managed by anindependent guarantee company, which we refer to as risk safeguard funds. Such independent guarantee company provides make-up payments to an investorusing the risk safeguard funds when a user fails to satisfy his interest or principal repayment obligations. Under these agreements between users and investorsrelating to the risk safeguard scheme, the amount of make-up payments is up to the available balance of the risk safeguard funds. As a result of continued introduction of new products and changes in the composition of the underlying loan assets, we may not be able toaccurately forecast delinquencies and charge-offs for our target user cohort based on information on historical delinquency rates and charge off rates. Giventhese challenges, it is possible that we will under- or over-fund to the risk safeguard funds. If we under-fund the risk safeguard funds, and we do not or areunable to replenish the risk safeguard funds to a sufficient level in time, individual investors may not be fully protected from losses, which may result innegative publicity and reduce the attractiveness of our online investment platform. Conversely, if we over-fund the risk safeguard funds, this will reduce ourincome and revenue. In the event any investor is not fully compensated by the risk safeguard funds for delinquent payments, a dispute may arise between theinvestor and us as a result of the investor’s uncompensated loss, which may adversely affect our reputation, the perception of us by the investors andregulatory authorities, or our business. We have entered into a cooperation agreement with the guarantee company that is currently managing the risk safeguard fund, which agreement willexpire in April 2020. We cannot assure you that we will be able to renew the cooperation agreement before its expiration or find an alternative guaranteecompany that is willing to manage the risk safeguard scheme on terms reasonable to us. If we fail to do the foregoing, the operations of our risk safeguardscheme would be materially and adversely affected, which may cause investors to lose confidence in our platform. Should any of the foregoing occur, ourcompetitive position as well as our results of operations could be materially and adversely affected. If we fail to maintain cooperation with our funding partners or to maintain sufficient liquidity to originate loans to our users, our reputation, results ofoperations and financial condition may be materially and adversely affected. We currently offer our individual investors on Juzi Licai a variety of investment programs. Upon maturity of an investment program with fixedmaturities or a withdrawal request made by an individual investor in step-up returns investment programs that allow weekly or monthly withdrawals onspecified dates during each weekly or monthly period, the loans underlying such investment program held by the individual investor may be transferred toanother investment program as part of the underlying loan portfolios. In the event that investors request to withdraw a substantial amount of their investmentsat the same time or within a short time period, it may cause a run on our investment programs. Although we have developed sophisticated algorithms andsystems to match the investment and redemption requests among the investors to provide liquidity, we cannot guarantee that we will be able to maintain theliquidity at a sufficient level that every withdrawal request from our investors who subscribe to our investment programs can be met on a timely basis, or atall. 17Table of Contents Our institutional funding partners typically agree to provide funding to our users who meet their predetermined criteria, subject to their approvalprocess. These agreements have fixed terms ranging from one to two years. Some of these agreements have automatic renewal options upon expiration. Inaddition, while our users’ loan requests are usually approved if they fall within the parameters set and agreed upon by us and our institutional fundingpartners, they may implement additional requirements in their approval process outside of our monitor and control. Thus, there is no assurance that ourinstitutional funding partners could provide reliable, sustainable and adequate funding to support the required liquidity, either because they could decline tofund user loans originated on our platform or decline to renew or renegotiate their participation in our direct lending programs. In addition, if PRC laws andregulations impose more restrictions on cooperation with institutional funding partners, these institutional funding partners will become more selective inchoosing cooperation partners, which may drive up the funding costs and the competition among online lending platforms to cooperate with a limitednumber of institutional funding partners as well as other non-institutional funding sources. Any of the above may materially increase our funding costs,which may adversely affect our results of operations and profitability. Furthermore, if PRC laws and regulations are issued that prohibit our cooperation withour institutional funding partners, including licensed financial institutions, micro credit lenders or other P2P platforms, our cooperation with our fundingpartners may have to be terminated or suspended, which may materially and adversely affect our business, financial condition and results of operations. The smooth operations of our business require sufficient liquidity on a consistent basis. We are in the process of establishing a liquidity riskmanagement system. However, if any of the risks described above were to occur, our reputation, results of operations, financial condition and businessprospect may be materially and adversely affected. We may not be able to sustain our historical growth rates. We have experienced rapid growth since we commenced our online consumer finance business. Our total operating revenue increased significantlyfrom RMB4,339 million in 2016 to RMB5,582 million in 2017, and further to RMB7,597 million (US$1,105 million) in 2018. We originated RMB47.7billion and RMB66.1 billion (US$9.6 billion) in loans in 2017 and 2018. However, there can be no assurance that we will be able to maintain our historicalgrowth rates in future periods. Our revenue growth may slow, or our operating revenue may decline for a number of possible reasons, including decreasingconsumer spending, changes in regulations and government policies, increasing competition, slowing the growth of China’s online consumer financeindustry, emergence of alternative business models, and general economic conditions. If our growth rate declines, investors’ perceptions of our business andbusiness prospects may be adversely affected and the market price of the ADSs could decline. We incurred net losses in the past and may incur net losses in the future. We incurred net losses in the past while we had a net income in 2017 and 2018, respectively. We anticipate that our operating expenses will increasein the foreseeable future as we seek to continue to grow our business, attract potential users, investors and partners, and further enhance and develop productand service offerings. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our operating revenuesufficiently to offset these higher expenses. We strategically focus on serving educated young adults and seek to capture their long-term growth potential. Tothe extent we are unable to execute this strategy or if we are unable to generate increased revenue on repeat users, we may not continue to generate netincome. In addition, we historically had relatively low charge-off rates. Our vintage charge-off rates as of December 31, 2018 for each vintage of a three-month period from January 1, 2015 through December 31, 2018 were just over 2%. If our charge-off rates were to increase in the future, we may incur losses. Ifany of the foregoing occurs, we may incur net losses again and may be unable to achieve or maintain profitability on a quarterly or annual basis for theforeseeable future. 18Table of Contents Our business is dependent on our ability to maintain relationships with our business partners and other third parties, and at the same time, we are subjectto risks associated with our business partners and other third parties. We currently rely on a number of business partners and other third parties in various aspects of our business. For example, we source products fromthird-party suppliers for our online direct sales. In particular, we have formed a strategic partnership with JD.com, from which we source a significant portionof products that we offer on our e-commerce channel. We cannot assure you that our current suppliers will continue to sell products to us on commerciallyacceptable terms, or at all, after the current agreement expires. In addition, if we fail to attract new suppliers to sell their products to us due to any reason, ourbusiness and growth prospects may be materially and adversely affected. In addition, we have third-party sellers on our online marketplace on the e-commerce channel. We do not have as much control over the quality, storage and delivery of products sold on our online marketplace as we do over theproducts that we sell directly ourselves. If any third-party seller does not control the quality of the products that it sells on our website, or if it does not deliverthe products or delivers them late or delivers products that are materially different from its description of them, or if it sells certain products without licensesor permits as required by the relevant laws and regulations, we could face claims that we should be held liable for any losses or face product liability claims.We may also incur liability or become subject to administrative penalties for counterfeit or unauthorized products sold on our website, or for products sold onour website or content posted on our website that infringe on intellectual property rights, or for other misconduct, including carrying out fictitioustransactions or deleting unfavorable comments. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating toE-Commerce” and “—Regulations Relating to Product Quality and Consumer Rights Protection.” In addition, we cooperate with a number of business partners and other third parties to fulfill and deliver our products to our users. For example, weuse the warehousing and delivery infrastructure of JD.com and SF Express for fulfilling user orders on our e-commerce channel. Our ability to process andfulfill orders accurately and provide high-quality user service depends on the fulfillment infrastructure of our business partners and other third parties. Anyinterruptions to or failures in their delivery and fulfillment services could prevent the timely or proper delivery of our products to users. Our business,financial condition and results of operations may be adversely affected by any disruptions to their delivery and fulfillment services. Furthermore, since we rely on certain third-party service providers, such as third-party payment platforms and custody and settlement serviceproviders, in conducting our business, if these third-party service providers fail to function properly, we cannot assure you that we would be able to find analternative in a timely and cost-efficient manner, or at all. Pursuing, establishing and maintaining relationships with business partners and other third parties, as well as integrating their data and services withour system, require significant time and resources. Our current agreements with partners and other third parties generally do not prohibit them from workingwith our competitors or from offering competing services. Our competitors may be more effective in providing incentives to our partners to favor ourcompetitors’ products or services. Certain types of partners may devote more resources to support their own businesses which compete with us. For example,JD Finance conducts consumer finance business and is supported with the significant resources available from JD.com. The smooth operation of our business also depends on the compliance by our business partners and other third parties with applicable laws andregulations. Any negative publicity about business partners and other third parties, such as negative publicity about their loan collection practices and anyfailure by them to adequately protect the information of our users and investors, to comply with applicable laws and regulations or to otherwise meet requiredquality and service standards, could harm our reputation and further lead to decrease in the willingness of prospective borrowers. We may also be holdresponsible for any misconduct of their loan collection practice. If any of the foregoing were to occur, our business and results of operations could bematerially and adversely affected. Our reputation is associated with these business partners and other third parties, and if any of the foregoing were to occur,our reputation may suffer. 19Table of Contents Fraudulent activities on our platforms or that target our users could negatively impact our operating results, brand and reputation. We are subject to risks associated with fraudulent activities on our platforms as well as risks associated with handling user and investor information.Our resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent fraud. In addition, our educated young adult usersmay be more susceptible to fraud due to their limited financial knowledge and experience in using financial services. They may not be well equipped todetect sophisticated fraudulent schemes that directly target them. For instance, our users may be encouraged by third parties or organized criminal groups toincur personal installment loans on our platform and transfer the proceeds to them, who have no intention to repay, ultimately resulting in default. Weprovide our users with education on financial planning and management, including on the concept of credit, credit and personal information protection,fraud and identity theft prevention. However, we cannot assure you that these efforts will be effective in preventing fraud. While we have not historicallyexperienced any significant incident of fraud that caused material losses to us, significant increases in fraudulent activities on our platform could negativelyimpact our brand and reputation, result in losses to us and our funding sources, reduce loan originations on our platform and lead us to take additional stepsto reduce the risk of fraud, which could increase our costs and expenses. High-profile fraudulent activity could even lead to regulatory intervention, and maydivert our management’s attention and cause us to incur additional expenses and costs. If any of the foregoing were to occur, our business, results ofoperations and financial condition could be materially and adversely affected. Any lack of requisite approvals, licenses or permits applicable to our business may have a material and adverse impact on our business, financialcondition and results of operations. Our business is subject to governmental supervision and regulation by the relevant PRC governmental authorities. Together, these governmentauthorities promulgate and enforce regulations that cover many aspects of the operation of the online retail and the online finance industries. The PRCgovernment extensively regulates the internet industry. See “Item 4. Information on the Company—B. Business Overview—Regulations.” As a result, incertain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. In addition, the e-commerce industry is highly regulated by the PRC government. We are required to obtain various licenses and permits fromdifferent regulatory authorities in order to distribute certain categories of products on our website. We have made efforts to obtain all the applicable licensesand permits, but due to the large number and variety of products sold on our websites, we may not always be able to do so, and we may be penalized bygovernmental authorities for selling products without proper licenses. As we increase our product selection, we may also become subject to new or existinglaws and regulations that did not affect us before. We only have contractual control over our websites or mobile applications. Furthermore, we do not directlyown the websites or mobile internet applications due to the restriction of foreign investment in businesses providing value-added telecommunicationservices in China. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of related contractual arrangements, or haveother harmful effects on us. Our online consumer finance platform, Fenqile, has obtained certain value-added telecommunications service license for theoperations of internet content service from the Guangdong Administration of Telecommunications in April 2017, which will remain valid until May 2019and certain value-added telecommunications service license for the operation of domestic call center service and content service (excluding internet contentservice) from the Ministry of Industry and Information Technology, or the MIIT, in July 2017, which will remain valid until July 2022. MengtianTechnology, one of our variable interest entities, has obtained certain value-added telecommunications service license for the operations of internet contentservice from the Guangdong Administration of Telecommunications in January 2019, which will remain valid until January 2024. Further, the application ofcertain value-added telecommunications service license for online data processing and transaction processing submitted by Shenzhen Fenqile was receivedby Guangdong Administration of Telecommunications in April 2019. We cannot assure you that we have obtained all the permits or licenses required forconducting our business in China or will be able to maintain our existing licenses or obtain new ones. If the PRC government determines that we areoperating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposesadditional restrictions on the operation of any part of our business, it has the power, among other things, to levy fines, confiscate our income, revoke ourbusiness licenses, and require us to discontinue the relevant parts of our business or to impose restrictions on the affected portion of our business. Any ofthese actions by the PRC government may have a material adverse effect on our business and results of operations. 20Table of Contents In addition to licenses and permits, PRC laws and regulations also require e-commerce platform operators to take measures to protect consumerrights. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to E-Commerce.” Failure to do so maysubject the e-commerce platform operators to rectification requirements and penalties. For examples, the E-Commerce Law requires e-commerce platformoperators to take necessary actions if the merchants on the platform fail to display prominently on their home page the information contained in theirbusiness licenses or administrative permits relating to their operations. Moreover, according to the E-Commerce Law, except for in certain circumstances, alle-commerce operators, including individuals and entities carrying out business online, e-commerce platform operators and merchants on these platforms,shall register with local branches of the State Administration for Industry and Commerce, or the SAIC (which was integrated into the State Administration forMarket Regulations with other governmental departments in April 2018), provide identity information of merchants on their platform to local branches ofSAIC and prompt any merchants failing to make such registrations to comply with the relevant registration requirements. We have required merchants on ourplatform to complete such registrations. As a result of such requirements, we may lose existing merchants and fail to attract potential merchants who may notbe willing to cooperate with us in full compliance with the E-Commerce Law. Our current level of fee rates may decline in the future. Any material reduction in our fee rates could reduce our profitability. We primarily generate financial services income by charging fees to users for services we provide on loans originated on our platform. These feerates may also be affected by a change over time in the mix of the types of products we provide to our users and investors, the macroeconomic factors, as wellas the competition in the online consumer finance industry. Any material reduction in our fee rates could have a material adverse effect on our business,results of operations and financial condition. Fluctuations in interest rates could negatively affect our business. The profitability of our business depends on the interest rates at which our users are willing to borrow, and the interest rates at which our fundingpartners are willing to lend. If we fail to respond to the fluctuations in interest rates in a timely manner and reprice our loan products, our loan products maybecome less attractive to our users. For example, in a falling interest rate environment, potential users may seek lower priced loans from other channels if wedo not lower the interest rates on our loan products. Similarly, in a rising interest rate environment, potential investors may seek higher return investmentsfrom other channels if we do not increase the return on our investment products. Moreover, if we are unable to reprice our loan products and investmentproducts correspondingly, the spreads between the interest rates on our loan products and the expected rates of return on our investment products may bereduced, and our profitability may be adversely affected. We rely on the sale of computers, smartphones and other consumer electronics for a significant portion of our loans originated to finance user purchaseson our e-commerce channel. Historically, online sales of electronic products, including computers and smartphones, have accounted for a majority of purchases on our e-commerce channel, and thus a significant portion of online direct sales and services income. Electronic products sold on our e-commerce channel accountedfor approximately 77%, 69% and 52% of our total loans originated to finance user purchases on our e-commerce channel in 2016, 2017 and 2018. We expectthat sales of these products will continue to translate into a significant portion of our total operating revenue and loans originated to finance user purchaseson our e-commerce channel in the near future. We have increased our offerings on our e-commerce channel to include other product categories, and we havecontinuously added new products within each product category. However, due to the demographic characteristics of our target user cohort and their demand,our sales of these new products and services may not increase to a level that would substantially reduce our dependence on the sales of electronic products.We face intense competition from online sellers of electronic products and from established companies with physical stores that are moving into online retail,such as Taobao.com, Tmall.com, JD.com and Suning. Any event that results in a reduction in our sales of electronic products could materially and adverselyaffect our ability to maintain or increase the level of our operating revenue and loan originations and to maintain or improve our business prospects. 21Table of Contents If we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materially and adversely affected. Our scale and business model require us to manage our inventory effectively. We depend on our demand forecasts for various kinds of products tomake purchase decisions and to manage our inventory. Demand for products, however, can change significantly between the time inventory is ordered andthe date by which we hope to sell it. Demand may be affected by seasonality, new product launches, changes in product cycles and pricing, product defects,changes in consumer spending patterns, changes in consumer tastes and other factors, and our users may not order products in the quantities that we expect.In addition, when we begin selling a new product, it may be difficult to establish supplier relationships, determine appropriate product selection, andaccurately forecast demand. The acquisition of certain types of inventory may require significant lead time and prepayment and they may not be returnable. Furthermore, as we plan to continue expanding our product offerings, we expect to include more products in our inventory, which will make it morechallenging for us to manage our inventory and logistics effectively. If we fail to manage our inventory effectively, we may be subject to a heightened risk ofinventory obsolescence, a decline in inventory value, and significant inventory write-downs or write-offs. In addition, we may be required to lower sale pricesin order to reduce inventory level, which may lead to lower gross margins. High inventory levels may also require us to commit substantial capital resources,preventing us from using that capital for other purposes. Any of the above may materially and adversely affect our results of operations and financialcondition. On the other hand, if we underestimate demand for our products, or if our suppliers fail to supply quality products in a timely manner, we mayexperience inventory shortages, which might result in missed sales, diminished brand loyalty and lost revenues, any of which could harm our business andreputation. Limited liquidity exists for investments made on Juzi Licai, which may make these investments less attractive to investors. There currently exists no trading market for the loans invested by individual investors on Juzi Licai. Individual investors are not permitted todirectly transfer their investments to other individual investors prior to maturity. For fixed maturities investment programs, investors are only allowed towithdraw their funds upon maturity. For step-up returns investment programs, individual investors are allowed to withdraw their funds on the condition thatwithdrawals be made on specified dates during each weekly or monthly period. In the event that investors request to withdraw a substantial amount of theirinvestments at the same time or within a short time period, it may cause a run on our investment programs and we may be unable to meet the investors’withdrawal demands on a timely basis, or at all. To the extent that individual investors are not able to transfer loans at all or withdraw their funds when needsfor liquidity arise, individual investors may be discouraged from investing on Juzi Licai in the future, which may have a material and adverse effect on ourbusiness and competitive position. Misconduct, errors and failure to perform by our employees could harm our business and reputation. We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees. Our business depends on ouremployees to interact with users and investors, process large numbers of transactions and support the loan collection process, all of which involve the use anddisclosure of personal information. We could be materially and adversely affected if transactions were redirected, misappropriated or otherwise improperlyexecuted, if personal information was disclosed to unintended 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. In addition, the manner in which we storeand use certain personal information and interact with users and investors is governed by various PRC laws. It is not always possible to identify and determisconduct or errors by employees, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses. If any of our employees take, convert or misuse funds, documents or data or fail to follow protocol when interacting with users andinvestors, we could be liable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in theillegal misappropriation of funds, documents or data, or have failed to follow protocol, and therefore be subject to civil or criminal liability. 22Table of Contents If our ability to collect delinquent loans is impaired, or if the collection efforts of our in-house team or third-party service providers are impaired, ourbusiness and results of operations might be materially and adversely affected. Our in-house collection team handles the collection of delinquent loans. We also engage certain third-party collection service providers from time totime. If either our or our third-party service providers’ collection methods, such as phone calls, text messages, in-person visits and legal letters, are noteffective and we fail to respond quickly and improve our collection methods, our delinquent loan collection rate may decrease. While we have implementedand enforced policies and procedures relating to collection activities by us and third-party service providers, if those collection methods were to be viewedby the users or regulatory authorities as harassments, threats or other illegal conducts, we may be subject to lawsuits initiated by the users or prohibited by theregulatory authorities from using certain collection methods. If this were to happen and we fail to adopt alternative collection methods in a timely manner orthe alternative collection methods are proven to be ineffective, we might not be able to maintain our delinquent loan collection rate and the funding sources’confidence in our platform may be negatively impacted. If any of the foregoing takes place and impairs our ability to collect delinquent loans, the loanoriginations on our platform will decrease, and our business and the results of operations could be materially and adversely affected. Uncertainties relating to the growth and profitability of the online retail industry in China in general, and the e-commerce industry in particular, couldadversely affect our operating revenue and business prospects. Online direct sales on our e-commerce channel account for a significant portion of our total operating revenue and loan originations. Our futureresults of operations will depend on numerous factors affecting the development of the e-commerce industry in China, which may be beyond our control.These factors include: · the growth of internet, broadband, personal computer and mobile penetration and usage in China, and the rate of any such growth; · the level of trust and confidence of Chinese consumers in online shopping, as well as changes in user demographics and consumer tastes andpreferences; · the selection, price and popularity of products that we and our competitors offer online; · whether alternative retail channels or business models that better address the needs of consumers emerge in China; and · the development of fulfillment, payment and other ancillary services associated with online purchases. A decline in the popularity of online shopping in general, or any failure by us to adapt our website and improve the online shopping experience ofour users in response to trends and consumer requirements, may adversely affect our operating revenue and business prospects. Furthermore, the e-commerce industry is subject to macroeconomic changes, and retail purchases tend to decline during recessionary periods. Manyfactors outside of our control, including inflation and deflation, currency exchange rate fluctuation, volatility of stock and property markets, interest rates,tax rates, other government policies, and unemployment rates, can adversely affect consumer confidence and spending, which could in turn materially andadversely affect our growth and profitability. Unfavorable developments in domestic and international politics, including military conflicts, political turmoiland social instability, may also adversely affect consumer confidence and reduce spending, which could in turn materially and adversely affect our growthand profitability. Our delivery, return and exchange policies may materially and adversely affect our results of operations. We have adopted user-friendly return and exchange policies. We may also be required by law to adopt new or amend existing return and exchangepolicies from time to time. For example, pursuant to the PRC Consumer Rights and Interests Protection Law and the Measures on the Administration ofOnline Transactions promulgated by the SAIC, in January 2014, which became effective in March 2014, or the Online Transactions Measures, consumers areentitled to return goods purchased online within seven days upon receipt of such goods for no reason, subject to certain exceptions. See “Item 4. Informationon the Company—B. Business Overview— Regulations—Regulations Relating to Product Quality and Consumer Rights Protection.” These policiesimprove users’ shopping experience and promote user loyalty, which in turn help us acquire and retain users. However, these policies also subject us toadditional costs and expenses which we may not be able to recoup with increased revenue. Our ability to handle a large volume of returns is unproven. If ourreturn and exchange policy is misused by a significant number of users, our costs may increase significantly and our results of operations may be materiallyand adversely affected. If we revise these policies to reduce our costs and expenses, our users may be dissatisfied, which may result in a loss of existing usersor failure to acquire new users at a desirable pace, and may materially and adversely affect our results of operations as a result. 23Table of Contents If we fail to compete effectively, our results of operations and market share could be harmed. The online consumer finance industry in China is highly competitive and evolving. As a leading online consumer finance platform in China, weface competition from other online platforms, major internet players, traditional financial institutions as well as other installment loan service providers. Ourcompetitors include, among others, Ant Financial Services Group, JD Finance and WeBank. We also compete with traditional financial institutions,including credit card issuers, consumer finance business units in commercial banks and other consumer finance companies. Our competitors operate with different business models, have different cost structures or participate selectively in different market segments. Theymay ultimately prove more successful or more adaptable to new regulatory, technological and other developments. Some of our current and potentialcompetitors have significantly more financial, technical, marketing and other resources than we do, and may be able to devote greater resources to thedevelopment, promotion, sale and support of their platforms. Our competitors may also have longer operating histories, more extensive user or investor bases,larger amounts of data, greater brand recognition and loyalty, and broader partner relationships than we do. Additionally, a current or potential competitormay acquire one or more of our existing competitors or form a strategic alliance with one or more of our competitors. Any of the foregoing could adverselyaffect our business, results of operations, financial condition and future growth. In addition, our competitors may be better at developing new products, responding to new technologies, charging lower fees on loans andundertaking more extensive marketing campaigns. When new competitors seek to enter our target market, or when existing market participants seek toincrease their market share, they sometimes undercut the pricing and/or terms prevalent in that market, which could adversely affect our market share orability to exploit new market opportunities. Also, since the online consumer finance industry in China is relatively new and fast evolving, potential investorsand users may not fully understand how our platform works. Our pricing and terms could deteriorate if we fail to act to meet these competitive challenges. Inaddition, in response to more stringent PRC laws and regulations regarding cash loans, more online lending platforms may expand their services and productsto scenario-based lending, including partnering with e-commerce platforms, which may drive up the competition among online lending platforms. Suchintensified competition may increase our operation costs and adversely affect our results of operations and profitability. Furthermore, to the extent that ourcompetitors are able to offer more attractive terms to our business partners, such business partners may choose to terminate their relationships with us. Inaddition, as our competitors may implement certain procedures to reduce their fees in response to the current or potential PRC regulations on interest ratesand fees charged by online lending platforms, we may need to reduce our fees as well to comply with such regulations and to remain competitive in theonline lending industry. If we are unable to compete with our competitors, or if we are forced to charge lower fees due to competitive pressures, we couldexperience reduced revenues or our platforms could fail to achieve market acceptance, any of which could materially and adversely affect our business andresults of operations. If the total addressable market for our target user cohort is smaller than what we believe it is, our results of operations may be adversely affected and ourbusiness may suffer. It is very difficult to estimate the total addressable market for our target user cohort due to factors such as market demand, PRC regulations of thecredit industry, competition, general economic conditions and the relatively short history of the online consumer finance industry in China. We believe thatour total addressable market of users consists of educated young adults. However, if there is less demand than we anticipate for loan products offered on ourplatform, it may materially and adversely impact our business, financial condition and results of operations. 24Table of Contents Our quarterly results may fluctuate significantly due to the seasonality of our business and may not fully reflect the underlying performance of ourbusiness. We experience some seasonality in our business, reflecting a combination of seasonal demand for consumer loans and seasonality patternsassociated with the online retail industry. For example, we generally experience less user traffic and purchase orders during national holidays in China,particularly during the Chinese New Year holiday season in the first quarter of each year. Furthermore, e-commerce companies in China hold specialpromotional campaigns on November 11 each year, which improve our results for that quarter. The demand for our products and services is higher in March,April, September, October and November, which generally corresponds to the start of school and our promotional activities around November 11. While ourrapid growth has somewhat masked this seasonality, our quarterly operating results could be affected by such seasonality in the future. Therefore, our quarterly results of operations, including our operating revenue, expenses, net loss or income and other key metrics, may varysignificantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results for any single quarterare not necessarily an indication of future performance. We may not be able to obtain additional operating capital on favorable terms or at all. Our consolidated financial statements have been prepared on a going concern basis. We believe that our current cash, cash provided by operatingactivities and funds available through our bank loans and credit facilities, will be sufficient to meet our current and anticipated needs for general corporatepurposes for at least the next 12 months. However, we need to make continued investments in facilities, hardware, software, technological systems and toretain talents to remain competitive. Due to the unpredictable nature of the capital markets and our industry, we cannot assure you that we will be able toraise additional capital on terms favorable to us, or at all, if and when required, especially if we experience disappointing operating results. If adequate capitalis not available to us as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure orrespond to competitive pressures could be significantly limited, which would adversely affect our business, financial condition and results of operations. Insuch event, there may also be significant doubt as to our ability to continue as a going concern. If we do raise additional funds through the issuance of equityor convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights,preferences or privileges senior to those of existing shareholders. We have obligations to verify information relating to users and to detect fraud. If we fail to perform such obligations to meet the requirements of relevantlaws and regulations, we may be subject to liabilities. Our business of connecting individual investors and users on Juzi Licai constitutes an intermediary service, and Qianhai Juzi’s contracts withindividual investors and/or users on Juzi Licai are intermediation contracts under the PRC Contract Law. Under the PRC Contract Law, an intermediary thatintentionally conceals any material information or provides false information in connection with the conclusion of the proposed contract, which results inharm to the client’s interests, may not claim any service fee for its intermediary services and is liable for any damage incurred by the client. In addition, theInterim Measures have imposed on us additional obligations to verify the truthfulness of the information provided by or in relation to users, and to activelydetect fraud. Therefore, if we intentionally conceal any material information or provide false information to funding sources, or fail to verify the truthfulnessof the information provided by or in relation to our users or to actively detect fraud, we could be subject to liabilities as an intermediary under the PRCContract Law and liabilities under the Interim Measures, and our results of operations and financial condition could be materially and adversely affected. Changes in PRC regulations relating to interest rates and fees for online consumer finance platforms and microcredit lending, including campus onlinelending, could have a material adverse effect on our business. The interest rate permitted to be charged on loans originated on our platform is subject to limitations set forth in the Provisions on Several IssuesConcerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court in August 2015 and effective in September 2015, orthe Private Lending Judicial Interpretations, which provide that (i) when the interest rate agreed between the borrower and lender does not exceed an annualinterest rate of 24%, the People’s Court will uphold the interest rate charged by the lender, and (ii) when the interest rate agreed between the borrower andlender exceeds an annual interest rate of 36%, the portion in excess of 36% is void and the People’s Court will uphold the borrower’s claim for return of theexcess portion to the borrower. For loans with interest rates per annum between 24% and 36%, if the interest on the loans has already been paid to the lenders,and so long as such payment has not damaged the interest of the state, the community or any third parties, the courts will likely not enforce the borrower’sdemand for the return of such interest payment. 25Table of Contents Ji’an Microcredit, is subject to regulations applicable to micro-credit companies. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Microcredit.” These regulations provide that “integrated actual interest” (namely the aggregated borrowing costscharged to borrowers in the forms of interest and various fees) shall be subject to the limit on interest rate of private lending set forth in the Private LendingJudicial Interpretations issued by the Supreme People’s Court. The loans originated on our platform and by Ji’an Microcredit will be subject to theaforementioned interest rate restrictions, which could affect our ability to originate loans to certain users and may have a material adverse effect on ourbusiness. In addition, the Notice on Further Strengthening the Rectification of Campus Online Lending issued by six PRC regulatory agencies inOctober 2016 prohibits, among other things, providing usurious loans by charging various fees such as procedure fee, overdue fine, service fee and recoveryfee. Certain Opinions Regarding Further Strengthening the Financial Judgment Work issued by the Supreme People’s Court in August 2017, or theOpinions for Financial Judgment Work, provide more detailed rules on the legal limits of interest and fees charged in connection with a loan and specify thatthe intermediary service fees charged by an online lending intermediary to circumvent the legal limit of interest of private lending shall be invalid. TheCircular 141 jointly issued by the Internet Finance Rectification Office and the Online Lending Rectification Office in December 2017 further clarifies thatthe total amount of interest and fees charged to borrowers must be within the limit set forth in the Private Lending Judicial Interpretations. See “Item 4.Information on the Company—B. Business Overview—Regulations—Regulations Relating to Online Consumer Finance Services—Regulations Relating toLoans Between Individuals.” Currently, none of our loans facilitated by us has an overall annualized interest rate exceeding 36%. We believe our current service fees and variousother fees charged to our users are reasonable and in compliance with relevant requirements under the Provisions on Several Issues Concerning LawsApplicable to Trials of Private Lending Cases, the Notice on Further Strengthening the Rectification of Campus Online Lending, the CBRC Circular 26 andthe Opinions for Financial Judgment Work. However, if our current fee level is deemed to be excessive or constitutes usurious loans under any existing orfuture relevant PRC laws, regulations and rules, we may face, among others, regulatory warning, correction order, condemnation, fines and criminal liabilityand may be required to reduce the fees and annual interest rate we charge to our users. If such situations were to occur, our business, financial condition,results of operations and prospects would be materially and adversely affected. The origination of loans on our platform could give rise to liabilities under PRC laws and regulations that prohibit illegal fundraising and unauthorizedpublic offerings. PRC laws and regulations prohibit persons and companies from raising funds by advertising to the public a promise to repay premium or interestpayments over time through payments in cash or in kind except with the prior approval of the applicable government authorities. Failure to comply withthese laws and regulations may result in penalties imposed by the PBOC, the SAIC, and other governmental authorities, and can lead to civil or criminallawsuits. We have taken measures to avoid conducting any activities that are prohibited under the illegal-funding related laws and regulations. We act asonline lending information intermediaries for users and individual investors. In addition, we do not directly receive any funds from individual investors inour own accounts as funds from individual investors are deposited into and settled by a third-party custody account managed by China Guangfa Bank. Todate, our platform has not been subject to any fines or other penalties under any PRC laws and regulations that prohibit illegal fundraising. Nevertheless,considerable uncertainties exist with respect to the PBOC, the SAIC and other governmental authorities’ interpretations of the fundraising-related laws andregulations. Therefore, we cannot guarantee you that our current services provided to investors will not be deemed to violate illegal fundraising laws andregulations in the future. 26Table of Contents The PRC Securities Law prohibits the issuance of securities for public offering without obtaining prior approval in accordance with the provisions ofthe law. The following offerings are deemed to be public offerings under the PRC Securities Law: (i) offering of securities to non-specific targets; (ii) offeringof securities to more than 200 specific targets; and (iii) other offerings provided by the laws and administrative regulations. Additionally, private offerings ofsecurities may not be carried out through advertising, open solicitation and disguised publicity campaigns. If any transaction between a user and multipleindividual investors is identified as a public offering by PRC government authorities, we may be subject to sanctions under PRC laws and our business maybe adversely affected. Credit and other information that we receive from prospective users and third parties about a user may be inaccurate and thus may not accurately reflectthe user’s creditworthiness, which may compromise the accuracy of our credit assessment. For our credit assessment, we obtain from prospective users and third parties certain information of the prospective users, which may not becomplete, accurate or reliable. Our credit assessment of a user may not reflect that particular user’s actual creditworthiness due to outdated, incomplete orinaccurate user information. Additionally, once we have obtained a user’s information, the user may subsequently (i) become delinquent in the payment of anoutstanding obligation; (ii) default on a pre-existing debt obligation; (iii) take on additional debt; or (iv) experience other adverse financial events, makingthe information we previously obtained inaccurate. We currently determine whether users have outstanding loans through consumer finance platforms usingexternal databases at the time they obtain a loan from us. We also compare a user’s name against our database on a regular basis. Once we detect that a userhas multiple outstanding loans with substantial aggregate balances and poses a high credit risk, we will place such user on a high risk user list and closelymonitor the user going forward. However, there is no assurance that we have complete and accurate information relating to all of our users’ outstanding loans.For example, a user may borrow money through our platform in order to pay off loans on other consumer finance platforms, and vice versa. If a user incursadditional debt before fully repaying any loan that user takes out on our platform, the additional debt may impair the ability of that user to make paymentson his or her loan with us and our funding sources, ability to receive investment returns associated with such loan. In addition, the additional debt mayadversely affect the user’s creditworthiness generally and could result in the financial distress or insolvency of the user. To the extent that a user has otherindebtedness and cannot repay all of his or her indebtedness, the user may choose to make payments to other platforms instead of us. Such inaccurate or incomplete user information could affect the accuracy of our credit assessment and the effectiveness of our risk management,which could in turn harm our reputation, and as a result, our business and results of operations could be materially and adversely affected. Our ability to protect the confidential information of our users and funding sources and our ability to conduct our business may be adversely affected bycyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions and we may be subject to liabilities imposed by the relevantgovernment regulations. Our platform collects, stores and processes certain personal and other sensitive data from our users and funding sources. There are numerous lawsgoverning privacy and the storage, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personallyidentifiable and other confidential information is increasingly subject to legislation and regulations in numerous domestic and international jurisdictions.The regulatory framework for privacy protection in China and worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. Wecould be adversely affected if legislation or regulations in China are expanded to require changes in business practices or privacy policies, or if the PRCgovernmental authorities interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results ofoperations. In November 2016, the Standing Committee of the NPC released the Internet Security Law, which became effective in June 2017. The InternetSecurity Law requires network operators to perform certain functions related to internet security protection and the strengthening of network informationmanagement. For instance, under the Internet Security Law, network operators of key information infrastructure generally shall, during their operations in thePRC, store the personal information and important data collected and produced within the territory of the PRC. We plan to further strengthen our informationmanagement and privacy protection of the user data stored in our system. However, we cannot assure you that the measures we have taken or will take areadequate under the Internet Security Law. If further changes in our business practices are required under China’s evolving regulatory framework for privacyprotection, our business, financial condition and results of operations may be adversely affected. Further, we use certain data collected from external datasources to make credit assessment. In the event that the data collection and provision by any of our external data sources is considered in violation of theInternet Security Law, we may not be able to use relevant data for our credit assessment and our business may be materially and adversely affected. 27Table of Contents In addition to laws, regulations and other applicable rules regarding privacy and privacy advocacy, industry associations or other private partiesmay propose new and different privacy standards. Because the interpretation and application of privacy and data protection laws and privacy standards arestill uncertain, it is possible that these laws or privacy standards may be interpreted and applied in a manner that is inconsistent with our practices. Anyinability to adequately address privacy concerns, even if unfounded, or to comply with applicable privacy or data protection laws, regulations and privacystandards, could result in additional cost and liability to us, damage our reputation, inhibit the use of our platform and harm our business. The massive data that we have processed and stored makes us or third-party service providers who host our servers a target and potentiallyvulnerable to cyber-attacks, computer viruses, physical or electronic break-ins, or similar disruptions. While we have taken steps to protect the confidentialinformation that we have access to, our security measures could be breached. Because techniques used to sabotage or obtain unauthorized access to systemschange frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implementadequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our platform could cause confidential user andinvestor information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose usto liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached becauseof any third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, ourrelationships with users and investors could be severely damaged, we could incur significant liability and our business and operations could be adverselyaffected. In addition, we rely on the massive amount of data and user information that we have accumulated over time to conduct our business. In particularwe use user information to make credit assessment of users through our Hawkeye engine. If these data are lost due to cyber-attacks, computer viruses, physicalor electronic break-ins, or similar disruptions, our business could be adversely affected. Any significant disruption in service on our platforms, our computer systems or third-party service providers’ systems, including events beyond our control,could reduce the attractiveness of our platforms and result in a loss of users or investors. In the event of a platform outage and physical data loss, our ability to perform our servicing obligations, process loan applications or make fundsavailable on our platforms would be materially and adversely affected. The satisfactory performance, reliability and availability of our platforms and ourunderlying network infrastructure are critical to our operations, user service, reputation, and ability to retain existing and attract new users, investors andinstitutional funding partners. Much of our system hardware is hosted in leased facilities located in Guangzhou and Beijing. We also rely significantly on ourthird-party service providers for the operation of our platform. Our operations depend on our ability to protect our systems against damage or interruptionfrom natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses, or attempts to harm our systems,criminal acts and similar events. If there is a lapse in service or damage to our leased facilities in Guangzhou and Beijing, we could experience interruptionsand delays in our service and may incur additional expenses in arranging new facilities. Any interruptions or delays in our service, whether as a result of third-party or our error, natural disasters or security breaches, whether accidental orwillful, could harm our relationships with our users, investors and institutional funding partners and our reputation. Our disaster recovery plan has not beentested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors couldprevent us from processing or posting payments on loans, damage our brand and reputation, divert our employees’ attention, subject us to liability and causeusers, investors and institutional funding partners to abandon our platforms, any of which could adversely affect our business, financial condition and resultsof operations. 28Table of Contents We rely on app stores to disseminate our mobile applications. We offer our services mainly through our mobile applications. Our mobile applications are offered via app stores operated by third parties, such asApple’s app store, which could suspend or terminate users’ access to our mobile applications, increase access costs or change the terms of access in a way thatmakes our applications more difficult to access. As a result, our ability to expand our user base may be adversely affected if potential users experiencedifficulties in or are prevented from accessing our mobile applications. In the past, our mobile applications were taken down from certain third-party appstores for a short period of time. We cannot assure you that we will not experience incidents of similar nature in the future, and occurrence of such incidentsmay adversely affect our brand and reputation, business, financial condition and results of operations. Our platforms and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected. Our platforms and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend onthe ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or inthe future contain, undetected errors or bugs. Errors or other design defects within the software on which we rely may result in a negative experience for usersand funding sources, delay introductions of new features or enhancements, result in errors or compromise our ability to protect user or investor 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 of users or investorsor liability for damages, any of which could adversely affect our business, results of operations and financial condition. We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we relyon a combination of intellectual property laws and contractual arrangements, including confidentiality with our employees and others, to protect ourproprietary rights. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or suchintellectual property may not be sufficient to provide us with competitive advantages. Furthermore, our efforts in protecting our brand and intellectualproperty rights may not always be effective. We regularly file applications to register our trademarks in China, but these applications may be challenged bythird parties and may not be successful. In addition, because of the rapid pace of technological change in our industry, parts of our business rely ontechnologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third partieson reasonable terms, or at all. It is often difficult to maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretationand enforcement, and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality agreements may bebreached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectivelyprotect our intellectual property rights or to enforce our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficultand costly, and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation toenforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We canprovide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or beindependently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us,disputes may arise 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. We may be subject to intellectual property infringement claims, which may be expensive 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, patents,copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings andclaims relating to the intellectual property rights of others. Some of our trademarks applications have been challenged by third parties, and we may not beable to successfully register such trademarks. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual propertyrights that are infringed upon by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rightsmay seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims arebrought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims,regardless of their merits. 29Table of Contents Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks,patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts orregulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject toliability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to developalternatives of our own. As a result, our business and results of operations may be materially and adversely affected. We may be held liable for information or content displayed on, retrieved from or linked to our mobile applications, which may materially and adverselyaffect our business and operating results. In addition to our website, we also offer consumer finance products on our mobile applications, which are regulated by the AdministrativeProvisions on Mobile Internet Applications Information Services, or the APP Provisions, promulgated by the Cyberspace Administration of China, or theCAC, in June 2016 and effective in August 2016. According to the APP Provisions, the providers of mobile applications shall not create, copy, publish ordistribute information and content that is prohibited by laws and regulations. We have implemented internal control procedures screening the informationand content on our mobile applications to ensure their compliance with the APP Provisions. However, we cannot assure that all the information or contentdisplayed on, retrieved from or linked to our mobile applications complies with the requirements of the APP Provisions at all times. If our mobile applicationswere found to be violating the APP Provisions, we may be subject to relevant penalties, including warning, service suspension or removal of our mobileapplications from the relevant mobile application store, which may materially and adversely affect our business and operating results. Any failure by us or our third-party service providers to comply with applicable anti-money laundering laws and regulations could damage our reputation. In cooperation with our partnering custody banks and payment companies, we have adopted various policies and procedures, such as internalcontrols and “know-your-customer” procedures, for anti-money laundering purposes. The Guidelines purport, among other things, to require internet financeservice providers, including online lending information intermediaries, to comply with certain anti-money laundering requirements, including theestablishment of a customer identification program, the monitoring and reporting of suspicious transactions, the preservation of customer information andtransaction records, and the provision of assistance to the public security department and judicial authority in investigations and proceedings in relation toanti-money laundering matters. In conjunction with the Guidelines, the PBOC and the CSRC jointly released the Administrative Measures for Anti-MoneyLaundering and Anti-Terrorism Financing of Internet Financial Institutions (for Trial Implementation), or the Anti-Money Laundering Measures for InternetFinancial Institutions, effected in January 2019, pursuant to which institutions engaging in internet finance business, including online payment, onlinelending, online lending information intermediary business etc., shall be subject to the obligation of anti-money laundering and anti-terrorism financing. TheAnti-Money Laundering Measures for Internet Financial Institutions further requires that institutions engaging in internet finance business (other thanfinancing institutions and non-bank payment institutions) shall complete a registration and report large-sum transactions and suspicious transactions throughan internet platform to monitor anti-money laundering and anti-terrorism financing, or the Anti-Money Laundering Internet Monitoring Platform, which shallbe established by the PBOC. The Interim Measures also require the online lending information intermediaries, among other things, to comply with certainanti-money laundering obligations, including verifying customer identification, reporting suspicious transactions and preserving customer information andtransaction records. The Custodian Guidelines require that the anti-money laundering obligation be included in the fund custodian agreements between anonline lending intermediary and custody banks, and the online lending intermediary shall fulfill and cooperate with depositary to fulfill anti-moneylaundering obligations. There is no assurance that our anti-money laundering policies and procedures will protect us from being exploited for moneylaundering purposes or that we will be deemed to be in compliance with applicable anti-money laundering implementing rules, if and when adopted. Forexamples, we are still in the progress of establishing access to the Anti-Money Laundering Internet Monitoring Platform to report large-sum transactions andsuspicious transactions thereon in accordance with such Anti-Money Laundering Measures for Internet Financial Institutions. Any new requirement undermoney laundering laws could increase our costs, and may expose us to potential sanctions if we fail to comply. 30Table of Contents In addition, we rely on our third-party service providers, in particular the custody banks and payment companies that handle the transfer of fundsbetween borrowers and lenders, to have their own appropriate anti-money laundering policies and procedures. The custody banks and payment companies aresubject to anti-money laundering obligations under applicable anti-money laundering laws and regulations and are regulated in that respect by the People’sBank of China, or the PBOC. If any of our third-party service providers fail to comply with applicable anti-money laundering laws and regulations, ourreputation could suffer and we could become subject to regulatory intervention, which could have a material adverse effect on our business, financialcondition and results of operations. Any negative perception of the industry, such as those that arise from any failure of other consumer finance marketplacesto detect or prevent money laundering activities, could compromise our image or undermine the trust and credibility we have established. If any of theforegoing were to occur, our reputation, business, financial condition and results of operations might be materially and adversely affected. From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant managementattention, 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 platforms and betterserve users, investors and institutional funding partners. These transactions could be material to our financial condition and results of operations ifconsummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if wedo consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction. If we fail to maintain an effective system of internal control over financial reporting, we may lose investor confidence in the reliability of our financialstatements. In connection with the audits of our consolidated financial statements as of and for the years ended December 31, 2016 and 2017, we and ourindependent registered public accounting firm identified one material weakness in our internal control over financial reporting. As defined in the standardsestablished by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, or combination of deficiencies, in internalcontrol over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will notbe prevented or detected on a timely basis. The material weakness related to our lack of sufficient competent financial reporting and accounting personnel with appropriate understanding ofU.S. GAAP to design and implement formal period-end financial reporting controls and procedures, to address complex U.S. GAAP technical accountingissues, and to prepare and review our consolidated financial statements and related disclosures in accordance with U.S. GAAP and financial reportingrequirements set forth by the SEC. We have undertaken certain remedial measures to improve our internal control over financial reporting and disclosure controls to address thematerial weakness. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2018 after theremediation. For details on these initiatives, please see “Item 15. Controls and Procedures —Remediation of Material Weaknesses in Internal Control overFinancial Reporting Reported in 2016 and 2017.” However, if we fail to maintain effective internal control over financial reporting in the future, our management may not be able to conclude that wehave effective internal control over financial reporting at a reasonable assurance level. In addition, the process of designing and implementing an effectivefinancial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatoryenvironments and to expend significant resources to maintain a financial reporting system that satisfies our reporting obligations. Our failure to discover andaddress any other material weaknesses or deficiencies may result in inaccuracies in our financial statements or delay in the preparation of our financialstatements. This could in turn result in the loss of investor confidence in the reliability of our financial statements and negatively impact the trading price ofour ADSs. Ineffective internal control over financial reporting could also expose us to increased risk of fraud or misappropriations of corporate assets andsubject us to potential delisting from the stock exchange on which our ADSs are listed, regulatory investigations or civil or criminal sanctions. We are subject to changing laws and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both ourcosts and the risk of non-compliance. We are subject to rules and regulations by various governing bodies, including, for example, the Securities and Exchange Commission, which ischarged with the protection of investors and the oversight of companies whose securities are publicly traded, and the various regulatory authorities in Chinaand the Cayman Islands, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws andregulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time andattention from revenue-generating activities to compliance activities. Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time asnew guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated byongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may besubject to penalty and our business may be harmed. 31Table of Contents Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in theirpresent positions, our business may be severely disrupted. Our business operations depend on the continued services of our senior management, particularly the executive officers named in this annual report.While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our keyexecutives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may beconstrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and wemay incur additional expenses to recruit, train and retain qualified personnel. There is no assurance that any member of our management team will not joinour competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs andexpenses in order to enforce such agreements in China or we may be unable to enforce them at all. Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business. We believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial andmarketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees.Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire and retain thesepersonnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete forexperienced 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 to recruitthem. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees, and the quality of our services and ourability to serve users and investors 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 inflation and labor costs in recent years. As a result, average wages in the PRC are expected 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, on-the-job injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of ouremployees. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs orpass on these increased labor costs to our users by increasing the fees of our services, our financial condition and results of operations may be adverselyaffected. 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 more developedeconomies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring forthese risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance.Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on ourresults of operations and financial condition. 32Table of Contents We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations. We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins,war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures,which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affecting our ability to provide products andservices on our platform. Our business could also be adversely affected by the effects of Ebola virus disease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, Severe AcuteRespiratory Syndrome, or SARS, or other epidemics. Our business operations could be disrupted if any of our employees is suspected of having Ebola virusdisease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, SARS or any other epidemic, since it could require our employees to be quarantined and/or ouroffices to be disinfected. In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chineseeconomy in general. Our headquarters is located in Shenzhen, where most of our directors and management and a significant portion of our employees currently reside.Most of our system hardware and back-up systems are hosted in leased facilities located in Guangzhou and Beijing. Consequently, we are highly susceptibleto factors adversely affecting Shenzhen, Guangzhou and Beijing. If any of the abovementioned natural disasters, health epidemics or other outbreaks were tooccur in Shenzhen, Guangzhou or Beijing, our operation may experience material disruptions, such as temporary closure of our offices and suspension ofservices, which may materially and adversely affect our business, financial condition and results of operations. Risks Related to Our Corporate Structure If the PRC government deems that the contractual arrangements in relation to our variable interest entities and their subsidiaries do not comply with PRCregulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in thefuture, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Foreign ownership of internet-based businesses, such as distribution of online information and other value-added telecommunication services, aresubject to restrictions under current PRC laws and regulations. For example, foreign investors are generally not allowed to own more than 50% of the equityinterests in a value-added telecommunication service provider with certain exceptions relating to e-commerce business, and any such foreign investor musthave experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Negative List(2018 version), and other applicable laws and regulations. We are a Cayman Islands company and our PRC subsidiaries are considered foreign-invested enterprises. To comply with PRC laws and regulations,we set up a series of contractual arrangements entered into among our PRC subsidiary (namely Beijing Shijitong or Shenzhen Lexin Software TechnologyCo., Ltd., as applicable), our variable interest entities, and their shareholders to conduct our operations in China. For a detailed description of thesecontractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with Our Variable InterestEntities.” As a result of these contractual arrangements, we exert control over our variable interest entities and their subsidiaries and consolidate theiroperating results in our financial statements under U.S. GAAP. Our online consumer finance platform, Fenqile, operated by Shenzhen Fenqile, a subsidiary ofShenzhen Xinjie, our variable interest entity, has obtained certain value-added telecommunications service license for the operations of internet contentservice from the Guangdong Administration of Telecommunications in April 2017, which will remain valid until May 2019 and certain value-addedtelecommunications service license for the operation of domestic call center service and content service (excluding internet content service) from MIIT inJuly 2017, which will remain valid until July 2022. Mengtian Technology, one of our variable interest entities, has obtained certain value-addedtelecommunications service license for the operations of internet content service from the Guangdong Administration of Telecommunications inJanuary 2019, which will remain valid until January 2024. Further, the application of certain value-added telecommunications service license for online dataprocessing and transaction processing submitted by Shenzhen Fenqile was received by Guangdong Administration of Telecommunications in April 2019. Itis uncertain if our variable interest entities and their subsidiaries will be required to obtain a separate operating license with respect to our mobileapplications in addition to the value-added telecommunications business license. 33Table of Contents In the opinion of our PRC counsel, Shihui Partners, the ownership structures of our PRC subsidiaries and our variable interest entities, currently donot, result in any violation of the applicable PRC laws or regulations currently in effect; and the contractual arrangements among our PRC subsidiaries, ourvariable interest entities and their shareholders, are governed by PRC laws or regulations, and are currently valid, binding and enforceable in accordance withthe applicable PRC laws or regulations currently in effect, and do not result in any violation of the applicable PRC laws or regulations currently in effect,except that the equity pledge under that certain equity pledge agreement would not be deemed validly created until they are registered with the competentgovernmental authorities. However, Shihui Partners 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 consistent with theopinion of our PRC counsel. It is uncertain whether any new PRC laws, regulations or rules relating to such contractual arrangements will be adopted or if adopted, what theywould provide. In particular, in March 2019, the NPC passed the PRC Foreign Investment Law, which will become effective as of January 1, 2020. For theeffect of the PRC Foreign Investment Law on us, see “—Risks Related to Doing Business in China—Uncertainties exist with respect to the interpretation andimplementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance andbusiness operations.” We rely on contractual arrangements with our variable interest entities and their shareholders, for a significant portion of our business operations, whichmay not be as effective as direct ownership in providing operational control. We have relied and expect to continue to rely on contractual arrangements with our variable interest entities and their shareholders to operateFenqile and Juzi Licai through Shenzhen Fenqile and Qianhai Juzi, respectively. For a description of these contractual arrangements, see “Item 7 MajorShareholders and Related Party Transaction—B. Related Party Transaction—Contractual Arrangements with Our Variable Interest Entities.” Thesecontractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entities and their subsidiaries. Forexample, our variable interest entities or their shareholders may fail to fulfill their contractual obligations with us, by, among other things, failing to maintainour website and use the domain names and trademarks in a manner as stipulated in the contractual arrangements, or taking other actions that are detrimentalto our interests. If we had direct ownership of our variable interest entities, we would be able to exercise our rights as shareholders to effect changes in their board ofdirectors, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, underthe current contractual arrangements, we rely on the performance by our variable interest entities and their shareholders of their obligations under thecontractual arrangements to exercise control over our variable interest entities and their subsidiaries. The shareholders of our variable interest entities maynot act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which weintend to operate a certain portion of our business through the contractual arrangements with our variable interest entities and their shareholders. Althoughwe have the right to replace any shareholder of such entities under the contractual arrangements, if any of these shareholders is uncooperative or any disputerelating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC laws and arbitration,litigation and other legal proceedings, the outcome of which will be subject to uncertainties in the PRC legal system. Therefore, our contractual arrangementswith our variable interest entities and their shareholders may not be as effective in ensuring our control over the relevant portion of our business operations asdirect ownership would be. Any failure by our variable interest entities or their respective shareholders to perform their obligations under our contractual arrangements with themwould have a material adverse effect on our business. We have entered into a series of contractual arrangements with our variable interest entities and their shareholders. For a description of thesecontractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with Our Variable InterestEntities.” If our variable interest entities or their shareholders fail to perform their respective obligations under the contractual arrangements, we may incursubstantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, includingseeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if theshareholders of our variable interest entities were to refuse to transfer their equity interests in such entities to us or our designee when we exercise thepurchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal action tocompel them to perform their contractual obligations. 34Table of Contents All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration inChina. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legalprocedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRClegal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to howcontractual arrangements 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 are final andparties cannot appeal the arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing partiesfail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts througharbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractualarrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exerteffective control over our variable interest entities and their subsidiaries, and our ability to conduct our business may be negatively affected. See “—RisksRelated to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protectionsavailable to us.” The shareholders of our variable interest entities may have potential conflicts of interest with us, which may materially and adversely affect our businessand financial condition. The shareholders of our variable interest entities include Mr. Jay Wenjie Xiao, Mr. Richard Qiangdong Liu, Mr. Wenbin Li, Mr. Kris Qian Qiao,Mr. Jianwei Wei, Mr. Hua Chen, Mr. Xiaoting Zhou, Mrs. Shan Xu, and Tibet Xianfeng Changqing Start-up Investment and Management Co., Ltd. (asapplicable). These shareholders may have potential conflicts of interest with us. These shareholders may breach, or cause our variable interest entities tobreach, the existing contractual arrangements, which would have a material adverse effect on our ability to effectively control our variable interest entitiesand their subsidiaries and receive economic benefits from them. For example, these shareholders may be able to cause our agreements with our variableinterest entities to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us ona timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or suchconflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that wecould exercise our purchase option under the exclusive option agreement with these shareholders to request them to transfer all of their equity interests in ourvariable interest entities to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict of interest ordispute between us and these shareholders, we would have to rely on legal proceedings, which could result in the disruption of our business and subject us tosubstantial uncertainty as to the outcome of any such legal proceedings. Contractual arrangements in relation to our variable interest entities, may be subject to scrutiny by the PRC tax authorities and they may determine thatwe, or our variable interest entities and their subsidiaries, owe additional taxes, which could negatively affect our financial condition and the value ofyour investment. Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRCtax authorities. The PRC enterprise income tax law requires every enterprise in China to submit its annual enterprise income tax return together with a reporton transactions with its related parties to the relevant 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 if the PRC taxauthorities determine that the contractual arrangements among our PRC subsidiaries, our variable interest entities and their shareholders were not entered intoon an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, regulations and rules, and adjust incomeof our variable interest entities in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction ofexpense deductions recorded by our variable interest entities for PRC tax purposes, which could in turn increase their tax liabilities without reducing the taxexpenses of our PRC subsidiaries. In addition, if a PRC subsidiary requests the shareholders of our variable interest entities to transfer their equity interests atnominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject the PRC subsidiary to PRC income tax.Furthermore, the PRC tax authorities may impose late payment fees and other penalties on our variable interest entities for the adjusted but unpaid taxesaccording to the applicable regulations. Our financial position could be materially adversely affected if our variable interest entities’ tax liabilities increaseor if they are required to pay late payment fees and other penalties. 35Table of Contents We may lose the ability to use and benefit from assets held by our variable interest entities that are material to the operation of our business if the entitygoes bankrupt or becomes subject to a dissolution or liquidation proceeding. Our variable interest entities hold certain assets that are material to the operation of our business, including, among others, intellectual properties,hardware and software. Shenzhen Fenqile holds our value-added telecommunication business license for our online consumer finance business. Under thecontractual arrangements, our variable interest entities may not, and the shareholders of our variable interest entities and Shenzhen Fenqile may not causethem to, in any manner, sell, transfer, mortgage or dispose of their assets or their legal or beneficial interests in the business without our prior consent.However, in the event these shareholders breach these contractual arrangements and voluntarily liquidate our variable interest entities, or our variable interestentities declare bankruptcy and all or part of their assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without ourconsent, we may be unable to continue some or all of our business activities, which could materially adversely affect our business, financial condition andresults of operations. If our variable interest entities undergo a voluntary or involuntary liquidation proceeding, the independent third-party creditors mayclaim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business,financial condition and results of operations. Risks Related to Doing Business in China Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results ofoperations. Substantially all of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations may beinfluenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole. The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement,level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measuresemphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improvedcorporate governance in business enterprises, a substantial portion of productive assets in China are still owned by the government. In addition, the Chinesegovernment continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercisessignificant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, settingmonetary policy and providing preferential treatment to particular industries or companies. While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and amongvarious sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation ofresources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition andresults of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past theChinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may causedecreased economic activity in China, and since 2012, the Chinese economy has slowed down. Any prolonged slowdown in the Chinese economy mayreduce the demand for our products and services and materially and adversely affect our business and results of operations. 36Table of Contents A downturn in the Chinese or global economy could reduce the demand for consumer loans and investments, which could materially and adversely affectour business and financial condition. The global financial markets have experienced significant disruptions between 2008 and 2009 and the United States, Europe and other economieshave experienced periods of recessions. The recovery from the economic downturns of 2008 and 2009 has been uneven and is facing new challenges,including the announcement of Brexit which creates additional global economic uncertainty and the slowdown of the Chinese economic growth since 2012.It is unclear whether the Chinese economy will resume its high growth rate. There is considerable uncertainty over the long-term effects of the expansionarymonetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States andChina. There have also been concerns over unrest in the Middle East and Africa, which have resulted in volatility in financial and other markets. There havealso been concerns about the economic effect of the tensions in the relationship between China and surrounding Asian countries. Economic conditions inChina are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy may reduce the demand for consumer loansand investments and have a negative impact on our business, results of operations and financial condition. Additionally, continued turbulence in theinternational markets may adversely affect our ability to access the capital markets to meet liquidity needs. 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. Since these laws and regulations arerelatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform andenforcement of these laws, regulations and rules involves uncertainties. In particular, PRC laws and regulations concerning the online consumer finance industry are developing and evolving. Although we have takenmeasures to comply with the laws and regulations that are applicable to our business operations, including the regulatory principles raised by the CBRC, andavoid conducting any noncompliant activities under the applicable laws and regulations, such as illegal fund-raising, forming fund collection or providingguarantee to investors, the PRC government authority may promulgate detailed implementation regulation of the Interim Measure, or other new laws andregulations regulating the online consumer finance industry in the future. We cannot assure you that our practice would not be deemed to violate any newPRC laws or regulations relating to online consumer finance. Moreover, developments in the online consumer finance industry may lead to changes in PRClaws, regulations and policies or in the interpretation and application of existing laws, regulations and policies that may limit or restrict online consumerfinance platforms like us, which could materially and adversely affect our business and operations. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative andcourt authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate theoutcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRClegal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may haveretroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties,including uncertainty 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. 37Table of Contents Uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment Law and how it may impact the viability of ourcurrent corporate structure, corporate governance and business operations. On March 15, 2019, the National People’s Congress promulgated the PRC Foreign Investment Law, which will become effective on January 1, 2020and replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreignCooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillaryregulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line withprevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation. For instance, under the ForeignInvestment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entitiesin China. Though it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment viacontractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, thedefinition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrativeregulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisionspromulgated by the State Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whetherour contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations.Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies withrespect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all.Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affectour current corporate structure, corporate governance and business operations. We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and anylimitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct 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 and financingrequirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRCsubsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make otherdistributions to us. In addition, the PRC tax authorities may require our PRC subsidiaries to adjust their taxable income under the contractual arrangements itcurrently has in place with our variable interest entities and their subsidiaries, in a manner that would materially and adversely affect their ability to paydividends and other distributions to us. Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of theirrespective accumulated 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 the aggregateamount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profitsbased on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cashdividends. In response to the persistent capital outflow and RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the PBOC and the StateAdministration of Foreign Exchange, or SAFE, have implemented a series of capital control measures over recent months, including stricter vettingprocedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. For instance,the PBOC issued the Circular on Further Clarification of Relevant Matters Relating to Offshore RMB Loans Provided by Domestic Enterprises, or the PBOCCircular 306, in November 2016, which provides that offshore RMB loans provided by a domestic enterprise to offshore enterprises that it holds equityinterests in shall not exceed 30% of such equity interests. The PBOC Circular 306 may constrain our PRC subsidiaries’ ability to provide offshore loans to us.The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends and other distributions may be subjected to tighterscrutiny in the future. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adverselylimit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct ourbusiness. See also “—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable taxconsequences to us and our non-PRC shareholders or ADS holders.” 38Table of Contents PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion maydelay or prevent us from using the proceeds of our initial public offering to make loans to or make additional capital contributions to our PRCsubsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to filing or registrationwith the relevant governmental authorities in China. According to the relevant 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 Comprehensive ManagementInformation System, or FICMIS, and registration with other governmental authorities in China. In addition, (a) any foreign loan procured by our PRCsubsidiaries is required to be registered with SAFE, or its local branches, and (b) each of our PRC subsidiaries may not procure loans which exceed thestatutory limit. Any medium or long-term loan to be provided by us to our variable interest entity must be recorded and registered by the NationalDevelopment and Reform Committee and SAFE or its local branches. We may not complete such recording or registrations on a timely basis, if at all, withrespect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to complete such recording or registration, our ability to usethe proceeds of our initial public offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity andour ability to fund and expand our business. In 2008, SAFE promulgated the Notice of the General Affairs Department of the State Administration of Foreign Exchange on the RelevantOperating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises,or Circular 142, which used to regulate the conversion by foreign-invested enterprises of foreign currency into Renminbi by restricting the usage ofconverted Renminbi. In March 2015, SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the AdministrativeApproach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-invested Enterprises, or Circular 19. Circular 19 became effective as ofJune 1, 2015 and superseded Circular 142 on the same date. Circular 19 launched a nationwide reform of the administration of the settlement of the foreignexchange capitals of foreign-invested enterprises and allows foreign-invested enterprises to settle their foreign exchange capital at their discretion, butcontinues to prohibit foreign-invested enterprises from using the Renminbi fund converted from their foreign exchange capitals for expenditures beyondtheir business scopes. In June 2016, SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing theAdministrative Provisions on Capital Account Foreign Exchange Settlement, or Circular 16. Circular 19 and Circular 16 continue to prohibit foreign-invested enterprises from, among other things, using the Renminbi fund converted from its foreign exchange capitals for expenditure beyond its businessscope, investment and financing (except for security investment or guarantee products issued by bank), providing loans to non-affiliated enterprises orconstructing or purchasing real estate not for self-use. Circular 19 and Circular 16 may significantly limit our ability to transfer to and use in China the netproceeds from our initial public offering, 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 the ADSs. The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political andeconomic conditions in China and by China’s foreign exchange policies. In July 2005, the PRC government changed its decade-old policy of pegging thevalue of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. BetweenJuly 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. SinceJune 2010, RMB has fluctuated against the U.S. dollar, at certain times significantly and unpredictably. With the development of the foreign exchangemarket progressing towards interest rate liberalization and Renminbi internationalization and economic uncertainties in both China and the world, the PRCgovernment may in the future announce further changes to the exchange rate system and we cannot assure you that the Renminbi will not appreciate ordepreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impactthe exchange rate between the Renminbi and the U.S. dollar in the future. 39Table of Contents Our revenue and costs are mostly denominated in Renminbi and our reporting currency is Renminbi. Significant revaluation of the Renminbi mayhave a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars for our operations, appreciation of theRenminbi against the U.S. dollar would reduce the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert ourRenminbi into U.S. dollars for the purpose of making payments for dividends on our Class A ordinary shares or ADSs or for other business purposes,appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amount available to us. Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into anyhedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in thefuture, the availability and effectiveness of these hedges may be limited and we may not be able to hedge our exposure adequately or at all. In addition, ourcurrency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. Governmental control of currency conversion may limit our ability to utilize our operating revenue effectively and affect the value of your investment. The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency outof China. We receive substantially all of our operating revenue in RMB. Under our current corporate structure, our company in the Cayman Islands relies ondividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations,payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencieswithout prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreigncurrencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certainprocedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRCresidents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency andremitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. In light of the substantial capital outflows of China in 2016 due to the weakening of Renminbi, the PRC government has imposed more restrictiveforeign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting processes have been put inplace by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further restrict access toforeign currencies in the future for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreigncurrencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of ourADSs. Failure to make adequate contributions to various employee benefit plans and withhold individual income tax on employees’ salaries as required by PRCregulations may subject us to penalties. Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain socialinsurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries,including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where weoperate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given thedifferent levels 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. We have not made adequate employee benefit payments. Neither have wefully withheld the individual income tax in accordance with the relevant PRC laws and regulations. With respect to the underpaid employee benefits, we maybe required to make up the contributions for these plans as well as to pay late fees and fines; with respect to the under withheld individual income tax, wemay 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 the underpaid employeebenefits and under withheld individual income tax, our financial condition and results of operations may be adversely affected. 40Table of Contents The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, whichcould make it more difficult for us to pursue growth through acquisitions in China. The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatoryagencies in 2006 and amended in 2009, 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 in someinstances that the Ministry of Commerce, or the MOC, 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 MOC shall be notified in advance of any concentration of undertaking ifcertain thresholds are triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers andacquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors mayacquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the rules prohibit anyactivities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future,we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevantrules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOC or its localcounterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our marketshare. PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital ordistribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law. SAFE promulgated the Notice of the State Administration of Foreign Exchange on the Administration of Foreign Exchange Involved in OverseasInvestment, Financing and Return on Investment Conducted by Residents in China via Special-Purpose Companies, or Circular 37, in July 2014 that requiresPRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for thepurpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore specialpurpose vehicle undergoes material events relating to any change of basic information (including change of such PRC residents or entities, name andoperation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. Circular 37 was issued to replace the Circular on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging inFinancing and Roundtrip Investments through Overseas Special Purpose Vehicles, or Circular 75. In February 2015, SAFE released the Notice of the StateAdministration of Foreign Exchange on Further Simplifying and Improving the Policies of Foreign Exchange Administration Applicable to DirectInvestment, or Circular 13, which has amended Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its localbranch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. If our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited fromdistributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contributeadditional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC lawsfor evasion of applicable foreign exchange restrictions. 41Table of Contents Mr. Jay Wenjie Xiao and Mr. Richard Qiangdong Liu, who directly or indirectly hold shares in our Cayman Islands holding company and who areknown to us as being PRC residents, have completed the foreign exchange registrations in accordance with Circular 75 then in effect. 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 wecompel our beneficial owners to comply with the requirements of Circular 37. As a result, we cannot assure you that all of our shareholders or beneficialowners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by,Circular 37. Failure by such shareholders or beneficial owners to comply with Circular 37, or failure by us to amend the foreign exchange registrations of ourPRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities and limit our PRC subsidiaries’ abilityto make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects. Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC planparticipants or us to fines and other legal or administrative sanctions. Pursuant to Circular 37, PRC residents who participate in stock incentive plans in overseas non-publicly-listed companies may submit applicationsto SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose vehicles. In the meantime, our directors, executiveofficers and other employees who are PRC citizens, subject to limited exceptions, and who have been granted stock options by us, may follow the Notices onIssues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-ListedCompany, promulgated by SAFE in 2012, or 2012 SAFE Notices. Pursuant to the 2012 SAFE Notices, PRC citizens and non-PRC citizens who reside inChina for a continuous period of no less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a fewexceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas listed company, andcomplete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale ofstock options and the purchase or sale of shares and interests. We and our directors, executive officers and other employees who are PRC citizens or whoreside in the PRC for a continuous period of no less than one year and who have been granted stock options are subject to these regulations. Failure tocomplete the SAFE registrations may subject them to fines and legal sanctions, and may also limit our ability to contribute additional capital into our PRCsubsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adoptadditional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company—B. BusinessOverview—Regulations—Regulations Relating to Foreign Currency Exchange.” The State Administration of Taxation, or SAT, has issued certain circulars concerning employee stock options and restricted shares. Under thesecirculars, our employees working in China who exercise stock options or are granted restricted shares will be subject to PRC individual income tax. Our PRCsubsidiaries have obligations to file documents related to employee stock options or restricted shares with relevant tax authorities and to withhold individualincome taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevantlaws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Foreign Currency Exchange.” If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us andour non-PRC shareholders or ADS holders. Under the PRC Enterprise Income Tax Law and its implementation rules, enterprises that are registered in countries or regions outside the PRC buthave their “de facto management bodies” located within China may be considered as PRC resident enterprises and are therefore subject to PRC enterpriseincome tax at the rate of 25% on their worldwide income. For detailed discussions of applicable laws, regulations and implementation rules, see “Item 4.Information on the Company—B. Business Overview—Regulations—Regulations Relating to Tax—Enterprise Income Tax.” 42Table of Contents We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Item 4. Information on the Company—B.Business Overview—Regulations—Regulations Relating to Tax— Enterprise Income Tax.” However, the tax resident status of an enterprise is subject todetermination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” Assubstantially all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC taxauthorities determine that LexinFintech Holdings Ltd. or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income taxpurposes, then LexinFintech Holdings Ltd. or such subsidiary could be subject to PRC tax at a rate of 25% on its worldwide income, which could materiallyreduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authoritiesdetermine that we are a PRC resident enterprise for enterprise income tax purposes, dividends we distribute to non-PRC resident holders may be subject toPRC withholding tax, and gains realized on the sale or other disposition of our ADSs or ordinary shares may be subject to PRC tax, at a rate of 10% in thecase of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains aredeemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties betweentheir country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on yourinvestment in the ADSs or ordinary shares. If the status of certain of our PRC subsidiaries and variable interest entities as “High and New Technology Enterprises” or “Software Enterprises” isrevoked or expires, we may have to pay additional taxes or make up any previously unpaid taxes and may be subject to a higher tax rate, which wouldadversely affect our results of operations. The PRC Enterprise Income Tax Law generally imposes a uniform income tax rate of 25% on all enterprises, but grants preferential treatment to“High and New Technology Enterprises”, or HNTEs, pursuant to which HNTEs are instead subject to an income tax rate of 15%, subject to a requirement thatthey re-apply for HNTE status every three years. During this three-year period, an HNTE must conduct a qualification self-review each year to ensure it meetsthe HNTE criteria, and will be subject to the regular 25% income tax rate for any year in which it does not meet the criteria. Qianhai Juzi, is qualified as anHNTE for the three years ending December 31, 2017, 2018, and 2019, and will need to re-apply for HNTE qualification in 2020. The PRC Enterprise Income Tax Law and its implementing rules provide that a “Software Enterprise” is entitled to an income tax exemption for twoyears beginning with its first profitable year and a 50% reduction to a rate of 12.5% for the subsequent three years, and our certain PRC subsidiary, ShenzhenLexin Software Technology Co., Ltd., and the subsidiary of our variable interest entities, Shenzhen Dingsheng Computer Technology Co., Ltd., qualified as“Software Enterprises” in 2017. However, these enterprises shall go through record-filing with the tax authority at the time of final settlement each year andbe subject to the examination by the relevant authorities in PRC. There are uncertainties regarding future interpretation and implementation of the PRCEnterprise Income Tax Law and its implementing regulations. It is possible that the HNTE and Software Enterprise qualifications of our operating entitiescurrently qualified as such, or their entitlement to an income tax exemption or refund of their value-added tax, will be challenged by tax authorities and berepealed, or that there will be future implementing regulations that are inconsistent with current interpretation of the PRC Enterprise Income Tax. If thoseoperating entities cannot qualify for such preferential income tax status, our effective income tax rate will be increased significantly and we may have to payadditional income taxes to make up the previously unpaid taxes, which would reduce our net income. We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kongsubsidiary. Pursuant to the EIT Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or hasset up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to awithholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong SpecialAdministrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends bya PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRCenterprise. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 4.Information on the Company—B. Business Overview—Regulations—Regulations Relating to Tax—Dividend Withholding Tax.” We cannot assure you thatour determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority that or we willbe able to complete the necessary filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under the DoubleTaxation Arrangement with respect to dividends to be paid by our PRC subsidiaries to Installment (HK) Investment Limited, our Hong Kong subsidiary. 43Table of Contents We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. According to the Announcement of the SAT on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-ResidentEnterprises, or Circular 7, promulgated by the SAT in February 2015, if a non-resident enterprise transfers the equity interests of a PRC resident enterpriseindirectly by transfer of the equity interests of an offshore holding company (other than a purchase and sale of shares issued by a PRC resident enterprise inpublic securities market) without a reasonable commercial purpose, the PRC tax authorities have the power to reassess the nature of the transaction and theindirect equity transfer will be treated as a direct transfer. As a result, the gain derived from such transfer, which means the equity transfer price minus the costof equity, will be subject to PRC withholding tax at a rate of up to 10%. Under the terms of Circular 7, the transfer which meets all of the followingcircumstances shall be directly deemed as having no reasonable commercial purposes: (i) over 75% of the value of the equity interests of the offshore holdingcompany are directly or indirectly derived from PRC taxable properties; (ii) at any time during the year before the indirect transfer, over 90% of the totalproperties of the offshore holding company are investments within PRC territory, or in the year before the indirect transfer, over 90% of the offshore holdingcompany’s revenue is directly or indirectly derived from PRC territory; (iii) the function performed and risks assumed by the offshore holding company areinsufficient to substantiate its corporate existence; or (iv) the foreign income tax imposed on the indirect transfer is lower than the PRC tax imposed on thedirect transfer of the PRC taxable properties. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Tax—Income Tax for Share Transfers.” We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, suchas offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our company and our non-PRC resident investors may be subject tofiling obligations or taxed or subject to withholding obligations in such transactions, under Circular 7. See “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation.” For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiaries may berequested to assist in the filing under Circular 7. As a result, we may be required to expend valuable resources to comply with Circular 7 or to request therelevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under thesecirculars, which may have a material adverse effect on our financial condition and results of operations. Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by Public CompanyAccounting Oversight Board, and consequently investors may be deprived of the benefits of such inspection. Our auditor, the independent registered public accounting firm that issued the audit reports included elsewhere in this annual report, as an auditor ofcompanies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or thePCAOB, is subject to laws in the United States, pursuant to which, the PCAOB conducts regular inspections by the PCAOB to assess its compliance with thelaws of the United States and applicable professional standards. Our auditor is located in, and organized under the laws of the PRC, which is a jurisdictionwhere the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities. In May 2013, the PCAOB announced that it hadentered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission, or the CSRC, and the PRCMinistry of Finance, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant toinvestigations undertaken by the PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively. The PCAOB continuesto be in discussions with the China Securities Regulatory Commission, or the CSRC, and the PRC Ministry of Finance to permit joint inspections in the PRCof audit firms that are registered with the PCAOB and audit Chinese companies that trade on U.S. exchanges. 44Table of Contents On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in theiroversight of financial statement audits of U.S.-listed companies with significant operations in China. However, it remains unclear what further actions, if any,the SEC and the PCAOB will take to address the problem. This lack of the PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independentregistered public accounting firm. As a result, we and investors in our ordinary shares are deprived of the benefits of such the PCAOB inspections. Theinability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered publicaccounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, whichcould cause investors and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of ourfinancial statements. Proceedings instituted by the SEC against certain PRC-based accounting firms, including our independent registered public accounting firm, could resultin financial statements being determined to not be in compliance with the requirements of the Exchange Act. In December 2012, the SEC instituted administrative proceedings against the Big Four PRC-based accounting firms, including our independentregistered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing toprovide to the SEC the firms’ audit work papers with respect to certain PRC-based companies that are publicly traded in the United States. On January 22, 2014, the administrative law judge, or the ALJ, presiding over the matter rendered an initial decision that each of the firms hadviolated the SEC’s rules of practice by failing to produce audit papers and other documents to the SEC. The initial decision censured each of the firms andbarred them from practicing before the SEC for a period of six months. On February 6, 2015, the four PRC-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoidsuspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and toseek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. Under the terms of the settlement, the underlying proceeding againstthe four PRC-based accounting firms was deemed dismissed with prejudice four years after entry of the settlement. The four-year mark occurred onFebruary 6, 2019. While we cannot predict if the SEC will further challenge the four PRC-based accounting firms’ compliance with the U.S. laws inconnection with the U.S. regulatory requests for audit work papers, or if the results of such a challenge would result in the SEC imposing penalties such assuspension. If the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance with the SECrequirements could be impacted. A determination that we have not timely filed financial statements in compliance with SEC requirements could ultimatelylead to the delisting of our ADSs from Nasdaq or the termination of the registration of our ADSs under the Securities Exchange Act of 1934, or both, whichwould substantially reduce or effectively terminate the trading of our ADSs in the United States. Risks Related to the American Depositary Shares The market price for the ADSs may be volatile. Since the ADSs became listed on Nasdaq on December 21, 2017, the trading price of the ADSs has ranged from US$6.5 to US$20.0. The tradingprices of ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industryfactors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of internet or other companiesbased in China that have listed their securities in the United States in recent years. The trading performances of other Chinese companies’ securities,including internet and e-commerce companies, may affect the attitudes of investors toward Chinese companies listed in the United States, whichconsequently may impact the trading performance of the ADSs, regardless of our actual operating performance. In addition, any negative news or perceptionsabout inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters of other Chinese companies may alsonegatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have conducted any inappropriateactivities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operatingperformance, such as the large decline in share prices in the United States, China and other jurisdictions in late 2008, early 2009 and the second half of 2011,third quarter of 2015 and the first quarter of 2016, which may have a material adverse effect on the market price of the ADSs. 45Table of Contents In addition to the above factors, the price and trading volume of the ADSs may be highly volatile due to multiple factors, including the following: · regulatory developments affecting us, our users, or our industry; · conditions in the online consumer finance industry and the public perception of the legitimacy and ethics of certain business practices of ourcompetitors or other market players within the 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 online consumer finance 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 or capitalcommitments; · additions to or departures of our senior management; · detrimental negative publicity about us, our management or our industry; · fluctuations of exchange rates between the RMB and the U.S. dollar; · release or expiry of lock-up or other transfer restrictions on our outstanding Class A ordinary shares or the ADSs; and · sales or perceived potential sales of additional Class A ordinary shares or ADSs. The trading market for the ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business.If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade the ADSs or publishinaccurate or unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage ofour company or fail 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 the ADSs to decline. Our dual-class share structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of controltransactions that holders of our Class A ordinary shares and the ADSs may view as beneficial. We have a dual-class share structure such that our ordinary shares consists of Class A ordinary shares and Class B ordinary shares with disparatevoting powers. Each Class A ordinary share shall entitle the holder thereof to one vote on all matters subject to vote at general meetings of the Company, andeach Class B ordinary share shall entitle the holder thereof to ten votes on all matters subject to vote at general meetings of the Company. Each Class Bordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class Bordinary shares in any event. As of March 31, 2019, Mr. Jay Wenjie Xiao, the beneficial owner of our Class B ordinary shares, beneficially owns 80.9% of theaggregate voting power of our company. As a result, Mr. Jay Wenjie Xiao will have considerable influence over matters such as electing directors andapproving material mergers, acquisitions or other business combination transactions. Upon any sale, transfer, assignment or disposition of any Class Bordinary share by a shareholder to any non-affiliates of such shareholder, or upon a change of control of the shareholder who holds the Class B ordinary share,each of such Class B ordinary share shall be automatically and immediately converted into one Class A ordinary share. If at any time Mr. Jay Wenjie Xiaoand his affiliates collectively hold less than five percent (5%) of our issued and outstanding shares, each Class B ordinary share will automatically be re-designated into one Class A ordinary share without any action being required by the holders of Class B ordinary shares and whether or not the certificatesrepresenting such shares are surrendered to the Company or its transfer agent, and no Class B ordinary shares shall be issued by us thereafter. Theconcentrated control associated with our dual-class share structure will limit your ability to influence corporate matters and could also discourage others frompursuing any potential merger, takeover or other change of control transactions, which could have the effect of depriving the holders of our Class A ordinaryshares and the ADSs of the opportunity to sell their shares at a premium over the prevailing market price. 46Table of Contents Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of the ADSs for return on your investment. We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. Asa result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for anyfuture dividend income. Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that ourcompany may only pay dividends either out of profits or share premium, and provided always that in no circumstances may a dividend be paid if this wouldresult in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders may by ordinaryresolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides todeclare and pay dividends on our ordinary shares, the timing, amount and form of future dividends, if any, will depend on, among other things, our futureresults of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financialcondition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs willlikely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value in the future or evenmaintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entireinvestment in our ADSs. Substantial future sales or perceived potential sales of the ADSs in the public market could cause the price of our ADSs to decline. Sales of the ADSs in the public market, or the perception that these sales could occur, could cause the market price of the ADSs to decline. As ofMarch 31, 2019, we have 250,092,040 Class A ordinary shares outstanding, including 168,196,690 Class A ordinary shares represented by ADSs. All of ourADSs will be freely transferable without restriction or additional registration under the Securities Act. The remaining Class A ordinary shares outstanding willbe available for sale subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. To the extent shares are soldinto the market, the market price of the ADSs could decline. Certain holders of our Class A ordinary shares may cause us to register under the Securities Act the sale of their shares. Registration of these sharesunder the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act immediatelyupon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the public market could cause the price of the ADSs todecline. We have adopted a 2017 Share Incentive Plan, or the 2017 Plan, under which we have the discretion to grant a broad range of equity-based awards toeligible participants. See “Item 6. Directors, Senior Management and Employees—B. Compensation.” We have registered certain ordinary shares that we mayissue under this equity compensation plan and intend to register all ordinary shares that we may issue under this equity compensation plan. Once we registerthese ordinary shares, they can be freely sold in the public market in the form of ADSs upon issuance, subject to volume limitations applicable to affiliatesand relevant lock-up agreements. If a large number of our ordinary shares or securities convertible into our ordinary shares are sold in the public market in theform of ADSs after they become eligible for sale, the sales could reduce the trading price of our ADSs and impede our ability to raise future capital. Inaddition, any ordinary shares that we issue under an equity incentive plan would dilute the percentage ownership held by the investors who purchased ADSs. 47Table of Contents The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting ofthe underlying Class A ordinary shares which are represented by your ADSs. As a Cayman Islands exempted company, we are not obliged by the Companies Law to call shareholders’ annual general meetings. Our sixthamended and restated memorandum and articles of association provide that we may (but are not obliged to) each year hold a general meeting as our annualgeneral meeting. As a holder of ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings.You will only be able to exercise the voting rights which attach to the underlying Class A ordinary shares which are represented by your ADSs indirectly bygiving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only bygiving voting instructions to the depositary, as the holder of the underlying Class A ordinary shares that are represented by your ADSs. Upon receipt of yourvoting instructions, the depositary will endeavor to vote the underlying Class A ordinary shares represented by your ADSs in accordance with yourinstructions. You will not be able to directly exercise any right to vote with respect to the underlying Class A ordinary shares represented by your ADSsunless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. Under our amended andrestated memorandum and articles of association, the minimum notice period required to be given by our company to our registered shareholders forconvening a general meeting is seven (7) calendar days. When a general meeting is convened, you may not receive sufficient advance notice to enable you towithdraw the underlying Class A ordinary shares which are represented by your ADSs and become the registered holder of such shares prior to the record datefor the general meeting to allow you to attend the general meeting or to vote directly with respect to any specific matter or resolution which is to beconsidered and voted upon at the general meeting. In addition, under our amended and restated memorandum and articles of association, for the purposes ofdetermining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix inadvance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing theunderlying Class A ordinary shares which are represented by your ADSs and becoming the registered holder of such shares prior to the record date for thegeneral meeting, so that you would 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 endeavor to notify you of the upcoming vote and to deliver our voting materials to you. We cannot assure you that you will receive thevoting materials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary shares which are represented by your ADSs. Inaddition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your votinginstructions. This means that you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares that are represented byyour ADSs, and you may have no legal remedy if the underlying Class A ordinary shares are not voted as you requested. Except in limited circumstances, the depositary will give us a discretionary proxy to vote the Class A ordinary shares underlying your ADSs if you do notgive voting instructions, which could adversely affect your interests. Under the deposit agreement for the ADSs, the depositary will give us (or our nominee) a discretionary proxy to vote the Class A ordinary sharesunderlying your ADSs at any particular shareholders’ meetings if you do not timely and properly give voting instructions to the depositary as to how to votethe Class A ordinary shares underlying your ADSs at any particular shareholders’ meeting, unless: · we have failed to timely provide the depositary with our notice of meeting and related voting materials; · we have instructed the depositary that we do not wish a discretionary proxy to be given; · we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; · a matter to be voted on at the meeting would have a material adverse impact on shareholders; or 48Table of Contents · the voting at the meeting is to be made on a show of hands The effect of this discretionary proxy is that, if you fail to timely and properly give voting instructions to the depositary as to how to vote theClass A ordinary shares underlying your ADSs at any particular shareholders’ meeting, you cannot prevent the Class A ordinary shares underlying your ADSsfrom being voted at that meeting, absent the situations described above, and it may make it more difficult for shareholders to influence our management.Holders of our Class A ordinary shares are not subject to this discretionary proxy. The deposit agreement may be amended or terminated without your consent. We and the depositary may amend the deposit agreement, and we may initiate termination of it, without your consent. If you continue to hold yourADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended. Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings. We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make such rightsavailable to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemptionfrom the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights andthe underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act.We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement tobe declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly, you may be unableto participate in our rights offerings in the future and may experience dilution in your holdings. You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value for them, if it is illegal orimpractical to make them available to you. The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our Class A ordinary shares or otherdeposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class Aordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution availableto any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration underthe Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine thatit is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. Inthese cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinaryshares, 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 you may not receive distributions we make on our Class A ordinary shares or anyvalue for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs. You may be subject to limitations on transfer of your ADSs. Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to timewhen it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers ofADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of anyrequirement 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 limited by shares incorporated under the laws of the Cayman Islands. We conduct substantially all of our operationsin China and substantially all of our assets are located in China. In addition, a majority of our directors and executive officers reside within China, and mostof the assets of these persons are located within China. As a result, it may be difficult or impossible for you to effect service of process within the UnitedStates upon these individuals, or to bring an action against us or against these individuals in the United States in the event that you believe your rights havebeen infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islandsand of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers. However, the deposit agreementgives you the right to submit claims against us to binding arbitration, and arbitration awards may be enforceable against us and our assets in China evenwhen court judgments are not. 49Table of Contents You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we areincorporated under Cayman Islands law. We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by ourmemorandum and articles of association, the Companies Law (2018 Revision) of the Cayman Islands and the common law of the Cayman Islands. The rightsof shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islandslaw are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparativelylimited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, butare not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not asclearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a lessdeveloped body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies ofcorporate laws than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federalcourt of the United States. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or toobtain copies of lists of shareholders of these companies. Our directors have discretion under our amended and restated memorandum and articles ofassociation, to determine 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. 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 by ourmanagement, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the UnitedStates. The memorandum and articles of association contains anti-takeover provisions that could discourage a third party from acquiring us and adversely affectthe rights of holders of our Class A ordinary shares and the ADSs. Our sixth amended and restated memorandum and articles of association contains certain provisions that could limit the ability of others to acquirecontrol of our company, including a provision that grants authority to our board of directors to establish and issue from time to time one or more series ofpreferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. Theseprovisions could have the effect of depriving our shareholders and holders of the ADSs 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 transactions. In addition, ourdual-class structure could discourage others from pursuing any change of control transactions. See “—Our dual-class share structure will limit your ability toinfluence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and theADSs may view as beneficial.” Certain existing shareholders have substantial influence over our company and their interests may not be aligned with the interests of our othershareholders. As of March 31, 2019, our directors and officers collectively owns an aggregate of 81.2% of the total voting power of our issued and outstandingordinary shares. As a result, they have substantial influence over our business, including significant corporate actions such as mergers, consolidations,election of directors and other significant corporate actions. 50Table of Contents They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay orprevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale ofour company and may reduce the price of the ADSs. These actions may be taken even if they are opposed by our other shareholders. In addition, thesignificant concentration of share ownership may adversely affect the trading price of the ADSs due to investors’ perception that conflicts of interest mayexist or arise. For more information regarding our principal shareholders and their affiliated entities, see “Item 6. Directors, Senior Management andEmployees—E. Share Ownership.” We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable toU.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 and regulationsin 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 registered under theExchange Act; · the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiderswho profit from trades made in a short period of time; and · 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 intend to publish our resultson a quarterly basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq Global Market. Press releases relating to financial resultsand material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be lessextensive 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 sameprotections 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 to corporategovernance matters that differ significantly from the Nasdaq corporate governance requirements; these practices may afford less protection to shareholdersthan they would enjoy if we complied fully with the Nasdaq corporate governance requirements. There can be no assurance that we will not be classified as a passive foreign investment company, or PFIC, for United States federal income tax purposesfor any taxable year, which could subject United States investors in our ADSs or ordinary shares to significant adverse United States federal income taxconsequences. We will be a “passive foreign investment company,” or “PFIC,” if, in any particular taxable year, either (a) 75% or more of our gross income for suchyear consists of certain types of “passive” income or (b) 50% or more of the average quarterly value of our assets (as determined on the basis of fair marketvalue) during such year produce or are held for the production of passive income (the “asset test”). Although the law in this regard is unclear, we intend totreat our variable interest entities (including their subsidiaries) as being owned by us for United States federal income tax purposes, not only because weexercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result,we consolidate their results of operations in our consolidated financial statements. A certain portion of our financial services income is treated as activeincome solely for purpose of the PFIC determination. Any change in the composition of the loans originated on our platform may affect the composition ofour income for purposes of the PFIC determination. Assuming that we are the owner of our variable interest entities (including their subsidiaries) for UnitedStates federal income tax purposes, and based upon our current income and assets, including goodwill and unbooked intangibles, we do not believe that wewere a PFIC for the taxable year ended December 31, 2018 and do not anticipate becoming a PFIC in future taxable years. 51Table of Contents While we do not believe that we were a PFIC for the taxable year ended December 31, 2018 and do not anticipate becoming a PFIC in theforeseeable future, because the value of our assets for purposes of the asset test may be determined by reference to the market price of our ADSs, fluctuationsin the market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years. The determination of whether we will be orbecome a PFIC will also depend, in part, on the composition of our income and assets, which may be affected by how, and how quickly, we use our liquidassets. If our revenue from activities that produce passive income significantly increases relative to our revenue from activities that produce non-passiveincome, or if we determine not to deploy significant amounts of cash for active purposes or if it were determined that we do not own the stock of our variableinterest entity for United States federal income tax purposes, our risk of being a PFIC may substantially increase. Because there are uncertainties in theapplication of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance thatwe will not be a PFIC for the current taxable year or any future taxable year. If we are a PFIC in any taxable year, a U.S. holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income Tax—General”) may incur significantly increased United States federal income tax on gain recognized on the sale or other disposition of the ADSs or ordinaryshares and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under theUnited States federal income tax rules and such holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year duringwhich a U.S. holder holds ADSs or our ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S.holder holds our ADSs or ordinary shares. For more information see “Item 10. Additional Information—E. Taxation—United States Federal Income Tax—Passive Foreign Investment Company Considerations.” We will incur increased costs as a result of being a public company. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Actof 2002, as well as rules subsequently implemented by the SEC and The Nasdaq Global Market, impose various requirements on the corporate governancepractices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporateactivities more time-consuming and costly. Our management will be required to devote substantial time and attention to our public company reportingobligations and other compliance matters. We are currently evaluating and monitoring developments with respect to these rules and regulations, and wecannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in themarket price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention andother resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit.Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim issuccessfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition andresults of operations. Item 4. Information on the Company A. History and Development of the Company We commenced our online consumer finance business and began to operate Fenqile in October 2013 through Shenzhen Fenqile NetworkTechnology Co., Ltd., or Shenzhen Fenqile. In October 2013, Beijing Lejiaxin Network Technology Co., Ltd., or Beijing Lejiaxin, was incorporated as aninvestment holding company in the PRC and established its wholly owned subsidiary Qianhai Juzi in June 2014 to operate our online investment platformJuzi Licai. In November 2013, Staging Finance Holding Ltd., or Staging Finance, was incorporated under the laws of the Cayman Islands as our offshoreholding company, which then established our wholly owned subsidiary, Installment (HK) Investment Limited, or Installment HK, in Hong Kong. BeijingShijitong Technology Co., Ltd., or Beijing Shijitong was established in July 2014 as a wholly owned subsidiary of Installment HK in the PRC. InMarch 2017, we changed our name from “Staging Finance Holding Ltd.” to “LexinFintech Holdings Ltd.” 52Table of Contents Through Beijing Shijitong and Shenzhen Lexin Software Technology Co., Ltd., we obtained control over Beijing Lejiaxin, Shenzhen Xinjie,Shenzhen Fenqile, Qianhai Dingsheng and Mengtian Technology, or collectively, our variable interest entities, based on a series of contractual arrangements.See “—C. Organizational Structure —Contractual Arrangement with Our Variable Interest Entities.” On December 21, 2017, our ADSs commenced trading on Nasdaq under the symbol “LX.” We raised from our initial public offering ofapproximately US$108.4 million in net proceeds (including the net proceeds generated from the offering of additional 1,800,000 ADSs upon theunderwriters’ exercise of their over-allotment option in full) after deducting underwriting commissions and the offering expenses payable by us. Our principal executive offices are located at 27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen 518052, the People’sRepublic of China. Our telephone number at this address is +86 755 3637 8888. Our registered office in the Cayman Islands is located at the offices ofMaples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process in the UnitedStates is Law Debenture Corporate Services Inc. located at 801 2nd Avenue, Suite 403, New York, NY 10017. B. Business Overview Overview We are a leading online consumer finance platform for educated young adults in China. We strategically focus on serving the credit needs ofeducated young adults aged between 18 and 36 in China, featuring young people with high income potential, high educational background, highconsumption needs, a strong desire to build their credit profile, and an appreciation for efficient user experience. Our online consumer finance platform,Fenqile, addresses our users’ credit needs by offering personal installment loans, installment purchase loans and other loan products. We offer a wide varietyof competitively priced products on our e-commerce channel and allow users to use their credit lines to finance purchases. We match user loans withdiversified funding sources, including individual investors on our Juzi Licai online investment platform, institutional funding partners in our direct lendingprograms and investors of our asset-backed securities. Our Users From our inception in August 2013 through the end of 2018, we originated loans to over 7.2 million users on a cumulative basis. In 2016, 2017 and2018, we originated loans to approximately 3.0 million, 4.1 million and 4.9 million active users through our platform, representing a compound annualgrowth rate, or CAGR, of 28%. Our online consumer finance platform features a high proportion of repeat users. Of all active users on our platform in 2016,2017 and 2018, approximately 74%, 80% and 80%, respectively, were repeat users who had made at least one transaction on our platform before in the sameyear or in the previous year. As of December 31, 2018, we had over 10.5 million users with an approved credit line and over 37.3 million registered users. User acquisition We strategically focus on serving educated young adults in China, our target user cohort. As of December 31, 2018, this target user grouprepresented over 90% of our total user base. To date, we have successfully accumulated a large user base and achieved deep market penetration amongeducated young adults in China by providing high quality financial services, e-commerce consumption scenarios and membership benefits. Historically, we acquired our educated young adult users primarily through referrals, our e-commerce channel and our cooperation with third-partye-commerce platforms and commercial banks. In addition to these historical user acquisition methods, we currently acquire users through brand marketing,which help drive the growth of traffic on our platform. Our current user acquisition method also involves cooperation with our institutional funding partnersand third-party platforms that focus on lifestyle, travel and entertainment. We cooperate with these third-party platforms on a wide range of events, such aspromoting co-branded credit cards, co-hosting marketing events, launching customized financial products and offering special privileges or discounts to ourusers. As our target user cohort is typically geographically concentrated and socially connected, we adjust from time to time our user acquisition methods inaccordance with these characteristics. 53Table of Contents Our e-commerce channel offers a wide variety of competitively priced products across categories that specifically meet the consumption needs ofeducated young adults. Our e-commerce channel allows users to use their credit lines to finance their purchases, which converts e-commerce shoppers intoborrowing users at points-of-sale on our e-commerce channel. See “—Our E-Commerce Channel.” We also use other online marketing channels to attract users, including using social media such as WeChat and Weibo and press outlets to help drivebrand awareness, using paid placement on major online search engines in China, partnering with leading websites such as Jumei that are able to reach qualityusers with credit needs, and working with online advertising channels such as App stores to promote our mobile applications. We have established a membership program to cultivate user loyalty and improve user engagement. In addition to the original Le Card membershipprogram, we have launched a paid membership program, Lehei/Black Card, in April 2017, to further improve user service and increase user stickiness. Our E-Commerce Channel The e-commerce channel on Fenqile offers competitively priced products across 17 categories with relatively high value, including electronics,fashion accessories, home furnishings and decor, and outdoor apparel. The product offerings on our e-commerce channel specifically meet the shoppingneeds of educated young adults. Our e-commerce channel features both direct sales of merchandise curated by us, as well as a marketplace through whichthird-party online merchants offer and sell their own products and services, such as leisure travel and continuing education. On our online marketplace, userorders are placed and fulfilled directly by the third-party merchants. The GMV of our e-commerce channel amounted to RMB4.0 billion in 2016, RMB4.1billion in 2017, and RMB5.8 billion (US$848 million) in 2018. In 2018, we had provided over 1.2 million stock keeping units to our users. Users use their approved credit line to finance their purchases on our e-commerce channel. See “—Our Loan Products.” Approximately 44% of ourusers with an approved credit line as of December 31, 2018 had shopped on our e-commerce channel at least once previously. The operation of our e-commerce channel is highly efficient because of our asset-light approach. Our strategic cooperation with business partners enables us to offer morecompetitively priced products, while requiring minimal capital, personnel and other resources. For example, we strategically cooperate with JD.com, a majorsupplier from which we acquire products for our direct sales business at competitive prices. We have achieved seamless connections of user order data withJD.com’s platform. Pursuant to our annual sales agreement with JD.com, which may be automatically extended by another year, JD.com offers us products atexclusive prices and is also responsible for the delivery of product orders. We are responsible for the payment of product orders within 60 days of thepurchase. Furthermore, by leveraging the inventory and logistics capabilities of business partners such as JD.com and SF Express, we have been able to rapidlydevelop and grow our e-commerce channel without building our own fulfillment infrastructure for warehousing and delivery. We typically enter into annualcontracts with our business partners for logistics services, which may be terminated upon advance notice ranging from 30 days to 3 months. Our businesspartners agree to provide warehousing or delivery services to us, and we are responsible for the settlement of service fees typically on a monthly basis. Our Loan Products We launched Fenqile, our online consumer finance and e-commerce channel, in October 2013. On Fenqile, we offer personal installment loans andinstallment purchase loans using available credit lines approved by us with flexible repayment solutions. All of our loan products are unsecured and featurefixed monthly payments with various terms. In 2017 and 2018, we originated RMB47.7 billion and RMB66.1 billion (US$9.6 billion) in loans, representinga 38.5% increase. As of December 31, 2016, 2017 and 2018, the average user loan balance was RMB4,838, RMB6,580 and RMB9,048 (US$1,316),respectively. 54Table of Contents Le Card credit line Le Card is the credit line that we offer to our users. We determine the amount of credit line available to each user based on the result of our creditassessment. When a user is first approved for a credit line, the amount of credit line we offer ranges from RMB1,000 to RMB48,000 and the aggregate loanamount of personal installment loans and installment purchase loans borrowed by one single user may not exceed the credit line available to the user. Thecredit line available to a user, once approved, does not have a term limit. Based on our continuing risk monitoring and assessment, we may unilaterally adjustthe amount of the credit line, change the percentage of the credit line that may be applied towards personal installment loans, or revoke the credit line. Wemay grant up to an RMB200,000 credit line to existing users who have established a credit history with us. While a user may use the entire amount of thiscredit line towards purchases on our e-commerce channel, only up to a certain percentage of such credit line may be applied towards personal installmentloans to obtain cash, the percentage of which ranges from 0% to 100%, depending on the result of the credit assessment. We had approved 10.5 million usersfor our Le Card credit line as of December 31, 2018. The average credit limit we granted to each user was RMB6,165 in 2016, RMB8,201 in 2017 andRMB8,648 (US$1,258) in 2018. The aggregate amount of credit lines approved by us was RMB27.8 billion as of December 31, 2016, RMB62.2 billion as ofDecember 31, 2017 and RMB91.0 billion (US$13.2 billion) as of December 31, 2018, whereas the utilization rate, which is calculated as the percentage ofoutstanding principal balance relative to the total amount of credit lines approved by us, was 35.5% as of December 31, 2016, 31.0% as of December 31,2017 and 35.6% as of December 31, 2018. Personal installment loans Our users approved for our credit line are automatically eligible for personal installment loans with terms generally ranging from 1 to 36 months.Users can have multiple personal installment loans outstanding as long as the aggregated outstanding balance does not exceed the credit limit available forpersonal installment loans. Users may use personal installment loans to obtain cash or to finance purchases from third-party merchants on our marketplacethrough our e-commerce channel. With respect to the personal installment loans that are not borrowed to finance user purchases on the e-commerce channel,we do not track the actual use of the loans, while we require the users to select in their loan applications one of the specified permissible uses of loanproceeds, such as education, cost of living or driving school expenses. We offer users who meet certain criteria, including user’s credit profile and repayment history, flexible repayment options. These include the optionto postpone their current monthly repayment to the next scheduled payment date or finance the repayment of a particular monthly repayment with a newloan. The flexible repayment options will not increase the available credit line for each user approved by us. We have set certain requirements for the use offlexible repayment options, such as minimum monthly repayments. Moreover, our users currently may not use the flexible repayment options for any newloan that is borrowed to finance the repayment of a monthly repayment. We may adjust the features of the flexible repayment options based on creditperformance and our risk management approach from time to time. The flexible repayment options are designed to assist those users who have relatively highconsumption needs, and the willingness and potential ability to repay their loans. The new loans are newly originated personal installment loans at higherAPRs than other personal installment loans. The APR for personal installment loans currently ranges from 14% to 36%. In 2016, 2017 and 2018, the total amount of personal installment loansoriginated on our platform was approximately RMB19.0 billion, RMB44.8 billion and RMB63.3 billion (US$9.2 billion), respectively. The outstandingprincipal balance of these loans (including on- and off-balance sheet loans) was RMB30.8 billion (US$4.5 billion) as of December 31, 2018. Installment purchase loans A user approved for our credit line can use the available credit line to purchase a variety of products available on direct sales on our e-commercechannel, subject to the approved credit limit available to the user. See “—Our E-Commerce Channel.” Our e-commerce channel enables us to track the users’use of loans when they are borrowed to finance purchases on our e-commerce channel. We provide financing solutions to help our users finance a purchase by offering installment payment options with flexible minimum down paymentsranging from 0% to 50% as well as various loan term ranging from 1 to 36 months, depending on the product, price, supplier and source of funding. Shoppershave the option to choose any combination of these terms, and our system will automatically calculate monthly payments and service fees. The APR forinstallment purchase loans currently ranges from 18% to 36%. In 2016, 2017 and 2018, the total amount of installment purchase loans originated on ourplatform was approximately RMB3.2 billion, RMB2.9 billion and RMB2.7 billion (US$398 million), respectively. The outstanding principal balance ofinstallment purchase loans (including on- and off-balance sheet loans) was RMB1.6 billion (US$228 million) as of December 31, 2018. 55Table of Contents Loan pricing Our loan pricing mechanism consists of two components, APRs and credit lines. We price our loans with different APRs based on different productsto address product-related credit risks and as a function of market competition and supply and demand. We primarily address credit risks by varying the amount of credit lines approved for each user. To enhance user experience, we seek to maintainconsistency in terms of credit lines among newly acquired users in the same geographic area as they are likely to share their experience with each other. Thisapproach is also consistent with the fact that the risk profiles of similarly situated users are largely homogenous and we utilize grouping as our primarymethod of credit assessment for new users. For the determination of credit limit based on the level of credit risks, see “—Our Loan Application and ApprovalProcess —Step 3: Credit risk assessment.” Our Investors and Funding Partners We benefit from our position of having diversified funding sources, including a wide array of types of investors and funding partners. Our variousinvestment programs and products are designed to cater to investors and funding partners with different risk-and-return parameters. The table below sets forththe outstanding balance of funds as of December 31, 2016, 2017 and 2018, respectively, provided by different funding sources to finance loans (includingon-balance sheet loans and off-balance sheet loans). As of December 31, 2016 2017 Change inOutstandingbalance2018Change inOutstandingbalance RMB % RMB % %RMBUS$%% (in thousands, except for percentages)Individualinvestors5,537,03158.99,785,17153.576.713,384,4071,946,68143.836.8Institutionalfundingpartners3,711,34139.58,499,45546.5129.017,177,2232,498,32356.2102.1Asset-backedsecurities155,8141.6——(100.0)———N/ATotal9,404,186100.018,284,626100.094.430,561,6304,445,004100.067.1 Individual investors on Juzi Licai We offer our Juzi Licai online investment platform to individual investors seeking attractive risk-adjusted investment returns. We have experiencedstrong growth in both the number of individual investors and the investment amount per investor in recent years. On Juzi Licai, we had over 442,000cumulative individual investors as of December 31, 2018. In 2018, over 225,000 individual investors invested through Juzi Licai, compared to over 171,000in 2017 and over 131,000 in 2016, among which over 98,000, 126,000 and 170,000 were repeat investors who had invested at least once before in the sameyear or in the previous year in 2016, 2017 and 2018, respectively. We had over 97,000, over 114,000 and over 134,000 new active individual investors in2016, 2017 and 2018, respectively, who invested through Juzi Licai during the relevant year but had not done so prior to the beginning of that year. As ofDecember 31, 2018, Juzi Licai had over 141,000 individual investors who had outstanding investments, with an average AUM of RMB94,599 (US$13,759). Investment programs offered on Juzi Licai. We offer investment programs and tools that enable individual investors to manage their investments.Investors can choose from several investment programs with different terms and estimated rates of return and commit a minimum amount of RMB100(US$14.5). Once the funds are committed, they are automatically matched with our approved users. Our platform automatically reinvests investors’ funds assoon as a loan is repaid. If an investment period ends during the loan terms of the underlying loans, we will facilitate the investor’s exit by transferring, on theinvestor’s behalf, his or her creditor’s rights with respect to the underlying loans; provided however, the exit is not guaranteed and the transfer would notoccur until transferees are identified. We do not maintain a secondary loan market on our investment platform. Investors can monitor the performance of theirinvestment in real time through our website or mobile application. Depending on the type of investment program an individual investor chooses, aninvesting period could be as short as one week and as long as 24 months. Currently, we offer the following two main types of investment programs: 56Table of Contents · Fixed maturities: Terms of 1, 3, 6, 12 and 24 months with expected rates of return ranging from 5.50% to 10.41%. Principals and interests arecollected at the end of the investing period. We offer fixed maturity investment programs with a preferred rate of return exclusively to certainVIP individual investors to foster investor loyalty; · Weekly or monthly step-up returns: Up to 12 months. Investors who commit funds for a longer period of time are rewarded with higher rates ofreturn. To encourage longer commitment of investment funds, we offer investors the option to receive a step-up in the rate of return on a weeklyor monthly basis on the condition that withdrawals can only be made on specified dates during each weekly or monthly period, as applicable. Acquisition and retention of individual investors. Our investor acquisition efforts are primarily directed towards enhancing our brand name,building investor trust and enhancing word-of-mouth referrals. To attract and retain individual investors, we organize a variety of promotional events,encourage referrals by offering more attractive returns and other benefits, and cooperate with our business partners to offer joint member benefit programs. Recent development of Juzi Licai. On April 24, 2018, we made some adjustments to our business model for new loans funded by individual investorson Juzi Licai in responses to the evolving regulatory requirements. One adjustment is to streamline the role of Qianhai Juzi, a subsidiary of one of ourvariable interest entities which operates Juzi Licai, in providing services to participants on Juzi Licai. According to the adjustments, Qianhai Juzi, rather thananother operating entity of our company, will enter into service agreements with borrowers and accordingly will directly charge service fees to the borrowersfor new loans facilitated on Juzi Licai after April 2018. This way, Qianhai Juzi provides services to both investors and borrowers on Juzi Licai, assuming atypical role of online lending information intermediary as defined under relevant laws and regulations. We also amended the form of agreements betweenQianhai Juzi and individual investors, providing explicitly that an investor’s exit from an investment program is not guaranteed and is subject to successfulidentification of transferees, namely other investors on Juzi Licai who are willing to acquire the creditor’s right from the exiting investor. In addition, wediscontinued the operation of the quality assurance program and replaced it with a risk safeguard scheme that is managed by a third-party guaranteecompany. See “—Protection of investors and funding partners.” Institutional funding partners in our direct lending programs Beginning in 2015, we expanded our funding sources to include institutional funding partners, including commercial banks, consumer financecompanies, other licensed financial institutions and peer-to-peer lending platforms. In our direct lending programs, we refer qualified users to institutionalfunding partners which provide the funds to finance the loans, based on their risk-and-return requirements. Our proprietary Wormhole system, operated byQianhai Dingsheng, one of our variable interest entities, connects our users and funding partners’ systems in an automated process that minimizes manualreview and approval by the funding partners, and allocates funding needs to various funding sources with different risk-and-return parameters. As part of our arrangement with each institutional funding partner, we typically agree on an aggregated amount of funds provided by the fundingpartner, maximum credit limit given to an individual user, maximum maturity and an annualized interest rate. The investing period of our institutionalfunding partners ranges from one to 36 months. Depending on contractual terms of our arrangement with each intuitional funding partners, loans funded byfunding partners include on-balance sheet loans and off-balance sheet loans. With respect to certain institutional funding partners, we are responsible forcollecting loan proceeds from the institutional funding partners and lending the funds to users, as well as collecting monthly repayments from the users andrepaying the funding partners according to the terms of our agreements with the funding partners. Loans funded by these intuitional funding partners areaccounted for as on-balance sheet loans. With respect to the other funding partners, such as commercial banks, consumer finance companies, we only offerloan facilitation and matching services to the users and the funding partners, and the funding partners will fund the loans directly to the users referred by us.Loans funded by these intuitional funding partners are accounted for as off-balance sheet loans. 57Table of Contents As of December 31, 2018, we had over 30 funding partners on our direct lending programs. The outstanding balance of funds provided byinstitutional funding partners increased from RMB3.7 billion as of December 31, 2016 to RMB8.5 billion as of December 31, 2017 and further to RMB17.2billion (US$2.5 billion) as of December 31, 2018. Investors purchasing our asset-backed securities Historically, we have issued both public and private asset-backed securities to diversify our funding sources. As of December 31, 2018, theoutstanding principal balance of public and private asset-backed securities is immaterial. Protection of investors and funding partners Juzi Licai. We started a quality assurance program in July 2017, which discontinued in April 2018. During the operation of this quality assuranceprogram, with respect to loans funded by individual investors on Juzi Licai, a portion of each repayment by the users equal to a certain percentage of theoutstanding principal balance of the loan is transferred to a custody account managed by China Guangfa Bank, which we refer to as our quality assurancefunds. Such portion of the quality assurance funds is held in the custody account until the corresponding investment on Juzi Licai is repaid to the relevantindividual investors. Our quality assurance funds provide make-up payments to an investor when a user fails to satisfy his interest or principal repaymentobligations, up to the available balance of the quality assurance funds. Our quality assurance program only applies to loans funded by individual investorson Juzi Licai between July 7, 2017 and April 24, 2018. On December 8, 2017, the Online Lending Rectification Office issued the Notice on the Rectification and Inspection Acceptance of Risk of OnlineLending Information Intermediaries, or the Circular 57, which provides further clarification on several matters in connection with the rectification of onlinelending information intermediaries. Pursuant to the Circular 57, online lending information intermediaries that have already established risk reserve fundsshall not continue to set aside any of its funds as additional risk reserve and shall gradually reduce the balance of their existing risk reserve funds. Other thanrisk reserve funds, online lending information intermediaries shall actively seek alternative means of investor protection, such as third-party guaranteearrangements. As of the date of this annual report, our quality assurance program has not been deemed as a form of risk reserve funds. However, we cannotassure you that our quality assurance program will not be deemed as a form of risk reserve funds. See “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Business and Industry—If our current investor protection measures are deemed to violate the relevant laws and regulations, our business,financial condition and results of operations would be materially and adversely affected.” Starting from April 2018, we discontinued the operation of the quality assurance program, and replaced it with a risk safeguard scheme managed bya guarantee company. We set aside a portion of each repayment equal to certain percentage of the outstanding principal balance of the loan and transfer such amount to acustody account managed by an independent guarantee company, which we refer to as risk safeguard funds. Then such independent guarantee company shallprovide make-up payments to an investor using the risk safeguard funds when a user fails to satisfy his interest or principal repayment obligations. Underthese agreements between users and investors relating to the risk safeguard scheme, the amount of make-up payments is up to the available balance of the risksafeguard funds. We determine the percentage of the outstanding principal balance to be transferred to the custody account based on, among other factors, historicalloan performance, in particular, the percentage of loans that are more than seven days delinquent, and the expected repayments (including prepayments) byusers. We also consider market conditions, our product lines, profitability, cash position and the actual and expected payouts of the risk safeguard funds. Therisk safeguard scheme only applies to loans newly funded by individual investors on Juzi Licai on or after April 24, 2018. 58Table of Contents Funding partners in direct lending programs. With respect to certain institutional funding partners on our direct lending programs, we are obligatedto provide advances to the funding partners to compensate them for delinquent principal and interest repayments of loans in the event of a user default. Wemay also provide full interest repayment according to the terms of the loan, in the event that a user makes an early repayment of the loan. Certain of our funding partners also require us to set up a deposit account with the funding partner and maintain a cash deposit equal to an agreedpercentage (generally 5%) of the outstanding principal balance, which amount is calculated and replenished on a monthly basis. The funding partner has apriority right to be compensated by using the deposit amount for any delinquent repayments for which we have not compensated the funding partner. If we fail to compensate the funding partners for delinquent repayments either with our own funds or with the amount deposited with our fundingpartner, our funding partner may terminate or decline to renew their funding partnership with us. In light of the Circular 141, which requires financial institutions not to accept any credit enhancement services or other similar services from thirdparties without qualification to provide guarantee and to ensure that no third parties will charge any interest or fees to borrowers, we have made anadjustment to our cooperation model with institutional funding partners. We have made the cooperation with institutional funding partners throughShenzhen Lexin Financing Guarantee Co., Ltd., a subsidiary of Shenzhen Fenqile, which is qualified to provide financing guarantee for the users on ourplatform and to charge fees for the relevant guarantee services. For personal installment loans funded by banking financial institutions and networkmicrocredit companies, Shenzhen Fenqile has discontinued to charge any fees to users. Instead, Shenzhen Lexin Financing Guarantee Co., Ltd. have chargedusers fees for the guarantee services it provides to users in favor of our institutional funding partners. We have further adjusted our cooperation model withcertain institutional funding partners by having them charge fees directly to borrowers. However, we cannot assure you that our solutions, including the waysthe fees are charged, will be viable, nor can we assure you that we would not be required to make further change to our business in the future. See “Item 3. KeyInformation—D. Risk Factors—Risks Related to Our Business—Risks Related to Our Business and Industry— If our current investor protection measures aredeemed to violate the relevant laws and regulations, our business, financial condition and results of operations would be materially and adversely affected.” Our Loan Application and Approval Process Step 1: User credit application The first step to fully utilize our installment loan products and other products and service on our platform is to be approved for a Le Card credit line.Prospective users registered with Fenqile can initiate the Le Card application anywhere and anytime, accessible from our e-commerce channel at the point-of-sale or directly from our Le Card channel. Potential users may generally complete the Le Card application process within a few minutes by providing therequired personal information. Step 2: User identification and anti-fraud detection We identify our users and detect fraudulent users or behavior with three methods: · First, we work with our external data sources and utilize existing databases to authenticate the identities of our prospective users during theapplication process through facial recognition, bank issued debit and credit card registration information and real name mobile registrationinformation. We also use the Ministry of Public Security’s identity verification system in authenticating prospective users. · Second, we maintain our own database and external data sources to detect fraudulent activities and criminal behaviors. We consistently finetune our anti-fraud rules and analyze fraud cases by drawing insights using big data analytics with the data we accumulated over time. Our anti-fraud model uses a multifaceted detection method that combines sophisticated data integration with a hybrid analytical approach to bothidentify individual fraud based on existing fraud databases and spot collusions among multiple individuals to uncover fraudulent schemes. Weconduct social network analysis to identify relationships pertinent to fraud and connect the individual fraudulent activities to uncover complexfraud schemes and criminal organizations. In addition, we run anomaly detection to detect individual and aggregated abnormal patterns in orderto catch unknown fraudulent behaviors. We also perform such anomaly detection regularly throughout other transaction processes such as riskmanagement to measure the suspicious activities on our platform. 59Table of Contents · Third, if available information is insufficient for our system to exclude the possibility of fraud at a preset confidence level, then the relevantcredit applications will be forwarded to our antifraud team for manual examination, which involves members of our anti-fraud team speakingwith applicants to inquire into any discrepancies in the application and to verify application materials. Our operational team also facilitates ourrisk management efforts by verifying users’ educational and personal background information by visiting selected users onsite. Step 3: Credit risk assessment Following user identification and anti-fraud detection, we match the application with data from both internal and external sources, includinginformation submitted by prospective users, collected from third-party data partners (including commercial data providers as well as governmental dataproviders), and collected from the internet using our proprietary data collection technologies with the authorization of our prospective users. Our information collected for the evaluation of the creditworthiness of a user may include: · basic personal background information, including age, gender and educational background, social network information; · additional personal background information relating to occupation, employment history and income range; · information on user behavior, including the user’s online shopping history, GPS data and information available on social media; · information relating to credit card balances and the balance of outstanding borrowings of the same individual from other online consumerfinance platforms; · the user’s credit history, if available, maintained by China Union Pay and the Credit Reference Center of the PBOC; and · for repeat users, the historical loan performance accumulated on our platform. We perform a screening of our prospective users’ creditworthiness and decline applications by those who appear on any of the credit blacklistsmaintained by us or our partners, and those who have reached their credit limits with us. We have maintained a blacklist system including high-risk incidentssuch as bad faith defaults, significant delinquencies, and fraudulent applications or agents, which cover both credit and fraud risks. Our anti-fraud, collectionand credit assessment personnel can add users to our blacklist system after review of a particular incident. We closely monitor the additions to our blacklistsystem. A removal from our blacklist will be subject to manual approval by supervisors of the relevant function, while to date we have not removed anyindividual from our blacklist. In 2016, 2017 and 2018, approximately 64.1%, 85.3% and 88.7% of all credit applications were declined, respectively. We then initiate a credit review using our proprietary credit assessment engine Hawkeye to generate a credit risk level for a prospective user, whichinforms our decision on whether to extend a credit. For discussion of our Hawkeye engine, see “—Risk Management—Our proprietary credit assessmentprocess” and “—Technology—Our risk analytics capabilities—Artificial intelligence and Hawkeye engine.” We will assign a credit line to each userapproved by our credit assessment system. After obtaining a credit line, a user may apply for installment purchase loans or personal installment loans from us.Approximately 98% of all loan applications are handled and approved automatically. The remaining applications, which require additional information orverification, are forwarded to our credit assessment team for manual review. The manual review is generally completed within 48 hours. Following thisreview, our credit assessment team will either approve or decline the application. 60Table of Contents Step 4: Our loan funding and issuance mechanism Once we approve a loan application from a user, our system will then automatically generate a form of service agreement between the user and us.Our users authorize us to facilitate borrowing from third parties and our partners. See “— Our Investors and Funding Partners.” Our proprietary Wormholesystem connects our users and funding partners’ systems in an automated process that minimizes manual review and approval by the funding partners, andallocates funding needs to various funding sources with different risk-and-return parameters. We also continuously monitor user behavior for fraud and otheranomalies, and may decline loan applications and halt a transaction at any time. Step 5: Loan servicing and repayment Upon the origination of our loan products, we establish a repayment schedule with repayment occurring on a set business day each month andupdate the loan performance status in real time once a payment has been made or is overdue. In most situations, we charge service fees to users by deductingthe relevant fees from the user’s monthly repayment. Starting from 2018, in certain situations, we also collect fees directly from funding partners withoutdeducting fees from the user’s monthly repayment. Users are able to monitor the status of loan repayment on our platform on PC and mobile apps. Users canmake loan repayments via third-party payment platforms (including WeChat Pay, YeePay and 99Bill), and either authorize us to settle with the relevantsources of funding or settle repayments through a clearing bank. We have adopted a set of collection policies and practices that focus on enhancing userexperience and cultivating healthy habits of credit use and repayment among our users. We determine the priorities of our collection efforts based on the level of delinquency, which dictates the level of collection steps taken. Themajority of our collection activities are done in automated processes through digital means such as payment reminder notifications on our mobileapplication, reminder text messages, voice messages and e-mails. We have an effective in-house collection team consisting of 156 members as ofDecember 31, 2018. If a loan remains overdue after a certain time period, we then outsource loan collection to third-party contractors to optimize collectionefficiency. We very carefully select our third-party contractors, setting forth certain guidelines and limitations on their collection actions, and enforce thoseguidelines and limitations. Risk Management We take an advanced and customized risk management approach driven by our Hawkeye credit assessment engine and strong risk managementculture. Our proprietary credit assessment process For a new user, our credit assessment primarily utilizes grouping on the basis of the new user’s education background, location and other availableinformation, as well as our insights into similarly situated users. Our newly acquired users share similar risk profiles and certain key group or riskcharacteristics, which adequately account for a majority of their credit risks. As we gain more experience with the user, our credit assessment gradually shiftsemphasis to the individual’s credit history with us, employment and income information, and other data that we have accumulated. We develop our credit assessment model based on the historical delinquency performance of our users as well as information submitted in the users’credit applications. Our credit assessment model is designed to predict the likelihood that a user will be delinquent in the future. Based on our prediction ofthe user’s likelihood of future delinquency and the user profile, we assign one of the seven credit risk levels to each user, with risk level A representing thelowest risk, risk level F representing the highest risk and risk level N representing users who are approved for trial purposes only and will be separatelytracked accordingly. The key factors we consider in determining the credit risk level of each user include: · Geographic location, for example, whether the user is located in a first-tier, second-tier or third-tier city, and the level of economic developmentof the relevant city; ·· Education background, i.e., the user’s academic degree and past or current education institutions; 61Table of Contents · Level of income; · Outstanding loans from other external sources, such as credit card issuers and other consumer finance platforms; and · External credit references. The table below sets forth the amount of our loan originations to users of each credit risk level in 2016, 2017 and 2018, respectively. Year Ended December 31, 2016 2017 2018Credit risk level RMB % RMB % RMB US$ % (in millions, except for percentages)A7,83135.315,94333.417,9652,61327.2B3,82717.210,52422.117,0822,48425.8C6,92731.210,22221.413,7191,99520.8D2,36010.67,18615.111,5681,68217.5E6502.93,0546.42,3843473.6F2351.15011.12,6393844.0N and others3671.72740.57301061.1Total22,197100.047,704100.066,0879,611100.0 Technology The success of our business depends on our strong technological capabilities that support us in delivering a seamless user experience, makingaccurate credit assessment, protecting information on our platform, increasing operational efficiency and enabling innovations. We have our own proprietaryend-to-end loan origination, decisioning, loan management and servicing platform, which is designed to optimize user experience. Our platform was fullydeveloped internally, with our own proprietary architecture. Our technology platform allows us to quickly modify products, add functionality, and providedata analytics to meet evolving market conditions. Our technology platform includes proprietary architecture that facilitates high availability, scalability,and flexibility for modifying product features. It supports both open-end lines of credit as well as closed-end installment loans and is easily configurable fornew pricing and term structures, whether in response to evolving user demands or competitive opportunities. Our risk analytics capabilities Data aggregation. We believe that successfully providing loan products to our target user cohort that lacks historical credit information requiresaccess to a much wider variety of data including not only traditional credit attributes and application information, but also website behavior, internalinformation, bank account information, social media information, GPS data, email and phone number information, among others. We have investedsignificant resources in building up a comprehensive credit database since our inception. Today, we own an extensive database covering a wide range ofinformation pertinent to a user’s creditworthiness and presenting a user profile from a 360-degree view. Data are aggregated from a number of sources. Wecooperate with a number of organizations, such as government agencies, who grant us the access to their respective data. Our strong data-mining capabilitiesalso enable us to collect a large amount of data concerning prospective users. We have developed a number of proprietary automated programs that arecapable of searching, aggregating and processing massive data from the internet in a short period of time. Another important component of our creditdatabase is the payment histories of our prior and existing users. Artificial intelligence and Hawkeye engine. Upon data aggregation, our system converts the originally unstructured data into structured data usingmachine learning and artificial intelligence techniques. We apply artificial intelligence in assessing credit risks, detecting potential frauds, optimizingmarketing resource allocation and increasing collection efficiency. We have made substantial investments in our Hawkeye risk analytics infrastructure and inthe development of the latest generation of our risk management strategies. Our Hawkeye is a highly automated and dynamic credit assessment engine. Wedeveloped more than 2,000 decisioning rules utilizing 8,000 potential data variables and accumulated a massive amount of proprietary data from over 10.5million users and 53 million credit applications since inception. Our team of data scientists uses Hawkeye to build and test scores and strategies across theentire loan transaction process described above under “—Our Loan Application and Approval Process.” Our Hawkeye engine supports a variety of analyticaltechniques and model outputs from traditional regression models to artificial intelligence. 62Table of Contents Our Hawkeye engine also utilizes a Restricted Boltzmann Machine (RBM) algorithm to run an artificial neural network to detect any anomalyindicative of fraudulent behaviors on our platform. Our deep learning algorithms, through supervised learning processes and leveraging our massive data,enable us to identify any red flags for fraud based on a user’s credit application information, social connections and contacts. Funding-related technologies Wormhole system. Our proprietary Wormhole system connects our users and funding partners’ systems in real time, and allocates funding needs tovarious funding sources with different risk-and-return parameters, including individual investors on Juzi Licai and funding partners through our directlending programs. We are capable of allocating and sending qualified user loans and proposed credit limits to funding partners for final approval, with bothtypically completed in an automated process using sophisticated algorithms. Our ABS asset management. We utilize an automated assets filtering and packaging process to select assets and optimize the securitization process.Our assets are trenched to cater to different investors’ risk appetite and investment goals. We provide transparent monitoring and disclosure of theperformance of the underlying assets of our ABS products that meet the regulatory requirements for ABS programs. Our operational infrastructure Data security and multi-dimensional monitoring. We are committed to maintaining a secure online platform, as data protection and privacy are keyconcerns of our target user cohort. We have built a firewall that monitors and controls incoming and outgoing traffic on our platform around the clock. Onceany abnormal activity is detected, our system will immediately notify our IT team and simultaneously take automatic counter measures, such as activatingthird-party traffic control services, to prevent any harm to our platform. We block over 400 million visit requests that we deemed harmful or malicious and wehave maintained an IP blacklist of over 1.5 million IPs. Our platform has been rated as ICP Internet Safety 3.2. For any transmission of sensitive userinformation, we use data encryption to ensure confidentiality. Within our organization, we have adopted a series of policies on internal control overinformation system, including physical security measures, such as entry and equipment control, and network access management, such as identification,authentication and remote access control. We employ data slicing and distribute the storage of a user’s data points across several servers. We also maintainredundancy through a real-time multi-layer data backup system to prevent loss of data resulting from unforeseen circumstances. We conduct periodic reviewsof our technology platform, identifying and correcting problems that may undermine our system security. Cloud-based service and computing capabilities. We depend on cloud-based services for computing power for our user-facing systems and services.Our business is growing at a tremendous pace and thus need to scale up services to fit our needs and customize applications. Our cloud-based services enableus to maintain flexibility in managing our IT resources with improved manageability and less maintenance. Thus we can more rapidly adjust resources tomeet any fluctuating or unpredictable business demand. System stability. Our systems infrastructure is hosted in data centers at 3 separate locations in Guangzhou and Beijing. We maintain redundancythrough a real-time multi-layer data backup system to ensure the reliability of our network. Our platform adopts modular architecture that consists of multipleconnected components, each of which can be separately upgraded and replaced without compromising the functioning of other components. This makes ourplatform both highly reliable and scalable. We have developed a business continuity plan and have implemented a disaster recovery program, which enablesus to move operations to a back-up data center in the event of a catastrophe. 63Table of Contents Competition The online consumer finance market is an emerging industry in China. It provides a new means for consumers to obtain financing and for investorsand funding partners to seek new investment and lending opportunities. As a leading online consumer finance platform in China, we face competition fromother online platforms, major internet players, traditional financial institutions as well as other installment loan service providers. Our competitors include,among others, Ant Financial Services Group, JD Finance and WeBank. Some of our larger competitors have substantially broader product or service offeringsand significant financial resources to support heavy spending on sales and marketing and to provide lower APRs to users. We believe that our ability tocompete effectively for users, investors and funding partners depends on many factors, including the variety of our products, user experience on our platform,effectiveness of our risk management, the risk-adjusted return offered to investors and funding partners, our partnership with third parties, our marketing andselling efforts and the strength and reputation of our brands. Furthermore, as our business continues to grow rapidly, we face significant competition for highly skilled personnel, including management,engineers, product managers and risk management personnel. The success of our growth strategy depends in part on our ability to retain existing personneland add additional highly skilled employees. Intellectual Property We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual propertyrights. We have registered 15 patents in China, and have applied for 204 additional patents with the PRC State Intellectual Property Office and 3international patents through the procedures under the Patent Cooperation Treaty. We have registered 91 software copyrights with the PRC NationalCopyright Administration. We have 113 registered domain names, including lexin.com, lexinfintech.com, fenqile.com and juzilicai.com. As of the date of thisannual report, we had 264 registered trademarks, including our “Fenqile”, “” and “” trademarks. Insurance We maintain property insurance policies covering certain equipment and other property that are essential to our business operations to safeguardagainst risks and unexpected events. We also provide social security insurance including pension insurance, medical insurance, unemployment insurance,maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan for our employees.We do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-maninsurance. We consider our insurance coverage to be sufficient for our business operations in China. Seasonality We experience some seasonality in our business, reflecting a combination of seasonal demand for consumer loans and seasonality patternsassociated with the online retail industry. For example, we generally experience less user traffic and purchase orders during national holidays in China,particularly during the Chinese New Year holiday season in the first quarter of each year. Furthermore, e-commerce companies in China hold specialpromotional campaigns on November 11 each year, which improve our results for that quarter. The demand for our products and services is higher in March,April, September, October and November, which generally corresponds to the start of school and our promotional activities around November 11. While ourrapid growth has somewhat masked this seasonality, our quarterly operating results could be affected by such seasonality in the future. See “Item 3. KeyInformation—D. Risk Factors—Risks Related to Our Business and Industry—Our quarterly results may fluctuate significantly due to the seasonality of ourbusiness and may not fully reflect the underlying performance of our business.” Regulations This section sets forth a summary of the most significant rules and regulations that affect our business activities in China. 64Table of Contents We are regulated by various government authorities, including, among others: · the Ministry of Industry and Information Technology, or the MIIT, regulating the telecommunications and telecommunications-relatedactivities, including, but not limited to, the internet information services and other value-added telecommunication services; · the People’s Bank of China, or the PBOC, as the central bank of China, regulating the formation and implementation of monetary policy,issuing the currency, supervising the commercial banks and assisting the administration of the financing; · China Banking and Insurance Regulatory Commission, or the CBIRC (which was integrated by China Banking Regulatory Commission, or theCBRC, and other governmental departments in April 2018), regulating financial institutions and promulgating the regulations related to theadministration of financial institutions. Regulations Relating to Foreign Investment The PRC Foreign Investment Law In March 2019, the NPC passed the PRC Foreign Investment Law, which will become effective as of January 1, 2020. The PRC Foreign InvestmentLaw, when taking effect, will replace the Law on Sino-Foreign Equity Joint Ventures, the Laws on Sino-Foreign Contractual Joint Ventures and the Law onForeign-Capital Enterprises to become the legal foundation for foreign investment in the PRC. For more details, see “Item 3. Key Information — RisksRelated to our Corporate Structure — If the PRC government deems that the contractual arrangements in relation to our variable interest entities and theirsubsidiaries do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation ofexisting regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.” In particular, the PRC Foreign Investment Law reiterates and officially establishes the pre-access national treatment plus negative list managementsystem for foreign investment. The national negative list system was first introduced in 2016. In September 2016, the Standing Committee of the NPCpublished its decision to revise the laws relating to wholly foreign-owned enterprises and other foreign-invested enterprises. Such decision, which becameeffective in October 2016, changes the “filing or approval” procedure for foreign investments in China. Foreign investments in those business sectors that arenot subject to special access management measures, or the Negative List, will only be subject to filing instead of approval requirement. In June 2017, the MOC and the NDRC promulgated the Guidance Catalog of Industries for Foreign Investment, or the Catalog (2017 Revision),which became effective in July 2017. Industries listed in the Catalog (2017 Revision) are divided into two parts: encouraged category and the Negative List,and the Negative list are further divided into the restricted category and prohibited category. Industries not listed in the Catalog (2017 Revision) aregenerally deemed to be in a fourth “permitted” category, and are generally open to foreign investment unless specifically restricted by other PRC regulations.The Negative List, in a unified manner, lists the restrictive measures for the entry of foreign investment. For examples, some restricted industries are limited toSino-foreign equity/cooperative joint ventures, and some cases, Chinese partners are required to hold the majority interests in such joint ventures. Inaddition, restricted category projects are subject to higher-level government approvals. Furthermore, foreign investors are not allowed to invest in companiesin industries in the prohibited category. For the industries not listed in the Negative List, the restrictive measures for the entry of foreign investment shall notapply in principle, and establishment of wholly foreign-owned enterprises in such industries is generally allowed. In June 2018, the MOC and the NDRCpromulgated the Negative List (2018 version), which became effective in July 2018. The Negative List (2018 version) expands the scope of permittedindustries by foreign investment by reducing the number of industries that fall within the Negative List where restrictions on the shareholding percentage orrequirements on the composition of board or senior management still exists. Industries such as value-added telecommunication services (except e-commerce), including internet information services, are restricted from foreigninvestment pursuant to the Negative List (2018 version). We provide the value-added telecommunication services that are restricted to foreign investmentthrough our consolidated variable interest entities. 65Table of Contents Foreign Investment in Value-Added Telecommunication Services According to the Provisions on the Administration of Foreign-Invested Telecommunications Enterprises issued by the State Council inDecember 2001 and amended in September 2008 and February 2016, foreign-invested value-added telecommunications enterprises must be in the form ofSino-foreign equity joint ventures. The regulations restrict the ultimate capital contribution percentage held by foreign investors in a foreign-invested value-added telecommunications enterprise to 50% or less and require the primary foreign investor in a foreign-invested value-added telecommunicationsenterprise to have a good track record and operational experience in the value-added telecommunications industry. The Negative List (2018 version) andCircular of the Ministry of Industry and Information Technology on Liberalizing the Restrictions on Foreign Shareholding Percentages in Online DataProcessing and Transaction Processing Business (for-profit e-commerce business) promulgated by the MIIT, in June 2015, or Circular 196, allow a foreigninvestor to own more than 50% of the total equity interest in an e-commerce business. In July 2006, the Ministry of Information Industry (which was integrated into the MIIT with other governmental departments in March 2008), issuedthe Notice of the Ministry of Information Industry on Strengthening the Administration over Foreign Investment in the Operation of Value-AddedTelecommunications Business, or the MIIT Notice. According to the MIIT Notice, a foreign investor in the telecommunications service industry mustestablish a foreign invested enterprise and apply for a telecommunications service license. The MIIT Notice also requires that: (i) PRC domestictelecommunications enterprises must not, through any form, lease, transfer or sell a telecommunications service license to a foreign investor, or provideresources, offices and working places, facilities or other assistance to support illegal telecommunications services operations by a foreign investor; (ii) value-added telecommunications enterprises or their shareholders must directly own the domain names and trademarks used in their daily operations; and (iii) eachvalue-added telecommunications enterprise must have necessary facilities for its approved business operations and maintain such facilities only in theregions covered by its license. In light of the above restrictions and requirements, we provide the value-added telecommunication services through our consolidated variableinterest entities, and such variable interest entities own the relevant domain names and registered trademarks and have the necessary personnel to operate thewebsite. Licenses and Permits We are required to hold a variety of licenses and permits in connection with various aspects of our business, including the following: Value-added Telecommunication Service License The Telecommunications Regulations of PRC promulgated in September 2000 and amended in July 2014 and February 2016 respectively by theState Council and its related implementation rules, including the Catalog of Classification of Telecommunications Business issued by the Ministry ofIndustry and Information Technology, or the MIIT, categorize various types of telecommunications and telecommunications-related activities into basic orvalue-added telecommunications services. The Administrative Measures on Telecommunications Business Operating set forth more specific provisionsregarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining such licensesand the administration and supervision of such licenses. Under these regulations, a commercial operator of value-added telecommunications services mustfirst obtain a license for value-added telecommunications business, or value-added telecommunications service license, from the MIIT or its provincial levelcounterparts. The Interim Measures for Administration of the Business Activities of Online Lending Information Intermediary Agencies published inAugust 2016, or the Interim Measures, provide that the “online lending information intermediary agencies,” or online lending intermediaries, must apply forapplicable telecommunications service license in accordance with relevant provisions of telecommunications authorities after record-filing with a localfinancial regulatory authority. However, PRC telecommunication authorities have not explicitly stipulated which kind of telecommunications service licenseis required for online lending intermediaries (including in the form of a website or mobile application) engaged in telecommunication services. 66Table of Contents Administration of mobile internet application information services is strengthened through the Regulations for Administration of Mobile InternetApplication Information Services, or the MIAIS Regulations, issued in June 2016 and effective in August 2016. The MIAIS Regulations were enacted toregulate mobile application information services, or the App, the App providers (including App owners or operators) and online App stores. App serviceproviders are required to obtain relevant qualifications pursuant to PRC laws and regulations. Our online consumer finance platform, Fenqile, operated by Shenzhen Fenqile, has obtained a certain value-added or telecommunications servicelicenses for the operations of internet content service from the Guangdong Administration of Telecommunications in April 2017, which will remain validuntil May 2019 and certain value-added telecommunications service license for the operation of domestic call center service and content service (excludinginternet content service) from MIIT in July 2017, which will remain valid until July 2022. Mengtian Technology, one of our variable interest entities, hasobtained certain value-added telecommunications service license for the operations of internet content service from the Guangdong Administration ofTelecommunications in January 2019, which will remain valid until January 2024. Further, the application of certain value-added telecommunicationsservice license for online data processing and transaction processing submitted by Shenzhen Fenqile was received by Guangdong Administration ofTelecommunications in April 2019. Our online investment platform, Juzi Licai, operated by Qianhai Juzi, would be required to obtain a certaintelecommunications service licenses in accordance with the Interim Measures and the relevant provisions of telecommunications authorities after record-filing with a local financial regulatory authority. Furthermore, it is uncertain if our variable interest entities and their subsidiaries will be required to obtain aseparate operating license with respect to our mobile applications in addition to the value-added telecommunications business license. Online Culture Operating Permit The Provisional Measures on Administration of Internet Culture issued by the Ministry of Culture (which was integrated into the Ministry of Cultureand Tourism with other governmental departments in March 2018) in February 2011 and amended in December 2017, and other related rules require anentity to obtain an Online Culture Operating Permit from the applicable provincial level cultural administrative authority before engaging in activitiesrelated to “online cultural products,” which is defined as cultural products produced, disseminated and circulated via the internet. Pursuant to InterimMeasures for the Administration of Online Games promulgated by the Ministry of Culture in June 2010 and amended in December 2017, an entity is requiredto obtain an Online Culture Operating Permit to engage in transaction service of virtual currencies used for online games. We provide platform services fortrading virtual currencies used for online games on Fenqile. We have obtained an Online Culture Operating Permit from the Guangdong Municipal Bureau ofCulture in March 2017 which will remain valid until March 2020. Regulations Relating to Online Consumer Finance Services Regulations Relating to Loans Between Individuals The PRC Contract Law recognizes the validity of loan agreement between natural persons and provides that a loan agreement becomes effectivewhen an individual lender provides the loan to an individual borrower. The Contract Law requires that the interest rates charged under the loan agreementmust not violate the applicable provisions of the PRC laws and regulations. In accordance with the Provisions on Several Issues Concerning Laws Applicableto Trials of Private Lending Cases issued by the Supreme People’s Court in August 2015 and effective in September 2015, or the Private Lending JudicialInterpretations, agreements between a lender and a borrower on loans with annual interest rates below 24% are valid and enforceable. With respect to loanswith annual interest rates between 24% and 36%, if the interest on the loans has already been paid to the lender, and so long as such payment has notdamaged the interest of the state, the community or any third parties, the courts will likely turn down the borrower’s request to demand the return of theinterest payment. If the annual interest rate of a private loan is higher than 36%, the obligations to pay interest payment in excess of the maximum interestrate allowed will be invalidated. 67Table of Contents In addition, according to the Contract Law, an intermediation contract is defined as a contract whereby an intermediary presents to its client anopportunity for entering into a contract or provides the client with other intermediary services in connection with the conclusion of a contract, and the clientpays the intermediary service fees. Pursuant to the Contract Law, an intermediary must provide true information relating to the proposed contract. If anintermediary conceals any material fact intentionally or provides false information in connection with the conclusion of the proposed contract, which resultsin harm to the client’s interests, the intermediary may not claim for service fees and is liable for the damages caused. The Opinions for Financial JudgmentWork issued by the Supreme People’s Court in August 2017 further specify that the relationship between online lending intermediary and each party ofonline lending loan agreement shall be defined as an intermediary contractual relationship, and the intermediary service fees charged by an online lendingintermediary to circumvent the legal limit of interest of private lending shall be invalid. Our services offered on Juzi Licai constitute intermediary service,and the agreements by and between Qianhai Juzi, users and/or individual investors on Juzi Licai are intermediation contracts under the Contract Law. Regulations Relating to Illegal Fund-Raising and Unapproved Loan Facilitation Raising funds by entities or individuals from the general public must be conducted in strict compliance with applicable PRC laws and regulations toavoid administrative and criminal liabilities. The Measures for the Banning of Illegal Financial Institutions and Illegal Financial Business Operationspromulgated by the State Council in July 1998 and amended in January 2011, or the Measures for the Banning of Illegal Financial Business Operations, andthe Notice on Relevant Issues Concerning the Penalty on Illegal Fund-Raising issued by the General Office of the State Council in July 2007, explicitlyprohibit illegal public fund-raising. The main features of illegal public fund-raising include: (i) illegally soliciting and raising funds from the general publicby means of issuing stocks, bonds, lotteries or other securities without obtaining the approval of relevant authorities, (ii) promising a return of interest orprofits or investment returns in cash, properties or other forms within a specified period of time and (iii) using a legitimate form to disguise the unlawfulpurpose. To further clarify the criminal charges and punishments relating to illegal public fund-raising, the Supreme People’s Court promulgated the JudicialInterpretations to Issues Concerning Applications of Laws for Trial of Criminal Cases on Illegal Fund-Raising which came into force in January 2011, or theIllegal Fund-Raising Judicial Interpretations. The Illegal Fund-Raising Judicial Interpretations provide that a public fund-raising will constitute a criminaloffense related to “illegally soliciting deposits from the public” under the PRC Criminal Law, if it meets all of the following four criteria: (i) the fund-raisinghas not been approved by the relevant authorities or is concealed under the guise of legitimate acts; (ii) the fundraising employs general solicitation oradvertising such as social media, promotion meetings, leafleting and short messaging service advertising; (iii) the fundraiser promises to repay, after aspecified period of time, the capital and interests, or investment returns in cash, properties in kind and other forms; and (iv) the fund-raising targets at thegeneral public as opposed to specific individuals. An illegal fund-raising activity will be fined or prosecuted in the event that it constitutes a criminaloffense. Pursuant to the Illegal Fund-Raising Judicial Interpretations, an offender that is an entity will be subject to criminal liabilities, if it illegally solicitsdeposits from the general public or illegally solicits deposits in disguised form (i) in an amount exceeding RMB1,000,000, (ii) with over 150 fund-raisingtargets involved, or (iii) with the direct economic loss caused to fund-raising targets exceeding RMB500,000, or (iv) the illegal fundraising activities havecaused baneful influences to the public or have led to other severe consequences. An offender who is a natural person is also subject to criminal liabilities butwith lower thresholds. In January 2019, the Supreme People’s Court, Supreme People’s Procuratorate and Ministry of Public Security issued the Opinions on HandlingCriminal Cases of Illegal Fund-raising, which further clarified, among other things, that the PRC financial administration laws and regulations shall beconsidered as the basis for determining the illegality of illegal fund-raising. We have taken measures to avoid conducting any activities that are prohibited under the illegal-funding related laws and regulations. We act asintermediaries for users and retail investors. In addition, we do not directly receive any funds from retail investors in our own accounts, as funds loanedthrough our platform are deposited into and settled by a third-party custody account managed by China Guangfa Bank. The Measures for the Banning of Illegal Financial Business Operations also prohibits facilitating loans to the public without the approval of thePBOC. The General Rules on Loans issued by the PBOC in June 1996 further provides that a financial institution shall conduct the loan business with theapproval of the PBOC. The funding of loans by us without going through network microcredit companies or trusts may render us to be deemed as a lender ora provider of financial services by the PRC regulatory authorities, and we may be subject to supervision and restrictions on lending under such PRC laws andregulations. 68Table of Contents Regulations Relating to Online Lending Information Intermediary Service Agency In July 2015, ten PRC regulatory agencies, including the PBOC, the MIIT and the CBRC jointly issued the Guidelines on Promoting the HealthyDevelopment of Internet Finance, or the Guidelines. The Guidelines call for active government support of China’s internet finance industry, including theonline peer-to-peer lending service industry, and clarify the division of responsibility among regulatory agencies. The Guidelines specify that the CBRC willhave primary regulatory responsibility for the online peer-to-peer lending service industry in China and state that online peer-to-peer lending serviceproviders shall act as an intermediary platform to provide information exchange, matching, credit assessment and other intermediary services, and must notprovide credit enhancement services and/or engage in illegal fundraising. The Guidelines provide additional requirements for China’s internet financeindustry, including the use of custody accounts with qualified banks to hold user funds as well as information disclosure requirements. In April 2016, to further implement the requirements specified in the Guidelines, the General Office of the State Council and fifteen regulatoryagencies (including the CBRC) promulgated the Implementation Plan of Specific Rectification for Risks in Internet Finance and the Implementation Plan ofSpecific Rectification for Risks in Online Peer-to-Peer Lending, or the Implementation Plans. The Implementation Plans emphasize several requirements thatare contemplated for the rectification of the peer-to-peer lending service industry, which include, among others, that (i) an online peer-to-peer lending serviceprovider is an information intermediary; (ii) the lending through the online platform conducted by such service provider meets the standards of directlending, namely the direct lending from individuals to individuals realized through the online platform; (iii) the online peer-to-peer lending service providershall not violate regulatory “red lines”, including setting up any capital pools, financing for itself, promising on a guarantee of principal and interest and etc.;(iv) the funds of lenders and borrowers shall be deposited with eligible third-party custodian accounts and (v) full, timely and objective disclosure of theinformation, and the establishment of information security measures. In August 2016, four PRC regulatory agencies, including the CBRC, the MIIT, the MPS and Cyberspace Administration of China, published theInterim Measures. The Interim Measures define online lending intermediaries as the financial information intermediaries that are engaged in online peer-to-peer lending information business and provide lenders and borrowers with lending information services, such as information collection and publication,credit rating, information interaction and loan facilitation. Consistent with the Guidelines, the Interim Measures prohibit online lending intermediaries fromproviding credit enhancement services and collecting funds directly or indirectly, and require, among others, (i) that online lending intermediaries intendingto provide online lending information agency services and its subsidiaries and branches must make relevant record-filing with local financial regulatoryauthorities with which it is registered after obtaining the business license; (ii) that online lending intermediaries operating telecommunication services mustapply for relevant telecommunication service license after the completion of the record-filing and registration with the local financial regulatory authority;and (iii) that online lending intermediaries must materially specify the online lending information intermediary in the business scope. The Interim Measures list the following businesses that an online lending intermediary must not, by itself or on behalf of a third party, participate in:(i) financing for themselves whether or not in disguised form; (ii) accepting or collecting directly or indirectly the funds of lenders; (iii) providing lenderswith guarantee or promise on guarantee of principal and interest directly or in disguised form; (iv) publicizing or promoting financing projects at physicallocations; (v) extending loans, except otherwise as provided by laws and regulations; (vi) splitting the term of any financing project; (vii) offering wealthmanagement and other financial products by themselves to raise funds, and selling as an agent bank wealth management, securities company assetmanagement, fund, insurance or trust products and other financial products; (viii) conducting asset securitization business or realizing transfer of creditors’rights in the forms of asset packaging, asset securitization, trust assets, fund shares, etc.; (ix) engaging in any form of mixture, bundling or agency with otherinstitutions in investment, agency in sale, brokerage and other business except as permitted by laws, regulations and relevant regulatory provisions on onlinepeer-to-peer lending; (x) falsifying or exaggerating earnings outlook of financing projects, concealing the defects and risks of financing projects, makingfalse advertising or promotion, etc., by using ambiguous words or other fraudulent means, fabricating or spreading false or incomplete information impairingthe business reputation of others or misleading lenders or borrowers; (xi) providing information intermediary services for high-risk financing which uses theborrowed funds for investment in stocks, over-the-counter fund distribution, futures contracts, structured funds and other derivative products; (xii) engagingin businesses such as crowd-funding in equity; and (xiii) other activities prohibited by the laws, regulations and the regulatory provisions on online peer-to-peer lending. In addition, the Interim Measures stipulate that online lending intermediaries shall not operate businesses other than risk management andnecessary business processes such as information collection and confirmation, post-loan tracking and pledge management in accordance with online lendingregulations, via offline physical locations. Furthermore, the Interim Measures provide that online lending intermediaries shall, based on their riskmanagement capabilities, set upper limits on the loan balance of a single borrower borrowing both from one online lending intermediary and from all onlinelending intermediaries. In the case of natural persons, this limit shall not be more than RMB200,000 for one online lending intermediary and not more thanRMB1 million in total from all platforms, while the limit for a legal person or organization shall not be more than RMB1 million for one online lendingintermediary and not more than RMB5 million in total from all platforms. 69Table of Contents Moreover, the Interim Measures require that each online lending intermediary (i) separate its own capital from funds received from lenders andborrowers and (ii) select a qualified banking financial institution as its funding custodian institution, which shall perform custody and administrativeresponsibilities as required. The Interim Measures also set out certain additional requirements applicable to online lending intermediaries on, among other things, the real-nameregistration of lenders and borrowers, the risk control, internet and information security, limits on the fund collection period (up to 20 business days),allocation of charges, personal credit management, file management, lenders and borrowers protection, prohibition on making decisions by online lendingintermediaries on behalf of the lender without the authorization of the lender, administration of electronic signatures and information disclosure. Any violation of the Interim Measures by an online lending intermediary may subject such online lending intermediary to certain penalties asdetermined by applicable laws, and regulations, or by relevant government authorities if the applicable laws and regulations are silent on the penalties. Theapplicable penalties may include but are not limited to, criminal liabilities, warning, rectification, tainted integrity record and fines of up to RMB30,000. If any online lending intermediary established prior to the implementation of these Interim Measures fail to conform to the provisions of theseInterim Measures, the local financial regulatory authority shall require such online lending intermediary to make rectification, and the rectification periodshall not exceed 12 months. In April 2017, CBRC issued the Guidelines on Prevention and Control of the Risks in Banking Industry, to further emphasize that the InterimMeasures and the supporting mechanism (including but not limited to the record-filing mechanism and the fund custodian mechanism) shall be strictlyimplemented. In April 2017, the Online Lending Rectification Office issued the Notice on the Performance of Check and Rectification of Cash Loan BusinessActivities and a supplementary notice, or the Notice on Cash Loan. The Notice on Cash Loan requires the local branches of the Online Lending RectificationOffice to conduct a comprehensive review and inspection of the cash loan business of online lending platforms and require such platforms to implementnecessary improvements and remediation within a specific period to comply with the relevant requirements under the applicable laws and regulations. TheNotice on Cash Loan focuses on preventing malicious fraudulent activities, loans that are offered at excessive interest rates and violence in the loancollection processes in the cash loan business operation of online lending platforms. The Online Lending Rectification Office also issued a list of cash loanbusiness activities that are to be examined. In December 2017, the Internet Finance Rectification Office and the Online Lending Rectification Office jointly issued the Circular 141, outlininggeneral requirements on the “cash loan” business conducted by network microcredit companies, banking financial institutions and online lendinginformation intermediaries. The Circular 141 specifies the features of “cash loans” as not relying on consumption scenarios, with no specified use of loanproceeds, no qualification requirement on users and unsecured etc. The Circular 141 sets forth several general requirements with respect to “cash loan”business, including, without limitation: (i) no organizations or individuals may conduct the lending business without obtaining approvals for the lendingbusiness; (ii) the aggregated borrowing costs of borrowers charged by institutions in the forms of interest and various fees should be annualized and subjectto the limit on interest rate of private lending set forth in the Private Lending Judicial Interpretations issued by the Supreme People’s Court; (iii) all relevantinstitutions shall follow the “know-your-customer” principle and prudentially assess and determine the borrower’s eligibility, credit limit and cooling-offperiod, etc. Loans to any borrower without income sources are prohibited; and (iv) all relevant institutions shall enhance the internal risk control andprudentially use the “data-driven” risk management model. 70Table of Contents With respect to network microcredit companies, the Circular 141 requires the relevant regulatory authorities to suspend the approval of theestablishment of network microcredit companies and the approval of any microcredit business across provinces. The Circular 141 also specifies that networkmicrocredit companies shall not provide campus loans, and should suspend the funding of network micro-loans with no specific scenario or designated use ofloan proceeds, gradually reduce the volume of the existing business relating to such loans and take rectification measures in a period to be separatelyspecified by authorities. Further detailed requirements on network microcredit companies are provided in a rectification implementation plan issued by theOnline Lending Rectification Office on December 8, 2017. See “Item 4. Information on the Company—B. Business Overview—Regulations Relating toMicrocredit.” The Circular 141 also sets forth several requirements on banking financial institutions participating in “cash loan” business, including, among otherthings, (i) such banking financial institutions shall not extend loans jointly with any third-party institution which has not obtained approvals for the lendingbusiness, or fund such institution for the purpose of extending loans in any form; (ii) with respect to the loan business conducted in cooperation with third-party institutions, such banking financial institutions shall not outsource the core business (including the credit assessment and risk control), and shall notaccept any credit enhancement service whether or not in a disguised form (including the commitment to taking default risks) provided by any third-partyinstitutions with no guarantee qualification and (iii) such banking financial institutions must require and ensure that the third-party institutions shall notcollect any interests or fees from the borrowers. In additions, the Circular 141 emphasizes several requirements on the online lending information intermediaries. For instance, such intermediariesare prohibited from facilitating any loans to students or other persons without repayment source or repayment capacity, or loans with no designated use ofproceeds. Also, such intermediaries are not permitted to deduct interest, handling fee, management fee or deposit from the principal of loans provided to theborrowers in advance. Any violation of the Circular 141 may result in penalties, including but not limited to suspension of operation, orders to make rectification,condemnation, revocation of license, order to cease business operation, and criminal liabilities. Regulations Relating to Record-filings of Online Lending Information Intermediary Service Agency In November 2016, the CBRC, the MIIT and the SAIC, jointly published the Guidelines on the Administration of Record-filings of Online LendingInformation Intermediary Agencies, or the Record-filings Guidelines, to establish and improve the record-filing mechanisms for online lendingintermediaries. According to the Record-filings Guidelines, a newly established online lending information intermediary shall make the record-filings andregistration with the local financial regulatory authority after obtaining the business license; while with respect to any online lending informationintermediary which is established and begins to conduct the business prior to the publication of this Record-filings Guidelines, the local financial regulatoryauthority shall, pursuant to relevant arrangement of specific rectification work for risks in online peer-to-peer lending, accept the application for record-filings and registration submitted by a qualified online lending information intermediary, or any online lending information intermediary which hascompleted the rectification confirmed by relevant authorities. On December 8, 2017, the Online Lending Rectification Office issued the Notice on the Rectification and Inspection Acceptance of Risk of OnlineLending Information Intermediaries, or the Circular 57, providing further clarification on several matters in connection with the rectification and record-filingof online lending information intermediaries, including, among other things: 71Table of Contents · Requirements relating to risk reserve funds. The online lending information intermediaries shall discontinue setting aside additional funds asrisk reserve funds or originating new risk reserve funds. In addition, the existing balance of risk reserve funds shall be gradually reduced.Moreover, online lending information intermediaries are prohibited from promoting their services by publicizing the risk reserve funds, andauthorities shall actively encourage the online lending information intermediaries to seek third parties to provide lenders with alternate meansof investors protection, including third-party guarantee arrangements. · Requirements to qualify for record-filing. The Circular 57 sets forth certain requirements which an online lending information intermediaryshall not be in breach before it can qualify for the record-filing, including: (i) an online lending information intermediary may not conduct the“thirteen prohibited actions” or exceed the Individual Lending Amount Limit after August 24, 2016, and shall gradually reduce the balance;(ii) an online lending information intermediary which has participated in businesses of the real estate mortgage, campus loan or “cash loan,” isrequired to suspend the new loan origination and the outstanding balance of the abovementioned loan shall be gradually reduced within acertain timetable as required under the CBRC Circular 26 and the Circular 141; and (iii) the online lending intermediaries are required to set upcustody accounts with qualified banks that have passed certain testing and evaluation procedures run by the Online Lending RectificationOffice to hold user funds. For the online lending intermediaries that are unable to accomplish the rectification and record-filing but arecontinuing to participate in the online lending business, the relevant authorities shall subject online lending intermediaries to administrativesanctions, including but not limited to revoking their telecommunicating business operation license, shutting down their business websites andrequesting financial institutions not to provide any financial services to such online lending intermediaries. · Requirements relating to the timing of record-filing. The local governmental authorities shall conduct and complete acceptance inspection ofthe rectification with the following timetable: (i) completion of record-filing for major online lending information intermediaries by the end ofApril 2018; (ii) with respect to online lending information intermediaries with substantial outstanding balance of those loans prohibited underthe relevant laws and regulations and timely reduction of those balance is difficult, the relevant business and outstanding balance shall bedisposed and/or carved out, and record-filing shall be completed by the end of May 2018; (iii) with respect to those online lending informationintermediaries with complex and extraordinary circumstances and substantial difficulties exist to complete rectification, the “relevant work”shall be completed by the end of June 2018. From August 2018 to the date of this annual report, the Online Lending Rectification Office, the Internet Finance Rectification Office and/or othercompetent authorities implemented certain rules, including but without limitation (i) the Notice Regarding Conducting Compliance Inspections on OnlineLending Information Intermediary issued by the Online Lending Rectification Office in August 2018, or the Circular 63, (ii) the Notice Regarding theEstablishment of Online Lending Information Intermediaries Data Reporting System issued by the Online Lending Rectification Office in November 2018, orthe Circular 73, (iii) the Notice on Proper Disposal of Online Lending Information Intermediaries in a Classified Manner and Risk Control jointly issued bythe Internet Finance Rectification Office and the Online Lending Rectification Office in December 2018, or the Circular 175, and (iv) the Notice on FurtherImplementation of Online Lending Intermediaries Compliance Inspection and Follow-up Work issued by the Online Lending Rectification Office inJanuary 2019, or the Circular 1. Those rules further set forth several matters in connection with the rectification of the online lending informationintermediaries, including, among other things: · Compliance Inspection. Circular 63 requires that each online lending information intermediary shall start three types of inspection inaccordance with the Issues List for Compliance Inspection on Online Lending Information Intermediaries attached thereto, or the ComplianceInspection Issues List, including (i) the self-inspection conducted by the online lending information intermediary itself, (ii) the self-disciplineinspection conducted by local internet finance associations or other local organizations, and (iii) the administrative inspection conducted bythe local online lending rectification offices. All of these compliance inspections shall be completed before the end of 2018. However, theCircular 1 issued in January 2019 specified that by the end of 2018, all self-inspection has been completed, but the administrative inspectioncould be completed in only a few jurisdictions. Thus the administrative inspection shall be conducted in the first quarter of 2019. As of the dateof this annual report, all three types of inspection of us have been completed; however, we have not been informed about the result of theadministrative inspection conducted by SFO. 72Table of Contents · Disposal in a Classified Manner. Circular 175 emphasizes again that the online lending information intermediaries shall be disposed of in aclassified manner, based on current results of identification in accordance with Circular 63 and other applicable circulars. Circular 175 furtherprovides that an online lending information intermediary shall be classified into two general categories: (i) Intermediary with Incurred Risk,which means any online lending information intermediary having been exposed to high risks such as delinquency and not able to run itsbusiness in a consistent manner; and (ii) Intermediary without Incurred Risk, which means any online lending information intermediary havingnot been exposed to any high risk. The Intermediary without Incurred Risk shall be further divided into certain categories, including but notlimited to a zombie intermediary, an online lending intermediary with high risk, and a normally running online lending intermediary, amongwhich only the normally running online lending intermediaries could be subject to further compliance inspection. As of the date of this annualreport, we have not been informed by any regulatory authorities that we would be classified as an Intermediary with Incurred Risk, a zombieintermediary, or an online lending intermediary with high risk. · Access to Data Reporting System. Circular 73 and Circular 175 require that all online lending information intermediaries shall be accessed tothe Specific Rectification of Online Lending Information Intermediaries Data Reporting System, and any online lending informationintermediary not listed in such system shall be transferred to designated local authorities dealing with illegal fund-raising for furtherdisposition. As of the date of this annual report, we have successfully registered for such data reporting system. · Reduction of Business Volume. According to the Circular 1, (x) with respect to administrative regions, the number of online lendingintermediaries, the number of investors and the business volume therein shall be reduced, (y) with respect to an online lending intermediary, thenumber of investors, business volume and number of lenders thereon shall be reduced. The Note on Further Regulating Relevant PerformanceDuring the Special Rectification of Online Lending Intermediaries Industry issued by Shenzhen Internet Finance Association inDecember 2018, also requires the online lending intermediaries with registered address or place of actual business within the administrativeregion of Shenzhen, among other things: (i) not to increase the outstanding balance of loan; (ii) not to increase the number of lenders and reducethe number of lenders in an orderly manner; and (iii) not to establish new branches and reduce the number of offline stores. Notwithstanding the forgoing, the local financial regulatory authority in Shenzhen are still in the process of drafting detailed implementationrules regarding the record-filing procedures, and to our knowledge, none of the online information intermediaries, including us, have been permitted tosubmit such application for record-filing in Shenzhen, and we cannot assure you that once submitted, our application will be accepted by the relevantgovernment authorities. Regulations Relating to Funds Custodian of Online Lending The Interim Measures purport, among other things, to require an online lending intermediary to carry out isolated management of its proprietaryfunds and the funds of lenders and borrowers and choose an eligible banking financial institution as the custodian institution for the funds of lenders andborrowers. Pursuant to the Interim Measures, the depositary shall enter into fund custodian agreements with an online Information Intermediary, theborrowers, the lenders and/or other related parties, and conduct custodian, transfer, payment, accounting and supervision of the funds of lenders andborrowers pursuant to such agreements. In February 2017, the CBRC released the Guidelines to Regulate Funds Custodian for online lending intermediaries, or the Custodian Guidelines.The Custodian Guidelines define depositories as commercial banks that provide online lending fund custodian services, and stipulate that the depositoriesshall not engage in offering any guarantee, including: (i) offering guarantees for lending transaction activities conducted by online lending intermediaries, orundertaking any liability for breach of contract related to such activities; (ii) offering guarantees to lenders, guaranteeing principal and dividend payments orbearing the risks associated with fund lending operations for lenders. 73Table of Contents Apart from the requirements set forth in the Interim Measures and the Guidelines, the Custodian Guidelines impose certain responsibilities on onlinelending intermediaries, including entering into fund custodian agreements with only one commercial bank to provide fund custodian services, andorganizing independent audit on funds custodian accounts of borrowers and investors and various other services. The Custodian Guidelines also provide thatonline lending intermediaries are permitted to develop an online lending fund custodian business only after satisfying certain conditions, including:(i) completing registration, filing records and obtaining a business license from the competent industry and commerce administration authority; (ii) filingrecords with the local financial regulatory authority; and (iii) applying for a corresponding telecommunications service license pursuant with the relevanttelecommunication authorities. The Custodian Guidelines also require online lending intermediaries to perform various obligations, and prohibits them fromadvertising their services except in accordance with certain exposure requirements, the interpretation and applicability of which is unclear, as well as certainoversight requirements. The Custodian Guidelines also sets forth other business standards and miscellaneous requirements for depositories and onlinelending intermediaries as well. Online lending intermediaries and commercial banks conducting the online custodian services prior to the effectiveness of theCustodian Guidelines have a six-month grace period to rectify any activities not in compliance with the Custodian Guidelines. We have entered into an online lending fund custodian agreement with China Guangfa Bank, pursuant to which China Guangfa Bank shall set upseparate custodian accounts for funds of lenders and users on Juzi Licai, and shall perform fund custody, payment and settlement services on Juzi Licai. Regulations Relating to Information Disclosure by Online Lending Intermediary The Interim Measures stipulate certain requirements on the information disclosure by an online lending intermediary, which include, among otherthings: (i) full disclosure of the basic information of borrowers and the financing projects, the risk assessment results and potential risk of the projects, the useof funds, and other related information on the official websites; and (ii) submission of the regular information disclosure announcements and other relevantdocuments to the local financial regulatory authorities for records, and preservation of such documents at the intermediary’s domicile for inspection by thepublic. Pursuant to the Interim Measures, detailed rules on the information disclosure by an online lending intermediary shall be formulated separately. In August 2017, the General Office of the CBRC released the Guidelines on Information Disclosure of Business Activities of Online LendingInformation Intermediaries, or the Information Disclosure Guidelines. Consistent with the Interim Measures, the Information Disclosure Guidelines emphasizethe requirement of information disclosure by an online lending intermediary and further, detail the frequency and scope of such information disclosure. Anyviolation of the Information Disclosure Guidelines by an online lending intermediary may subject the online lending intermediary to certain penalties underInterim Measures. In addition, the Information Disclosure Guidelines require online lending intermediaries that do not fully comply with the InformationDisclosure Guidelines in conducting their business to rectify the relevant activities within six months after the release of the Information DisclosureGuidelines. We have implemented and will continue to implement various policies and procedures to conduct our business and operations to comply suchInterim Measures and the Information Disclosure Guidelines, including: maintaining a section on official website and APPs for disclosing the basicinformation of Juzi Licai, the borrowers and the financing projects on Juzi Licai. Regulations Relating to Campus Online Lending In April 2016, the General Office of the Ministry of Education, or the MOE, and the General Office of the CBRC jointly issued the Notice onEducation and Guidance Work and Strengthening the Risks Prevention of Campus Delinquency Online Lending, or the Education and Guidance WorkNotice. The Education and Guidance Work Notice provides that (i) the local financial regulatory authority shall closely monitor the online lendingintermediaries’ actions, such as false and misleading advertising and promotion, or other actions that may mislead the lenders or borrowers, and strengthenthe supervision and the risk warnings of online lending intermediaries’ advertising and promotional activities focusing on those college students, as well asthose online lending intermediaries who neglect to conduct borrower qualification examination; and (ii) the corresponding response measures and plan fornon-compliant campus online lending shall be established and improved; and any non-compliant online lending intermediary that has advertised andpromoted its services within the campus and thus may infringe upon the legal rights of the students, cause safety hazards or lack advance permission, shallpromptly be reported to the relevant regulatory authorities and be dealt with pursuant to the applicable laws. 74Table of Contents In October 2016, six PRC regulatory agencies, including the CBRC, the Office of the Central Leading Group for Cyberspace Affairs and the MOE,jointly issued the Notice on Further Strengthening the Rectification of Campus Online Lending, or Rectification of Campus Online Lending Notice. TheRectification of Campus Online Lending Notice strengthens and details the remediation measures of the online lending business focusing on the students, orcampus online lending, and provides the following: (i) providing online lending service to college students under the age of eighteen is prohibited (forcollege students over eighteen, the person engaging in campus online lending must verify the secondary repayment source of such borrower (which could bethe borrower’s parents, guardian, or other custodian), obtain the written undertaking documents consenting to the loan and the repayment guarantee from thesecondary repayment source of such borrower, and verify the identity of the secondary repayment source of such borrower through the phone or othermethods); (ii) prohibits false and fraudulent advertising and promotion through the use of discriminatory and misleading language or other methods, and thedistribution of false or incomplete information to mislead college students borrowers; (iii) prohibits publicizing or promoting lending services at physicallocations (excluding electronic means such as the internet) either by persons engaging in campus online lending themselves or by a third party; or(iv) prohibits usurious loans in disguised forms by charging various fees such as procedure fee, overdue fine, service fee and recovery fee, or forcingrepayment by illegal collection. In addition, the Rectification of Campus Online Lending Notice requires that the person engaging in campus online lending shall establish the threemechanisms, namely borrower qualification examination, risk monitoring and user information protection, as follows: (i) to establish borrower qualificationexamination and classification system to ensure that the borrowers have the repayment capacity for the loan pursuant to the relevant agreement; (ii) toestablish risk monitoring system to further strengthen information disclosure and to provide risk warnings to borrowers, and to ensure that the lendingprocedures and the key elements of the loan are open and transparent; and (iii) to establish the user information protection mechanism, by implementing theOrder for the Protection of Telecommunication and Internet User Personal Information and other relevant criteria and by conducting the information systemgradation registration and testing, to strength user information protection and ensure the legality and information security during the collection, settlementand use of lenders’ and borrowers’ information. Pursuant to the Rectification of Campus Online Lending Notice, the local financial regulatory authorities and the branches of the CBRC shalljointly conduct a thorough examination and centralized rectification of persons engaging in campus online lending. When the violation is determined to beminor, rectification shall be made within a prescribed time limit; and when the conduction of the rectification is refused or the violation is determined to bematerial, such person’s business of campus online lending could be suspended, shut down or banned according to the applicable laws. Any person that issuspected to be involved in any malicious fraud or other serious extraordinary activities shall be severely punished. In any case involving criminal activities,the relevant person shall be dealt with by relevant judicial authorities. In April 2017, CBRC issued the Guidelines on Prevention and Control of the Risks in Banking Industry, to further emphasize the relevantrequirements on the campus online lending business provided in the Rectification of Campus Online Lending Notice, which include the prohibitions of:(i) marketing to individuals unable to repay loans; (ii) providing online lending service to college students under the age of eighteen; (iii) conducting falseand fraudulent advertising and promotion; or (iv) providing usurious loans in disguised forms. In May 2017, CBRC, MOE and Ministry of Human Resources and Social Security issued the Notice on Further Strengthening the Regulation andManagement Work of Campus Online Lending Business, or the CBRC Circular 26. The CBRC Circular 26 provides that (i) the commercial banks and thepolicy banks may research and develop financial products and provide loans that provide general assistance to college students and support them in areassuch as learning and training, consumption and entrepreneurship, and provide customized and quality financial services to college students with reasonablecredit limits and interest rates; (ii) any entity established without approval of the relevant banking regulatory authority shall not provide any credit servicesto college students so as to eliminate fraud, usurious loans or violent loan collections; and (iii) all Campus Online Lending business conducted by the OnlineLending Information Intermediaries shall be suspended and the outstanding balance of Online Campus Lending loans shall be gradually reduced untilreaching a zero balance. 75Table of Contents Regulations Relating to Microcredit The Guidance on the Pilot Establishment of Microcredit Companies jointly promulgated by the CBRC and the PBOC in May 2008 allowsprovincial governments to approve the establishment of microcredit companies on a test basis. Based on this guidance, many provincial governments inChina, including that of Jiangxi Province, promulgated local implementation rules on the administration of microcredit companies. For example, JiangxiFinancial Service Office, the regulatory authority for microcredit companies in Jiangxi Province, promulgated Measures for the Supervision andAdministration of Microcredit Companies in Jiangxi Province (Trial Version) in March 2012, to impose the management duties upon the relevant regulatoryauthorities and to specify more detailed requirements on the microcredit companies, in accordance with which, among other requirements, (i) the microcreditcompanies are prohibited from engaging in deposit taking activities from the public and illegal fund-raising; (ii) the modification of certain companyregistration issues shall be subject to the approval by the relevant regulatory authorities; and (iii) the microcredit company shall engage in the loan businessin the place of registration and in or around the surrounding counties within the same municipality of the place of registration, and the loan balance for theborrowers in the county of registration shall not be less than the 60% of the aggregate loan balance. Jiangxi Financial Service Office further issued the Guidelines for the Supervision and Administration of Network Microcredit Companies of JiangxiProvince (for Trial Implementation) in September 2016, or Jiangxi Network Microcredit Companies Guidelines, to provide more specific rules on thesupervision and administration of network microcredit companies in Jiangxi Province, pursuant to which, among other things, the network microcreditcompany could raise funds through transferring credit asset and asset-backed securitization with the approval of the regulatory authority, apart from thecapital contributions paid by its shareholders and loans from no more than two banking financial institutions. In addition, Jiangxi Network MicrocreditCompanies Guidelines require that (i) the network microcredit company shall primarily conduct its microcredit loan business through the internet, and thatthe working capital used in the microcredit loan business through the internet shall be no less than 70% of the aggregate working capital of such networkmicrocredit company, and (ii) the aggregate loan balance within the municipality where such network microcredit company is located shall be no less than30% of the aggregate loan balance of the network microcredit company. In November 2017, the Internet Finance Rectification Office issued the Notice on the Immediate Suspension of Approvals for the Establishment ofNetwork Microcredit Companies, which became effective immediately and provides that the relevant regulatory authorities of microcredit companies at alllevels shall suspend the approval of the establishment of network microcredit companies and the approval of any microcredit business conducted acrossprovincial lines. On December 1, 2017, the Internet Finance Rectification Office and the Online Lending Rectification Office jointly issued the Circular 141, whichemphasizes the suspension of approving new network microcredit companies and further imposes measures to strengthen the regulation of networkmicrocredit companies. See “—Regulations Relating to Online Consumer Finance Services.” On December 8, 2017, the Online Lending Rectification Office promulgated the Implementation Plan of Specific Rectification for Risks inMicrocredit Companies and Network Microcredit Companies, or the Rectification Implementation Plans of Network Microcredit Companies. Pursuant to theRectification Implementation Plans of Network Microcredit Companies, “network micro-loans” are defined as micro-loans provided through the internet bynetwork microcredit companies controlled by internet enterprise. The features of network micro-loans include online borrower acquisition, credit assessmentbased on the online information collected from the business operation and internet consumption, as well as online loan application, approval and funding. 76Table of Contents Consistent with the Guidance on the Pilot Establishment of Microcredit Companies and the Circular 141, the Rectification Implementation Plans ofNetwork Microcredit Companies emphasize several aspects where inspection and rectification measures must be carried out for the network micro-loansindustry, which include, among others, (i) the network microcredit companies shall be approved by the competent authorities in accordance with theapplicable regulations promulgated by the State Council, and the approved network microcredit companies in violation of any regulatory requirements shallbe re-examined; (ii) qualification requirements to conduct network micro-loan business (including the qualification of sponsor shareholders, the sources ofborrowers, the internet scenario and the digital risk-management technology); (iii) whether the qualification and funding source of the shareholders ofnetwork microcredit companies are in compliance with the applicable laws and regulations; (iv) whether the “integrated actual interest” (namely theaggregated borrowing costs charged to borrowers in the form of interest and various fees) are annualized and subject to the limit on interest rate of privatelending set forth in the Private Lending Judicial Interpretations issued by the Supreme People’s Court and, whether any interest, handling fee, managementfee or deposit are deducted from the principal of loans provided to the borrowers in advance; (v) whether campus loans, or network micro-loans with nospecific scenario or designated use of loan proceeds are granted; (vi) with respect to the loan business conducted in cooperation with third-party institutions,whether the network microcredit companies outsource the core business (including the credit assessment and risk control), or accept any credit enhancementservice (whether or not in a disguised form) provided by any third-party institutions with no guarantee qualification; or whether any applicable third-partyinstitution collects any interests or fees from the borrowers; and (vii) entities that conduct network micro-loans business without relevant approval or licensefor lending business. The Rectification Implementation Plans of Network Microcredit Companies also set forth that all related institutions shall be subject to inspectionand investigation before the end of January 2018. Depending on the results, different measures shall be taken before the end of March 2018: (i) forinstitutions holding network microcredit licenses but do not meet the qualification requirements to conduct network micro-loan business, their networkmicrocredit licenses shall be revoked and such institutions will be prohibited from conducting loan business outside the administrative jurisdiction of theirrespective approving authorities; (ii) for institutions holding network microcredit licenses that meet the qualification requirements to conduct network micro-loan business but were found not in compliance with other requirements, such as the requirements on the integrated actual interest rate, the scope of loan andthe cooperation with third-party institutions, such institutions shall take rectification measures in a period separately specified by authorities, and in theevent that the rectification does not meet the authorities’ requirements, such institutions shall be subject to several sanctions, including revocation of licenseand orders to cease business operation. We engage in network microcredit businesses through Ji’an Microcredit, a subsidiary of Shenzhen Fenqile, in Ji’an, Jiangxi Province, whichobtained a network microcredit license from the relevant local authority. The microcredit license expired in August 2018. We have submitted an applicationto renew such license and to increase the registered capital of Ji’an Microcredit from RMB300 million (US$43.6 million) to RMB500 million (US$72.7million). On April 29, 2019, we received the approval of our application from the relevant local authority and are in the process of completing the renewalprocedure. If we cannot complete the renewal procedure as we expected, our operation of network microcredit companies would be materially and adverselyaffected. Regulations Relating to Financing Guarantee In August 2010, CBRC, NDRC, MIIT, MOC, PBOC, SAIC and Ministry of Finance of PRC promulgated the Tentative Administrative Measures forFinancing Guarantee Companies. The Tentative Administrative Measures for Financing Guarantee Companies require an entity or individual to obtain aprior approval from the relevant regulatory body to engage in the financing guarantee business, and defines “financing guarantee” as an activity whereby theguarantor and 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. In August 2017, the State Council promulgated the Regulations on the Supervision and Administration of Financing Guarantee Companies, or theFinancing Guarantee Regulations, which became effective on October 1, 2017. The Financing Guarantee Regulations define “financing guarantee” as aguarantee provided for the debt financing (including but not limited to the extension of loans or issuance of bonds), and set out that the establishment of afinancing guarantee company or engagement in the financing guarantee business without approval may result in several penalties, including but not limitedto banning, an order to cease business operation, confiscation of illegal gains, fines of up to RMB1,000,000 and criminal liabilities. The Financing GuaranteeRegulations also set forth that the outstanding guarantee liabilities of a financing guarantee company shall not exceed ten times of its net assets, and that theoutstanding guarantee liabilities of a financing guarantee company vis-à-vis the same guaranteed party shall not exceed 10% of the net assets of thefinancing guarantee company, while the outstanding guarantee liabilities of a financing guarantee company vis-à-vis the same guaranteed party and itsaffiliated parties shall not exceed 15% of its net assets. 77Table of Contents In April 2018, seven PRC regulatory agencies including the CBIRC, the National Development and Reform Committee and the MIIT, jointly issuedfour supporting documents, or the CBIRC Circular 1, including Administration Measures for the Permits to Conduct Financing Guarantee Business,Measures for the Calculation of Outstanding Financing Guarantee Liabilities, Administration Measures for the Assets Ratio of Financing GuaranteeCompanies, and Guidelines to the Cooperation by and between the Banking Financial Institutions and Financing Guarantee Companies, to set forthimplementation measures of the Financing Guarantee Regulations. These measures cover various aspects of business operations of financing guaranteecompanies, including certain limits on outstanding guarantee liabilities and liability-to-asset ratio, and the requirements on cooperation model with thebanking financial institutions. Shenzhen Lexin Financing Guarantee Co., Ltd., one of subsidiaries of Shenzhen Fenqile, through which we intend to providethe guarantee to our borrowers on our e-commerce channel for the loan provided by our funding partners on our direct lending programs, has obtained thelicense to conduct financing guarantee business in September 2017. The license was updated in September 2018 to reflect the increase of its registeredcapital to RMB1.0 billion and will remain valid until September 2022. Regulations Relating to Anti-Money Laundering The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirementsapplicable to financial institutions as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary andsupervisory measures, establishment of various systems for client identification, retention of clients identification information and transactions records, andreports on large transactions and suspicious transactions. According to the PRC Anti-money Laundering Law, financial institutions subject to the PRC Anti-money Laundering Law include banks, credit unions, trust investment companies, stock brokerage companies, futures brokerage companies, insurancecompanies and other financial institutions as listed and published by the State Council, while the list of the non-financial institutions with anti-moneylaundering obligations will be published by the State Council. However, the State Council has not promulgated a list of the non-financial institutions subjectto anti-money laundering obligations. The Guidelines jointly released by ten PRC regulatory agencies in July 2015, purport, among other things, to require the internet finance industry,including online peer-to-peer lending platforms, to comply with certain anti-money laundering requirements, including establishing a user identificationprogram, monitoring and reporting of suspicious transactions, preserving user information and transaction records, and providing assistance to the publicsecurity department and judicial authority in investigations and proceedings in relation to anti-money laundering matters. The PBOC will formulateimplementation rules to further specify the anti-money laundering obligations of the internet finance industry. In October 2018, the PBOC and the CSRC jointly released the Administrative Measures for Anti-Money Laundering and Anti-Terrorism Financingof Internet Financial Institutions (for Trial Implementation), or the Anti-Money Laundering Measures for Internet Financial Institutions, which becameeffective in January 2019. The Anti-Money Laundering Measures for Internet Financial Institutions provides that the institutions engaging in internetfinance business, including online payment, online lending, online lending information intermediary business etc., shall be subject to the obligation of anti-money laundering and anti-terrorism financing, and further refined and detailed requirements of verifying client identity, reporting suspicious transactions,keeping identity data and transaction records, and other anti-money laundering obligations. The Interim Measures also stipulated the anti-money launderingobligations of an online lending intermediary therein. In addition, the Custodian Guidelines require that the anti-money laundering obligation shall be included in the fund custodian agreements betweenan online lending intermediary and the commercial bank acting as the depositary, and the online lending intermediary shall fulfill and cooperate with thedepositary to fulfill anti-money laundering obligations. We have implemented various policies and procedures, such as internal controls and “know-your-customer” procedures, for anti-money launderingpurposes. 78Table of Contents Regulations Relating to Internet Information Security and Privacy Protection Internet information in China is regulated from a national security standpoint. The NPC has enacted the Decisions on Preserving Internet Security inDecember 2000 as amended in August 2009, which subjects violators to potential criminal punishment in China for any effort to: (i) gain improper entry intoa computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercialinformation; or (v) infringe intellectual property rights. The MPS has promulgated measures that prohibit use of the internet in ways which, among otherthings, result in leaking state secrets or spreading socially destabilizing content. If an internet information service provider violates these measures, the MPSand its local branches may revoke its operating license and shut down its websites. In recent years, the PRC government authorities have enacted laws and regulations on internet use to protect users’ personal information from anyunauthorized disclosure. Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT inDecember 2011 and effective in March 2012, an internet information service provider may not collect any user personal information or provide any suchinformation to third parties without the consent of the user. An internet information service provider must expressly inform the users of the method, contentand purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of itsservices. An internet information service provider is also required to properly maintain the user’s personal information, and in case of any leak or likely leakof the user’s personal information, the internet information service provider must take immediate remedial measures and, in severe circumstances,immediately report to the telecommunications authority. In addition, pursuant to the Decision on Strengthening the Protection of Online Information issuedby the Standing Committee of the NPC in December 2012, the Order for the Protection of Telecommunication and Internet User Personal Information issuedby the MIIT in July 2013 and came into force in September 2013, any collection and use of user personal information must (i) be subject to the consent of theuser, (ii) abide by the principles of legality, rationality and necessity and (iii) be within the specified purposes, methods and scopes. An internet informationservice provider must also keep such information strictly confidential, and is further prohibited from divulging, tampering or destroying any suchinformation, or selling or providing such information to other parties. An internet information service provider is required to take technical and othermeasures to prevent the collected personal information from any unauthorized disclosure, damage or loss. Any violation of these laws and regulations maysubject the internet information service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown ofwebsites or even criminal liabilities. Moreover, pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the NPC in August 2015, which becameeffective in 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 transgressions upon order, shall be subject to criminal penalty for the result of (i) any dissemination of illegalinformation in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severesituations. Any individual or entity that (i) sells or provides personal information to others in a way violating the applicable law, or (ii) steals or illegallyobtain any personal information, shall be subject to severe criminal penalties. In addition, the Interpretations of the Supreme People’s Court and the SupremePeople’s Procuratorate of the PRC on Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringing Personal Information,issued in May 2017 and effective in June 2017, clarified certain standards for the conviction and sentencing of the criminals in relation to personalinformation infringement. In November 2016, the Standing Committee of the NPC released the Internet Security Law, which became effective in June 2017. The InternetSecurity Law requires network operators to perform certain functions related to internet security protection and the strengthening of network informationmanagement. For instance, under the Internet Security Law, network operators of key information infrastructure generally shall, during their operations in thePRC, store the personal information and important data collected and produced within the territory of the PRC. The Guidelines and the Interim Measures also set out certain requirements applicable to online lending intermediaries on, among other things,internet and information security. For example, an online lending intermediary shall in accordance with the relevant provisions on internet security of thestate and the requirements of the state’s system for classified protection of information security, conduct the record-filing of the class determination and classtesting of information systems, and possess perfect internet security facility and management systems. 79Table of Contents Regulations Relating to E-Commerce Certain laws and regulations are promulgated in recent years to specifically regulate the e-commerce industry in PRC. In January 2014, the SAICadopted the Online Transactions Measures, which impose certain stringent requirements and obligations on online trading or service operators as well as themarketplace platform providers. For example, the marketplace platform providers are obligated to examine the legal status of each third-party merchantselling products or services on the platform and display on a prominent location on the web page of such merchant the information stated in the merchant’sbusiness licenses or a link to such business license. Where the marketplace platform providers also act as online distributors, these marketplace platformproviders must make a clear distinction between their online direct sales and sales of third-party merchant products. Moreover, consumers are generallyentitled to return the products sold by an online trading operator within seven days upon the receipt thereof and are not required to provide reasons for suchreturn. In addition, the Online Transactions Measures specifies that online distributors or related service operators, as well as marketplace platform providers,shall conduct their businesses in full compliance with the Anti-unfair Competition Law and other relevant PRC laws and regulations, and shall not unfairlycompete with other operators or disturb social and economic orders, including but not limited to carrying out any fictitious transactions and deleting anyunfavorable comments. In November, 2017, the Standing Committee of the NPC released a newly amended Anti-unfair Competition Law of the PRC, or the Anti-unfairCompetition Law, which was implemented on January 1, 2018. Such newly amended Anti-unfair Competition Law further emphasized that a businessoperator shall not engage in any false or misleading publicity for its products, or fictitious transactions to defraud or mislead consumers. Violation of theseprovisions may subject the relevant business operators to various penalties, including an order from the relevant governmental authorities to cease illegalacts, with payment of a fine ranging from RMB200,000 to RMB1 million, or in the case of a severe violation, revocation of business licenses and payment ofa fine ranging from RMB1 million to RMB2 million. In August 2018, the Standing Committee of the NPC promulgated the PRC E-Commerce Law, or the E-Commerce Law, which became effective inJanuary 2019. The E-Commerce Law proposes a series of requirements on e-commerce operators, including individuals and entities carrying out businessonline, e-commerce platform operators and merchants within the platform. For example, the E-Commerce Law requires e-commerce operators to respect andequally protect consumers’ legitimate rights and provide options to consumers without targeting their personal characteristics, and also requires e-commerceoperators to clearly point out to consumers their tie-in sales in which additional services or products are added by merchants to a purchase, and not to assumeconsumers’ consent to such tie-in sales by default. Moreover, the E-Commerce Law requires e-commerce operators, including individuals and entitiescarrying out business online, e-commerce platform operators and merchants on these platforms, to display prominently on their home page the informationcontained in their business licenses or administrative permits relating to their operating businesses; failure to take necessary actions against merchants on thee-commerce platforms that are not in compliance with such requirements may subject the e-commerce platform operators to rectification within a specifiedperiod and a fine between RMB20,000 and RMB100,000. The E-Commerce Law also sets forth certain requirements and/or obligations particularly applicable to the e-commerce platform operators,including, among other things: · Requirements relating to credit evaluation. The e-commerce platform operators are required to establish a credit evaluation system andpublicize the credit evaluation rules, and provide consumers with ways to evaluate products sold or services provided within the platform. · Requirements relating to transaction rules. The e-commerce platform operators shall develop and continuously publish or make publiclyavailable, prominently on its homepage, a link to its platform service agreement and transaction rules, specifying the rights and obligations ofrelevant parties with respect to joining and leaving the platform, quality assurance and protection of consumer rights and personal information,and to ensure convenience and complete access to reading and downloading such service agreement and transaction rules by merchants andconsumers. · Liability of the e-commerce platform operators. The e-commerce platform operators who fail to take necessary actions when they know orshould have known that the merchants within the platform infringe upon others’ intellectual property rights or the products or services providedby the merchants do not meet the requirements for personal and property security, or otherwise infringe upon consumers’ legitimate rights, willbe imposed a joint liability with the merchants; with respect to the products or services affecting consumers’ life and health, the e-commerceplatform operators will bear relevant responsibilities if they fail to review the qualifications of merchants or fail to safeguard the interests of theconsumers. 80Table of Contents We are subject to these measures as a result of our online direct sales and online marketplace. Regulations Relating to Product Quality and Consumer Rights Protection Pursuant to the Product Quality Law of PRC promulgated by the Standing Committee of the NPC in February 1993, and as amended in July 2000,August 2009 and December 2018 respectively, or the Product Quality Law, a seller must establish and practice a check-for-acceptance system forreplenishment of its stock, and examine the quality certificates and other marks and must also adopt measures to keep the products for sale in good quality.Violation of the Product Quality Law could result in various penalties, including the imposition of fines, suspension of business operations, revocation ofbusiness licenses or criminal liabilities. Where a defective product causes physical injury to a person or damage to another person’s property, the victim mayclaim compensation from the manufacturer or from the seller of the product. If the seller pays compensation and it is the manufacturer that should bear theliability, the seller has a right of recourse against the manufacturer. Similarly, if the manufacturer pays compensation and it is the seller that should bear theliability, the manufacturer has a right of recourse against the seller. The PRC Consumer Rights and Interests Protection Law, as amended and effective as of March 15, 2014, the Online Transactions Measures and theE-Commerce Law, have provided stringent requirements and obligations on business operators, including internet business operators and platform serviceproviders. For example, consumers are entitled to return goods purchased online, subject to certain exceptions, within seven days upon receipt of such goodswithout stating a reason for such return. To ensure that sellers and service providers comply with these laws and regulations, the platform operators arerequired to implement rules governing transactions on the platform, monitor the information posted by sellers and service providers, and report anyviolations by such sellers or service providers to the relevant authorities. In addition, online marketplace platform providers may, pursuant to the relevantPRC consumer protection laws, be exposed to liabilities if the lawful rights and interests of consumers are infringed upon in connection with consumers’purchase of goods or acceptance of services on online marketplace platforms and the online marketplace platform providers fail to provide consumers withthe contact information of the seller or manufacturer. In addition, online marketplace platform providers may be jointly and severally liable with sellers andmanufacturers if they are aware or should be aware that any seller or manufacturer is using the online platform to infringe upon the lawful rights and interestsof consumers and fail to take measures necessary to prevent or stop such activity. The PRC Tort Liability Law, which was enacted by the Standing Committee of the NPC in December 2009 and became effective in July 2010, alsoprovides that if an online service provider is aware that an online user is committing infringing activities, such as selling counterfeit products, through itsinternet services and fails to take necessary measures, it shall be jointly liable with the said online user for such infringement. If the online service providerreceives any notice from the infringed party on any infringing activities, the online service provider shall take necessary measures, including deleting,blocking and unlinking the infringing content, in a timely manner. Otherwise, it will be jointly liable with the relevant online user for the extended damages. We are subject to these laws and regulations as an online supplier of commodities and a provider of an online marketplace platform. Regulations Relating to Internet Advertising In April 2015, the Standing Committee of the NPC promulgated the PRC Advertising Law, which became effective in September 2015. Pursuant tothe Advertising Law, the contents of advertisements shall be authentic and legal, expressed in healthy form, and shall not contain any information that isfalse or confusing. Violation of these provisions may result in penalties, including fines, orders to cease dissemination of the advertisements and orders topublish an advertisement correcting the misleading information. 81Table of Contents The Interim Measures for Administration of Internet Advertising, or the Internet Advertising Measures, were adopted by the SAIC and becameeffective in September, 2016. The Internet Advertising Measures regulate internet advertisement, which are defined as commercial advertisements thatdirectly or indirectly promote goods or services through websites, web pages, internet applications or other internet media in various forms, including texts,pictures, audio clips and videos. According to the Internet Advertising Measures, internet advertisers are responsible for the authenticity of the content ofadvertisements. The identity, administrative license, cited information and other certificates that advertisers are required to obtain in publishing internetadvertisements shall be true and valid. Internet advertisements shall be distinguishable and prominently marked as “advertisements” in order to enableconsumers to identify them as advertisements. Publishing and circulating advertisements through the internet shall not affect the normal use of the internetby users. It is not allowed to induce users to click on the content of advertisements by any fraudulent means, or to attach advertisements or advertising linksin emails without users’ permission. The Internet Advertising Measures also impose several restrictions on the forms of advertisements and activities used inadvertising. Although sufficient measures have been implemented by us to comply with these laws and regulations, we cannot assure you that all advertisementswe display are in compliance with the regulatory requirements under such laws and regulations, and failure to comply with such laws and regulations wouldmaterially and adversely affect our business, financial condition, results of operations and prospects. Regulations Relating to Intellectual Property Rights The PRC has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents, trademarks anddomain names. Copyright. Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC, promulgated inFebruary 2010 and taking effect in April 2010, or the Copyright Law, and related rules and regulations. Under the Copyright Law, the term of protection forcopyrighted software is 50 years. Patent. The Patent Law of the PRC, promulgated in December 2008 and becoming effective in October 2009, or the Patent Law, provides forpatentable inventions, utility models and designs. An invention or utility model for which patents may be granted shall have novelty, creativity and practicalapplicability. The State Intellectual Property Office under the State Council is responsible for examining and approving patent applications. Trademark. The Trademark Law of the PRC, promulgated in August 2013 and taking effect in May 2014, or the Trademark Law, and therules implemented thereunder protect registered trademarks. The PRC Trademark Office of the SAIC is responsible for the registration and administration oftrademarks throughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Domain Name. Domain names are protected under the Measures for the Administration of the Internet Domain Names promulgated by the MIIT inAugust 2017 and becoming effective in November 2017 or the Domain Names Measures. The MIIT is the major regulatory body responsible for theadministration of the PRC internet domain names. The Domain Names Measures has adopted a “first-to-file” principle with respect to the registration ofdomain names. We have registered 15 patents in China, and have applied for 204 additional patents with the PRC State Intellectual Property Office and we alsohave three international patents through the procedures under the Patent Cooperation Treaty. We have registered 91 software copyrights with the PRCNational Copyright Administration. We have 113 registered domain names, including lexin.com, lexinfintech.com, fenqile.com and juzilicai.com. As of thedate of this annual report, we had 264 registered trademarks, including our “Fenqile,”, “ “ and “ “ trademarks. 82Table of Contents Regulations Relating to Tax Enterprise Income Tax PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, implementedin January 2008 and amended by NPC in December 2018, or the EIT Law, and (ii) the implementation rules to the EIT Law promulgated by the State Counciland implemented in January 2008. The EIT Law imposes a uniform enterprise income tax rate of 25% on all resident enterprises in the PRC, includingforeign-invested enterprises and domestic enterprises but, grants preferential treatment to “High and New Technology Enterprises,” or HNTEs, and qualified“Software Enterprises.” HNTEs are instead subject to an income tax rate of 15%, subject to the requirement that they re-apply for HNTE status every threeyears. During each year of this three-year period, an HNTE must conduct a qualification self-review to ensure it meets the HNTE criteria, or be subject to theregular 25% income tax rate for any year in which it does not meet the criteria. A qualified “Software Enterprise” is entitled to an income tax exemption fortwo years beginning with its first profitable year and a 50% reduction to a rate of 12.5% for the subsequent three years. However, these enterprises shall gothrough record-filing with the tax authority at the time of final settlement each year and be subject to the examination of the development and reformauthority and the industry and information technology authority. In addition, according to the EIT Law, enterprises registered in countries or regions outside the PRC but have their “de facto management bodies”located within China may be considered to be PRC resident enterprises and are therefore subject to PRC enterprise income tax at the rate of 25% on theirworldwide income. Though the implementation rules of the EIT Law define “de facto management bodies” as “establishments that carry out substantial andoverall management and control over the manufacturing and business operations, personnel, accounting, properties, etc., of an enterprise,” the only detailedguidance currently available for the definition of “de facto management body” as well as the determination and administration of tax residency status ofoffshore-incorporated enterprises are set forth in the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRCTax Resident Enterprises on the Basis of De Facto Management Bodies promulgated by the State Administration of Taxation, or the SAT, in April 2009, orCircular 82, and the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Overseas Incorporated Resident Enterprises (Trial Version)issued by the SAT in July 2011, or Bulletin No. 45, which provides guidance on the administration as well as the determination of the tax residency status ofa Chinese-controlled offshore-incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that hasa PRC company or PRC corporate group as its primary controlling shareholder. According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC resident enterprise by virtue of having its“de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: · the primary location of the day-to-day operational management and the places where they perform their duties are in the PRC; · decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval of organizations or personnel inthe PRC; · the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained inthe PRC; and · 50% or more of voting board members or senior executives habitually reside in the PRC. Bulletin No. 45 further clarifies certain issues related to the determination of tax resident status and competent tax authorities. It also specifies thatwhen provided with a copy of Recognition of Residential Status from a resident Chinese-controlled offshore-incorporated enterprise, a payer does not need towithhold income tax when paying certain PRC-sourced income such as dividends, interest and royalties to such Chinese-controlled offshore-incorporatedenterprise. 83Table of Contents Income Tax for Share Transfers According to the Announcement of the SAT on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-ResidentEnterprises, or Circular 7, promulgated by the SAT in February 2015 as amended in December 2017, if a non-resident enterprise transfers the equity interestsof a PRC resident enterprise indirectly by transfer of the equity interests of an offshore holding company (other than a purchase and sale of shares issued by aPRC resident enterprise in public securities market) without a reasonable commercial purpose, the PRC tax authorities have the power to reassess the natureof the transaction and the indirect equity transfer will be treated as a direct transfer. As a result, the gain derived from such transfer, which means the equitytransfer price less the cost of equity, will be subject to PRC withholding tax at a rate of up to 10%. Under the terms of Circular 7, the transfer which meets allof the following circumstances shall be directly deemed as having no reasonable commercial purposes: (i) over 75% of the value of the equity interests of theoffshore holding company are directly or indirectly derived from PRC taxable properties; (ii) at any time during the year before the indirect transfer, over90% of the total properties of the offshore holding company are investments within PRC territory, or in the year before the indirect transfer, over 90% of theoffshore holding company’s revenue is directly or indirectly derived from PRC territory; (iii) the function performed and risks assumed by the offshoreholding company are insufficient to substantiate its corporate existence; or (iv) the foreign income tax imposed on the indirect transfer is lower than the PRCtax imposed on the direct transfer of the PRC taxable properties. In October, 2017, SAT issued Bulletin of SAT on Issues Concerning the Withholding ofNon-resident Enterprise Income Tax at Source, or the Bulletin 37, which, among others, repeals certain rules stipulated in Circular 7 on December 1, 2017.The Bulletin 37 further details and clarifies the tax withholding methods in respect of income of non-resident enterprises. There is uncertainty as to the application of Circular 7. Circular 7 may be determined by the PRC tax authorities to be applicable to our prior privateequity financing transactions that involved non-resident investors, if any of such transactions are determined by the tax authorities to lack reasonablecommercial purpose. As a result, we and our non-resident investors in such transactions may become at risk of being taxed under Circular 7, and we may berequired to expend valuable resources to comply with Circular 7 or to establish that we should not be taxed under the general anti-avoidance rule of the EITLaw, which may have a material adverse effect on our financial condition and results of operations. Dividend Withholding Tax Pursuant to the EIT Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or hasset up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to awithholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong SpecialAdministrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends bya PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRCenterprise. Pursuant to the Notice of the SAT on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81,promulgated by the SAT in February 2009, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reducedwithholding tax: (i) it should be a company as provided in the tax treaty; (ii) it must directly own the required percentage of equity interests and voting rightsin the PRC resident enterprise; and (iii) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior toreceiving the dividends. In August 2015, the SAT promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under TaxTreaties, or Circular 60, which became effective in November 2015 and was amended in June 2018. Circular 60 provides that non-resident enterprises are notrequired to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, nonresident enterprises and theirwithholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply thereduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filingexaminations by the relevant tax authorities. In February 2018, the SAT promulgated the Notice on Issues Related to the “Beneficial Owner” in Tax Treaties,according to which when determining the applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends in the taxtreaties, several factors, including without limitation, whether the applicant is obligated to pay more than 50% of its income in twelve months to residents ina third-party country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterpartycountry or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levies tax at an extremely low rate, will be taken intoaccount, and it will be analyzed according to the actual circumstances of the specific cases. Accordingly, Installment (HK) Investment Limited, our HongKong subsidiary, may be able to enjoy the 5% withholding tax rate for the dividends they receive from our PRC subsidiaries, if it satisfies the conditionsprescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81, if the relevant tax authorities consider thetransactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorablewithholding tax in the future. 84Table of Contents Regulations Relating to Foreign Currency Exchange The principal regulations governing foreign currency exchange in China are the Regulations of the People’s Republic of China on ForeignExchange Control, promulgated by the State Council as amended in August 2008. Under these regulations, the Renminbi is freely convertible for currentaccount items, including the trade and service-related foreign exchange transactions and other current exchange transactions, but not for capital accountitems, such as direct investments, loans, repatriation of investments and investments in securities, unless the prior approval of the State Administration ofForeign Exchange, or SAFE, is obtained and prior registration with SAFE is made. The Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting the Foreign Exchange Administration Policies onDirect Investments promulgated by SAFE in November 2012 and amended in April 2015 substantially amends and simplifies the current foreign exchangeprocedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expense accounts, foreignexchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds by foreign investors in the PRC, and remittance of foreignexchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, andmultiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, according to the Notice ofthe State Administration of Foreign Exchange on Issuing the Provisions on the Foreign Exchange Administration of Domestic Direct Investment of ForeignInvestors and the Supporting Documents promulgated by SAFE in May 2013 and amended in October 2018, the administration by SAFE or its local branchesover direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relatingto the direct investment in the PRC based on the registration information provided by SAFE and its branches. In March 2015, SAFE released the Notice of theState Administration of Foreign Exchange on Reforming the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals ofForeign-invested Enterprises, or Circular 19, which became effective in June 2015 and has made certain adjustments to some regulatory requirements on thesettlement of foreign exchange capital of foreign-invested enterprises. Circular 19 annulled the Notice of the General Affairs Department of the StateAdministration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement ofForeign Currency Capital of Foreign-invested Enterprises, or Circular 142, and the Notice of the State Administration of Foreign Exchange on the PilotReform of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-Invested Enterprises in Certain Areas, andlifted some foreign exchange restrictions under Circular 142. However, Circular 19 continues to prohibit foreign-invested enterprises from, among otherthings, using a Renminbi fund converted from its foreign exchange capitals for expenditure beyond its business scope, providing entrusted loans or repayingloans between non-financial enterprises. In June 2016, SAFE issued the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the AdministrativeProvisions on Capital Account Foreign Exchange Settlement, or Circular 16, which became effective on the same day. Compared to Circular 19, Circular 16provides that, in addition to foreign exchange capital, foreign debt funds and proceeds remitted from foreign listings should also be subject to thediscretional foreign exchange settlement. In addition, it also lifted the restriction, that foreign exchange capital under the capital accounts and thecorresponding Renminbi capital obtained from foreign exchange settlement should not be used for repaying the inter-enterprise borrowings (includingadvances by the third party) or repaying bank loans in Renminbi that have been sub-lent to the third party. In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuinenessand Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domesticentities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, theoriginal version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses beforeremitting profits. Moreover, pursuant to Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements,and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment. 85Table of Contents C. Organizational Structure The following diagram illustrates our corporate structure, including our principal subsidiaries, consolidated affiliated entities and subsidiaries ofconsolidated affiliated entities as of the date of this annual report on Form 20-F. (1) The shareholders of Shenzhen Xinjie include Jay Wenjie Xiao (95%) and Wenbin Li (5%). Jay Wenjie Xiao is our chief executive officer and chairman ofour board of directors, and Wenbin Li is a non-executive PRC employee. (2) The shareholders of Shenzhen Fenqile include Shenzhen Xinjie (68.6667%), Jay Wenjie Xiao (31.2973%) and Richard Qiangdong Liu (0.0321%), anangel investor, and Tibet Xianfeng Changqing Start-up Investment and Management Co., Ltd. (formerly known as Tibet Xianfeng ManagementConsultation Co., Ltd) (0.0039%), whose shares were transferred from Tibet Xianfeng Huaxing Changqing Investment Co., Ltd., another angel investor. (3) The shareholders of Beijing Lejiaxin include Jay Wenjie Xiao (99.87%) and Richard Qiangdong Liu (0.13%). 86Table of Contents (4) The shareholders of Qianhai Dingsheng include Kris Qian Qiao (60%), our chief financing cooperation officer, and Jianwei Wei (30%), a non-executivePRC employee, and Shenzhen Xinjie (10%). (5) The shareholders of Mengtian Technology include Jay Wenjie Xiao (45%), Hua Chen (17.5%), Xiaoting Zhou (17.5%), Kris Qian Qiao (7.5%), JianweiWei (7.5%) and Shan Xu (5%). Hua Chen, Xiaoting Zhou and Shan Xu are our non-executive PRC employees. (6) 98.6% of the equity interest of Shenzhen Lexin Financing Guarantee Co., Ltd. is directly held by Shenzhen Fenqile, while the remaining 1.4% is held byMengtian Technology. Contractual Arrangements with Our Variable Interest Entities PRC laws and regulations impose restrictions on foreign ownership and investment in internet-based businesses such as distribution of onlineinformation and other value-added telecommunications services. We are a Cayman Islands exempted company and our PRC subsidiaries are consideredforeign-invested enterprises. To comply with PRC laws and regulations, we have entered into a series of contractual arrangements, through Beijing Shijitongand Shenzhen Lexin Software Technology Co., Ltd., with our variable interest entities, the shareholders of our variable interest entities to obtain effectivecontrol over our variable interest entities and their subsidiaries. We currently conduct our business through our variable interest entities and their subsidiaries based on these contractual arrangements, which allowus to: · exercise effective control over our variable interest entities and their subsidiaries; · receive substantially all of the economic benefits from our variable interest entities and their subsidiaries; and · have an exclusive option to purchase all or part of the equity interests in our variable interest entities and when and to the extent permitted byPRC law. As a result of these contractual arrangements, we have become the primary beneficiary of our variable interest entities under U.S. GAAP. We haveconsolidated the financial results of our variable interest entities and their subsidiaries in our consolidated financial statements in accordance with U.S.GAAP. The following is a summary of the currently effective contractual arrangements between our wholly owned PRC subsidiary, Beijing Shijitong,certain of our variable interest entities and their shareholders. The contractual arrangements between our wholly owned PRC subsidiary, Shenzhen LexinSoftware Technology Co., Ltd., and our variable interest entity, Mengtian Technology, and its shareholders are of substantially the same terms andconditions. Agreements that Allow Us to Receive Economic Benefits from Our Variable Interest Entities Exclusive Business Cooperation Agreements. Beijing Shijitong entered into exclusive business cooperation agreements with each of our variableinterest entities. Pursuant to these agreements, Beijing Shijitong or its designated party has the exclusive right to provide our variable interest entities withcomprehensive business support, technical support and consulting services. Without Beijing Shijitong’s prior written consent, our variable interest entitiesshall not accept any consulting and/or services covered by these agreements from any third party. Our variable interest entities agree to pay service fees in anamount determined by Beijing Shijitong based on respective profit calculated as revenue minus cost agreed and recognized by Beijing Shijitong of ourvariable interest entities for the relevant period on a yearly basis or other service fees for specific services as required and as otherwise agreed by both parties.Beijing Shijitong owns the intellectual property rights arising out of the services performed under these agreements. Unless Beijing Shijitong terminatesthese agreements or pursuant to other provisions of these agreements, these agreements will remain effective indefinitely. These agreements can be terminatedby Beijing Shijitong through a 30-day advance written notice, our variable interest entities have no right to unilaterally terminate these agreements. Agreements that Provide Us with Effective Control over Our Variable Interest Entities Power of Attorney. Through a series of power of attorney, each shareholder of our variable interest entities irrevocably authorizes Beijing Shijitongor any person(s) designated by Beijing Shijitong to act as its attorney-in- fact to exercise all of such shareholder’s voting and other rights associated with theshareholder’s equity interest in our variable interest entities, including but not limited to, the right to attend shareholder meetings on behalf of suchshareholder, the right to appoint legal representatives, directors, supervisors and chief executive officers and other senior management, and the right to sell,transfer, pledge and dispose of all or a portion of the shares held by such shareholder. The power of attorney is irrevocable and remains in force continuouslyupon execution. 87Table of Contents Equity Pledge Agreement. Beijing Shijitong has entered into an equity pledge agreement with each shareholder of our variable interest entities.Pursuant to these equity pledge agreements, each shareholder of our variable interest entities has pledged all of his, her or its respective equity interest in ourvariable interest entities to Beijing Shijitong to guarantee the performance by such shareholder and our variable interest entities of their respectiveobligations under the exclusive business cooperation agreements, the power of attorney, the loan agreement (applicable to the contractual arrangements withQianhai Dingsheng, Shenzhen Xinjie or Shenzhen Fenqile), the exclusive option agreements, and any amendment, supplement or restatement to suchagreements. If our variable interest entities or any of their shareholders breach any obligations under these agreements, Beijing Shijitong, as pledgee, will beentitled to dispose of the pledged equity and have priority to be compensated by the proceeds from the disposal of the pledged equity. Each of theshareholders of variable interest entities agrees that before his, her or its obligations under the contractual arrangements are discharged, he, she or it will notdispose of the pledged equity interests, create or allow any encumbrance on the pledged equity interests, which may result in the change of the pledgedequity that may have adverse effects on the pledgee’s rights under these agreements without the prior written consent of Beijing Shijitong. These equitypledge agreements will remain effective until our variable interest entities and their shareholders discharge all their respective obligations under thecontractual arrangements. As of the date of this annual report, the equity pledge has not been registered with local PRC authorities. Agreements that Provide Us with the Option to Purchase the Equity Interest in Our Variable Interest Entities Exclusive Option Agreements. Beijing Shijitong has entered into the exclusive option agreements with our variable interest entities. Pursuant tothese exclusive option agreements, the shareholders of our variable interest entities have irrevocably granted Beijing Shijitong or any third party designatedby Beijing Shijitong an exclusive option to purchase all or part of their respective equity interests in our variable interest entities. The purchase price shall bethe lowest price permitted by law. Without Beijing Shijitong’s prior written consent, our variable interest entities shall not, among other things, amend theirarticles of association, increase or decrease the registered capital, sell, dispose of or set any encumbrance on their assets, business or revenue, enter into anymaterial contract outside the ordinary course of business, merge with any other persons or make any investments, distribute dividends or enter into anytransactions which have material adverse effects on their business. The shareholders of our variable interest entities also jointly and severally undertake thatthey will not transfer, gift or otherwise dispose of their respective equity interests in our variable interest entities to any third party or create or allow anyencumbrance on their equity interests within the term of these agreements. These agreements will remain effective until Beijing Shijitong and/or any thirdparty designated by Beijing Shijitong has acquired all equity interests of our variable interest entities from their respective shareholders. Loan Agreements. Pursuant to the loan agreement between Beijing Shijitong and the shareholders of Qianhai Dingsheng, the loan agreementsbetween Beijing Shijitong and the shareholders of Shenzhen Xinjie, the loan agreements between Beijing Shijitong and the shareholders of ShenzhenFenqile, the loan agreements between Beijing Shijitong and the shareholders of Beijing Lejiaxin, and the loan agreements between Shenzhen Lexin Softwareand the shareholders of Mengtian Technology, which were entered into in 2017, 2018 and 2019, Beijing Shijitong and Shenzhen Lexin Software made loansin an aggregate amount of RMB1,459 million to the shareholders of our certain variable interest entities solely for the purpose of operating their respectivebusinesses. Pursuant to these loan agreements, the shareholders can only repay the loans by the transfer of all their equity interests in the applicable variableinterest entities to Beijing Shijitong and Shenzhen Lexin Software (as applicable) or its designated person(s) pursuant to their respective exclusive optionagreements. The shareholders must pay all of the proceeds from transfer of such equity interests to Beijing Shijitong and Shenzhen Lexin Software (asapplicable). In the event that shareholders transfer their equity interests to Beijing Shijitong and Shenzhen Lexin Software (as applicable) or its designatedperson(s) with a price equivalent to or less than the amount of the principal, the loans will be interest free. If the price is higher than the amount of theprincipal, the excess amount will be paid to Beijing Shijitong and Shenzhen Lexin Software (as applicable) as the loan interest. The loans must be repaidimmediately when permitted by PRC laws at Beijing Shijitong and Shenzhen Lexin Software (as applicable)’s request. The term of both loans are ten yearsand will be extended automatically for another ten years on each expiration. 88Table of Contents In the opinion of Shihui Partners, our PRC counsel: the ownership structures of our variable interest entities currently do not result in any violationof the applicable PRC laws or regulations currently in effect; and the contractual arrangements among our PRC subsidiaries, our variable interest entities andtheir shareholders, are governed by PRC laws or regulations and are currently valid, binding and enforceable in accordance with the applicable PRC laws orregulations currently in effect, and do not result in any violation of the applicable PRC laws or regulations currently in effect, except that the equity pledgeunder that certain equity pledge agreement will be deemed validly created only when they are registered with the competent governmental authorities.However, Shihui Partners has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC lawsand regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC counsel. Inparticular, in March 2019, the NPC passed the PRC Foreign Investment Law, which will become effective as of January 1, 2020. For the effect of the PRCForeign Investment Law on us. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure” and “—Risks Related to DoingBusiness in China—Uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment Law and how it may impact theviability of our current corporate structure, corporate governance and business operations.” D. Property, Plant and Equipment Our corporate headquarters is located in Shenzhen, China, where we lease office space with an area of approximately 15,000 square meters as of thedate of this annual report. For our user services, data verification services and collection services, we lease an area of approximately 1,800 square meters inShenzhen but at a separate location from our corporate headquarters. We also lease office space in various locations in the PRC, with an aggregate area ofapproximately 17,400 square meters. We lease our premises from unrelated third parties under operating lease agreements. The lease term varies from 3months to 6 years. Our servers are primarily hosted at internet data centers owned by major domestic internet data center providers. We believe that ourexisting facilities are generally adequate to meet our current needs, but we expect to seek additional space as needed to accommodate future growth. Item 4A. Unresolved Staff Comments None. Item 5. Operating and Financial Review and Prospects The following discussion of our financial condition and results of operations is based upon, and should be read in conjunction with, our auditedconsolidated financial statements and the related notes included in this annual report on Form 20-F. This report contains forward-looking statements. See“Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. KeyInformation—D. Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantialrisks and uncertainties. A. Operating Results Overview We are a leading online consumer finance platform for educated young adults in China. We strategically focus on serving the credit needs ofeducated young adults in China. Our online consumer finance platform, Fenqile, offers users personal installment loans, installment purchase loans and other loan products. Wematch user loans with diversified funding sources, including individual investors on our Juzi Licai platform, institutional funding partners on our directlending programs, investors of our asset-backed securities and others. We charge fees for our matching services. 89Table of Contents We have expanded the scale of our platform rapidly since our inception. From our inception in August 2013 through the end of 2018, wecumulatively originated RMB143 billion (US$20.7 billion) in loans. In 2016, 2017 and 2018, we originated RMB22.2 billion, RMB47.7 billion andRMB66.1 billion (US$9.6 billion) in loans, respectively, representing a CAGR of 73%. As of December 31, 2016, 2017 and 2018, our outstanding principalbalance of loans was approximately RMB9.9 billion, RMB19.3 billion and RMB32.4 billion (US$4.7 billion), respectively. The weighted average tenor ofloans originated on our platform in 2017 and 2018 was approximately 9.5 months and 14.2 months, respectively. Key Operating Metrics We regularly monitor a number of metrics in order to measure our current performance and project our future performance. These metrics aid us indeveloping and refining our growth strategies and making strategic decisions: As of or for the Year Ended December 31,2016 2017 2018RMB RMB RMB US$(except for number of users)Outstanding principal balance (in millions)9,89919,27232,3974,712Outstanding principal balance by accounting treatment:Outstanding principal balance of on-balance sheet loans (inmillions)7,71212,0126,808990Outstanding principal balance of off-balance sheet loans (inmillions)2,1877,26025,5893,722Outstanding principal balance by type of loan product:Outstanding principal balance of installment purchase loans (inmillions)2,1061,6771,570228Outstanding principal balance of personal installment loans (inmillions)7,79317,59530,8274,484Originations (in millions)22,19747,70466,0879,612Originations of installment purchase loans (in millions)3,1542,9132,738398Originations of personal installment loans (in millions)19,04344,79163,3499,214Average user loan balance4,8386,5809,0481,316Number of active users who used our loan products (inthousands)3,0054,0804,896N/ANumber of new active users who used our loan products (inthousands)1,9232,1592,257N/A Outstanding principal balance. Outstanding principal balance represents the total amount of principal outstanding for loans originated on ourplatform at the end of the period. The accounting treatment with respect to outstanding principal balance of loans on our consolidated balance sheets varies,depending primarily on whether we are considered as the primary obligor in the lending relationship. See “—Critical Accounting Policies—On-and off-balance sheet treatment of loans” below. Originations. Originations represent the total principal amount of the loans we originate during the period. Our users have the option to postpone orreschedule their monthly repayment. For originations, the principal amount postponed or rescheduled is calculated as a new loan principal amount. We treatoff-balance sheet loans as part of our originations. Average user loan balance. Average user loan balance is calculated by dividing the outstanding principal balance by the number of users withoutstanding loans at the period end. 90Table of Contents Number of active users and new active users using our loan products. We define an active user as a user who uses our loan products at least onceduring the relevant period. A new active user during a period is an active user during the period who did not use our loan products prior to the beginning ofthis period. On-and Off-Balance Sheet Treatment of Loans We access an array of diversified funding sources to ensure that we have scalable and stable funding. The accounting treatment of assets, liabilitiesand revenues arising from the loans we originate varies, depending primarily on whether we are considered as the primary obligor in the lending relationship. We generate financing receivables from providing installment purchase loans and personal installment loans to users. The loans generated from ourplatform or mobile application are primarily funded by the following funding sources: (1) individual investors on Juzi Licai; (2) institutional fundingpartners; and (3) the issuance of asset-backed securitized debts. Depending on the arrangements among us, the borrowers and the funding sources, theunderlying loans are accounted for as “on-balance sheet loans” or “off-balance sheet loans,” where applicable. With respect to the loans funded by individual investors through Juzi Licai before April 24, 2018 when we made a few adjustments to our businessmodel on Juzi Licai, as well as by certain institutional funding partners, we have determined that we are the primary obligator in the lending relationship. Wegenerate interest and financial services income from on-balance sheet loans, which is amortized over the terms of financing receivables using the effectiveinterest method. With respect to the loans funded by individual investors through Juzi Licai after our business model adjustments on April 24, 2018, and the loansfunded by other certain institutional funding partners, such as certain third-party commercial banks, we have determined that we are not the primary obligorin the lending relationship and thus do not record financing receivables from such loans. For certain off-balance sheet loans, we are obligated to compensateinstitutional funding partners for the principal and interest repayment of loans in the event of a user default. We also provide full interest repayment to certaininstitutional funding partners according to the terms of the loan in the event that a user makes an early repayment of the loan. We account for our contractswith these institutional funding partners as a derivative under ASC Topic 815, Derivatives and Hedging, which is recognized on our consolidated balancesheets as either assets or liabilities. For individual investors on Juzi Licai, we set up a new investor protection program for individual investors on Juzi Licaicalled the risk safeguard scheme on April 24, 2018, replacing the quality assurance program. We concluded that we are the primary obligor in providing theguarantee services in relation to the risk safeguard scheme and records our obligations in accordance with ASC 460, Guarantees. The balance of risksafeguard fund is recorded as “restricted cash” on our consolidated balance sheets. We earn loan facilitation and servicing fees from our platform users andindividual investors on Juzi Licai. See “—Critical Accounting Policies—On- and off-balance sheet treatment of loans.” General Factors Affecting Our Results of Operations Our results of operations are affected by general factors driving the online consumer finance industry in China. Regulatory environment in China China’s online consumer finance industry has historically been largely unregulated. Recently, PRC regulatory authorities, including the CBRC andthe PBOC, have issued guidelines and policy directives relating to the online consumer finance industry. See “Item 4. Information on the Company—B.Business Overview—Regulations.” It is expected that the online consumer finance market may be subject to closer scrutiny from regulators with moredetailed rules and regulations to be introduced. We modified our operations recently to comply with relevant PRC laws and regulations. For example, inresponse to certain requirements under the Circular 141, we have made an adjustment to our cooperation model with institutional funding partners bycooperating with these institutional funding partners through Shenzhen Lexin Financing Guarantee Co. Ltd., a subsidiary of Shenzhen Fenqile, which isqualified to provide financing guarantees for the users on our platform and to charge fees for the relevant guarantee services. In the future, we may be requiredto make further adjustment in our operations to comply with any relevant future PRC laws and regulations regarding the online consumer finance industry.These changes may have a material impact on our future financial results. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business andIndustry—If our current investor protection measures are deemed to violate the relevant laws and regulations, our business, financial condition and results ofoperations would be materially and adversely affected.” 91Table of Contents On the other hand, we have closely tracked the development and implementation of new rules and regulations that are likely to affect us. Tighterregulations may increase overall compliance costs of market players, promote more commercially reasonable and sensible credit products, enhance thecompetitive edge of established market players, and encourage consolidations within the industry. We believe these requirements have created entry barriersfor many market players in China and further differentiated us from our competitors. We will continue to ensure timely compliance with existing and newlaws and regulations applicable to our business. We believe that our ability to ensure timely and full compliance with these rules and regulations willimprove our competitive position in the online consumer finance industry in China. Economic and market conditions While we believe we will continue to offer attractive value propositions to users and funding sources in all economic environments, changes in theoverall economy may impact our business in several ways, including demand for our products, credit performance and funding costs. The demand from our users and funding sources for our loan products is dependent upon interest rates offered and the return earned relative to othercomparable or substitute products. For example, a significant interest rate increase could cause potential users to defer seeking loans as they wait for rates tosettle. Additionally, if weakness in the economy occurs and actual or expected default rates increase, investors and institutional funding partners may delayor reduce their funding of loans on our platform. Furthermore, although we have access to diversified funding sources, in the event of an insufficient amountof liquidity in the financial markets, it may be difficult for us to obtain sufficient funding from our institutional funding partners at a reasonable cost. In a strong economic climate, demand for our products and services may increase as consumer spending increases. In addition, additional potentialusers may qualify for a higher credit limit based on our credit assessment. Traditional lenders may also approve loans for a higher percentage of our potentialusers. Young adult professionals may receive higher and more stable salaries or other income, which may result in lower loan losses. In a weakeningeconomic climate or recession, the opposite may occur. Sudden changes in economic conditions may affect our actual loan losses. These effects may be partly mitigated by the fact each loan borrowed byour users is relatively small, which should be less affected by adverse economic conditions than if the principal amount of each loan were larger. Key Specific Factors Affecting Our Results of Operations Major specific factors affecting our results of operations include the following: Ability to attract and retain users Our operating revenue grew significantly in 2017 and 2018 primarily as a result of growth in loan originations on our platform. In 2017 and 2018,we originated RMB47.7 billion and RMB66.1 billion (US$9.6 billion) in loans, respectively. As of December 31, 2016, 2017 and 2018, we hadapproximately RMB9.9 billion, RMB19.3 billion and RMB32.4 billion (US$4.7 billion), respectively, in outstanding principal balance of loans. Growth inour loan originations and outstanding principal balance has been driven primarily by the addition of new users and increasing business from existing users.The number of our active users grew from approximately 3.0 million in 2016 to approximately 4.1 million in 2017, and further grew to approximately 4.9million in 2018. We anticipate that our future growth will continue to depend in part on attracting new users. In addition, we believe the repeat borrowing behavior of our existing users will be important to our future growth. Of all active users on our platformin 2016, 2017 and 2018, approximately 74%, 80% and 80%, respectively, were repeat users who had successfully borrowed on our platform at least oncepreviously. We believe our significant number of repeat users is primarily due to our ability to address the credit needs of our targeted user cohort, thesuperior user experience on our platform and the competitiveness of loan pricing. The extent to which we generate repeat business from our users will be animportant factor in our continued revenue growth. 92Table of Contents Ability to satisfy our users’ growing financial needs Creating value by satisfying our users’ growing financial needs will be an important component of our future performance. We seek to grow with ourusers and capture their long-term growth potential by effectively managing the mix of our product and service offerings to cater to their evolvingconsumption needs. In late 2014, we began to offer personal installment loans in addition to installment purchase loans on our platform. The outstandingprincipal balance of personal installment loans grew significantly from RMB7.8 billion as of December 31, 2016 to RMB17.6 billion as of December 31,2017, and further grew to RMB30.8 billion (US$4.5 billion) as of December 31, 2018. In addition, as our college student users build their credit history withus and enter the workforce, we offer them higher credit lines and the ability to borrow personal installment loans to obtain cash up to a higher limit, inanticipation of their expanding consumption requirements. For illustration, below is a cohort analysis on the users we acquired in the three months ended March 31, 2015. This analysis compares certainmetrics of this user cohort for each three-month period from January 1, 2016 through December 31, 2018. We selected this cohort because it containssufficient periods to demonstrate contribution after initial acquisition, and we believe that the trends reflected by this cohort are representative of the value ofour other users. As of or for the three months ended March31,2016 June30,2016 Sept.30,2016 Dec.31,2016 Mar.31,2017 June30,2017 Sept.30,2017 Dec.31,2017Mar.31,2018June30,2018Sept.30,2018Dec.31,2018Active users58.7%59.5%57.9%55.9%52.3%50.0%49.5%48.1%46.5%46.5%44.1%41.4%Average available credit line per user(RMB)7,5157,6497,96910,40810,88512,46513,59814,71415,40015,47915,59015,692Average user loan balance (RMB)3,5954,2685,9777,2787,8978,3548,9969,73810,52311,36611,66613,11630-day delinquency rate1.6%1.8%1.5%1.5%1.6%1.7%1.3%0.9%1.0%1.0%1.1%1.1% (1) Represents the percentage of active users in this cohort during each relevant period. (2) Includes both on- and off-balance sheet loans, depending on our relationship with the relevant funding source after the loan is originated to the user and matched with the funding source. See “—Critical AccountingPolicies—On- and Off-Balance Sheet Treatment of Loans.” Ability to control user acquisition cost Our results of operations depend in part on our ability to control user acquisition cost. Our educated young adult users are often geographicallyconcentrated and socially connected, which enables us to achieve effective user acquisition through user referrals. As a result, word-of-mouth referrals havebeen an effective driver of the continued growth of our user base. In addition, we also seek to attract and retain more educated young professionals byoffering products and services that cater to their evolving consumption needs. Our e-commerce channel on Fenqile, for example, offers a wide variety ofcompetitively priced products across categories that specifically meet the shopping needs of our targeted user cohort. Furthermore, our operational teamprovides ongoing user service by addressing our users’ questions in using our platform, which enhances user experience and user loyalty. We also use adiverse array of online marketing channels to attract users, including using social media such as WeChat and Weibo and press outlets to help drive brandawareness, using paid placement on major online search engines in China, partnering with leading websites such as Jumei that are able to reach quality userswith credit needs, and working with online advertising channels such as app stores to promote our mobile applications. Ability to access diversified and scalable funding The growth of our business is also dependent on our ability to ensure that we have access to diversified funding sources and secure scalable andstable funding to meet our users’ needs. With our access to multiple funding sources and the ability to adjust allocation of funding needs to different sources,we are not dependent on any particular type of funding source, and we are able to withstand seasonality and fluctuations in the supply and costs of funding.As of December 31, 2018, Juzi Licai had over 141,000 individual investors who had outstanding investments, with an average asset under management ofRMB94,599 (US$13,759). As of December 31, 2018, we had over 30 funding partners, including commercial banks, consumer finance companies, otherlicensed financial institutions and peer-to-peer lending platforms. Since 2016, we have also offered four public and private asset-backed securitizationprograms. 93(1)(2)Table of Contents Effectiveness of risk management Our ability to effectively segment users into appropriate risk profiles impacts our ability to attract and retain users, as well as our ability to offerinvestors and funding partners attractive risk-adjusted returns. We take an advanced and customized credit risk management approach driven by ourproprietary Hawkeye credit assessment engine and strong risk management culture. We intend to optimize our fraud detection capabilities, improve theaccuracy of our credit assessment model and enhance our collection effectiveness on a continuing basis through the combination of our big-data analyticalcapabilities and the increasing amount of data we accumulate through our operations. Loan Performance Data Delinquency rates We define delinquency rate as outstanding principal balance of loans that were 1 to 29, 30 to 59, 60 to 89 and 90 to 179 calendar days past due as apercentage of the total outstanding principal balance of the loans on our platform as of a specific date. Loans that are delinquent for 180 days or more arecharged off. The following table provides our delinquency rates for all loans (including on- and off-balance sheet loans) as of December 31, 2016, 2017 and2018: Delinquent for 1 - 29 days 30 - 59 days 60 - 89 days 90 - 179 days December 31, 20161.32%0.55%0.43%0.84%December 31, 20171.55%0.56%0.45%1.14%December 31, 20181.28%0.69%0.52%1.41% The following table provides our delinquency rates for installment purchase loans that were outstanding as of December 31, 2016, 2017 and 2018: Delinquent for 1 - 29 days 30 - 59 days 60 - 89 days 90 - 179 days December 31, 20160.79%0.37%0.34%0.85%December 31, 20170.79%0.25%0.18%0.62%December 31, 20180.51%0.28%0.21%0.68% The following table provides our delinquency rates for personal installment loans that were outstanding as of December 31, 2016, 2017 and 2018: Delinquent for 1 - 29 days 30 - 59 days 60 - 89 days 90 - 179 days December 31, 20161.46%0.59%0.45%0.84%December 31, 20171.63%0.59%0.47%1.20%December 31, 20181.32%0.71%0.53%1.45% 94Table of Contents Charge-off rates During 2016, 2017 and 2018, the total amount of loans that were charged off after 180 days past due was 1.73%, 3.59% and 4.74%, respectively, ofthe average outstanding principal balance during the relevant period. We define vintage charge-off rates as, with respect to loans originated during a specified time period, which we refer to as a “vintage,” the totaloutstanding principal balance of loans that are charged off during a specified period, divided by the total initial principal of the loans originated in suchvintage. The following chart displays our historical vintage charge-off rates as of December 31, 2018 for each vintage of a three-month period from January 1,2015 to June 30, 2018. Key Components of Our Results of Operations Operating revenue We generate our operating revenue from sales of products and services on our e-commerce channel and the provision of financial services. For the Year Ended December 31,2016 2017 2018RMB % RMB % RMB US$ %(in thousands, except for percentages)Online direct sales2,770,63463.92,534,98345.42,396,680348,58331.5Services and others5,0600.131,9500.6203,91429,6582.7Online direct sales and services income2,775,69464.02,566,93346.02,600,594378,24134.2Interest and financial services income1,373,55931.72,443,76143.82,742,643398,90136.2Loan facilitation and servicing fees54,2011.2378,8926.82,075,817301,91527.3Other revenue135,2323.1192,6033.4177,84225,8662.3Financial services income1,562,99236.03,015,25654.04,996,302726,68265.8Total operating revenue4,338,686100.05,582,189100.07,596,8961,104,923100.0 Online direct sales and services income. We generate revenue from our e-commerce channel from both online direct sales and services and others.Revenue from services and others primarily consists of premium membership fees earned from subscribed members and commissions earned from third-partysellers made on our online marketplace through our e-commerce channel. 95Table of Contents Financial services income · Interest and financial services income. We generate interest and financial services income earned on installment purchase loans from the onlinedirect sales on Fenqile’s website and mobile apps and personal installment loans to borrowers, if these loans are determined to be on balancesheet loans. · Loan facilitation and servicing fees. With respect to off-balance sheet loans, we earn loan facilitation and matching service fees, post-origination services fees and investment program management service fees from users. We charge service fees to users by deducting relevant feesfrom the monthly repayment to the institutional funding partners and individual investors on Juzi Licai. We provide intermediary services toboth the users and the funding partners, including loan facilitation and matching, account maintenance, collection, and payment processingservices and financial guarantee services. We also provide ongoing management services to the individual investors on Juzi Licai over the termsof respective investment programs. · Other revenue. Other revenue includes fees collected for early repayment and late payment for on-balance sheet loans, which is calculated as apercentage of interest over the prepaid principal loan amount in the case of an early repayment or a percentage of past due amounts in the caseof a late repayment. Operating cost For the Year Ended December 31,2016 2017 2018RMB% RMB % RMB US$ %(in thousands, except for percentages)Cost of sales2,894,02577.42,634,14261.82,440,613354,97253.2Funding cost491,69513.2792,17018.6898,028130,61319.6Processing and servicing cost114,3233.1223,9165.2324,00547,1257.1Provision for credit losses of financing receivables236,6116.3611,86914.4884,056128,58119.3Provision for credit losses of contract assets and servicefees receivable————38,2545,5640.8Total operating cost3,736,654100.04,262,097100.04,584,956666,855100.0 Cost of sales. Our cost of sales consists of the purchase price of the products, shipping charges and handling costs, as well as inventory write-downs,which were not significant in 2016, 2017 and 2018. Funding cost. Our funding cost consists of interest expenses paid to individual investors on Juzi Licai and institutional funding partners to fundfinancing receivables, and certain fees and amortization of deferred debt issuance cost incurred in connection with obtaining these debts, such as originationfees and legal fees. Processing and servicing cost. Our processing and servicing cost consists primarily of vendor costs related to credit assessment, user and systemsupport, payment processing services and collection services associated with originating, facilitating and servicing loans. With respect to on-balance sheetloans, we have determined that direct origination costs, including costs directly attributable to loan originations, such as vendor costs and personnel costsdirectly related to the time spent by those individuals performing loan origination activities, are insignificant and expensed as incurred and recorded inprocessing and servicing cost. Provision for credit losses of financing receivables. We evaluate the creditworthiness and collectability of our on-balance sheet loan portfolio on apooled basis. The provision for credit losses of financing receivables represents an estimate of the losses inherent in our on-balance sheet loan portfolio. Provision for credit losses of contract assets and service fees receivable. We evaluate the collectability of our contract assets and service feesreceivable related to loan facilitation and servicing fees. The provision for credit losses of contract assets and service fees receivable represents an estimate ofthe losses inherent in our off-balance sheet loan portfolio. 96Table of Contents Operating expenses For the Year Ended December 31,2016 2017 2018RMB % RMB % RMB US$ %(in thousands, except for percentages)Sales and marketing expenses376,31363.7405,50548.0589,98385,80949.6Research and development expenses127,31721.5235,29227.9320,16546,56626.9General and administrative expenses87,36414.8203,63524.1279,85940,70423.5Total operating expenses590,994100.0844,432100.01,190,007173,079100.0 Sales and marketing. Sales and marketing expenses consist primarily of advertising costs and payroll and related expenses for personnel engaged inmarketing and business development activities. Advertising costs consist primarily of costs of online advertising and offline promotional activities. Research and development. Research and development expenses consist primarily of payroll and related expenses for IT professionals involved indeveloping our technology platform and website, depreciation of server and other equipment, bandwidth and data center costs. General and administrative. General and administrative expenses consist of payroll and related expenses for employees engaged in generalcorporate functions, including finance, legal and human resources, costs associated with use of facilities and equipment, such as depreciation expenses, rentaland other general corporate related expenses. Taxation Cayman Islands We are an exempted company incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals or corporationsbased upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. The Cayman Islands does not imposea withholding tax on payments of dividends to shareholders. There are no taxes likely to be material to us levied by the Government of the Cayman Islandsexcept for stamp duties which may be applicable on instruments executed in or, after execution, brought within the jurisdiction of the Cayman Islands. Hong Kong Our 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 levied as we didnot have assessable profit that was earned in or derived from the Hong Kong subsidiary during the periods presented. Hong Kong does not impose awithholding tax on dividends. China Generally, our PRC subsidiaries, variable interest entities and their subsidiaries, which are considered PRC resident enterprises under PRC tax law,are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%, if theyare not eligible for any preferential tax treatment. However, a High and New Technology Enterprise (“HNTE”) is instead subject to an income tax rate of 15%,subject to a requirement that they re-apply for HNTE status every three years. A qualified “Software Enterprise” is entitled to an income tax exemption fortwo years beginning with its first profitable year and a 50% reduction to a rate of 12.5% for the subsequent three years, which shall be subject to the record-filing with the tax authority at the time of final settlement each year and the examination by the relevant authorities in PRC. Our subsidiary of the VIEsQianhai Juzi qualified as a HNTE and enjoyed a preferential income tax rate of 15% from 2017 to 2019, and will need to re-apply for the HNTE qualificationin 2020. Our subsidiary of the variable interest entities Shenzhen Dingsheng Computer Technology Co., Ltd., and our subsidiary Shenzhen Lexin SoftwareTechnology Co., Ltd. qualified as Software Enterprises have been entitled to an income tax exemption for two years beginning with the first profitable yearand a 50% reduction to a rate of 12.5% for the subsequent three years, respectively. 97Table of Contents Our online direct sales revenue from sales of electronic products, home appliance products and general merchandise products had been subject to a17% value-added tax until May 1, 2018, when the rate was adjusted to 16%. The tax rate will be further adjusted to 13% starting from April 1, 2019. Ourfinancial services income from services to our customers in the PRC is subject to a 6% value-added tax. Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to awithholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between Mainland China and theHong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income with respect to Taxes on Income and Capitaland receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receivesapproval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of5%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We rely on dividends and other distributions on equitypaid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to makepayments 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 China were deemed to be a “resident enterprise” under the PRCEnterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. 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, such classification couldresult in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” We intend to indefinitely reinvest all the undistributed earnings of our variable interest entities and their subsidiaries incorporated in the PRC anddo not plan to have our PRC subsidiary distribute any dividend. Therefore, no withholding tax is expected to be incurred in the foreseeable future.Accordingly, no income tax was accrued on the undistributed earnings of our PRC subsidiaries, variable interest entities or their subsidiaries as ofDecember 31, 2016, 2017 and 2018. Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated. The period-to-period comparisons ofresults of operations should not be relied upon as indicative of future performance. 98Table of Contents For the Year Ended December 31,2016 2017 2018RMB % RMB % RMB US$ %(in thousands)Operating revenue:Online direct sales2,770,63463.92,534,98345.42,396,680348,58331.5Services and others5,0600.131,9500.6203,91429,6582.7Online direct sales and services income2,775,69464.02,566,93346.02,600,594378,24134.2Interest and financial services income1,373,55931.72,443,76143.82,742,643398,90136.2Loan facilitation and servicing fees54,2011.2378,8926.82,075,817301,91527.3Other revenue135,2323.1192,6033.4177,84225,8662.3Financial services income1,562,99236.03,015,25654.04,996,302726,68265.8Total operating revenue4,338,686100.05,582,189100.07,596,8961,104,923100.0Operating cost:Cost of sales(2,894,025)(66.7)(2,634,142)(47.2)(2,440,613)(354,972)(32.1)Funding cost(491,695)(11.3)(792,170)(14.2)(898,028)(130,613)(11.8)Processing and servicing cost(114,323)(2.6)(223,916)(4.0)(324,005)(47,125)(4.3)Provision for credit losses of financingreceivables(236,611)(5.5)(611,869)(11.0)(884,056)(128,581)(11.6)Provision for credit losses of contractassets and service fees receivable————(38,254)(5,564)(0.6)Total operating cost(3,736,654)(86.1)(4,262,097)(76.4)(4,584,956)(666,855)(60.4)Gross profit602,03213.91,320,09223.63,011,940438,06839.6Operating expenses:Sales and marketing expenses(376,313)(8.7)(405,505)(7.3)(589,983)(85,809)(7.8)Research and development expenses(127,317)(2.9)(235,292)(4.2)(320,165)(46,566)(4.2)General and administrative expenses(87,364)(2.0)(203,635)(3.6)(279,859)(40,704)(3.7)Total operating expenses(590,994)(13.6)(844,432)(15.1)(1,190,007)(173,079)(15.7)Gain on guarantee liabilities, net————108,31615,7541.4Interest expense, net(48,343)(1.1)(75,517)(1.4)(23,059)(3,354)(0.3)Investment-related impairment(5,635)(0.1)(932)(0.0)(15,215)(2,213)(0.2)Investment income————18,7532,7280.3Change in fair value of financialguarantee derivatives, net(5,942)(0.1)47,3550.8197,02728,6562.6Others, net(10,799)(0.2)28,0130.51,7732580.0(Loss)/income before income taxexpense(59,681)(1.2)474,5798.42,109,528306,81827.7Income tax expense(58,258)(1.3)(234,227)(4.2)(132,222)(19,231)(1.7)Net (loss)/income(117,939)(2.5)240,3524.21,977,306287,58726.0Pre-IPO Preferred Shares redemptionvalue accretion(62,299)(1.4)(82,117)(1.5)———Income allocation to participating Pre-IPO Preferred Shares——(132,241)(2.4)———Deemed dividend to a preferredshareholder(42,679)(1.0)—————Net (loss)/income attributable toordinary shareholders(222,917)(4.9)25,9940.31,977,306287,58726.0 (1) Share-based compensation expenses are allocated to processing and servicing cost and operating expense items as follows: For the Year Ended December 31, 2016 2017 2018 RMB % RMB % RMB US$ % (in thousands)Processing and servicing cost1,0670.05,9160.18,1111,1800.1Sales and marketing expenses4,0090.16,6110.118,2232,6500.2Research and developmentexpenses9,0680.217,0890.333,1694,8240.4General and administrativeexpenses9,8550.246,1200.863,1339,1830.8 99(1)(1)(1)(1)Table of Contents Year Ended December 31, 2018 Compared to Year Ended December 31, 2017 Operating revenue Operating revenue increased by 36.1% from RMB5,582 million in 2017 to RMB7,597 million (US$1,105 million) in 2018. This increase wasprimarily due to the increase in financial services income, driven by continuing increases in the number of active users and the average total outstandingprincipal balance of total on-balance and off-balance sheet loans. In addition, as a result of the adoption of ASC 606, revenue from loan facilitation andservicing is generally recognized earlier in the life of a contract. For the year ended December 31, 2018, the impact of applying the new revenue standardresulted in an increase in revenue of approximately RMB826 million (US$120 million). Online direct sales and services income. Online direct sales and services income increased by 1.3% from RMB2,567 million in 2017 to RMB2,601million (US$378 million) in 2018, primarily as a result of the significant increase in revenues generated from services and others, which was partially offsetby the decrease in revenues generated from online direct sales. · Online direct sales. Online direct sales decreased by 5.5% from RMB2,535 million in 2017 to RMB2,397 million (US$349 million) in 2018.The slight decrease was due to the fact that we allocated more resources to grow our online marketplace in 2018. · Services and others. Services and others increased significantly by 538% from RMB32.0 million in 2017 to RMB204 million (US$29.7million) in 2018. The increase was primarily driven by the growth of sales amount made by third-party sellers on our online market through oure-commerce channel and the increase in the number of Lehei/Black Card members. Financial services income. Financial services income increased by 65.7% from RMB3,015 million in 2017 to RMB4,996 million (US$727 million)in 2018, mainly attributable to the increase in the loan facilitation and servicing fees. · Interest and financial services income. Interest and financial services income increased by 12.2% from RMB2,444 million in 2017 toRMB2,743 million (US$399 million) in 2018, while the outstanding principal balances of on-balance sheet loans decreased by 43.3% fromRMB12.0 billion as of December 31, 2017 to RMB6.8 billion (US$990 million) as of December 31, 2018 due to the decrease of on-balancesheet loans originated on our platform in 2018 as well as the repayment of existing on-balance sheet loans during the year. · Loan facilitation and servicing fees. Loan facilitation and servicing fees increased by 448% from RMB379 million in 2017 to RMB2,076million (US$302 million) in 2018. Except for the impact of the adoption of new revenue standard as discussed above, this increase wasprimarily driven by the significant increase in off-balance sheet loans originated as a result of the continuing growth of our business as well asthe business model adjustments made to Juzi Licai in the second quarter of 2018. Under the new business model, all new loans funded byindividual investors on Juzi Licai have been accounted for as off-balance sheet loans commencing from late April 2018. Prior to that, loansfunded by individual investors on Juzi Licai were accounted for as on-balance sheet loans. · Other revenue. Other revenue decreased by 7.7% from RMB193 million in 2017 to RMB178 million (US$25.9 million) in 2018, primarily as aresult of the decrease in the outstanding principal balances of on-balance sheet loans in 2018 and the associated decrease in the fees collectedfor early repayment and late repayment of loans. Operating cost Operating cost increased by 7.6% from RMB4,262 million in 2017 to RMB4,585 million (US$667 million) in 2018, primarily as a result of theincreases in processing and servicing cost and provision for credit losses of financing receivables. Cost of sales. Cost of sales decreased by 7.3% from RMB2,634 million in 2017 to RMB2,441 million (US$355 million) in 2018. This decrease wasconsistent with the decrease of the online direct sales on our e-commerce channel. Funding cost. Funding cost increased by 13.4% from RMB792 million in 2017 to RMB898 million (US$131 million) in 2018. The increase infunding cost was in line with the increase in our interest and financial services income. Processing and servicing cost. Processing and servicing cost increased by 44.7% from RMB224 million in 2017 to RMB324 million (US$47.1million) in 2018. The increase in processing and servicing cost was primarily attributable to an increase of RMB38.9 million (US$5.7 million) in salaries andpersonnel-related costs as we increased the headcount of processing and servicing personnel, an increase of RMB27.8 million (US$4.0 million) in fees tothird-party payment platforms, and an increase of RMB32.8 million (US$4.8 million) in risk management and collection expenses. 100Table of Contents Provision for credit losses of financing receivables. Provision for credit losses of financing receivables increased by 44.5% from RMB612 millionin 2017 to RMB884 million (US$129 million) in 2018. We will continue to improve our credit assessment and risk management capabilities to enhance ourcollection efforts while maintaining credit risks at a reasonable level. Provision for credit losses of contract assets and service fees receivable. Provision for credit losses of contract assets and service fees receivable wasRMB38.3 million (US$5.6 million) in 2018, mainly due to the significant increase in off-balance sheet loans originated as a result of the continuing growthof our business in 2018. Gross profit Our gross profit increased significantly by 128% from RMB1,320 million in 2017 to RMB3,012 million (US$438 million) in 2018. Our grossmargin increased from 23.6% in 2017 to 39.6% in 2018. The significant increase in our gross profit margin is primarily due to the significant increase of loanfacilitation and servicing fees resulting from the enlarged proportion of the off-balance sheet loans, which have higher gross profit margins than interest andfinancial services income generated from on-balance sheet loans. Operating expenses Operating expenses increased by 40.9% from RMB844 million in 2017 to RMB1,190 million (US$173 million) in 2018 with increases in all threecategories of operating expenses. Sales and marketing. Sales and marketing expenses increased by 45.5% from RMB406 million in 2017 to RMB590 million (US$85.8 million) in2018. This increase was primarily attributable to an increase of RMB101 million (US$14.7 million) in online promotional fees and advertising costs, anincrease of RMB11.6 million (US$1.7 million) in share-based compensation expenses allocated to sales and marketing expenses, and an increase ofRMB79.3 million (US$11.5 million) in salaries and personnel related costs. Research and development. Research and development expenses increased by 36.1% from RMB235 million in 2017 to RMB320 million (US$46.6million) in 2018. The increase was primarily attributable to an increase of RMB53.7 million (US$7.8 million) in payroll and related expenses, an increase ofRMB16.1 million (US$2.3 million) in share-based compensation expenses allocated to research and development expenses, and an increase of RMB8.2million (US$1.2 million) in depreciation expenses allocated to research and development expenses. General and administrative. General and administrative expenses increased by 37.4% from RMB204 million in 2017 to RMB280 million (US$40.7million) in 2018. The increase was primarily attributable to an RMB17.0 million (US$2.5 million) increase in share-based compensation expenses allocatedto general and administrative expenses and an RMB35.0 million (US$5.1 million) increase in payroll expenses. In addition, we incurred an increase ofRMB24.3 million (US$3.5 million) in professional service fees and rental expenses. Gain on guarantee liabilities, net Gain on guarantee liabilities, net was RMB108 million (US$15.8 million) in 2018, which mainly resulted from the releasing of liabilities throughour performance of the guarantee for loans funded by individual investors on Juzi Licai that are covered by risk safeguard scheme. Interest expense, net Interest expense, net was RMB23.1 million (US$3.4 million) in 2018, compared to RMB75.5 million in 2017. Net interest expense in 2018 wasmainly associated with interest expense incurred for bank borrowings, while net interest expense in 2017 was mainly associated with interest expenseincurred for the convertible loans issued in May 2016 and converted into series C-1 and series C-2 preferred shares in October 2017. 101Table of Contents Investment income We recorded investment income of RMB18.8 million (US$2.7 million) for an equity investee in 2018 due to observable price changes in an orderlytransaction for the identical investment of the same issuer, as a result of our adoption of Accounting Standards Update No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities on January 1, 2018. Change in fair value of financial guarantee derivatives, net Change in fair value of financial guarantee derivatives amounted to net gain of RMB197 million (US$28.7 million) in 2018, compared to a gain ofRMB47.4 million in 2017. The increase was primarily due to increasing realization of gains through our performance of the guarantee, as well as the impactof adjustment to the estimated expected default rate of the underlying loans. Income tax expense Income tax expense decreased by 43.5% from RMB234 million in 2017 to RMB132 million (US$19.2 million) in 2018. The decrease was due to thedecrease of the annualized effective income tax rate, primarily resulting from the lower enacted income tax rate for certain major subsidiaries in 2018. Inaddition, our PRC subsidiaries completed 2017 annual tax filings with relevant tax authorities in May 2018. The tax filing results provided additionalinsights as to the pre-tax deduction of qualified provision for credit losses of financing receivables. Accordingly, current income tax liability of RMB78million and valuation allowance of RMB115 million recognized as of December 31, 2017 in relation to our provision for credit losses of financingreceivables were reversed in 2018. Net income As a result of the foregoing, our net income increased significantly by 723% from RMB240 million in 2017 to RMB2.0 billion (US$288 million) in2018. Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 Operating revenue Operating revenue increased by 28.7% from RMB4,339 million in 2016 to RMB5,582 million in 2017. This increase was primarily due to asubstantial increase in our financial services income. Online direct sales and services income. Online direct sales and services income decreased by 7.5% from RMB2,776 million in 2016 to RMB2,567million in 2017, primarily due to a decrease in online direct sales, partially offset by an increase in services and others. · Online direct sales. Online direct sales were RMB2,535 million in 2017, compared to RMB2,771 million in 2016. The slight decrease was dueto the fact that we allocated more resources to grow our online marketplace in 2017. · Services and others. In March 2016, we began to have third-party merchants offer and sell their own products on our online marketplacethrough our e-commerce channel. Services and others increased from RMB5.1 million in 2016 to RMB32.0 million in 2017. Financial services income. Financial services income increased significantly by 92.9% from RMB1,563 million in 2016 to RMB3,015 million in2017, primarily due to the increase in the principal balance of loans. · Interest and financial services income. Interest and financial services income increased by 77.9% from RMB1,374 million in 2016 toRMB2,444 million in 2017. This growth was primarily driven by an increase in the outstanding principal balance of on-balance sheet loans in2017, which was in turn driven by increases in the number of active users and the average outstanding principal balance per user. Theoutstanding principal balance of on-balance sheet loans was RMB12.0 billion as of December 31, 2017, compared to RMB7.7 billion as ofDecember 31, 2016. 102Table of Contents · Loan facilitation and servicing fees. Loan facilitation and servicing fees increased from RMB54.2 million in 2016 to RMB379 million in 2017.This increase reflected the significant growth in off-balance sheet loans as a result of an expansion of our funding partnerships with financialinstitutions in 2017 as part of our continued efforts to diversify funding sources, as well as increases in the number of active users and theaverage outstanding principal balance per user. The outstanding principal balance of off-balance sheet loans was RMB7,260 million as ofDecember 31, 2017, compared to RMB2,187 million as of December 31, 2016. · Other revenue. Other revenue increased by 42.4% from RMB135 million in 2016 to RMB193 million in 2017, primarily as a result of thegrowth in the outstanding principal balances of loans between these periods and the associated increase in the fees collected for early repaymentand late repayment of loans. Operating cost Operating cost increased by 14.1% from RMB3,737 million in 2016 to RMB4,262 million in 2017. Cost of sales. Cost of sales decreased by 9.0% from RMB2,894 million in 2016 to RMB2,634 million in 2017. Funding cost. Funding cost increased by 61.1% from RMB492 million in 2016 to RMB792 million in 2017. The increase in funding cost wasprimarily attributable to an increase in our funding debts to fund on-balance sheet loans originated on our platform. Processing and servicing cost. Processing and servicing cost increased by 95.9% from RMB114 million in 2016 to RMB224 million in 2017. Theincrease in processing and servicing cost was primarily attributable to an increase of RMB32.0 million in salaries and personnel-related costs as we increasedthe headcount of processing and servicing personnel, an increase of RMB31.5 million in fees to third-party payment platforms, an increase of RMB17.9million in credit assessment cost, an increase of RMB14.3 million in risk management and collection expenses, an increase of RMB5.4 million in rentalexpense, and an increase of RMB4.8 million in share-based compensation expenses. These increases reflected the significant growth in the volume of creditapplications and in loan servicing requirements. Provision for credit losses of financing receivables. Provision for credit losses of financing receivables increased by 159% from RMB237 million in2016 to RMB612 million in 2017. The increase was mainly attributable to the increase in the average outstanding principal balance of on-balance sheetloans during these periods. In addition, as we had continued to improve our credit assessment and risk management capabilities as well as enhanced ourcollection efforts, we gradually expanded our user base to improve our profit, while maintaining credit risks at a reasonable level. Gross Profit Our gross profit increased significantly by 119% from RMB602 million in 2016 to RMB1,320 million in 2017. Our gross margin increased from13.9% in 2016 to 23.6% in 2017. Our gross margin is affected by the mix of our operating revenue between online direct sales and services income andfinancial services income. Our gross margin significantly increased in 2017, as a significantly greater percentage of our operating revenue was from financialservices income in 2017, as compared to 2016. We do not rely on our e-commerce channel to generate gross profit, as the focus of our e-commerce channel isto attract and retain users and convert them to users of our loan products. Our write-downs to inventory have been properly recorded and were insignificant in2016 and 2017. 103Table of Contents Operating expenses Operating expenses increased by 42.9% from RMB591 million in 2016 to RMB844 million in 2017 with increases in all three categories ofoperating expenses. Sales and marketing. Sales and marketing expenses increased by 7.8% from RMB376 million in 2016 to RMB406 million in 2017. This increasewas primarily attributable to an increase of RMB51.4 million in payroll and related expenses and an increase of RMB4.7 million of rental related expenses asa result of an increase in the number of sales and marketing personnel, offset by a decrease of RMB29.6 million in offline promotional activity fees andadvertising cost. Research and development. Research and development expenses increased by 84.8% from RMB127 million in 2016 to RMB235 million in 2017.The increase was primarily attributable to an increase of RMB77.0 million in payroll and related expenses, an increase of RMB13.6 million in rental anddepreciation expense allocated to research and development expenses, an increase of RMB8.0 million in share-based compensation expenses and an increaseof RMB7.3 million in technical service fee. General and administrative. General and administrative expenses increased by 133% from RMB87.4 million in 2016 to RMB204 million in 2017.The increase was primarily attributable to an RMB53.2 million increase in payroll and related expenses, an increase of RMB36.3 million in share-basedcompensation expenses allocated to general and administrative expenses as a result of an increase in the headcount of general and administrative personneland an increase in the salary and benefit level for the employees. In addition, we incurred an increase of RMB29.6 million in professional service fees, rentalexpenses and other general corporate-related expenses as a result of our business growth in 2017. Interest expense, net Interest expense, net was RMB75.5 million in 2017 and RMB48.3 million in 2016. The interest expense associated with the convertible loansissued in May 2016 amounted to RMB71.9 million in 2017 and was waived by the investors of the convertible loans upon the conversion of the convertibleloans into our series C-1 preferred shares and series C-2 preferred shares that we issued on October 23, 2017 to such investors or their respective affiliates. Change in fair value of financial guarantee derivatives, net Change in fair value of financial guarantee derivatives was a gain of RMB47.4 million in 2017, as compared to a loss of RMB5.9 million in 2016.The change was due to our ceasing to provide future interest to our funding partners in the event of full prepayment by a user starting from January 2017 andreleasing of liabilities through our performance of the financial guarantee by making payment on delinquent loans. Others, net Others, net was a gain of RMB28.0 million in 2017, as compared to a loss of RMB10.8 million in 2016. The change was due to the refund of value-added tax granted by relevant tax authorities in the form of reducing tax payable on our tax returns in 2017. Income tax expense Income tax expense increased by 302% from RMB58.3 million in 2016 to RMB234 million in 2017, mainly due to the increase in taxable incomein 2017. Net (loss)/income As a result of the foregoing, we recorded a net income of RMB240 million in 2017, compared to a net loss of RMB118 million in 2016. 104Table of Contents Changes in Financial Position The following table sets forth selected information from our consolidated balance sheets as of December 31, 2017 and 2018. This informationshould be read together with our consolidated financial statements and related notes included elsewhere in this annual report. As of December 31,2017 2018RMB RMB US$(in thousands)Assets:Cash and cash equivalents1,126,4751,148,292167,012Restricted cash—current561,9221,266,536184,210Short-term financing receivables, net9,857,2095,140,634747,674Prepaid expenses and other current assets945,258923,827134,365Risk safeguard fund receivable, net—current—395,02557,454Contract assets and service fees receivable, net—current—946,293137,633Inventories, net101,65357,1968,319Restricted cash—non-current46,88982,30611,971Long-term financing receivables, net1,785,0451,283,036186,610Risk safeguard fund receivable, net—non-current—116,20816,902Contract assets and service fees receivable, net—non-current—291,78442,438Total assets14,729,58412,470,5751,813,772Liabilities:Short-term funding debts10,525,1344,646,041675,739Risk safeguard fund payable—456,27666,363Accrued expenses and other current liabilities1,611,0292,145,689312,077Long-term funding debts166,629157,88722,964Total liabilities13,028,0588,363,7831,216,463Total shareholders’ equity1,701,5264,106,792597,309 Cash and cash equivalents Our cash and cash equivalents increased by 1.9% from RMB1,126 million as of December 31, 2017 to RMB1,148 million (US$167 million) as ofDecember 31, 2018, primarily due to an increase in cash inflow from operating and investing activities. Restricted cash Restricted cash mainly represents (i) cash received from users but not yet repaid to funding parties or received from funding parties but not yetremitted to users, which is not available to fund our general liquidity needs; (ii) security deposits set aside for our partnering commercial banks or certaininstitutional funding partners in case of users’ defaults; and (iii) cash set aside under the quality assurance program or risk safeguard scheme through third-party custody bank accounts. Our current restricted cash increased by 125% from RMB562 million as of December 31, 2017 to RMB1,267 million (US$184 million) as ofDecember 31, 2018, and non-current restricted cash increased from RMB46.9 million as of December 31, 2017 to RMB82.3 million (US$12.0 million) as ofDecember 31, 2018, primarily due to increase in investment funds received from the individual investors on Juzi Licai but not yet matched with andtransferred to the users due to the settlement time lag. Short-term financing receivables, net The following table sets forth a breakdown of our short-term financing receivables, net, as of December 31, 2017 and 2018: 105Table of Contents As of December 31,2017 2018RMB RMB US$(in thousands)Short-term financing receivables:Installment purchase loans1,020,662796,312115,819Personal installment loans9,159,8404,669,665679,174Net deferred origination fees(9,829)(1,011)(147)Total short-term financing receivables10,170,6735,464,966794,846Allowance for credit losses(313,464)(324,332)(47,172)Total short-term financing receivables, net9,857,2095,140,634747,674 Our net short-term financing receivables decreased by 47.8% from RMB9,857 million as of December 31, 2017 to RMB5,141 million (US$748million) as of December 31, 2018, primarily due to the decrease associated with on-balance sheet loans originated on our platform in 2018 as well as therepayment of existing on-balance sheet loans during the year. The decrease in on-balance sheet loans originated was primarily due to the business modeladjustments made to Juzi Licai in the second quarter of 2018. All new loans funded by individual investors on Juzi Licai under this new business model havebeen accounted for as off-balance sheet loans, commencing from late April 2018. Prior to that, loans funded by individual investors on Juzi Licai wereaccounted for as on-balance sheet loans. Risk safeguard fund receivable and payable We recorded net risk safeguard fund receivable of RMB511 million (US$74.4 million) and net risk safeguard fund payable of RMB456 million(US$66.4 million) as of December 31, 2018, primarily due to the significant growth of off-balance sheet loans funded by individual investors on Juzi Licaithat are covered by risk safeguard scheme. Short-term and long-term contract assets and service fees receivable, net We recorded net contract assets and service fees receivable of RMB1,238 million (US$180 million) as of December 31, 2018 primarily due tosignificant increase in off-balance sheet loans originated as a result of the continuing growth of our business as well as business model adjustments made toJuzi Licai in the second quarter of 2018. Inventories, net Our net inventories decreased by 43.7% from RMB102 million as of December 31, 2017 to RMB57.2 million (US$8.3 million) as of December 31,2018. Long-term financing receivables, net The following table sets forth a breakdown of our long-term financing receivables, net as of December 31, 2017 and 2018: As of December 31,2017 2018RMB RMB US$(in thousands)Long-term financing receivables:Installment purchase loans170,042178,24625,925Personal installment loans1,686,2181,165,894169,572Net deferred origination fees(14,483)(1,400)(204)Total long-term financing receivables1,841,7771,342,740195,293Allowance for credit losses(56,732)(59,704)(8,683)Total long-term financing receivables, net1,785,0451,283,036186,610 106Table of Contents Our net long-term financing receivables decreased by 28.1% from RMB1,785 million as of December 31, 2017 to RMB1,283 million (US$187million) as of December 31, 2018, primarily due to a substantial decrease associated with on-balance sheet loans on our platform in 2018 as well as therepayment of existing on-balance sheet loans during the year. Short-term funding debts Short-term funding debts decreased by 55.9% from RMB10,525 million as of December 31, 2017 to RMB4,646 million (US$676 million) as ofDecember 31, 2018, primarily due to the decrease in on-balance sheet loans originated as the business model adjustments made to Juzi Licai in the secondquarter of 2018. All new loans funded by individual investors on Juzi Licai under this new business model have been accounted for as off-balance sheetloans, commencing from late April 2018. Prior to that, loans funded by individual investors on Juzi Licai were accounted for as on-balance sheet loans. Accrued expenses and other current liabilities Accrued expenses and other current liabilities increased by 33.2% from RMB1,611 million as of December 31, 2017 to RMB2,146 million (US$312million) as of December 31, 2018, primarily due to an increase in funds payable to individual investors on Juzi Licai, and partially offset by a decrease inliabilities to Pre-IPO Series C-1 preferred shareholders and funds payable to institutional funding partners. Inflation Since our inception, inflation in China has not materially affected our results of operations. According to the National Bureau of Statistics of China,the year-over-year percent changes in the consumer price index for December 2016, 2017 and 2018 were increases of 2.1%, 1.8% and 1.9%, respectively.Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future. Critical Accounting Policies We prepare financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect thereported amounts of our assets and liabilities and the disclosure of our contingent assets and liabilities at the end of each fiscal period and the reportedamounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience,knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptionsthat we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since theuse of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accountingpolicies require a higher degree of judgment than others in their application. The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity ofreported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. For furtherinformation on our significant accounting policies, see Note 2 to our consolidated financial statements. We believe the following accounting policiesinvolve the most significant judgments and estimates used in the preparation of our financial statements. 107Table of Contents On-and off-balance sheet treatment of loans We generate financing receivables from providing installment purchase loans, from our online direct sales, and personal installment loans to theborrowers. Financing receivables are measured at amortized cost and reported on our consolidated balance sheets at outstanding principal balance adjustedfor any charge-offs, the allowance for credit losses, and net deferred origination fees on originated financing receivables. Depending on the arrangements among us, the borrowers and the funding sources, the underlying loans are accounted for as “on-balance sheetsloans” or “off-balance sheet loans”, where applicable. On-balance sheet loans (a) Loans funded by individual investors on Juzi Licai prior to April 24, 2018 or by certain institutional funding partners For loans funded by the proceeds from our own online investment platform Juzi Licai under our old business model before April 24, 2018, whichoffers individual investors various investment programs with different terms and estimated rates of return, or from certain of our institutional funding partners,our roles include (1) collecting the investment principal from the individual investors or institutional funding partners and lending the funds to borrowers,(2) collecting monthly repayment from the borrowers and repaying the individual investors or institutional funding partners according to the terms(i.e. interest rate and scheduled repayment dates) of the respective investment programs or agreements between the individual investors or institutionalfunding partners and us (“Investment Programs” or “Investment Agreements”, as applicable). The terms of the underlying loan agreements between the individual investors or institutional funding partners and the borrowers (“Underlying LoanAgreements”) do not necessarily match the terms of the Investment Programs or Investment Agreements. The mismatch is mainly due to the fact that someindividual investors or institutional funding partners may invest in the programs that have shorter investment periods than the terms of the Underlying LoanAgreements. Depending on the types of Investment Programs the individual investors choose or the Investment Agreements the institutional funding partnersentered into with us, the investing periods could be as short as one week and as long as thirty-six months. Pursuant to the Investment Programs or InvestmentAgreements, the individual investors or institutional funding partners agree on a rate of return with us which is normally lower than the coupon interest ratestipulated in the Underlying Loan Agreements, given the shorter periods of those Investment Programs or Investment Agreements. Under the terms of theInvestment Programs or Investment Agreements, which drive the return of the investments, we conclude that we have the liabilities to the individual investorsor institutional funding partners when the underlying loans are funded. Accordingly, we are considered as the primary obligor to the individual investors orinstitutional funding partners in the lending relationship and therefore record the liabilities to individual investors or institutional funding partners asfunding debts on our consolidated balance sheets. Therefore, we continue to account for the financing receivables over the terms of the installment purchaseloans and personal installment loans. · Quality assurance program on Juzi Licai In July 2017, we established a quality assurance program (“QAP”) with the purposes of providing make-up payments to the individual investors onJuzi Licai when the borrowers fail to satisfy their principal or interest repayment obligations. A portion of each monthly repayment by the borrower equal to acertain percentage of the outstanding principal balance of the loan was transferred to a third-party custody bank account. We reserved the right to revise thispercentage upwards or downwards from time to time. The QAP only applied to loans funded by the individual investors under our old business model on orafter July 7, 2017. 108Table of Contents Given that the loans covered by the QAP were accounted for as on-balance sheet loans, we are obligated to repay the individual investors for allamounts of principal and future interests regardless of whether the QAP was implemented or not. We determined that there were no additional liabilities to berecognized in addition to the principal and interests due to the individual investors recorded as “Funding Debts” and “Accrued interest payable” on ourconsdidated balance sheets. The quality assurance funds set aside under the QAP through custody bank accounts were recorded as “Restricted cash” on ourconsolidated balance sheets. We applied the same process and methodology to evaluate the creditworthiness and collectability of the loan portfolio coveredby the QAP on a pooled basis, mainly based on delinquency levels and historical charge-offs. (b) Loans funded by establishment of the consolidated trusts and issuance of asset-backed securitized debts We establish business relationships with trusts from time to time. Pursuant to applicable arrangements, we invested in the financing receivablesusing funds from the consolidated trusts. The trusts are administered by third-party trust companies, which act as the trustees, with funds contributed by usand/or other third-party investors for the purposes of providing returns to the beneficiary of the trusts. Since these trusts only invest in financing receivablesgenerated from our platform and our mobile application, we have power to direct the activities of the trusts. We have the obligation to absorb losses or theright to receive benefits from the trusts that could potentially be significant to the trusts. As a result, the trusts are considered consolidated VIEs underAccounting Standards Codification (“ASC”) 810, Consolidation. We created an asset-backed securitization plan (“ABS Plan”) with a final maturity of January 2018 in December 2015 and securitized our financingreceivables arising from online direct sales through transfer of those assets to the ABS Plan. The ABS Plan then issued debt securities to third-party investorsand was considered a consolidated VIE under ASC 810, Consolidation. Therefore, loans funded by the consolidated trusts and asset-backed securitized debts remain at us and are recorded as “Financing receivables, net”on the consolidated balance sheets. The proceeds received from third-party investors of the consolidated trusts and asset-backed securitized debts arerecorded as funding debts. Cash received via consolidated trusts that has not yet been distributed is recorded as restricted cash. Off-balance sheet loans (a) Loans funded by individual investors on Juzi Licai after April 24, 2018 On April 24, 2018, we made some adjustments to our business model for new loans funded by individual investors on Juzi Licai (the “Juzi NewModel”). Under the Juzi New Model, our roles include (1) matching the borrowing requests from the borrowers with the individual investors on Juzi Licai, (2)processing monthly repayment from the borrowers according to the terms of the Underlying Loan Agreements through third-party custodian bank accounts,and (3) providing ongoing management services to individual investors over the terms of respective Investment Programs. Under the Juzi New Model, we act as an intermediary between the borrower and the individual investors. Pursuant to the Underlying LoanAgreement and the Investment Programs, the individual investors are entitled to all the interests generated from the underlying loans. Such interests are notgenerated until the lending relationship has been established between the borrowers and the individual investors, as the lenders, upon entering into theUnderlying Loan Agreements. The existing individual investors cannot exit from any outstanding lending relationship unless the underlying loan is fullyrepaid by the borrower or the outstanding loan principal with the remaining term is successfully re-matched with other individual investors. We provideongoing matching and re-matching services to individual investors over the terms of respective Investment Programs while it does not have any obligationsto ensure such successful re-matching. We conclude that under the terms of the Underlying Loan Agreements and the Investment Programs under the Juzi New Model, we are not the legallender or borrower in the loan origination and repayment process. Accordingly, we do not record financing receivables arising from these loans nor fundingdebts to the individual investors. · Risk safeguard scheme on Juzi Licai Under the Juzi New Model, we have ceased offering the QAP for loans funded by the individual investors on Juzi Licai. Instead, we entered into acooperation agreement with an independent third-party guarantee company (the “Guarantee Company”), to set up a new investor protection program calledthe Risk Safeguard Scheme (“RSS”). The purpose of the RSS is to provide make-up payments to the individual investors on Juzi Licai when the borrowersdefault. The RSS only applies to loans newly funded under the Juzi New Model, and requires the borrowers to contribute to the RSS to protect the individualinvestors. By default, all borrowers enroll in the RSS when the Underlying Loan Agreements are entered into. 109Table of Contents Pursuant to the Underlying Loan Agreement, the borrower agrees to enroll in the RSS and pay the guarantee fee (the “Guarantee Fee”) into theguarantee fund special account (“Risk Safeguard Fund”) and the relevant guarantee service fees to the Guarantee Company. Accordingly, a certain amount ofeach monthly repayment from the borrowers, equal to a certain percentage of the outstanding principal balance of each loan, shall be transferred to the RiskSafeguard Fund. We have the discretion in determining the percentage, i.e. the amount of the Guarantee Fee, to be paid by the participating borrowers. Theamount of make-up payments is limited to the available balance of the Risk Safeguard Fund. If the Risk Safeguard Fund become insufficient to pay back allindividual investors with defaulted loans, these individual investors will be repaid on a pro rata basis, and their outstanding unpaid loans will be deferred tothe next time the Risk Safeguard Fund are replenished, at which time a distribution will again be made to all individual investors with those defaulted loans.The participation of the Risk Safeguard Fund is not refundable, even if there is no default of loans. Therefore, we concluded that we are the primary obligor inproviding the guarantee services and record our obligations associated with the RSS in accordance with Accounting Standards Codification (“ASC”) 460,Guarantees. The balance of Risk Safeguard Fund is recorded as “Restricted Cash” on our consolidated balance sheets. (b) Loans funded by certain other institutional funding partners such as third-party commercial banks or consumer finance companies For the loans funded by the proceeds from certain other institutional funding partners such as third-party commercial banks or consumer financecompanies, each underlying loan and borrower has to be approved by the third-party commercial banks or consumer finance companies individually. Oncethe loan is approved by and originated by the third-party commercial bank or consumer finance company, the fund is provided by the third-party commercialbank or consumer finance company to the borrower and a lending relationship between the borrower and the third-party commercial bank or consumerfinance company is established through a loan agreement. Effectively, we offer loan facilitation and matching services to the borrowers who have creditneeds and the commercial banks or consumer finance companies who originate loans directly to borrowers referred by us. We continue to provide accountmaintenance, collection, and payment processing services to the borrowers over the term of the loan agreement. At the same time, we also provide a financialguarantee on the principal and the accrued interest repayment of the defaulted loans in case of borrowers’ defaults, and full interest repayment in the eventthat borrowers early repay their loans. Under this scenario, we determine that we are not the legal lender or borrower in the loan origination and repaymentprocess. Accordingly, we do not record financing receivables arising from these loans nor funding debts to the third-party commercial banks or consumerfinance companies. Separately, we account for the financial guarantee provided. Revenue recognition On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective method for all contracts notcompleted as of the date of adoption. We considered relevant accounting guidance and concluded that arrangements for our on-balance sheet loans are out of scope of ASC 606.Therefore, “Interest and financial services income” and “Other revenue” included in “Financial services income” on our consolidated statements ofoperations should continue to be accounted for in accordance with ASC 310, Receivables. Other revenue streams for the year ended December 31, 2018 werepresented under ASC 606, while comparative information has not been restated and continues to be reported under the accounting standards in effect forthose periods. 110Table of Contents Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the considerationthe entity expects to receive in exchange for those goods or services, net of value-added tax. We identify our contracts with customers and all performanceobligations within those contracts. We then determine the transaction price and allocate the transaction price to the performance obligations within ourcontracts with customers, recognizing revenue when, or as, we satisfy our performance obligations. For considerations with original payment terms greaterthan 12 months, we determine a significant financing component exists in the arrangements. The discount rate, which reflects the credit risk of the customers,is used in adjusting the consideration at inception for revenue recognition. Interest income resulting from a significant financing component is recorded as“Interest and financial services income” on our consolidated statements of operations. We recognized a cumulative effect of approximately RMB209.5 million as an increase to the opening balances of retained earnings on January 1,2018, as a result of the initial application of ASC 606. For the year ended December 31, 2018, the adoption of ASC 606 resulted in an increase in operatingrevenue of approximately RMB826 million as compared with ASC 605, Revenue Recognition, that was in effect in prior periods. The impact primarilyresulted from the earlier recognition of revenue under ASC 606 for “Loan facilitation and servicing fees” collectible in monthly installments related to ouroff-balance sheet loans. We provide the loan facilitation and matching services and post-origination services as multiple deliverable arrangements. UnderASC 605, service fees collectible in monthly installments were considered contingent and, therefore, were not allocable to different deliverables until thecontingency was resolved (i.e., upon receipt of the monthly service fees). Under ASC 606, service fees collectible in monthly installments are consideredvariable consideration which is contingent on a future event occurring. We consider the constraint on variable consideration and only recognize revenue tothe extent that it is probable that a significant reversal will not occur when the uncertainty associated with the variable consideration is subsequentlyresolved. Revenue is recognized when each of the performance obligations is satisfied at a point in time or over time separately using the total estimatedconsideration allocated to the different performance obligations based on their relative fair value. Revenue from loan facilitation and matching services isrecognized upon successful matching of the borrowers with various funding parties, and revenue from post-origination services is recognized over the termsof the related contracts. We determined that, for “Online direct sales and services income” on our consolidated statements of operations, the adoption of ASC 606 did notsignificantly change (i) the timing and pattern of revenue recognition, and (ii) the presentation of revenue as gross versus net. Our revenue recognition policies effective on the adoption date of ASC 606 are as follows: Online direct sales and services Online direct sales We engage in the online direct sales of electronic products, and to a lesser extent, home appliance products and general merchandise products withinstallment payment terms mainly through our retail website www.fenqile.com and our mobile application. Online direct sales revenues are recognized at point-in-time when control of promised goods or services is transferred to the customers, whichgenerally occurs upon the acceptance of the goods or services by the customers. For arrangements where we control the goods or services before they aretransferred to the customers as a principal, as we are primarily responsible for fulfilling the promise to provide the goods or services, are subject to inventoryrisk, and have discretion in establishing prices, revenues are recorded on a gross basis. Otherwise, revenues are recorded on a net basis. The goods or servicesare generally sold with a right of return, which is accounted for as variable consideration when determining the amount of revenue to recognize. Returnallowances are estimated based on historical experiences and insignificant for all of the periods presented. For these transactions, we generate financing receivables due from the borrowers who place orders. The online direct sales revenues and relatedfinancing receivables are accounted for as sales of products or services to the borrowers with extended payment terms and recorded at present value of thecontractual cash flows when our performance obligations are satisfied. 111Table of Contents The financing receivables initially generated from online direct sales may be subsequently funded with the proceeds from on-or off-balance sheetloans. Services and others We offer quarterly or annual membership packages to our subscribing members with access to benefits of sales of products and services on the ourplatform and mobile application that represent a single stand-ready obligation, in exchange for upfront premium membership fees. The receipt of premiummembership fees is initially recorded as “Deferred service fees” included in “Accrued expenses and other current liabilities” and membership fees arerecognized ratably over the terms of the membership packages as our performance obligation is satisfied over time. We also operate an online marketplace that enable third-party sellers to sell their products to customers with installment payment terms. We chargethe third-party sellers a fixed rate commission fee based on the sales amount for the services rendered. Revenues are recognized at point-in-time when theunderlying transactions are completed, i.e., upon acceptance of the underlying goods or services by the borrowers. In accordance with ASC606-10-55-39, werecognize the commission fees as revenues from the third-party sellers on a net basis, as we are acting as an agent and do not have general inventory risk or donot have discretion to establish prices. For these transactions whereby we pay to the third-party sellers on behalf of the borrowers, we generate financingreceivables due from the borrowers, which may be subsequently funded with the proceeds from on- or off-balance sheet loans. Financial services Interest and financial services income We generate interest and financial services income from our financing receivables. Interest and financial services income is recognized over the terms of financing receivables using the effective interest method. Origination feescollected on the first repayment date, normally one month after the origination of personal installment loans, are recorded as a component of financingreceivables, on our consolidated balance sheets. Deferred origination fees are recognized over the terms of personal installment loans. Direct origination costsinclude costs directly attributable to originating financing receivables, including vendor costs and personnel costs directly related to the time spent by thoseindividuals performing activities related to the origination of financing receivables. Considering the credit risk characteristics of the borrowers as well as therelatively small amount of each individual financing receivable, we determined that direct origination costs incurred for originating individual financingreceivables are insignificant and expensed as incurred and recorded in “Processing and servicing cost” in our consolidated statements of operations. Interestand financial services income is not recorded when reasonable doubt exists as to the full, timely collection of interest or principal. Loan facilitation and servicing fees With respect to the off-balance sheet loans, we do not record financing receivables arising from these loans nor funding debts to the funding parties.We earn loan facilitation and servicing fees from these arrangements. Revenues from loan facilitation and matching and post-loan origination services We provide intermediary services to the borrowers and funding parties, as the lenders. The intermediary services provided include (i) loan facilitationand matching services, (ii) post-origination services (i.e. account maintenance, collection, and payment processing), and (iii) a financial guarantee. We haveassessed all these services and conclude that loan facilitation and matching services and post-origination services are distinct and therefore are separateperformance obligations. The financial guarantee is within the scope of ASC 815, Derivatives and Hedging or ASC 460, Guarantees, where applicable, andrecorded at fair value at inception of the loans. The remaining consideration is allocated to each of the performance obligations based on relative standaloneselling price of each of the services being provided to customers. We primarily use the expected cost plus a margin approach to determine the relativestandalone selling price as a result of the adoption of ASC 606. 112Table of Contents Revenues from loan facilitation and matching services are recognized at point-in-time upon the successful matching of the borrowing requests fromthe borrowers with the funding parties, as the lenders. Revenues from post-origination services are recognized ratably over the terms of the underlying loansas this performance obligation is satisfied over time. Revenues from Investment Program management services We provide ongoing management services to individual investors pursuant to the Investment Programs under the Juzi New Model, including(i) initial matching of the investment funds from the individual investors and (ii) continuous re-matching of the monthly repayment from the borrowers withany new borrowing requests to generate investment returns for the individual investors over the terms of the Investment Programs. The customers (i.e. the individual investors) simultaneously receive and consume the benefits provided by our performance throughout the terms ofthe Investment Programs. We conclude that the ongoing management services is a distinct service being provided over the time in accordance with ASC 606,therefore the revenues from Investment Program management services are recognized over the terms of the Investment Programs, using a straight-line method.We consider the options to the individual investors to renew the contract term of Investment Programs to purchase additional future services with a lowerservice fee rate, if any, as a material right to customers therefore is a separate performance obligation. The transaction price allocated to such options aredeferred to be recognized as revenues when the relevant future services are transferred or when the options expire. The remaining consideration is allocated toeach of the performance obligations based on relative standalone selling price of each of the services being provided to customers. We determine the relativestandalone selling price of such options primarily based on the historical data of the discounts that the customers obtain from exercising such options. Other revenue Other revenue includes fees collected for prepayment and late payment for on-balance sheet loans, which is calculated as a certain percentage ofinterest over the prepaid principal loan amount in case of prepayment or a certain percentage of past due amounts in case of late payment. Contract balances We classify our right to consideration in exchange for products or services transferred to a customer as either a receivable or a contract asset. Areceivable is a right to consideration that is unconditional as compared to a contract asset which is a right to consideration that is conditional upon factorsother than the passage of time. Generally, the amount of revenue recognized from loan facilitation and matching services and Investment Programmanagement services exceeds the amount billed to customers following the predetermined payment schedules at inception of the loans. We do not have anunconditional right to such exceeding amount. Service fees receivable represent the considerations for which we have satisfied our performance obligationsand have the unconditional right to consideration. At each reporting date, we assess whether there is any indicator of impairment to the contract assets andservice fees receivable. An impairment loss, if any, is recorded as “Provision for credit losses of contract assets and service fees receivable” on ourconsolidated statements of operations. Contract liabilities relate to unsatisfied performance obligations at the end of each reporting period and consist of cash payment received in advancefrom customers in membership services and post-origination services, which is recorded as “Deferred service fees” included in “Accrued expenses and othercurrent liabilities” on our consolidated balance sheets. Remaining performance obligations The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of thereporting period and an explanation as to when we expect to recognize these amounts in revenue. Additionally, as a practical expedient, we do not includecontracts that have an original duration of one year or less. As of December 31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations related to customercontracts that are unsatisfied or partially unsatisfied was RMB602 million. Given the profile of contract terms, substantially all of the remaining performanceobligation is expected to be recognized as revenue over the next three years. Practical expedients We have used the following practical expedients as allowed under ASC 606: The remaining performance obligation has not been disclosed when the performance obligation is part of a contract that has an original duration ofone year or less. We expense sales commissions as incurred when the amortization period is one year or less. Sales commission expenses are recorded within “Salesand marketing expenses” on our consolidated statements of operations. 113Table of Contents Risk safeguard fund receivable and payable For the off-balance sheet loans funded by individual investors on Juzi Licai, the obligations associated with the risk safeguard fund are comprised oftwo components: (i) ASC 460 component; and (ii) ASC 450 component. In accordance with ASC 460-10-25-2 and ASC 460-10-30-3, the non-contingent and contingent aspect of the financial guarantee must both beconsidered at initial measurement. Accordingly, the risk safeguard fund payable is measured at fair value at inception and reduced as we are released from theunderlying risk, i.e., as the underlying loan is repaid by the borrower or when the individual investor is compensated in the event of a borrower’s default. Thiscomponent is a stand ready obligation which is not subject to the probable threshold used to record a contingent obligation. The fair value of the guaranteeassociated with the risk safeguard fund recorded at inception of the loans is estimated using a discounted cash flow model to its expected net payouts fromthe risk safeguard fund, and also by incorporating a markup margin. The other component is a contingent liability determined based on historical default rates, representing the obligation to make future payouts fromthe risk safeguard fund, measured using the guidance in ASC 450, Contingencies. The ASC 450 contingent component considers the actual and expectedperformance of the loans on a pool basis when estimating the contingent liability. Subsequent to initial recognition, the risk safeguard fund payable is measured at the greater of the amount determined based on ASC 460 and theamount determined based on ASC 450. ASC 460 does not prescribe a method for subsequently measuring and recording the noncontingent guaranteeliability. However, as stated in ASC 460-10-35-1, the guarantee liability should generally be reduced by recording a credit to net income as the guarantor isreleased from the guaranteed risk. As the risk is reduced as each monthly payment is made, a systematic and rational amortization method based on when thepayments are made may be appropriate. Risk safeguard fund payable is recognized by a systematic and rational amortization method, i.e. over the terms of theunderlying loans, as “Gain on guarantee liabilities, net” on our consolidated statements of operations. At the end of each reporting period, on a portfoliobasis, when the aggregate contingent liability required to be recognized under ASC 450 exceeds the balance of risk safeguard fund payable, we record theexcess against “Gain on guarantee liabilities, net” on our consolidated statements of operations. Risk safeguard fund receivable is recognized and measured at inception at fair value. For loans with original terms greater than 12 months, wedetermine a significant financing component exists in the arrangements. The discount rate, which reflects the credit risk of the customers, was used inadjusting the risk safeguard fund receivable at inception. Interest income resulting from the significant financing component is recorded as “Interest andfinancial services income” on our consolidated statements of operations. At each reporting date, we assess whether there is any indicator of impairment to the risk safeguard fund receivable. An impairment loss is recorded ifthe carrying amounts of the risk safeguard fund receivable exceed the expected collections. Guarantee derivative liabilities For the off-balance sheet loans funded by certain other institutional funding partners such as third-party commercial banks or consumer financecompanies, we are obligated to compensate the commercial banks or consumer finance companies for the principal and interest repayment of the defaultedloans in case of borrowers’ default, and full interest repayment according to the loan terms in the event that the borrowers early repay their loans. Therefore,we effectively provide guarantees to the commercial banks or consumer finance companies that include credit risk and prepayment risk. In order to determine the accounting treatment of the guarantees, we considered the criteria of scope exception under ASC 815-10-15-58. In order toqualify for this scope exception, the financial guarantee contracts must meet all three of the following criteria: (a) provide for payments to be made solely toreimburse the guaranteed party for failure of the debtor to satisfy its required payment obligations either at prescriptive payment dates or accelerated paymentdates as a result of the occurrence of an event of default or notice of acceleration being made to the debtor by the creditor; (b) payment be made only if thedebtor’s obligation to make payments as a result of conditions as described in (a) is past due; and (c) the guaranteed party is, as a precondition in the contractfor receiving payment of any claim under the guarantee, exposed to the risk of non-payment both at inception and throughout its term either through directlegal ownership or through a back-to-back arrangement. 114Table of Contents As the guarantee provided by us does not solely reimburse these commercial banks or consumer finance companies for failure of the borrowers tosatisfy required payment obligations, but also the future interest in the event of early repayment by the borrowers, the scope exception under ASC 815-10-15-58(a) is not met. Therefore, these contracts are accounted for as a derivative under ASC 815, Derivatives and Hedging, and are recognized on ourconsolidated balance sheets as either assets or liabilities and recorded at fair value. Derivative assets and liabilities within the scope of ASC 815 are required to be recorded at fair value at inception and remeasured at fair value on anongoing basis in accordance with ASC 820, Fair Value Measurement. Therefore, the financial guarantee derivative liabilities will be subsequently marked tomarket at the end of each reporting period with gains and losses recognized as change in fair value of financial guarantee derivatives. The estimated fair valueof the financial guarantee derivative liabilities is determined by us based on a discounted cash flow model, with reference to estimates of cumulative defaultrates, margins on cost of comparable companies and discount rates, using industry standard valuation techniques with the assistance of an independentvaluation firm. Provision for credit losses We have the following types of financial assets that are subject to credit losses of the customers: financing receivables, contract assets, service feesreceivable, and risk safeguard fund receivable. We assess the creditworthiness and collectability of the portfolios of respective financial assets, mainly based on delinquency levels and historicalcharge offs of respective underlying on- and off-balance sheet loans, where applicable, using an established systematic process on a pooled basis within eachcredit risk levels of the borrowers. We consider location, education background, income level, outstanding external borrowings, and external credit referenceswhen assigning borrowers into different credit risk levels. Also, each portfolio of respective financial asset subject to credit losses within each credit risk levelconsists of individually small amount of on- and off-balance sheet loans. In the consideration of above factors, we determine that each portfolio of respectivefinancial asset subject to credit losses within each credit risk level is homogenous with similar credit characteristics. Our provision for credit losses of financial assets is calculated separately within each credit risk level of the borrowers, taking into considerations offlexible repayment options of the underlying on- and off-balance sheet loans, where applicable. For each credit risk level, we estimate the expected loss ratebased on delinquency status of the respective financial assets within that level: current, 1 to 29, 30 to 59, 60 to 89, 90 to 119, 120 to 149, 150 to 179 calendardays past due. These loss rates in each delinquency status are based on average historical loss rates of financial assets subject to credit losses associated witheach of the abovementioned delinquency categories. The expected loss rate of the specific delinquency status category within each risk level will be appliedto the applicable outstanding balances of respective financial assets within that level to determine the provision for credit losses for each reporting period. Inaddition, we consider other general economic conditions, if any, when determining the provision for credit losses. Accrued interest receivable Accrued interest income on financing receivables is calculated based on the contractual interest rate of the loan and recorded as interest andfinancial services income as earned. Financing receivables are placed on non-accrual status upon reaching 90 days past due. When a financing receivable isplaced on non-accrual status, we stop accruing interest and reverse all accrued but unpaid interest as of such date. Nonaccrual financing receivables and charged-off financing receivables We consider a financing receivable to be delinquent when a monthly payment is one day past due. When we determine it is probable that we will beunable to collect unpaid principal amount on the receivables, the remaining unpaid principal balance is charged off against the allowance for credit losses.Generally, charge-offs occur after the 180th day of delinquency. Interest and financial services income for nonaccrual financing receivables is recognized ona cash basis. Cash receipt of non-accrual financing receivables would be first applied to any unpaid principal and late payment fees, if any, beforerecognizing interest and financial services income. We do not resume accrual of interest after a loan has been placed on nonaccrual status. 115Table of Contents Share-based compensation Share-based awards granted to our employees, directors and non-employee directors, such as stock options and restricted share units, are measured atthe grant date based on the fair value of the awards in accordance with ASC 718, Compensation-Stock Compensation. Share-based compensation, net ofestimated forfeitures, is recognized as expenses on a straight-line basis over the requisite service period, which is the vesting period. The modification of the terms or conditions of the existing shared-based award is treated as an exchange of the original award for a new award. Theincremental compensation expenses are equal to the excess of the fair value of the modified award immediately after the modification over the fair value ofthe original award immediately before the modification. For stock options already vested as of the modification date, we immediately recognized theincremental value as compensation expenses. For stock options still unvested as of the modification date, the incremental compensation expenses arerecognized over the remaining service period of these stock options. Share-based awards granted to non-employees are accounted for in accordance with ASC 505-50, Equity-Based Payments to Non-Employee. Alltransactions in which services are received in exchange for share-based awards are accounted for based on the fair value of the consideration received or thefair value of the awards issued, whichever is more reliably measurable. Share-based compensation is measured at fair value at the earlier of the commitmentdate or the date the services are completed. We remeasure the awards using the then-current fair value at each reporting date until the measurement date,generally when the services are completed and awards are vested, and attribute the changes in those fair values over the service period by straight-linemethod. Stock options and restricted share units granted generally vest over four years. Prior to completion of our initial public offering, the exercise price of each granted stock option was US$0.0001, we used intrinsic value(approximately the fair value of each of our ordinary share) on the grant date to estimate the fair value of the stock options granted. After our initial publicoffering, the exercise price of each granted stock option is determined by the closing price of our ordinary share on the grant date. Therefore, we utilize thebinomial option pricing model to estimate the fair value of stock options granted after our initial public offering, with the assistance of an independentvaluation firm. The fair value of each granted restricted share unit is determined by the closing price of our ordinary share on the grant date. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. We use historical datato estimate forfeitures of share-based awards and record share-based compensation expenses only for those awards that are expected to vest. Taxation Income tax Our current income tax is provided for in accordance with the laws of the relevant tax jurisdictions. We provide deferred income tax using assets and liabilities method, which requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of events that have been included in our consolidated 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 in effect forthe 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, we considerall positive and negative evidence, including future reversals of projected future taxable income and results of recent operation. We record a valuationallowance to reduce the amount of deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of thedeferred tax assets will not be realized. Uncertain tax positions In order to assess uncertain tax positions, we apply a more-likely-than-not threshold and a two-step approach for the tax position measurement andfinancial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight ofavailable evidence indicates that it is more-likely-than-not that the position will be sustained, including resolution of related appeals or litigation processes,if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likelihood of being realized upon settlement. We classifyinterest and penalties related to income tax matters, if any, in income tax expense. Fair Value of Ordinary Shares Prior to our initial public offering in December 2017, we have been a private company with no quoted market prices for our ordinary shares. Wetherefore need to make estimates of the fair value of our ordinary shares at various dates for the purposes of (i) issuance of convertible instruments as one ofthe inputs in determining the intrinsic value of the beneficial conversion feature; and (ii) grant of a share-based award to our employees or non-employees asthe only input to determine the grant date fair value of the award. 116Table of Contents The following table sets forth the fair value of our ordinary shares estimated at different times with the assistance from an independent valuationfirm. The valuation was performed on retrospective basis, instead of contemporaneous basis because, at that time of valuation, our limited financial andhuman resources were principally focused on business development efforts. DateFair Valueper Share DiscountRate DLOM Purpose of ValuationUS$ July 18, 20140.03240.0%45.0%To determine potential beneficial conversion featurein connection with the issuance of Series A-1 andSeries A-2 preferred sharesNovember 10, 20140.31330.0%40.0%To determine potential beneficial conversion featurein connection with the issuance of Series B-1 andSeries B-2 preferred sharesMarch 13, 20150.35728.0%35.0%To determine potential beneficial conversion featurein connection with Series B-2 preferred sharesJuly 1, 20150.50428.0%25.0%Share option grantDecember 31, 20151.18426.0%20.0%Share option grantMay 26, 20161.39726.0%20.0%Share option grantNovember 1, 20163.46521.0%15.0%Share option grantJanuary 20, 20173.82020.0%15.0%Share option grantMarch 31, 20174.27520.0%15.0%Share option grantJune 30, 20175.11218.5%10.0%Share option grantSeptember 30, 20177.42118.0%5.0%Share option grantNovember 8, 20177.58418.0%5.0%Share option grant In determining the fair value of our ordinary shares, we applied the income approach/discounted cash flow analysis as the primary approach basedon our projected cash flow and using our best estimate as of the valuation date. The determination of the fair value of our ordinary shares requires complexand subjective judgments to be made regarding our projected financial and operating results, our unique business risks, the liquidity of our shares and ouroperating history and prospects at the time of valuation. We also applied back-solve method as a secondary method to check the reasonableness of our valuation results developed by the income approach.The back-solve method takes into consideration the rights and preferences of each class of equity and solves for the total equity value that is comparable witha recent transaction involving our securities. The method was used when we were in the early stage of development and completed financing transactionswith investors on an arm’s length basis. When we entered into the later stage of development and started generating profits, we used guideline companiesmethod and referred to forward price-earnings multiple of other guideline companies to check the reasonableness of our valuation results. The discounted cash flow method of the income approach involves applying appropriate discount rates to discount the forecasted future cash flowsto the present value. In determining an appropriate discount rate, we have considered the cost of equity and the rate of return expected by venture capitalists,or VCR. Cost of Equity. We calculated the cost of equity of the business as of the valuation dates using the capital asset pricing model, or CAPM, the mostcommonly adopted method for estimating the required rate of return for equity. Under CAPM, the cost of equity is determined with consideration of the risk-free rate, systematic risk, equity market premium, size of our company, the scale of our business and our ability in achieving forecasted projections. Inderiving the cost of equity, certain publicly traded companies involving consumer finance were selected for reference as our guideline companies. To reflectthe operating environment in China and the general sentiment in the U.S. capital markets towards the consumer finance, the guideline companies wereselected with consideration of the following factors: (i) the guideline companies should provide similar services, and (ii) the guideline companies shouldeither have their principal operations in Asia Pacific region, as we operate in China, and/or are publicly listed companies in the United States as we plan tolist our shares in the United States. 117Table of Contents VCR. The expected return from venture capitalists for investing in our company while in the expansion stage, ranges from 30% to 50%. As weprogress through an early stage of development towards the initial public offering, the expected return from venture capitalists for investing in our companygradually declines, which generally ranged from 20% to 30%. After considering the cost of equity, VCR, the relative risk of the industry and the characteristics of our company, we used a discount rate of 40% asof the valuation dates in July 2014 and 18.0% in November 2017. We also applied a discount for lack of marketability, or DLOM, ranging from 45% to 5%, to reflect the fact that there is no ready market for shares ina closely-held company like ours. When determining the DLOM, the Black-Scholes option pricing model was used. Under this option-pricing method, thecost of the put option, which can hedge the price change before the privately held shares can be sold, was considered as a basis to determine the discount forlack of marketability. This option pricing method was used because it takes into account certain company-specific factors, including the timing of theexpected initial public offering and the volatility of the share price of the guideline companies engaged in the same industry. The increase in the fair value of our ordinary shares from US$0.032 per share as of July 18, 2014 to US$0.313 per share as of November 10, 2014 wasprimarily attributable to continuous organic growth of our business, the decrease of the discount rate from 40% as of July 18, 2014 to 30% as ofNovember 10, 2014 and the raising of additional capital by issuance of our preferred shares. The decrease in the discount rate was due to increased investors’confidence in our business prospects and a corresponding decrease of their required rate of return. The increase in the fair value of our Class A ordinary shares from US$0.313 per share as of November 10, 2014 to US$0.357 per share as of March 13,2015 and further to US$0.504 as of July 1, 2015 was primarily attributable to the continuous organic growth of our business, a decrease of the discount ratefrom 30% as of November 10, 2014 to 28% as of March 13, 2015 and as of July 1, 2015, and a decrease in the discount for lack of marketability from 40% asof November 10, 2014 to 25% as of July 1, 2015. The decrease in discount rate was due to the substantial progress both in our business development and thehire of key management personnel, which resulted in a decrease of uncertainties associated with our financial forecasts. The decrease in the discount lack ofmarketability was due to the increased likelihood of a successful initial public offering of our securities. The increase in the fair value of our Class A ordinary shares from US$0.504 as of July 1, 2015 to US$1.184 per share as of December 31, 2015 andfurther to US$1.397 as of May 26, 2016 was primarily attributable to the continuous organic growth of our business and reduced uncertainties associate withour financial forecasts and increased shareholders’ confidence in our business prospect due to a convertible bond offering. The increase in the fair value of our Class A ordinary shares from US$1.397 as of May 26, 2016 to US$3.465 per share as of November 1, 2016 wasprimarily attributable to the continuous organic growth of our business, a decrease in small size premium and a decrease in the discount rate from 26% as ofMay 26, 2016 to 21% as of November 1, 2016. The decrease in discount rate was due to improved operating results and increased shareholders’ confidence. The increase in the fair value of our Class A ordinary shares from US$3.465 as of November 1, 2016 to US$4.275 per share as of March 31, 2017 andfurther to US$5.112 per share as of June 30, 2017 was primarily attributable to the continuous organic growth of our business and generating positiveoperating profit in the first half of 2017. The increase in the fair value of our Class A ordinary shares from US$5.112 per share as of June 30, 2017 to US$7.421 per share as of September 30,2017 was primarily attributable to the continuous organic growth of our business, our operating profit in the third quarter of 2017 and the substantialprogress in the preparation of our initial public offering. The increase in the fair value of our Class A ordinary shares from US$7.421 per share as of September 30, 2017 to US$7.584 per share as ofNovember 8, 2017 was primarily attributable to the continuous organic growth of our business, our operating profit in the third quarter of 2017 and thesubstantial progress in the preparation in connection with our initial public offering. 118Table of Contents Recent Accounting Pronouncements A list of recently issued accounting pronouncements that are relevant to us is included in note 2 to our consolidated financial statements includedelsewhere in this annual report. B. Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated by operating activities, the funding provided by individual investors onJuzi Licai and by institutional funding partners, the issuance of preferred shares in private placements, issuance of convertible loans and asset-backedsecurities. In December 2017, we completed our initial public offering in which we issued and sold an aggregate of 12,000,000 ADSs, representing24,000,000 Class A ordinary shares, resulting in net proceeds to us of approximately US$93.7 million. In January 2018, as a result of the underwriters’exercise of their over-allotment option in full, we issued and sold an additional of 1,800,000 ADSs, representing 3,600,000 Class A ordinary shares, resultingin net proceeds of approximately US$14.7 million. As of December 31, 2016, 2017 and 2018, we had RMB480 million, RMB1,126 million and RMB1,148million (US$167 million), respectively, in cash and cash equivalents. Our cash and cash equivalents solely consist of cash on hand. We believe that ourcurrent cash and cash equivalents and our anticipated cash flows from operations and financing activities will be sufficient to meet our anticipated workingcapital requirements and capital expenditures for the next 12 months. We may, however, need additional capital in the future to fund our continuedoperations. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issueequity or debt securities or obtain credit facilities. The issuance and sale of additional equity or convertible loans would result in further dilution to ourshareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that might restrict ouroperations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Although we consolidate the results of our consolidated variable interest entities, we only have access to cash balances or future earnings of ourconsolidated variable interest entities through our contractual arrangements with them. See “Item 4. Information on the Company—C. OrganizationalStructure—Contractual Arrangements with Our Variable Interest Entities.” For restrictions and limitations on liquidity and capital resources as a result of ourcorporate structure, see “—Holding Company Structure.” As a Cayman Islands exempted company and offshore holding company, we are permitted under PRC laws and regulations to provide funding to ourwholly foreign-owned subsidiaries in China only through loans or capital contributions, subject to the approval of government authorities and limits on theamount of capital contributions and loans. In addition, our wholly foreign-owned subsidiaries in China may provide Renminbi funding to their respectivesubsidiaries through capital contributions and entrusted loans, and to our consolidated variable interest entities only through entrusted loans. See “Item 3.Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—PRC regulation of loans to and direct investment in PRC entities by offshoreholding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our initial public offering to makeloans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fundand expand our business” and “Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.” Funding debts Liabilities to individual investors on Juzi Licai. We offer individual investors on Juzi Licai various investment programs. As of December 31, 2016and 2017, the terms of those programs were all within 24 months with weighted average interest rates of 8.3% and 7.6%, respectively, and as of December 31,2018, the terms of those programs were all within 24 months with weighted average interest rates of 7.6%. As of December 31, 2016, 2017 and 2018,individual investors on Juzi Licai funded an aggregate amount of RMB5,331 million, RMB9,253 million and RMB3,341 million (US$486 million),respectively, in our outstanding financing receivables. Liabilities to institutional funding partners. As part of our arrangement with institutional funding partners, we typically agree on an aggregateamount of funds to be provided, the maximum credit limit given to an individual customer, the maximum borrowing term and an annualized interest rate.These liabilities will mature between January 2018 and June 2019, and had weighted average interest rates of 8.3%, 7.7% and 10.0%, as of December 31,2016, 2017 and 2018, respectively. As of December 31, 2016, 2017 and 2018, institutional funding partners funded an aggregate amount of RMB1,303million, RMB1,158 million and RMB2,375 million (US$345 million), in our outstanding financing receivables, respectively. As of December 31, 2017 and2018, financing receivables amounting to nil and RMB34.9 million (US$5.1 million) were pledged as collaterals, respectively. 119Table of Contents The following table summarizes our outstanding funding debts on our consolidated balance sheets as of December 31, 2016, 2017 and 2018,respectively: As of December 31,2016 2017 2018RMB RMB RMB US$(in thousands)Short-term:Liabilities to individual investors on Juzi Licai5,537,0319,627,8503,014,670438,466Liabilities to institutional funding partners1,275,643897,2841,631,371237,273Asset-backed securitized debts155,814———Total short-term funding debts6,968,48810,525,1344,646,041675,739Long-term:Liabilities to individual investors on Juzi Licai—157,32181,16811,805Liabilities to institutional funding partners21,0149,30876,71911,159Total long-term funding debts21,014166,629157,88722,964 The following table summarizes the remaining contractual maturity dates of our funding debts on our consolidated balance sheets as ofDecember 31, 2018 and associated interest payments. 1 - 12months 13 - 24months 25 - 36months 37 - 48months 49 – 60months Total(RMB in thousands)Liabilities to individual investors on Juzi Licai3,014,67081,168———3,095,838Liabilities to institutional funding partners1,631,37176,719———1,708,090Total funding debts4,646,041157,887———4,803,928Interest payments204,0378,866———212,903Total interest payments204,0378,866———212,903 (1) Interest payments for funding debts with variable interest rates are calculated using the interest rate as of December 31, 2018. Convertible loans In May 2016, we issued convertible loans in the aggregated principal amount of US$100 million to four investors with compounding interest at12% per annum, maturing two years after the issuance. Under the convertible loan agreements, the holders of the convertible loans may (i) convert theoutstanding principal of the convertible loans into a fixed percentage of the equity interest in Shenzhen Fenqile, one of our variable interest entities, or(ii) convert the outstanding principal of the convertible loans into a fixed number of shares of our series C convertible redeemable preferred shares at aconversion price per share of US$2.5105. Accrued interests will be waived if the investors elect to exercise any of the conversion options. Convertible loansin the principal amount of US$15 million were issued by our Cayman Islands holding company and convertible loans in the principal amount of US$85million were issued by Shenzhen Fenqile. In October 2017, we entered into a series of agreements with the investors of the convertible loans, pursuant to which the convertible loans wereconverted into a certain number of series C-1 preferred shares and series C-2 preferred shares of our company. Upon our issuance of the series C-1 preferredshares and the series C-2 preferred shares to the investors or their respective affiliates, the interests associated with the convertible loans were waived by theinvestors. Upon the completion of our initial public offering in December 2017, these series C-1 preferred shares and the series C-2 preferred shares wereconverted into the same number of Class A ordinary shares. 120(1)Table of Contents Accounts payable and inventories Our accounts payable primarily include accounts payable to suppliers (except for JD.com, our related party, the payables to which were recorded asamounts due to related parties) associated with our online direct sales on Fenqile. As of December 31, 2016, 2017 and 2018, our accounts payable amountedto RMB72.7 million, RMB198 million and RMB136 million (US$19.8 million), respectively. The decrease in our accounts payable from December 31, 2017to December 31, 2018 was mainly due to the settlement with suppliers. The turnover days of our accounts payable and payables to JD.com for our onlinedirect sales were 23.2 days in 2016, 24.8 days in 2017 and 24.6 days in 2018. The turnover days of our accounts payable and payables to JD.com for a givenperiod are equal to the average balance of our accounts payable and payables to JD.com at the beginning and the end of the period divided by total cost ofrevenues during the period and multiplied by the number of days during the period. Our net inventories have decreased from RMB108 million as of December 31, 2016 to RMB102 million as of December 31, 2017, and havedecreased to RMB57.2 million (US$8.3 million) as of December 31, 2018. Our inventory turnover days were 9.5 days in 2016, 14.3 days in 2017 and 11.7days in 2018. Inventory turnover days for a given period equal average inventory balances at the beginning and the end of the period divided by total cost ofrevenues during the period and then multiplied by the number of days during the period. Our inventory balances will fluctuate over time due to a number offactors, including expansion in our product selection and changes in our product mix. Cash Flows The following table sets forth a summary of our cash flows for the periods presented: For the Year Ended December 31,2016 2017 2018RMB RMB RMB US$(in thousands)Net cash provided by operating activities379,8391,662,3252,794,710406,474Net cash (used in)/ provided by investing activities(4,355,730)*(4,987,943)*3,603,990524,179Net cash provided by/ (used in) financing activities4,459,9474,411,608(5,617,941)(817,097)Net increase in cash and cash equivalents and restricted cash490,774*1,082,811*761,848110,806Cash and cash equivalents and restricted cash at beginning ofthe period161,701*652,475*1,735,286252,387Cash and cash equivalents and restricted cash at end of theperiod652,475*1,735,286*2,497,134363,193 * Recast to reflect the adoption of Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments inthis Accounting Standards Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents andamounts generally described as restricted cash. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalentswhen reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted the amendments on January 1,2018 on a basis of using a retrospective transition method to each period presented. The changes in restricted cash on the Consolidated Statements of CashFlows of RMB147 million, RMB436 million and RMB740 million for the years ended December 31, 2016, 2017 and 2018, respectively, were no longerpresented within investing activities and were retrospectively included in the changes of cash and cash equivalents and restricted cash as required. 121Table of Contents Operating Activities Net cash provided by operating activities was RMB2,795 million (US$406 million) in 2018. In 2018, the difference between net cash provided byoperating activities and our net income of RMB1,977 million (US$288 million) mainly resulted from provision for credit losses of financing receivables ofRMB884 million (US$129 million), share-based compensation expenses of RMB123 million (US$17.8 million), net change in fair value of financialguarantee derivatives of RMB197 million (US$28.7 million), net gain on guarantee liabilities of RMB108 million (US$15.8 million), deferred income tax ofRMB58.2 million (US$8.5 million) and changes in certain working capital accounts. Changes in the working capital accounts mainly included an increase inaccrued expenses and other current liabilities of RMB897 million (US$130 million), an increase in risk safeguard fund payable of RMB587 million (US$85.4million), a decrease in financing receivables related to online direct sales of RMB219 million (US$31.9 million), partially offset by an increase in prepaidexpenses and other current assets of RMB136 million (US$19.8 million), an increase in risk safeguard fund receivable of RMB534 million (US$77.7 million),an increase in contract assets and service fees receivable of RMB982 million (US$143 million), a decrease in accounts payable of RMB62.3 million (US$9.1million) and a decrease in accrued interest payable of RMB108 million (US$15.7 million). The increase in accrued expenses and other current liabilities wasmainly attributable to the funds payable to individual investors on Juzi Licai. The decrease in accrued interest payable was in line with the decrease infunding debts. The decrease in financing receivables related to online direct sales was mainly due to a decrease in our outstanding principal balance ofinstallment purchase loans, which was in line with the decrease in online direct sales. The increase in prepaid expenses and other current assets was mainlydue to receivables from third-party online payment service providers, deposits to institutional funding partners and prepayment to inventory suppliers. Theincrease in contract assets and service fees receivable was mainly due to loan facilitation and servicing fees recognized earlier in life of a contract as a resultof the adoption of ASC 606. Net cash provided by operating activities was RMB1,662 million in 2017. In 2017, the difference between net cash provided by operating activitiesand our net income of RMB240 million resulted from accrued convertible loans interest expense of RMB67.3 million, provision for credit losses of financingreceivables of RMB612 million, share-based compensation expenses of RMB75.7 million, net change in fair value of financial guarantee derivatives ofRMB47.4 million and changes in certain working capital accounts. Changes in the working capital accounts mainly included an increase in accruedexpenses and other current liabilities of RMB508 million, a decrease in financing receivables related to online direct sales of RMB232 million, an increase inaccrued interest payable of RMB156 million and an increase in accounts payable of RMB125 million, partially offset by an increase in prepaid expenses andother current assets of RMB173 million, a decrease in amounts due to related parties of RMB92.6 million, an increase in accrued interest receivable ofRMB56.5 million. The increase in accrued expenses and other current liabilities was mainly attributable to the increase of liabilities to series C-1 preferredshareholders, funds payable to institutional funding partners, accrued payroll and welfare and tax payable. The increase in accrued interest payable was inline with the increase in both short-term and long-term funding debts. The decrease in financing receivables related to online direct sales was mainly due to adecrease in our outstanding principal balance of installment purchase loans, which was in line with the decrease in online direct sales. The increase in prepaidexpenses and other current assets was mainly due to receivables from third-party online payment service providers, deposits to institutional funding partnersand prepaid input value-added tax. Net cash provided by operating activities was RMB380 million in 2016. In 2016, the difference between net cash provided by operating activitiesand our net loss of RMB118 million resulted from accrued convertible loans interest expense of RMB45.3 million, provision for credit losses of financingreceivables of RMB237 million, deferred income tax of RMB47.1 million, and changes in certain working capital accounts. Changes in the working capitalaccounts mainly included an increase in accrued expenses and other liabilities of RMB460 million, an increase in accrued interest payable of RMB66.8million, partially offset by an increase in financing receivables related to online direct sales of RMB254 million, a decrease in amounts due to related partiesof RMB84.4 million and an increase in inventory of RMB65.1 million. The increase in financing receivables related to online direct sales was primarily dueto an increase in our outstanding principal balance of installment purchase loans, which was in line with the significant increase in the transaction volume.The increase in accrued expenses and other liabilities was attributable to the increase of funds payable to institutional funding partners, accrued payroll andwelfare, tax payable, guarantee liabilities at fair value and payable to third-party sellers. The increase in accrued interest payable was in line with the increaseof funding debts. The decrease in amounts due to related parties primarily reflected a decrease in amounts due to JD.com as we developed more diversifiedsupply channels. The increase in inventory was in line with the significant increase of online direct sales transaction volume. Investing Activities Net cash provided by investing activities was RMB3,604 million (US$524 million) in 2018, which was primarily attributable to proceeds providedby principal collection on financing receivables and recoveries (excluding receivables related to online direct sales) of RMB17,721 million (US$2,577million) and withdrawal of restricted time deposits of RMB268 million (US$39.0 million), partially offset by financing receivables originated (excludingreceivables related to online direct sales) of RMB13,606 million (US$1,979 million) and placement of restricted time deposits of RMB605 million (US$88.0million). Net cash used in investing activities was RMB4,988 million in 2017, which was primarily attributable to financing receivables originated(excluding receivables related to online direct sales) of RMB24,003 million, partially offset by proceeds provided by principal collection on financingreceivables and recoveries (excluding receivables related to online direct sales) of RMB19,054 million. 122Table of Contents Net cash used in investing activities was RMB4,356 million in 2016, which was primarily attributable to financing receivables originated(excluding receivables related to online direct sales) of RMB12,004 million, partially offset by proceeds provided by principal collection on financingreceivables and recoveries (excluding receivables related to online direct sales) of RMB7,703 million. Financing Activities Net cash used in financing activities was RMB5,618 million (US$817 million) in 2018, which was primarily attributable to principal payments onfunding debts of RMB20,859 million (US$3,034 million) and principal payments on borrowings of RMB567 million (US$82.4 million), which were partiallyoffset by proceeds from funding debts of RMB14,918 million (US$2,170 million) and proceeds from borrowings of RMB834 million (US$121 million). Net cash provided by financing activities was RMB4,412 million in 2017, which was primarily attributable to proceeds from funding debts ofRMB18,205 million and proceeds from initial public offering, net of issuance costs of RMB651 million, which were partially offset by principal payments onfunding debts of RMB14,542 million. Net cash provided by financing activities was RMB4,460 million in 2016, which was primarily attributable to proceeds from funding debts ofRMB15,432 million, proceeds from issuances of convertible loans of RMB655 million, and proceeds from financial institution borrowings of RMB80.0million, which were partially offset by principal payments on funding debts of RMB11,590 million and repurchase of preferred shares of RMB87.9 million. Capital Expenditures We incurred capital expenditures of RMB32.1 million, RMB37.8 million and RMB54.2 million (US$7.9 million) in 2016, 2017 and 2018,respectively. In these periods, our capital expenditures were mainly used for purchases of property, equipment and software. Our capital expenditures for2019 are expected to be approximately RMB61.3 million (US$8.9 million), consisting primarily of expenditures related to the expansion and enhancementof our information technology infrastructure. We will continue to incur capital expenditures to meet the expected growth of our business. Holding Company Structure LexinFintech Holdings Ltd. is a holding company with no material operations of its own. We conduct our operations primarily through oursubsidiary, our variable interest entities and their subsidiaries in China. As a result, LexinFintech Holdings Ltd.’s ability to pay dividends depends upondividends paid by our PRC subsidiary. If our existing PRC subsidiary or any newly formed ones incur debt on their own behalf in the future, the instrumentsgoverning their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiary in China is permitted to pay dividendsto us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of oursubsidiary, our variable interest entities and their subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fundcertain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, our wholly foreign-owned subsidiary in China mayallocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion,and our variable interest entity may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at itsdiscretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiary has not paid dividends and will not be able topay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. 123Table of Contents C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Technology” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the yearended December 31, 2018 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capitalresources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions. E. Off-Balance Sheet Arrangements We provide services in connection with off-balance sheet loans, including account maintenance, collection and payment processing from user anddistributions to certain institutional funding partners. We are obligated to compensate the funding partners for the principal and interest repayment of loansin the event of a user default. We also provide full interest repayment according to the terms of the loan in the event that a user makes an early repayment ofthe loan to the funding partners. Therefore, we effectively provide guarantees to the funding partners against the credit risk and prepayment risk. See “—A.Operating Results—Critical Accounting Policies—Guarantee derivative liabilities.” In addition, we cooperate with a third-party guarantee company tooperate a risk safeguard scheme for purposes of protecting individual investors on Juzi Licai. See “Item 4. Information on the Company—B. BusinessOverview—Our Investors and Funding Partners —Protection of investors and funding partners.” Other than the above, we have not entered into any other commitments to guarantee the payment obligations of any third parties. We have notentered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financialstatements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity ormarket risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or creditsupport to us or engages in leasing, hedging or product development services with us. F. Tabular Disclosure of Contractual Obligations The following table sets forth our contractual obligations, including interest payments, as of December 31, 2018: Payment Due by PeriodTotal Less than1 year 1 - 3 years 3 - 5 years More than5 years(RMB in thousands)Contractual Obligations:Debts obligationsFunding debts5,016,8314,850,078166,753——Short-term and long-term borrowings444,259444,259———Liabilities to Pre-IPO Series C-1 preferred shareholders335,238335,238———Operating leases obligations125,99654,70971,287——Total5,922,3245,684,284238,040—— Our operating lease obligations relate to our leases of office premises. Other than those shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as ofDecember 31, 2018. 124Table of Contents G. Safe Harbor See “Forward-Looking Information” on page 2 of this annual report. Item 6. Directors, Senior Management and Employees A. Directors and Senior Management The following table sets forth information regarding our executive officers and directors as of the date of this annual report. Directors and Executive Officers Age Position/TitleJay Wenjie Xiao36Chief Executive Officer and Chairman of the BoardJared Yi Wu40President and DirectorCraig Yan Zeng51Chief Financial Officer and DirectorKris Qian Qiao41Chief Financing Cooperation OfficerRyan Huanian Liu41Chief Risk OfficerShirley Yunwen Yang48Chief Human Resources OfficerKeyi Chen42DirectorYibo Shao46DirectorXiaoguang Wu44Independent DirectorWei Wu54Independent DirectorNeng Wang46Independent Director Mr. Jay Wenjie Xiao is our founder and has served as our chief executive officer and director since our inception. Mr. Xiao has served as chairman ofthe board since December 2017. Mr. Xiao has over 10 years of experience in the online finance industry. Prior to founding our company, Mr. Xiao served asproduct manager in the infrastructure platform department of Tenpay, a leading online payment platform in China owned by Tencent, and was responsible forproduct development and operations. Mr. Xiao received his bachelor’s degree in design from Nanchang Hangkong University in 2005. Mr. Jared Yi Wu has served as our president since May 2016 and as our director since November 2017. Prior to joining us, Mr. Wu served at Tencentfor 9 years. From 2013 to 2016, Mr. Wu served as general manager of WeChat Pay, an integrated feature in Tencent’s WeChat. From 2007 to 2013, Mr. Wuserved first as the director of product development at Tenpay and then as its deputy general manager. Mr. Wu received his master’s degree in computing andinternet systems from King’s College London in 2003 and his bachelor’s degree in automation from South China University Technology in 2002. Heobtained his EMBA degree from China Europe International Business School. Mr. Craig Yan Zeng has served as our chief financial officer since November 2016, and as our director since December 2017. Mr. Craig Yan Zengpreviously held various senior management positions at other companies. Prior to joining us, Mr. Craig Yan Zeng served as chief financial officer of YeePay.From 2013 to 2015, Mr. Zeng served as vice president of Hop Hing Group Holdings Limited, a company listed on the Hong Kong Stock Exchange. From2010 to 2013, Mr. Zeng served as executive vice president of VanceInfo Technologies Inc., a NYSE-listed company. Prior to 2010, Mr. Zeng served as afinancial director at Microsoft (Greater China), and was chief operating officer and chief financial officer of Venustech Group Inc. Mr. Zeng received hismaster’s degree in business administration from the Stern School of Business at New York University in 1999 and his bachelor’s degree in chemistry fromBeijing University of Chemical Technology in 1991. Mr. Kris Qian Qiao has served as our chief financing cooperation officer since April 2016. He was our vice president from December 2013 toMarch 2016. Mr. Qiao has over 14 years of experience in finance and other related areas. Prior to joining our company, Mr. Qiao worked as senior manager ofChina Universal Asset Management Co., Ltd. from 2010 to 2012. Prior to that, Mr. Qiao was senior product manager for financing cooperation at Tenpayfrom 2005 to 2010. Mr. Qiao also served as software engineer and project manager at the Bank of China Software Development Center (Shenzhen) from 2002to 2005. Mr. Qiao received his master’s degree in business administration from the Hong Kong Polytechnic University and his bachelor’s degree in appliedcomputer science from Henan University, Mr. Qiao received his EMBA degree from Cheung Kong Graduate School of Business. 125Table of Contents Mr. Ryan Huanian Liu has served as our chief risk officer since April 2015. Mr. Liu has over 14 years of experience of working in large financialinstitutions. Mr. Liu served as the general manager at the Zhejiang Province branch of PingAn Private Bank from May 2014 to April 2015. Prior to that,Mr. Liu was executive director of PingAn Trust Co., Ltd. from March 2013 to May 2014. Mr. Liu also served as the senior vice president of risk at SocietéGénérale from September 2010 to March 2013. From June 2007 to September 2010, Mr. Liu served as a senior risk manager of Standard Chartered Bank.Between April 2005 and June 2007, Mr. Liu served as the Asia risk manager at GE Capital. Mr. Liu received his master’s degree in informatics from theUniversity of Edinburgh in 2002 and his bachelor’s degree in statistics from Zhejiang University in 2000. Ms. Shirley Yunwen Yang has served as our chief human resources officer since February 2019. Ms. Yang has over 15 years of experience in varioussenior human resources positions. Prior to joining us, she served as an Assistant General Manager at Tencent’s Interactive Entertainment Group in charge ofhuman resources for overseas business. Prior to that, she held senior human resources executive positions at major multinational companies includingWalmart. Other than the Chinese mainland, she also has overseas working experience in North America and Hong Kong. Ms. Yang holds a college degreefrom Ningbo University and an MBA degree from the Hong Kong University of Science and Technology. Mr. Keyi Chen has served as our director since July 2014. Since 2010, Mr. Chen has served as the managing partner for K2 Partners in charge of fundoperations. Prior to joining K2 Partners, Mr. Chen served as a principal in Ce Yuan Ventures covering early stage investments in the companies from thetechnology, media and telecommunication sector. Mr. Chen received his bachelor’s degree in economics from Peking University in 2001. Mr. Yibo Shao has served as our director since July 2014. Mr. Shao is the co-founder of Matrix Partners China, a leading venture capital firm inChina focusing on the technology sector. Mr. Shao also serves on the board of directors of BabyTree Group, a China-based maternity and child communityplatform listed on the Hong Kong Stock Exchange. Mr. Shao co-founded BabyTree Group, and co-founded and serves as the chairman of Nuance Biotech Inc.In addition, Mr. Shao founded EachNet.com and served as its chief executive officer until its acquisition by eBay in 2003. He also served as its chiefexecutive officer from 1999 to September 21, 2006. He worked at Boston Consulting Group and Goldman Sachs prior to founding EachNet. Mr. Shaoreceived his bachelor degree in physics and electrical engineering from Harvard College in June 1995 and MBA degree from Harvard Business School inJune 1999. Mr. Shao has been named one of the Young Global Leaders of the World Economic Forum and Entrepreneur of the Year 2003 by Asian VentureCapital Journal. Mr. Xiaoguang Wu has served as our director since March 2018 and has become our independent director since August 2018. Mr. Xiaoguang Wucurrently serves as the co-founder of Welight Capital and as an advisor at Eleven Two Capital. He was named as senior management adviser of Tencent inJune 2015. Mr. Wu joined Tencent (SEHK: 00700) in 1999, and was a member of the founding team. He led the development and product planning forTencent’s core product, QQ, and served as project manager for the QQ research and development team. He also served as general manager of Tencent’s IMproduct division and the internet business division. From 2012 to 2014, Mr. Wu served as chief executive officer of Tencent’s e-commerce unit. Mr. Wu hasextensive experience in product research and development, product planning, product operations and marketing internet products. He received his B.S.degree from Nanjing University in 1996, and an EMBA degree from China Europe International Business School in 2008. Mr. Wei Wu has served as our independent director since December 2017. Mr. Wu has over 17 years of experience in the investment bankingindustry. Mr. Wu held several senior positions at leading investment banks. He served as managing director from 2010 to 2017 and as executive director from2008 to 2010 at Nomura International (Hong Kong) Limited, leading the coverage of TMT sector and general industrial sectors in China. From 2007 to 2008,Mr. Wu served as senior vice president at Lehman Brothers in Hong Kong. Mr. Wu received his bachelor’s degree in economics from Peking University in1988 and his MBA degree from Harvard Business School in 2000. Dr. Neng Wang has served as our independent director since March 2018. Dr. Wang has been Chong Khoon Lin Professor of Real Estate atColumbia Business School since July 2007, and a research associate at the National Bureau of Economic Research since 2009. He has widely published inleading economics, finance, and business journals. Among other awards and honors, he has won a Smith-Breeden Distinguished Paper Prize awarded by theJournal of Finance, and the Bettis Distinguished Scholar Award from Carey School of Business, Arizona State University. He was an editor in the Finance areaat the Management Science and is currently an associate editor at the Journal of Finance, among others. Dr. Wang is also serving as an independent directorof Puxin Limited (NYSE: NEW), a company operating in the after-school education industry. Dr. Wang received a B.S. in physical chemistry from NanjingUniversity, China in 1992, an M.S. in chemistry from California Institute of Technology in 1995, an M.A. in international relations from the University ofCalifornia, San Diego in 1997, and a Ph.D. in finance from the Graduate School of Business at Stanford University in 2002. 126Table of Contents B. Compensation For the fiscal year ended December 31, 2018, we paid an aggregate of approximately RMB15.5 million (US$2.3 million) in cash to our executiveofficers, and we did not pay any compensation to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement orother similar benefits to our executive officers and directors. Our PRC subsidiaries and our variable interest entity are required by law to make contributionsequal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan. Share Incentive Plan 2014 Plan In September 2014, our board of directors approved the Share Incentive Plan, or the 2014 Plan, to promote our success and the interests of ourshareholders by providing a means through which we may grant equity-based incentives to attract, motivate, retain and reward certain officers, employees,directors and other eligible persons and to further link the interests of recipients with those of our shareholders generally. Under the 2014 Plan, the maximumaggregate number of Class A Ordinary Shares which may be issued pursuant to all awards under the Share Incentive Plan is 35,456,559. Upon the adoption ofthe 2017 Plan as described below, we no longer grant any awards under the 2014 Plan and all future awards will be granted under the 2017 Plan. However, theoutstanding awards under the 2014 Plan will not be affected. The following paragraphs describe the principal terms of the 2014 Plan. Types of Awards. The Share Incentive Plan permits the awards of option grants and share awards, including restricted share awards. Plan Administration. Our board of directors or a committee of one or more members of the board of directors, or the plan administrator, willadminister the Share Incentive Plan. The committee or the full board of directors, as applicable, will determine the eligibility and participants to receiveawards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. Award Agreement. Generally, options and other awards granted under the plan are evidenced by an award agreement providing for the number ofordinary shares subject to the award, and the terms and conditions of the award, which must be consistent with the Share Incentive Plan. Eligibility. We may grant awards only to those persons that the plan administrator determines to be eligible persons, which may include our officers,employees, directors of our company, or directors, individual consultants or advisors of the affiliates of our company. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement. Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than to us, to immediate family, by will or the laws ofdescent and distribution, or to a designated legal representative upon disability of the recipient. 127Table of Contents Termination and Amendment of the Share Incentive Plan. Unless terminated earlier, the Share Incentive Plan has a term of ten years. Our board ofdirectors has the authority to amend or terminate the plan. However, no such action may adversely affect in any material way any awards previously grantedunless agreed by the recipient. 2017 Plan In October 2017, we adopted our 2017 Share Incentive Plan, or the 2017 Plan, which allows us to offer a variety of share-based incentive awards toemployees, officers, directors and individual consultants who render services to us. The plan permits the grant of three types of awards: options, restrictedshares and restricted share units. The maximum number of our shares that may be issued pursuant to all awards under the 2017 Plan is 22,859,634, plus anannual increase on the first day of each fiscal year of the Company during the ten-year term of the 2017 Plan commencing with the fiscal year beginningJanuary 1, 2019, by an amount equal to 1.0% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year.The following paragraphs summarize the terms of the 2017 Plan: Plan Administration. Our board of directors, or a committee designated by our board of directors, will administer the plan. The committee or the fullboard of directors, as appropriate, will determine the provisions and terms and conditions of each option grant. Award Agreements. Options and other awards granted under the plan are evidenced by an award agreement that sets forth the terms, conditions andlimitations for each grant, which may include the term of the award and the provisions applicable in the event of the grantee’s employment or serviceterminates. The exercise price of granted options may be amended or adjusted in the absolute discretion of our board of directors, or a committee designatedby our board of directors, without the approval of our shareholders or the recipients of the options. Eligibility. We may grant awards to employees, directors and consultants of our company or any of our affiliates, which include our parent company,subsidiaries and any entities in which our parent company or a subsidiary of our company holds a substantial ownership interest. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement. Acceleration of Awards upon Change in Control. If a change-of-control corporate transaction occurs, the plan administrator may, in its solediscretion, provide for (i) all awards outstanding to terminate at a specific time in the future and give each participant the right to exercise the vested portionof such awards during a specific period of time, or (ii) the purchase of any award for an amount of cash equal to the amount that could have been attainedupon the exercise of such award, or (iii) the replacement of such award with other rights or property selected by the plan administrator in its sole discretion, or(iv) payment of award in cash based on the value of ordinary shares on the date of the change-of-control corporate transaction plus reasonable interest. Term of the Options. The term of each option grant shall be stated in the award agreement, provided that the term shall not exceed ten years from thedate of the grant. Transfer Restrictions. Subject to certain exceptions, awards may not be transferred by the recipient, except as otherwise provided by applicable lawsor the award agreement. Termination of the Plan. Unless terminated earlier, the plan will terminate automatically in 2027. Our board of directors has the authority to amendor terminate the plan subject to shareholder approval to the extent necessary to comply with applicable law. However, no such action may impair the rights ofany award recipient unless agreed by the recipient The following table summarizes, as of the date of this annual report, the outstanding options and restricted share units granted under the 2014 Planand the 2017 Plan to our directors and executive officers. 128Table of Contents NameOrdinarySharesUnderlyingOptions orRestrictedShare UnitsAwarded ExercisePrice(US$/Share)Date of Grant Date of Expiration Jay Wenjie Xiao*5.15May 25, 2018May 25, 2028Jared Yi Wu*0.0001June 30, 2016June 30, 2026*5.15May 25, 2018May 25, 2028Craig Yan Zeng*0.0001December 31, 2016December 31, 2026*0.0001November 8, 2017November 8, 2027*5.15May 25,2018May 25,2028*—January 22,2019—Kris Qian Qiao*0.0001November 8, 2017November 8, 2027*5.15May 25, 2018May 25, 2028*—January 22,2019—Ryan Huanian Liu*0.0001August 21, 2015August 21, 2025*0.0001November 8, 2017November 8, 2027*5.15May 25,2018May 25,2028*—January 22,2019—Shirley Yunwen Yang*—March 14,2019—Keyi Chen————Yibo Shao————Xiaoguang Wu*—March 20, 2018—Wei Wu*0.0001November 8, 2017November 8, 2027Neng Wang*—March 20, 2018—All Directors and Executive Officers as a Group4,029,000 * Upon exercising of all options that are exercisable with 60 days after April 30, 2019 and vesting of all restricted shares unites that are to be vested within60 days after April 30, 2019, would beneficially own less than 1% of our total outstanding shares. (1) Represents restricted share units. C. Board Practices Board of Directors Our board of directors consists of eight directors. A director is not required to hold any shares in our company to qualify to serve as a director. Adirector who is in any way, whether directly or indirectly, interested in a contract or proposed contract with our company is required to declare the nature ofhis interest at a meeting of our directors. A director may vote in respect of any contract, proposed contract or arrangement notwithstanding that he may beinterested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of our directors at which any such contractor proposed contract or arrangement is considered. The directors may exercise all the powers of our company to raise or borrow money, to mortgage or chargeits undertaking, property, assets (present and future) and uncalled capital or any part thereof, and to issue debentures, debenture stock, bonds or othersecurities whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third party. None of our non-executivedirectors has a service contract with us that provides for benefits upon termination of service. Committees of the Board of Directors We have three committees under the board of directors: an audit committee, a compensation committee and a nominating and corporate governancecommittee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. Audit Committee Our audit committee consists of Mr. Wei Wu, Mr. Xiaoguang Wu and Dr. Neng Wang. Mr. Wei Wu is the chairman of our audit committee. We havedetermined that Mr. Wei Wu, Mr. Xiaoguang Wu and Dr. Neng Wang satisfy the “independence” requirements of Rule5605(c)(2) of the Listing Rules of theNasdaq Stock Market and Rule 10A-3 under the Securities Exchange Act of 1934. The audit committee oversees our accounting and financial reportingprocesses and the audits of the financial statements of our company. The audit committee is responsible for, among other things: 129(1)(1)(1)(1)(1)(1)Table of Contents · appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independentauditors; · 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 to monitor andcontrol 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 our procedures toensure proper compliance. Compensation Committee Our compensation committee consists of Mr. Wei Wu, Mr. Xiaoguang Wu and Dr. Neng Wang. Mr. Wei Wu is the chairman of our compensationcommittee. We have determined Mr. Wei Wu, Mr. Xiaoguang Wu and Dr. Neng Wang satisfy the “independence” requirements of Rule5605(a)(2) of theListing Rules of the Nasdaq Stock Market. The compensation committee assists the board in reviewing and approving the compensation structure, includingall forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting duringwhich 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 other executiveofficers; · reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; · 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 that person’sindependence from management. Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Mr. Xiaoguang Wu, Mr. Wei Wu and Dr. Neng Wang. Mr. Xiaoguang Wu is thechairperson of our nominating and corporate governance committee. Mr. Xiaoguang Wu, Mr. Wei Wu and Dr. Neng Wang satisfy the “independence”requirements of Rule5605(a)(2) of the Listing Rules of the Nasdaq Stock Market. The nominating and corporate governance committee assists the board ofdirectors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating andcorporate governance committee is responsible for, among other things: · selecting and recommending 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; 130Table of Contents · making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and · advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as ourcompliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on anyremedial action to be taken. Terms of Directors and Executive Officers Our directors may be appointed by a resolution of our board of directors, or by an ordinary resolution of our shareholders. A director may beappointed on terms that the director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual generalmeeting or upon any specified event or after any specified period in a written agreement between our company and the director, if any; but no such term shallbe implied in the absence of express provision. Each director whose term of office expires shall be eligible for re-election at a meeting of the shareholders orre-appointment by the board of directors. A director may be removed from office by an ordinary resolution of the shareholders. A director will cease to be adirector if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by ourcompany to be or becomes of unsound mind, (iii) resigns his office by notice in writing to the company, (iv) without special leave of absence from our board,is absent from three consecutive board meetings and our directors resolve that his office be vacated or (v) is removed from office pursuant to any otherprovision of our sixth amended and restated articles of association. Our officers are elected by and serve at the discretion of our board of directors. Employment Agreements and Indemnification Agreements We have entered into new employment agreements with each of our senior executive officers. Under these agreements, each of our executive officersis employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of theexecutive officer, such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts to our detriment, ormisconduct or a failure to perform agreed duties. We may also terminate an executive officer’s employment without cause upon three-month advance writtennotice. In such case of termination by us, we will provide severance payments to the executive officer as expressly required by applicable law of thejurisdiction where the executive officer is based. The executive officer may resign at any time with a three-month 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 strict confidenceand not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of ourconfidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietaryinformation of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose inconfidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment withus and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for theseinventions, 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 or heremployment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to (i) approach oursuppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for thepurpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment withor provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our expressconsent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive officer’stermination, or in the year preceding such termination, without our express consent. 131Table of Contents We have entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we may agree toindemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason oftheir being a director or officer of our company. D. Employees The following table sets forth the numbers of our employees categorized by function as of December 31, 2018. As of December 31, 2018 Number % of TotalEmployeesFunctions:E-commerce and operations1496.3Risk management36115.3Research and development62426.4Sales and marketing1,01542.9General and administrative2169.1Total number of employees2,365100.0 As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal andprovincial governments, including, among others, pension insurance, medical insurance, unemployment insurance, maternity insurance, on-the-job injuryinsurance, and housing fund plans through a PRC government-mandated defined contribution plan. We are required under PRC law to make contributions toemployee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by thelocal government from time to time. We typically enter into standard employment and confidentiality agreements with our senior management and core personnel. We maintain a goodworking relationship with our employees, and we have not experienced any material labor disputes. None of our employees are represented by labor unions. E. Share Ownership The following table sets forth information with respect to the beneficial ownership of our shares as of March 31, 2019 by: · each of our current directors and executive officers; and · each person known to us to own beneficially more than 5% of our shares. The calculations in the table below are based on 354,239,239 ordinary shares outstanding as of March 31, 2019, comprising of (i) 250,092,040Class A ordinary shares, and (ii) 104,147,199 Class B ordinary shares. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially ownedby a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including throughthe exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of thepercentage ownership of any other person. Ordinary shares held by a shareholder are determined in accordance with our register of members. See “—A. Directors, Senior Management and Employees—Compensation” for more details on options and restricted shares granted to our directorsand executive officers. 132Table of Contents Class AOrdinary Shares Class BOrdinary Shares Percentage oftotal ordinaryshares on an as-converted basis† Percentage ofaggregate voting power††Directors and Executive Officers**:Jay Wenjie Xiao3,911,948104,147,19930.580.9Jared Yi Wu*—*—Craig Yan Zeng*—*—Kris Qian Qiao*—**Ryan Huanian Liu*—**Shirley Yunwen Yang————Keyi Chen————Yibo Shao————Xiaoguang Wu*—**Wei Wu*—*—Dr. Neng Wang*—**All Directors and Executive Officers as a Group7,703,448104,147,19931.681.2Principal Shareholders:Installment Payment Investment Inc.3,911,948104,147,19930.580.9K2 Partners entities47,098,256—13.33.6Matrix Partners China III Hong Kong Limited36,490,086—10.32.8JD.com Inc. and its affiliates29,886,555—8.42.3Magic Peak Investments Limited17,927,557—5.11.4 * Aggregate number of shares accounts for less than 1% of our total outstanding ordinary shares and aggregate voting power. ** Except for Keyi Chen, Yibo Shao, Xiaoguang Wu, Wei Wu and Dr. Neng Wang, the business address for our directors and executive officers is 27/F CESTower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen 518052, the People’s Republic of China. † For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by suchperson or group by the sum of the total number of shares outstanding as of March 31, 2019 and the number of shares such person or group has the right toacquire upon exercise of option, warrant or other right within 60 days after March 31, 2019. The total number of ordinary shares outstanding as ofMarch 31, 2019 is 354,239,239. †† For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by suchperson or group by the voting power of all of our Class A and Class B ordinary shares as a single class. Each holder of Class A ordinary shares is entitledto one vote per share and each holder of our Class B ordinary shares is entitled to ten votes per share on all matters submitted to them for vote. OurClass B ordinary shares are convertible at any time by the holder thereof into Class A ordinary shares on a one-for-one basis. (1) Represents 3,911,948 Class A ordinary shares in the form of ADSs and 104,147,199 Class B ordinary shares held by The JX Chen Family Trust throughInstallment Payment Investment Inc., a company incorporated under the laws of the British Virgin Islands, as of March 31, 2019. The registered officeaddress of Installment Payment Investment Inc. is Start Chambers, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands. Thebeneficiaries of The JX Chen Family Trust are Mr. Jay Wenjia Xiao and his family and therefore, Mr. Xiao may be deemed to be the beneficial owner ofthe shares held by Installment Payment Investment Inc. through the Trust. (2) The business address of Mr. Keyi Chen is Suite 2706, Taikang Financial Tower, No. 38 East Third Ring North Road, Chaoyang District, Beijing, thePeople’s Republic of China. (3) The business address of Mr. Yibo Shao is Suite 2601, Taikang Financial Tower, No. 38 East Third Ring North Road, Chaoyang District, Beijing, thePeople’s Republic of China. (4) The business address of Mr. Xiaoguang Wu is Flat 49A, Tower 6, Phase 4, Bel-Air On The Peak, South Island, Pokfulam, Hong Kong. (5) The business address of Mr. Wei Wu is Room 2102, 21/F, World-Wide House, Central, Hong Kong. (6) The business address of Dr. Neng Wang is 3022 Broadway, Uris Hall 812, New York, NY 10027, USA. (7) Represents 3,911,948 Class A ordinary shares in the form of ADSs and 104,147,199 Class B ordinary shares beneficially owned by Mr. Jay Wenjie Xiaothrough The JX Chen Family Trust. See note (1) above. (8) Represents 11,029,412 Class A ordinary shares held by K2 Evergreen Partners Limited, and 35,468,844 Class A ordinary shares and 300,000 ADSsrepresenting 600,000 Class A ordinary shares held by K2 Partners II Limited, as reported on Schedule 13D filed on January 4, 2018. Both of K2Evergreen Partners Limited and K2 Partners II Limited, which we refer to as K2 Partners entities, are incorporated in Hong Kong and their registeredoffice address is Room C, 20/F., Lucky Plaza, 315-321, Lockhart Road, Wan Chai, Hong Kong. K2 Evergreen Partners LLC acts as the general partner ofK2 Evergreen Partners L.P., which is the sole shareholder of K2 Evergreen Partners Limited. K2 Partners II GP, L.P. acts as the general partner of K2Partners II L.P., which is the sole shareholder of K2 Partners II Limited. The registered office address of K2 Evergreen Partners LLC and K2 Partners II GP,L.P. is Osiris International Cayman Limited of Suite #4-210, Governors Square, 23 Lime Tree Bay Avenue, Po Box 32311, Grand Cayman KY1-1209,Cayman Islands. Both K2 Evergreen Partners LLC and K2 Partners II GP, L.P. are controlled by KPartners Limited. 133(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)Table of Contents (9) Represents 36,490,086 Class A ordinary shares held directly by Matrix Partners China III Hong Kong Limited, of which 32,841,077 are held indirectlyby Matrix China III, and 3,649,009 Class A ordinary shares held indirectly by Matrix China III-A (through Matrix Partners China III Hong KongLimited), all as of December 31, 2017, as reported on Schedule 13G filed on February 14, 2018. Matrix Management III and Matrix III GP are the directand indirect general partners, respectively, of Matrix China III and Matrix China III-A, and as such, may exercise voting and dispositive power over theseshares. Mr. Yibo Shao, a director of Matrix III GP, may be deemed to share voting and dispositive power over these shares. Matrix Partners China III HongKong Limited is a company incorporated in Hong Kong. The registered office address of Matrix Partners China III Hong Kong Limited is Suites 3701-3710, 37/F, Jardine House, 1 Connaught Place, Central, Hong Kong. The registered office address of Matrix Partners China III, L.P., Matrix PartnersChina III-A, L.P, Matrix China Management III, L.P., Matrix China III GP GP, Ltd. and Matrix Partners China III Hong Kong Limited, all of which isincorporated in the Cayman Islands, is Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. (10) Represent (i) 28,886,555 Class A ordinary shares held by JD.com Asia Pacific Investment Limited, a wholly owned subsidiary of JD.com E-Commerce(Technology) Hong Kong Corporation Limited, which in turn is a wholly-owned subsidiary of JD.com, Inc., and (ii) 1,000,000 Class A ordinary sharesrepresented by 500,000 ADSs held by Windcreek Limite, a wholly owned subsidiary of JD.com Investment Limited, which in turn is a wholly-ownedsubsidiary of JD.com, Inc., as reported on the Scheduled 13G filed by JD.com, Inc. and its affiliated on January 3, 2018. The registered address of JD.comAsia Pacific Investment Limited is Flat/RM 806, BLK II 8/F, Cheung Sha Wan Plaza, 833 Cheung Sha Wan Road, KL. The registered address of JD.comE-Commerce (Technology) Hong Kong Corporation Limited is 12/F Ruttonjee Hse 11 Duddell ST, Central Hong Kong. The registered address ofJD.com, Inc. is PO Box 309, Ugland House, Grand Cayman, KYI-1104, Cayman Islands. (11) Represents 17,927,557 Class A ordinary shares in the form of ADSs held by Magic Peak Investments Limited, as reported on Schedule 13G onFebruary 12, 2019. Magic Peak Investments Limited is a company incorporated in the British Virgin Islands and whose registered address is P.O. Box957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. These Class A ordinary shares are owned directly by Magic PeakInvestments Limited, which is wholly owned by Taikang Life Insurance Co., Ltd., which in turn is wholly owned by Taikang Insurance Group Inc. Withrespect to certain of its assets, Taikang Insurance Group Inc. has delegated to Taikang Asset Management Co., Ltd. certain investment discretion.Accordingly, Taikang Asset Management Co., Ltd. may be deemed to be a beneficial owner of the Class A ordinary shares held by Magic PeakInvestments Limited, as it has the power to vote and dispose of, or direct the voting and disposition of, the Shares. The address of principal businessoffice of Taikang Asset Management Co., Ltd. is 10F, Taikang Life Building, 156 Fuxingmennei Street, Xicheng District, Beijing, People’s Republic ofChina. The address of principal business office of Taikang Insurance Group Inc. is 8th and 9th Floor, Taikang Life Insurance Building, No. 156Fuxingmennei Street, Xicheng District, Beijing, the People’s Republic of China. The address of principal business office of Taikang Life InsuranceCo., Ltd.is 1/F, Taikang Zhongguancum Innovation Centre, No. 21-1 Kexueyuan Lu, Kejiyuanqu, Changping District, Beijing, the People’s Republic ofChina. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one voteper share, while holders of Class B ordinary shares are entitled to ten votes per share. We issued Class A ordinary shares represented by the ADSs in our initialpublic offering. As of March 31, 2019, 354,239,239 of our ordinary shares were issued and outstanding. To our knowledge, a total of 168,196,690 Class A ordinaryshares, representing approximately 47.5% of our total outstanding ordinary shares, were held by one record shareholder in the United States, which is TheBank of New York Mellon, the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much largerthan the number of record holders of our ordinary shares in the United States. Except for the above, we are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” 134Table of Contents B. Related Party Transactions Contractual Arrangements with Our Variable Interest Entities and Their Shareholders PRC laws and regulations currently restrict foreign ownership and investment in value-added telecommunications services in China. As a result, weoperate our relevant business through our variable interest entities and their subsidiaries based on a series of contractual arrangements. For a description ofthese contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with Our VariableInterest Entities.” Transactions with Mr. Jay Wenjie Xiao On December 16, 2015, we provided a loan in the amount of US$2.5 million to Mr. Jay Wenjie Xiao for the purpose of allowing Mr. Xiao to makepotential investments on behalf of us. On May 24, 2016, we, through Mr. Jay Wenjie Xiao, entered into an agreement with Finnov Private Limited, or Finnov,to subscribe and purchase 11,363,637 series A preferred shares of Finnov with a consideration of US$933,333, which was paid on December 30, 2016.Subsequently, on December 21, 2016, we, through Mr. Jay Wenjie Xiao, entered into another agreement with Finnov, to subscribe and purchase 1,804,449series A-2 preferred shares of Finnov with the total consideration of US$411,111, which was paid in March 2017. We are the beneficial owner with respect tothose shares purchased by Mr. Jay Wenjie Xiao on our behalf and obtain control of those shares through a share charge and an option agreement. We madesuch arrangement solely for the purpose of facilitating our investment in Finnov and to comply with certain regulatory requirements. The amounts due fromMr. Jay Wenjie Xiao were fully collected by us in March 2018. Transactions with Individual Directors and Officers on Juzi Licai Certain individual directors and officers and/or his immediate family members participate in our investment programs offered to individual investorson Juzi Licai. As of December 31, 2016, 2017 and 2018, we had RMB45.2 million, RMB67.5 million and RMB14.6 million (US$2.1 million) due to theserelated parties in connection with their investment. We believe that the terms of the transaction agreements with the related parties are comparable to those atarm’s-length transactions with third-party individual investors. Transactions with JD.com In 2015, we entered into a strategic cooperation agreement with JD.com and a series of related agreements pursuant to which we source our productssold on our e-commerce channel and receive fulfillment and storage service from JD.com. In 2016, 2017 and 2018, we purchased goods and received servicesfrom JD.com in a total amount of RMB668 million, RMB545 million, and RMB607 million (US$88.3 million), respectively. As of December 31, 2018, wedid not have any amount due to JD.com. Shareholders Agreement We entered into our amended and restated shareholders agreement on October 21, 2017 with our then-existing shareholders. The shareholdersagreement provides for certain preferential rights, including board representation rights, right of participation, co-sale rights and preemptive rights. Except forthe registration rights, all the preferential rights will automatically terminate upon the completion of this offering. Registration Rights Pursuant to our current shareholders agreement, we have granted certain registration rights to our shareholders. Set forth below is a description of theregistration rights granted under the agreement. Demand Registration Rights. Holders of at least 10% of our registrable securities have the right to demand in writing that we file a registrationstatement to register their registrable securities and registrable securities held by others who choose to participate in the offering. This right may be exercisedat any time after our initial public offering. We are not obligated to effect a demand registration if, within the six-month period preceding the date of suchrequest, we have already effected a registration pursuant to demand registration rights or Form F-3 registration rights, or holders had an opportunity toparticipate pursuant to piggyback registration rights. If the underwriters determine in good faith that marketing factors require a limitation of the number ofshare to be underwritten, the underwriters may reduce as required and allocate the shares to be included in the registration statement among holders, subjectto certain limitations. 135Table of Contents Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities, we must offer holders of ourregistrable securities an opportunity to include in the registration the number of registrable securities of the same class or series as those proposed to beregistered. If the underwriters determine in good faith that marketing factors require a limitation of the number of shares to be underwritten, the registrablesecurities shall allocate first to us, second to each of holders requesting for the inclusion of their registrable securities pursuant to the piggyback registration. Form F-3 Registration Rights. After our initial public offering, we shall use our best efforts to qualify for registration on Form F-3. After we arequalified to use Form F-3, holders of our securities may request to us in writing to effect a registration on Form F-3. We are not obligated to effect suchregistration if, among other things, (i) the anticipated aggregate offering price is less than US$1,000,000, or (ii) we have already effected three registrations inthe 6 month period preceding the date of the request. We may defer filing of a registration statement on Form F-3 no more than once during any 12 monthsperiod for up to 90 days if our board of directors determines in good faith that filing such registration statement will be materially detrimental to us and ourshareholders. Expenses of Registration. We will bear all registration expenses, other than underwriting discounts and selling commissions, incurred in connectionwith any demand, piggyback or F-3 registration. Termination of Obligations. The registration rights set forth above shall terminate on the earlier of (i) the fifth anniversary of our initial publicoffering and (ii) with respect to any holder of registrable securities, the time when all registrable securities held by such holder may be sold pursuant toRule 144 under the Securities Act without transfer restrictions. Employment Agreements and Indemnification Agreements See “Item 6—Directors, Senior Management and Employees—A. Compensation” Share Incentive Plans See “Item 6. Directors, Senior Management and Employees—A. Compensation” C. Interests of Experts and Counsel Not applicable. Item 8. Financial Information A. Consolidated Statements and Other Financial Information We have appended consolidated financial statements filed as part of this annual report. Legal Proceedings We are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various legal oradministrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of theoutcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention. Dividend Policy Our board of directors has discretion on whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that ourcompany may only pay dividends either out of profits or share premium account, and provided always that in no circumstances may a dividend be paid if thiswould result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders may by ordinaryresolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to paydividends on our ordinary shares, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus,general financial condition, contractual restrictions and other factors that our board of directors may deem relevant. 136Table of Contents We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, ifnot all, of our available funds and any future earnings to operate and expand our business. We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements,including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See “Item 4.Information on the Company—B. Business Overview—Regulation—Regulations Relating to Dividend Distribution” and “Taxation—Dividends.” If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the ordinary shares underlying the ADSsto the depositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to the ADS holders in proportion to theordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payablethereunder. See “Item 12. Description of Securities Other Than Equity Securities—Description of American Depositary Shares.” Cash dividends on ourordinary shares, if any, will be paid in U.S. dollars. B. Significant Changes Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidatedfinancial statements included in this annual report. Item 9. The Offer and Listing A. Offering and Listing Details Our ADSs, each representing two Class A ordinary shares, have been listed on The Nasdaq Global Market since December 21, 2017. The ADSs tradeunder the symbol “LX.” B. Plan of Distribution Not applicable. C. Markets The ADSs have been listed on Nasdaq since December 21, 2017 under the symbol “LX.” D. Selling Shareholders Not applicable. E. Dilution Not applicable. F. Expenses of the Issue Not applicable. Item 10. Additional Information A. Share Capital Not applicable. 137Table of Contents B. Memorandum and Articles of Association The following are summaries of material provisions of our third amended and restated memorandum and articles of association, as well as theCompanies Law (2018 Revision) insofar as they relate to the material terms of our ordinary shares. Registered Office and Objects Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, GrandCayman, KY1-1104, Cayman Islands. Our agent for service of process in the United States is Law Debenture Corporate Services Inc. The objects of ourcompany are unrestricted and we have the full power and authority to carry out any object not prohibited by the law of the Cayman Islands. Board of Directors See “Item 6. Directors, Senior Management and Employees—B. Board Practices—Board of Directors.” Ordinary Shares Ordinary Shares. Our ordinary shares are issued in registered form and are issued when registered in our register of members. Our shareholders whoare non-residents of the Cayman Islands may freely hold and vote their shares. We may not issue bearer shares. Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. In addition, ourshareholders may by an ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under CaymanIslands law, our company may declare and pay a dividend only out of funds legally available therefor, namely out of either profits or our share premiumaccount, provided that in no circumstances may we pay a dividend if this would result in our company being unable to pay its debts as they fall due in theordinary course of business. Voting Rights. In respect of all matters subject to a shareholders’ vote on a poll, each Class A ordinary share shall entitle the holder thereof to onevote on all matters subject to vote at general meetings of the Company, and each Class B ordinary share shall entitle the holder thereof to ten votes on allmatters subject to vote at general meetings of the Company. Voting at any shareholders’ meeting is by show of hands unless a poll is demanded. A poll maybe demanded by the chairman of such meeting or any shareholder holding not less than 10% of the votes attaching to the total ordinary shares present inperson or by proxy. A quorum required for a meeting of shareholders consists of one or more shareholders present or by proxy, holding shares which represent, inaggregate, not less than one-third of the votes attaching to the issued and outstanding ordinary shares in our company entitled to vote at general meetings.Shareholders may be present in person or by proxy or, if the shareholder is a legal entity, by its duly authorized representative. Shareholders’ meetings maybe convened by the Chairman or a majority of our board of directors on its own initiative or upon a request to the directors by shareholders holding shareswhich represent, in aggregate, not less than one-third of all votes attaching to all issued and outstanding ordinary shares in our company entitled to vote atgeneral meetings. Advance notice of at least seven calendar days is required for the convening of our annual general shareholders’ meeting and any othergeneral shareholders’ meeting. An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attached to theordinary shares cast by those shareholders entitled to vote who are present in person or by proxy at a general meeting, while a special resolution requires theaffirmative vote of no less than two-thirds of the votes attached to the ordinary shares cast by those shareholders entitled to vote who are present in person orby proxy at a general meeting. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all theshareholders of our company, as permitted by the Companies Law and our amended and restated memorandum and articles of association. A specialresolution will be required for important matters such as a change of name or making changes to our amended and restated memorandum and articles ofassociation. Holders of the ordinary shares may, among other things, divide or combine their shares by ordinary resolution. 138Table of Contents Conversion of Class B Ordinary Shares. Upon any sale, transfer, assignment or disposition of any Class B ordinary shares by the holder to any non-affiliates of such holder, each of such Class B ordinary share will be automatically and immediately converted into one Class A ordinary share. If at any timeMr. Jay Wenjie Xiao and his affiliates collectively hold less than five percent (5%) of our issued and outstanding shares, each Class B ordinary share willautomatically be re-designated into one Class A ordinary share, and no Class B ordinary shares shall be issued by us thereafter. Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her ordinary shares byan instrument of transfer in writing and in the usual or common form or any other form approved by our board of directors. Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which wehave a lien. Our board of directors may also decline to register any transfer of any ordinary share unless: · the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence asour 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 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 ordinary share is to be transferred does not exceed four; and · a fee of such maximum sum as the Nasdaq Global Market may determine to be payable or such lesser sum as our board of 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 was lodged withus, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, after compliance with any notice required of the Nasdaq Global 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 always, that the registration of transfers shall not besuspended nor the register closed for more than 30 calendar days in any year as our board may determine. Liquidation. On a winding up of our company, if the assets available for distribution among our shareholders shall be more than sufficient to repaythe whole of the share capital at the commencement of the winding up, the surplus will be distributed among our shareholders in proportion to the par valueof the ordinary shares held by them at the commencement of the winding up, subject to a deduction from those ordinary shares in respect of which there aremonies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay the whole ofthe share capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to the par value of the ordinary shares held bythem. We are an exempted company with “limited liability” incorporated under the Companies Law, and under the Companies Law, the liability of ourmembers is limited to the amount, if any, unpaid on the shares respectively held by them. Our amended and restated memorandum of association contains adeclaration that the liability of our members is so limited. Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid ontheir ordinary shares in a notice served to such shareholders at least 14 calendar days prior to the specified time and place of payment. The shares that havebeen called upon and remain unpaid are subject to forfeiture. Redemption, Repurchase and Surrender of Ordinary Shares. We may issue shares on terms that such shares are subject to redemption, at our optionor at the option of the holders thereof, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors or bya special resolution of our shareholders. Our company may also repurchase any of our shares provided that the manner and terms of such purchase have beenapproved by our board of directors or by ordinary resolution of our shareholders, or are otherwise authorized by our amended and restated memorandum andarticles of association. Under the Companies Law, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceedsof a fresh issue of shares made for the purpose of such redemption or repurchase, or out of capital (including a share premium account and capital redemptionreserve) if the company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under theCompanies Law no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there beingno shares outstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for noconsideration. 139Table of Contents Variations of Rights of Shares. If at any time, our share capital is divided into different classes of shares, all or any of the special rights attached toany class of shares may be varied with the consent in writing of the holders of all of the issued shares of that class or with the sanction of an ordinaryresolution passed by a majority of the votes cast at a separate meeting of the holders of the shares of that class. The rights conferred upon the holders of theshares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, bedeemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares. Issuance of Additional Shares. Our amended and restated memorandum and articles of association authorizes our board of directors to issueadditional Class A ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares. Our sixth amended and restated memorandum and articles of association also authorizes our board of directors to establish from time to time one ormore series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including: · the designation of the series; · the number of shares of the series; · the dividend rights, dividend rates, conversion rights, voting rights; and · the rights and terms of redemption and liquidation preferences. Our board of directors may issue preferred shares without approval from our shareholders to the extent authorized but unissued. Issuance of theseshares 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 or obtaincopies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. Anti-Takeover Provisions. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent achange of control of our company or management that shareholders may consider favorable, including provisions that: · authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges andrestrictions 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 sixth amended and restatedmemorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company. 140Table of Contents General Meetings of Shareholders and Shareholder Proposals. Our shareholders’ general meetings may be held in such place within or outside theCayman Islands as our board of directors considers appropriate. As a Cayman Islands exempted company, we are not obliged by the Companies Law to call shareholders’ annual general meetings. Our sixthamended and restated memorandum and articles of association provide that we may (but are not obliged to) in each year hold a general meeting as our annualgeneral meeting. Shareholders’ annual general meetings and any other general meetings of our shareholders may be convened by a majority of our board of directorsor our chairman. Advance notice of at least seven calendar days is required for the convening of our annual general shareholders’ meeting and any othergeneral meeting of our shareholders. A quorum required for a general meeting of shareholders consists of one or more shareholders present in person or byproxy, or, if a corporation or other non-natural person, by its duly authorized representative, representing not less than one-third of all votes attaching to allissued and outstanding ordinary shares in our company entitled to vote at general meetings. Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with anyright to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our amended and restated memorandum and articles of associationallows our shareholders holding shares representing in aggregate not less than one-third of the votes attaching to the issued and outstanding ordinary sharesof our company entitled to vote at general meetings, to requisition an extraordinary general meeting of our shareholders, in which case our directors areobliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting; however, our amended and restated memorandum andarticles of association does not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary generalmeetings not called by such shareholders. Appointment and Removal of Directors Unless otherwise determined by our company in general meeting, our sixth amended and restated articles of association provide that our board willconsist of not less than three directors. There are no provisions relating to retirement of directors upon reaching any age limit. The directors have the power to appoint any person as a director either to fill a casual vacancy on the board or as an addition to the existing board.Our shareholders may also appoint any person to be a director by way of ordinary resolution. A director may be removed with or without cause by ordinary resolution. In addition, the office of any director shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition with hiscreditors, (ii) dies or is found to be or becomes of unsound mind, (iii) resigns his office by notice in writing to our company, or (iv) without special leave ofabsence from our board, is absent from three consecutive board meetings and our board resolves that his office be vacated. Proceedings of Board of Directors Our sixth amended and restated memorandum and articles of association provide that our business is to be managed and conducted by our board ofdirectors. The quorum necessary for board meetings may be fixed by the board and, unless so fixed at another number, will be a majority of the directors. Our sixth amended and restated memorandum and articles of association provide that the board may exercise all the powers of our company toborrow money, to mortgage or charge all or any part of the undertaking, property and uncalled capital of our company and to issue debentures and othersecurities whenever money is borrowed, or as security for any debt, liability or obligation of our company or of any third party. Changes in Capital Our shareholders may from time to time by ordinary resolution: 141Table of Contents · increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe; · consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; · sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the proportion between theamount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reducedshare is derived; or · cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminishthe amount of our share capital by the amount of the shares so canceled. Our shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by our company foran order confirming such reduction, reduce our share capital or any capital redemption reserve in any manner permitted by law. Exempted Company. We are an exempted company with limited liability incorporated under the Companies Law. The Companies Law distinguishesbetween ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outsideof the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for anordinary company except that an exempted 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 negotiable or bearer shares or shares with no par value; · may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the firstinstance); · 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 that shareholder’s shares of thecompany (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose orother circumstances in which a court may be prepared to pierce or lift the corporate veil). Register of Members. Under Cayman Islands law, we must keep a register of members and there should be entered therein: · the names and addresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be consideredas paid, on the shares of each member; · the date on which the name of any person was entered on the register as a member; and · the date on which any person ceased to be a member. 142Table of Contents Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of memberswill raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members should be deemed as amatter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. Upon the closing of this offering, ourcompany’s register of members will be immediately updated to record and give effect to the issue of Class A ordinary shares by us to the Depositary (or itsnominee) as the depositary. Once our register of members has been updated, the shareholders recorded in the register of members will be deemed to have legaltitle to the shares set against their name in the register of members. If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any default or unnecessary delay in enteringon the register the fact of any person having ceased to be a member of our company, the person or member aggrieved (or any member of our company or ourcompany itself) may apply to the Grand Court of the Cayman Islands for an order that the register be rectified, and the Court may either refuse suchapplication or it may, if satisfied of the justice of the case, make an order for the rectification of the register. C. Material Contracts We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Informationon the Company” or elsewhere in this annual report on Form 20-F. D. Exchange Controls See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Foreign Currency Exchange.” E. Taxation The following summary of the material Cayman Islands, PRC and United States federal income tax consequences of an investment in the ADSs orordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. Thissummary does not deal with all possible tax consequences relating to an investment in the ADSs or ordinary shares, such as the tax consequences underUnited States state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China and the UnitedStates. Cayman Islands Taxation The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is notaxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islandsexcept for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. TheCayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange controlregulations or currency restrictions in the Cayman Islands. Payments of dividends and capital in respect of the ADSs and 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 the Shares, nor will gains derived from the disposal of the shares besubject to Cayman Islands income or corporation tax. People’s Republic of China Taxation Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto managementbody” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. Theimplementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of thebusiness, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known asCircular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that isincorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups,not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general positionon how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, anoffshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “defacto management body” in China only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in thePRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in thePRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained inthe PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. 143Table of Contents We do not believe that LexinFintech Holdings Ltd. meets all of the conditions above. LexinFintech Holdings Ltd. is a company incorporatedoutside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (includingthe resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons, we believe our otherentities outside of China are not PRC resident enterprises either. 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.” There can be no assurance that the PRCgovernment will ultimately take a view that is consistent with ours. However, if the PRC tax authorities determine that LexinFintech Holdings Ltd. is a PRC resident enterprise for enterprise income tax purposes, wemay be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of ourADSs. Such 10% tax rate could be reduced by applicable tax treaties or similar arrangements between China and the jurisdiction of our shareholders. Forexample, for shareholders eligible for the benefits of the tax treaty between China and Hong Kong, the tax rate is reduced to 5% for dividends if relevantconditions are met. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on thesale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individualshareholders (including our ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in theevent we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20%unless a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of LexinFintech Holdings Ltd.would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that LexinFintech Holdings Ltd. istreated as a PRC resident enterprise. The PRC Enterprise Income Tax Law generally imposes a uniform income tax rate of 25% on all enterprises, but grants preferential treatment to“High and New Technology Enterprises,” or HNTEs, and qualified “Software Enterprises.” HNTEs are instead subject to an income tax rate of 15%, subject toa requirement that they re-apply for HNTE status every three years. During this three-year period, an HNTE must conduct a qualification self-review each yearto ensure it meets the HNTE criteria, and will be subject to the regular 25% income tax rate for any year in which it does not meet the criteria. A qualified“Software Enterprise” is entitled to an income tax exemption for two years beginning with its first profitable year and a 50% reduction to a rate of 12.5% forthe subsequent three years. However, these enterprises shall go through record-filing with the tax authority at the time of final settlement each year and besubject to the examination of the development and reform authority and the industry and information technology authority. Provided that our Cayman Islands holding company, LexinFintech Holdings Ltd., 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 from the sale orother disposition of our shares or ADSs. However, under Circular 7, if a non-resident enterprise transfers the equity interests of a PRC resident enterpriseindirectly by transfer of the equity interests of an offshore holding company (other than a purchase and sale of shares issued by a PRC resident enterprise inpublic securities market) without a reasonable commercial purpose, the PRC tax authorities have the power to reassess the nature of the transaction and theindirect equity transfer will be treated as a direct transfer. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax,and the transferor obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. We andour non-PRC resident investors may be at risk of being required to file a return and being taxed under Circular 7, and we may be required to expend valuableresources to comply with Circular 7, or to establish that we should not be taxed under these circulars. See “Item 3. Key Information—D. Risk Factors—RisksRelated to Doing Business in China—We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRCholding companies.” 144Table of Contents United States Federal Income Taxation The following discussion is a summary of United States 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 acquires our ADSs in our initial public offering and holds our ADSs or ordinary shares as“capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This discussion isbased upon existing United States federal income tax law, which is subject to differing interpretations and may be changed, possibly with retroactive effect.No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any United States federal income tax consequences described below,and there can be no assurance that the IRS or a court will not take a contrary position. This discussion does not address all aspects of United States federalincome taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (forexample, certain financial institutions, insurance companies, broker-dealers, traders in securities that have elected the mark-to-market method of accountingfor their securities, partnerships and their partners, regulated investment companies, real estate investment trusts, and tax-exempt organizations (includingprivate foundations)), investors who are not U.S. holders, United States expatriates, investors who own (directly, indirectly, or constructively) 10% or more ofour stock (by vote or value), investors that will hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale, or otherintegrated transaction for United States federal income tax purposes, investors required to accelerate the recognition of any item of gross income with respectto our ADSs or ordinary shares as a result of such income being recognized on an applicable financial statement or investors that have a functional currencyother than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussiondoes not discuss any non-United States, alternative minimum tax, state, or local tax or any non-income tax (such as the United States federal gift or estate tax)considerations, or the Medicare tax on net investment income. Each U.S. holder is urged to consult its tax advisor regarding the United States federal, state,local, and non-United States income and other tax considerations of an investment in our ADSs or ordinary shares. General For purposes of this discussion, a “U.S. holder” is a beneficial owner of our ADSs or ordinary shares that is, for United States federal income taxpurposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federalincome tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income ofwhich is subject to United States federal income taxation regardless of its source, or (iv) a trust (A) the administration of which is subject to the primarysupervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or(B) that has otherwise elected to be treated as a United States person under applicable United States Treasury regulations. If a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) is a beneficial owner of ourADSs or ordinary 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 partners in such partnerships are urged to consult their tax advisors as to the particularUnited States federal income tax consequences of an investment in our ADSs or ordinary shares. For United States 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 as the beneficial owner of the underlyingshares represented by the ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will generally not be subject to United States federalincome tax. 145Table of Contents Passive Foreign Investment Company Considerations A non-United States corporation, such as our company, will be a “passive foreign investment company” (a “PFIC”) for United States federal incometax purposes, if, in any particular taxable year, either (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 average quarterly value of its assets (as determined on the basis of fair market value) during such year produce or are held for theproduction of passive income. Cash is categorized as a passive asset and the company’s goodwill and other unbooked intangibles associated with activebusiness activities may generally be classified as active assets. Passive income generally includes, among other things, dividends, interest, rents, royalties,and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in whichwe own, directly or indirectly, at least 25% (by value) of the stock. Although the law in this regard is unclear, we intend to treat our variable interest entities(including their subsidiaries) as being owned by us for United States federal income tax purposes, and we treat them that way, not only because we exerciseeffective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, weconsolidate their results of operations in our consolidated financial statements. A certain portion of our financial services income is treated as active incomesolely for purposes of the PFIC determination. Any change in the composition of the loans originated on our platform may affect the composition of ourincome for purposes of the PFIC determination. Assuming that we are the owner of our variable interest entities (including their subsidiaries) for United Statesfederal income tax purposes, and based upon our current income and assets, including goodwill and unbooked intangibles, we do not believe that we were aPFIC for the taxable year ended December 31, 2018 and do not anticipate becoming a PFIC in future taxable years. While we do not believe that we were a PFIC for the taxable year ended December 31, 2018 and do not anticipate becoming a PFIC in theforeseeable future, no assurance can be given with respect to our PFIC status for the current taxable year or any future taxable years because the determinationof whether we are or will become a PFIC will depend in part upon the value of our goodwill and other unbooked intangibles (which will depend upon themarket price of our ADSs from time to time, which may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we have takeninto account our market capitalization. Among other matters, if our market capitalization subsequently declines, we may be or become a PFIC for the currentor future taxable years. It is also possible that the IRS may challenge our classification or valuation of our goodwill and other unbooked intangibles, whichmay result in our company being or becoming a PFIC for the current or one or more future taxable years. The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets, which may beaffected by how, and how quickly, we use our liquid assets. If our revenue from activities that produce passive income significantly increases relative to ourrevenue from activities that produce non-passive income, or if we determine not to deploy significant amounts of cash for active purposes or if we weretreated as not owning our variable interest entities for United States federal income tax purposes, our risk of being classified as a PFIC may substantiallyincrease. Because our PFIC status for any taxable year is a factual determination that can be made only after the close of a taxable year, there can be noassurance that we will not be a PFIC for the current taxable year or any future taxable year. If we are a PFIC for any year during which a U.S. holder holds ourADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our ADSs or ordinaryshares. The discussion below under “Dividends” and “Sale or Other Disposition of ADSs or Ordinary Shares” is written on the basis that we will not be orbecome a PFIC for United States federal income tax purposes. The United States federal income tax rules that apply if we are a PFIC for the current taxableyear or any subsequent taxable year are generally discussed below under “Passive Foreign Investment Company Rules.” Dividends Subject to the PFIC rules discussed below, any cash distributions paid on our ADSs or ordinary shares (including the amount of any tax withheld)out of our current or accumulated earnings and profits, as determined under United States federal income tax principles, will generally be includible in thegross income of a U.S. holder as dividend income on the day actually or constructively received by the U.S. holder, in the case of ordinary shares, or by thedepositary, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of United States federal income tax principles,we will generally report any distribution paid as a dividend for United States federal income tax purposes. Dividends received on the ADSs or ordinary shareswill not be eligible for the dividends received deduction allowed to corporations. 146Table of Contents Individuals and other non-corporate recipients of dividend income from a “qualified foreign corporation” will generally be subject to tax at areduced United States federal income tax rate rather than the marginal tax rates generally applicable to ordinary income provided that certain holding periodand other requirements are met. A non-United States corporation will generally be considered to be a qualified foreign corporation (a) with respect to anydividend it pays on stock (or ADSs in respect of such stock) which is readily tradable on an established securities market in the United States, or (b) if it iseligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory forpurposes of this provision and which includes an exchange of information program. Our ADSs are readily tradable on the Nasdaq Global Market, which is anestablished securities market in the United States. There can be no assurance that our ADSs will continue to be considered readily tradable on an establishedsecurities market in later years. Since we do not expect that our ordinary shares will be listed on established securities markets, we do not believe thatdividends that we pay on our ordinary shares that are not backed by ADSs currently meet the conditions required for the reduced tax rate. However, in theevent we are deemed to be a resident enterprise under the PRC Enterprise Income Tax Law, we may be eligible for the benefits of the United States-PRCincome tax treaty (which the U.S. Treasury Department has determined is satisfactory for this purpose) and in that case, we would be treated as a qualifiedforeign corporation with respect to dividends paid on our ordinary shares as well as our ADSs. Each non-corporate U.S. holder is advised to consult its taxadvisors regarding the availability of the reduced tax rate applicable to qualified dividend income for any dividends we pay with respect to our ADSs orordinary shares. Dividends generally will be treated as income from foreign sources for United States foreign tax credit purposes and generally will constitute passivecategory income. In the event that we are deemed to be a PRC “resident enterprise” under the Enterprise Income Tax Law, a U.S. holder may be subject toPRC withholding taxes on dividends paid on our ADSs or ordinary shares. See “Item 10. Additional Information—E. Taxation—People’s Republic of ChinaTaxation.” In that case, a U.S. holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreignwithholding taxes imposed on dividends received on ADSs or ordinary shares. A U.S. holder who does not elect to claim a foreign tax credit for foreign taxwithheld may instead claim a deduction, for United States federal income tax purposes, in respect of such withholdings, but only for a year in which such U.S.holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex. U.S. holders are advised to consult theirtax advisors regarding the availability of the foreign tax credit under their particular circumstances. Sale or Other Disposition of ADSs or Ordinary Shares Subject to the PFIC rules discussed below, a U.S. holder generally will recognize capital gain or loss upon the sale or other disposition of ADSs orordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. holder’s adjusted tax basis in such ADSsor ordinary shares. Any capital gain or loss will be long-term if the ADSs or ordinary shares have been held for more than one year and generally will beUnited States source gain or loss for United States foreign tax credit purposes. Long-term capital gains of individuals and other non-corporate U.S. holdersgenerally are eligible for a reduced rate of taxation. The deductibility of a capital loss may be subject to limitations. In the event that we are treated as a PRC “resident enterprise” under the Enterprise Income Tax Law and gain from the disposition of the ADSs orordinary shares is subject to tax in the PRC, a U.S. holder that is eligible for the benefits of the income tax treaty between the United States and the PRC mayelect to treat the gain as PRC source income. U.S. holders are advised to consult their tax advisors regarding the tax consequences if a foreign tax is imposedon a disposition of our ADSs or ordinary shares, including the availability of the foreign tax credit under their particular circumstances and the election totreat any gain as PRC source income. 147Table of Contents Passive Foreign Investment Company Rules If we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or ordinary shares, 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 tax rules that have a penalizing effect, regardless of whether weremain a PFIC, for subsequent taxable years, on (i) any excess distribution that we make to the U.S. holder (which generally means any distribution paidduring a taxable year to a U.S. holder that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, theU.S. holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale or other disposition, including, under certaincircumstances, a pledge, of ADSs or ordinary shares. Under the PFIC rules: · such excess distribution and/or gain will be allocated ratably over the U.S. holder’s holding period for the ADSs or ordinary shares; · such amount allocated to the current taxable year and any taxable years in the U.S. holder’s holding period prior to the first taxable year inwhich we are a PFIC, or pre-PFIC year, will be taxable as ordinary income; · such 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 for that year;and · an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than apre-PFIC 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 non-United States subsidiaries isalso a PFIC, such U.S. holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of theapplication of these rules. U.S. holders are advised to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries. As an alternative to the foregoing rules, a U.S. holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to our ADSs,provided that the ADSs are regularly traded on the Nasdaq Global Market. Because a mark-to-market election cannot be made for any lower-tier PFICs that aPFIC may own, a U.S. holder who makes a mark-to-market election with respect to our ADSs will generally continue to be subject to the foregoing rules withrespect to such U.S. holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for United States federal income taxpurposes. If a U.S. holder makes a mark-to-market election with respect to our ADSs, the U.S. holder generally will (i) include as ordinary income for eachtaxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSsand (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of thetaxable year, but only 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 taxbasis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. Further, in each year that we are a PFIC any gainrecognized upon the sale or other disposition of the ADSs will be treated as ordinary income and loss will be treated as ordinary loss, but only to the extent ofthe net amount previously included in income as a result of the mark-to-market election. If a U.S. holder makes a mark-to-market election it will be effectivefor the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange orthe IRS consents to the revocation of the election. It should also be noted that it is intended that only the ADSs and not the ordinary shares will be listed onthe Nasdaq Global Market. Consequently, if a U.S. holder holds ordinary shares that are not represented by ADSs, such holder generally will not be eligible tomake a mark-to-market election if we are or were to become a PFIC. If a U.S. holder makes a mark-to-market election in respect of a PFIC and such corporation ceases to be a PFIC, the U.S. holder will not be required totake into account the mark-to-market gain or loss described above during any period that such corporation is not a PFIC. 148Table of Contents We do not intend to provide information necessary for U.S. holders to make qualified electing fund elections, which, if available, would result in taxtreatment different from (and generally less adverse than) the general tax treatment for PFICs described above. As discussed above under “Dividends,” dividends that we pay on our ADSs or ordinary shares will not be eligible for the reduced tax rate thatapplies to qualified dividend income if we are a PFIC for the taxable year in which the dividend is paid or the preceding taxable year. In addition, if a U.S.holder owns our ADSs or ordinary shares during any taxable year that we are a PFIC, such holder would generally be required to file an annual IRSForm 8621. Each U.S. holder is advised to consult its tax advisors regarding the potential tax consequences to such holder if we are or become a PFIC,including the possibility of making a mark-to-market election. Information Reporting Certain U.S. holders may be required to report information to the IRS relating to an interest in “specified foreign financial assets,” including sharesissued by a non-United States corporation, for any year in which the aggregate value of all specified foreign financial assets exceeds US$50,000 (or a higherdollar amount prescribed by the IRS), subject to certain exceptions (including an exception for shares held in custodial accounts maintained with a UnitedStates financial institution). These rules also impose penalties if a U.S. holder is required to submit such information to the IRS and fails to do so. In addition, U.S. holders may be subject to information reporting to the IRS with respect to dividends on and proceeds from the sale or otherdisposition of our ADSs or ordinary shares. Each U.S. holder is advised to consult with its tax advisor regarding the application of the United Statesinformation reporting rules to their particular circumstances. F. Dividends and Paying Agents Not applicable. G. Statement by Experts Not applicable. H. Documents on Display We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers, and arerequired to file reports and other information with the SEC. Specifically, we are required to file annually an annual report on Form 20-F within four monthsafter the end of each fiscal year, which is December 31. All information filed with the SEC can be obtained over the internet at the SEC’s website atwww.sec.gov or inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can requestcopies of documents, upon payment of a duplicating fee, by writing to the SEC. As a foreign private issuer, we are exempt from the rules under the ExchangeAct prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from thereporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. We will furnish the Bank of New York Mellon, the depositary of the ADSs, with our annual reports, which will include a review of operations andannual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports andcommunications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available toholders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received bythe depositary from us. In accordance with NASDAQ Stock Market Rule 5250(d), we will post this annual report on Form 20-F on our website at http://ir.lexinfintech.com.In addition, we will provide hardcopies of our annual report free of charge to shareholders and ADS holders upon request. 149Table of Contents I. Subsidiary Information Not applicable. Item 11. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financial instruments tomanage our interest risk exposure. The fluctuation of interest rates may affect the demand for loan services on our platform. For example, a decrease in interest rates may cause potentialusers to seek lower-priced loans from other channels. A high interest rate environment may lead to an increase in competing investment options and dampeninvestors’ desire to invest on our platform. We do not expect that the fluctuation of interest rates will have a material impact on our financial condition.However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future. See “Item 3. KeyInformation—D. Risk Factors—Risks Related to Our Business and Industry—Fluctuations in interest rates could negatively affect our business.” Foreign Exchange Risk All of our revenues and substantially all of our expenses are denominated in RMB. Our exposure to foreign exchange risk primarily relates to cashand cash equivalent denominated in U.S. dollars. We do not believe that we currently have any significant direct foreign exchange risk and have not usedany derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the valueof your investment in our ADSs will be affected by the exchange rate between U.S. dollar and RMB because the value of our business is effectivelydenominated in RMB, while our ADSs will be traded in U.S. dollars. The conversion of RMB into foreign currencies, including U.S. dollars, is based on rates set by the PBOC. The PRC government allowed the RMB toappreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010, this appreciation halted and theexchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, RMB has fluctuated against the U.S. dollar, at certaintimes significantly and unpredictably. With the development of the foreign exchange market progressing towards interest rate liberalization and Renminbiinternationalization and economic uncertainties in both China and the world, the PRC government may in the future announce further changes to theexchange rate system and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future.It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. To the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have anadverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of makingpayments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negativeeffect on the U.S. dollar amounts available to us. Item 12. Description of Securities Other Than Equity Securities A. Debt Securities Not applicable. B. Warrants and Rights Not applicable. C. Other Securities Not applicable. 150Table of Contents D. American Depositary Shares Fees and Charges Our ADS Holders May Have to Pay The Bank of New York Mellon, as depositary, will register and deliver American Depositary shares, also referred to as ADSs. Each ADS will representtwo Class A ordinary shares (or a right to receive two Class A ordinary shares) deposited with The Hong Kong and Shanghai Banking Corporation Limited, ascustodian for the depositary in Hong Kong. Each ADS will also represent any other securities, cash or other property which may be held by the depositary.The deposited Class A ordinary shares together with any other securities, cash or other property held by the depositary are referred to as the depositedsecurities. The depositary’s office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of NewYork Mellon’s principal executive office is located at 225 Liberty Street, New York, New York 10286. Persons depositing or withdrawing Class A ordinaryshares or ADS holders must pay: For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution ofClass A ordinary shares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates $0.05 (or less) per ADSAny cash distribution to ADS holders A fee equivalent to the fee that would be payable if securities distributed toyou had been Class A ordinary shares and the Class A ordinary 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 holders $0.05 (or less) per ADS per calendar yearDepositary services Registration or transfer feesTransfer and registration of Class A ordinary shares on our share register to orfrom the name of the depositary or its agent when you deposit or withdrawClass A ordinary shares Expenses of the depositaryCable and facsimile transmissions (when expressly provided in the depositagreement)Converting foreign currency to U.S. dollars Taxes and other governmental charges the depositary or the custodian has topay on any ADSs or Class A ordinary shares underlying ADSs, such as stocktransfer taxes, stamp duty or withholding taxesAs necessary Any charges incurred by the depositary or its agents for servicing thedeposited securitiesAs necessary Fees and Other Payments Made by the Depositary to Us The depositary has agreed to reimburse us annually for our expenses incurred in connection with investor relationship programs and any otherprogram related to our ADS facility and the travel expense of our key personnel in connection with such programs. The depositary has also agreed to provideadditional payments to us based on the applicable performance indicators relating to our ADS facility. There are limits on the amount of expenses for whichthe depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects frominvestors. In 2018, we received approximately US$2.8 million (after tax) reimbursement from the depositary for our expenses incurred in connection withinvestor relationship programs related to the ADS facility and the travel expense of our key personnel in connection with such programs. 151Table of Contents PART II Item 13. Defaults, Dividend Arrearages and Delinquencies None. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds See “Item 10. Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of the rights of securitiesholders, which remain unchanged. The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number: 333-221509) in relation toour initial public offering of 12,000,000 ADSs representing 24,000,000 of our Class A ordinary shares, and the underwriters’ full exercise of their option topurchase from us 1,800,000 additional ADSs representing 3,600,000 Class A ordinary shares, at an initial offering price of US$9.00 per ADS. Goldman Sachs(Asia) L.L.C., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc. and China Renaissance Securities (Hong Kong) Limited arethe representatives of the underwriters. As a result of our initial public offering, we raised an aggregate proceeds of approximately US$108.4 million, after deducting underwriting discountsand commissions and estimated offering expenses payable by us. For the period from December 20, 2017, the date that the F-1 Registration Statement wasdeclared effective by the SEC, to the date of this annual report, we used a portion of the net proceeds from our initial public offering, which consisted ofUS$100 million for capital contribution to our operating entities in China and US$5.1 million for investment in Southeast Asia and North America. We still intend to use the proceeds from our initial public offering, as disclosed in our registration statements on Form F-1, for (i) general corporatepurposes, including investment in product development, sales and marketing activities, technology infrastructure, capital expenditures, improvement ofcorporate facilities and other general and administrative matters, and (ii) acquisition of, or investment in, technologies, solutions or business that complementour business. Item 15. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness ofour disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as requiredby Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, as of December 31, 2018, our disclosure controls and procedures were effective inensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed,summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reportsthat we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chieffinancial officer, to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP, and includes those policies and procedures that(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance withU.S. GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and(3) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our company’s assets thatcould have a material effect on the consolidated financial statements. Our management evaluated the effectiveness of our internal control over financialreporting as of December 31, 2018, as required by Rule 13a-15(c) of the Exchange Act, based on criteria established in the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, ourmanagement has concluded that our internal control over financial reporting was effective as of December 31, 2018. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of anyevaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Remediation of Material Weaknesses in Internal Control over Financial Reporting Reported in 2016 and 2017 In the course of auditing our consolidated financial statements as of and for the years ended December 31, 2016 and 2017, we and our independentregistered public accounting firm identified one material weakness in our internal control over financial reporting. As defined in the standards established bythe U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, or combination of deficiencies, in internal control overfinancial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be preventedor detected on a timely basis. 152Table of Contents The material weakness that had been identified as of December 31, 2016 and 2017 related to our lack of sufficient competent financial reporting andaccounting personnel with appropriate understanding of U.S. GAAP to design and implement formal period-end financial reporting controls and procedures,to address complex U.S. GAAP technical accounting issues, and to prepare and review our consolidated financial statements and related disclosures inaccordance with U.S. GAAP and financial reporting requirements set forth by the SEC. The material weakness, if not timely remedied, may lead to significantmisstatements in our consolidated financial statements in the future. In 2017, we implemented a number of measures to address the material weakness that was identified. We hired additional qualified financial andaccounting staff with working experience of U.S. GAAP and SEC reporting requirements, including our chief financial officer and senior financial director.We also implemented new financial software to improve visibility of data, journal entries and closing and reporting process controls. In 2018, we furtherexpedited and streamlined our financial reporting process. As of December 31, 2018, based on an assessment performed by our management onthe performance of the above mentioned remediation measures, we determined that the material weakness previously identified in our internal control overfinancial reporting had been remediated. Attestation Report of the Independent Registered Public Accounting Firm PricewaterhouseCoopers Zhong Tian LLP has audited the effectiveness of our internal control over financial reporting as of December 31, 2018 asstated in its report, which appears on page F-2 of this annual report on Form 20-F. Changes in Internal Control over Financial Reporting Other than as described above in “Item 15.Control and Procedures— Management’s Annual Report on Internal Control over Financial Reporting”,there were no other changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 16A. Audit Committee Financial Expert Our board of directors has determined that Mr. Wei Wu, an independent director (under the standards set forth in Nasdaq Stock Market Rule 5605(c)(2) and Rule 10A-3 under the Exchange Act) and chairman of our audit committee, is an audit committee financial expert. Item 16B. Code of Ethics Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers, employees and advisors in October 2017.We have posted a copy of our code of business conduct and ethics on our website at http://ir.lexin.com. Item 16C. Principal Accountant Fees and Services The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered byPricewaterhouseCoopers Zhong Tian LLP, our principal external auditors, for the periods indicated. For the year ended December 31,2017 2018Audit feesUS$2,462,867US$2,268,926Audit-related fees—US$407,243Tax feesUS$380,862US$135,263 (1) “Audit fees” means the aggregate fees incurred in each of the fiscal years listed for professional services rendered by our principal auditor for the audit orreview of our annual financial statements or quarterly financial information and review of documents filed with the SEC. In 2017, the audit refers tofinancial statement audit and assurance services rendered in connection with our IPO in 2017. In 2018, the audit refers to financial statement audit andaudit pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. (2) “Audit-related fees” means the aggregate fees incurred in each of the fiscal years listed for permissible services to review and comment on the design ofinternal control over financial reporting rendered by our principal auditors. (3) “Tax fees” means the aggregate fees incurred in each of the fiscal years listed for professional services rendered by our principal auditors for taxcompliance, tax advice, and tax planning. The policy of our audit committee or our board of directors is to pre-approve all audit and non-audit services provided by PricewaterhouseCoopersZhong Tian LLP, including audit services, audit related services, tax services and other services as described above. Item 16D. Exemptions from the Listing Standards for Audit Committees Not applicable. 153(1)(2)(3)Table of Contents Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 16F. Change in Registrant’s Certifying Accountant Not applicable. Item 16G. Corporate Governance As a Cayman Islands exempted company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaqrules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in theCayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. See “Item 3. Key Information—D. Risk Factors— Risks Related to the American Depositary 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 provisions applicable to U.S. domestic public companies.” Maples and Calder (Hong Kong) LLP, our Cayman Islands counsel, has provided a letter to the Nasdaq Stock Market certifying that under CaymanIslands law, we are not required to hold annual shareholders meetings every year. We followed and intend to continue to follow our home country practice inlieu of the requirement to hold an annual meeting of shareholders no later than one year after the end of a fiscal year under Nasdaq Rule 5620(a). Other than the home country practice described above, we are not aware of any significant differences between our corporate governance practicesand those followed by U.S. domestic companies under Nasdaq Stock Market Rules. Item 16H. Mine Safety Disclosure Not applicable. PART III Item 17. Financial Statements We have elected to provide financial statements pursuant to Item 18. Item 18. Financial Statements The consolidated financial statements of LexinFintech Holdings Ltd., its subsidiaries and its consolidated affiliated entities are included at the endof this annual report. Item 19. Exhibits ExhibitNumber Description of Document1.1Sixth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 of ourregistration statement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission onNovember 13, 2017)2.1Registrant’s Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 of our registration statement on Form F-1(file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017)2.2Registrant’s Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 of our registration statement on Form F-1(file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017) 154Table of Contents ExhibitNumber Description of Document2.3Deposit Agreement dated December 20, 2017 among the Registrant, the depositary and holder of the American Depositary Receipts(incorporated by reference to Exhibit 4.3 of our registration statement on Form S-8 (file no. 333-225322) filed with the Securities andExchange Commission on May 31, 2018)2.4Fourth Amended and Restated Shareholders Agreement dated October 21, 2017 between the Registrant and other parties thereto(incorporated by reference to Exhibit 4.4 of our registration statement on Form F-1 (file no. 333-221509), as amended, initially filed withthe Securities and Exchange Commission on November 13, 2017)4.1The 2017 Share Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.2 of our Registration Statement on Form F-1(file no. 333-221509) filed with the Securities and Exchange Commission on November 13, 2017)4.3Indemnification Agreement between the Registrant and its directors and executive officers (incorporated by reference to Exhibit 10.4 ofour registration statement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securities and Exchange Commissionon November 13, 2017)4.4Employment Agreement between the Registrant and its executive officers (incorporated by reference to Exhibit 10.3 of our registrationstatement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13,2017)4.5English translation of Exclusive Business Cooperation Agreement between Beijing Shijitong Technology Co., Ltd. and ShenzhenFenqile Network Technology Co., Ltd. dated November 4, 2014 (incorporated by reference to Exhibit 10.5 of our registration statementon Form F-1 (file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017)4.6English translation of Exclusive Option Agreement among Beijing Shijitong Technology Co., Ltd., Shenzhen Fenqile NetworkTechnology Co., Ltd. and shareholders of Shenzhen Fenqile Network Technology Co., Ltd. dated March 1, 2016 (incorporated byreference to Exhibit 10.6 of our registration statement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securitiesand Exchange Commission on November 13, 2017)4.7*English translation of Equity Pledge Agreement among Beijing Shijitong Technology Co., Ltd., Shenzhen Fenqile Network TechnologyCo., Ltd. and shareholders of Shenzhen Fenqile Network Technology Co., Ltd. dated May 29, 20184.8*English translation of the Power of Attorney by the shareholders of Shenzhen Fenqile Network Technology Co., Ltd. dated May 29,20184.9*English translation of Loan Agreement among Beijing Shijitong Technology Co., Ltd. and shareholders of Shenzhen Fenqile NetworkTechnology Co., Ltd. dated May 29, 20184.10English translation of Exclusive Business Cooperation Agreement between Beijing Shijitong Technology Co., Ltd. and Beijing LejiaxinNetwork Technology Co., Ltd. dated July 18, 2014 (incorporated by reference to Exhibit 10.9 of our registration statement on Form F-1(file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017)4.11English translation of Exclusive Option Agreement among Beijing Shijitong Technology Co., Ltd., Beijing Lejiaxin NetworkTechnology Co., Ltd. and shareholders of Beijing Lejiaxin Network Technology Co., Ltd. dated July 18, 2014 (incorporated byreference to Exhibit 10.10 of our registration statement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securitiesand Exchange Commission on November 13, 2017) 155Table of Contents ExhibitNumber Description of Document4.12*English translation of Equity Pledge Agreement among Beijing Shijitong Technology Co., Ltd., Beijing Lejiaxin Network TechnologyCo., Ltd. and shareholders of Beijing Lejiaxin Network Technology Co., Ltd. dated October 10, 20184.13*English translation of the Power of Attorney by the shareholders of Beijing Lejiaxin Network Technology Co., Ltd. dated October 10,20184.14*English translation of Loan Agreement among Beijing Shijitong Technology Co., Ltd. and shareholders of Beijing Lejiaxin NetworkTechnology Co., Ltd. dated October 10, 20184.15English translation of Exclusive Business Cooperation Agreement between Beijing Shijitong Technology Co., Ltd. and Shenzhen XinjieInvestment Co., Ltd. dated December 22, 2015 (incorporated by reference to Exhibit 10.13 of our registration statement on Form F-1 (fileno. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017)4.16English translation of Exclusive Option Agreement among Beijing Shijitong Technology Co., Ltd., Shenzhen Xinjie InvestmentCo., Ltd. and shareholders of Shenzhen Xinjie Investment Co., Ltd. dated March 10, 2017 (incorporated by reference to Exhibit 10.14 ofour registration statement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securities and Exchange Commissionon November 13, 2017)4.17*English translation of Equity Pledge Agreement among Beijing Shijitong Technology Co., Ltd., Shenzhen Xinjie Investment Co., Ltd.and shareholders of Shenzhen Xinjie Investment Co., Ltd. dated June 1, 20184.18*English translation of Power of Attorney by the shareholders of Shenzhen Xinjie Investment Co., Ltd. dated June 1, 20184.19*English translation of Loan Agreements among Beijing Shijitong Technology Co., Ltd. and shareholders of Shenzhen Xinjie InvestmentCo., Ltd. dated May 10, 2017 and June 1, 20184.20English translation of Exclusive Business Cooperation Agreement between Beijing Shijitong Technology Co., Ltd. and ShenzhenQianhai Dingsheng Asset Management Co., Ltd. dated January 13, 2016 (incorporated by reference to Exhibit 10.18 of our registrationstatement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13,2017)4.21English translation of Exclusive Option Agreement among Beijing Shijitong Technology Co., Ltd., Shenzhen Qianhai Dingsheng AssetManagement Co., Ltd. and shareholders of Shenzhen Qianhai Dingsheng Asset Management Co., Ltd. dated March 9, 2017(incorporated by reference to Exhibit 10.19 of our registration statement on Form F-1 (file no. 333-221509), as amended, initially filedwith the Securities and Exchange Commission on November 13, 2017)4.22English translation of Equity Pledge Agreement among Beijing Shijitong Technology Co., Ltd., Shenzhen Qianhai Dingsheng AssetManagement Co., Ltd. and shareholders of Shenzhen Qianhai Dingsheng Asset Management Co., Ltd. dated March 9, 2017, and itsSupplementary Agreement dated April 13, 2017 (incorporated by reference to Exhibit 10.20 of our registration statement on Form F-1(file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017)4.23English translation of Power of Attorney by the shareholders of Shenzhen Qianhai Dingsheng Asset Management Co., Ltd. datedMarch 9, 2017 (incorporated by reference to Exhibit 10.21 of our registration statement on Form F-1 (file no. 333-221509), as amended,initially filed with the Securities and Exchange Commission on November 13, 2017)4.24English translation of Loan Agreement among Beijing Shijitong Technology Co., Ltd. and shareholders of Qianhai Dingsheng AssetManagement Co., Ltd. dated April 13, 2017 (incorporated by reference to Exhibit 10.22 of our registration statement on Form F-1 (fileno. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017) 156Table of Contents ExhibitNumber Description of Document4.25*English translation of Exclusive Business Cooperation Agreement between Shenzhen Lexin Software Technology Co., Ltd. andShenzhen Mengtian Technology Co., Ltd. dated August 27, 20184.26*English translation of Exclusive Option Agreement among Shenzhen Lexin Software Technology Co., Ltd., Shenzhen MengtianTechnology Co., Ltd. and shareholders of Shenzhen Mengtian Technology Co., Ltd. dated August 27, 20184.27*English translation of Equity Pledge Agreement among Shenzhen Lexin Software Technology Co., Ltd., Shenzhen MengtianTechnology Co., Ltd. and shareholders of Shenzhen Mengtian Technology Co., Ltd. dated January 25, 20194.28*English translation of Power of Attorney by the shareholders of Shenzhen Mengtian Technology Co., Ltd. dated January 25, 20194.29*English translation of Loan Agreements among Shenzhen Lexin Software Technology Co., Ltd. and the shareholders of ShenzhenMengtian Technology Co., Ltd. dated August 27, 2018 and January 25, 20194.30English translation of Agreement of Long-Term Sales of Goods between Shenzhen Fenqile Trading Co., Ltd. and Guangzhou JingdongTrading Co., Ltd. dated May 1, 2017 (incorporated by reference to Exhibit 10.23 of our registration statement on Form F-1 (file no. 333-221509), as amended, initially filed with the Securities and Exchange Commission on November 13, 2017)8.1*List of Principal Subsidiaries and Consolidated Affiliated Entities11.1Code of Business Conduct and Ethics(incorporated by reference to Exhibit 99.1 of our Registration Statement on Form F-1 (file no. 333-221509) filed with the Securities and Exchange Commission on November 13, 2017)12.1*Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2*Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1**Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2**Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200215.1*Consent of PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm15.2*Consent of Shihui Partners101.INS*XBRL Instance Document101.SCH*XBRL Taxonomy Extension Schema Document101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document101.DEF*XBRL Taxonomy Extension Definition Linkbase Document101.LAB*XBRL Taxonomy Extension Label Linkbase Document101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith ** Furnished herewith 157Table of Contents SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused andauthorized the undersigned to sign this annual report on its behalf. LexinFintech Holdings Ltd. By:/s/ Jay Wenjie XiaoName: Jay Wenjie XiaoTitle: Chief Executive Officer and Chairman of the Board Date: April 30, 2019 158Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting FirmF-2Consolidated Balance Sheets as of December 31, 2017 and 2018F-4Consolidated Statements of Operations for the Years Ended December 31, 2016, 2017 and 2018F-6Consolidated Statements of Comprehensive (Loss)/Income for the Years Ended December 31, 2016, 2017 and 2018F-7Consolidated Statements of Changes in Shareholders’ (Deficit)/Equity for the Years Ended December 31, 2016, 2017 and 2018F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2017 and 2018F-9Notes to Consolidated Financial StatementsF-11 F-1Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of LexinFintech Holdings Ltd. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of LexinFintech Holdings Ltd. and its subsidiaries (the “Company”) as of December 31,2018 and 2017, and the related consolidated statements of operations, of comprehensive (loss)/income, of changes in shareholders’ (deficit)/equity and ofcash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidatedfinancial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria establishedin Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO. Change in Accounting Principles As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for revenue from contracts withcustomers, the manner in which it accounts for long-term equity investments, and the manner in which it accounts for restricted cash in the consolidatedstatements of cash flows in 2018. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control overFinancial Reporting appearing under Item 15 of the Form 20-F. Our responsibility is to express opinions on the Company’s consolidated financial statementsand on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public CompanyAccounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federalsecurities laws and the applicable rules and regulations of the Securities 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 audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F-2Table of Contents Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’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 of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ PricewaterhouseCoopers Zhong Tian LLP Beijing, the People’s Republic of China April 30, 2019 We have served as the Company’s auditor since 2016. F-3Table of Contents LEXINFINTECH HOLDINGS LTD. CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) As of December 31,2017RMB 2018RMB 2018US$ Note 2(e)ASSETSCurrent assetsCash and cash equivalents1,126,4751,148,292167,012Restricted cash561,9221,266,536184,210Restricted time deposits6,750344,21250,064Short-term financing receivables, net9,857,2095,140,634747,674Accrued interest receivable129,62282,94312,064Prepaid expenses and other current assets945,258923,827134,365Amounts due from related parties9,447——Risk safeguard fund receivable, net—395,02557,454Contract assets and service fees receivable, net—946,293137,633Inventories, net101,65357,1968,319Total current assets12,738,33610,304,9581,498,795Non-current assetsRestricted cash46,88982,30611,971Restricted time deposits600——Long-term financing receivables, net1,785,0451,283,036186,610Risk safeguard fund receivable, net—116,20816,902Contract assets and service fees receivable, net—291,78442,438Property, equipment and software, net63,12582,42011,987Long-term investments23,485186,07327,063Deferred tax assets38,84194,59813,759Other assets33,26329,1924,247Total non-current assets1,991,2482,165,617314,977TOTAL ASSETS14,729,58412,470,5751,813,772 LIABILITIESCurrent liabilitiesAccounts payable (including amounts of the consolidated VIEs of RMB158,692 andRMB135,848 as of December 31, 2017 and 2018, respectively)198,177135,84819,758Amounts due to related parties (including amounts of the consolidated VIEs of RMB67,510and RMB14,569 as of December 31, 2017 and 2018, respectively)67,51014,5692,119Short-term borrowings (including amounts of the consolidated VIEs of RMB168,844 andRMB438,010 as of December 31, 2017 and 2018, respectively)168,844438,01063,706Short-term Funding Debts (including amounts of the consolidated VIEs of RMB10,525,134and RMB4,646,041 as of December 31, 2017 and 2018, respectively)10,525,1344,646,041675,739Accrued interest payable (including amounts of the consolidated VIEs of RMB290,446 andRMB182,280 as of December 31, 2017 and 2018, respectively)290,446182,28026,512Risk safeguard fund payable (including amounts of the consolidated VIEs of nil andRMB456,276 as of December 31, 2017 and 2018, respectively)—456,27666,363Accrued expenses and other current liabilities (including amounts of the consolidated VIEs ofRMB1,506,805 and RMB2,010,042 as of December 31, 2017 and 2018, respectively)1,611,0292,145,689312,077Total current liabilities12,861,1408,018,7131,166,274Non-current liabilitiesLong-term Funding Debts (including amounts of the consolidated VIEs of RMB166,629 andRMB157,887 as of December 31, 2017 and 2018, respectively)166,629157,88722,964Deferred tax liabilities (including amounts of the consolidated VIEs of nil and RMB187,183as of December 31, 2017 and 2018, respectively)—187,18327,225Long-term borrowings (including amounts of the consolidated VIEs of RMB289 and nil as ofDecember 31, 2017 and 2018, respectively)289——Total non-current liabilities166,918345,07050,189TOTAL LIABILITIES13,028,0588,363,7831,216,463Commitments and contingencies (Note 20) F-4Table of Contents LEXINFINTECH HOLDINGS LTD. CONSOLIDATED BALANCE SHEETS (Continued) (In thousands, except for share and per share data) As of December 31,2017RMB 2018RMB 2018US$ Note 2(e)SHAREHOLDERS’ EQUITY:Class A Ordinary Shares ($0.0001 par value per share; 1,889,352,801 shares authorized,217,070,940 shares issued and outstanding as of December 31, 2017; 1,889,352,801 sharesauthorized, 253,693,940 shares issued, 243,090,108 shares outstanding as of December 31,2018)14216023Class B Ordinary Shares ($0.0001 par value per share; 110,647,199 shares authorized,110,647,199 shares issued and outstanding as of December 31, 2017; 110,647,199 sharesauthorized, 108,147,199 shares issued and outstanding as of December 31, 2018)686610Additional paid-in capital2,110,9572,328,716338,698Statutory reserves55,861200,26229,127Accumulated other comprehensive loss(14,951)(14,308)(2,081)(Accumulated deficit)/Retained earnings(450,551)1,591,896231,532TOTAL SHAREHOLDERS’ EQUITY1,701,5264,106,792597,309TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY14,729,58412,470,5751,813,772 The accompanying notes are an integral part of these consolidated financial statements. F-5Table of Contents LEXINFINTECH HOLDINGS LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for share and per share data) For the Year Ended December 31,2016 2017 2018RMB RMB RMB US$ Note 2(e)Operating revenue:Online direct sales2,770,6342,534,9832,396,680348,583Services and others5,06031,950203,91429,658Online direct sales and services income2,775,6942,566,9332,600,594378,241Interest and financial services income1,373,5592,443,7612,742,643398,901Loan facilitation and servicing fees54,201378,8922,075,817301,915Other revenue135,232192,603177,84225,866Financial services income1,562,9923,015,2564,996,302726,682Total operating revenue4,338,6865,582,1897,596,8961,104,923Operating cost:Cost of sales (including cost of goods purchased from a related party ofRMB658,898, RMB530,605 and RMB614,766 for the years endedDecember 31, 2016, 2017 and 2018, respectively)(2,894,025)(2,634,142)(2,440,613)(354,972)Funding cost(491,695)(792,170)(898,028)(130,613)Processing and servicing cost(114,323)(223,916)(324,005)(47,125)Provision for credit losses of financing receivables(236,611)(611,869)(884,056)(128,581)Provision for credit losses of contract assets and service fees receivable——(38,254)(5,564)Total operating cost(3,736,654)(4,262,097)(4,584,956)(666,855)Gross profit602,0321,320,0923,011,940438,068Operating expenses:Sales and marketing expenses(376,313)(405,505)(589,983)(85,809)Research and development expenses(127,317)(235,292)(320,165)(46,566)General and administrative expenses(87,364)(203,635)(279,859)(40,704)Total operating expenses(590,994)(844,432)(1,190,007)(173,079)Gain on guarantee liabilities, net——108,31615,754Interest expense, net(48,343)(75,517)(23,059)(3,354)Investment-related impairment(5,635)(932)(15,215)(2,213)Investment income——18,7532,728Change in fair value of financial guarantee derivatives, net(5,942)47,355197,02728,656Others, net(10,799)28,0131,773258(Loss)/income before income tax expense(59,681)474,5792,109,528306,818Income tax expense(58,258)(234,227)(132,222)(19,231)Net (loss)/income(117,939)240,3521,977,306287,587Pre-IPO Preferred Shares redemption value accretion(62,299)(82,117)——Income allocation to participating Pre-IPO Preferred Shares—(132,241)——Deemed dividend to a preferred shareholder(42,679)———Net (loss)/income attributable to ordinary shareholders(222,917)25,9941,977,306287,587 Net (loss)/income per ordinary shareBasic(2.01)0.235.850.85Diluted(2.01)0.185.450.79 Net (loss)/income per ADSBasic(4.03)0.4611.701.70Diluted(4.03)0.3710.901.59 Weighted average number of ordinary shares outstandingBasic110,647,199113,620,774337,883,964337,883,964Diluted110,647,199140,852,401362,762,561362,762,561 Share-based compensation expenses included in:Processing and servicing cost1,0675,9168,1111,180Sales and marketing expenses4,0096,61118,2232,650Research and development expenses9,06817,08933,1694,824General and administrative expenses9,85546,12063,1339,183 The accompanying notes are an integral part of these consolidated financial statements. F-6Table of Contents LEXINFINTECH HOLDINGS LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME (In thousands, except for share and per share data) For the Year Ended December 31,2016 2017 2018RMB RMB RMB US$ Note 2(e) Net (loss)/income(117,939)240,3521,977,306287,587Other comprehensive income/(loss)Foreign currency translation adjustments, net of nil tax1,908(31,893)64393Total comprehensive (loss)/income(116,031)208,4591,977,949287,680 Net (loss)/income(117,939)240,3521,977,306287,587Pre-IPO Preferred Shares redemption value accretion(62,299)(82,117)——Income allocation to participating Pre-IPO Preferred Shares—(132,241)——Deemed dividend to a preferred shareholder(42,679)———Net (loss)/income attributable to ordinary shareholders(222,917)25,9941,977,306287,587Other comprehensive income/(loss)Foreign currency translation adjustments, net of nil tax1,908(31,893)64393Total comprehensive (loss)/income attributable to ordinary shareholders(221,009)(5,899)1,977,949287,680 The accompanying notes are an integral part of these consolidated financial statements. F-7Table of Contents LEXINFINTECH HOLDINGS LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITY (In thousands, except for share and per share data) Pre-IPO Class AOrdinary Shares Class A OrdinaryShares Class B OrdinaryShares AdditionalPaid-inCapital StatutoryReserves AccumulatedOtherComprehensiveIncome/(Loss) (AccumulatedDeficit)/RetainedEarnings TotalShareholders’(Deficit)/Equity Shares Amount Shares Amount Shares Amount RMB RMB RMB RMB RMB RMB RMB RMB Balances as atDecember 31, 2015110,647,19968—————10315,034(429,846)(414,641)Net loss—————————(117,939)(117,939)Share-based compensationexpenses——————23,999———23,999Preferred shares redemptionvalue accretion——————(23,999)——(38,300)(62,299)Deemed dividend to apreferred shareholder—————————(42,679)(42,679)Appropriation to statutoryreserves———————1,900—(1,900)—Foreign currency translationadjustments, net of nil tax————————1,908—1,908Balances as atDecember 31, 2016110,647,19968—————2,00316,942(630,664)(611,651)Share issuance upon theinitial public offering, netof issuance costs——24,000,00016——612,835———612,851Share issuance upon theconversion andredesignation of Pre-IPOPreferred Shares intoClass A Ordinary Shares——193,070,940126——1,498,122———1,498,248Share issuance upon theredesignation of Pre-IPOClass A Ordinary Sharesinto Class B OrdinaryShares(110,647,199)(68)——110,647,19968—————Net income—————————240,352240,352Share-based compensationexpenses——————75,736———75,736Preferred shares redemptionvalue accretion——————(75,736)——(6,381)(82,117)Appropriation to statutoryreserves———————53,858—(53,858)—Foreign currency translationadjustments, net of nil tax————————(31,893)—(31,893)Balances as atDecember 31, 2017——217,070,940142110,647,199682,110,95755,861(14,951)(450,551)1,701,526Cumulative effect of changesin accounting policies—————————209,542209,542Share issuance upon theunderwriters’ exercise ofover-allotment options,net of issuance costs——3,600,0002——95,123———95,125Net income—————————1,977,3061,977,306Exercise and vesting ofshare-based awards——19,919,16814——————14Redesignation of Class BOrdinary Shares intoClass A Ordinary Shares——2,500,0002(2,500,000)(2)—————Share-based compensationexpenses——————122,636———122,636Appropriation to statutoryreserves———————144,401—(144,401)—Foreign currency translationadjustments, net of nil tax————————643—643Balances as atDecember 31, 2018——243,090,108160108,147,199662,328,716200,262(14,308)1,591,8964,106,792 The accompanying notes are an integral part of these consolidated financial statements. F-8Table of Contents LEXINFINTECH HOLDINGS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Year Ended December 31,2016 2017 2018RMB RMB RMB US$ Note 2(e)Cash flows from operating activities:Net (loss)/income(117,939)240,3521,977,306287,587Adjustments to reconcile net (loss)/income to net cash provided byoperating activities:Accrued convertible loans interest expense45,26867,270——Amortization of debt issuance cost10,8804,5972,332339Change in fair value of servicing rights3,53512,741——Share-based compensation expenses23,99975,736122,63617,837Depreciation and amortization4,58618,85930,3984,421Provision for credit losses of financing receivables236,611611,869884,056128,581Provision for credit losses of contract assets and service feesreceivable——38,2545,564Inventory impairment charges/(reversals)1,6881,764(3,334)(485)Net change in fair value of financial guarantee derivatives5,942(47,355)(197,027)(28,656)Net gain on guarantee liabilities——(108,316)(15,754)Deferred income tax47,0543,56458,1768,461Investment-related impairment5,63593215,2152,213Investment income——(18,753)(2,728)Share of results of an equity investee1,6402,028——Foreign exchange (gain)/ loss—(2,090)4,876709Changes in operating assets and liabilities:Financing receivables related to online direct sales(253,660)231,840219,45031,918Accrued interest receivable(47,628)(56,474)46,6796,789Prepaid expenses and other current assets(8,356)(173,026)(136,276)(19,821)Amounts due from related parties1,4871,7269,4471,374Risk safeguard fund receivable——(534,112)(77,683)Contract assets and service fees receivable——(981,958)(142,820)Inventories(65,097)4,28747,7916,951Other assets—(33,263)4,071592Accounts payable41,942125,474(62,329)(9,065)Amounts due to related parties(84,411)(92,597)——Accrued interest payable66,831156,453(108,166)(15,732)Risk safeguard fund payable——587,47185,444Accrued expenses and other current liabilities459,832507,638896,823130,438Net cash provided by operating activities379,8391,662,3252,794,710406,474 Cash flows from investing activities:Cash paid on long-term investments(13,333)(2,832)(120,000)(17,453)Purchases of property, equipment and software(32,147)(37,844)(54,226)(7,887)Financing receivables originated (excluding receivables related toonline direct sales)(12,004,213)(24,002,518)(13,606,064)(1,978,920)Principal collection on financing receivables and recoveries(excluding receivables related to online direct sales)7,702,96319,053,60117,721,1422,577,433Placement of restricted time deposits(9,000)(10,850)(604,736)(87,955)Withdrawal of restricted time deposits—12,500267,87438,961Net cash (used in)/ provided by investing activities(4,355,730)(4,987,943)3,603,990524,179 Cash flows from financing activities:Proceeds from borrowings80,000232,000834,000121,300Principal payments on borrowings(8,202)(132,969)(566,819)(82,440)Proceeds from Funding Debts15,432,17418,204,82514,918,1652,169,757Principal payments on Funding Debts(11,589,727)(14,541,577)(20,858,941)(3,033,807)Proceeds from issuances of convertible loans654,680———Payment of debt issuance cost(21,055)(1,696)(636)(93)Proceeds from initial public offering, net of issuance costs—651,250——Proceeds from share issuance upon the underwriters’ exercise ofover-allotment options, net of issuance costs——95,12513,835Exercise of share-based awards——142Payment of initial public offering expenses——(38,399)(5,585)Proceeds from receivables from Pre-IPO Series C-1 preferredshareholders—49,775170,79024,840Repayment of liabilities to Pre-IPO Series C-1 preferred shareholders—(50,000)(171,240)(24,906)Repurchase of Pre-IPO Preferred Shares(87,923)———Net cash provided by/ (used in) financing activities4,459,9474,411,608(5,617,941)(817,097) F-9**Table of Contents LEXINFINTECH HOLDINGS LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In thousands) For the Year Ended December 31,2016 2017 2018RMB RMB RMB US$ Note 2(e)Effect of exchange rate changes on cash and cash equivalents andrestricted cash6,718(3,179)(18,911)(2,750) Net increase in cash and cash equivalents and restricted cash490,7741,082,811761,848110,806 Cash and cash equivalents and restricted cash at beginning of the year161,701652,4751,735,286252,387Including:Cash and cash equivalents at beginning of the year135,371479,6051,126,475163,839Restricted cash at beginning of the year26,330172,870608,81188,548 Cash and cash equivalents and restricted cash at end of the year652,4751,735,2862,497,134363,193Including:Cash and cash equivalents at end of the year479,6051,126,4751,148,292167,012Restricted cash at end of the year172,870608,8111,348,842196,181 Supplemental disclosure of cash flows informationCash paid for interest expense1,1324,58025,4683,704Cash paid for income tax expense—57,924185,01526,909 Non-cash investing and financing activitiesPre-IPO Preferred Shares redemption value accretion62,29982,117——Conversion of convertible loans into Pre-IPO Preferred Shares—764,703——Conversion and redesignation of Pre-IPO Preferred Shares into Class AOrdinary Shares—1,498,248——Long-term investments financed by accrued expenses and other currentliabilities——36,4145,296 * Recast to reflect the adoption of Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (Note 2(p)). The accompanying notes are an integral part of these consolidated financial statements. F-10******Table of Contents LEXINFINTECH HOLDINGS LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND PRINCIPAL ACTIVITIES LexinFintech Holdings Ltd. (“Lexin” or the “Company”), formerly known as Staging Finance Holding Ltd., was incorporated in the Cayman Islandson November 22, 2013. The Company is a holding company and conducts its business mainly through its subsidiaries, variable interest entities (“VIEs”) andsubsidiaries of the VIEs (collectively referred to as the “Group”). The Group offers online direct sales with installment payment terms and offers installmentpurchase loans and personal installment loans mainly through its retail and online consumer finance platform (“Platform”), www.fenqile.com, and its mobileapplication (“APP”) to young adults typically between the age of 18 and 36 (“Borrowers”) in the People’s Republic of China (“PRC”). The Group addresses the Borrowers’ credit needs by offering installment purchase loans and personal installment loans. Installment purchase loansare loans offered to Borrowers who want to finance their online direct purchase from the Platform and APP with general terms between one month and thirty-six months. Personal installment loans are loans provided to Borrowers who have consumption needs (other than online direct purchase) with terms generallyranging from one month to thirty-six months. The Group finances the loans to Borrowers through its own online investment platform, www.juzilicai.com and its APP, or Juzi Licai, by offeringvarious investment programs (“Investment Programs”) that are backed by the loans to the individual investors (“Individual Investors”). The Group alsofinances the loans with proceeds from third-party commercial banks, consumer finance companies, other licensed financial institutions and partnering peer-to-peer lending platforms (collectively “Institutional Funding Partners”), and the establishment of consolidated trusts (“Trusts”) and issuance of asset-backedsecuritized debts. As of December 31, 2018, the Company’s principal subsidiaries, consolidated VIEs and subsidiaries of VIEs are as follows: Date ofIncorporation/Establishment Place ofIncorporation/Establishment Percentage ofDirect or IndirectEconomic Interest Principal ActivitiesSubsidiariesInstallment (HK) Investment Limited(“Installment HK”)December 9, 2013Hong Kong, PRC100%Investment holdingBeijing Shijitong Technology Co., Ltd.(“Beijing Shijitong”)July 1, 2014Beijing, PRC100%Technical support andconsulting servicesShenzhen Lexin SoftwareTechnology Co., Ltd. (“Shenzhen LexinSoftware”)March 1, 2017Shenzhen, PRC100%Software developmentVIEs Beijing Lejiaxin NetworkTechnology Co., Ltd. (“Beijing Lejiaxin”)October 25, 2013Beijing, PRC100%Investment holdingShenzhen Xinjie Investment Co., Ltd.(“Shenzhen Xinjie”)December 22, 2015Shenzhen, PRC100%Investment holdingShenzhen Qianhai Dingsheng AssetManagement Co., Ltd. (“QianhaiDingsheng”)January 13, 2016Shenzhen, PRC100%Financial technologyservicesShenzhen Mengtian Technology Co., Ltd.(“Mengtian Technology”)August 9, 2016Shenzhen, PRC100%Software developmentTrust AAugust 31, 2017Shenzhen, PRC100%Investment in loans throughthe Group’s Platform andAPPTrust BDecember 27, 2017Shenzhen, PRC100%Investment in loans throughthe Group’s Platform andAPPSubsidiaries of the VIEs Shenzhen Fenqile NetworkTechnology Co., Ltd. (“ShenzhenFenqile”)August 15, 2013Shenzhen, PRC100%Online direct sales andonline consumer financeShenzhen Qianhai Juzi InformationTechnology Co., Ltd. (“Qianhai Juzi”)June 26, 2014Shenzhen, PRC100%Online investment platformShenzhen Tiqianle NetworkTechnology Co., Ltd. (“ShenzhenTiqianle”)January 13, 2016Shenzhen, PRC100%Online direct sales andonline consumer financeJi’an Fenqile Network Microcredit Co., Ltd.(“Ji’an Microcredit”)December 2, 2016Ji’an, PRC100%Online consumer creditShenzhen Fenqile Trading Co., Ltd.(“Shenzhen Fenqile Trading”)December 30, 2016Shenzhen, PRC100%Online direct salesShenzhen Dingsheng Computer TechnologyCo., Ltd. (“Shenzhen DingshengTechnology”)March 23, 2017Shenzhen, PRC100%Financial technologyservicesShenzhen Lexin Financing GuaranteeCo., Ltd. (“Shenzhen Lexin FinancingGuarantee”)September 14, 2017Shenzhen, PRC100%Financing guaranteeservices F-11Table of Contents History of the Group and Basis of Presentation The Group commenced operations through Shenzhen Fenqile, a PRC company incorporated in August 2013 that offers online direct sales withinstallment payment terms, installment purchase loans and personal installment loans. The equity interests of Shenzhen Fenqile were held by Mr. Jay WenjieXiao, the Group’s founder, Chief Executive Officer and chairman of board of directors (the “Founding Shareholder”), and two angel investors, Mr. RichardQiangdong Liu and Tibet Xianfeng Huaxing Changqing Investment Co. Ltd. (“Tibet Xianfeng Huaxing”), prior to July 2014. In October 2013, BeijingLejiaxin was incorporated as an investment holding company in the PRC. The equity interests of Beijing Lejiaxin were held by the Founding Shareholderand Mr. Richard Qiangdong Liu. Beijing Lejiaxin established its wholly owned subsidiary Qianhai Juzi in June 2014 in order to launch the Group’s onlineinvestment platform Juzi Licai, which offers Investment Programs to the Individual Investors. 2014 Reorganization In order to facilitate international financing for the Company, the Group underwent a reorganization (“2014 Reorganization”) from November 2013to July 2014. In November 2013, the Company was incorporated under the Laws of the Cayman Islands to be an offshore holding company for the Group. InDecember 2013, Installment HK was incorporated in Hong Kong as a wholly owned subsidiary of the Company. In July 2014, Beijing Shijitong wasincorporated as a wholly owned subsidiary of Installment HK in the PRC. To comply with PRC laws and regulations which prohibit or restrict foreign ownership of Internet content, the Company obtained control overShenzhen Fenqile and Beijing Lejiaxin through Beijing Shijitong by entering into a series of contractual arrangements with Shenzhen Fenqile, BeijingLejiaxin and their shareholders in July 2014. These contractual arrangements include exclusive option agreements, power of attorney, exclusive businesscooperation agreements, and equity pledge agreements. As a result of the 2014 Reorganization, Shenzhen Fenqile and Beijing Lejiaxin became theconsolidated VIEs of the Group through the contractual arrangements described in Note 2(b). The Founding Shareholder, Tibet Xianfeng Huaxing, andMr. Richard Qiangdong Liu are collectively referred to as the nominee shareholders. The nominee shareholders are defined as legal owners of an entity;however, the rights of the shareholders have been transferred to the Company through contractual arrangements. Concurrently with the 2014 Reorganization, the Company completed its Pre-IPO Class B Ordinary Shares, Pre-IPO Series A-1 Preferred Shares andPre-IPO Series A-2 Preferred Shares financing. The 2014 Reorganization was accounted for as a reorganization and the historical financial statements werepresented on a carryover basis. 2016 Reorganization In December 2015, Shenzhen Xinjie was incorporated by the Founding Shareholder as an investment holding company in the PRC. In March 2016,Shenzhen Xinjie acquired 73.33% equity interests of Shenzhen Fenqile by investing additional capital in Shenzhen Fenqile to better structure the Group, andthe remaining equity interests were still held by the same nominee shareholders (“2016 Reorganization”). In January 2016, Shenzhen Xinjie established asubsidiary Shenzhen Tiqianle to offer online direct sales and online consumer finance services. In January 2016, Qianhai Dingsheng was incorporated by theFounding Shareholder (90%) and Shenzhen Xinjie (10%) to conduct financial technology services business. The Company obtained control over Shenzhen Xinjie and Qianhai Dingsheng through Beijing Shijitong in December 2015 and January 2016respectively by entering into a series of contractual arrangements with Shenzhen Xinjie, Qianhai Dingsheng and the Founding Shareholder. Thesecontractual arrangements include exclusive option agreements, power of attorney, exclusive business cooperation agreements, and equity pledge agreements.As a result of the 2016 Reorganization, Shenzhen Xinjie and Qianhai Dingsheng became the consolidated VIEs of the Group through the contractualarrangements described in Note 2(b) and the Company’s ability to control Shenzhen Fenqile remains unchanged. Shenzhen Fenqile then became one of thesubsidiaries of Shenzhen Xinjie. All the entities involved in the 2016 Reorganization were under common control and therefore the historical financial statements were presented ona carryover basis. In December 2016, Ji’an Microcredit and Shenzhen Fenqile Trading were incorporated by Shenzhen Fenqile. The two entities started to carry outonline consumer credit businesses and online direct sales businesses respectively since early 2017. In March 2017, Shenzhen Lexin Software wasincorporated by Installment HK to conduct software development businesses. Subsequently in March 2017, the Founding Shareholder transferred 90% equity interests of Qianhai Dingsheng to two employees as the nomineeshareholders and the remaining 10% equity interests were still held by Shenzhen Xinjie. In April 2017, Beijing Shijitong granted a loan with a total principalof RMB10.0 million to these two nominee shareholders and Shenzhen Xinjie. In May 2017, Beijing Shijitong granted another loan with a total principal ofRMB1.0 million to the nominee shareholders of Shenzhen Xinjie. The two loans granted by Beijing Shijitong were solely for the purpose of providing fundsnecessary for capital injection into the VIEs to operate their respective businesses. Term of both loans is ten years and will be extended automatically foranother ten years on each expiration. These loans were eliminated with the paid-in capital of the VIEs during consolidation. F-12Table of Contents In August 2018, Mengtian Technology, which previously was a subsidiary of one of the Company’s VIEs, became a consolidated VIE by enteringinto a series of contractual arrangements with its nominee shareholders and Shenzhen Lexin Software as described in Note 2(b). Management concluded that the Company is entitled to substantially all of the economic benefits from the VIEs and is obligated to absorb all oftheir expected losses. As such, the Company is the ultimate primary beneficiary of the VIEs and shall consolidate the financial results of these VIEs and theirsubsidiaries in the Group’s consolidated financial statements. Refer to Note 2(b) to the consolidated financial statements for the basis of consolidation. Initial Public Offering On December 26, 2017, the Company completed its initial public offering (“IPO”) on the NASDAQ Global Market in the United States of America.In this offering, 12,000,000 American Depositary Shares (“ADSs”), representing 24,000,000 Class A ordinary shares (“Class A Ordinary Shares”), were issuedand sold to the public at a price of US$9.00 per ADS. Immediately prior to the completion of the IPO, in accordance with the written resolutions passed by the board of directors of the Company and itsshareholders in October 2017 (“October 2017 Resolutions”), all of 110,647,199 shares of issued and outstanding Pre-IPO Class A Ordinary Shares wereautomatically redesignated into Class B Ordinary Shares on a one-for-one basis. All of 193,070,940 shares of issued and outstanding Pre-IPO Class BOrdinary Shares, Pre-IPO Series A-1 Preferred Shares, Pre-IPO Series A-2 Preferred Shares, Pre-IPO Series B-1 Preferred Shares, Pre-IPO Series B-2 PreferredShares, Pre-IPO Series C-1 Preferred Shares, and Pre-IPO Series C-2 Preferred Shares (collectively, “Pre-IPO Preferred Shares”) were automatically convertedand redesignated into Class A Ordinary Shares on a one-for-one basis. In addition, the authorized share capital of the Company was increased fromUS$50,000 divided into 500,000,000 shares with par value of US$0.0001 each, to US$500,000 divided into 5,000,000,000 shares with par value ofUS$0.0001 each, of which (i) 1,889,352,801 shares were designated as Class A Ordinary Shares; (ii) 110,647,199 shares were designated as Class B OrdinaryShares; and (iii) 3,000,000,000 shares were designated as Reserved Shares, with rights preferences and privileges as set forth in the Sixth Amended andRestated Memorandum and Articles of Association of the Company effective immediately prior to the completion of the IPO. In January 2018, the underwriters of the Company’s IPO exercised the options to purchase an additional 1,800,000 ADSs, representing 3,600,000Class A Ordinary Shares, par value US$0.0001 per share, of the Company to cover over-allotments in full. The net proceeds in connection with 1,800,000ADSs received by the Company was RMB95.1 million (US$14.7 million), which represents a total gross capital raise of RMB105.2 million (US$16.2 million)less underwriting discounts and commissions and offering expenses in the aggregate amount of RMB10.1 million (US$1.5 million). 2. SIGNIFICANT ACCOUNTING POLICIES (a) Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in theUnited States of America (“U.S. GAAP”). Significant accounting policies followed by the Group in the preparation of the accompanying consolidatedfinancial statements are summarized below. Revision of previously announced unaudited financial statements for the year ended December 31, 2018 The Group revised its unaudited consolidated balance sheets as previously announced through press release filed on Form 6-K in March 15, 2019, toreflect classification adjustments (“Classification Adjustments”) of short-term Funding Debts and long-term Funding Debts as of December 31, 2018. TheClassification Adjustments had no impact on the Group’s results of operations and cash flows for the year ended December 31, 2018, or the line items of theConsolidated Balance Sheets other than short-term Funding Debts and Long-term Funding Debts as of December 31, 2018. This revision was not material tothe previously announced unaudited financial statements taken as a whole based on assessment under relevant guidance. The impact of the Classification Adjustments on the line items within the Group’s Consolidated Balance Sheets as of December 31, 2018 is asfollows: F-13Table of Contents As of December 31, 2018As previouslyannounced inpress release Revision As revised(RMB in thousands)Short-term Funding debts4,393,834252,2074,646,041Long-term Funding debts410,094(252,207)157,887 (b) Basis of consolidation The consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIEs and subsidiaries of the VIEs forwhich the Company is the primary beneficiary. Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power or has the power togovern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at themeeting of directors. A consolidated VIE is an entity in which the Company, or its subsidiaries, through contractual arrangements, has the power to direct the activitiesthat most significantly impact the entity’s economic performance, bears the risks of and enjoys the rewards normally associated with ownership of the entity,and therefore the Company or its subsidiaries is the primary beneficiary of the entity. All transactions and balances among the Company, its subsidiaries, the VIEs and subsidiaries of the VIEs have been eliminated upon consolidation. VIE Companies (excluding the consolidated Trusts and asset-backed securitized debts as discussed in Note 2(f)) a. Contractual Agreements with VIEs The following is a summary of the contractual agreements (collectively, “Contractual Agreements”) that the Company’s relevant PRC subsidiariesentered into with the VIEs and their nominee shareholders. Through the Contractual Agreements, the VIEs are effectively controlled by the Company. Exclusive Option Agreements. Pursuant to the Exclusive Option Agreements, the nominee shareholders of the VIEs have irrevocably granted theGroup’s relevant PRC subsidiaries an exclusive option to purchase all or part of their respective equity interests in the VIEs. The purchase price shall be thelowest price permitted by law. Without prior written consent of the Group’s relevant PRC subsidiaries, the VIEs shall not, among other things, amend theirarticles of association, increase or decrease the registered capital, sell, dispose of or set any encumbrance on their assets and equity interests in VIEs, businessor revenue, enter into any material contract outside the ordinary course of business, merge with any other persons or make any investments, distributedividends, or enter into any transactions which have material adverse effects on their business. These agreements will remain effective until the Group’srelevant PRC subsidiaries and/or any third party designated by the Group’s relevant PRC subsidiaries have acquired all equity interests of the VIEs from theirrespective nominee shareholders. Power of Attorney. Pursuant to the Power of Attorney, each nominee shareholder of the VIEs irrevocably authorizes the Group’s relevant PRCsubsidiaries to act as its attorney-in-fact to exercise all of such shareholder’s voting and other rights associated with the shareholder’s equity interests in theVIEs, including but not limited to, the right to attend shareholder meetings on behalf of such shareholder, the right to appoint legal representatives, directors,supervisors and chief executive officers and other senior management, and the right to sell, transfer, pledge and dispose of all or a portion of the shares heldby such shareholder. The power of attorney is irrevocable and remains in force continuously upon execution. Exclusive Business Cooperation Agreements. Pursuant to these Exclusive Business Cooperation Agreements, the Group’s relevant PRC subsidiarieshave the exclusive right to provide the VIEs with comprehensive business support, technical support and consulting services. Without prior written consentof the Group’s relevant PRC subsidiaries, the VIEs shall not accept any services covered by these agreements from any third party. The VIEs agree to payservice fees in an amount determined by the Group’s relevant PRC subsidiaries based on respective profits calculated as operating revenue minus operatingcost of the VIEs for the relevant period on a yearly basis or other service fees for specific services as required and as otherwise agreed by both parties. TheGroup’s relevant PRC subsidiaries own the intellectual property rights arising out of the services performed under these agreements. Unless the Group’srelevant PRC subsidiaries terminate these agreements or pursuant to other provisions of these agreements, these agreements will remain effective indefinitely.These agreements can be terminated by the Group’s relevant PRC subsidiaries through a 30-day advance written notice, the VIEs have no right to unilaterallyterminate these agreements. The Group’s relevant PRC subsidiaries are entitled to substantially all of the economic benefits of the VIEs. F-14Table of Contents Loan Agreements. Pursuant to the relevant loan agreements, the Group’s relevant PRC subsidiaries have granted loans to the relevant nomineeshareholders of the VIEs solely for the purpose of providing funds necessary for capital injection into the VIEs to operate their respective businesses. Pursuantto these loan agreements, the nominee shareholders can only repay the loans by the transfer of all their equity interests in the VIEs to the Group’s relevantPRC subsidiaries. The nominee shareholders of the VIEs must pay all of the proceeds from transfer of such equity interests to the Group’s relevant PRCsubsidiaries. In the event that the nominee shareholders transfer their equity interests to the Group’s relevant PRC subsidiaries or their designatedperson(s) with a price equivalent to or less than the amount of the principal, the loans will be interest free. If the price is higher than the amount of theprincipal, the excess amount will be paid to the Group’s relevant PRC subsidiaries as the loan interest. The loans must be repaid immediately when permittedby PRC laws at the request of the Group’s relevant PRC subsidiaries. Term of both loans is ten years and will be extended automatically for another ten yearson each expiration. Equity Pledge Agreements. Pursuant to these Equity Pledge Agreements, each nominee shareholder of the VIEs has pledged all of his, her or itsrespective equity interests in the VIEs to the Group’s relevant PRC subsidiaries to guarantee the performance by such nominee shareholder and the VIEs oftheir respective obligations under the Exclusive Option Agreements, the Power of Attorney, the Loan Agreements, where applicable, and the ExclusiveBusiness Cooperation Agreements, and any amendment, supplement or restatement to such agreements. If the VIEs or any of their nominee shareholdersbreach any obligations under these agreements, the Group’s relevant PRC subsidiaries, as pledgee, will be entitled to dispose of the pledged equity and havepriority to be compensated by the proceeds from the disposal of the pledged equity. Each of the nominee shareholders of the VIEs agrees that before his, heror its obligations under the Contractual Agreements are discharged, he, she or it will not dispose of the pledged equity interests, create or allow anyencumbrance on the pledged equity interests, which may result in the change of the pledged equity that may have adverse effects on the pledgee’s rightsunder these agreements without the prior written consent of the Group’s relevant PRC subsidiaries. These Equity Pledge Agreements will remain effectiveuntil the VIEs and their nominee shareholders discharge all their respective obligations under the Contractual Agreements. In April 2015, the Contractual Agreements between Beijing Shijitong and Shenzhen Fenqile were restated to reflect the replacement of TibetXianfeng Huaxing with its affiliated entity, Tibet Xianfeng Changqing Start-up Investment and Management Co., Ltd. (formerly known as Tibet XianfengManagement Consultation Co., Ltd.), as a nominee shareholder of Shenzhen Fenqile. In March 2016, the Contractual Agreements between Beijing Shijitongand Shenzhen Fenqile were restated to reflect the 2016 Reorganization. These changes had no impact on the Group’s effective control over ShenzhenFenqile, and therefore had no impact on the consolidated financial statements. In March 2017, the Contractual Agreements between Beijing Shijitong and Qianhai Dingsheng were restated to reflect the replacement of theFounding Shareholder with two employees nominee shareholders of Qianhai Dingsheng. In April and May 2017, the Contractual Agreements betweenBeijing Shijitong and Qianhai Dingsheng were restated to reflect the Loan Agreements entered into between Beijing Shijitong and the nominee shareholdersof Qianhai Dingsheng, and Beijing Shijitong and the nominee shareholders of Shenzhen Xinjie, respectively. These changes had no impact on the Group’seffective control over Qianhai Dingsheng and Shenzhen Xinjie, and therefore had no impact on the consolidated financial statements. b. Risks in relation to the VIE structure Under the Contractual Agreements with the VIEs, the Company has the power to direct activities of the VIEs and VIEs’ subsidiaries and can haveassets transferred out of the VIEs and VIEs’ subsidiaries. Therefore, the Company considers itself the ultimate primary beneficiary of the VIEs and there is noasset of the VIEs that can only be used to settle obligations of the VIEs and VIEs’ subsidiaries except for registered capitals and PRC statutory reserves of theGroup’s consolidated VIEs amounting to RMB3,342.5 million as of December 31, 2018. Since the VIEs are incorporated as limited liability companies underthe PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company. There is currently no contractual arrangement thatwould require the Company to provide additional financial support to the VIEs. However, as the Company is conducting certain businesses mainly throughits VIEs and VIEs’ subsidiaries, the Company may provide such support on a discretionary basis in the future, which could expose the Company to a loss. In the opinion of the Company’s management, the contractual arrangements among its subsidiaries, the VIEs and their respective nomineeshareholders are in compliance with current PRC laws and are legally binding and enforceable. However, uncertainties in the interpretation and enforcementof the PRC laws, regulations and policies could limit the Company’s ability to enforce these contractual arrangements. As a result, the Company may beunable to consolidate the VIEs and VIEs’ subsidiaries in the consolidated financial statements. In March 2019, the draft Foreign Investment Law was submitted to the National People’s Congress for review and was approved on March 15, 2019,which will come into effect on January 1, 2020. The approved Foreign Investment Law does not touch upon the relevant concepts and regulatory regimesthat were historically suggested for the regulation of VIE structures, and thus this regulatory topic remains unclear under the Foreign Investment Law. Giventhat the Foreign Investment Law is new, substantial uncertainties exist with respect to its implementation and interpretation and the possibility that the VIEswill be deemed as foreign-invested enterprise and subject to relevant restrictions in the future shall not be excluded. F-15Table of Contents The Company’s ability to control the VIEs also depends on the power of attorney the Group’s relevant PRC subsidiaries have to vote on all mattersrequiring shareholders’ approvals in the VIEs. As noted above, the Company believes these power of attorney are legally binding and enforceable but maynot be as effective as direct equity ownership. In addition, if the Group’s corporate structure or the contractual arrangements with the VIEs were found to be inviolation of any existing PRC laws and regulations, the PRC regulatory authorities could, within their respective jurisdictions: · revoke the Group’s business and operating licenses; · require the Group to discontinue or restrict its operations; · restrict the Group’s right to collect revenues; · block the Group’s websites; · require the Group to restructure its operations, re-apply for the necessary licenses or relocate the Group’s businesses, staff and assets; · impose additional conditions or requirements with which the Group may not be able to comply; or · take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. The imposition of any of these restrictions or actions may result in a material adverse effect on the Group’s ability to conduct its business. Inaddition, if the imposition of any of these restrictions causes the Group to lose the right to direct the activities of the VIEs or the right to receive theireconomic benefits, the Group would no longer be able to consolidate the financial statements of the VIEs. In the opinion of management, the likelihood oflosing the benefits in respect of the Group’s current ownership structure or the contractual arrangements with its VIEs is remote. Summary of Financial Information of the Group’s VIEs The following table sets forth the assets, liabilities, results of operations and changes in cash and cash equivalents and restricted cash of the VIEs(including the consolidated Trusts and asset-backed securitized debts) and their subsidiaries taken as a whole, which were included in the Group’sconsolidated financial statements with intercompany balances and transactions eliminated: As of December 31, 2017 2018 (RMB in thousands)Total assets14,453,38612,113,439Total liabilities14,730,44010,261,397 For the Year Ended December 31,2016 2017 2018(RMB in thousands)Total operating revenue4,338,6865,582,1897,596,896Net (loss)/income(89,726)(7,905)1,088,805 For the Year Ended December 31,2016 2017 2018(RMB in thousands)Net cash provided by operating activities360,7901,652,2672,158,663Net cash (used in)/provided by investing activities(4,351,628)(4,971,765)3,783,432Net cash provided by/(used in) financing activities4,450,3923,851,583(4,540,746)Net increase in cash and cash equivalents and restricted cash459,554532,0851,401,349Cash and cash equivalents and restricted cash at beginning of the year69,146528,7001,060,785Cash and cash equivalents and restricted cash at end of the year528,7001,060,7852,462,134 F-16Table of Contents (c) Use of estimates The preparation of the Group’s consolidated financial statements is in conformity with the U.S. GAAP, which requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of financialstatement and reported revenues and expenses during the reported periods. Significant accounting estimates include, but are not limited to (i) revenuerecognition; (ii) fair value of financial guarantee derivative liabilities; (iii) valuation and recognition of share-based compensation expenses; (iv) provisionfor income tax and valuation allowance for deferred tax assets; (v) provision for credit losses of financing receivables, contract assets, and service feesreceivable; (vi) determination of fair value of long-term investments, (vii) determination of the fair value of Pre-IPO Preferred Shares and Pre-IPO Class AOrdinary Shares. Actual results could materially differ from these estimates. (d) Functional currency and foreign currency translation The Group uses Renminbi (“RMB”) as its reporting currency. The functional currency of the Company and its subsidiaries incorporated in HongKong is United States dollars (“US$”) and the functional currencies of the PRC entities in the Group are RMB. In the consolidated financial statements, the financial information of the Company and its subsidiaries incorporated in Hong Kong have beentranslated into RMB at the exchange rates quoted by the People’s Bank of China (the “PBOC”). Assets and liabilities are translated at the exchange rates onthe balance sheet date, equity amounts are translated at historical exchange rates, and revenues, expenses, gains and losses are translated using the averagerate for the period. Translation adjustments arising from these are reported as foreign currency translation adjustments, and are shown as a component ofaccumulated other comprehensive income/(loss) on the Consolidated Statements of Changes in Shareholders’ (Deficit)/Equity and a component of othercomprehensive income/(loss) on the Consolidated Statements of Comprehensive (Loss)/Income. Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using theexchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date areremeasured at the applicable rates of exchange in effect at that date. Foreign currency exchange gain or loss resulting from the settlement of such transactionsand from remeasurement at period-end is recognized in “Others, net” on the Consolidated Statements of Operations. Foreign currency translation adjustments included in the Group’s Consolidated Statements of Comprehensive (Loss)/Income for the years endedDecember 31, 2016, 2017 and 2018 were gain of RMB1.9 million, loss of RMB31.9 million, and gain of RMB0.6 million, respectively. Foreign currencyexchange gain or loss recorded was immaterial for each of the periods presented. (e) Convenience translation Translations of balances on the Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive(Loss)/Income and Consolidated Statements of Cash Flows from RMB into US$ as of and for the year ended December 31, 2018 are solely for theconvenience of the readers and were calculated at the rate of US$1.00=RMB6.8755, representing the noon buying rate set forth in the H.10 statistical releaseof the U.S. Federal Reserve Board on December 31, 2018. No representation is made that the RMB amounts could have been, or could be, converted, realizedor settled into US$ at that rate on December 31, 2018, or at any other rate. (f) Presentation for on- and off-balance sheet loans The Group finances the loans with the proceeds from various funding parties, which primarily include: (1) the Individual Investors on Juzi Licai;(2) the Institutional Funding Partners; (3) third-party investors of the consolidated Trusts and asset-backed securitized debts. Depending on the arrangementsamong the Group, the Borrowers and the funding parties, the underlying loans are accounted for as “on-balance sheet loans” or “off-balance sheet loans”,where applicable. On-balance sheet loans (a) Loans funded by the Individual Investors on Juzi Licai under the Old Model (as defined hereinafter) or certain Institutional Funding Partners For loans funded by the proceeds from the Group’s own online investment platform Juzi Licai under the Old Model (as defined hereinafter), whichoffers the Individual Investors various Investment Programs with different terms and estimated rates of return, or from certain Institutional Funding Partners,the Group’s roles include: (1) collecting the investment principal from the Individual Investors or Institutional Funding Partners and lending the funds to theBorrowers, (2) collecting monthly repayment from the Borrowers and repaying the Individual Investors or Institutional Funding Partners according to theterms (i.e. interest rate and scheduled repayment dates) of respective Investment Programs or agreements (“Investment Agreements”) between the IndividualInvestors or Institutional Funding Partners and the Group. F-17Table of Contents The Group noted that the terms of the underlying loan agreements between the Individual Investors or Institutional Funding Partners and theBorrowers (“Underlying Loan Agreements”) do not necessarily match the terms of the Investment Programs or Agreements. The mismatch is mainly due to thefact that some Individual Investors or Institutional Funding Partners may invest in the programs that have shorter investment periods than the terms of theUnderlying Loan Agreements. Depending on the types of Investment Programs the Individual Investors choose or the Investment Agreements theInstitutional Funding Partners entered into with the Group, the investing periods could be as short as one week and as long as thirty-six months. Pursuant tothe Investment Programs or Agreements, the Individual Investors or Institutional Funding Partners agree on a rate of return with the Group which is normallylower than the coupon interest rate stipulated in the Underlying Loan Agreement, given the shorter periods of those Investment Programs or Agreements. TheGroup considers the terms of the Investment Programs or Agreements, which drive the return of the investments, and concludes the Group has liabilities to theIndividual Investors or Institutional Funding Partners when the underlying loans are funded. Accordingly, the Group is considered as the primary obligor tothe Individual Investors or Institutional Funding Partners in the lending relationship and therefore records the liabilities to the Individual Investors orInstitutional Funding Partners as “Funding Debts” (Note 2(j)) on its Consolidated Balance Sheets. The underlying loans are recorded as “Financingreceivables, net” on the Consolidated Balance Sheets. Quality assurance program on Juzi Licai In July 2017, the Group established a quality assurance program (“QAP”) with the purposes of providing make-up payments to the IndividualInvestors on Juzi Licai when the Borrowers fail to satisfy their principal or interest repayment obligations. A portion of each monthly repayment by theBorrower equal to a certain percentage of the outstanding principal balance of the loan was transferred to a third-party custody bank account. The Groupreserved the right to revise this percentage upwards or downwards from time to time. The QAP only applied to loans funded by the Individual Investors underthe Old Model on or after July 7, 2017. Considering that the loans covered by the QAP were accounted for as on-balance sheet loans, the Group was obligated to repay the IndividualInvestors for all amounts of principal and future interests regardless of whether the QAP was implemented or not. The Group determined that there were noadditional liabilities to be recognized in addition to the principal and interests due to the Individual Investors recorded as “Funding Debts” (Note 2(j)) and“Accrued interest payable” on its Consolidated Balance Sheets. The quality assurance funds set aside under the QAP through custody bank accounts wererecorded as “Restricted cash” on its Consolidated Balance Sheets. The Group applied the same process and methodology to evaluate the creditworthiness andcollectability of the loan portfolio covered by the QAP on a pooled basis, mainly based on delinquency levels and historical charge-offs. (b) Loans funded by establishment of the consolidated Trusts and issuance of asset-backed securitized debts The Group establishes business relationships with Trusts from time to time. Pursuant to applicable arrangements, the Group invested in the financingreceivables using funds from the consolidated Trusts. The Trusts are administered by third-party trust companies, which act as the trustees, with fundscontributed by the Group and/or other third-party investors for the purposes of providing returns to the beneficiary of the Trusts. Since these Trusts onlyinvest in financing receivables generated from the Group’s Platform and APP, the Group has power to direct the activities of the Trusts. The Group has theobligation to absorb losses or the right to receive benefits from the Trusts that could potentially be significant to the Trusts. As a result, the Trusts areconsidered consolidated VIEs of the Group under Accounting Standards Codification (“ASC”) 810, Consolidation. The Group created an asset-backed securitization plan (“ABS Plan”) with a final maturity of January 2018 in December 2015 and securitized itsfinancing receivables arising from online direct sales through transfer of those assets to the ABS Plan. The ABS Plan then issued debt securities to third-partyinvestors and was considered a consolidated VIE under ASC 810, Consolidation. Therefore, loans funded by the consolidated Trusts and asset-backed securitized debts remain at the Group and are recorded as “Financingreceivables, net” on the Consolidated Balance Sheets. The proceeds received from third-party investors of the consolidated Trusts and asset-backedsecuritized debts are recorded as Funding Debts (Note 2(j)). Cash received via consolidated Trusts that has not yet been distributed is recorded as restrictedcash. F-18Table of Contents Off-balance sheet loans (a) Loans funded by the Individual Investors on Juzi Licai under the New Model (as defined hereinafter) In late April 2018, the Group made some adjustments to its business model for new loans funded by the Individual Investors on Juzi Licai (the “NewModel”, and the “Old Model” refers to the business model of Juzi Licai before such adjustments). Under the New Model, the Group’s roles include:(1) matching the borrowing requests from the Borrowers with the Individual Investors on Juzi Licai, (2) processing monthly repayment from the Borrowersaccording to the terms of the Underlying Loan Agreements through third-party custodian bank accounts, and (3) providing ongoing management services tothe Individual Investors over the terms of respective Investment Programs. Under the New Model, the Group acts as an intermediary between the Borrower and the Individual Investors. Pursuant to the Underlying LoanAgreement and the Investment Programs, the Individual Investors are entitled to all the interests generated from the underlying loans. Such interests are notgenerated until the lending relationship has been established between the Borrowers and the Individual Investors, as the lenders, upon entering into theUnderlying Loan Agreements. The existing Individual Investor cannot exit from any lending relationship of outstanding loan unless the underlying loan isfully repaid or the outstanding loan principal with the remaining term is successfully re-matched with other Individual Investors. The Group providesongoing matching and re-matching services to the Individual Investors over the terms of respective Investment Programs while it does not have anyobligations to ensure such successful re-matching. The Group considers the terms of the Underlying Loan Agreements and the Investment Programs under the New Model and concludes that the Groupis not the legal lender or borrower in the loan origination and repayment process. Accordingly, the Group does not record financing receivables arising fromthese loans nor Funding Debts to the Individual Investors. Risk safeguard scheme on Juzi Licai Under the New Model, the Group has ceased offering the QAP for loans funded by the Individual Investors on Juzi Licai. Instead, the Group enteredinto a cooperation agreement with an independent third-party guarantee company (the “Guarantee Company”), to set up a new investor protection programcalled the Risk Safeguard Scheme (“RSS”). The purpose of the RSS is to provide make-up payments to the Individual Investors on Juzi Licai when theBorrowers default. The RSS only applies to loans newly funded under the New Model, and requires the Borrowers to contribute to the RSS to protect theIndividual Investors. By default, all Borrowers enroll in the RSS when the Underlying Loan Agreements are entered into. Pursuant to the Underlying Loan Agreement, the Borrower agrees to enroll in the RSS and pay the guarantee fee (the “Guarantee Fee”) into theguarantee fund special account (“Risk Safeguard Fund”) and the relevant guarantee service fees to the Guarantee Company. Accordingly, a certain amount ofeach monthly repayment from the Borrowers, equal to a certain percentage of the outstanding principal balance of each loan, shall be transferred to the RiskSafeguard Fund. The Group has the discretion in determining the percentage, i.e. the amount of the Guarantee Fee, to be paid by the participating Borrowers.The amount of make-up payments is limited to the available balance of the Risk Safeguard Fund. If the Risk Safeguard Fund become insufficient to pay backall Individual Investors with defaulted loans, these Individual Investors will be repaid on a pro rata basis, and their outstanding unpaid loans will be deferredto the next time the Risk Safeguard Fund are replenished, at which time a distribution will again be made to all Individual Investors with those defaultedloans. The participation of the Risk Safeguard Fund is not refundable, even if there is no default of loans. Therefore, the Group concluded that it is theprimary obligor in providing the guarantee services and records its obligations associated with the RSS in accordance with ASC 460, Guarantees asdiscussed in Note 2(l). The balance of Risk Safeguard Fund is recorded as “Restricted cash” on its Consolidated Balance Sheets. (b) Loans funded by certain other Institutional Funding Partners such as third-party commercial banks or consumer finance companies For loans funded by the proceeds from certain other Institutional Funding Partners such as third-party commercial banks or consumer financecompanies, each underlying loan and Borrower has to be approved by the third-party commercial banks or consumer finance companies individually. Oncethe loan is approved by and originated by the third-party commercial bank or consumer finance company, the fund is provided by the third-party commercialbank or consumer finance company to the Borrower and a lending relationship between the Borrower and the third-party commercial bank or consumerfinance company is established through a loan agreement. Effectively, the Group offers loan facilitation and matching services to the Borrowers who havecredit needs and the commercial banks or consumer finance companies who originate loans directly to Borrowers referred by the Group. The Group continuesto provide account maintenance, collection, and payment processing services to the Borrowers over the term of the loan agreement. At the same time, theGroup also provides a financial guarantee on the principal and the accrued interest repayment of the defaulted loans in case of Borrowers’ defaults, and fullinterest repayment under the original terms in the event that Borrowers early repay their loans. Under this scenario, the Group determines that it is not thelegal lender or borrower in the loan origination and repayment process. Accordingly, the Group does not record financing receivables arising from these loansnor Funding Debts to the third-party commercial banks or consumer finance companies. Separately, the Group accounts for the financial guarantee providedas discussed in Note 2(m). F-19Table of Contents Measurement of financing receivables Financing receivables are measured at amortized cost and reported on the Consolidated Balance Sheets at outstanding principal adjusted for anycharge-offs, the allowance for credit losses, and net deferred origination fees on originated financing receivables. The Group recognizes interest and financialservices income over the terms of the financing receivables using the effective interest rate method. Refer to Note 2(n) for details. For financing receivablesinitially generated from online sales with installment payment terms on the Group’s Platform or APP, if they are subsequently funded by on-balance sheetloans, the Group considers that the financing receivables are not settled or extinguished, and therefore continues to account for these financing receivablesaccording to the installment payment terms. If the financing receivables are subsequently funded by off-balance sheet loans, the Group considers that thesefinancing receivables are settled and extinguished with the proceeds from the off-balance sheet loans as facilitated by the Group. (g) Provision for credit losses The Group has the following types of financial assets that are subject to credit losses of the customers: financing receivables, contract assets, servicefees receivable, and Risk Safeguard Fund receivable. The Group assesses the creditworthiness and collectability of the portfolios of respective financial assets, mainly based on delinquency levels andhistorical charge offs of respective underlying on- and off-balance sheet loans, where applicable, using an established systematic process on a pooled basiswithin each credit risk levels of the Borrowers. The Group considers location, education background, income level, outstanding external borrowings, andexternal credit references when assigning Borrowers into different credit risk levels. Also, each portfolio of respective financial asset subject to credit losseswithin each credit risk level consists of individually small amount of on- and off-balance sheet loans. In the consideration of above factors, the Groupdetermines that each portfolio of respective financial asset subject to credit losses within each credit risk level is homogenous with similar creditcharacteristics. The Group’s provision for credit losses of financial assets is calculated separately within each credit risk level of the Borrowers, taking intoconsiderations of flexible repayment options of the underlying on- and off-balance sheet loans, where applicable. For each credit risk level, the Groupestimates the expected loss rate based on delinquency status of the respective financial assets within that level: current, 1 to 29, 30 to 59, 60 to 89, 90 to 119,120 to 149, 150 to 179 calendar days past due. These loss rates in each delinquency status are based on average historical loss rates of financial assets subjectto credit losses associated with each of the abovementioned delinquency categories. The expected loss rate of the specific delinquency status category withineach risk level will be applied to the applicable outstanding balances of respective financial assets within that level to determine the provision for creditlosses for each reporting period. In addition, the Group considers other general economic conditions, if any, when determining the provision for credit losses. (h) Accrued interest receivable Accrued interest income on financing receivables is calculated based on the contractual interest rate of the loan and recorded as interest andfinancial services income as earned. Financing receivables are placed on non-accrual status upon reaching 90 days past due. When a financing receivable isplaced on non-accrual status, the Group stops accruing interest and reverses all accrued but unpaid interest as of such date. (i) Nonaccrual financing receivables and charged-off financing receivables The Group considers a financing receivable to be delinquent when a monthly payment is one day past due. When the Group determines it isprobable that it will be unable to collect unpaid principal amount on the receivable, the remaining unpaid principal balance is charged off against theallowance for credit losses. Generally, charge-offs occur after the 180th day of delinquency. Interest and financial services income for nonaccrual financingreceivables is recognized on a cash basis. Cash receipt of non-accrual financing receivables would be first applied to any unpaid principal, late payment fees,if any, before recognizing interest and financial services income. The Group does not resume accrual of interest after a loan has been placed on nonaccrualstatus. F-20Table of Contents (j) Funding Debts For the proceeds received from the Individual Investors on Juzi Licai, and other funding partners, including certain Institutional Funding Partnersand the third-party investors of the consolidated Trusts, and the issuance of asset backed securitized debts, to fund the Group’s on balance sheet loans, theGroup records them as funding debts (“Funding Debts”) on its Consolidated Balance Sheets. (k) Accrued interest payable Accrued interest payable is calculated based on the contractual interest rates of Funding Debts. (l) Risk Safeguard Fund receivable and payable For the off-balance sheet loans funded by the Individual Investors on Juzi Licai, the obligations associated with the Risk Safeguard Fund arecomprised of two components: (i) ASC 460 component; and (ii) ASC 450 component. In accordance with ASC 460-10-25-2 and ASC 460-10-30-3, the non-contingent and contingent aspect of the financial guarantee must both beconsidered at initial measurement. Accordingly, the Risk Safeguard Fund payable is measured at fair value at inception and reduced as the Group is releasedfrom the underlying risk, i.e., as the underlying loan is repaid by the Borrower or when the Individual Investor is compensated in the event of a Borrower’sdefault. This component is a stand ready obligation which is not subject to the probable threshold used to record a contingent obligation. The fair value ofthe guarantee associated with the Risk Safeguard Fund recorded at inception of the loans is estimated using a discounted cash flow model to its expected netpayouts from the Risk Safeguard Fund, and also by incorporating a markup margin. The other component is a contingent liability determined based on historical default rates, representing the obligation to make future payouts fromthe Risk Safeguard Fund, measured using the guidance in ASC 450, Contingencies. The ASC 450 contingent component considers the actual and expectedperformance of the loans on a pool basis when estimating the contingent liability. Subsequent to initial recognition, the Risk Safeguard Fund payable is measured at the greater of the amount determined based on ASC 460 and theamount determined based on ASC 450. ASC 460 does not prescribe a method for subsequently measuring and recording the noncontingent guaranteeliability. However, as stated in ASC 460-10-35-1, the guarantee liability should generally be reduced by recording a credit to net income as the guarantor isreleased from the guaranteed risk. As the risk is reduced as each monthly payment is made, a systematic and rational amortization method based on when thepayments are made may be appropriate. Risk Safeguard Fund payable is recognized by a systematic and rational amortization method, i.e. over the terms ofthe underlying loans, as “Gain on guarantee liabilities, net” on the Consolidated Statements of Operations. At the end of each reporting period, on a portfoliobasis, when the aggregate contingent liability required to be recognized under ASC 450 exceeds the balance of Risk Safeguard Fund payable, the Grouprecords the excess against “Gain on guarantee liabilities, net” on its Consolidated Statements of Operations. Risk Safeguard Fund receivable is recognized and measured at inception at fair value. For loans with original terms greater than 12 months, theGroup determines a significant financing component exists in the arrangements. The discount rate, which reflects the credit risk of the customers, was used inadjusting the Risk Safeguard Fund receivable at inception. Interest income resulting from the significant financing component is recorded as “Interest andfinancial services income” on the Consolidated Statements of Operations. At each reporting date, the Group assesses whether there is any indicator of impairment to the Risk Safeguard Fund receivable as discussed in Note2(g). An impairment loss is recorded if the carrying amounts of the Risk Safeguard Fund receivable exceed the expected collections. F-21Table of Contents The following table sets forth the activities of the Group’s obligations associated with the Risk Safeguard Fund for the year ended December 31,2018: For the Year Ended December 31,2018(RMB in thousands)Opening balances—Fair value of Risk Safeguard Fund payable at inception of new loans782,477Release of Risk Safeguard Fund payable upon the Borrowers’ repayment(196,332)Contingent liability65,137Payouts during the year(454,126)Recoveries during the year259,120Ending balances456,276 (m) Guarantee derivative liabilities For the off-balance sheet loans funded by certain other Institutional Funding Partners such as third-party commercial banks or consumer financecompanies, the Group is obligated to compensate the commercial banks or consumer finance companies for the principal and interest repayment of thedefaulted loans in case of Borrowers’ default, and full interest repayment according to the loan terms in the event that the Borrowers early repay their loans.Therefore, the Group effectively provides guarantees to the commercial banks or consumer finance companies that include credit risk and prepayment risk. In order to determine the accounting treatment of the guarantees, the Group considered the criteria of scope exception under ASC 815-10-15-58. Inorder to qualify for this scope exception, the financial guarantee contracts must meet all three of the following criteria: (a) provide for payments to be madesolely to reimburse the guaranteed party for failure of the debtor to satisfy its required payment obligations either at prescriptive payment dates or acceleratedpayment dates as a result of the occurrence of an event of default or notice of acceleration being made to the debtor by the creditor; (b) payment be made onlyif the debtor’s obligation to make payments as a result of conditions as described in (a) is past due; and (c) the guaranteed party is, as a precondition in thecontract for receiving payment of any claim under the guarantee, exposed to the risk of non-payment both at inception and throughout its term either throughdirect legal ownership or through a back-to-back arrangement. As the guarantee provided by the Group does not solely reimburse these commercial banks or consumer finance companies for failure of theBorrowers to satisfy required payment obligations, but also the future interest in the event of early repayment by the Borrowers, the scope exception underASC 815-10-15-58(a) is not met. Therefore, these contracts are accounted for as a derivative under ASC 815, Derivatives and Hedging, and are recognized onthe Consolidated Balance Sheets as either assets or liabilities and recorded at fair value. Derivative assets and liabilities within the scope of ASC 815 are required to be recorded at fair value at inception and remeasured at fair value on anongoing basis in accordance with ASC 820, Fair Value Measurement. Therefore, the financial guarantee derivative liabilities will be subsequently marked tomarket at the end of each reporting period with gains and losses recognized as change in fair value of financial guarantee derivatives. The estimated fair valueof the financial guarantee derivative liabilities is determined by the Group based on a discounted cash flow model, with reference to estimates of cumulativedefault rates, margins on cost of comparable companies and discount rates, using industry standard valuation techniques with the assistance of anindependent valuation firm. (n) Revenue recognition On January 1, 2018, the Group adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective method for all contractsnot completed as of the date of adoption. The Group considered relevant accounting guidance and concluded that arrangements for its on-balance sheet loans are out of scope of ASC 606.Therefore, “Interest and financial services income” and “Other revenue” included in “Financial services income” on the Consolidated Statements ofOperations should continue to be accounted for in accordance with ASC 310, Receivables. Other revenue streams for the year ended December 31, 2018 werepresented under ASC 606, while comparative information has not been restated and continues to be reported under the accounting standards in effect forthose periods. F-22Table of Contents Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the considerationthe entity expects to receive in exchange for those goods or services, net of value-added tax. The Group identifies its contracts with customers and allperformance obligations within those contracts. The Group then determines the transaction price and allocates the transaction price to the performanceobligations within the Group’s contracts with customers, recognizing revenue when, or as, the Group satisfies its performance obligations. For considerationswith original payment terms greater than 12 months, the Group determines a significant financing component exists in the arrangements. The discount rate,which reflects the credit risk of the customers, is used in adjusting the consideration at inception for revenue recognition. Interest income resulting from asignificant financing component is recorded as “Interest and financial services income” on the Group’s Consolidated Statements of Operations. The Group recognized a cumulative effect of approximately RMB209.5 million as an increase to the opening balances of retained earnings onJanuary 1, 2018, as a result of the initial application of ASC 606. For the year ended December 31, 2018, the adoption of ASC 606 resulted in an increase inoperating revenue of approximately RMB826.1 million as compared with ASC 605, Revenue Recognition, that was in effect in prior periods. The impactprimarily resulted from the earlier recognition of revenue under ASC 606 for “Loan facilitation and servicing fees” collectible in monthly installments relatedto the Group’s off-balance sheet loans. The Group provides the loan facilitation and matching services and post-origination services as multiple deliverablearrangements. Under ASC 605, service fees collectible in monthly installments were considered contingent and, therefore, were not allocable to differentdeliverables until the contingency was resolved (i.e., upon receipt of the monthly service fees). Under ASC 606, service fees collectible in monthlyinstallments are considered variable consideration which is contingent on a future event occurring. The Group considers the constraint on variableconsideration and only recognizes revenue to the extent that it is probable that a significant reversal will not occur when the uncertainty associated with thevariable consideration is subsequently resolved. Revenue is recognized when each of the performance obligations is satisfied at a point in time or over timeseparately using the total estimated consideration allocated to the different performance obligations based on their relative fair value. Revenue from loanfacilitation and matching services is recognized upon successful matching of the Borrowers with various funding parties, and revenue from post-originationservices is recognized over the terms of the related contracts. F-23Table of Contents The following table sets forth the cumulative effect of the changes on the Group’s Consolidated Balance Sheet as of January 1, 2018 due to theadoption of ASC 606: As ofDecember 31, 2017 Adjustments due tothe Adoption of ASC 606 As ofJanuary 1, 2018(RMB in thousands)ASSETSContract assets and service fees receivable, net—294,373294,373Deferred tax assets38,841(18,540)20,301 LIABILITIESAccrued expenses and other current liabilities1,611,02911,5811,622,610Deferred tax liabilities—54,71054,710 SHAREHOLDERS’ (DEFICIT)/EQUITY(Accumulated deficit)/Retained earnings(450,551)209,542(241,009) The following table sets forth the cumulative effect of the changes on the Group’s Consolidated Balance Sheet as of December 31, 2018 due to theadoption of ASC 606: As ofDecember 31, 2018 Balances withoutthe Adoption of ASC 606 Effect ofChange(RMB in thousands)ASSETSContract assets and service fees receivable, net1,238,077132,0791,105,998Deferred tax assets94,598102,737(8,139) LIABILITIESAccrued expenses and other current liabilities2,145,6892,110,35435,335Deferred tax liabilities187,183—187,183 SHAREHOLDERS’ EQUITYRetained earnings1,591,896716,555875,341 The following table sets forth the impact on the Group’s Consolidated Statements of Operations for the year ended December 31, 2018 due to theadoption of ASC 606: For the Year Ended December 31, 2018As Reportedunder ASC 606 Amounts withoutthe Adoption ofASC 606 Effect ofChange(RMB in thousands)Operating revenue:Interest and financial services income2,742,6432,732,7649,879*Loan facilitation and servicing fees2,075,8171,259,571816,246Financial services income4,996,3024,170,177826,125Total operating revenue7,596,8966,770,771826,125Operating cost:Provision for credit losses of contract assets and service fees receivable(38,254)—(38,254)Total operating cost(4,584,956)(4,546,702)(38,254)Gross profit3,011,9402,224,069787,871Income before income tax expense2,109,5281,321,657787,871Income tax expense(132,222)(10,150)(122,072)Net income1,977,3061,311,507665,799 * RMB9.9 million of interest and financial services income was recognized resulting from significant financing components of considerations for certainloan facilitation and servicing arrangements. The Group determined that, for “Online direct sales and services income” on the Consolidated Statements of Operations, the adoption of ASC 606did not significantly change (i) the timing and pattern of revenue recognition, and (ii) the presentation of revenue as gross versus net. The Group’s revenue recognition policies effective on the adoption date of ASC 606 are as follows: Online direct sales and services Online direct sales The Group engages in the online direct sales of electronic products, and to a lesser extent, home appliance products and general merchandiseproducts with installment payment terms mainly through its retail website www.fenqile.com and its APP. Online direct sales revenues are recognized at point-in-time when control of promised goods or services is transferred to the customers, whichgenerally occurs upon the acceptance of the goods or services by the customers. For arrangements where the Group controls the goods or services before theyare transferred to the customers as a principal, as it is primarily responsible for fulfilling the promise to provide the goods or services, is subject to inventoryrisk, and has discretion in establishing prices, revenues are recorded on a gross basis. Otherwise, revenues are recorded on a net basis. The goods or servicesare generally sold with a right of return, which is accounted for as variable consideration when determining the amount of revenue to recognize. Returnallowances are estimated based on historical experiences and insignificant for all of the periods presented. For these transactions, the Group generates financing receivables due from the Borrowers who place orders. The online direct sales revenues andrelated financing receivables are accounted for as sales of products or services to the Borrowers with extended payment terms and recorded at present value ofthe contractual cash flows when the Group’s performance obligations are satisfied. F-24Table of Contents The financing receivables initially generated from online direct sales may be subsequently funded with the proceeds from on- or off-balance sheetloans as discussed in Note 2(f). Services and others The Group offers quarterly or annual membership packages to the subscribing members with access to benefits of sales of products and services onthe Group’s Platform and APP that represent a single stand-ready obligation, in exchange for upfront premium membership fees. The receipt of premiummembership fees is initially recorded as “Deferred service fees” included in “Accrued expenses and other current liabilities” and membership fees arerecognized ratably over the terms of the membership packages as the Group’s performance obligation is satisfied over time. The Group also operates an online marketplace that enable third-party sellers to sell their products to customers with installment payment terms. TheGroup charges the third-party sellers a fixed rate commission fee based on the sales amount for the services rendered. Revenues are recognized at point-in-time when the underlying transactions are completed, i.e., upon acceptance of the underlying goods or services by the Borrowers. In accordance with ASC606-10-55-39, the Group recognizes the commission fees as revenues from the third-party sellers on a net basis, as the Group is acting as an agent and doesnot have general inventory risk or does not have discretion to establish prices. For these transactions whereby the Group pays to the third-party sellers onbehalf of the Borrowers, the Group generates financing receivables due from the Borrowers, which may be subsequently funded with the proceeds from on- oroff-balance sheet loans as discussed in Note 2(f). Financial services Interest and financial services income The Group generates interest and financial services income from its financing receivables. Interest and financial services income is recognized over the terms of financing receivables using the effective interest method. Origination feescollected on the first repayment date, normally one month after the origination of personal installment loans, are recorded as a component of financingreceivables, on the Consolidated Balance Sheets. Deferred origination fees are recognized over the terms of personal installment loans. Direct originationcosts include costs directly attributable to originating financing receivables, including vendor costs and personnel costs directly related to the time spent bythose individuals performing activities related to the origination of financing receivables. Considering the credit risk characteristics of the Borrowers as wellas the relatively small amount of each individual financing receivable, the Group determined that direct origination costs incurred for originating individualfinancing receivables are insignificant and expensed as incurred and recorded in “Processing and servicing cost” in the Consolidated Statements ofOperations. Interest and financial services income is not recorded when reasonable doubt exists as to the full, timely collection of interest or principal. Loan facilitation and servicing fees With respect to the off-balance sheet loans, the Group does not record financing receivables arising from these loans nor Funding Debts to thefunding parties. The Group earns loan facilitation and servicing fees from these arrangements. Revenues from loan facilitation and matching and post-origination services The Group provides intermediary services to the Borrowers and funding parties, as the lenders. The intermediary services provided include (i) loanfacilitation and matching services, (ii) post-origination services (i.e. account maintenance, collection, and payment processing), and (iii) a financialguarantee. The Group has assessed all these services and concludes that loan facilitation and matching services and post-origination services are distinct andtherefore are separate performance obligations. The financial guarantee is within the scope of ASC 815, Derivatives and Hedging or ASC 460, Guarantees,where applicable, and recorded at fair value at inception of the loans. The remaining consideration is allocated to each of the performance obligations basedon relative standalone selling price of each of the services being provided to customers. The Group primarily uses the expected cost plus a margin approachto determine the relative standalone selling price as a result of the adoption of ASC 606. Revenues from loan facilitation and matching services are recognized at point-in-time upon the successful matching of the borrowing requests fromthe Borrowers with the funding parties, as the lenders. Revenues from post-origination services are recognized ratably over the terms of the underlying loansas this performance obligation is satisfied over time. F-25Table of Contents Revenues from Investment Program management services The Group provides ongoing management services to the Individual Investors pursuant to the Investment Programs under the New Model, including(i) initial matching of the investment funds from the Individual Investors and (ii) continuous re-matching of the monthly repayment from the Borrowers withany new borrowing requests to generate investment returns for the Individual Investors over the terms of the Investment Programs. The customers (i.e. the Individual Investors) simultaneously receive and consume the benefits provided by the Group’s performance throughout theterms of the Investment Programs. The Group concludes that the ongoing management services is a distinct service being provided over the time inaccordance with ASC 606, therefore the revenues from Investment Program management services are recognized over the terms of the Investment Programs,using a straight-line method. The Group considers the options to the Individual Investors to renew the contract term of Investment Programs to purchaseadditional future services with a lower service fee rate, if any, as a material right to customers therefore is a separate performance obligation. The transactionprice allocated to such options are deferred to be recognized as revenues when the relevant future services are transferred or when the options expire. Theremaining consideration is allocated to each of the performance obligations based on relative standalone selling price of each of the services being providedto customers. The Group determines the relative standalone selling price of such options primarily based on historical data of the discounts that the customersobtain from exercising such options. Other revenue Other revenue includes fees collected for prepayment and late payment for on-balance sheet loans, which is calculated as a certain percentage ofinterest over the prepaid principal loan amount in case of prepayment or a certain percentage of past due amounts in case of late payment. Customer incentives In order to incentivize the individual customers to use the Platform and APP, the Group provides two major types of incentive coupons: cashcoupons that have a stated discount amount that reduces the selling price of a future purchase of product and repayment coupons that have a stated discountamount that reduce a future repayment on the installment purchase loans or personal installment loans. Both cash coupons and repayment coupons are givenfor free at the Group’s discretion, which are not linked to any transactions or previous transactions from the Platform and APP when they are given. Inaccordance with ASC 606-10-32-27, cash coupons and repayment coupons are accounted for as a reduction of revenue of the Group upon the future purchaseor application by the customers. The amount of cash coupons recognized as a reduction of revenue was RMB125.0 million, RMB209.4 million andRMB310.5 million for the years ended December 31, 2016, 2017 and 2018, respectively. The amount of repayment coupons recognized as a reduction ofrevenue was not material for all the periods presented. The Group offers a referral code incentive in cash to existing Borrowers for promoting its Platform and APP. Referral code incentives are granted toexisting Borrowers for each new Borrower who successfully signs up on the Platform and APP using the existing Borrowers’ referral codes and has beengranted a credit line. Referral code incentives, amounting to RMB37.2 million, RMB15.0 million and RMB13.1 million, were recorded as sales andmarketing expenses on the Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and 2018, respectively. Contract balances The Group classifies its right to consideration in exchange for products or services transferred to a customer as either a receivable or a contract asset.A receivable is a right to consideration that is unconditional as compared to a contract asset which is a right to consideration that is conditional upon factorsother than the passage of time. Generally, the amount of revenue recognized from loan facilitation and matching services and Investment Programmanagement services exceeds the amount billed to customers following the predetermined payment schedules at inception of the loans. The Group does nothave an unconditional right to such exceeding amount. Service fees receivable represent the considerations for which the Group has satisfied its performanceobligations and has the unconditional right to consideration. At each reporting date, the Group assesses whether there is any indicator of impairment to thecontract assets and service fees receivable as discussed in Note 2(g). An impairment loss, if any, is recorded as “Provision for credit losses of contract assetsand service fees receivable” on the Consolidated Statements of Operations. Contract liabilities relate to unsatisfied performance obligations at the end of each reporting period and consist of cash payment received in advancefrom customers in membership services and post-origination services, which is recorded as “Deferred service fees” included in “Accrued expenses and othercurrent liabilities” (Note 10) on the Consolidated Balance Sheets. The amount of revenue recognized that was included in the contract liabilities balance atthe beginning of the year was RMB52.6 million for the year ended December 31, 2018. F-26Table of Contents The following table provides information about the Group’s service fees receivable and contract balances with its customers: As ofDecember 31, 2018 Upon adoption onJanuary 1, 2018 (RMB in thousands) Service fees receivable87,4394,769Allowance for service fees receivable(26,442)(2,288)Service fees receivable, net60,9972,481Contract assets1,181,818292,501Allowance for contract assets(4,738)(609)Contract assets, net1,177,080291,892 Contract liabilities92,05655,771 Remaining performance obligations The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of thereporting period and an explanation as to when the Group expects to recognize these amounts in revenue. Additionally, as a practical expedient, the Groupdoes not include contracts that have an original duration of one year or less. As of December 31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations related to customer contractsthat are unsatisfied or partially unsatisfied was RMB601.6 million. Given the profile of contract terms, substantially all of the remaining performanceobligation is expected to be recognized as revenue over the next three years. Practical expedients The Group has used the following practical expedients as allowed under ASC 606: The remaining performance obligation has not been disclosed when the performance obligation is part of a contract that has an original duration ofone year or less. The Group expenses sales commissions as incurred when the amortization period is one year or less. Sales commission expenses are recorded within“Sales and marketing expenses” on the Consolidated Statements of Operations. Disaggregation of revenues within the scope of ASC 606 The following table presents the Group’s operating revenue within the scope of ASC 606 disaggregated by revenue sources: For the Year EndedDecember 31,2018(RMB in thousands)Online direct sales and services income:Online direct sales2,396,680Services and others203,914Total2,600,594 Loan facilitation and servicing fees:Loan facilitation and matching service fees1,679,932Post-origination service fees304,554Investment Program management service fees91,331Total2,075,817 F-27Table of Contents The following table presents the Group’s operating revenue within the scope of ASC 606 disaggregated by timing of revenue recognition: For the Year EndedDecember 31, 2018 (RMB in thousands) Revenues recognized at point-in-time4,156,460Revenues recognized over time519,951Total4,676,411 (o) Cash and cash equivalents Cash and cash equivalents represent cash on hand, demand deposits, time deposits and highly liquid investments placed with banks or otherfinancial institutions, which are unrestricted to withdrawal or use, and which have original maturities of three months or less. As of December 31, 2017 and2018, the Group did not have any cash equivalents. (p) Restricted cash Restricted cash mainly represents: (i) cash received from the Borrowers but not yet been repaid to the funding parties or received from the fundingparties but not yet been remitted to the Borrowers which is not available to fund the general liquidity needs of the Group; (ii) security deposits set aside forpartnering commercial banks or certain Institutional Funding Partners in case of Borrowers’ defaults; and (iii) cash set aside under the QAP or RSS throughthird-party custody bank accounts. In November 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): RestrictedCash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents andamounts generally described as restricted cash. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalentswhen reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Group adopted the amendments onJanuary 1, 2018 on a basis of using a retrospective transition method to each period presented. The changes in restricted cash on the Consolidated Statementsof Cash Flows of RMB146.5 million, RMB435.9 million and RMB740.0 million for the years ended December 31, 2016, 2017 and 2018, respectively, wereno longer presented within investing activities and were retrospectively included in the changes of cash and cash equivalents and restricted cash as required. (q) Restricted time deposits Time deposits securing the Group’s short-term and long-term borrowings from financial institutions are treated as restricted time deposits on theConsolidated Balance Sheets. Short-term and long-term borrowings are designated to support the Group’s general operation and could not be used to fundthe Group’s financing receivables. (r) Inventories, net Inventories, consisting of products available for sale, are stated at the lower of cost or net realizable value. Cost of inventory is determined using thefirst-in first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of disposal andtransportation. Adjustments are recorded to write down the cost of inventory to the net realizable value due to slow-moving merchandise and damaged goods,which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Group takes ownership, risks andrewards of the products purchased. Write-downs are recorded in cost of revenues in the Consolidated Statements of Operations. As of December 31, 2017 and2018, all inventory balances were products available for sale. The Group also provides fulfillment-related services in connection with the Group’s online marketplace. Third-party sellers maintain ownership oftheir inventories and therefore these products are not included in the Group’s inventories. (s) Long-term investments The Group’s long-term investments consist of equity investments in privately held companies and a debt investment in forms of a loan for which theGroup has the intent and ability to hold to maturity or payoff. F-28Table of Contents Prior to adopting ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities onJanuary 1, 2018, for those equity investments over which the Group does not have significant influence and without readily determinable fair value, theGroup carried the investment at cost and only adjusted for other-than-temporary declines in fair value and for distributions of earnings that exceed theGroup’s share of earnings. On January 1, 2018, the Group adopted ASU No. 2016-01 and started to measure long-term equity investments, other than equity methodinvestments, at fair value through earnings. For those investments over which the Group does not have significant influence and without readily determinablefair value, the Group elected to record these investments at cost, less impairment, and plus or minus subsequent adjustments for observable price changes.Under this measurement alternative, changes in the carrying value of the equity investments will be required to be made whenever there are observable pricechanges in orderly transactions for the identical or similar investment of the same issuer. The Group makes reasonable efforts to identify price changes thatare known or that can reasonably be known. The Group also makes a qualitative assessment of whether these investments are impaired at each reporting date.If a qualitative assessment indicates that the investment is impaired, the Group has to estimate the investment’s fair value in accordance with the principles ofASC 820. If the fair value is less than the investment’s carrying value, the Group has to recognize an impairment loss equal to the difference between thecarrying value and fair value on its Consolidated Statements of Operations. The loan held for long-term investment is carried at outstanding principal adjusted for any write-offs, and allowance for loan losses, any deferred feesor cost, and any unamortized premiums or discounts on the Consolidated Balance Sheets. The Group records the interest income associated with the debtinvestment using effective interest rate method on the Consolidated Statements of Operations. An allowance for doubtful accounts is recorded in the periodin which a loss is determined to be probable. (t) Property, equipment and software, net Property, equipment and software, net are stated at cost less accumulated depreciation, amortization and impairment, if any. Depreciation andamortization is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: Category Estimated Useful LivesComputers and equipment3 - 5 yearsFurniture and fixtures3 - 5 yearsLeasehold improvementOver the shorter of the expected life of leasehold improvement or the leasetermSoftware3 - 10 years (u) Impairment of long-lived assets Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to marketconditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorterthan the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carryingvalue of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If thesum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excessof the carrying value of the assets over the fair value of the assets. (v) Fair value measurements Financial instruments Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required orpermitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptionsthat market participants would use when pricing the asset or liability. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use ofunobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of inputthat is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value: F-29Table of Contents · 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 for theasset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical asset or liabilities in marketswith insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observableor can be derived principally from, or corroborated by, observable market data. · Level 3 applies to asset 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. Fair value measurements on a recurring basis The carrying amount of cash and cash equivalents, restricted cash, amounts due from related parties, accounts payable, and amounts due to relatedparties approximates fair value because of their short-term nature. Financing receivables are measured at amortized cost. Funding Debts and accrued interestpayable are carried at amortized cost. The carrying amount of the financing receivables, Funding Debts, accrued interest receivable, and accrued interestpayable approximates their respective fair value as the interest rates applied reflect the current quoted market yield for comparable financial instruments. For the off-balance sheet loans funded by certain third-party commercial banks or consumer finance companies, the Group accounts for financialguarantee provided to the commercial banks or consumer finance companies at fair value (Note 7). The Group uses significant unobservable inputs tomeasure the fair value of these guarantee liabilities (Level 3). The Group considers unobservable inputs to be significant, if, by their exclusion, the estimatedfair value of a Level 3 asset or liability would be impacted by a significant percentage change, or based on qualitative factors such as the nature of theinstrument and significance of the unobservable inputs relative to other inputs used within the valuation. Fair value measurements on a non-recurring basis The Group measures certain financial assets, including the equity investments under the cost method prior to the adoption of ASU No. 2016-01, atfair value on a non-recurring basis only if an impairment charge were to be recognized. Starting on January 1, 2018, the Group’s long-term equity investmentsare measured at fair value on a nonrecurring basis under measurement alternative, if an impairment loss is charged or fair value adjustment is made for anobservable price change in an orderly transaction for identical or similar investments of the same issuer. The Group’s non-financial assets, such as property,equipment and software, would be measured at fair value only if they were determined to be impaired. (w) Cost of sales Cost of sales consists of purchase price of the products, shipping charges and handling costs, as well as write-downs of inventory. Shipping chargesto receive products from suppliers are included in the inventories, and recognized as cost of sales upon sale of the products to customers. For each of theperiods presented, write-downs of inventory were insignificant. (x) Funding cost Funding cost consists of interest expense the Group pays to Individual Investors on Juzi Licai, and other funding partners, including certainInstitutional Funding Partners and third-party investors of the consolidated Trusts and the asset backed securitized debts, to fund its on-balance sheet loans,certain fees and amortization of deferred debt issuance costs incurred in connection with obtaining these debts, such as origination fees and legal fees. (y) Processing and servicing cost Processing and servicing cost consists primarily of vendor costs related to credit assessment, customer and system support, payment processingservices and collection services associated with originating, facilitating and servicing the loans. (z) Sales and marketing expenses Sales and marketing expenses consist primarily of advertising costs and payroll and related expenses for personnel engaged in marketing andbusiness development activities. Advertising costs, which consist primarily costs of online advertising and offline outdoor promotion activities, are expensedas incurred and are included within sales and marketing expenses on the Consolidated Statements of Operations. For the years ended December 31, 2016,2017 and 2018, advertising costs totaled RMB104.9 million, RMB98.5 million and RMB199.5 million, respectively. F-30Table of Contents (aa) Research and development expenses Research and development expenses consist primarily of payroll and related expenses for IT professionals involved in developing technologyplatform and website, server and other equipment depreciation, bandwidth and data center costs. All research and development costs have been expensed asincurred as the costs qualifying for capitalization have been insignificant. (bb) General and administrative expenses General and administrative expenses consist of payroll and related expenses for employees involved in general corporate functions, includingfinance, legal and human resources; costs associated with use of facilities and equipment, such as depreciation expenses, rental and other general corporaterelated expenses. (cc) Operating leases The Group leases office space under operating lease agreements with initial lease term up to five years. Rental expense is recognized from the date ofinitial possession of the leased property on a straight-line basis over the term of the lease and charged to earnings. Certain lease agreements contain rentholidays, which are recognized on a straight-line basis over the lease term. Lease renewal periods are considered on a lease-by-lease basis and are generallynot included in the initial lease terms. (dd) Share-based compensation Share-based awards granted to the Group’s employees, directors and non-employee directors, such as stock options and restricted share units, aremeasured at the grant date based on the fair value of the awards in accordance with ASC 718, Compensation-Stock Compensation. Share-basedcompensation, net of estimated forfeitures, is recognized as expenses on a straight-line basis over the requisite service period, which is the vesting period. The modification of the terms or conditions of the existing shared-based award is treated as an exchange of the original award for a new award. Theincremental compensation expenses are equal to the excess of the fair value of the modified award immediately after the modification over the fair value ofthe original award immediately before the modification. For stock options already vested as of the modification date, the Group immediately recognized theincremental value as compensation expenses. For stock options still unvested as of the modification date, the incremental compensation expenses arerecognized over the remaining service period of these stock options. Share-based awards granted to non-employees are accounted for in accordance with ASC 505-50, Equity-Based Payments to Non-Employee. Alltransactions in which services are received in exchange for share-based awards are accounted for based on the fair value of the consideration received or thefair value of the awards issued, whichever is more reliably measurable. Share-based compensation is measured at fair value at the earlier of the commitmentdate or the date the services are completed. The Group remeasures the awards using the then-current fair value at each reporting date until the measurementdate, generally when the services are completed and awards are vested, and attributes the changes in those fair values over the service period by straight-linemethod. Stock options and restricted share units granted generally vest over four years. Prior to completion of the IPO, the exercise price of each granted stock option was US$0.0001, the Company used intrinsic value (approximately thefair value of each of the Company’s ordinary share) on the grant date to estimate the fair value of the stock options granted. After the IPO, the exercise price ofeach granted stock option is determined by the closing price of the Company’s ordinary share on the grant date. Therefore, the Company utilizes thebinomial option pricing model to estimate the fair value of stock options granted after the IPO, with the assistance of an independent valuation firm. The fairvalue of each granted restricted share unit is determined by the closing price of the Company’s ordinary share on the grant date. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. The Group useshistorical data to estimate forfeitures of share-based awards and records share-based compensation expenses only for those awards that are expected to vest.See Note 19 for further discussion on share-based compensation. F-31Table of Contents (ee) Fair value of Pre-IPO Preferred Shares and Pre-IPO Class A Ordinary Shares Shares of the Company, which did not have quoted market prices before the IPO, were valued based on the income approach. The income approachinvolves applying the discounted cash flow analysis based on projected cash flows using the Group’s best estimate as of the valuation dates. Estimatingfuture cash flows requires the Group to analyze projected revenue growth, gross margins, effective tax rates, capital expenditures and working capitalrequirements. In determining an appropriate discount rate, the Group considered the cost of equity and the rate of return expected by venture capitalists. TheGroup also applied a discount for lack of marketability given that the shares underlying the award were not publicly traded at the time of grant.Determination of estimated fair value of the Group requires complex and subjective judgments due to its limited financial and operating history, uniquebusiness risks and limited public information on companies in China similar to the Group. Option-pricing method was used to allocate enterprise value to Pre-IPO Preferred Shares and Pre-IPO Class A Ordinary Shares. The method treats Pre-IPO Preferred Shares and Pre-IPO Class A Ordinary Shares as call options on the enterprise’s value, with exercise prices based on the liquidation preference ofPre-IPO Preferred Shares. The strike prices of the “options” based on the characteristics of the Group’s capital structure, including number of shares of eachclass of ordinary shares, seniority levels, liquidation preferences, and conversion values for Pre-IPO Preferred Shares. The option-pricing method alsoinvolves making estimates of the anticipated timing of a potential liquidity event, such as a sale of the Group or an IPO, and estimates of the volatility of theGroup’s equity securities. The anticipated timing is based on the plans of board of directors and management of the Group. Estimating the volatility of theshare price of a privately held company is complex because there is no readily available market for the shares. Volatility is estimated based on annualizedstandard deviation of daily stock price return of comparable companies. (ff) Taxation Income tax Current income tax is provided for in accordance with the laws of the relevant tax jurisdictions. Deferred income tax is provided using assets and liabilities method, which requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of events that have been included in the consolidated 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 in effect forthe 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 Groupconsiders all positive and negative evidence, including future reversals of projected future taxable income and results of recent operation. The Group recordsa valuation allowance to reduce the amount of deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, orall, of the deferred tax assets will not be realized. Uncertain tax positions To assess uncertain tax positions, the Group applies a more-likely-than-not threshold and a two-step approach for the tax position measurement andfinancial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight ofavailable evidence indicates that it is more-likely-than-not that the position will be sustained, including resolution of related appeals or litigation processes,if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likelihood of being realized upon settlement. The Groupclassifies interest and penalties related to income tax matters, if any, in income tax expense. (gg) (Loss)/income per share Basic (loss)/income per share is computed by dividing net (loss)/income attributable to ordinary shareholders, considering the accretion toredemption value of Pre-IPO Preferred Shares, allocation of net income attributable to Pre-IPO Preferred Shares and deemed dividend to a preferredshareholder, by the weighted average number of ordinary shares outstanding during the period using the two-class method. The two-class method was used tocalculate the basic net (loss)/income per ordinary share for periods prior to the completion of the IPO, since the Pre-IPO Preferred Shares were entitled toparticipation with Pre-IPO Class A Ordinary Shares in the Company’s undistributed net income and therefore were deemed to be participating securities. Afterthe IPO, net (loss)/income per ordinary share are computed on Class A Ordinary Shares and Class B Ordinary Shares together, because both classes have thesame dividend rights in the Company’s undistributed net income. Under the two-class method, net loss is not allocated to other participating securities ifbased on their contractual terms they are not obligated to share in the loss. F-32Table of Contents Diluted (loss)/income per share is calculated by dividing net (loss)/income attributable to ordinary shareholders by the weighted average number ofordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of ordinary shares issuable upon theconversion of the Pre-IPO Preferred Shares and convertible loans, for periods prior to the completion of the IPO, using the if-converted method, and ordinaryshares issuable upon the exercise of outstanding stock options and vesting of restricted share units, using the treasury stock method. Ordinary equivalentshares are not included in the denominator of the diluted (loss)/income per share calculation when inclusion of such shares would be anti-dilutive. (hh) Segment reporting The Group engages primarily in online direct sales services and online consumer finance services for its customers in the PRC. The Group does notdistinguish between markets or segments for the purpose of internal reports. The Group does not distinguish revenues, costs and expenses between segmentsin its internal reporting, and reports costs and expenses by nature as a whole. The Group’s chief operating decision maker, who has been identified as theChief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as awhole and hence, the Group has only one reportable segment. As most of the Group’s long-lived assets are all located in the PRC and all the Group’s revenuesare derived from the PRC, no geographical segments are presented. (ii) Statutory reserves The Company’s subsidiaries, VIEs and VIEs’ subsidiaries established in the PRC are required to make appropriations to certain non-distributablereserve funds. In accordance with the laws applicable to the Foreign Investment Enterprises (“FIEs”) established in the PRC, the Group’s subsidiaries registered aswholly foreign-owned enterprises (“WFOEs”) have to make appropriations from its annual after-tax profits as determined under Generally AcceptedAccounting Principles in the PRC (“PRC GAAP”) to reserve funds including general reserve fund, enterprise expansion fund and staff bonus and welfarefund. The appropriation to the general reserve fund must be at least 10% of the annual after-tax profits calculated in accordance with PRC GAAP.Appropriation is not required if the general reserve fund has reached 50% of the registered capital of the company. Appropriations to the enterprise expansionfund and staff bonus and welfare fund are made at the respective company’s discretion. In addition, in accordance with the PRC Company Laws, the Group’s VIEs and VIE’s subsidiaries, registered as Chinese domestic companies, mustmake appropriations from their annual after-tax profits as determined under PRC GAAP to non-distributable reserve funds including statutory surplus fundand discretionary surplus fund. The appropriation to the statutory surplus fund must be 10% of the annual after-tax profits as determined under PRC GAAP.Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the company. Appropriation to the discretionarysurplus fund is made at the respective company’s discretion. The use of the general reserve fund, enterprise expansion fund, statutory surplus fund and discretionary surplus fund are restricted to offsetting oflosses or increasing of the registered capital of the respective company. The staff bonus and welfare fund is a liability in nature and is restricted to fundpayments of special bonus to employees and for the collective welfare of all employees. None of these reserves is allowed to be transferred to the company interms of cash dividends, loans or advances, nor can they be distributed except under liquidation. For the years ended December 31, 2016, 2017 and 2018, profit appropriation to general reserve fund and statutory surplus fund for the Group’sentities incorporated in the PRC was approximately RMB1.9 million, RMB53.9 million and RMB144.4 million respectively. No appropriation to otherreserve funds was made for any of the periods presented. (jj) Significant risks and uncertainties Foreign currency risk The PRC government imposes controls on the convertibility of RMB into foreign currencies. The Group’s cash and cash equivalents, restricted cashand restricted time deposits denominated in RMB that are subject to such government controls amounted to RMB1,073.4million and RMB2,818.6 million asof December 31, 2017 and 2018, respectively. The value of RMB is subject to changes in the central government policies and to international economic andpolitical developments affecting supply and demand in the PRC foreign exchange trading system market. In the PRC, certain foreign exchange transactionsare required by law to be transacted only by authorized financial institutions at exchange rates set by the PBOC. Remittances in currencies other than RMBby the Group in the PRC must be processed through PBOC or other Chinese foreign exchange regulatory bodies which require certain supportingdocumentation in order to process the remittance. F-33Table of Contents Concentration of credit risk Credit risk is one of the most significant risks for the Group’s installment purchase loans and personal installment loans businesses. The Grouprecords provision for credit losses based on its estimated probable losses against its financing receivables. Apart from the financing receivables, financialinstruments that potentially expose the Group to significant concentration of credit risk primarily included in the financial statement line items of cash andcash equivalents, restricted cash, restricted time deposits, accrued interest receivable, prepaid expenses and other current assets, risk safeguard fundreceivable, service fees receivable and contract assets. The Group holds its cash and cash equivalents, restricted cash and restricted time deposits at reputablefinancial institutions in the PRC and at international financial institutions with high ratings from internationally recognized rating agencies. As ofDecember 31, 2018, almost 100% of the Group’s cash and cash equivalents, restricted cash and restricted time deposits were held in the financial institutionsin the PRC and the remaining cash and cash equivalents, restricted cash and restricted time deposits were held in one financial institution outside the PRC.Financing receivables, accrued interest receivable, service fees receivable and contract assets are typically unsecured and are derived from revenues earnedfrom customers in the PRC. The risk with respect to these receivables and contract assets are mitigated by credit evaluations the Group performs on itsBorrowers and the Group’s ongoing monitoring process of outstanding balances. Concentration of customers, suppliers, and funding parties There was no revenue from customers which individually represented greater than 10% of the total operating revenue for any year of the three-yearsperiod ended December 31, 2018. There was no financing receivables due from customers of the Group that individually accounted for greater than 10% ofthe Group’s carrying amount of financing receivables as of December 31, 2017 and 2018, respectively. There were three, two, two inventory suppliers accounted for more than 10% of the Group’s total purchases for the years ended December 31, 2016,2017 and 2018, respectively. There was no supplier accounted for more than 10% of the Group’s accounts payable as of December 31, 2017. Only onesupplier accounted for more than 10% of the Group’s accounts payable as of December 31, 2018 as follows: As of December 31, 2017 2018 Inventory supplier A*10.2% * Less than 10%. There was no funding parties, including Individual Investor or Institutional Funding Partner, that accounted for more than 10% of the Group’s totalfunding cost for the years ended December 31, 2016, 2017 and 2018, respectively. There was no Individual Investor or Institutional Funding Partner thataccounted for more than 10% of the Group’s Funding Debts as of December 31, 2017. Only one Institutional Funding Partner accounted for more than 10% ofthe Group’s Funding Debts as of December 31, 2018 as follows: As of December 31, 2017 2018 Institutional Funding Partner A*16.6% * Less than 10%. (kk) Recent accounting pronouncements The Group previously qualified as an “emerging growth company”, or EGC, pursuant to the Jumpstart Our Business Startups Act of 2012, as amended, orthe JOBS Act. As an EGC, the Group was not required to comply with any new or revised financial accounting standards until such date that a privatecompany is otherwise required to comply with such new or revised accounting standards. In 2018, the Group elected to “opt out” of such exemption affordedto an EGC and, as a result, the Group has adopted all applicable accounting standards which have been effective for public companies for the year beginningon January 1, 2018, for the preparation of the financial information for the year ended December 31, 2018. The adoption of these new accounting standardshas a significant impact on the Group’s consolidated financial statements as discussed in the notes of relevant accounting policies. For the year endedDecember 31, 2018, the total operating revenue of the Group exceeded US$1.07 billion. Therefore, the Group no longer qualified as an EGC as ofDecember 31, 2018, pursuant to the JOBS Act. F-34Table of Contents In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires that a lessee should recognize the assets and liabilities thatarise from operating leases. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use assetrepresenting its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accountingpolicy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize leaseexpenses for such lease generally on a straight-line basis over the lease term. ASU No. 2016-02 is effective for public business entities for annual reportingperiods and interim periods within those years beginning after December 15, 2018. The Group adopted ASU 2016-02 No. on January 1, 2019 using themodified retrospective method. The Group currently believes the most significant change will be related to the recognition of right-of-use assets and leaseliabilities on the Group’s Consolidated Balance Sheets for certain in-scope operating leases. The Group does not expect any material impact on net assets andthe Consolidated Statements of Operations as a result of adopting the new standard. In June 2016, the FASB amended guidance related to impairment of financial instruments as part of ASU No. 2016-13, Financial Instruments—CreditLosses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective for the Group on January 1, 2020. The guidance replacesthe incurred loss impairment methodology with an expected credit loss model for which the Group is required to recognize an allowance based on its estimateof expected credit losses. The Group is in the process of implementing changes to its systems and processes in conjunction with the review of existing modeland methodology of credit losses. The Group is currently evaluating the impact, and expects this ASU will have a material impact on the consolidatedfinancial statements and related disclosures. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments toemployees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date, which maylower their cost and reduce volatility in the income statement. The Group adopted this new standard effective on January 1, 2019. The adoption of ASUNo. 2018-07 did not have a material impact on the Group’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the DisclosureRequirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Under theguidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fairvalue measurements. The guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscalyears, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Group iscurrently in the process of evaluating the impact of the adoption of this guidance on its consolidated financial statements. 3. FINANCING RECEIVABLES, NET Financing receivables, net as of December 31, 2017 and 2018 consisted of the followings: As of December 31, 2017 2018 (RMB in thousands)Short-term:Installment purchase loans1,020,662796,312Personal installment loans9,159,8404,669,665Net deferred origination fees(9,829)(1,011)Total short-term financing receivables10,170,6735,464,966Allowance for credit losses(313,464)(324,332)Total short-term financing receivables, net9,857,2095,140,634Long-term:Installment purchase loans170,042178,246Personal installment loans1,686,2181,165,894Net deferred origination fees(14,483)(1,400)Total long-term financing receivables1,841,7771,342,740Allowance for credit losses(56,732)(59,704)Total long-term financing receivables, net1,785,0451,283,036 F-35Table of Contents These balances represent short-term and long-term financing receivables generated from installment purchase loans and personal installment loanstransacted on the Group’s Platform and APP with an original term generally up to three years and do not have collateral. The weighted average interest ratesof these financing receivables were 24.5% and 24.7% as of December 31, 2017 and 2018, respectively. As of December 31, 2017, installment purchase loans and personal installment loans that were collectively evaluated for impairment wereRMB1,190.7 million and RMB10,821.7 million, respectively. As of December 31, 2017, installment purchase loans and personal installment loans that wereindividually evaluated for impairment were RMB87.0 million and RMB460.1 million, respectively. As of December 31, 2018, installment purchase loans and personal installment loans that were collectively evaluated for impairment wereRMB974.6 million and RMB5,833.1 million, respectively. As of December 31, 2018, installment purchase loans and personal installment loans that wereindividually evaluated for impairment were RMB120.9 million and RMB1,296.4 million, respectively. As of December 31, 2017 and 2018, installment purchase loans and personal installment loans that were individually evaluated for impairment wereall charged off, respectively, given the Group determined it was probable that the Group will be unable to collect unpaid principal amount on those loans. The following table summarizes the balances of financing receivables by due date as of December 31, 2017 and 2018: As of December 31, 2017 2018 (RMB in thousands)Due in months0 - 1210,170,6735,464,96613 - 241,425,8511,149,15525 - 36406,671193,556Thereafter9,25529Total financing receivables12,012,4506,807,706 The activities in the provision for credit losses of financing receivables for the years ended December 31, 2016, 2017 and 2018, respectively,consisted of the following: For the Year Ended December 31,2016 2017 2018(RMB in thousands)Beginning balances(47,667)(174,826)(370,196)Provisions(236,611)(611,869)(884,056)Charge-offs114,698444,242974,483Recoveries from prior charge-offs(5,246)(27,743)(104,267)Ending balances(174,826)(370,196)(384,036) As of December 31, 2017, allowance for credit losses of financing receivables that was collectively and individually evaluated for impairment wasRMB370.2 million and RMB547.1 million, respectively. As of December 31, 2018, allowance for credit losses of financing receivables that was collectively and individually evaluated for impairment wasRMB384.0 million and RMB1,417.3 million, respectively. Aging analysis of past due financing receivables as of December 31, 2017 and 2018 are as follows: 180 Days 1 - 29 Days 30 - 59 Days 60 - 89 Days 90 - 179 Days or Greater Total RMB in thousandsPast Due Past Due Past Due Past Due Past Due Past Due Current TotalInstallment purchase loans10,7593,4412,5829,370—26,1521,164,5521,190,704Personal installment loans219,53582,00268,644183,668—553,84910,267,89710,821,746December 31, 2017230,29485,44371,226193,038—580,00111,432,44912,012,450Installment purchase loans6,2973,4692,5748,570—20,910953,648974,558Personal installment loans139,63375,10764,947227,041—506,7285,326,4205,833,148December 31, 2018145,93078,57667,521235,611—527,6386,280,0686,807,706 F-36Table of Contents The Group evaluates the creditworthiness and collectability of its financing receivable portfolio on a pooled basis, due to its composition of small,homogeneous financing receivables with similar general credit risk characteristics. Financing receivables amounting to RMB193.0 million andRMB235.6 million as of December 31, 2017 and 2018, respectively, were in non-accrual status. Interest and financial services income for non-accrualfinancing receivables is recognized on a cash basis. Cash receipt of non-accrual financing receivables would be first applied to any unpaid principal, latepayment fees, if any, before recognizing interest and financial services income. For the years ended December 31, 2016, 2017 and 2018, interest and financialservices income earned from non-accrual financing receivables were RMB37.1 million, RMB86.0 million and RMB102.8 million, respectively. As of December 31, 2017 and 2018, financing receivables amounting to RMB75.8 million and RMB42.4 million have been pledged as collateralspursuant to investment agreements with certain Institutional Funding Partners (Note 8) and credit facility arrangements with lending financial institutions(Note 9). For the years ended December 31, 2016, 2017 and 2018, net deferred origination fees associated with the financing receivables amounting toRMB67.4 million, RMB168.4 million and RMB14.5 million have been recognized as adjustments to interest and financial services income over the terms ofthe personal installment loans. Credit Quality Indicators The Group developed its credit assessment model based on the historical delinquency performance of the Borrowers as well as informationsubmitted in the Borrowers’ credit applications. The credit assessment model is designed to predict the likelihood that a Borrower will be delinquent in thefuture. The Group assigns one of the seven credit risk levels to each Borrower, with risk level A representing the lowest risk, risk level F representing thehighest risk and risk level N representing Borrowers who are approved for trial purposes only and will be separately tracked accordingly. The key factors theGroup considers in determining the credit risk level of each Borrower include geographic location, education background, level of income, etc. The Groupupdates the information for each of the risk levels on a regularly basis. The following tables present the net recorded investment of financing receivables, by credit quality indicator, as of December 31, 2017 and 2018. As of December 31, 2017 As of December 31, 2018InstallmentPurchase Loans PersonalInstallment Loans InstallmentPurchase Loans PersonalInstallment Loans(RMB in thousand)Risk level:A598,4182,480,065442,6551,101,982B264,5741,970,978234,1511,268,530C180,4462,709,756178,1531,269,632D102,4262,612,08490,4611,269,521E34,293772,99711,167297,361F4,857165,47810,134308,142N and others5,690110,3887,837317,980Total1,190,70410,821,746974,5585,833,148 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS As of December 31, 2017 2018 (RMB in thousands)Receivables from Pre-IPO Series C-1 preferred shareholders (Note 14)502,211347,238Receivables from third-party payment service providers (i)171,788225,449Deposits to Institutional Funding Partners146,881207,429Prepayment to inventory suppliers26,59761,064Prepaid input value-added tax44,83919,750Rental deposits and other current assets52,94262,897Total prepaid expenses and other current assets945,258923,827 (i) The Group opened accounts with third-party payment service providers mainly to facilitate collection and transfer of the funds, interest and servicefees from/to the Borrowers and Individual Investors or Institutional Funding Partners. The balance of receivables from third-party payment serviceproviders represents amounts temporarily held in these accounts. F-37Table of Contents 5. PROPERTY, EQUIPMENT AND SOFTWARE, NET As of December 31, 2017 2018 (RMB in thousands)Computers and equipment41,37466,205Furniture and fixtures9,97210,587Leasehold improvement23,00525,375Software13,81433,407Total property, equipment and software88,165135,574Accumulated depreciation and amortization(25,040)(53,154)Total property, equipment and software, net63,12582,420 Depreciation and amortization expenses on property, equipment and software for the years ended December 31, 2016, 2017 and 2018 were RMB4.6million, RMB18.9 million and RMB30.4 million, respectively. 6. LONG-TERM INVESTMENTS Equity investments As of December 31, 2017 and 2018, the Group’s equity investments primarily included an investment of preferred shares in a privately heldcompany, which operates an online consumer finance platform in India. These preferred shares invested are not considered in-substance ordinary shares anddo not have readily determinable fair value. Prior to the adoption of ASU No. 2016-01, the carrying value of the Group’s cost method equity investments was RMB23.5 million as ofDecember 31, 2017. After the adoption of ASU No. 2016-01 on January 1, 2018, these cost method equity investments were measured using the measurementalternative (Note 2(s)). The carrying value of the Group’s equity investments measured at fair value was RMB28.2 million as of December 31, 2018.Unrealized upward adjustments of fair value of equity investments for the year ended December 31, 2018 were RMB18.8 million for the observable pricechanges in orderly transactions for the identical or similar investment of the same issuer. In 2018, the Croup recognized RMB15.2 million impairment relatedto investments without readily determinable fair value and no other downward adjustment was related to investments without readily determinable fair value. The following table summarizes the total carrying value of the Group’s equity investments measured using the measurement alternative as ofDecember 31, 2018 including cumulative unrealized upward or downward adjustments and impairment charges: As of December 31, 2017 2018 (RMB in thousands)Initial cost basis28,80223,485Cumulative unrealized upward adjustments—18,753Cumulative impairment charges(5,635)(15,215)Cumulative foreign currency translation adjustments3181,143Total carrying value at end of the year23,48528,166 Debt investment The debt investment is in the form of an interest-bearing loan to an investee, acquired by the Group in September 2018, with a principal ofRMB120.0 million that matures in July 2026. The coupon rate of the loan acquired by the Group is a floating rate linked to the benchmark rate of the PBOC.The loan was to provide the initial operating fund to the investee. The Group has the intent and ability to hold the loan to maturity or payoff. As of December 31, 2018, the Group’s loan receivable recorded at amortized cost was RMB157.9 million. The interest income in relation to this loanreceivable recorded was RMB1.5 million for the year ended December 31, 2018. F-38Table of Contents Investment-related impairment Management regularly evaluates the impairment of long-term investments based on performance and financial position of the investee as well asother evidence of market value. For the years ended December 31, 2016, 2017 and 2018, the Group recorded impairment charges for long-term investments ofRMB5.6 million, RMB0.9 million and RMB15.2 million, respectively. 7. FAIR VALUE MEASUREMENT Recurring The following table presents the fair value hierarchy for the Group’s assets and liabilities that are measured and recorded at fair value on a recurringbasis as of December 31, 2017 and 2018: December 31, 2017Level 1Inputs Level 2Inputs Level 3Inputs Balances atFair Value(RMB in thousands)AssetsRestricted time deposits-current portion—6,750—6,750Restricted time deposits-noncurrent portion—600—600Total assets—7,350—7,350LiabilitiesGuarantee derivative liabilities——30,95830,958Total liabilities——30,95830,958 December 31, 2018Level 1Inputs Level 2Inputs Level 3Inputs Balances atFair Value(RMB in thousands)AssetsRestricted time deposits-current portion—344,212—344,212Total assets—344,212—344,212LiabilitiesGuarantee derivative liabilities——52,43452,434Total liabilities——52,43452,434 The fair value of the Group’s restricted time deposits is determined based on the prevailing interest rates for similar products in the market (Level 2).For the off-balance sheet loans funded by certain third-party commercial banks or consumer finance companies, as the Group’s financial guarantee providedto the third-party commercial banks or consumer finance companies does not trade in an active market with readily observable quoted prices, the Group usessignificant unobservable inputs to measure the fair value of these guarantee derivative liabilities (Level 3). Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair value ofthe assets and liabilities became unobservable or observable in the current marketplace. These transfers are considered to be effective as of the beginning ofthe period in which they occur. The Group did not transfer any assets or liabilities in or out of Level 2 and Level 3 during each of the periods presented. Significant Unobservable Inputs The Group uses a discounted cash flows model to estimate fair value of the guarantee derivative liabilities. The following table presents quantitativeinformation about the significant unobservable inputs used for the Group’s Level 3 fair value measurement as of December 31, 2017 and 2018: Range of Inputs December 31, 2017December 31, 2018Financial InstrumentUnobservable InputMinimum MaximumWeighted-AverageMinimumMaximumWeighted-AverageGuarantee derivative liabilitiesCumulative default rates2.3%2.3%2.3%2.0%2.0%2.0%Margins on cost70.0%70.0%70.0%70.0%70.0%70.0% (i) Expressed as a percentage of the original principal balance of the loans. F-39(i)Table of Contents The following table summarizes the activities related to fair value of the guarantee derivative liabilities: For the Year Ended December 31,2016 2017 2018(RMB in thousands)Fair value at beginning of the year (Level 3)—31,19130,958Issuances38,516134,881449,778Cash payment(13,267)(87,759)(231,275)Change in fair value(i)5,942(47,355)(197,027)Fair value at end of the year (Level 3)31,19130,95852,434 (i) Recognized as “Change in fair value of financial guarantee derivatives, net” on the Consolidated Statements of Operations. Significant Recurring Level 3 Fair Value Liability Input Sensitivity Changes in certain of the unobservable inputs noted above may have a significant impact on the fair value of the guarantee derivative liabilities.The following table summarizes the effect adverse changes in estimate would have on the fair value of the guarantee derivative liabilities as of December 31,2017 and 2018, respectively, given a hypothetical changes in the cumulative default rates: As of December 31, 20172018 (RMB in thousands, except for percentages) Weighted-average cumulative default rates(i)2.3%2.0%Change in fair value from:Increase by 10%13,22229.725Decrease by 10%(13,222)(29,725) (i) Expressed as a percentage of the original principal balance of the loans. Other financial instruments The followings are other financial instruments not measured at fair value on the Consolidated Balance Sheets, but for which the fair value isestimated for disclosure purposes. Cash and cash equivalents, current restricted cash and amounts due from related parties are financial assets with carrying amounts that approximatefair value due to their short-term nature. Accounts payable and amounts due to related parties are financial liabilities with carrying amounts that approximatefair value because of their short-term nature. Non-recurring The Group measures certain financial assets, including the equity investments under the cost method prior to the adoption of ASU No. 2016-01, atfair value on a non-recurring basis only if an impairment charge were to be recognized. Starting on January 1, 2018, the Group’s long-term equity investmentsare measured at fair value on a nonrecurring basis under measurement alternative, if an impairment loss is charged or fair value adjustment is made for anobservable price change in an orderly transaction for identical or similar investments of the same issuer. The related inputs used are classified as Level 3 fairvalue measurement. The Group’s non-financial assets, such as property, equipment and software, would be measured at fair value only if they were determined to beimpaired. F-40Table of Contents 8. FUNDING DEBTS The following table summarizes the Group’s outstanding Funding Debts as of December 31, 2017 and 2018, respectively: As of December 31, 2017 2018 (RMB in thousands)Short-term:Liabilities to Individual Investors—Juzi Licai9,627,8503,014,670Liabilities to other funding partners897,2841,631,371Total short-term Funding Debts10,525,1344,646,041Long-term:Liabilities to Individual Investors—Juzi Licai157,32181,168Liabilities to other funding partners9,30876,719Total long-term Funding Debts166,629157,887 For the years ended December 31, 2016, 2017 and 2018, the following significant activities took place related to the Group’s funding parties: Liabilities to Individual Investors on Juzi Licai under the Old Model The Group finances its on-balance sheet loans using the proceeds from Individual Investors on Juzi Licai by offering various investment programs.As of December 31, 2017 and 2018, the terms of those programs were all within 24 months with weighted average interest rates of 7.6%. As of December 31,2017 and 2018, Individual Investors on Juzi Licai funded an aggregate amount of RMB9,253.4 million and RMB3,341.4 million in outstanding financingreceivables originated by the Group, respectively. Liabilities to other funding partners The Group finances its on-balance sheet loans using the proceeds from other funding partners, including certain Institutional Funding Partners andthe third-party investors of the consolidated Trusts. As part of the arrangement with each of Institutional Funding Partners, the Group and Institutional Funding Partners typically agree on anaggregated amount of funds to be provided, maximum credit limit given to an individual Borrower, maximum borrowing term and an annualized interest rate. The Group also invests in its on-balance sheet loans using funds from the consolidated Trusts contributed by the Group and/or other third-partyinvestors. The Trusts are administered by third-party trust companies, which act as the trustees, for the purposes of providing returns to the beneficiary of theTrusts. Those liabilities to other funding partners bearing weighted average interest rates of 7.7% and 10.0% as of December 31, 2017 and 2018,respectively. As of December 31, 2017 and 2018, other funding partners funded an aggregate amount of RMB1,157.7 million and RMB2,374.7 million inoutstanding financing receivables originated by the Group, respectively. As of December 31, 2017 and 2018, financing receivables amounting to nil andRMB34.9 million were pledged as collaterals to secure the underlying loans funded by other funding partners, respectively. Asset-backed securitized debts In December 2015, the Group, through its VIE, Shenzhen Fenqile, created an ABS Plan with a final maturity of January 2018. As of December 31,2017 and 2018, there were no financing receivables funded under the ABS Plan. F-41Table of Contents Maturities of Funding Debts The following table summarizes the contractual maturity dates of the Group’s Funding Debts and associated interest payments as of December 31,2018. 1 - 12 months 13 - 24 months25 - 36 months37 - 48 months49 - 60 monthsTotal(RMB in thousands)Liabilities to Individual Investors—Juzi Licai3,014,67081,168———3,095,838Liabilities to other funding partners1,631,37176,719———1,708,090Total Funding Debts4,646,041157,887———4,803,928Interest payments(i)204,0378,866———212,903Total interest payments204,0378,866———212,903 (i) Interest payments for Funding Debts with variable interest rates are calculated using the interest rate as of December 31, 2018. 9. SHORT-TERM AND LONG-TERM BORROWINGS As of December 31, 2017 and 2018, the Group had short-term borrowings primarily from banks with weighted average interest rates ofapproximately 6.2% and 5.3% per annum, respectively. Such borrowings are all denominated in RMB. As of December 31, 2017, the Group had long-term borrowings from banks with weighted average interest rates of approximately 7.3% per annum.Such borrowings are all denominated in RMB. The Group had no long-term borrowings as of December 31, 2018. The Group’s certain borrowings, amounting to RMB169.1 million and RMB372.5 million, as of December 31, 2017 and 2018, respectively, arecollateralized by a pledge of the Group’s time deposits and financing receivables. As of December 31, 2017, the outstanding balance of short-term and long-term borrowings was secured by RMB4.1 million time deposits and RMB75.8 million financing receivables of the Group pledged as collateral. As ofDecember 31, 2018, the outstanding balance of short-term borrowings was secured by RMB340.0 million time deposits and RMB7.5 million financingreceivables of the Group pledged as collateral. 10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES As of December 31, 2017 2018 (RMB in thousands)Funds payable to Individual Investors on Juzi Licai (i)—782,109Liabilities to Pre-IPO Series C-1 preferred shareholders (Note 14)506,478335,238Funds payable to Institutional Funding Partners (ii)449,127252,678Accrued payroll and welfare168,249254,852Tax payable228,660114,887Deferred interest and financial services income and others56,25971,634Deferred service fees44,18992,056Payable to third-party sellers33,84157,637Guarantee derivative liabilities at fair value30,95852,434Consideration payable for investments—36,414Accrued professional fees1,11419,057Security deposits from third-party sellers10,10412,206Accrued IPO expenses38,399—Other accrued expenses43,65164,487Total accrued expenses and other current liabilities1,611,0292,145,689 (i) The payable balances mainly include investment funds received from the Individual Investors on Juzi Licai under the New Model but not yetmatched with and transferred to the Borrowers due to the settlement time lag. (ii) The payable balances mainly include repayment received from Borrowers but not yet transferred to accounts of Institutional Funding Partners due tothe settlement time lag. F-42Table of Contents 11. RELATED PARTY BALANCES AND TRANSACTIONS The table below sets forth major related parties of the Group and their relationships with the Group: Entity or individual name Relationship with the GroupJD.com, Inc. and its subsidiaries (“JD Group”)JD Group is a shareholder of the GroupMr. Jay Wenjie XiaoChief Executive Officer and Chairman of Board of Directors of the GroupIndividual Director or OfficerDirectors or Officers of the Group (a) The Group entered into the following significant related party transactions: For the Year Ended December 31,2016 2017 2018(RMB in thousands)Purchases of goods and services from JD Group668,029544,708607,086 (b) The Group had the following significant related party balances: (i) Amounts due from related parties As of December 31, 2017 2018 (RMB in thousands)Due from Mr. Jay Wenjie Xiao8,122—Others1,325—Total9,447— (ii) Amounts due to related parties As of December 31, 2017 2018 (RMB in thousands)Due to individual Director or Officer and his/her immediate family members under Juzi Licai investmentprograms as Individual Investors under the Old Model67,51014,569Total67,51014,569 The Group believes that the terms of the transactions with the related parties are comparable to the terms of arm’s-length transactions with third-partyvendors and Individual Investors. 12. TAXATION a) Value-added tax (“VAT”) During the periods presented, the Group is subject to 17% or 16% VAT for online direct sales revenues from sales of electronic products, homeappliance products and general merchandise products, and 6% for premium membership fees, third-party sellers’ commission fees, and financial servicesincome earned from rendering services to its customers in the PRC. The Group is also subject to surcharges on VAT payments according to PRC tax law. b) Income tax Cayman Islands The Company was incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to tax on eitherincome or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders. Hong Kong Under the current Hong Kong Inland Revenue Ordinance, the Company’s subsidiaries incorporated in Hong Kong are subject to 16.5% income taxon their taxable income generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to theCompany are not subject to any Hong Kong withholding tax. F-43Table of Contents PRC The Enterprise Income Tax (“EIT”) Law generally applies a statutory income tax rate of 25% to all enterprises, but grants preferential tax treatmentto qualified High and New Technology Enterprises (“HNTEs”) and Software Enterprises. Qianhai Juzi qualified as an HNTE and is entitled for a preferential income tax rate of 15% from 2017 to 2019, provided that it is qualified as anHNTE during such periods. Shenzhen Lexin Software and Shenzhen Dingsheng Technology qualify as Software Enterprises and are entitled to an income tax exemption for thetwo years beginning with their respective first profitable year and a preferential income tax rate of 12.5% for the subsequent three years. MengtianTechnology, qualified as a Software Enterprise, started to enjoy income tax exemption from its first profitable year in 2013 and was subject to a reducedenterprise income tax rate of 12.5% from 2015 to 2017. The Group’s other PRC subsidiaries, VIEs and VIEs’ subsidiaries are subject to the statutory income tax rate of 25%. PRC Withholding Tax on Dividends Under the EIT Law enacted by the National People’s Congress of PRC on March 16, 2007 and its implementation rules which became effective onJanuary 1, 2008, dividends generated after January 1, 2008 and payable by FIEs in the PRC to its foreign investors who are non-resident enterprises aresubject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a differentwithholding arrangement. Under the taxation arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the “beneficialowner” and directly holds 25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. The CaymanIslands, where the Company was incorporated, does not have a tax treaty with the PRC. The EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered resident enterprises for the PRCincome tax purposes if the place of effective management or control of the entity is within the PRC. The implementation rules to the EIT Law provide thatnon-resident legal entities will be considered as PRC resident enterprises if substantial and overall management and control over the manufacturing andbusiness operations, personnel, accounting, properties, etc., occurs within the PRC. Despite the present uncertainties resulting from the limited PRC taxguidance on the issue, the Group does not believe that the Group’s entities organized outside of the PRC should be treated as resident enterprises for the PRCincome tax purposes. If the PRC tax authorities subsequently determine that the Company and its subsidiaries registered outside the PRC should be deemedas resident enterprises, the Company and its subsidiaries registered outside the PRC will be subject to the PRC income tax, at a rate of 25%. The componentsof the Group’s (loss)/income before income tax expense for the years ended December 31, 2016, 2017 and 2018 are as follows: For the Year Ended December 31, 2016 2017 2018 (RMB in thousands, except for percentages) (Loss)/income before income tax expense(59,681)474,5792,109,528Loss from non-China operations(12,943)(11,125)(13,479)(Loss)/income from China operations(46,738)485,7042,123,007Income tax expense applicable to China operations58,258234,227132,222Effective tax rate for China operations-124.6%48.2%6.2% Composition of income tax expense for China operations The following table sets forth current and deferred portion of income tax expense of the Company’s China subsidiaries, VIEs, and subsidiaries of theVIEs: For the Year Ended December 31,2016 2017 2018(RMB in thousands)Current income tax expense11,204230,66374,046Deferred income tax expense47,0543,56458,176Income tax expense58,258234,227132,222 F-44Table of Contents The following table sets forth reconciliation between the statutory EIT rate and the effective tax rate for the Group’s China operations: For the Year Ended December 31,2016 2017 2018Statutory EIT rate25.0%25.0%25.0%Change of tax position*——-3.7%Effect of tax holidays—-12.3%-7.0%Tax effect of non-deductible expense-24.2%-0.1%-0.5%Changes in valuation allowance*-125.4%35.6%-7.6%Effective tax rate for China operations-124.6%48.2%6.2% * The Group’s PRC subsidiaries completed 2017 annual tax filings with relevant tax authorities in May 2018. The tax filing results providedadditional insights as to the pre-tax deduction of qualified provision for credit losses of financing receivables. Accordingly, current income taxliability of RMB78.0 million and valuation allowance of RMB114.7 million recognized as of December 31, 2017 in relation to the Group’sprovision for credit losses of financing receivables were reversed in 2018. The following table sets forth the effect of tax holiday related to China operations: For the Year Ended December 31,2016 2017 2018(In thousands, except for per share data)Tax holiday effect—59,877148,350Basic net income per share effect—0.530.44Diluted net income per share effect—0.430.41 Deferred tax assets and deferred tax liabilities Deferred income tax expense reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for income tax purposes. The components of the deferred tax assets are as follows: As of December 31, 2017 2018 (RMB in thousands)Deferred tax assets— Provision for credit losses241,90186,900— Net operating loss carryforwards7,0408,642— Accrued expenses and others36,4085,841Less: valuation allowance(246,508)(6,785)Net deferred tax assets38,84194,598 The components of the deferred tax liabilities are as follows: As of December 31, 2017 2018 (RMB in thousands)Deferred tax liabilities— Contract assets and service fees receivable—187,183Net deferred tax liabilities—187,183 Movement of valuation allowance For the Year Ended December 31,2016 2017 2018(RMB in thousands)Balances at beginning of the year(17,864)(76,526)(246,508)Additions(58,662)(175,849)(5,245)Reversals—5,867244,968Balances at end of the year(76,526)(246,508)(6,785) F-45Table of Contents Valuation allowance is provided against deferred tax assets when the Group determines that it is more-likely-than-not that the deferred tax assets willnot be utilized in the future. The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will bemore-likely-than-not realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of futureprofitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans and estimates the Groupis using to manage the underlying businesses. The statutory income tax rate of 25% or applicable preferential income tax rates were applied when calculatingdeferred tax assets. As of December 31, 2017, the Group provided full valuation allowance of RMB241.9 million for the deferred tax assets related to provision forcredit losses. Given that the Group had limited successful experience in getting approval from the relevant tax authorities for the deduction of the taxallowance on provision for credit losses at that time, the Group concluded it was more-likely-than-not that these deferred tax assets would not be realizedgoing forward. As of December 31, 2018, the Group evaluated a variety of factors including the successful experiences in pre-tax deduction of provision forcredit losses in 2017 annual tax filing completed in May 2018, and concluded that the deferred tax assets arose from provision for credit losses are more-likely-than-not to be realized going forward. Therefore, no valuation allowance was provided for the provision for credit losses as of December 31, 2018. As of December 31, 2017 and 2018 the Group had net operating loss carryforwards of approximately RMB35.5 million and RMB34.7 million,respectively, which arose from the Group’s certain subsidiaries, VIEs and the VIEs’ subsidiaries established in the PRC. As of December 31, 2017 and 2018,deferred tax assets arose from the net operating loss carryforwards amounted to RMB16.8 million and RMB19.9 million was provided for full valuationallowance respectively, while the remaining RMB18.7 million and RMB14.8 million is expected to be utilized prior to expiration considering future taxableincome for respective entities. As of December 31, 2018, the net operating loss carryforwards of RMB0.1 million, RMB15.3 million and RMB19.3 millionwill expire in 2021, 2022 and 2023, respectively, if not utilized. The Company intends to indefinitely reinvest all the undistributed earnings of the Company’s VIEs and subsidiaries of the VIEs in China, and doesnot plan to have any of its PRC subsidiaries to distribute any dividend; therefore no withholding tax is expected to be incurred in the foreseeable future.Accordingly, no income tax is accrued on the undistributed earnings of the Company’s VIEs and subsidiaries of the VIEs as of December 31, 2017 and 2018Although the Company’s certain PRC subsidiaries have generated accumulated earnings as of December 31, 2018, they have not paid any dividends in thepast and currently have no plans to pay any dividends. These PRC subsidiaries plan to reinvest their profits into the PRC operations. Uncertain Tax Position The Group did not identify any significant unrecognized tax benefits for each of the periods presented. The Group did not incur any interest relatedto unrecognized tax benefits, did not recognize any penalties as income tax expense and also does not anticipate any significant change in unrecognized taxbenefits within 12 months from December 31, 2018. 13. CONVERTIBLE LOANS In May 2016, the Group issued convertible loans in the aggregated principal amount of RMB654,680,000 (US$100,000,000) to four investors of theGroup with compounding interest at 12% per annum, maturing two years after the issuance date. Pursuant to the convertible loans agreements, the holders ofthe convertible loans may (i) convert the outstanding principal of the convertible loans into a fixed percentage of the equity interest in Shenzhen Fenqile,one subsidiary of the Group’s VIE, or (ii) convert the outstanding principal of the convertible loans into a fixed number of shares of Pre-IPO Series CConvertible Redeemable Preferred Shares (“Pre-IPO Series C Preferred Shares”) of the Company at a conversion price of US$2.5105 per share. Accruedinterests shall be waived if the investors elect to exercise any of the conversion options. Convertible loans in the principal amount of RMB98,202,000(US$15,000,000) were issued by the Company (the “Convertible Loans A”) and convertible loans in the principal amount of RMB556,478,000(US$85,000,000) were issued by Shenzhen Fenqile (the “Convertible Loans B”). The issuance costs for the convertible loans were RMB11.3 million. In conjunction with the issuance of the convertible loans, the Group entered into Pre-IPO Series C Preferred Shares purchase agreements with twoConvertible Loans B investors and issued 1 share of Pre-IPO Series C Preferred Shares to each of them for no consideration. The issuance of Pre-IPO Series CPreferred Shares was to allow Convertible Loans B investors to exercise voting rights in the Company on an as-converted basis. No other rights of Pre-IPOSeries C Preferred Shares could be enjoyed by Convertible Loans B investors prior to the conversion of the Convertible Loans B. F-46Table of Contents Although the legal forms of the Convertible Loans B and the 2 shares of Pre-IPO Series C Preferred Shares of the Company are two separateinstruments held by Convertible Loans B investors, the Group considered these two instruments are in substance one combined instrument issued toConvertible Loans B investors, that is, convertible loans, which were initially measured at par under ASC 470 and subsequently stated at amortized cost withany difference between the initial carrying value and the principal amount as interest expenses using the effective interest method over the period from theissuance date to the maturity date. The 2 shares of Pre-IPO Series C Preferred Shares were recorded at par and classified as mezzanine equity. The investors for Convertible Loans B are entitled to down round protection if the Group issues additional equity interest in the future at a lowervaluation. The protection will be provided through conversion price adjustments (“Conversion Price Adjustments”) before the Convertible Loans B areconverted or by issuing additional shares for free after the conversion of the loans into the equity interest of the VIE (“After Conversion Adjustments”). In the event of a lower valuation prior to the conversion of Convertible Loans B, the down round protection is provided in the form of ConversionPrice Adjustment, which effectively resets the strike or conversion rate to the lower valuation. The Group considers the Conversion Price Adjustments are partof the conversion features that do not require bifurcation. The After Conversion Adjustments are considered as an embedded feature that requires bifurcationpursuant to criteria set forth under ASC 815. The Group determined the fair value of the After Conversion Adjustments was immaterial with the assistancefrom an independent valuation firm. No Pre-IPO Series C Preferred Shares of the Company were issued to Convertible Loans A investors, and the investors of Convertible Loans A are notentitled to the down round protection as discussed above. In October 2017, the Convertible Loans B were converted into 33,857,797 shares of Pre-IPO Series C-1 Preferred Shares and the Convertible Loans Awere converted into 5,974,905 shares of Pre-IPO Series C-2 Preferred Shares. The accrued but unpaid convertible loans interests were waived by the investorsupon the conversion of the convertible loans. Refer to Note 14 for further discussion on the accounting for the conversion of convertible loans into Pre-IPOSeries C-1/C-2 Preferred Shares. 14. CONVERTIBLE REDEEMABLE PREFERRED SHARES From 2014 to 2015, the Group issued several rounds of Pre-IPO Preferred Shares to certain investors. All series of Pre-IPO Preferred Shares had thesame par value of US$0.0001 per share. Upon the completion of the Company’s IPO in December 2017, all of the issued and outstanding Pre-IPO PreferredShares were automatically converted and redesignated into Class A Ordinary Shares on a one-for-one basis. Prior to the automatic conversion into Class A Ordinary Shares, the Pre-IPO Preferred Shares were entitled to certain preferences with respect toconversion, dividend, liquidation and redemption. The holders of Pre-IPO Preferred Shares were entitled to vote together with the holders of ordinary shareson all matters submitted to a vote of the shareholders of the Company on an as-if-converted basis and not as a separate class. Immediately prior to the IPO, thePre-IPO Preferred Shares comprised the following: SeriesIssuance Date Shares Issued Issuance Priceper Share Proceeds fromIssuance SharesOutstanding US$ US$Pre-IPO Series A-1 Preferred SharesJuly 18, 201438,602,9410.0222857,15738,602,941Pre-IPO Class B Ordinary SharesJuly 18, 20147,350,0000.0222163,4287,350,000Pre-IPO Series A-2 Preferred SharesJuly 18, 201435,014,0060.13714,800,00039,390,757*Pre-IPO Series B-1 Preferred SharesNovember 10, 20144,119,2940.97104,000,0004,119,294Pre-IPO Series B-2 Preferred SharesNovember 10,2014,March 13, 201569,152,6611.142479,000,00063,775,246**Pre-IPO Series C-1 Preferred SharesOctober 23, 201733,857,7972.5105Not Applicable33,857,797Pre-IPO Series C-2 Preferred SharesOctober 23, 20175,974,9052.5105Not Applicable5,974,905 *Among total shares outstanding, 4,376,751 shares were re-designated from Pre-IPO Class A Shares in conjunction with the issuance of the Pre-IPO Series A-2Preferred Shares. ** In May 2016, the Group repurchased 5,377,415 Pre-IPO Series B-2 Preferred Shares from one of preferred shareholders with a total repurchase price ofRMB87,922,800 (US$13,500,000). The difference of the repurchase price and the carrying amount of Pre-IPO Series B-2 Preferred Shares, ofRMB42,679,055, was accounted for as deemed dividend to the preferred shareholder. F-47Table of Contents The Group determined that the Pre-IPO Series A-1 Preferred Shares, Pre-IPO Class B Ordinary Shares, Pre-IPO Series A-2 Preferred Shares, Pre-IPOSeries B-1 Preferred Shares, Pre-IPO Series B-2 Preferred Shares, and Pre-IPO Series C Preferred Shares should be classified as mezzanine equity upon theirrespective issuance since the Pre-IPO Preferred Shares were contingently redeemable. Except for Pre-IPO Series C Preferred Shares discussed in Note 13, the Group accreted changes in the redemption value over the period from the dateof issuance of the Pre-IPO Preferred Shares to their respective earliest redemption date using effective interest method. Changes in the redemption valueshould be considered to be changes in accounting estimates. The accretion were recorded against retained earnings, or in the absence of retained earnings, bycharges against additional paid-in capital. Once additional paid-in capital was exhausted, additional charges was recorded by increasing the accumulateddeficit. The accretion of Pre-IPO Preferred Shares was RMB62.3 million and RMB82.1 million for the years ended December 31, 2016 and 2017, respectively. F-48Table of Contents The Group’s Pre-IPO Preferred Shares activities for the years ended December 31, 2016 and 2017 are summarized below: Pre-IPO Series A-1Preferred SharesPre-IPO Class BOrdinary SharesPre-IPO Series A-2Preferred SharesPre-IPO Series B-1Preferred SharesPre-IPO Series B-2Preferred SharesPre-IPO Series CPreferred Shares Pre-IPO Series C-1Preferred SharesPre-IPO Series C-2Preferred Shares No. ofsharesAmountinRMBNo. ofsharesAmountinRMBNo. ofsharesAmountinRMBNo. ofsharesAmountinRMBNo. ofsharesAmountinRMBNo. ofsharesAmountinRMB No. ofsharesAmountinRMBNo. ofsharesAmountinRMBBalances atDecember 31,201538,602,94113,797,2767,350,0001,191,26839,390,75738,122,6074,119,29426,935,32569,152,661528,467,734——————Issuance of Pre-IPO PreferredShares——————————2*————Pre-IPO PreferredSharesredemptionvalueaccretion—687,599—127,310—3,687,152—3,035,116—54,761,693——————Repurchase ofPre-IPOPreferredShares————————(5,377,415)(45,243,745)——————Balances atDecember 31,201638,602,94114,484,8757,350,0001,318,57839,390,75741,809,7594,119,29429,970,44163,775,246537,985,6822*————Issuance of Pre-IPO PreferredShares————————————33,857,795647,734,1165,974,905116,969,352Redesignation ofPre-IPOSeries CPreferredShares——————————(2)(*)2*——Pre-IPO PreferredSharesredemptionvalueaccretion—755,455—139,412—4,043,130—3,335,065—58,599,600———12,912,925—2,331,846Conversion andredesignationof Pre-IPOPreferredShares(38,602,941)(15,240,330)(7,350,000)(1,457,990)(39,390,757)(45,852,889)(4,119,294)(33,305,506)(63,775,246)(596,585,282)——(33,857,797)(660,647,041)(5,974,905)(119,301,198)Balances atDecember 31,2017———————————————— * Less than 1. F-49Table of Contents Accounting for the Conversion of Convertible Loans into Pre-IPO Series C-1/C-2 Preferred Shares Pursuant to the October 2017 Resolutions, in connection with the exercise of the conversion options of the convertible loans issued in May 2016,the Group entered into share purchase agreements (“SPAs”) for Pre-IPO Series C-2 Convertible Redeemable Preferred Shares (“Pre-IPO Series C-2 PreferredShares”) with Convertible Loans A investors and issued 5,974,905 Pre-IPO Series C-2 Preferred Shares to Convertible Loans A investors in October 2017. Theaccrued but unpaid interests were waived by Convertible Loans A investors upon the conversion of the Convertible Loans A. In October 2017, the Group also entered into SPAs for Pre-IPO Series C-1 Convertible Redeemable Preferred Shares (“Pre-IPO Series C-1 PreferredShares”) with Convertible Loans B investors and issued 33,857,795 Pre-IPO Series C-1 Preferred Shares and redesignated and reclassified 2 Pre-IPO Series CPreferred Shares previously issued to Convertible Loans B investors in May 2016 as 2 Pre-IPO Series C-1 Preferred Shares. In conjunction with the issuance ofPre-IPO Series C-1 Preferred Shares, the Group entered into supplementary agreements to the convertible loans agreements with Convertible Loans BInvestors (“Convertible Loans B Amendments”). Pursuant to the Convertible Loans B Amendments, the Convertible Loans B was modified to two interest-free loans (“Interest-free Loans”) payable to two Convertible Loans B investors respectively by Shenzhen Fenqile with no conversion features. The accruedbut unpaid interests were waived by Convertible Loans B investors upon the conversion of the Convertible Loans B. The principal amount of the Interest-freeLoans is RMB556,478,000 and shall be repaid prior to or on the date of the 5 anniversary of the date of the issuance of Pre-IPO Series C-1 Preferred Shares. At the same time, Convertible Loans B Investors issued two promissory notes (“Promissory Notes”) with principal amounts of RMB327,340,000(US$49,443,396) and RMB229,138,000, respectively. Upon the issuance of the Promissory Notes, the purchase price of Pre-IPO Series C-1 Preferred Shareswere deemed fully paid and the Convertible Loans B investors are entitled to all rights as the holder of such shares. The Pre-IPO Series C-1 Preferred Shareshave the same rights and preferences as the 2 Pre-IPO Series C Preferred Shares previously issued to the Convertible Loans B investors. All series of Pre-IPO C-1/C-2 Preferred Shares had the same par value of US$0.0001 per share. The Group considered above facts and concluded that the Convertible Loans B Amendments, the Interest-free Loans and the Promissory Notes are insubstance one instrument, that is, the Pre-IPO Series C-1 Preferred Shares. The carrying amount of the convertible loans, including unamortized issuance costsand accrued but unpaid interests, was credited to the capital accounts (i.e. the carrying value of Pre-IPO Series C-1/C-2 Preferred Shares on the date ofissuance) upon conversion in accordance with ASC 470-20-40-4. The Group recorded the Interest-free Loans payable to the two Convertible Loans Binvestors by Shenzhen Fenqile in “Accrued expenses and other current liabilities” and the Promissory Notes receivable from Convertible Loans B investorsby the Company in “Prepaid expenses and other current assets” respectively on its Consolidated Balance Sheets. The Group accreted changes in the redemption value over the period from the date of issuance of the Pre-IPO C-1/C-2 Preferred Shares to theirrespective earliest redemption date using effective interest method. Changes in the redemption value should be considered to be changes in accountingestimates. The accretion were recorded against retained earnings, or in the absence of retained earnings, by charges against additional paid-in capital. Onceadditional paid-in capital was exhausted, additional charges were recorded by increasing the accumulated deficit. The Group has determined that there wasno embedded beneficial conversion feature attributable to the Pre-IPO Series C-1/C-2 Preferred Shares. All of the issued and outstanding Pre-IPO Series C1/C2 Preferred Shares were converted into Class A Ordinary Shares upon the completion of theCompany’s IPO on a one-for-one basis. Amendment of the Definition of QIPO The October 2017 Resolutions amended the definition of QIPO in the then-effective memorandum and articles of association and shareholderagreement of the Company by replacing the existing definition of QIPO with the following: “an initial public offering of the Company that is completed byand prior to June 30, 2018 shall be deemed to be a QIPO.” The October 2017 Resolutions resulted in value transfer from the preferred shareholders of theCompany, which would be recorded as a deemed contribution from the preferred shareholders in the fourth quarter of 2017. The Group concluded that thevalue transfer was not material to its consolidated financial statements. F-50thTable of Contents 15. ORDINARY SHARES In November 2013, the Company was formed as a limited liability company in the Cayman Islands with issuance of 125,000,000 ordinary shares at apar value of US$0.0001 each. In July 2014, the Company became the holding company of the Group pursuant to the 2014 Reorganization described inNote 1. On December 26, 2017, the Company completed its IPO on the NASDAQ Global Market. In this offering, 12,000,000 ADSs, representing 24,000,000Class A Ordinary Shares, were issued and sold to the public at a price of US$9.00 per ADS. The aggregate proceeds received by the Company from the IPO,net of issuance costs, were approximately RMB651.3 million ($100.1 million). Immediately prior to the completion of the IPO, the Company adopted a dual-class share structure, consisting of Class A Ordinary Shares and Class BOrdinary Shares, par value US$0.0001 per share. All of the issued and outstanding Pre-IPO Class A Ordinary Shares were automatically re-designated intoClass B Ordinary Shares on a one-for-one basis, and all of the issued and outstanding Pre-IPO Preferred Shares were automatically converted and redesignatedinto Class A Ordinary Shares on a one-for-one basis. Holders of Class A Ordinary Shares and Class B Ordinary Shares have the same rights except that theholders of Class A Ordinary Shares are entitled to one vote per share in respect of matters requiring the votes of shareholders, while holders of Class BOrdinary Shares are entitled to ten votes per share. Each Class B Ordinary Share is convertible into one Class A Ordinary Share at any time by the holderthereof. Class A Ordinary Shares are not convertible into Class B Ordinary Shares under any circumstances. The Group concluded that the adoption of dual-class share structure did not have a material impact on its consolidated financial statements. In January 2018, the underwriters of the Company’s IPO exercised the options to purchase an additional 1,800,000 ADSs, representing 3,600,000Class A Ordinary Shares, par value US$0.0001 per share, of the Company to cover over-allotments in full. The proceeds in connection with 1,800,000 ADSsreceived by the Company was RMB95.1 million (US$14.7 million). In June 2018, 27,000,000 shares of Class A Ordinary Shares were issued to the Company’s depositary bank for bulk issuance of ADSs reserved forfuture issuances upon the exercise or vesting of awards under the Group’s share-based incentive plans. As of December 31, 2018, 10,603,832 out of27,000,000 shares of Class A Ordinary Shares were deemed issued but not outstanding as they have not been transferred to grantees. F-51Table of Contents 16. NET (LOSS)/INCOME PER SHARE Basic net (loss)/income per share is the amount of net (loss)/income available to each share of ordinary shares outstanding during the reporting period.Diluted net (loss)/income per share is the amount of net (loss)/income available to each share of ordinary shares outstanding during the reporting periodadjusted to include the effect of potentially dilutive ordinary shares. For the years ended December 31, 2016, 2017 and 2018, stock options to purchaseordinary shares and restricted share units that were anti-dilutive and excluded from the calculation of diluted net (loss)/income per share were22,635,281 shares, 10,851 shares and 5,785,724 shares, on a weighted average basis, respectively. For the years ended December 31, 2016 and 2017, the Pre-IPO Preferred Shares and convertible loans convertible into ordinary shares that were also anti-dilutive and excluded from the calculation of diluted net(loss)/income per share of the Company were 178,923,801 shares and 190,426,133 shares on a weighted average basis, respectively. The following table sets forth the computation of basic and diluted net (loss)/income per share for the periods indicated: For the Year Ended December 31,2016 2017 2018(RMB in thousands, except for share and per share data)Basic net (loss)/income per share calculation:Numerator:Net (loss)/income(117,939)240,3521,977,306Accretion on Pre-IPO Preferred Shares redemption value(62,299)(82,117)—Income allocation to participating Pre-IPO Preferred Shares—(132,241)—Deemed dividend to a preferred shareholder(42,679)——Net (loss)/income attributable to ordinary shareholders(222,917)25,9941,977,306Denominator:Weighted average number of ordinary shares outstanding—basic110,647,199113,620,774337,883,964Net (loss)/income per share attributable to ordinary shareholders—basic(2.01)0.235.85 Diluted net (loss)/income per share calculation:Numerator:Net (loss)/income attributable to ordinary shareholders(222,917)25,9941,977,306Denominator:Weighted average number of ordinary shares outstanding—basic110,647,199113,620,774337,883,964Ordinary shares issuable upon the exercise of outstanding stock options using thetreasury stock method—27,231,62724,875,327Ordinary shares issuable upon the vesting of outstanding restricted share unitsusing the treasury stock method——3,270Weighted average number of ordinary shares outstanding—diluted110,647,199140,852,401362,762,561Net (loss)/income per share attributable to ordinary shareholders—diluted(2.01)0.185.45 17. EMPLOYEE BENEFIT PLAN Full-time employees of the Group in the PRC are entitled to welfare benefits including pension insurance, medical insurance, unemploymentinsurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan.Chinese labor regulations require that the Group makes contributions to the government for these benefits based on certain percentages of the employees’salaries, up to a maximum amount specified by the local government. The Group has no legal obligation for the benefits beyond the contributions. Total contributions by the Group for such employee benefits were RMB54.2 million, RMB79.7 million and RMB102.7 million for the years endedDecember 31, 2016, 2017 and 2018, respectively. 18. STATUTORY RESERVES AND RESTRICTED NET ASSETS In accordance with the PRC laws and regulations, the Company’s PRC subsidiaries registered as wholly foreign-owned enterprise are required tomake appropriation to certain reserve funds, namely general reserve fund, enterprise expansion fund, and staff bonus and welfare fund, all of which areappropriated from the subsidiaries’ annual after-tax profits as reported under PRC GAAP. The appropriation must be at least 10% of the annual after-taxprofits to the general reserve fund until such reserve fund has reached 50% of the subsidiaries’ registered capital. F-52Table of Contents Additionally, in accordance with the PRC Company Laws, a domestic company is required to provide statutory surplus fund at least 10% of itsannual after-tax profits as reported under PRC GAAP until such statutory surplus fund has reached 50% of its registered capital. A domestic company is alsorequired to provide discretionary surplus fund, at the discretion of the board of directors, from its annual after-tax profits as reported under PRC GAAP. Theaforementioned reserve funds can only be used for specific purposes and are not distributable as cash dividends. As a result of the PRC laws and regulations and the requirement that distributions by the PRC entity can only be paid out of distributable profitscomputed in accordance with PRC GAAP, the PRC entity is restricted from transferring a portion of its net assets to the Company. Amounts restricted includepaid-in capital, additional paid-in capital and statutory reserves of the Company’s PRC entities. As of December 31, 2017 and 2018, the restricted net assetsof the Group’s relevant PRC entities amounted to RMB895.8 million and RMB1,977.4 million, respectively. The restricted net assets of the Group’s relevantPRC entities accounted for 48.1% of the consolidated net assets as of December 31, 2018. As a result of the above restrictions, parent company onlycondensed financial information is disclosed in Note 22. 19. SHARE-BASED COMPENSATION Share-based compensation was recognized in operating cost and expenses for the years ended December 31, 2016, 2017 and 2018 as follows: For the Year EndedDecember 31,2016 2017 2018(RMB in thousands)Processing and servicing cost1,0675,9168,111Sales and marketing expenses4,0096,61118,223Research and development expenses9,06817,08933,169General and administrative expenses9,85546,12063,133Total share-based compensation expenses23,99975,736122,636 The Group recognizes share-based compensation, net of estimated forfeitures, on a straight line basis over the vesting term of the awards. All theshare-based awards granted by the Group are service conditions only. There was no income tax benefit recognized on the Consolidated Statements ofOperations for share-based compensation and the Group did not capitalize any of the share-based compensation as part of the cost of any asset in the yearsended December 31, 2016, 2017 and 2018. 2014 Share Incentive Plan In September 2014, the Group adopted its 2014 Share Incentive Plan (“2014 Plan”), which permits the grant of stock options, restricted shares andrestricted share units of the Company to employees, directors and other eligible persons of the Company and its affiliates. Under the 2014 Plan, the maximumnumber of Class A Ordinary Shares that may be delivered will not exceed a total of 20,220,588 shares in the aggregate. In August 2015, the Company’sshareholders approved to newly reserve an additional of 15,235,971 Class A Ordinary Shares for future issuance. Option awards are granted with an exerciseprice determined by the board of directors. Those option awards generally vest over a period of four years and expire in ten years. 2017 Share Incentive Plan In October 2017, the Group adopted its 2017 Share Incentive Plan (“2017 Plan”), which permits the grant of stock options, restricted shares andrestricted share units of the Company to employees, directors and other eligible persons of the Company and its affiliates. The Group planned to no longergrant share-based awards under the 2014 Plan and all future share-based shares will be granted under its 2017 Plan. Under the 2017 Plan, the maximumnumber of Class A Ordinary Shares that may be delivered will not exceed a total of 22,859,634 shares in the aggregate. Option awards are granted with anexercise price determined by the board of directors. Those option awards generally vest over a period of four years and expire in ten years. F-53Table of Contents The following table sets forth a summary of the number of shares available for issuance: Shares Available (In thousands)December 31, 201511,217Granted(5,805)Cancelled/forfeited945December 31, 20166,357Additions under the 2017 Plan22,860Granted(7,348)Cancelled/forfeited1,300Expired(2,686)December 31, 201720,483Granted(7,576)Cancelled/forfeited926December 31, 201813,833 Stock options 1) Stock options granted to employees, directors and non-employee directors The following table sets forth the summary of activities for stock options granted to employees, directors and non-employee directors under the2014 Plan and 2017 Plan: OptionsOutstanding WeightedAverageExercise Price Weighted AverageRemainingContractualLife AggregateIntrinsicValue(In thousands) US$ (In years) (RMB inthousands)December 31, 201524,2400.00019.11178,676Granted*5,8050.0001Exercised——Cancelled/forfeited(945)0.0001December 31, 201629,1000.00018.41737,880Granted*6,8480.0001Exercised——Cancelled/forfeited(1,300)0.0001December 31, 201734,6480.00017.441,573,424Granted*6,2635.1500Exercised(19,911)0.0001Cancelled/forfeited(858)1.9962December 31, 201820,1421.51647.95353,559Vested and expected to vest as of December 31, 201819,1071.50827.94336,141Exercisable as of December 31, 20186,6610.00016.75165,714 * Nil, 50,000 and nil stock options were granted to non-employee directors in 2016, 2017 and 2018, respectively. The weighted average grant date fair value of stock options granted to employees, directors and non-employee directors for the years endedDecember 31, 2016, 2017 and 2018 was RMB20.7 (US$3.0), RMB38.1 (US$5.7) and RMB27.8 (US$4.3) per share, respectively. The total intrinsic value of stock options exercised for the years ended December 31, 2016, 2017 and 2018 was nil, nil and RMB788.9 million(US$118.3 million), respectively. The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price ofthe stock options. For the years ended December 31, 2016, 2017 and 2018, total share-based compensation expenses recognized for stock options granted toemployees, directors and non-employee directors were RMB24.0 million, RMB73.8 million and RMB110.8 million, respectively. F-54Table of Contents As of December 31, 2018, the unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options granted to theGroup’s employees, directors and non-employee directors was RMB323.9 million. Total unrecognized compensation cost is expected to be recognized over aweighted-average period of 2.9 years and may be adjusted for future changes in estimated forfeitures. In August 2018, the Company modified the exercise price of 6,263,000 stock options granted under 2017 Plan to US$5.15. The incrementalcompensation expenses of RMB16.9 million (US$2.5 million) was equal to the excess of the fair value of the modified award immediately after themodification over the fair value of the original award immediately before the modification. Prior to completion of the IPO, the exercise price of each granted stock option was US$0.0001, the Company used intrinsic value (approximately thefair value of each of the Company’s ordinary share) on the grant date to estimate the fair value of the stock options granted. After the IPO, the exercise price ofeach granted stock option is determined by the closing price of the Company’s ordinary share on the grant date, therefore, the estimated fair value of eachstock option granted is estimated on the date of grant using the binomial option-pricing model with the following assumptions: 2016 2017 2018Expected volatilityN/AN/A52.1%~54.9%Risk-free interest rate (per annum)N/AN/A3.65%~3.74%Exercise multiplesN/AN/A2.2 ~2.8Expected dividend yieldN/AN/A—Expected term (in years)N/AN/A9.8~10.0Fair value of the underlying shares on the date ofgrants (US$)1.40~3.823.82~7.583.70~4.57 2) Stock options granted to non-employees The following table sets forth the summary of activities for stock options granted to non-employees under the 2014 Plan and 2017 Plan: OptionsOutstanding Weighted AverageExercise Price Weighted AverageRemaining Contractual Life AggregateIntrinsic Value(In thousands) US$ (In years) (RMB in thousands)December 31, 2016————Granted5000.0001Exercised——Cancelled/forfeited/repurchased——December 31, 20175000.00019.5822,706Granted——Exercised——Cancelled/forfeited/repurchased——December 31, 20185000.00018.5812,439Vested and expected to vest as of December 31, 20185000.00018.5812,439Exercisable as of December 31, 20181250.00018.583,110 For the years ended December 31, 2017 and 2018, total share-based compensation expenses recognized for stock options granted to non-employeeswere RMB1.9 million and RMB2.3 million, respectively. As of December 31, 2018, the unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options granted to theGroup’s non-employees was RMB8.0 million. Total unrecognized compensation cost is expected to be recognized over a weighted average period of 2.6years and may be adjusted for future changes in estimated forfeitures. F-55Table of Contents Restricted share units The following table sets forth the summary of activities for restricted share units granted to employees, directors and non-employee directors underthe 2014 Plan and 2017 Plan: Shares Outstanding Weighted Average Grant DateFair Value (In thousands) US$December 31, 2017——Granted*1,3137.45Vested(8)7.99Cancelled(68)7.02December 31, 20181,2377.47 * 100,000 restricted share units were granted to non-employee directors in 2018. The fair value and intrinsic value of restricted share units vested for the year ended December 31, 2018 was RMB0.2 million (US$0.03 million). For the year ended December 31, 2018, total share-based compensation expenses recognized for restricted share units was RMB9.5 million. As of December 31, 2018, the unrecognized compensation cost, related to unvested restricted share units under the 2017 Plan was RMB49.7 million.Total unrecognized compensation cost is expected to be recognized over a weighted average period of 3.4 years. 20. COMMITMENTS AND CONTINGENCIES Operating lease commitments The Group leases certain office premises under non-cancelable leases. Rental expenses under operating leases for the years ended December 31,2016, 2017 and 2018 were RMB26.2 million, RMB43.2 million and RMB47.5 million, respectively. Future minimum lease payments under non-cancelable operating leases agreements are as follows: Years ending December 31, RMB in thousands201954,709202045,074202126,2132022—2023 and thereafter— F-56Table of Contents Debt obligations The Group’s debt obligations are associated with 1) the Funding Debts and interest payable to Individual Investors on Juzi Licai and other fundingpartners; 2) the borrowings to support the Group’s general operations; and 3) the liabilities to Pre-IPO Series C-1 preferred shareholders. The expected repayment amount of the debt obligations are as follows: Less than 1 year 1 - 2 years 2 - 3 years Total(RMB in thousands)Funding Debts obligationsLiabilities to Individual Investors — Juzi Licai3,014,67081,168—3,095,838Liabilities to other funding partners1,631,37176,719—1,708,090Interest payments (i)204,0378,866—212,903Total Funding Debts obligations4,850,078166,753—5,016,831Short-term borrowings438,010——438,010Interest payments (i)6,249——6,249Total short-term borrowings obligations444,259——444,259Liabilities to Pre-IPO Series C-1 preferred shareholders335,238——335,238Total liabilities to Pre-IPO Series C-1 preferred shareholders335,238——335,238 (i) Interest payments with variable interest rates are calculated using the interest rate as of December 31, 2018. 21. SUBSEQUENT EVENTS In January and March 2019, the Group granted 3,467,500 and 947,000 service-based restricted share units to its employees and directors under the2017 Plan, respectively. F-57Table of Contents 22. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION The condensed financial information of the Company has been prepared in accordance with SEC Regulation S-X Rule 5-04 and Rule 12-04, usingthe same accounting policies as set out in the Group’s consolidated financial statements, except that the Company uses the equity method to account forinvestments in its subsidiaries, VIEs and VIEs’ subsidiaries. The subsidiaries did not pay any dividend to the Company for the years presented. Certain information and footnote disclosures generally includedin financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote disclosures contain supplementalinformation relating to the operations of the Company, as such, these statements are not the general-purpose financial statements of the reporting entity andshould be read in conjunction with the notes to the consolidated financial statements of the Group. The Company did not have significant capital and other commitments or guarantees as of December 31, 2017 and 2018, except for those which havebeen separately disclosed in the consolidated financial statements. Condensed Balance Sheets (In thousands, except for share and per share data) As of December 31,2017 2018RMB RMB US$ Note 2(e)ASSETSCurrent assetsCash and cash equivalents570,359875127Amounts due from subsidiaries and other related parties98,734243,55235,423Prepaid expenses and other current assets509,776356,55451,859Total current assets1,178,869600,98187,409Non-current assetsInvestments in subsidiaries, VIEs and VIEs’ subsidiaries549,8533,516,976511,523Long-term investments21,00828,1664,097Total non-current assets570,8613,545,142515,620Total assets1,749,7304,146,123603,029LIABILITIESCurrent liabilitiesAmounts due to subsidiaries, VIEs and VIEs’ subsidiaries17,51217,5122,547Accrued expenses and other current liabilities30,69221,8193,173Total current liabilities48,20439,3315,720Total liabilities48,20439,3315,720Commitments and contingencies SHAREHOLDERS’ EQUITY:Class A Ordinary Shares ($0.0001 par value per share; 1,889,352,801 sharesauthorized, 217,070,940 shares issued and outstanding as of December 31, 2017;1,889,352,801 shares authorized, 253,693,940 shares issued, 243,090,108 sharesoutstanding as of December 31, 2018)14216023Class B Ordinary Shares ($0.0001 par value per share; 110,647,199 sharesauthorized, 110,647,199 shares issued and outstanding as of December 31, 2017;110,647,199 shares authorized, 108,147,199 shares issued and outstanding as ofDecember 31, 2018)686610Additional paid-in capital2,110,9572,328,716338,698Accumulated other comprehensive loss(14,951)(14,308)(2,081)(Accumulated deficit)/Retained Earnings(394,690)1,792,158260,659Total shareholders’ equity1,701,5264,106,792597,309Total liabilities and shareholders’ equity1,749,7304,146,123603,029 F-58Table of Contents Condensed Statements of Operations and Comprehensive (Loss)/Income (In thousands) For the Year Ended December 31,2016 2017 2018RMB RMB RMB US$ Note 2(e)Operating expenses:General and administrative expenses(1,611)(1,989)(15,686)(2,281)Total operating expenses(1,611)(1,989)(15,686)(2,281)Interest (expense)/income, net(7,458)(9,134)4,304626Equity in (loss)/income of subsidiaries, VIEs and VIEs’subsidiaries(104,996)251,4751,978,986287,831Other long-term investments related impairment(3,874)—(12,739)(1,853)Investment income——18,7532,728Others, net——3,688536(Loss)/income before income tax expense(117,939)240,3521,977,306287,587Income tax expense————Net (loss)/income(117,939)240,3521,977,306287,587Pre-IPO Preferred Shares redemption value accretion(62,299)(82,117)——Income allocation to participating Pre-IPO Preferred Shares—(132,241)——Deemed dividend to a preferred shareholder(42,679)———Net (loss)/income attributable to ordinary shareholders(222,917)25,9941,977,306287,587 Net (loss)/income(117,939)240,3521,977,306287,587Other comprehensive income/(loss):Foreign currency translation adjustments, net of nil tax1,908(31,893)64393Total comprehensive (loss)/income(116,031)208,4591,977,949287,680 Condensed Statements of Cash Flows (In thousands) For the Year Ended December 31,2016 2017 2018RMB RMB RMB US$ Note 2(e)Net cash provided by/(used in) operating activities1,040(987)(126,773)(18,438)Cash flows from investing activities:Cash paid on long-term investments(6,306)(231,986)(655,959)(95,405)Net cash used in investing activities(6,306)(231,986)(655,959)(95,405)Cash flows from financing activities:Proceeds from share issuance upon the underwriters’ exerciseof over-allotment options, net of issuance costs——95,12513,835Proceeds from initial public offering, net of issuance costs—654,319——Proceeds from receivables from Pre-IPO Series C-1 preferredshareholders—49,775170,79024,840Repurchase of Pre-IPO Preferred Shares(87,923)———Proceeds from issuance of convertible loans98,202———Payment of debt issuance cost(722)———Payment of initial public offering expenses——(23,908)(3,477)Exercise of share-based awards——142Net cash provided by financing activities9,557704,094242,02135,200Effect of exchange rate changes on cash and cash equivalentsand restricted cash6,094(3,193)(28,773)(4,185)Net increase/(decrease) in cash and cash equivalents andrestricted cash10,385467,928(569,484)(82,828)Cash and cash equivalents and restricted cash at beginning ofthe year92,046102,431570,35982,955Cash and cash equivalents and restricted cash at end of the year102,431570,359875127 F-59Table of Contents Basis of presentation The Company’s accounting policies are the same as the Group’s accounting policies with the exception of the accounting for the investments insubsidiaries, VIEs and VIEs’ subsidiaries. For the Company only condensed financial information, the Company records its investments in subsidiaries, VIEs and VIEs’ subsidiaries under theequity method of accounting as prescribed in ASC 323, Investments—Equity Method and Joint Ventures. Such investments are presented on the CondensedBalance Sheets as “Investments in subsidiaries, VIEs and VIEs’ subsidiaries” and shares in the subsidiaries, VIEs and VIEs’ subsidiaries’ (loss)/income arepresented as “Equity in (loss)/income of subsidiaries, VIEs and VIEs’ subsidiaries” on the Condensed Statements of Operations and Comprehensive(Loss)/Income. The parent company only condensed financial information should be read in conjunction with the Group’s consolidated financial statements. F-60Exhibit 4.7 Equity Pledge Contract This Equity Pledge Contract (this “Contract”) is made and entered into by and among the following parties on May 29, 2018, in Beijing, the People’sRepublic of China (“China” or “PRC”): Party A:Beijing Shijitong Technology Co., Ltd. (“Pledgee”) Unified SocialCredit Code:91110108397827646N Party B:XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; LIU Qiangdong (“Party B2”), a Chinese citizen whose ID number is ******************; Tibet Xianfeng Changqing Start-up Investment and Management Co., Ltd. (“Party B3”), a limited liability company organizedand existing under the laws of China, whose Unified Social Credit Code is 91540000585773438E; and Shenzhen Xinjie Investment Co., Ltd. (“Party B4”), a limited liability company organized and existing under the laws of China,whose Unified Social Credit Code is 91440300359619977T. Party B1, Party B2, Party B3 and Party B4 are collectively referred to as the “Pledgers” or “Party B”. Party C:Shenzhen Fenqile Network Technology Co., Ltd. Unified SocialCredit Code:914403000758305191 In this Contract, The Pledgee, the Pledgers and Party C are hereinafter referred to individually as a “Party” and collectively the “Parties”. Whereas: 1. The Pledgers are citizens/limited liability companies of China who as of the date hereof hold 100% of equity interests of Party C in total. Party C is alimited liability company registered in Shenzhen, China, engaging in enterprise image planning, enterprise marketing planning, investmentconsulting, entrusted asset management, project investment, economic information consulting; electronic commerce; technical development ofelectronic products, network products, scientific and technological products; technical development and sales of software; domestic trade; goods andtechnology import and export business; guarantee business (excluding financing guarantee business and other restricted businesses); optometry andmirror matching; technology development, sales and production of mobile phone and mobile communication equipment (managed by branches only),photography service; sales of household appliances, machinery and equipment, hardware and electricity, building materials, electronic products,cultural products, photographic equipment, computer hardware and software and peripheral equipment, cosmetics and sanitary products, chemicalproducts (excluding dangerous chemicals and a Category I precursor chemicals), sports goods, textiles, clothing, daily necessities, furniture, gold andsilver jewelry, feed, fresh fruits, vegetables, industrial products artistic gifts (except ivory products), watches and glasses, toys, automobile andmotorcycle accessories, instruments, ceramics, rubber and plastic products, flowers, decorative materials, communication equipment; (enterprisesindependently choose business projects and carry out business activities according to law; projects subject to approval according to law shall becarried out according to approved contents after approval by relevant departments; and they shall not engage in business activities of projectsprohibited or restricted by the city’s industrial policy. ) sales of health food and prepackaged food; sales of Class II, Class III medical devices;production of electronic products, photographic equipment, computer hardware and software and auxiliary equipment, household appliances;warehousing service; labor dispatch; assemble computers; book sales; wholesale of packaged seeds, fertilizers and pesticides (excluding hazardouschemicals and pesticides); retail bulk food (including aquatic products), dairy products (including infant formula milk powder). Party B1, Party B2,Party B3 and Party B4 respectively hold 31.2973%, 0.0321%, 0.0039% and 68.6667% of Party C’s equity interests. Party C acknowledges therespective rights and obligations of the Pledgers and the Pledgee hereunder and agrees to provide any necessary assistance for the registration of thePledge;  2. The Pledgee is a wholly foreign-owned enterprise registered in Beijing, China. The Pledgee and Party C entered into an Exclusive BusinessCooperation Agreement (“Exclusive Business Cooperation Agreement”) on November 4, 2014; the Pledgee entered into an Exclusive PurchaseOption Contract (“Exclusive Purchase Option Contract”) with the Pledgers and Party C on March 1, 2016; the Pledgers and Pledgee signed an Powerof Attorney Agreement (“Power of Attorney Agreement”) on May 29, 2018; The Pledgee, XIAO Wenjie and Shenzhen Xinjie Investment Co., Ltd.signed an Loan Contact(“Loan Contact”) on May 29, 2018. 3. To ensure the performance by Party C and the Pledgers of their obligations under the Exclusive Business Cooperation Agreement, Exclusive PurchaseOption Contract, Power of Attorney Agreement (collectively referred to as “Transaction Documents”), the Pledgers pledge with the Pledgee all of theirequity in Party C as security for the performance of the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, and thePower of Attorney Agreement by Party C and the Pledgers. To perform the provisions of the Transaction Documents, the Parties hereby agree as follows through mutual negotiations. 1. Definitions Unless otherwise specified herein, the terms below shall have the following meanings: 1.1 “Pledge”: shall refer to the security interest created by the Pledgers in favor of the Pledgee pursuant to Section 2 of this Contract, i.e., the right of thePledgee to be paid in priority from the proceeds from the transfer, auction or sale of the Equity Interest. 1.2 “Equity Interest”: shall refer to all equity interests currently held by and hereafter acquired by the Pledgers in Party C. 1.3 “Term of Pledge”: shall refer to the term set forth in Section 3 of this Contract. 1.4 “Transaction Documents”: shall refer to the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, the Power ofAttorney Agreement and any revision, amendment and/or restatement thereto. 1.5 “Contractual Obligations”: shall refer to all the obligations of the Pledgers under the Exclusive Purchase Option Contract, the Power of AttorneyAgreement and this Contract; as well as all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive PurchaseOption Contract and this Contract. 2 1.6 “Secured Indebtedness”: shall refer to any and all direct, indirect, derivative losses and losses of predictable benefits incurred due to any default by thePledgers and/or Party C, the amount of which shall be determined based on the pledgee’s reasonable business plan and profit forecast; service feespayable by Party C under the Exclusive Business Cooperation Agreement; and all costs and expenses incurred by the Pledgee in enforcing the Pledgersand/or Party C to perform their contractual obligations. 1.7 “Event of Default”: shall refer to any of the circumstances as enumerated in Section 7 of this Contract. 1.8 “Notice of Default”: shall refer to the notice issued by the Pledgee in accordance with this Contract declaring an Event of Default. 2. Pledge 2.1 The Pledgers agree to pledge all the Equity Interest that it lawfully owns and has the right to dispose of to the Pledgee as security for payment of theSecured Indebtedness under this Contract, and Party C hereby assents to such pledge. 2.2 During the Term of Pledge, the Pledgee is entitled to receive dividends distributed on the Equity Interest. The Pledgers may receive dividendsdistributed on the Equity Interest only with prior written consent of the Pledgee. Dividends received by the Pledgers on Equity Interest shall be, asrequired by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and applied first to pay the Secured Indebtedness; or(2) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permitted under applicable PRC laws. 2.3 The Pledgers may subscribe for capital increase in Party C only with prior written consent of the Pledgee. Any equity interest obtained by the Pledgersas a result of the Pledgers’ subscription of the increased registered capital of the Company shall also be deemed as Equity Interest. 2.4 In the event that Party C is to be liquidated or dissolved under compulsory laws of China, any interest distributed to the Pledgers upon Party C’sdissolution or liquidation shall, at the request of the Pledgee, be (i) deposited into an account designate and supervised by the Pledgee and applied firstto pay the Secured Indebtedness; or (ii) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permittedunder applicable PRC laws. 3. Term of Pledge 3.1 The Pledge shall become effective on such date when it is registered with competent administration for industry and commerce (the “AIC”) at thelocation of Party C. The Pledge shall remain effective until full discharge of all Contractual Obligations. All Parties agree that the Pledgers and Party Cshall (i) register the Pledge in the shareholders’ register of Party C within 3 business days following execution of this Contract, and (ii) submit anapplication to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution ofthis Contract. The Pledgers and Party C shall submit to the AIC all necessary documents and complete all necessary formalities to ensure that the Pledgeof the Equity Interest shall be registered with the AIC as soon as possible. 3.2 During the Term of Pledge, in the event that the Pledgers and/or Party C fail to perform the Contractual Obligations, the Pledgee shall have the right,but not the obligation, to dispose of the Pledge in accordance with the provisions of this Contract. 3 4. Custody of Equity Interest Records 4.1 During the Term of Pledge, the Pledgers shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and theshareholders’ register indicating the Pledge within one week following execution of this Contract. The Pledgee shall have custody of such documentsduring the entire Term of Pledge. 4.2 During the Term of Pledge, the Pledgers shall have the right to collect dividends accrued on the Equity Interest. 5. Representations and Warranties of the Pledgers and Party C As of the execution date of this Contract, the Pledgers and Party C hereby jointly and severally represent and warrant to the Pledgee that: 5.1 The Pledgers are the sole legal and beneficial owner of the Equity Interest. 5.2 Except for the Pledge, the Pledgers have not created any security interest or other encumbrance on the Equity Interest. 5.3 The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions of this Contract. 5.4 The Pledgers and Party C have obtained any and all approvals and consents from competent government authorities and third parties (if required) forexecution, delivery and performance of this Contract. 5.5 The execution, delivery and performance of this Contract will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of associationor other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it is a party or bywhich it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to anyParty; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or imposed with additional conditions. 6. Covenants and Further Agreement of the Pledgers and Party C 6.1 During the term of this Contract, the Pledgers and Party C hereby jointly and severally covenant to the Pledgee that the Pledgers and Party C: 6.1.1 shall not transfer the Equity Interest, create or permit the existence of any security interest or other encumbrance on the Equity Interest, withoutthe prior written consent of the Pledgee, except for the purposes of the performance of the Transaction Documents; 6.1.2 shall promptly notify the Pledgee of any event or notice received by the Pledgers that may have an impact on the Equity Interest or any portionthereof, as well as any event or notice received by the Pledgers that may have an impact on any guarantees and other obligations of the Pledgershereunder. 6.2 The Pledgers agree that the rights acquired by the Pledgee in accordance with this Contract with respect to the Pledge shall not be interrupted orjeopardized by the Pledgers or any heirs or representatives of the Pledgers or any other persons through any legal proceedings. 4 6.3 To protect or perfect the security hereunder for the Contractual Obligations and Secured Indebtedness, the Pledgers hereby undertakes to execute ingood faith and to cause other parties who have an interest in the Pledge to execute all such certificates, contracts, deeds and/or covenants, and take allsuch actions as required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority hereunder, to enter into all relevantdocuments regarding ownership of Equity Interest with the Pledgee or assignee(s) of the Pledgee (natural persons/legal persons), and to provide thePledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that the Pledgee deems necessary. 6.4 The Pledgers hereby undertakes to comply with and perform all guarantees, promises, agreement, representations and conditions of and under thisContract. In the event of failure or partial performance of such guarantees, promises, agreements, representations and conditions, the Pledgers shallindemnify the Pledgee for all losses resulting therefrom. 7. Event of Breach 7.1 The following circumstances shall be deemed Event of Default: 7.1.1 The Pledgers and/or Party B breach any obligations under the Transaction Documents and/or this Contract; 7.1.2 The Pledgers have serious misstatement or mistake in any statement or warranty made in Section 5 of this Contract and/or the Pledgers violateany warranty in Section 5 of this Contract; 7.1.3 The Pledgers and Party C fail to complete the registration of equity pledge with the registration authority in accordance with Section 3.1. 7.1.4 The Pledgers and Party C violate any provision of this Contract; 7.1.5 Except otherwise clearly stipulated in Section 6.1.1, the Pledgers transfer or intend to transfer or surrender the Equity Interest or assign theEquity Interest without the Pledgee’s written consent; 7.1.6 The Pledgers (i) are required to repay or perform in advance or (ii) fails to repay or perform upon maturity any debt obligations owed to anythird party such as loan, guarantee, indemnification and promise; 7.1.7 Any government approval, license, permit or authorization that renders this Contract enforceable, lawful and valid is withdrawn, terminated,invalid or substantially changed; 7.1.8 The enactment of governing laws renders this Contract unlawful or makes the Pledgers unable to continue performing its obligationshereunder; 7.1.9 The Pledgers’ assets experience negative change to the extent that affects the Pledgers’ ability to perform its obligations hereunder; 7.1.10 Party B’s heirs or custodians only partially perform or refuse to perform their payment obligations under the Transaction Documents; 7.1.11 Any other circumstance where the Pledgers cannot or possibly cannot exercise its rights over the Pledge. 7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1,the Pledgers shall immediately notify the Pledgee in writing accordingly. 5 7.3 Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to the Pledgee’s satisfaction, the Pledgee may issue a Notice ofDefault to the Pledgers upon the occurrence of the Event of Default or at any time thereafter, demanding the Pledgers and/or Party C to immediatelyperform their due obligations under the Transaction Documents and/or dispose of the Pledge in accordance with Section 8 of this Contract. 8. Exercise of Pledge 8.1 When the Pledgers and Party C are yet to fully perform their Contractual Obligations under the Transaction Documents, the Pledgers shall not transferthe Pledge or its Equity Interest in Party C without the Pledgee’s written consent. 8.2 The Pledgee may issue a written Notice of Default to the Pledgers when it exercises the Pledge. 8.3 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Defaultin accordance with Section 8.2. Once the Pledgee elects to exercise the right to dispose the Pledge, the Pledgers shall cease to be entitled to any rightsor interests associated with the Equity Interest. 8.4 The Pledgee shall the have right to be paid in priority with all or part of the Equity Interest from the proceeds from the transfer, auction or sale of theEquity Interest until the complete compensation of all outstanding payments due under the Transaction Documents and all other due payments to thePledgee. The Pledgee shall not be liable for any loss incurred by its due exercise of such rights and powers. 8.5 The Pledgee may exercise any remedy available simultaneously or in any order. The Pledgee may exercise the right to be paid in priority with theEquity Interest from the proceeds from auction or sale of the Equity Interest under this Contract, without recourse to any other remedy measure first. 8.6 When the Pledgee disposes of the Pledge in accordance with this Contract, the Pledgers and Party C shall provide necessary assistance to enable thePledgee to enforce the Pledge in accordance with this Contract. 9. Assignment 9.1 Without the Pledgee’s prior written consent, the Pledgers shall not assign or delegate their rights and obligations under this Contract. 9.2 This Contract shall be binding on the Pledgers and his/her successors and permitted assignees, and shall be valid with respect to the Pledgee and eachof his/her successors and assignees. 9.3 The Pledgee may at any time assign any and all of its rights and obligations under the Transaction Documents to its assignee(s) (natural persons/legalpersons), in which case the assignee shall enjoy and undertake the rights and obligations of the Pledgee under this Contract, as if it were the originalparty to this Contract. When the assignee transfers its rights and obligations under the Transaction Documents, the Pledgers shall execute relevantagreements or other documents related to such transfer as required by the Pledgee. 9.4 In the event of change of the Pledgee due to assignment, the Pledgers shall, at the request of the Pledgee, execute a new pledge contract with the newthe Pledgee on the same terms and conditions as this Contract. 6 9.5 The Pledgers shall strictly abide by the provisions of this Contract and other contracts jointly or separately executed by all or any of the Parties hereto,including the Exclusive Purchase Option Contract and the Power of Attorney Agreement, perform the obligations hereunder and thereunder, and refrainfrom any action/omission that may affect the effectiveness and enforceability hereof and thereof. Any residual rights of the Pledgers with respect to theEquity Pledged hereunder shall not be exercised by the Pledgers except in accordance with the written instructions of the Pledgee. 10. Termination Upon the sufficient and complete fulfillment of all Contractual Obligations and the full payment of all Secured Indebtedness by the Pledgers and PartyC, this Contract shall be terminated and the Pledgee shall terminate this Contract within reasonable and effective scope. Sections 10, 12 and 14 of this Contract shall survive the expiration or termination of this Contract. 11. Handling Fees and Other Expenses All fees and out of pocket expenses relating to this Contract, including but not limited to legal costs, costs of production, stamp tax and any other taxesand fees, shall be borne by Party C. If the Pledgee is required under applicable laws to bear certain taxes and fees, the Pledgers shall cause Party C toreimburse in full such taxes and fees paid by the Pledgee. 12. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) is orbecomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed by applicablelaws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels or financialadvisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 13. Governing Law and Dispute Resolution 13.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the dispute resolution hereunder shall begoverned by the promulgated and publicly available laws of China. For matters not covered by the promulgated and publicly available laws of China,the principles and practices of international laws shall apply. 13.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission(CIETAC) for arbitration in accordance with its then effective Arbitration Rules. The arbitration shall be conducted in Beijing. The language ofarbitration shall be Chinese. The arbitration award shall be final and binding on all Parties. 7 13.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 14. Notices 14.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 14.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices. 14.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 14.2 The addresses of the Parties for receiving notices are as follows: Party A:Beijing Shijitong Technology Co., Ltd.Address:27/F CES Tower, No. 3099 Keyuan South Road, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 Party B:Address:27/F CES Tower, No. 3099 Keyuan South Road, Nanshan District, ShenzhenTel.:0755-36378888 Party C:Shenzhen Fenqile Network Technology Co., Ltd.Address:27/F CES Tower, No. 3099 Keyuan South Road, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 14.3 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof. 8 15. Severability In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 16. Schedules The schedules hereto shall form an integral part of this Contract. 17. Effectiveness 17.1 This Contract shall come into force upon being signed by the Parties. Any amendment, change and supplement to this Contract shall be made inwritten form and become effective after being signed and stamped by the Parties and upon the completion of the registration with the government (ifapplicable). 17.2 This Contract is written in Chinese and English in six counterparts of equal legal force, with each Party holding one. 17.3 The Equity Pledge Contract signed by the Parties on March 1, 2016 shall be automatically terminated as at the execution date hereof. [Signature page follows] 9 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Pledge Contract as of the date first above written. Party A:Beijing Shijitong Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Party B: By:/s/ XIAO WenjieName:XIAO Wenjie By:/s/ LIU QiangdongName:LIU Qiangdong Tibet Xianfeng Changqing Start-up Investment and Management Co., Ltd. By:/s/ CHEN KeyiName:CHEN KeyiTitle:Legal Representative Shenzhen Xinjie Investment Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Party C:Shenzhen Fenqile Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative  Schedules 1. Capital Contribution Certificate 2. Shareholders’ Register of Shenzhen Fenqile Network Technology Co., Ltd.  Schedule 1 Capital Contribution Certificate This is to certify that XIAO Wenjie (ID No. ******************) has subscribed to the contribution of RMB 469,458,986.00, thus holding 31.2973%equity interest of Shenzhen Fenqile Network Technology Co., Ltd. and that all of such 31.2973% equity interest has been pledged to Beijing ShijitongTechnology Co., Ltd. Company:Shenzhen Fenqile Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:May 29, 2018  Schedule 1 Capital Contribution Certificate This is to certify that LIU Qiangdong (ID No. ******************) has subscribed to the contribution of RMB 482,190.00, thus holding 0.0321% equityinterest of Shenzhen Fenqile Network Technology Co., Ltd. and that all of such 0.0321% equity interest has been pledged to Beijing Shijitong TechnologyCo., Ltd. Company:Shenzhen Fenqile Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:May 29, 2018  Schedule 1 Capital Contribution Certificate This is to certify that Tibet Xianfeng Changqing Start-up Investment and Management Co., Ltd. (Unified Social Credit Code: 91540000585773438E) hassubscribed to the contribution of RMB 58,824.00, thus holding 0.0039% equity interest of Shenzhen Fenqile Network Technology Co., Ltd. and that all ofsuch 0.0039% equity interest has been pledged to Beijing Shijitong Technology Co., Ltd. Company:Shenzhen Fenqile Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:May 29, 2018  Schedule 1 Capital Contribution Certificate This is to certify that Shenzhen Xinjie Investment Co., Ltd. (Unified Social Credit Code: 91440300359619977T) has subscribed to the contribution of RMB1,030,000,000.00, thus holding 68.6667% equity interest of Shenzhen Fenqile Network Technology Co., Ltd. and that all of such 68.6667% equity interesthas been pledged to Beijing Shijitong Technology Co., Ltd. Company:Shenzhen Fenqile Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:May 29, 2018  Schedule 2 Shareholders’ RegisterofShenzhen Fenqile Network Technology Co., Ltd. Shareholder’sname ID No. /Registration No. Amount ofSubscription(RMB) Ratio ofContribution Equity PledgeXIAO Wenjie******************469,458,986.0031.2973%XIAO Wenjie owns31.2973% equity interest ofShenzhen Fenqile NetworkTechnology Co., Ltd. andall of such 31.2973% equityinterest has been pledged toBeijing ShijitongTechnology Co., Ltd.LIU Qiangdong******************482,190.000.0321%LIU Qiangdong owns0.0321% equity interest ofShenzhen Fenqile NetworkTechnology Co., Ltd. andall of such 0.0321% equityinterest has been pledged toBeijing ShijitongTechnology Co., Ltd.Tibet Xianfeng ChangqingStart-up Investment andManagement Co., Ltd.91540000585773438E58,824.000.0039%Tibet Xianfeng ChangqingStart-up Investment andManagement Co., Ltd. owns0.0039% equity interest ofShenzhen Fenqile NetworkTechnology Co., Ltd. andall of such 0.0039% equityinterest has been pledged toBeijing ShijitongTechnology Co., Ltd.Shenzhen Xinjie InvestmentCo., Ltd.91440300359619977T1,030,000,000.0068.6667%Shenzhen Xinjie InvestmentCo., Ltd. owns 68.6667%equity interest of ShenzhenFenqile NetworkTechnology Co., Ltd. andall of such 68.6667% equityinterest has been pledged toBeijing ShijitongTechnology Co., Ltd. Company:Shenzhen Fenqile Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative  Shareholder:XIAO WenjieShareholder:LIU Qiangdong Signature:/s/ XIAO WenjieSignature:/s/ LIU Qiangdong Shareholder:Tibet Xianfeng Changqing Start-up Investment andManagement Co., Ltd.Shareholder:Shenzhen Xinjie Investment Co., Ltd. By:/s/ CHEN KeyiBy:/s/ XIAO WenjieName:CHEN KeyiName:XIAO WenjieTitle:Legal RepresentativeTitle:Legal Representative Date:May 29, 2018 Exhibit 4.8 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on May 29, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: LIU Qiangdong, a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 0.0321% of the equity interests (“Party B Equity”) in Shenzhen Fenqile Network Technology Co., Ltd. (“Shenzhen Fenqile”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Shenzhen Fenqile; (2 exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Shenzhen Fenqile, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A.  Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Shenzhen Fenqile, this Agreement and the authorization hereunder shall be irrevocable and remain in full forceas from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on March 1, 2016 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 2 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Party B: Signature:/s/ LIU QiangdongName:LIU Qiangdong 3 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on May 29, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: Shenzhen Xinjie Investment Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified Social CreditCode is 91440300359619977T. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 68.6667% of the equity interests (“Party B Equity”) in Shenzhen Fenqile Network Technology Co., Ltd. (“Shenzhen Fenqile”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Shenzhen Fenqile; (2) exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Shenzhen Fenqile, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. 4 Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Shenzhen Fenqile, this Agreement and the authorization hereunder shall be irrevocable and remain in full forceas from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on March 1, 2016 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 5 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Party B:Shenzhen Xinjie Investment Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative 6 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on May 29, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: XIAO Wenjie, a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 31.2973% of the equity interests (“Party B Equity”) in Shenzhen Fenqile Network Technology Co., Ltd. (“Shenzhen Fenqile”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Shenzhen Fenqile; (2 exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Shenzhen Fenqile, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. 7 Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Shenzhen Fenqile, this Agreement and the authorization hereunder shall be irrevocable and remain in full forceas from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on March 1, 2016 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 8 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ XIAO Wenjie Name:XIAO Wenjie 9 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on May 29, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: Tibet Xianfeng Changqing Start-up Investment and Management Co., Ltd., a limited company duly incorporated and existing under the lawsof China, whose Unified Social Credit Code is 91540000585773438E. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 0.0039% of the equity interests (“Party B Equity”) in Shenzhen Fenqile Network Technology Co., Ltd. (“Shenzhen Fenqile”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Shenzhen Fenqile; (2) exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Shenzhen Fenqile, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. 10 Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Shenzhen Fenqile, this Agreement and the authorization hereunder shall be irrevocable and remain in full forceas from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on March 1, 2016 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 11 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B:Tibet Xianfeng Changqing Start-up Investment andManagement Co., Ltd. By:/s/ CHEN Keyi Name:CHEN Keyi Title:Legal Representative 12Exhibit 4.9 LOAN CONTRACT This Loan Contract (this “Contract”) is executed on May 29, 2018 in Beijing, the People’s Republic of China (the “PRC”) by and between: Party A:Beijing Shijitong Technology Co., Ltd. (the “Lender”) Unified Social Credit Code:91110108397827646N Party B: XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; Shenzhen Xinjie Investment Co., Ltd. (“Party B2”), a a limited liability company organized and existing under the laws of PRC, whose unified social creditcode is 91440300359619977T; Party B1 and Party B2, collectively the “Borrowers”. The Lender and the Borrowers are hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS: The Borrowers hold in aggregate 99.9639% equity interests (the “Borrower Interests”) in Shenzhen Fenqile Network Technology Co., Ltd. (Unified SocialCredit Code: 914403000758305191) (the “Borrower Company”), a limited liability company incorporated in Shenzhen, the PRC with a registered capitalof RMB1,500,000,000.00. The Lender intends to extend a loan to the Borrowers for the purposes set out in this Contract. The Parties hereby agree as follows through friendlyconsultations: 1. Loan 1.1 In accordance with the terms and conditions of this Contract, the Lender agrees to extend a loan totaling RMB1,498,458,986 (the “Loan”) to theBorrowers. The term of the Loan shall be ten (10) years as from the execution date of this Contract. Unless otherwise agreed by the Parties in writing,the term of the Loan shall be renewed automatically upon each of its expirations for another ten (10) years. 1.2 During the original or renewed term of the Loan, the Borrowers must make prepayment immediately upon occurrence of any of the followingcircumstances: 1.1.1 where the 30-day period expires after the Borrowers receive the written notice demanding repayment from the Lender; 1.1.2 where the Borrower, in the case of an individual, dies, losses or becomes limited in terms of civil capacity, or in the case of a limited liabilitycompany, is dissolved or liquidated;  1.1.3 where the Borrowers are no longer employed by the Lender, the Borrower Company or their affiliates for whatever reason; 1.1.4 where the Borrowers are engaged or involved in criminal activities; 1.1.5 where any third party make claims against the Borrowers with an amount of RMB100,000 or more; or 1.1.6 where in accordance with the applicable PRC laws, the Lender may directly hold the equity interests in the Borrower Company, the BorrowerCompany may lawfully continue with its business, and the Lender decides to exercise its exclusive purchase option under the exclusivepurchase option contract (the “Exclusive Purchase Option Contract”) referred to herein. 1.2 Subject to satisfaction of all conditions precedent set out in Section 2, the Lender agrees to remit the Loan to the bank account designated by theBorrowers within twenty (20) days of the receipt of the written notice indicating the Borrowers’ demand for the Loan. The Borrowers shall issue anacknowledgement of receipt to the Lender on the same day when they receive such amount. The Loan extended by the Lender under this Contract shallbe utilized by the Borrowers only, and shall not be used by the successors or assignees of the Borrowers. 1.3 The Borrowers agree to accept the above Loan extended by the Lender, and hereby agree and undertake to use the Loan for funding businessdevelopment of the Borrower Company. Without prior written consent of the Lender, the Borrowers shall not use such amount for any other purpose. 1.4 Both the Lender and the Borrowers agree and acknowledge that the Borrowers may make repayment only in following manner determined by theLender: the Borrowers shall transfer all the Borrower Interests they hold to the Lender or the legal or natural person designated by the Lender upon theLender’s exercise of its option to buy the Borrower Interests under the Exclusive Purchase Option Contract. 1.5 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted, any proceeds obtained by the Borrowers from transfer of theBorrower Interests shall be used for repaying for the Loan in accordance with this Contract in such manner as designated by the Lender. 1.6 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted by applicable laws, the Lender shall have the right but noobligation to buy, or designated other legal or natural persons to buy, in whole or in part the Borrower Interests at any time at the purchase price agreedunder the Exclusive Purchase Option Contract. 1.7 Both the Lender and the Borrowers agree and acknowledge that the Borrowers agree to create a pledge over all the equity interests they hold in theBorrower Company in favor of the Lender to secure the debt repayment hereunder. For the avoidance of doubt, the Parties acknowledge that, inaddition to the debt under this Contract, the principal debt secured by the equity pledge under this section also includes all the debts owed by theBorrowers and the Borrower Company to the Lender under the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contractand the Power of Attorney Agreement (as defined below). 1.8 Each of the Borrowers has executed an irrevocable Power of Attorney Agreement (the “Power of Attorney Agreement”), under which they authorizethe Lender or any legal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company. 2 1.9 When the Borrowers transfer their Borrower Interests to the Lender or the person designated by the Lender, if the transfer price is equal to or lower thanthe principal of the Loan under this Contract, the Loan under this Contract shall be deemed to be interest free loan; if the transfer price is higher thanthe principal of the Loan under this Contract, the portion of the transfer price in excess of the principal shall be deemed to be the interests on theprincipal of the Loan and shall be repaid by the Borrowers to the Lender. 2. Conditions Precedent for Loan Extending The Lender will not be obligated to extend the Loan to the Borrowers in accordance with Section 1.1 unless and until all the conditions below aresatisfied or waived by the Lender in writing. 2.1 The Lender receives on time the drawdown notice duly signed by the Borrowers in accordance with Section 1.2. The Borrower Company and theLender or the legal or natural person designated by the Lender has duly entered into a definite exclusive business cooperation agreement (the“Exclusive Business Cooperation Agreement”), under which the Lender or the person designated by the Lender will, to the extent permitted by thePRC laws, provide the Borrower Company with technical services and business consultancy services in the capacity of an exclusive service provider. 2.2 The Borrower, the Borrower Company and the Lender or the legal or natural person designated by the Lender have duly entered into a definite equitypledge contract (the “Equity Pledge Contract”), under which the Borrowers agree to create a pledge over all the Borrower Interests in favor of theLender or the person designated by the Lender. 2.3 The Borrower, the Lender and the Borrower Company have duly entered into a definite Exclusive Purchase Option Contract, under which theBorrowers will, to the extent permitted by the PRC laws, irrevocably grant the Lender an exclusive Purchase Option to buy all Borrower Interests. 2.4 The Borrowers and the Lender have entered into an irrevocable Power of Attorney Agreement, under which the Borrowers authorize the Lender or anylegal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company 2.5 The above Equity Pledge Contract, Power of Attorney Agreement, Exclusive Purchase Option Contract and Exclusive Business CooperationAgreement are executed on or prior to the execution date of this Contract, and entered into full legal force. There have been no event that breaches orprejudices any of such contracts or agreements, and all the relevant filings, approvals, authorizations, registrations and government procedures havebeen secured or completed in accordance with such contracts or agreements, if required. 2.6 The representations and warranties made by the Borrowers under Section 3.2 are truthful, complete and accurate, and contain no misleading content. 2.7 The Borrowers have not breached any of the undertakings they make under Section 4 of this Contract, and there is no actual or threatened event thatmay affect the performance of their obligations under this Contract. 3 3. Representations and Warranties 3.1 From the execution date to the termination of this Contract, the Lender represents and warrants to the Borrowers as follows: 3.1.1 The Lender is a company duly incorporated and existing under the PRC laws; 3.1.2 The Lender has the authority to execute and perform this Contract. Its execution and performance of this Contract are in line with its scope ofbusiness and the provisions in its articles of association and other constitutional documents. The Lender has obtained all necessary andappropriate approvals and authorizations required for the execution and performance of this Contract; and 3.1.3 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Lender. 3.2 From the execution date to the termination of this Contract, the Borrowers represent and warrant as follows: 3.2.1 The Borrowers have the authority to execute and perform this Contract, and have obtained all necessary and appropriate approvals andauthorizations required for the execution and performance of this Contract; 3.2.2 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Borrowers; and 3.2.3 There is no actual or potential dispute, action, arbitration, administrative procedures or other legal proceedings involving the Borrowers. 4. Undertakings of the Borrowers 4.1 The Borrowers irrevocably undertake in the capacity of the shareholders of the Borrower Company that they will, during the term of this Contract,procure the Borrower Company: 4.1.1 to strictly comply with the provisions of the Exclusive Purchase Option Contract and the Exclusive Business Cooperation Agreement, and notto engage in any action or omission that is sufficient to affect the validity and enforceability of the Exclusive Purchase Option Contract and theExclusive Business Cooperation Agreement; 4.1.2 to enter into contracts/agreements on business cooperation with the Lender or the person designated by the Lender or the person designated bythe Lender at any time as requested by the Lender, and ensure the strict performance of such contracts/agreements; 4.1.3 to provide the Lender with all its operating and financial information at the request of the Lender; 4.1.4 to inform the Lender promptly of any existing or potential litigation, arbitration or administrative procedures in connection with its assets,business and revenue; and 4.1.5 to appoint any person designated by the Lender as director of the Borrower Company at the request of the Lender. 4.2 The Borrowers undertake that during the term of this Contract: 4 4.2.1 they shall exert their best efforts to cause the Borrower Company to continue with its existing business; 4.2.2 they shall strictly comply with the provisions of this Contract, the Power of Attorney Agreement, the Equity Pledge Contract and the ExclusivePurchase Option Contract, and shall not engage in any action or omission that is sufficient to affect the validity and enforceability of thisContract, the Power of Attorney Agreement, the Equity Pledge Contract and the Exclusive Purchase Option Contract; 4.2.3 unless otherwise provided under the Equity Pledge Contract, they shall not sell, transfer, charge or otherwise dispose of the legal or beneficialinterests in the Borrower Interests, or permit any other security interests to be created over the same; 4.2.4 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove any sale, transfer, charge or otherdisposal of the legal or beneficial interests in the Borrower Interests, or permission of any other security interests to be created over the same, ineach case without prior written consent of the Lender, unless in favor of the Lender or the person designated by the Lender; 4.2.5 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove the merger or consolidation ofthe Borrower Company with any person or acquisition of or investment in any person by the Borrower Company, in each case without priorwritten consent of the Lender; 4.2.6 they shall inform the Lender promptly of any actual or threatened litigation, arbitration or administrative procedures in connection with theBorrower Interests; 4.2.7 they shall execute all such documents, take all such actions, make all such allegations, or present such defense against all claims as arenecessary and appropriate for maintaining their ownership over the Borrower Interests; 4.2.8 without prior written consent of the Lender, they shall not take any action or omission that may cause a material adverse effect on the assets,business and liabilities of the Borrower Company; 4.2.9 they shall, at the request of the Lender, appoint any person designated by the Lender as director of the Borrower Company; 4.2.10 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, unconditionally transfer the BorrowerInterests to the Lender or the person designated by the Lender, and cause other shareholders of the Borrower Company to waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.11 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, cause other shareholders of the BorrowerCompany to unconditionally transfer all the equity interests they hold in the Borrower Company to the Lender or the representative designatedby the Lender, in which case, the Borrowers shall waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.12 the Borrowers shall use the purchase price for repaying for the Loan first if the Lender purchases the Borrower Interests from them in accordancewith the Exclusive Purchase Option Contract; and 5 4.2.13 without prior written consent of the Lender, they shall not supplement, change or amend their articles of association in any manner, increase ordecrease the registered capital, or change the capital structure in any form. 5. Liabilities for Breach of Contract 5.1 Either Party that breaches this Contract and thus causes it impossible to perform this Contract in whole or in part shall bear the liability for breach ofcontract, and indemnify the other Party against the losses (including litigation fees and attorney fees) thus caused. Where both Parties are in breach ofthis Contract, they shall bear their respective liabilities according to the actual circumstances. 5.2 Where the Borrowers fail to perform their obligations to make repayment within the period set out in this Contract, they shall pay the default interestsat a rate of 0.1% of the overdue amount on a daily basis, until all the principal, default interests and other amount are paid up. 6. Notice 6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 6.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices; or 6.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 6.2 The addresses of the Parties for receiving notices are as follows: Lender: Beijing Shijitong Technology Co., Ltd. Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-3368 8788 Borrowers: XIAO Wenjie Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:0755-******** 6 LI Wenbin Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** 6.3 Any Party may send a notice to the other Party as provided in this Section to change its address used to receive notice. 7. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) is orbecomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed by applicablelaws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels or financialadvisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 8. Governing Law and Dispute Resolution 8.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the resolution of disputes hereunder shall begoverned by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws ofChina shall be governed by international legal principles and practices. 8.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission forarbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the language shall be Chinese. Thearbitration award shall be final and binding on all Parties. 8.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 9. Miscellaneous 9.1 This Contract shall take effect on the day when it is executed by the Parties and expire on the day when the Parties have completed the performance oftheir obligations under this Contract. 9.2 This Contract is made in Chinese in four counterparts of equal legal force with each of the Lender and the Borrower holding one. 9.3 The Parties may amend and supplement this Contract by written agreement. The amendment agreement and/or supplementary agreement among theParties in connection with this Contract shall be integral part of and have the equal legal effect with this Contract. 7 9.4 In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 9.5 The schedules, if any, to this Contract shall be integral part of and have equal legal effect with this Contract. [Signature page follows] 8 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute sign this Loan Contract as of the date first above written. Lender: Beijing Shijitong Technology Co., Ltd. (Seal) By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Borrowers: By:/s/ XIAO Wenjie Name:XIAO Wenjie Shenzhen Xinjie Investment Co., Ltd. By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative  Appendix 1 Loan Amount BorrowerLoan Amount (RMB)Shenzhen Xinjie Investment Co., Ltd.1,030,000,000XIAO Wenjie468,458,986Total1,498,458,986 Exhibit 4.12 Equity Pledge Contract This Equity Pledge Contract (this “Contract”) is made and entered into by and among the following parties on October 10, 2018, in Beijing, the People’sRepublic of China (“China” or “PRC”): Party A:Beijing Shijitong Technology Co., Ltd. (“Pledgee”) Unified Social Credit Code:91110108397827646N Party B:XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; and LIU Qiangdong (“Party B2”), a Chinese citizen whose ID number is ******************; Party B1 and Party B2 are collectively referred to as the “Pledgers” or “Party B”. Party C:Beijing Lejiaxin Network Technology Co., Ltd. Unified Social Credit Code:91110105080484040M In this Contract, The Pledgee, the Pledgers and the Party C are hereinafter referred to individually as a “Party” and collectively the “Parties”. Whereas: 1. The Pledgers are citizens/limited liability companies of China who as of the date hereof hold 100% of equity interests of Party C in total. Party C is alimited liability company registered in Beijing, China, engaging in technology promotion service; enterprise planning; business managementconsulting; investment management; investment consultation; asset management; import and export of goods; technology import and export; exportand import agency; sale of electronic product, communication equipment, daily necessities, arts and crafts, sports goods and camera equipment. PartyB1 and Party B2 respectively hold 99.87% and 0.13% of Party C’s equity interests. Party C acknowledges the respective rights and obligations of thePledgers and the Pledgee hereunder and agrees to provide any necessary assistance for the registration of the Pledge; 2. The Pledgee is a wholly foreign-owned enterprise registered in Beijing, China. The Pledgee and Party C entered into an Exclusive BusinessCooperation Agreement (“Exclusive Business Cooperation Agreement”) on July 18, 2014; the Pledgee entered into an Exclusive Purchase OptionContract (“Exclusive Purchase Option Contract”) with the Pledgers and Party C on July 18, 2014; the Pledgers and Pledgee signed an Power ofAttorney Agreement (“Power of Attorney Agreement”) on October 10, 2018; the Pledgers and Pledgee signed an Loan Contract(“Loan Contract”) onOctober 10, 2018;  3. To ensure the performance by Party C and the Pledgers of their obligations under the Exclusive Business Cooperation Agreement, Exclusive PurchaseOption Contract, Power of Attorney Agreement (collectively referred to as “Transaction Documents”), the Pledgers pledge with the Pledgee all of theirequity in Party C as security for the performance of the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, and thePower of Attorney Agreement by Party C and the Pledgers. To perform the provisions of the Transaction Documents, the Parties hereby agree as follows through mutual negotiations. 1. Definitions Unless otherwise specified herein, the terms below shall have the following meanings: 1.1 “Pledge”: shall refer to the security interest created by the Pledgers in favor of the Pledgee pursuant to Section 2 of this Contract, i.e., the right of thePledgee to be paid in priority from the proceeds from the transfer, auction or sale of the Equity Interest. 1.2 “Equity Interest”: shall refer to all equity interests currently held by and hereafter acquired by the Pledgers in Party C. 1.3 “Term of Pledge”: shall refer to the term set forth in Section 3 of this Contract. 1.4 “Transaction Documents”: shall refer to the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, the Power ofAttorney Agreement and any revision, amendment and/or restatement thereto. 1.5 “Contractual Obligations”: shall refer to all the obligations of the Pledgers under the Exclusive Purchase Option Contract, the Power of AttorneyAgreement and this Contract; as well as all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive PurchaseOption Contract and this Contract. 1.6 “Secured Indebtedness”: shall refer to any and all direct, indirect, derivative losses and losses of predictable benefits incurred due to any default by thePledgers and/or Party C, the amount of which shall be determined based on the pledgee’s reasonable business plan and profit forecast; service feespayable by Party C under the Exclusive Business Cooperation Agreement; and all costs and expenses incurred by the Pledgee in enforcing the Pledgersand/or Party C to perform their contractual obligations. 1.7 “Event of Default”: shall refer to any of the circumstances as enumerated in Section 7 of this Contract. 1.8 “Notice of Default”: shall refer to the notice issued by the Pledgee in accordance with this Contract declaring an Event of Default. 2 2. Pledge 2.1 The Pledgers agree to pledge all the Equity Interest that it lawfully owns and has the right to dispose of to the Pledgee as security for payment of theSecured Indebtedness under this Contract, and Party C hereby assents to such pledge. 2.2 During the Term of Pledge, the Pledgee is entitled to receive dividends distributed on the Equity Interest. The Pledgers may receive dividendsdistributed on the Equity Interest only with prior written consent of the Pledgee. Dividends received by the Pledgers on Equity Interest shall be, asrequired by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and applied first to pay the Secured Indebtedness; or(2) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permitted under applicable PRC laws. 2.3 The Pledgers may subscribe for capital increase in Party C only with prior written consent of the Pledgee. Any equity interest obtained by the Pledgersas a result of the Pledgers’ subscription of the increased registered capital of the Company shall also be deemed as Equity Interest. 2.4 In the event that Party C is to be liquidated or dissolved under compulsory laws of China, any interest distributed to the Pledgers upon Party C’sdissolution or liquidation shall, at the request of the Pledgee, be (i) deposited into an account designate and supervised by the Pledgee and applied firstto pay the Secured Indebtedness; or (ii) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permittedunder applicable PRC laws. 3. Term of Pledge 3.1 The Pledge shall become effective on such date when it is registered with competent administration for industry and commerce (the “AIC”) at thelocation of Party C. The Pledge shall remain effective until full discharge of all Contractual Obligations. All Parties agree that the Pledgers and Party Cshall (i) register the Pledge in the shareholders’ register of Party C within 3 business days following execution of this Contract, and (ii) submit anapplication to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution ofthis Contract. The Pledgers and Party C shall submit to the AIC all necessary documents and complete all necessary formalities to ensure that the Pledgeof the Equity Interest shall be registered with the AIC as soon as possible. 3.2 During the Term of Pledge, in the event that the Pledgers and/or Party C fail to perform the Contractual Obligations, the Pledgee shall have the right,but not the obligation, to dispose of the Pledge in accordance with the provisions of this Contract. 4. Custody of Equity Interest Records 4.1 During the Term of Pledge, the Pledgers shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and theshareholders’ register indicating the Pledge within one week following execution of this Contract. The Pledgee shall have custody of such documentsduring the entire Term of Pledge. 3 4.2 During the Term of Pledge, the Pledgers shall have the right to collect dividends accrued on the Equity Interest. 5. Representations and Warranties of the Pledgers and Party C As of the execution date of this Contract, the Pledgers and Party C hereby jointly and severally represent and warrant to the Pledgee that: 5.1 The Pledgers are the sole legal and beneficial owner of the Equity Interest. 5.2 Except for the Pledge, the Pledgers have not created any security interest or other encumbrance on the Equity Interest. 5.3 The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions of this Contract. 5.4 The Pledgers and Party C have obtained any and all approvals and consents from competent government authorities and third parties (if required) forexecution, delivery and performance of this Contract. 5.5 The execution, delivery and performance of this Contract will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of associationor other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it is a party or bywhich it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to anyParty; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or imposed with additional conditions. 6. Covenants and Further Agreement of the Pledgers and Party C 6.1 During the term of this Contract, the Pledgers and Party C hereby jointly and severally covenant to the Pledgee that the Pledgers and Party C: 6.1.1 shall not transfer the Equity Interest, create or permit the existence of any security interest or other encumbrance on the Equity Interest, withoutthe prior written consent of the Pledgee, except for the purposes of the performance of the Transaction Documents; 6.1.2 shall promptly notify the Pledgee of any event or notice received by the Pledgers that may have an impact on the Equity Interest or any portionthereof, as well as any event or notice received by the Pledgers that may have an impact on any guarantees and other obligations of the Pledgershereunder. 6.2 The Pledgers agree that the rights acquired by the Pledgee in accordance with this Contract with respect to the Pledge shall not be interrupted orjeopardized by the Pledgers or any heirs or representatives of the Pledgers or any other persons through any legal proceedings. 6.3 To protect or perfect the security hereunder for the Contractual Obligations and Secured Indebtedness, the Pledgers hereby undertakes to execute ingood faith and to cause other parties who have an interest in the Pledge to execute all such certificates, contracts, deeds and/or covenants, and take allsuch actions as required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority hereunder, to enter into all relevantdocuments regarding ownership of Equity Interest with the Pledgee or assignee(s) of the Pledgee (natural persons/legal persons), and to provide thePledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that the Pledgee deems necessary. 4 6.4 The Pledgers hereby undertakes to comply with and perform all guarantees, promises, agreement, representations and conditions of and under thisContract. In the event of failure or partial performance of such guarantees, promises, agreements, representations and conditions, the Pledgers shallindemnify the Pledgee for all losses resulting therefrom. 7. Event of Breach 7.1 The following circumstances shall be deemed Event of Default: 7.1.1 The Pledgers and/or Party B breach any obligations under the Transaction Documents and/or this Contract; 7.1.2 The Pledgers have serious misstatement or mistake in any statement or warranty made in Section 5 of this Contract and/or the Pledgers violateany warranty in Section 5 of this Contract; 7.1.3 The Pledgers and Party C fail to complete the registration of equity pledge with the registration authority in accordance with Section 3.1. 7.1.4 The Pledgers and Party C violate any provision of this Contract; 7.1.5 Except otherwise clearly stipulated in Section 6.1.1, the Pledgers transfer or intend to transfer or surrender the Equity Interest or assign theEquity Interest without the Pledgee’s written consent; 7.1.6 The Pledgers (i) are required to repay or perform in advance or (ii) fails to repay or perform upon maturity any debt obligations owed to anythird party such as loan, guarantee, indemnification and promise; 7.1.7 Any government approval, license, permit or authorization that renders this Contract enforceable, lawful and valid is withdrawn, terminated,invalid or substantially changed; 7.1.8 The enactment of governing laws renders this Contract unlawful or makes the Pledgers unable to continue performing its obligationshereunder; 7.1.9 The Pledgers’ assets experience negative change to the extent that affects the Pledgers’ ability to perform its obligations hereunder; 7.1.10 Party B’s heirs or custodians only partially perform or refuse to perform their payment obligations under the Transaction Documents; 5 7.1.11 Any other circumstance where the Pledgers cannot or possibly cannot exercise its rights over the Pledge. 7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1,the Pledgers shall immediately notify the Pledgee in writing accordingly. 7.3 Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to the Pledgee’s satisfaction, the Pledgee may issue a Notice ofDefault to the Pledgers upon the occurrence of the Event of Default or at any time thereafter, demanding the Pledgers and/or Party C to immediatelyperform their due obligations under the Transaction Documents and/or dispose of the Pledge in accordance with Section 8 of this Contract. 8. Exercise of Pledge 8.1 When the Pledgers and Party C are yet to fully perform their Contractual Obligations under the Transaction Documents, the Pledgers shall not transferthe Pledge or its Equity Interest in Party C without the Pledgee’s written consent. 8.2 The Pledgee may issue a written Notice of Default to the Pledgers when it exercises the Pledge. 8.3 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Defaultin accordance with Section 8.2. Once the Pledgee elects to exercise the right to dispose the Pledge, the Pledgers shall cease to be entitled to any rightsor interests associated with the Equity Interest. 8.4 The Pledgee shall the have right to be paid in priority with all or part of the Equity Interest from the proceeds from the transfer, auction or sale of theEquity Interest until the complete compensation of all outstanding payments due under the Transaction Documents and all other due payments to thePledgee. The Pledgee shall not be liable for any loss incurred by its due exercise of such rights and powers. 8.5 The Pledgee may exercise any remedy available simultaneously or in any order. The Pledgee may exercise the right to be paid in priority with theEquity Interest from the proceeds from auction or sale of the Equity Interest under this Contract, without recourse to any other remedy measure first. 8.6 When the Pledgee disposes of the Pledge in accordance with this Contract, the Pledgers and Party C shall provide necessary assistance to enable thePledgee to enforce the Pledge in accordance with this Contract. 9. Assignment 9.1 Without the Pledgee’s prior written consent, the Pledgers shall not assign or delegate their rights and obligations under this Contract. 9.2 This Contract shall be binding on the Pledgers and his/her successors and permitted assignees, and shall be valid with respect to the Pledgee and eachof his/her successors and assignees. 6 9.3 The Pledgee may at any time assign any and all of its rights and obligations under the Transaction Documents to its assignee(s) (natural persons/legalpersons), in which case the assignee shall enjoy and undertake the rights and obligations of the Pledgee under this Contract, as if it were the originalparty to this Contract. When the assignee transfers its rights and obligations under the Transaction Documents, the Pledgers shall execute relevantagreements or other documents related to such transfer as required by the Pledgee. 9.4 In the event of change of the Pledgee due to assignment, the Pledgers shall, at the request of the Pledgee, execute a new pledge contract with the newthe Pledgee on the same terms and conditions as this Contract. 9.5 The Pledgers shall strictly abide by the provisions of this Contract and other contracts jointly or separately executed by all or any of the Parties hereto,including the Exclusive Purchase Option Contract and the Power of Attorney Agreement, perform the obligations hereunder and thereunder, and refrainfrom any action/omission that may affect the effectiveness and enforceability hereof and thereof. Any residual rights of the Pledgers with respect to theEquity Pledged hereunder shall not be exercised by the Pledgers except in accordance with the written instructions of the Pledgee. 10. Termination Upon the sufficient and complete fulfillment of all Contractual Obligations and the full payment of all Secured Indebtedness by the Pledgers and PartyC, this Contract shall be terminated and the Pledgee shall terminate this Contract within reasonable and effective scope. Sections 10, 12 and 14 of this Contract shall survive the expiration or termination of this Contract. 11. Handling Fees and Other Expenses All fees and out of pocket expenses relating to this Contract, including but not limited to legal costs, costs of production, stamp tax and any other taxesand fees, shall be borne by Party C. If the Pledgee is required under applicable laws to bear certain taxes and fees, the Pledgers shall cause Party C toreimburse in full such taxes and fees paid by the Pledgee. 12. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) is orbecomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed by applicablelaws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels or financialadvisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 7 13. Governing Law and Dispute Resolution 13.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the dispute resolution hereunder shall begoverned by the promulgated and publicly available laws of China. For matters not covered by the promulgated and publicly available laws of China,the principles and practices of international laws shall apply. 13.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission(CIETAC) for arbitration in accordance with its then effective Arbitration Rules. The arbitration shall be conducted in Beijing. The language ofarbitration shall be Chinese. The arbitration award shall be final and binding on all Parties. 13.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 14. Notices 14.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 14.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices. 14.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 8 14.2 The addresses of the Parties for receiving notices are as follows: Party A:Address:Attn:XIAO WenjieTel.:0755-36378888 Party B:XIAO Wenjie/LIU QiangdongAddress:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenTel.:0755-36378888 Party C:Address:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 14.3 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof. 15. Severability In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 16. Schedules The schedules hereto shall form an integral part of this Contract. 17. Effectiveness 17.1 This Contract shall come into force upon being signed by the Parties. Any amendment, change and supplement to this Contract shall be made inwritten form and become effective after being signed and stamped by the Parties and upon the completion of the registration with the government (ifapplicable). 17.2 This Contract is written in Chinese in four counterparts of equal legal force, with each Party holding one. 9 17.3 The equity pledge contract signed by the Parties on July 18, 2014 will shall be terminated automatically from the date of signing of this Contract. [Signature page follows] 10 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Pledge Contract as of the date first above written. Party A:Beijing Shijitong Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Party B: By:/s/ XIAO WenjieName:XIAO Wenjie By:/s/ LIU QiangdonName:LIU Qiangdong Party C:Beijing Lejiaxin Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative  Schedules 1. Capital Contribution Certificate 2. Shareholders’ Register of Beijing Lejiaxin Network Technology Co., Ltd.  Schedule 1 Capital Contribution Certificate This is to certify that XIAO Wenjie (ID No. ******************) has subscribed to the contribution of RMB49,935,320.00, thus holding 99.87% equityinterest of Beijing Lejiaxin Network Technology Co., Ltd. and that all of such 99.87% equity interest has been pledged to Beijing Shijitong TechnologyCo., Ltd. Company:Beijing Lejiaxin Network Technology Co., Ltd. By:/s/XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:October 10, 2018  Schedule 1 Capital Contribution Certificate This is to certify that LIU Qiangdong (ID No. ******************) has subscribed to the contribution of RMB64,680.00, thus holding 0.13% equityinterest of Beijing Lejiaxin Network Technology Co., Ltd. and that all of such 0.13% equity interest has been pledged to Beijing Shijitong TechnologyCo., Ltd. Company:Beijing Lejiaxin Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:October 10, 2018  Schedule 2 Shareholders’ RegisterofBeijing Lejiaxin Network Technology Co., Ltd. Shareholder’snameID No. /Registration No.Amount ofSubscription (RMB)Ratio ofContributionEquity PledgeXIAO Wenjie******************49,935,320.0099.87%XIAO Wenjie owns 99.87% equityinterest of Beijing Lejiaxin NetworkTechnology Co., Ltd. and all of such99.87% equity interest has been pledgedto Beijing Shijitong TechnologyCo., Ltd.LIU Qiangdong******************64,680.000.13%LIU Qiangdong owns 0.13% equityinterest of Beijing Lejiaxin NetworkTechnology Co., Ltd. and all of such0.13% equity interest has been pledged toBeijing Shijitong Technology Co., Ltd. Company:Beijing Lejiaxin Network Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Shareholder:XIAO Wenjie Signature:/s/ XIAO Wenjie Shareholder:LIU Qiangdong Signature:/s/ LIU Qiangdong Dated :October 10, 2018 Exhibit 4.13 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on October 10, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: LIU Qiangdong a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 0.13% of the equity interests (“Party B Equity”) in Beijng Lejiaxin Network Technology Co., Ltd. (“Beijng Lejiaxin”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Beijng Lejiaxin; (2) exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Beijng Lejiaxin, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A.  Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Beijng Lejiaxin, this Agreement and the authorization hereunder shall be irrevocable and remain in full force asfrom the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on July 14, 2014 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 2 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ LIU Qiangdong Name:LIU Qiangdong 3 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on October 10, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: XIAO Wenjie a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 99.87% of the equity interests (“Party B Equity”) in Beijng Lejiaxin Network Technology Co., Ltd. (“Beijng Lejiaxin”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Beijng Lejiaxin; (2) exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Beijng Lejiaxin, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. 4 Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Beijng Lejiaxin, this Agreement and the authorization hereunder shall be irrevocable and remain in full force asfrom the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on July 14, 2014 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 5 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ XIAO Wenjie Name:XIAO Wenjie 6Exhibit 4.14 LOAN CONTRACT This Loan Contract (this “Contract”) is executed on October 10, 2018 in Beijing, the People’s Republic of China (the “PRC”) by and between: Party A: Beijing Shijitong Technology Co., Ltd. (the “Lender”) Unified Social Credit 91110108397827646NCode: Party B: XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; LIU Qiangdong (“Party B2”, collectively the “Borrowers” with Party B1), a Chinese citizen whose ID number is ******************; The Lender and the Borrowers are hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS: The Borrowers hold in aggregate 100% equity interests (the “Borrower Interests”) in Beijing Lejiaxin Network Technology Co., Ltd. (the “BorrowerCompany”), a limited liability company incorporated in Shenzhen, the PRC with a registered capital of RMB50,000,000.00. The Lender intends to extend a loan to the Borrowers for the purposes set out in this Contract. The Parties hereby agree as follows through friendlyconsultations: 1. Loan 1.1 In accordance with the terms and conditions of this Contract, the Lender agrees to extend a loan totaling RMB49,900,000.00 (the “Loan”) to theBorrowers. The term of the Loan shall be ten (10) years as from the execution date of this Contract. Unless otherwise agreed by the Parties in writing,the term of the Loan shall be renewed automatically upon each of its expirations for another ten (10) years. 1.2 During the original or renewed term of the Loan, the Borrowers must make prepayment immediately upon occurrence of any of the followingcircumstances: 1.1.1 where the 30-day period expires after the Borrowers receive the written notice demanding repayment from the Lender; 1.1.2 where the Borrower, in the case of an individual, dies, losses or becomes limited in terms of civil capacity, or in the case of a limited liabilitycompany, is dissolved or liquidated; 1.1.3 where the Borrowers are no longer employed by the Lender, the Borrower Company or their affiliates for whatever reason; 1.1.4 where the Borrowers are engaged or involved in criminal activities;  1.1.5 where any third party make claims against the Borrowers with an amount of RMB100,000 or more; or 1.1.6 where in accordance with the applicable PRC laws, the Lender may directly hold the equity interests in the Borrower Company, the BorrowerCompany may lawfully continue with its business, and the Lender decides to exercise its exclusive purchase option under the exclusivepurchase option contract (the “Exclusive Purchase Option Contract”) referred to herein. 1.2 Subject to satisfaction of all conditions precedent set out in Section 2, the Lender agrees to remit the Loan to the bank account designated by theBorrowers within twenty (20) days of the receipt of the written notice indicating the Borrowers’ demand for the Loan. The Borrowers shall issue anacknowledgement of receipt to the Lender on the same day when they receive such amount. The Loan extended by the Lender under this Contract shallbe utilized by the Borrowers only, and shall not be used by the successors or assignees of the Borrowers. 1.3 The Borrowers agree to accept the above Loan extended by the Lender, and hereby agree and undertake to use the Loan for funding businessdevelopment of the Borrower Company. Without prior written consent of the Lender, the Borrowers shall not use such amount for any other purpose. 1.4 Both the Lender and the Borrowers agree and acknowledge that the Borrowers may make repayment only in following manner determined by theLender: the Borrowers shall transfer all the Borrower Interests they hold to the Lender or the legal or natural person designated by the Lender upon theLender’s exercise of its option to buy the Borrower Interests under the Exclusive Purchase Option Contract. 1.5 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted, any proceeds obtained by the Borrowers from transfer of theBorrower Interests shall be used for repaying for the Loan in accordance with this Contract in such manner as designated by the Lender. 1.6 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted by applicable laws, the Lender shall have the right but noobligation to buy, or designated other legal or natural persons to buy, in whole or in part the Borrower Interests at any time at the purchase price agreedunder the Exclusive Purchase Option Contract. 1.7 Both the Lender and the Borrowers agree and acknowledge that the Borrowers agree to create a pledge over all the equity interests they hold in theBorrower Company in favor of the Lender to secure the debt repayment hereunder. For the avoidance of doubt, the Parties acknowledge that, inaddition to the debt under this Contract, the principal debt secured by the equity pledge under this section also includes all the debts owed by theBorrowers and the Borrower Company to the Lender under the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contractand the Power of Attorney Agreement (as defined below). 1.8 Each of the Borrowers has executed an irrevocable Power of Attorney Agreement (the “Power of Attorney Agreement”), under which they authorizethe Lender or any legal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company. 1.9 When the Borrowers transfer their Borrower Interests to the Lender or the person designated by the Lender, if the transfer price is equal to or lower thanthe principal of the Loan under this Contract, the Loan under this Contract shall be deemed to be interest free loan; if the transfer price is higher thanthe principal of the Loan under this Contract, the portion of the transfer price in excess of the principal shall be deemed to be the interests on theprincipal of the Loan and shall be repaid by the Borrowers to the Lender. 2 2. Conditions Precedent for Loan Extending The Lender will not be obligated to extend the Loan to the Borrowers in accordance with Section 1.1 unless and until all the conditions below aresatisfied or waived by the Lender in writing. 2.1 The Lender receives on time the drawdown notice duly signed by the Borrowers in accordance with Section 1.2. The Borrower Company and theLender or the legal or natural person designated by the Lender has duly entered into a definite exclusive business cooperation agreement (the“Exclusive Business Cooperation Agreement”), under which the Lender or the person designated by the Lender will, to the extent permitted by thePRC laws, provide the Borrower Company with technical services and business consultancy services in the capacity of an exclusive service provider. 2.2 The Borrower, the Borrower Company and the Lender or the legal or natural person designated by the Lender have duly entered into a definite equitypledge contract (the “Equity Pledge Contract”), under which the Borrowers agree to create a pledge over all the Borrower Interests in favor of theLender or the person designated by the Lender. 2.3 The Borrower, the Lender and the Borrower Company have duly entered into a definite Exclusive Purchase Option Contract, under which theBorrowers will, to the extent permitted by the PRC laws, irrevocably grant the Lender an exclusive Purchase Option to buy all Borrower Interests. 2.4 The Borrowers and the Lender have entered into an irrevocable Power of Attorney Agreement, under which the Borrowers authorize the Lender or anylegal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company 2.5 The above Equity Pledge Contract, Power of Attorney Agreement, Exclusive Purchase Option Contract and Exclusive Business CooperationAgreement are executed on or prior to the execution date of this Contract, and entered into full legal force. There have been no event that breaches orprejudices any of such contracts or agreements, and all the relevant filings, approvals, authorizations, registrations and government procedures havebeen secured or completed in accordance with such contracts or agreements, if required. 2.6 The representations and warranties made by the Borrowers under Section 3.2 are truthful, complete and accurate, and contain no misleading content. 2.7 The Borrowers have not breached any of the undertakings they make under Section 4 of this Contract, and there is no actual or threatened event thatmay affect the performance of their obligations under this Contract. 3. Representations and Warranties 3.1 From the execution date to the termination of this Contract, the Lender represents and warrants to the Borrowers as follows: 3.1.1 The Lender is a company duly incorporated and existing under the PRC laws; 3 3.1.2 The Lender has the authority to execute and perform this Contract. Its execution and performance of this Contract are in line with its scope ofbusiness and the provisions in its articles of association and other constitutional documents. The Lender has obtained all necessary andappropriate approvals and authorizations required for the execution and performance of this Contract; and 3.1.3 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Lender. 3.2 From the execution date to the termination of this Contract, the Borrowers represent and warrant as follows: 3.2.1 The Borrowers have the authority to execute and perform this Contract, and have obtained all necessary and appropriate approvals andauthorizations required for the execution and performance of this Contract; 3.2.2 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Borrowers; and 3.2.3 There is no actual or potential dispute, action, arbitration, administrative procedures or other legal proceedings involving the Borrowers. 4. Undertakings of the Borrowers 4.1 The Borrowers irrevocably undertake in the capacity of the shareholders of the Borrower Company that they will, during the term of this Contract,procure the Borrower Company: 4.1.1 to strictly comply with the provisions of the Exclusive Purchase Option Contract and the Exclusive Business Cooperation Agreement, and notto engage in any action or omission that is sufficient to affect the validity and enforceability of the Exclusive Purchase Option Contract and theExclusive Business Cooperation Agreement; 4.1.2 to enter into contracts/agreements on business cooperation with the Lender or the person designated by the Lender or the person designated bythe Lender at any time as requested by the Lender, and ensure the strict performance of such contracts/agreements; 4.1.3 to provide the Lender with all its operating and financial information at the request of the Lender; 4.1.4 to inform the Lender promptly of any existing or potential litigation, arbitration or administrative procedures in connection with its assets,business and revenue; and 4.1.5 to appoint any person designated by the Lender as director of the Borrower Company at the request of the Lender. 4.2 The Borrowers undertake that during the term of this Contract: 4.2.1 they shall exert their best efforts to cause the Borrower Company to continue with its existing business; 4.2.2 they shall strictly comply with the provisions of this Contract, the Power of Attorney Agreement, the Equity Pledge Contract and the ExclusivePurchase Option Contract, and shall not engage in any action or omission that is sufficient to affect the validity and enforceability of thisContract, the Power of Attorney Agreement, the Equity Pledge Contract and the Exclusive Purchase Option Contract; 4 4.2.3 unless otherwise provided under the Equity Pledge Contract, they shall not sell, transfer, charge or otherwise dispose of the legal or beneficialinterests in the Borrower Interests, or permit any other security interests to be created over the same; 4.2.4 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove any sale, transfer, charge or otherdisposal of the legal or beneficial interests in the Borrower Interests, or permission of any other security interests to be created over the same, ineach case without prior written consent of the Lender, unless in favor of the Lender or the person designated by the Lender; 4.2.5 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove the merger or consolidation ofthe Borrower Company with any person or acquisition of or investment in any person by the Borrower Company, in each case without priorwritten consent of the Lender; 4.2.6 they shall inform the Lender promptly of any actual or threatened litigation, arbitration or administrative procedures in connection with theBorrower Interests; 4.2.7 they shall execute all such documents, take all such actions, make all such allegations, or present such defense against all claims as arenecessary and appropriate for maintaining their ownership over the Borrower Interests; 4.2.8 without prior written consent of the Lender, they shall not take any action or omission that may cause a material adverse effect on the assets,business and liabilities of the Borrower Company; 4.2.9 they shall, at the request of the Lender, appoint any person designated by the Lender as director of the Borrower Company; 4.2.10 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, unconditionally transfer the BorrowerInterests to the Lender or the person designated by the Lender, and cause other shareholders of the Borrower Company to waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.11 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, cause other shareholders of the BorrowerCompany to unconditionally transfer all the equity interests they hold in the Borrower Company to the Lender or the representative designatedby the Lender, in which case, the Borrowers shall waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.12 the Borrowers shall use the purchase price for repaying for the Loan first if the Lender purchases the Borrower Interests from them in accordancewith the Exclusive Purchase Option Contract; and 4.2.13 without prior written consent of the Lender, they shall not supplement, change or amend their articles of association in any manner, increase ordecrease the registered capital, or change the capital structure in any form. 5 5. Liabilities for Breach of Contract 5.1 Either Party that breaches this Contract and thus causes it impossible to perform this Contract in whole or in part shall bear the liability for breach ofcontract, and indemnify the other Party against the losses (including litigation fees and attorney fees) thus caused. Where both Parties are in breach ofthis Contract, they shall bear their respective liabilities according to the actual circumstances. 5.2 Where the Borrowers fail to perform their obligations to make repayment within the period set out in this Contract, they shall pay the default interestsat a rate of 0.1% of the overdue amount on a daily basis, until all the principal, default interests and other amount are paid up. 6. Notice 6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 6.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices; or 6.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 6.2 The addresses of the Parties for receiving notices are as follows: Lender: Beijing Shijitong Technology Co., Ltd. Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-3368 8788 Borrowers: XIAO Wenjie/LIU Qiangdong Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:0755-******** 6.3 Any Party may send a notice to the other Party as provided in this Section to change its address used to receive notice. 6 7. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) is orbecomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed by applicablelaws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels or financialadvisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 8. Governing Law and Dispute Resolution 8.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the resolution of disputes hereunder shall begoverned by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws ofChina shall be governed by international legal principles and practices. 8.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission forarbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the language shall be Chinese. Thearbitration award shall be final and binding on all Parties. 8.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 9. Miscellaneous 9.1 This Contract shall take effect on the day when it is executed by the Parties and expire on the day when the Parties have completed the performance oftheir obligations under this Contract. 9.2 This Contract is made in Chinese in four counterparts of equal legal force with each of the Lender and the Borrower holding one. 9.3 The Parties may amend and supplement this Contract by written agreement. The amendment agreement and/or supplementary agreement among theParties in connection with this Contract shall be integral part of and have the equal legal effect with this Contract. 9.4 In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 9.5 The schedules, if any, to this Contract shall be integral part of and have equal legal effect with this Contract. 7 [Signature page follows] 8 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute sign this Loan Contract as of the date first above written. Lender: Beijing Shijitong Technology Co., Ltd. (Seal) By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Borrowers: By:/s/ XIAO Wenjie Name:XIAO Wenjie By:/s/ LIU Qiangdong Name:LIU Qiangdong  Appendix 1 Loan Amount Borrower Loan Amount (RMB)XIAO Wenjie49,835,320LIU Qiangdong64,680Total49,900,000 Exhibit 4.17 Equity Pledge Contract This Equity Pledge Contract (this “Contract”) is made and entered into by and among the following parties on June 1, 2018, in Beijing, the People’sRepublic of China (“China” or “PRC”): Party A:Beijing Shijitong Technology Co., Ltd. (“Pledgee”) Unified Social Credit Code:91110108397827646N Party B:XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; LI Wenbin (“Party B2”), a Chinese citizen whose ID number is ******************; Party B1 and Party B2 are collectively referred to as the “Pledgers” or “Party B”. Party C:Shenzhen Xinjie Investment Co., Ltd. Unified Social Credit Code:91440300359619977T In this Contract, The Pledgee, the Pledgers and the Party C are hereinafter referred to individually as a “Party” and collectively the “Parties”. Whereas: 1. The Pledgers are citizens/limited liability companies of China who as of the date hereof hold 100% of equity interests of Party C in total. Party C is alimited liability company registered in Beijing, China, engaging in investment management, investment consulting, guarantee business (excludingfinancing guarantee business and other restricted businesses) , industrial and commercial investments (specific projects to be separately applied for);economic information consulting; entrusted asset management(shall not engage in trust, financial asset management, securities asset management andother business), equity investment, equity investment fund management (securities investment, raising funds publicly and management of publiclyraised funds prohibited); enterprise management consulting, enterprise image planning, enterprise financial consulting, supply chain management andsupporting services; online commercial activities, sales of dyed knitwear and electronic products; domestic trade; import/export business; and realestate development and operation on land plots for which use rights have been lawfully obtained. Party B1 and Party B2 respectively hold 95% and5% of Party C’s equity interests. Party C acknowledges the respective rights and obligations of the Pledgers and the Pledgee hereunder and agrees toprovide any necessary assistance for the registration of the Pledge; 2. The Pledgee is a wholly foreign-owned enterprise registered in Beijing, China. The Pledgee and Party C entered into an Exclusive BusinessCooperation Agreement (“Exclusive Business Cooperation Agreement”) on December 22, 2015; the Pledgee entered into an Exclusive PurchaseOption Contract (“Exclusive Purchase Option Contract”) with the Pledgers and Party C on March 10, 2017; the Pledgers and Pledgee signed anPower of Attorney Agreement (“Power of Attorney Agreement”) on June 1, 2018; the Pledgers and Pledgee signed an Loan Contract on May 10, 2017and June 1, 2018, respectively (“Loan Contract”);  3. To ensure the performance by Party C and the Pledgers of their obligations under the Exclusive Business Cooperation Agreement, Exclusive PurchaseOption Contract, Power of Attorney Agreement (collectively referred to as “Transaction Documents”), the Pledgers pledge with the Pledgee all of theirequity in Party C as security for the performance of the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, and thePower of Attorney Agreement by Party C and the Pledgers. To perform the provisions of the Transaction Documents, the Parties hereby agree as follows through mutual negotiations. 1. Definitions Unless otherwise specified herein, the terms below shall have the following meanings: 1.1 “Pledge”: shall refer to the security interest created by the Pledgers in favor of the Pledgee pursuant to Section 2 of this Contract, i.e., the right of thePledgee to be paid in priority from the proceeds from the transfer, auction or sale of the Equity Interest. 1.2 “Equity Interest”: shall refer to all equity interests currently held by and hereafter acquired by the Pledgers in Party C. 1.3 “Term of Pledge”: shall refer to the term set forth in Section 3 of this Contract. 1.4 “Transaction Documents”: shall refer to the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, the Power ofAttorney Agreement and any revision, amendment and/or restatement thereto. 1.5 “Contractual Obligations”: shall refer to all the obligations of the Pledgers under the Exclusive Purchase Option Contract, the Power of AttorneyAgreement and this Contract; as well as all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive PurchaseOption Contract and this Contract. 1.6 “Secured Indebtedness”: shall refer to any and all direct, indirect, derivative losses and losses of predictable benefits incurred due to any default by thePledgers and/or Party C, the amount of which shall be determined based on the pledgee’s reasonable business plan and profit forecast; service feespayable by Party C under the Exclusive Business Cooperation Agreement; and all costs and expenses incurred by the Pledgee in enforcing the Pledgersand/or Party C to perform their contractual obligations. 1.7 “Event of Default”: shall refer to any of the circumstances as enumerated in Section 7 of this Contract. 1.8 “Notice of Default”: shall refer to the notice issued by the Pledgee in accordance with this Contract declaring an Event of Default. 2. Pledge 2.1 The Pledgers agree to pledge all the Equity Interest that it lawfully owns and has the right to dispose of to the Pledgee as security for payment of theSecured Indebtedness under this Contract, and Party C hereby assents to such pledge. 2.2 During the Term of Pledge, the Pledgee is entitled to receive dividends distributed on the Equity Interest. The Pledgers may receive dividendsdistributed on the Equity Interest only with prior written consent of the Pledgee. Dividends received by the Pledgers on Equity Interest shall be, asrequired by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and applied first to pay the Secured Indebtedness; or(2) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permitted under applicable PRC laws. 2 2.3 The Pledgers may subscribe for capital increase in Party C only with prior written consent of the Pledgee. Any equity interest obtained by the Pledgersas a result of the Pledgers’ subscription of the increased registered capital of the Company shall also be deemed as Equity Interest. 2.4 In the event that Party C is to be liquidated or dissolved under compulsory laws of China, any interest distributed to the Pledgers upon Party C’sdissolution or liquidation shall, at the request of the Pledgee, be (i) deposited into an account designate and supervised by the Pledgee and applied firstto pay the Secured Indebtedness; or (ii) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permittedunder applicable PRC laws. 3. Term of Pledge 3.1 The Pledge shall become effective on such date when it is registered with competent administration for industry and commerce (the “AIC”) at thelocation of Party C. The Pledge shall remain effective until full discharge of all Contractual Obligations. All Parties agree that the Pledgers and Party Cshall (i) register the Pledge in the shareholders’ register of Party C within 3 business days following execution of this Contract, and (ii) submit anapplication to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution ofthis Contract. The Pledgers and Party C shall submit to the AIC all necessary documents and complete all necessary formalities to ensure that the Pledgeof the Equity Interest shall be registered with the AIC as soon as possible. 3.2 During the Term of Pledge, in the event that the Pledgers and/or Party C fail to perform the Contractual Obligations, the Pledgee shall have the right,but not the obligation, to dispose of the Pledge in accordance with the provisions of this Contract. 4. Custody of Equity Interest Records 4.1 During the Term of Pledge, the Pledgers shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and theshareholders’ register indicating the Pledge within one week following execution of this Contract. The Pledgee shall have custody of such documentsduring the entire Term of Pledge. 4.2 During the Term of Pledge, the Pledgers shall have the right to collect dividends accrued on the Equity Interest. 5. Representations and Warranties of the Pledgers and Party C As of the execution date of this Contract, the Pledgers and Party C hereby jointly and severally represent and warrant to the Pledgee that: 5.1 The Pledgers are the sole legal and beneficial owner of the Equity Interest. 5.2 Except for the Pledge, the Pledgers have not created any security interest or other encumbrance on the Equity Interest. 5.3 The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions of this Contract. 5.4 The Pledgers and Party C have obtained any and all approvals and consents from competent government authorities and third parties (if required) forexecution, delivery and performance of this Contract. 3 5.5 The execution, delivery and performance of this Contract will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of associationor other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it is a party or bywhich it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to anyParty; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or imposed with additional conditions. 6. Covenants and Further Agreement of the Pledgers and Party C 6.1 During the term of this Contract, the Pledgers and Party C hereby jointly and severally covenant to the Pledgee that the Pledgers and Party C: 6.1.1 shall not transfer the Equity Interest, create or permit the existence of any security interest or other encumbrance on the Equity Interest, withoutthe prior written consent of the Pledgee, except for the purposes of the performance of the Transaction Documents; 6.1.2 shall promptly notify the Pledgee of any event or notice received by the Pledgers that may have an impact on the Equity Interest or any portionthereof, as well as any event or notice received by the Pledgers that may have an impact on any guarantees and other obligations of the Pledgershereunder. 6.2 The Pledgers agree that the rights acquired by the Pledgee in accordance with this Contract with respect to the Pledge shall not be interrupted orjeopardized by the Pledgers or any heirs or representatives of the Pledgers or any other persons through any legal proceedings. 6.3 To protect or perfect the security hereunder for the Contractual Obligations and Secured Indebtedness, the Pledgers hereby undertakes to execute ingood faith and to cause other parties who have an interest in the Pledge to execute all such certificates, contracts, deeds and/or covenants, and take allsuch actions as required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority hereunder, to enter into all relevantdocuments regarding ownership of Equity Interest with the Pledgee or assignee(s) of the Pledgee (natural persons/legal persons), and to provide thePledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that the Pledgee deems necessary. 6.4 The Pledgers hereby undertakes to comply with and perform all guarantees, promises, agreement, representations and conditions of and under thisContract. In the event of failure or partial performance of such guarantees, promises, agreements, representations and conditions, the Pledgers shallindemnify the Pledgee for all losses resulting therefrom. 7. Event of Breach 7.1 The following circumstances shall be deemed Event of Default: 7.1.1 The Pledgers and/or Party B breach any obligations under the Transaction Documents and/or this Contract; 7.1.2 The Pledgers have serious misstatement or mistake in any statement or warranty made in Section 5 of this Contract and/or the Pledgers violateany warranty in Section 5 of this Contract; 4 7.1.3 The Pledgers and Party C fail to complete the registration of equity pledge with the registration authority in accordance with Section 3.1. 7.1.4 The Pledgers and Party C violate any provision of this Contract; 7.1.5 Except otherwise clearly stipulated in Section 6.1.1, the Pledgers transfer or intend to transfer or surrender the Equity Interest or assign theEquity Interest without the Pledgee’s written consent; 7.1.6 The Pledgers (i) are required to repay or perform in advance or (ii) fails to repay or perform upon maturity any debt obligations owed to anythird party such as loan, guarantee, indemnification and promise; 7.1.7 Any government approval, license, permit or authorization that renders this Contract enforceable, lawful and valid is withdrawn, terminated,invalid or substantially changed; 7.1.8 The enactment of governing laws renders this Contract unlawful or makes the Pledgers unable to continue performing its obligationshereunder; 7.1.9 The Pledgers’ assets experience negative change to the extent that affects the Pledgers’ ability to perform its obligations hereunder; 7.1.10 Party B’s heirs or custodians only partially perform or refuse to perform their payment obligations under the Transaction Documents; 7.1.11 Any other circumstance where the Pledgers cannot or possibly cannot exercise its rights over the Pledge. 7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1,the Pledgers shall immediately notify the Pledgee in writing accordingly. 7.3 Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to the Pledgee’s satisfaction, the Pledgee may issue a Notice ofDefault to the Pledgers upon the occurrence of the Event of Default or at any time thereafter, demanding the Pledgers and/or Party C to immediatelyperform their due obligations under the Transaction Documents and/or dispose of the Pledge in accordance with Section 8 of this Contract. 8. Exercise of Pledge 8.1 When the Pledgers and Party C are yet to fully perform their Contractual Obligations under the Transaction Documents, the Pledgers shall not transferthe Pledge or its Equity Interest in Party C without the Pledgee’s written consent. 8.2 The Pledgee may issue a written Notice of Default to the Pledgers when it exercises the Pledge. 8.3 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Defaultin accordance with Section 8.2. Once the Pledgee elects to exercise the right to dispose the Pledge, the Pledgers shall cease to be entitled to any rightsor interests associated with the Equity Interest. 8.4 The Pledgee shall the have right to be paid in priority with all or part of the Equity Interest from the proceeds from the transfer, auction or sale of theEquity Interest until the complete compensation of all outstanding payments due under the Transaction Documents and all other due payments to thePledgee. The Pledgee shall not be liable for any loss incurred by its due exercise of such rights and powers. 5 8.5 The Pledgee may exercise any remedy available simultaneously or in any order. The Pledgee may exercise the right to be paid in priority with theEquity Interest from the proceeds from auction or sale of the Equity Interest under this Contract, without recourse to any other remedy measure first. 8.6 When the Pledgee disposes of the Pledge in accordance with this Contract, the Pledgers and Party C shall provide necessary assistance to enable thePledgee to enforce the Pledge in accordance with this Contract. 9. Assignment 9.1 Without the Pledgee’s prior written consent, the Pledgers shall not assign or delegate their rights and obligations under this Contract. 9.2 This Contract shall be binding on the Pledgers and his/her successors and permitted assignees, and shall be valid with respect to the Pledgee and eachof his/her successors and assignees. 9.3 The Pledgee may at any time assign any and all of its rights and obligations under the Transaction Documents to its assignee(s) (natural persons/legalpersons), in which case the assignee shall enjoy and undertake the rights and obligations of the Pledgee under this Contract, as if it were the originalparty to this Contract. When the assignee transfers its rights and obligations under the Transaction Documents, the Pledgers shall execute relevantagreements or other documents related to such transfer as required by the Pledgee. 9.4 In the event of change of the Pledgee due to assignment, the Pledgers shall, at the request of the Pledgee, execute a new pledge contract with the newthe Pledgee on the same terms and conditions as this Contract. 9.5 The Pledgers shall strictly abide by the provisions of this Contract and other contracts jointly or separately executed by all or any of the Parties hereto,including the Exclusive Purchase Option Contract and the Power of Attorney Agreement, perform the obligations hereunder and thereunder, and refrainfrom any action/omission that may affect the effectiveness and enforceability hereof and thereof. Any residual rights of the Pledgers with respect to theEquity Pledged hereunder shall not be exercised by the Pledgers except in accordance with the written instructions of the Pledgee. 10. Termination Upon the sufficient and complete fulfillment of all Contractual Obligations and the full payment of all Secured Indebtedness by the Pledgers and PartyC, this Contract shall be terminated and the Pledgee shall terminate this Contract within reasonable and effective scope. Sections 10, 12 and 14 of this Contract shall survive the expiration or termination of this Contract. 11. Handling Fees and Other Expenses All fees and out of pocket expenses relating to this Contract, including but not limited to legal costs, costs of production, stamp tax and any other taxesand fees, shall be borne by Party C. If the Pledgee is required under applicable laws to bear certain taxes and fees, the Pledgers shall cause Party C toreimburse in full such taxes and fees paid by the Pledgee. 6 12. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) is orbecomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed by applicablelaws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels or financialadvisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 13. Governing Law and Dispute Resolution 13.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the dispute resolution hereunder shall begoverned by the promulgated and publicly available laws of China. For matters not covered by the promulgated and publicly available laws of China,the principles and practices of international laws shall apply. 13.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission(CIETAC) for arbitration in accordance with its then effective Arbitration Rules. The arbitration shall be conducted in Beijing. The language ofarbitration shall be Chinese. The arbitration award shall be final and binding on all Parties. 13.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 14. Notices 14.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 14.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices. 14.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 7 14.2 The addresses of the Parties for receiving notices are as follows: Party A: Address:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-******** Party B: XIAO Wenjie Address:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:0755-******** LI Wenbin Address:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** Party C: Address:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-******** 14.3 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof. 15. Severability In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 16. Schedules The schedules hereto shall form an integral part of this Contract. 17. Effectiveness 17.1 This Contract shall come into force upon being signed by the Parties. Any amendment, change and supplement to this Contract shall be made inwritten form and become effective after being signed and stamped by the Parties and upon the completion of the registration with the government (ifapplicable). 8 17.2 This Contract is written in Chinese in four counterparts of equal legal force, with each Party holding one. 17.3 The Equity Pledge Agreement signed the Parties on March 10, 2017 and the Supplementary Agreement to the Equity Pledge Agreement signed onMay 10, 2017 shall be automatically terminated as at the execution date hereof. [Signature page follows] 9 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Pledge Contract as of the date first above written. Party A:Beijing Shijitong Technology Co., Ltd. By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: By:/s/ XIAO Wenjie Name:XIAO Wenjie By:/s/ LI Wenbin Name:LI Wenbin Party C:Shenzhen Xinjie Investment Co., Ltd. By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative  Schedules 1. Capital Contribution Certificate 2. Shareholders’ Register of Shenzhen Xinjie Investment Co., Ltd.  Schedule 1 Capital Contribution Certificate This is to certify that XIAO Wenjie (ID No. ******************) has subscribed to the contribution of RMB47,500,000.00, thus holding 95% equityinterest of Shenzhen Xinjie Investment Co., Ltd. and that all of such 95% equity interest has been pledged to Beijing Shijitong Technology Co., Ltd. Company:Shenzhen Xinjie Investment Co., Ltd. By:/s/XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:June 1, 2018  Schedule 1 Capital Contribution Certificate This is to certify that LI Wenbin (ID No. ******************) has subscribed to the contribution of RMB2,500,000.00, thus holding 5% equity interest ofShenzhen Xinjie Investment Co., Ltd. and that all of such 5% equity interest has been pledged to Beijing Shijitong Technology Co., Ltd. Company:Shenzhen Xinjie Investment Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:June 1, 2018  Schedule 2 Shareholders’ RegisterofShenzhen Xinjie Investment Co., Ltd. Shareholder’snameID No. /Registration No. Amount ofSubscription(RMB) Ratio of Contribution Equity PledgeXIAO Wenjie******************46,500,000.0095%XIAO Wenjie owns 95% equity interest ofShenzhen Xinjie Investment Co., Ltd. and allof such 95% equity interest has been pledgedto Beijing Shijitong Technology Co., Ltd.LI Wenbin******************2,500,000.005%LI Wenbin owns 5% equity interest ofShenzhen Xinjie Investment Co., Ltd. and allof such 5% equity interest has been pledgedto Beijing Shijitong Technology Co., Ltd. Company:Shenzhen Xinjie Investment Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Shareholder:XIAO Wenjie Signature:/s/ XIAO Wenjie Shareholder:LI Wenbin Signature:/s/ LI Wenbin Dated :June 1, 2018 Exhibit 4.18 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on June 1, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: LI Wenbin a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 5% of the equity interests (“Party B Equity”) in Shenzhen Xinjie Investment Co., Ltd. (“Shenzhen Xinjie”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Shenzhen Xinjie; (2) exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Shenzhen Xinjie, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A.  Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Shenzhen Xinjie, this Agreement and the authorization hereunder shall be irrevocable and remain in full forceas from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on March 10, 2017 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 2 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ LI Wenbin Name:LI Wenbin 3 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Beijing, the People’s Republic of China(“China”) on June 1, 2018 by andbetween the following parties. Party A: Beijing Shijitong Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose Unified SocialCredit Code is 91110108397827646N; and Party B: XIAO Wenjie a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 95% of the equity interests (“Party B Equity”) in Shenzhen Xinjie Investment Co., Ltd. (“Shenzhen Xinjie”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Shenzhen Xinjie; (2) exercising all the powers and voting rights of Party B asthe shareholder in accordance to Chinese laws and the articles of association of Shenzhen Xinjie, including but not limited to on the sale, transfer, pledge ordisposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors, supervisors, chiefexecutive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. 4 Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Shenzhen Xinjie, this Agreement and the authorization hereunder shall be irrevocable and remain in full forceas from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on March 10, 2017 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 5 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Beijing Shijitong Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ XIAO Wenjie Name:XIAO Wenjie 6Exhibit 4.19 LOAN AGREEMENT This Loan Agreement (this “Agreement”) is executed on May 10, 2017 in Beijing, the People’s Republic of China (the “PRC”) by and between: Party A:Beijing Shijitong Technology Co., Ltd. (the “Lender”) Address:Room 1505, Building 1, No. 108 Zhichun Road, Haidian District, Beijing; and Party B: XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************;LI Wenbin (“Party B2”, collectively the “Borrowers” with Party B1), a Chinese citizen whose ID number is ******************;The Lender and the Borrowers are hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS: The Borrowers hold in aggregate 100% equity interests (the “Borrower Interests”) in Shenzhen Xinjie Investment Co., Ltd. (the “Borrower Company”), alimited liability company incorporated in Shenzhen, the PRC with a registered capital of RMB1,000,000. The Lender intends to extend a loan to the Borrowers for the purposes set out in this Agreement. The Parties hereby agree as follows through friendlyconsultations: 1. Loan 1.1 In accordance with the terms and conditions of this Agreement, the Lender agrees to extend a loan totaling RMB1,000,000 (the “Loan”) to theBorrowers. The term of the Loan shall be ten (10) years as from the execution date of this Agreement. Unless otherwise agreed by the Parties in writing,the term of the Loan shall be renewed automatically upon each of its expirations for another ten (10) years. 1.2 During the original or renewed term of the Loan, the Borrowers must make prepayment immediately upon occurrence of any of the followingcircumstances: 1.1.1 where the 30-day period expires after the Borrowers receive the written notice demanding repayment from the Lender; 1.1.2 where the Borrower, in the case of an individual, dies, losses or becomes limited in terms of civil capacity, or in the case of a limited liabilitycompany, is dissolved or liquidated; 1.1.3 where the Borrowers are no longer employed by the Lender, the Borrower Company or their affiliates for whatever reason; 1 1.1.4 where the Borrowers are engaged or involved in criminal activities; 1.1.5 where any third party make claims against the Borrowers with an amount of RMB100,000 or more; or 1.1.6 where in accordance with the applicable PRC laws, the Lender may directly hold the equity interests in the Borrower Company, the BorrowerCompany may lawfully continue with its business, and the Lender decides to exercise its exclusive purchase option under the ExclusiveOption Agreement (the “Exclusive Option Agreement”) referred to herein. 1.2 Subject to satisfaction of all conditions precedent set out in Section 2, the Lender agrees to remit the Loan to the bank account designated by theBorrowers within twenty (20) days of the receipt of the written notice indicating the Borrowers’ demand for the Loan. The Borrowers shall issue anacknowledgement of receipt to the Lender on the same day when they receive such amount. The Loan extended by the Lender under this Agreementshall be utilized by the Borrowers only, and shall not be used by the successors or assignees of the Borrowers. 1.3 The Borrowers agree to accept the above Loan extended by the Lender, and hereby agree and undertake to use the Loan for funding businessdevelopment of the Borrower Company. Without prior written consent of the Lender, the Borrowers shall not use such amount for any other purpose. 1.4 Both the Lender and the Borrowers agree and acknowledge that the Borrowers may make repayment only in following manner determined by theLender: the Borrowers shall transfer all the Borrower Interests they hold to the Lender or the legal or natural person designated by the Lender upon theLender’s exercise of its option to buy the Borrower Interests under the Exclusive Option Agreement. 1.5 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted, any proceeds obtained by the Borrowers from transfer of theBorrower Interests shall be used for repaying for the Loan in accordance with this Agreement in such manner as designated by the Lender. 1.6 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted by applicable laws, the Lender shall have the right but noobligation to buy, or designated other legal or natural persons to buy, in whole or in part the Borrower Interests at any time at the purchase priceagreed under the Exclusive Option Agreement. 1.7 Both the Lender and the Borrowers agree and acknowledge that the Borrowers agree to create a pledge over all the equity interests they hold in theBorrower Company in favor of the Lender to secure the debt repayment hereunder. For the avoidance of doubt, the Parties acknowledge that, inaddition to the debt under this Agreement, the principal debt secured by the equity pledge under this section also includes all the debts owed by theBorrowers and the Borrower Company to the Lender under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and thePower of Attorney (as defined below). 2 1.8 Each of the Borrowers has executed an irrevocable Power of Attorney (the “Power of Attorney”), under which they authorize the Lender or any legalor natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company. 1.9 When the Borrowers transfer their Borrower Interests to the Lender or the person designated by the Lender, if the transfer price is equal to or lower thanthe principal of the Loan under this Agreement, the Loan under this Agreement shall be deemed to be interest free loan; if the transfer price is higherthan the principal of the Loan under this Agreement, the portion of the transfer price in excess of the principal shall be deemed to be the interests onthe principal of the Loan and shall be repaid by the Borrowers to the Lender. 2. Conditions Precedent for Loan Extending The Lender will not be obligated to extend the Loan to the Borrowers in accordance with Section 1.1 unless and until all the conditions below aresatisfied or waived by the Lender in writing. 2.1 The Lender receives on time the drawdown notice duly signed by the Borrowers in accordance with Section 1.2. The Borrower Company and theLender or the legal or natural person designated by the Lender has duly entered into a definite exclusive business cooperation agreement (the“Exclusive Business Cooperation Agreement”), under which the Lender or the person designated by the Lender will, to the extent permitted by thePRC laws, provide the Borrower Company with technical services and business consultancy services in the capacity of an exclusive service provider. 2.2 The Borrower, the Borrower Company and the Lender or the legal or natural person designated by the Lender have duly entered into a definite equitypledge contract (the “Equity Pledge Contract”), under which the Borrowers agree to create a pledge over all the Borrower Interests in favor of theLender or the person designated by the Lender. 2.3 The Borrower, the Lender and the Borrower Company have duly entered into a definite Exclusive Option Agreement, under which the Borrowers will,to the extent permitted by the PRC laws, irrevocably grant the Lender an exclusive Purchase Option to buy all Borrower Interests. 2.4 The Borrowers and the Lender have entered into an irrevocable Power of Attorney, under which the Borrowers authorize the Lender or any legal ornatural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company 2.5 The above Equity Pledge Contract, Power of Attorney, Exclusive Option Agreement and Exclusive Business Cooperation Agreement are executed onor prior to the execution date of this Agreement, and entered into full legal force. There have been no event that breaches or prejudices any of suchcontracts or agreements, and all the relevant filings, approvals, authorizations, registrations and government procedures have been secured orcompleted in accordance with such contracts or agreements, if required. 3 2.6 The representations and warranties made by the Borrowers under Section 3.2 are truthful, complete and accurate, and contain no misleading content. 2.7 The Borrowers have not breached any of the undertakings they make under Section 4 of this Agreement, and there is no actual or threatened event thatmay affect the performance of their obligations under this Agreement. 3. Representations and Warranties 3.1 From the execution date to the termination of this Agreement, the Lender represents and warrants to the Borrowers as follows: 3.1.1 The Lender is a company duly incorporated and existing under the PRC laws; 3.1.2 The Lender has the authority to execute and perform this Agreement. Its execution and performance of this Agreement are in line with its scopeof business and the provisions in its articles of association and other constitutional documents. The Lender has obtained all necessary andappropriate approvals and authorizations required for the execution and performance of this Agreement; and 3.1.3 Upon execution, this Agreement shall constitute lawful, valid and enforceable obligations for the Lender. 3.2 From the execution date to the termination of this Agreement, the Borrowers represent and warrant as follows: 3.2.1 The Borrowers have the authority to execute and perform this Agreement, and have obtained all necessary and appropriate approvals andauthorizations required for the execution and performance of this Agreement; 3.2.2 Upon execution, this Agreement shall constitute lawful, valid and enforceable obligations for the Borrowers; and 3.2.3 There is no actual or potential dispute, action, arbitration, administrative procedures or other legal proceedings involving the Borrowers. 4. Undertakings of the Borrowers 4.1 The Borrowers irrevocably undertake in the capacity of the shareholders of the Borrower Company that they will, during the term of this Agreement,procure the Borrower Company: 4.1.1 to strictly comply with the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement, and not toengage in any action or omission that is sufficient to affect the validity and enforceability of the Exclusive Option Agreement and theExclusive Business Cooperation Agreement; 4 4.1.2 to enter into contracts/agreements on business cooperation with the Lender or the person designated by the Lender or the person designated bythe Lender at any time as requested by the Lender, and ensure the strict performance of such contracts/agreements; 4.1.3 to provide the Lender with all its operating and financial information at the request of the Lender; 4.1.4 to inform the Lender promptly of any existing or potential litigation, arbitration or administrative procedures in connection with its assets,business and revenue; and 4.1.5 to appoint any person designated by the Lender as director of the Borrower Company at the request of the Lender. 4.2 The Borrowers undertake that during the term of this Agreement: 4.2.1 they shall exert their best efforts to cause the Borrower Company to continue with its existing business; 4.2.2 they shall strictly comply with the provisions of this Agreement, the Power of Attorney, the Equity Pledge Contract and the Exclusive OptionAgreement, and shall not engage in any action or omission that is sufficient to affect the validity and enforceability of this Agreement, thePower of Attorney, the Equity Pledge Contract and the Exclusive Option Agreement; 4.2.3 unless otherwise provided under the Equity Pledge Contract, they shall not sell, transfer, charge or otherwise dispose of the legal or beneficialinterests in the Borrower Interests, or permit any other security interests to be created over the same; 4.2.4 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove any sale, transfer, charge or otherdisposal of the legal or beneficial interests in the Borrower Interests, or permission of any other security interests to be created over the same, ineach case without prior written consent of the Lender, unless in favor of the Lender or the person designated by the Lender; 4.2.5 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove the merger or consolidation ofthe Borrower Company with any person or acquisition of or investment in any person by the Borrower Company, in each case without priorwritten consent of the Lender; 4.2.6 they shall inform the Lender promptly of any actual or threatened litigation, arbitration or administrative procedures in connection with theBorrower Interests; 5 4.2.7 they shall execute all such documents, take all such actions, make all such allegations, or present such defense against all claims as arenecessary and appropriate for maintaining their ownership over the Borrower Interests; 4.2.8 without prior written consent of the Lender, they shall not take any action or omission that may cause a material adverse effect on the assets,business and liabilities of the Borrower Company; 4.2.9 they shall, at the request of the Lender, appoint any person designated by the Lender as director of the Borrower Company; 4.2.10 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, unconditionally transfer the BorrowerInterests to the Lender or the person designated by the Lender, and cause other shareholders of the Borrower Company to waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.11 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, cause other shareholders of the BorrowerCompany to unconditionally transfer all the equity interests they hold in the Borrower Company to the Lender or the representative designatedby the Lender, in which case, the Borrowers shall waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.12 the Borrowers shall use the purchase price for repaying for the Loan first if the Lender purchases the Borrower Interests from them in accordancewith the Exclusive Option Agreement; and 4.2.13 without prior written consent of the Lender, they shall not supplement, change or amend their articles of association in any manner, increase ordecrease the registered capital, or change the capital structure in any form. 5. Liabilities for Breach of Contract 5.1 Either Party that breaches this Agreement and thus causes it impossible to perform this Agreement in whole or in part shall bear the liability for breachof contract, and indemnify the other Party against the losses (including litigation fees and attorney fees) thus caused. Where both Parties are in breachof this Agreement, they shall bear their respective liabilities according to the actual circumstances. 5.2 Where the Borrowers fail to perform their obligations to make repayment within the period set out in this Agreement, they shall pay the defaultinterests at a rate of 0.1% of the overdue amount on a daily basis, until all the principal, default interests and other amount are paid up. 6. Notice 6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 6 6.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices; or 6.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 6.2 The addresses of the Parties for receiving notices are as follows: Lender: Beijing Shijitong Technology Co., Ltd. Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-33688788 Borrowers: XIAO Wenjie Address:******************, Nanshan District, Shenzhen Tel.:****************** LI Wenbin Address:******************, Futian District, Shenzhen Tel.:****************** 6.3 Any Party may send a notice to the other Party as provided in this Section to change its address used to receive notice. 7. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisAgreement constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtainingthe written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that:(i) is or becomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed byapplicable laws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels orfinancial advisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Agreement. ThisSection shall survive the termination of this Agreement for any reason. 7 8. Governing Law and Dispute Resolution 8.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shallbe governed by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available lawsof China shall be governed by international legal principles and practices. 8.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute throughfriendly negotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution ofthe dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade ArbitrationCommission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the languageshall be Chinese. The arbitration award shall be final and binding on all Parties. 8.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 9. Miscellaneous 9.1 This Agreement shall take effect on the day when it is executed by the Parties and expire on the day when the Parties have completed the performanceof their obligations under this Agreement. 9.2 This Agreement is made in Chinese in four counterparts of equal legal force with each of the Lender and the Borrower holding one. 9.3 The Parties may amend and supplement this Agreement by written agreement. The amendment agreement and/or supplementary agreement among theParties in connection with this Agreement shall be integral part of and have the equal legal effect with this Agreement. 8 9.4 In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 9.5 The schedules, if any, to this Agreement shall be integral part of and have equal legal effect with this Agreement. [Signature page follows] 9 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute sign this Loan Agreement as of the date first above written. Lender: Beijing Shijitong Technology Co., Ltd. (Seal) Signature:/s/XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative /s/Seal of Beijing Shijitong Technology Co., Ltd. Borrowers: Signature:/s/XIAO Wenjie Name:XIAO Wenjie Signature:/s/LI Wenbin Name:LI Wenbin  Appendix 1 Loan Amount BorrowerLoan Amount (RMB)XIAO Wenjie950,000LI Wenbin50,000Total1,000,000  LOAN CONTRACT This Loan Contract （this “Contract”） is executed on June 1, 2018 in Beijing, the People’s Republic of China (the “PRC”) by and between: Party A:Beijing Shijitong Technology Co., Ltd. (the “Lender”) Unified Social Credit91110108397827646NCode: Party B: XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; LI Wenbin (“Party B2”, collectively the “Borrowers” with Party B1), a Chinese citizen whose ID number is ******************; The Lender and the Borrowers are hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS: The Borrowers hold in aggregate 100% equity interests (the “Borrower Interests”) in Shenzhen Xinjie Investment Co., Ltd. (the “Borrower Company”), alimited liability company incorporated in Shenzhen, the PRC with a registered capital of RMB50,000,000.00. The Lender intends to extend a loan to the Borrowers for the purposes set out in this Contract. The Parties hereby agree as follows through friendlyconsultations: 1. Loan 1.1 In accordance with the terms and conditions of this Contract, the Lender agrees to extend a loan totaling RMB49,000,000.00 (the “Loan”) to theBorrowers. The term of the Loan shall be ten (10) years as from the execution date of this Contract. Unless otherwise agreed by the Parties in writing,the term of the Loan shall be renewed automatically upon each of its expirations for another ten (10) years. 1.2 During the original or renewed term of the Loan, the Borrowers must make prepayment immediately upon occurrence of any of the followingcircumstances: 1.1.1 where the 30-day period expires after the Borrowers receive the written notice demanding repayment from the Lender; 1.1.2 where the Borrower, in the case of an individual, dies, losses or becomes limited in terms of civil capacity, or in the case of a limited liabilitycompany, is dissolved or liquidated; 1.1.3 where the Borrowers are no longer employed by the Lender, the Borrower Company or their affiliates for whatever reason; 1.1.4 where the Borrowers are engaged or involved in criminal activities;  1.1.5 where any third party make claims against the Borrowers with an amount of RMB100,000 or more; or 1.1.6 where in accordance with the applicable PRC laws, the Lender may directly hold the equity interests in the Borrower Company, the BorrowerCompany may lawfully continue with its business, and the Lender decides to exercise its exclusive purchase option under the exclusivepurchase option contract (the “Exclusive Purchase Option Contract”) referred to herein. 1.2 Subject to satisfaction of all conditions precedent set out in Section 2, the Lender agrees to remit the Loan to the bank account designated by theBorrowers within twenty (20) days of the receipt of the written notice indicating the Borrowers’ demand for the Loan. The Borrowers shall issue anacknowledgement of receipt to the Lender on the same day when they receive such amount. The Loan extended by the Lender under this Contract shallbe utilized by the Borrowers only, and shall not be used by the successors or assignees of the Borrowers. 1.3 The Borrowers agree to accept the above Loan extended by the Lender, and hereby agree and undertake to use the Loan for funding businessdevelopment of the Borrower Company. Without prior written consent of the Lender, the Borrowers shall not use such amount for any other purpose. 1.4 Both the Lender and the Borrowers agree and acknowledge that the Borrowers may make repayment only in following manner determined by theLender: the Borrowers shall transfer all the Borrower Interests they hold to the Lender or the legal or natural person designated by the Lender upon theLender’s exercise of its option to buy the Borrower Interests under the Exclusive Purchase Option Contract. 1.5 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted, any proceeds obtained by the Borrowers from transfer of theBorrower Interests shall be used for repaying for the Loan in accordance with this Contract in such manner as designated by the Lender. 1.6 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted by applicable laws, the Lender shall have the right but noobligation to buy, or designated other legal or natural persons to buy, in whole or in part the Borrower Interests at any time at the purchase price agreedunder the Exclusive Purchase Option Contract. 1.7 Both the Lender and the Borrowers agree and acknowledge that the Borrowers agree to create a pledge over all the equity interests they hold in theBorrower Company in favor of the Lender to secure the debt repayment hereunder. For the avoidance of doubt, the Parties acknowledge that, inaddition to the debt under this Contract, the principal debt secured by the equity pledge under this section also includes all the debts owed by theBorrowers and the Borrower Company to the Lender under the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contractand the Power of Attorney Agreement (as defined below). 1.8 Each of the Borrowers has executed an irrevocable Power of Attorney Agreement (the “Power of Attorney Agreement”), under which they authorizethe Lender or any legal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company. 1.9 When the Borrowers transfer their Borrower Interests to the Lender or the person designated by the Lender, if the transfer price is equal to or lower thanthe principal of the Loan under this Contract, the Loan under this Contract shall be deemed to be interest free loan; if the transfer price is higher thanthe principal of the Loan under this Contract, the portion of the transfer price in excess of the principal shall be deemed to be the interests on theprincipal of the Loan and shall be repaid by the Borrowers to the Lender. 2 2. Conditions Precedent for Loan Extending The Lender will not be obligated to extend the Loan to the Borrowers in accordance with Section 1.1 unless and until all the conditions below aresatisfied or waived by the Lender in writing. 2.1 The Lender receives on time the drawdown notice duly signed by the Borrowers in accordance with Section 1.2. The Borrower Company and theLender or the legal or natural person designated by the Lender has duly entered into a definite exclusive business cooperation agreement (the“Exclusive Business Cooperation Agreement”), under which the Lender or the person designated by the Lender will, to the extent permitted by thePRC laws, provide the Borrower Company with technical services and business consultancy services in the capacity of an exclusive service provider. 2.2 The Borrower, the Borrower Company and the Lender or the legal or natural person designated by the Lender have duly entered into a definite equitypledge contract (the “Equity Pledge Contract”), under which the Borrowers agree to create a pledge over all the Borrower Interests in favor of theLender or the person designated by the Lender. 2.3 The Borrower, the Lender and the Borrower Company have duly entered into a definite Exclusive Purchase Option Contract, under which theBorrowers will, to the extent permitted by the PRC laws, irrevocably grant the Lender an exclusive Purchase Option to buy all Borrower Interests. 2.4 The Borrowers and the Lender have entered into an irrevocable Power of Attorney Agreement, under which the Borrowers authorize the Lender or anylegal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company 2.5 The above Equity Pledge Contract, Power of Attorney Agreement, Exclusive Purchase Option Contract and Exclusive Business CooperationAgreement are executed on or prior to the execution date of this Contract, and entered into full legal force. There have been no event that breaches orprejudices any of such contracts or agreements, and all the relevant filings, approvals, authorizations, registrations and government procedures havebeen secured or completed in accordance with such contracts or agreements, if required. 2.6 The representations and warranties made by the Borrowers under Section 3.2 are truthful, complete and accurate, and contain no misleading content. 2.7 The Borrowers have not breached any of the undertakings they make under Section 4 of this Contract, and there is no actual or threatened event thatmay affect the performance of their obligations under this Contract. 3. Representations and Warranties 3.1 From the execution date to the termination of this Contract, the Lender represents and warrants to the Borrowers as follows: 3.1.1 The Lender is a company duly incorporated and existing under the PRC laws; 3 3.1.2 The Lender has the authority to execute and perform this Contract. Its execution and performance of this Contract are in line with its scope ofbusiness and the provisions in its articles of association and other constitutional documents. The Lender has obtained all necessary andappropriate approvals and authorizations required for the execution and performance of this Contract; and 3.1.3 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Lender. 3.2 From the execution date to the termination of this Contract, the Borrowers represent and warrant as follows: 3.2.1 The Borrowers have the authority to execute and perform this Contract, and have obtained all necessary and appropriate approvals andauthorizations required for the execution and performance of this Contract; 3.2.2 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Borrowers; and 3.2.3 There is no actual or potential dispute, action, arbitration, administrative procedures or other legal proceedings involving the Borrowers. 4. Undertakings of the Borrowers 4.1 The Borrowers irrevocably undertake in the capacity of the shareholders of the Borrower Company that they will, during the term of this Contract,procure the Borrower Company: 4.1.1 to strictly comply with the provisions of the Exclusive Purchase Option Contract and the Exclusive Business Cooperation Agreement, and notto engage in any action or omission that is sufficient to affect the validity and enforceability of the Exclusive Purchase Option Contract and theExclusive Business Cooperation Agreement; 4.1.2 to enter into contracts/agreements on business cooperation with the Lender or the person designated by the Lender or the person designated bythe Lender at any time as requested by the Lender, and ensure the strict performance of such contracts/agreements; 4.1.3 to provide the Lender with all its operating and financial information at the request of the Lender; 4.1.4 to inform the Lender promptly of any existing or potential litigation, arbitration or administrative procedures in connection with its assets,business and revenue; and 4.1.5 to appoint any person designated by the Lender as director of the Borrower Company at the request of the Lender. 4.2 The Borrowers undertake that during the term of this Contract: 4.2.1 they shall exert their best efforts to cause the Borrower Company to continue with its existing business; 4.2.2 they shall strictly comply with the provisions of this Contract, the Power of Attorney Agreement, the Equity Pledge Contract and the ExclusivePurchase Option Contract, and shall not engage in any action or omission that is sufficient to affect the validity and enforceability of thisContract, the Power of Attorney Agreement, the Equity Pledge Contract and the Exclusive Purchase Option Contract; 4 4.2.3 unless otherwise provided under the Equity Pledge Contract, they shall not sell, transfer, charge or otherwise dispose of the legal or beneficialinterests in the Borrower Interests, or permit any other security interests to be created over the same; 4.2.4 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove any sale, transfer, charge or otherdisposal of the legal or beneficial interests in the Borrower Interests, or permission of any other security interests to be created over the same, ineach case without prior written consent of the Lender, unless in favor of the Lender or the person designated by the Lender; 4.2.5 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove the merger or consolidation ofthe Borrower Company with any person or acquisition of or investment in any person by the Borrower Company, in each case without priorwritten consent of the Lender; 4.2.6 they shall inform the Lender promptly of any actual or threatened litigation, arbitration or administrative procedures in connection with theBorrower Interests; 4.2.7 they shall execute all such documents, take all such actions, make all such allegations, or present such defense against all claims as arenecessary and appropriate for maintaining their ownership over the Borrower Interests; 4.2.8 without prior written consent of the Lender, they shall not take any action or omission that may cause a material adverse effect on the assets,business and liabilities of the Borrower Company; 4.2.9 they shall, at the request of the Lender, appoint any person designated by the Lender as director of the Borrower Company; 4.2.10 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, unconditionally transfer the BorrowerInterests to the Lender or the person designated by the Lender, and cause other shareholders of the Borrower Company to waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.11 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, cause other shareholders of the BorrowerCompany to unconditionally transfer all the equity interests they hold in the Borrower Company to the Lender or the representative designatedby the Lender, in which case, the Borrowers shall waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.12 the Borrowers shall use the purchase price for repaying for the Loan first if the Lender purchases the Borrower Interests from them in accordancewith the Exclusive Purchase Option Contract; and 4.2.13 without prior written consent of the Lender, they shall not supplement, change or amend their articles of association in any manner, increase ordecrease the registered capital, or change the capital structure in any form. 5 5. Liabilities for Breach of Contract 5.1 Either Party that breaches this Contract and thus causes it impossible to perform this Contract in whole or in part shall bear the liability for breach ofcontract, and indemnify the other Party against the losses (including litigation fees and attorney fees) thus caused. Where both Parties are in breach ofthis Contract, they shall bear their respective liabilities according to the actual circumstances. 5.2 Where the Borrowers fail to perform their obligations to make repayment within the period set out in this Contract, they shall pay the default interestsat a rate of 0.1% of the overdue amount on a daily basis, until all the principal, default interests and other amount are paid up. 6. Notice 6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 6.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices; or 6.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 6.2 The addresses of the Parties for receiving notices are as follows: Lender: Beijing Shijitong Technology Co., Ltd. Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-3368 8788 Borrowers: XIAO Wenjie Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:0755-******** LI Wenbin Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** 6.3 Any Party may send a notice to the other Party as provided in this Section to change its address used to receive notice. 6 7. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) isor becomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed byapplicable laws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels orfinancial advisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 8. Governing Law and Dispute Resolution 8.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the resolution of disputes hereunder shall begoverned by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws ofChina shall be governed by international legal principles and practices. 8.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission forarbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the language shall be Chinese. Thearbitration award shall be final and binding on all Parties. 8.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 9. Miscellaneous 9.1 This Contract shall take effect on the day when it is executed by the Parties and expire on the day when the Parties have completed the performance oftheir obligations under this Contract. 9.2 This Contract is made in Chinese in four counterparts of equal legal force with each of the Lender and the Borrower holding one. 9.3 The Parties may amend and supplement this Contract by written agreement. The amendment agreement and/or supplementary agreement among theParties in connection with this Contract shall be integral part of and have the equal legal effect with this Contract. 9.4 In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 7 9.5 The schedules, if any, to this Contract shall be integral part of and have equal legal effect with this Contract. [Signature page follows] 8 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute sign this Loan Contract as of the date first above written. Lender: Beijing Shijitong Technology Co., Ltd. (Seal) By:/s/ XIAO Wenjie Name: XIAO Wenjie Title: Legal Representative Borrowers: By:/s/ XIAO Wenjie Name: XIAO Wenjie By:/s/ LI Wenbin Name: LI Wenbin  Appendix 1 Loan Amount BorrowerLoan Amount (RMB)XIAO Wenjie46,550,000LI Wenbin2,450,000Total49,000,000 Exhibit 4.25 Exclusive Business Cooperation Agreement This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following parties on August 27, 2018 inShenzhen, the People’s Republic of China. Party A: Shenzhen Lexin Software Technology Co., Ltd. Unified Social Credit Code: 91440300MA5ED2L92Q Address:24/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, Shenzhen Party B:Shenzhen Mengtian Technology Co., Ltd. Unified Social Credit Code:914403000654729224 Address:23/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, Shenzhen Party A and Party B shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively. Whereas, 1. Party A is a wholly foreign-owned enterprise registered in the People’s Republic of China’s (hereinafter “China” or “PRC”) with necessary resourcesfor providing technical services and commercial consulting services; 2. Party B is a domestic company registered in China and is approved by competent Chinese government authorities to engage in computer database andcomputer system analysis; providing computer technology services; operating on the Internet and Providing Services on the Internet; onlinecommerce, online consultation and online auction; engaging in cultural exchanges; literary creation and performance; advertising(if the laws andadministrative regulations stipulate that the advertising business shall be examined and registered, the business shall be operated only after theexamination and approval registration is conducted separately); enterprise image planning; cultural activity planning; purchase and sale of culturalgoods, arts and crafts, electronic products, gifts and other domestic trade; decoration design; exhibition; art design, computer animation design;information consultation (excluding restricted items) ; online advertising; system integration of radio and external equipment, network game,multimedia products and technology development and sale of wireless data products (excluding restricted projects); research and development and saleof wireless access equipment, GSM and CDMA wireless repeater equipment; computer programming; computer software design; engaged ininformation technology, electronic products, biotechnology, chemical products, building materials, machinery and other fields of technologydevelopment, technical advice, technical services, technology transfer; technical development and sales of electronic components, integrated circuits,photoelectric products, semiconductors, solar energy products, instrument accessories, digital tv broadcasting products and communication products;development and sales of dryers, industrial dehumidifiers, purification equipment, mechanical and electrical machinery, refrigeration equipment;research and development of intelligent transportation products, installation, development and sale of road traffic facilities; technical development andsale of conference public broadcasting equipment, avionics equipment and testing equipment. Party B’s current business and any business to beoperated and developed at any time during the term of this Agreement are collectively referred to as “Principal Business”.  3. Party A is willing to, with its advantages in technology, human resources, and information, provide Party B with technical support, consulting servicesand other services on an exclusive basis in relation to the Principal Business during the term of this Agreement, and Party B is willing to accept suchservices provided by Party A or Party A’s designee(s), each on the terms set forth herein. Now, therefore, the Parties hereby agree as follows through mutual negotiations: 1. Services to be Provided by Party A 1.1 Pursuant to the terms and conditions set forth herein, Party B hereby appoints Party A as Party B’s exclusive services provider to provide Party Bwith full-range business support and technical and consulting services during the term of this Agreement, which may include all such services asmay be determined from time to time by Party A within Party B’s scope of the Principal Business, such as but not limited to technical services,network support, business consultations, intellectual property licenses, equipment or office premise leasing, marketing consultancy, systemintegration, product research and development, and system maintenance. 1.2 Party B agrees to accept the consultations and services provided by Party A. Party B further agrees that unless with Party A’s prior writtenconsent, during the term of this Agreement, Party B shall not directly or indirectly accept any same or similar services provided by any thirdparty and shall not establish similar cooperation relationships with any third party regarding the matters contemplated by this Agreement. PartyA may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with the servicesunder this Agreement. 1.3 Service Mode 1.3.1 Party A and Party B agree that during the term of this Agreement, both Parties may, directly or through their respective affiliates, enterinto further technical service agreements or consulting service agreements, which shall specify the specific contents, manner, personnel,and fees for the specific technical services and consulting services to be provided by Party A. 2 1.3.2 To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both Parties may, directly or through theirrespective affiliates, enter into intellectual property (including, but not limited to, software, trademark, patent and know-how) licenseagreements which shall permit Party B to, based on its business needs, use Party A’s relevant intellectual property rights at any time andfrom time to time. 1.3.3 To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both Parties may, directly or through theirrespective affiliates, enter into equipment or property leases which shall permit Party B to, based on its business needs, use Party A’srelevant equipment or property at any time and from time to time. 1.3.4 Party B hereby grants to Party A an irrevocable and exclusive option to purchase from Party B, at Party A’s sole discretion, any or all ofthe assets of Party B, to the extent permitted under PRC law, and at the lowest purchase price permitted by PRC law. Upon exercise ofsuch option by Party A, The Parties shall enter into a separate asset transfer agreement, specifying the terms and conditions of thetransfer of the assets. 2. The Calculation and Payment of Service Fees Both Parties agree that Party B shall pay Party A consulting service fees in the amount and on the date stipulated in the invoice. Party A shall have theright to adjust the service fee rate at any time in accordance with the quantity and content of consulting services it provides to Party B. 2.1 Party B shall pay service fees to Party A in the following manner for the services provided by Party A hereunder. 2.1.1 Service fee equivalent to a certain ratio of the balance of Party B’s current-year revenue deducting the cost recognized by Party A, whichratio shall be otherwise determined by Party A annually based on Party B’s actual profitability; and 2.1.2 Service fee otherwise agreed upon by the Parties for specific technical services provided by Party A from time to time upon Party B’srequest. 2.2 Party B shall pay the service fees determined pursuant to Section 2.1 to Party A’s designated bank account in a lump sum within three (3) monthsfollowing the end of each Gregorian Calendar year. 2.3 With fifteen (15) days following the end of each financial year, Party B shall provide Party A with current-year financial statements and allbusiness records, business contracts and financial information necessary for the issuance of financial statements. If Party A disputes with thefinancial information provided by Party B, it may appoint an independent accountant with good reputation to audit relevant information andParty B shall cooperate. 3 3. Intellectual Property Rights and Confidentiality Clauses 3.1 Party A shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created duringthe performance of this Agreement, including but not limited to copyrights, patents, patent applications, trademarks, software, technical secrets,trade secrets, regardless of whether they have been developed by Party A or Party B. Party B shall execute all appropriate documents, take allappropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct as deemed necessary by PartyA at its sole discretion, so as to vest any ownership, right or interest of any such intellectual property rights in Party A, and/or perfect theprotections for any such intellectual property rights of Party A. 3.2 The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties inconnection with the preparation and performance of this Agreement constitute confidential information. Each Party shall maintainconfidentiality of all such confidential information, and without obtaining written consent of the other Party, it shall not disclose any relevantconfidential information to any third party, except for the information that: (i) is or becomes available to the general public (other than throughthe receiving Party’s unauthorized disclosure); (ii) is required to be disclosed by applicable laws or regulations or rules or regulations of anystock exchange; or (iii) is necessary to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisorsregarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisorsshall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by theshareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure by such Party itself and such Party shall beheld liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason. 3.3 The Parties agree that this Section shall survive changes to, and rescission or termination of, this Agreement. 4. Representation and Warranties 4.1 Party A hereby represents and warrants as follows: 4.1.1 Party A is a wholly foreign-owned enterprise legally established and validly existing under the laws of China; 4.1.2 Party A has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from thirdparties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party A’s execution,delivery and performance of this Agreement do not violate any restrictions in law or otherwise binding or having an impact on Party A. 4 4.1.3 This Agreement constitutes Party A’s legal, valid and binding obligations, enforceable against it in accordance with its terms. 4.2 Party B hereby represents and warrants as follows: 4.2.1 Party B is a company legally established and validly existing under the laws of China and has obtained all government permits andlicenses for engaging in the Principal Business. 4.2.2 Party B’s execution and performance of this Agreement is within its corporate capacity and the scope of its business operations; Party Bhas taken necessary corporate actions and given appropriate authorization and has obtained the consent and approval from third partiesand government agencies, and will not violate any restrictions in law or otherwise binding or having an impact on Party B. 4.2.3 This Agreement constitutes Party B’s legal, valid and binding obligations, and shall be enforceable against it in accordance with itsterms. 5. Effectiveness and Term 5.1 This Agreement is executed on the date first above written and shall take effect as of such date. This Agreement shall have an indefinite term andremain effective unless terminated in accordance with the provisions of this Agreement or terminated in writing by Party A. 5.2 During the term of this Agreement, each Party shall renew its operation term prior to the expiration thereof so as to enable this Agreement toremain effective. This Agreement shall be terminated upon the expiration of the operation term of a Party if the application for the renewal of itsoperation term is not approved by relevant government authorities. 6. Termination 6.1 Party B shall not terminate this Agreement prior to expiration of the term of this Agreement. 6.2 During the term of this Agreement, Party A shall have the right to terminate this Agreement upon giving 30 days’ prior written notice to Party Bat any time. 6.3 The rights and obligations of the Parties under Sections 3, 7 and 8 shall survive the termination of this Agreement. 7. Governing Law and Dispute Resolution 7.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the dispute resolution hereundershall be governed by the laws of China. 5 7.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute throughfriendly negotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party forresolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and TradeArbitration Commission for arbitration in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. Thearbitration award shall be final and binding on both Parties. 7.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, exceptfor the matters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 8. Indemnification Party B shall indemnify and hold harmless Party A from any losses, injuries, obligations or expenses incurred by Party A due to any lawsuit, claims orother demands against Party A arising from or caused by the consultations and services provided by Party A at the request of Party B, except where suchlosses, injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A. 9. Notices 9.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent byregistered mail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Eachnotice shall be followed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shallbe determined as follows: 9.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the dateof receipt or rejection at the address specified for notices. 9.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 9.2 The addresses of the Parties for receiving notices are as follows: Party A:Shenzhen Lexin Software Technology Co., Ltd.Addres:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 Party B:Shenzhen Mengtian Technology Co., Ltd.Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 6 9.3 Either Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof. 10. Assignment 10.1 Without Party A’s prior written consent, Party B shall not assign its rights and obligations hereunder to any third party. 10.2 Party B agrees that Party A may assign its obligations and rights hereunder to any third party and in the case of such assignment, Party A is onlyrequired to give written notice to Party B and does not need to seek any consent from Party B. 11. Severability In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 12. Modification and Supplement Any amendments and supplements to this Agreement shall be in writing. Any amendment agreements and supplementary agreements signed by theParties with respect to this Agreement shall form an integral part of this Agreement and have the same legal effect as this Agreement. 13. Language and Counterparts This Agreement is written in Chinese in two counterparts of equal legal force, with each Party holding one. [Signature page follows] 7 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the datefirst above written. Party A: Shenzhen Lexin Software Technology Co., Ltd. By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Shenzhen Mengtian Technology Co., Ltd. By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative 8Exhibit 4.26 EXCLUSIVE PURCHASE OPTION CONTRACT This Exclusive Purchase Option Contract (“this Contract”) is made and entered into by and among the following Parties as of August 27, 2018 in Shenzhen,the People’s Republic of China (“China”): Party A:Shenzhen Lexin Software Technology Co., Ltd, a wholly foreign-owned enterprise duly registered in China, whose Unified Social CreditCode is 91440300MA5ED2L92Q and having its registered office at 24/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district,Nanshan District, Shenzhen; Party B:XIAO Wenjie, a Chinese citizen whose ID number is ******************; CHEN Hua, a Chinese citizen whose ID number is ******************; ZHOU Xiaoting, a Chinese citizen whose ID number is ******************; QIAO Qian, a Chinese citizen whose ID number is ******************; WEI Jianwei, a Chinese citizen whose ID number is ******************; XU Shan, a Chinese citizen whose ID number is ******************; Party C:Shenzhen Mengtian Technology Co., Ltd., a limited liability company organized and existing under the laws of China, whose Unified SocialCredit Code is 914403000654729224 having its registered office at 23/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district,Nanshan District, Shenzhen. In this Contract, Party A, Party B and Party C shall be hereinafter referred to as a “Party” individually, and the “Parties” collectively. WHEREAS: Party B is a shareholder of Party C and holds 100% of the Equity Interest in Party C as of the execution date hereof; Now Therefore, the Parties hereby agree as follows through mutual negotiations: 1. Sale and Purchase of Equity Interest 1.1 Grant of Option In consideration of the payment of RMB10.00 by Party A, the receipt and sufficiency of which is hereby acknowledged by Party B, Party B herebyirrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”) to purchase inwhole or in part the equity interests in Party C now or then held by Party B (regardless of whether Party B’s capital contribution and/or shareholdingpercentage is changed or not in the future) at any time and from time to time at Party A’s sole and absolute discretion to the extent permitted byChinese laws and at the price described in Section 1.3 herein (such right being the “Equity Interest Purchase Option”). Except for Party A and theDesignee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests held by PartyB. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term “person” as used herein shall refer toindividuals, corporations, joint ventures, partnerships, enterprises, trusts or non-corporate organizations.  1.2 Steps for Exercise of Equity Interest Purchase Option Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written noticeto Party B (the “Equity Interest Purchase Option Notice”), specifying: (i) Party A’s decision to exercise the Equity Interest Purchase Option; (ii) theportion of equity interests Party A proposes to be purchase from Party B (the “Optioned Interests”); and (iii) the date for purchasing/transferring theOptioned Interests. 1.3 Equity Interest Purchase Price Unless an appraisal is required by the laws of China for the Equity Interest Purchase Option exercised by Party A, the purchase price of the OptionedInterests (the “Equity Interest Purchase Price”) shall be the minimum price to the extent permitted by law. 1.4 Transfer of Optioned Interests For each exercise of the Equity Interest Purchase Option: 1.4.1 Party B shall cause Party C to promptly convene a shareholders meeting, at which a resolution shall be adopted approving Party B’s transferof the Optioned Interests to Party A and/or the Designee(s); 1.4.2 Party B shall obtain written statements from the other shareholders of Party C (if any) giving consent to the transfer of the equity interest toParty A and/or the Designee(s) and waiving any right of first refusal related thereto; 1.4.3 Party B shall execute a share transfer contract with Party A and/or each Designee (whichever is applicable) with respect to each transfer(“Transfer Contract”), in accordance with the provisions of this Contract and the Equity Interest Purchase Option Notice; 1.4.4 The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses andpermits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumberedby any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For thepurposes of this Section and this Contract, “Security Interests” shall include securities, mortgages, third party’s rights or interests, anystock options, acquisition right, right of first refusal, right to offset, title retention or other security arrangements, but shall be deemed toexclude any security interest created by this Contract and Party B’s Equity Pledge Contract. “Party B’s Equity Pledge Contract” as used inthis Section and this Contract shall refer to the Equity Pledge Contract executed by and among Party A, Party B and Party C on the date ofthis Contract (“Equity Pledge Contract”), whereby Party B pledges all of its equity interests in Party C to Party A, in order to guaranteeParty C’s performance of its obligations under the Exclusive Business Cooperation Contract and other agreements executed by andbetween Party C and Party A. 2 2. Covenants 2.1 Covenants regarding Party C Party B (as a shareholder of Party C) and Party C hereby covenant as follows: 2.1.1 Without prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylawsof Party C, increase or decrease its registered capital, or otherwise change its structure of registered capital; 2.1.2 They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices, obtain andmaintain all government permits and licenses necessary for Party C to engage in its business, and prudently and effectively operate itsbusiness and handle its affairs; 2.1.3 Without prior written consent of Party A, they shall not at any time after the execution date hereof, sell, transfer, mortgage or otherwisedispose of any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow creation of any encumbranceor security interest thereon; 2.1.4 Without prior written consent of Party A, they shall not incur, inherit, guarantee or allow the existence of any debt, except for (i) debtsincurred in the ordinary course of business other than through borrowing loans; and (ii) debts that have been disclosed to Party A and forwhich Party A’s written consent has been obtained; 2.1.5 They shall always operate all of Party C’s businesses during the ordinary course of business to maintain the asset value of Party C andrefrain from any action/omission that may affect Party C’s operating status and asset value; 2.1.6 Without prior written consent of Party A, they shall not cause Party C to execute any major contract, except for contracts executed in theordinary course of business (for the purpose of this subsection, a contract with a value exceeding RMB100,000 shall be deemed a majorcontract); 3 2.1.7 Without prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit; 2.1.8 They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request; 2.1.9 If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance carrieracceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses; 2.1.10 Without prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person; 2.1.11 Without prior written consent of Party A, they shall not liquidate, dissolve or deregister Party C; 2.1.12 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedingsrelating to Party C’s assets, business or revenue; 2.1.13 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary orappropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims; 2.1.14 Without prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholder,provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its shareholders; and 2.1.15 At the request of Party A, they shall appoint any persons designated by Party A as the director of Party C. 2.2 Covenants of Party B Party B hereby covenants as follows: 2.2.1 Without prior written consent of Party A, Party B shall not sell, transfer, mortgage or otherwise dispose any legal or beneficial interest in theequity interests in Party C held by Party B, or allow creation of any encumbrance or security interest thereon, except for the pledge createdon these equity interests in accordance with Party B’s Equity Pledge Contract; 2.2.2 Party B shall cause the shareholder and/or the board of directors and/or executive director of Party C to disapprove the sale, transfer,mortgage or otherwise disposition of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the creationof encumbrance or any security interest thereon, without prior written consent of Party A, except for the pledge created on these equityinterests in accordance with Party B’s Equity Pledge Contract; 4 2.2.3 Party B shall cause the shareholder or the board of directors and/or executive director of Party C to disapprove Party C’s merger orconsolidation with any person, or the acquisition of or investment in any person, without prior written consent of Party A; 2.2.4 Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrativeproceedings relating to the equity interests in Party C held by Party B; 2.2.5 Party B shall cause the shareholder or executive director and/or the board of directors of Party C to vote their approval of the transfer of theOptioned Interests as set forth in this Contract and to take any and all other actions that may be requested by Party A; 2.2.6 To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate documents, take allnecessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against allclaims; 2.2.7 Party B shall, at the request of Party A, appoint any designee of Party A as the director and/or executive director of Party C; 2.2.8 Party B shall, at the request of Party A at any time, promptly and unconditionally transfer its equity interests in Party C to Party A’sDesignee(s) in accordance with the Equity Interest Purchase Option under this Contract, and Party B hereby waives its right of first refusal(if any) to the share transfer by the other existing shareholder of Party C (if any); and 2.2.9 If Party B receives from Party C any profit, profit sharing, stock dividend, or liquidation proceeds, Party B shall promptly donate the sameto Party A or any of its Designee(s) on the premise of complying with Chinese laws; and 2.2.10 Party B shall strictly abide by the provisions of this Contract and other contracts jointly or separately executed by and among Party Band/or Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect theeffectiveness and enforceability hereof and thereof. To the extent that Party B has any residual rights with respect to the equity interestssubject to this Contract hereunder or under Party B’s Equity Pledge Contract or under the Power of Attorney Agreement granted in favor ofParty A, Party B shall not exercise such rights except in accordance with the written instructions of Party A. 5 3. Representations and Warranties Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Contract and each date of transfer of theOptioned Interests, that: 3.1 They have the authority to execute and deliver this Contract and any share transfer contracts to which they are a party concerning the OptionedInterests to be transferred thereunder (each, a “Transfer Contracts”), and to perform their obligations under this Contract and any Transfer Contracts. Party Band Party C agree to enter into Transfer Contracts consistent with the terms of this Contract upon Party A’s exercise of the Equity Interest Purchase Option.This Contract and the Transfer Contracts to which Party B and Party C are a party constitute or will constitute their legal, valid and binding obligations andshall be enforceable against them in accordance with the provisions thereof; 3.2 The execution and delivery of this Contract or any Transfer Contracts and the obligations under this Contract or any Transfer Contracts shall not:(i) cause any violation of any applicable Chinese laws; (ii) be inconsistent with the articles of association, bylaws or other organizational documentsof Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breachunder any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grantand/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition ofadditional conditions to any licenses or permits issued to either of them; 3.3 Party B has a good and merchantable title to the equity interests in Party C held by Party B. Except for that disclosed in Party B’s Equity PledgeContract or other written instruments, Party B has not created any security interest on such equity interests; 3.4 Party C has a good and merchantable title to all of its assets, and except otherwise disclosed in writing, has not created any security interest orpurchase option on the aforementioned assets; 3.5 Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts that have been disclosedto Party A and for which Party A’s written consent has been obtained; 3.6 There are no pending or threatened litigation, arbitration or administrative proceedings involving the equity interests in Party C, assets of Party C orParty C; and 3.7 Party C has complied with all laws and regulations of China applicable to asset acquisitions; 4. Effective Date This Contract shall become effective upon the execution date hereof, and shall be terminated upon the complete transfer of all options held by PartyB in Party C to Party A and/or its Designee(s) pursuant to this Contract. 6 5. Governing Law and Dispute Resolution 5.1 Governing Law The execution, effectiveness, construction, performance, amendment and termination of this Contract and the Dispute Resolution hereunder shall begoverned by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws ofChina shall be governed by international legal principles and practices. 5.2 Dispute Resolution In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute throughfriendly negotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution ofthe dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade ArbitrationCommission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the languageshall be Chinese. The arbitration award shall be final and binding on all Parties. 6. Taxes and Fees Each Party shall pay any and all transfer and registration tax, expenses and fees incurred by or levied on itself in accordance with the laws of Chinain connection with the preparation and execution of this Contract and the Transfer Contracts, as well as the consummation of the transactionscontemplated under this Contract and the Transfer Contracts. 7. Notices 7.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent byregistered mail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each noticeshall be followed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall bedetermined as follows: 7.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices. 7.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 7 7.2 The addresses of the Parties for receiving notices are as follows: Party A:Shenzhen Lexin Software Technology Co., Ltd.Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 Party B:XIAO WenjieAddress:24/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenTel.:0755-******** CHEN Hua:Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenTel.:*********** ZHOU Xiaoting:Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenTel.:*********** QIAO Qian:Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenTel.:*********** WEI Jianwei:Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenTel.:*********** XU Shan:Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenTel.:*********** Party C:Shenzhen Mengtian Technology Co., Ltd.Address:27/F CES Tower, No.3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 8 7.3 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof. 8. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performancethis Contract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and withoutobtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for theinformation that: (i) is or becomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is requiredto be disclosed by applicable laws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to itslegal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shallbe bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees ofor agencies engaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. ThisSection shall survive the termination of this Agreement for any reason. 9. Further Warranties The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions andpurposes of this Contract and take further actions that are reasonably required for or are conducive to the implementation of the provisions andpurposes of this Contract. 10. Miscellaneous 10.1 Amendment, change and supplement Any amendment, change and supplement to this Contract shall be made only by a written contract executed by all of the Parties. 10.2 Entire Agreement Except for the amendments, supplements or changes made in writing after the execution hereof, this Contract shall constitute the entire agreementreached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior oral and written consultations,representations and contracts reached with respect to the subject matter of this Contract. 9 10.3 Headings The headings of this Contract are inserted for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of theprovisions of this Contract. 10.4 Language This Contract is written in Chinese in four counterparts of equal legal force, with each Party holding one. 10.5 Severability In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 10.6 Successors This Contract shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assignees of such Parties. 10.7 Survival 10.7.1 Any obligations arising out of or due hereunder before the expiration or early termination of this Contract shall survive the expiration orearly termination thereof. 10.7.2 Sections 5, 7, 8 and this Section 10.7 shall survive the expiration or termination of this Contract. 10.8 Waivers Any Party may waive the terms and conditions of this Contract, provided that such a waiver must be made in writing and shall require the signaturesof all the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such Partywith respect to any similar breach in other circumstances. [Signature page follows] 10 IN WITNESS WHEREOF, the Parties have caused their respective duly authorized representatives to execute this Exclusive Purchase Option Contract as ofthe date first above written. Party A: Shenzhen Lexin Software Technology Co., Ltd.By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Party B:XIAO WenjieSignature:/s/ XIAO Wenjie CHEN HuaSignature:/s/ CHEN Hua ZHOU XiaotingSignature:/s/ ZHOU Xiaoting QIAO QianSignature:/s/ QIAO Qian WEI JianweiSignature:/s/ WEI Jianwei XU ShanSignature:/s/ XU Shan Party C: Shenzhen Mengtian Technology Co., Ltd.By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Exhibit 4.27 Equity Pledge Contract This Equity Pledge Contract (this “Contract”) is made and entered into by and among the following parties on January 25, 2019, in Beijing, the People’sRepublic of China (“China” or “PRC”): Party A:Shenzhen Lexin Software Technology Co., Ltd. (“Pledgee”) Unified Social Credit Code:91110108397827646N Party B:XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; CHEN Hua (“Party B2”), a Chinese citizen whose ID number is ******************; ZHOU Xiaoting (“Party B3”), a Chinese citizen whose ID number is ******************; QIAO Qian (“Party B4”), a Chinese citizen whose ID number is ******************; XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; WEI Jianwei (“Party B5”), a Chinese citizen whose ID number is ******************; XU Shan (“Party B6”), a Chinese citizen whose ID number is ******************; Party B1, Party B2, Party B3, Party B4, Party B5 and Party B6 are collectively referred to as the “Pledgers” or“Party B”. Party C:Shenzhen Mengtian Technology Co., Ltd. Unified Social Credit Code:914403000654729224 In this Contract, The Pledgee, the Pledgers and the Party C are hereinafter referred to individually as a “Party” and collectively the “Parties”. Whereas: 1. The Pledgers are citizens/limited liability companies of China who as of the date hereof hold 100% of equity interests of Party C in total. Party C is alimited liability company registered in Beijing, China, engaging in tcomputer database and computer system analysis; providing computer technologyservices; operating on the Internet and Providing Services on the Internet; online commerce, online consultation and online auction; engaging incultural exchanges; literary creation and performance; advertising(if the laws and administrative regulations stipulate that the advertising businessshall be examined and registered, the business shall be operated only after the examination and approval registration is conducted separately);enterprise image planning; cultural activity planning; purchase and sale of cultural goods, arts and crafts, electronic products, gifts and other domestictrade; decoration design; exhibition; art design, computer animation design; information consultation (excluding restricted items) ; online advertising;system integration of radio and external equipment, network game, multimedia products and technology development and sale of wireless dataproducts (excluding restricted projects); research and development and sale of wireless access equipment, GSM and CDMA wireless repeaterequipment; computer programming; computer software design; engaged in information technology, electronic products, biotechnology, chemicalproducts, building materials, machinery and other fields of technology development, technical advice, technical services, technology transfer;technical development and sales of electronic components, integrated circuits, photoelectric products, semiconductors, solar energy products,instrument accessories, digital tv broadcasting products and communication products; development and sales of dryers, industrial dehumidifiers,purification equipment, mechanical and electrical machinery, refrigeration equipment; research and development of intelligent transportation products,installation, development and sale of road traffic facilities; technical development and sale of conference public broadcasting equipment, avionicsequipment and testing equipment. Party B1 and Party B2 respectively hold 45%, 17.5%, 17.5%, 7.5%, 7.5% and 5% of Party C’s equity interests. PartyC acknowledges the respective rights and obligations of the Pledgers and the Pledgee hereunder and agrees to provide any necessary assistance for theregistration of the Pledge;  2. The Pledgee is a wholly foreign-owned enterprise registered in Beijing, China. The Pledgee and Party C entered into an Exclusive BusinessCooperation Agreement (“Exclusive Business Cooperation Agreement”) on August 27, 2018; the Pledgee entered into an Exclusive Purchase OptionContract (“Exclusive Purchase Option Contract”) with the Pledgers and Party C on August 27, 2018; the Pledgers and Pledgee signed an Power ofAttorney Agreement (“Power of Attorney Agreement”) on January 15, 2019; the Pledgers and Pledgee signed two Loan Contract on August 27, 2018and January 25, 2019, respectively(“Loan Contract”); 3. To ensure the performance by Party C and the Pledgers of their obligations under the Exclusive Business Cooperation Agreement, Exclusive PurchaseOption Contract, Power of Attorney Agreement (collectively referred to as “Transaction Documents”), the Pledgers pledge with the Pledgee all of theirequity in Party C as security for the performance of the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, and thePower of Attorney Agreement by Party C and the Pledgers. To perform the provisions of the Transaction Documents, the Parties hereby agree as follows through mutual negotiations. 1. Definitions Unless otherwise specified herein, the terms below shall have the following meanings: 1.1 “Pledge”: shall refer to the security interest created by the Pledgers in favor of the Pledgee pursuant to Section 2 of this Contract, i.e., the right of thePledgee to be paid in priority from the proceeds from the transfer, auction or sale of the Equity Interest. 1.2 “Equity Interest”: shall refer to all equity interests currently held by and hereafter acquired by the Pledgers in Party C. 1.3 “Term of Pledge”: shall refer to the term set forth in Section 3 of this Contract. 1.4 “Transaction Documents”: shall refer to the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contract, the Power ofAttorney Agreement and any revision, amendment and/or restatement thereto. 1.5 “Contractual Obligations”: shall refer to all the obligations of the Pledgers under the Exclusive Purchase Option Contract, the Power of AttorneyAgreement and this Contract; as well as all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive PurchaseOption Contract and this Contract. 2 1.6 “Secured Indebtedness”: shall refer to any and all direct, indirect, derivative losses and losses of predictable benefits incurred due to any default by thePledgers and/or Party C, the amount of which shall be determined based on the pledgee’s reasonable business plan and profit forecast; service feespayable by Party C under the Exclusive Business Cooperation Agreement; and all costs and expenses incurred by the Pledgee in enforcing the Pledgersand/or Party C to perform their contractual obligations. 1.7 “Event of Default”: shall refer to any of the circumstances as enumerated in Section 7 of this Contract. 1.8 “Notice of Default”: shall refer to the notice issued by the Pledgee in accordance with this Contract declaring an Event of Default. 2. Pledge 2.1 The Pledgers agree to pledge all the Equity Interest that it lawfully owns and has the right to dispose of to the Pledgee as security for payment of theSecured Indebtedness under this Contract, and Party C hereby assents to such pledge. 2.2 During the Term of Pledge, the Pledgee is entitled to receive dividends distributed on the Equity Interest. The Pledgers may receive dividendsdistributed on the Equity Interest only with prior written consent of the Pledgee. Dividends received by the Pledgers on Equity Interest shall be, asrequired by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and applied first to pay the Secured Indebtedness; or(2) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permitted under applicable PRC laws. 2.3 The Pledgers may subscribe for capital increase in Party C only with prior written consent of the Pledgee. Any equity interest obtained by the Pledgersas a result of the Pledgers’ subscription of the increased registered capital of the Company shall also be deemed as Equity Interest. 2.4 In the event that Party C is to be liquidated or dissolved under compulsory laws of China, any interest distributed to the Pledgers upon Party C’sdissolution or liquidation shall, at the request of the Pledgee, be (i) deposited into an account designate and supervised by the Pledgee and applied firstto pay the Secured Indebtedness; or (ii) unconditionally donated to the Pledgee or any other person designated by the Pledgee to the extent permittedunder applicable PRC laws. 3. Term of Pledge 3.1 The Pledge shall become effective on such date when it is registered with competent administration for industry and commerce (the “AIC”) at thelocation of Party C. The Pledge shall remain effective until full discharge of all Contractual Obligations. All Parties agree that the Pledgers and Party Cshall (i) register the Pledge in the shareholders’ register of Party C within 3 business days following execution of this Contract, and (ii) submit anapplication to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution ofthis Contract. The Pledgers and Party C shall submit to the AIC all necessary documents and complete all necessary formalities to ensure that thePledge of the Equity Interest shall be registered with the AIC as soon as possible. 3.2 During the Term of Pledge, in the event that the Pledgers and/or Party C fail to perform the Contractual Obligations, the Pledgee shall have the right,but not the obligation, to dispose of the Pledge in accordance with the provisions of this Contract. 3 4. Custody of Equity Interest Records 4.1 During the Term of Pledge, the Pledgers shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and theshareholders’ register indicating the Pledge within one week following execution of this Contract. The Pledgee shall have custody of such documentsduring the entire Term of Pledge. 4.2 During the Term of Pledge, the Pledgers shall have the right to collect dividends accrued on the Equity Interest. 5. Representations and Warranties of the Pledgers and Party C As of the execution date of this Contract, the Pledgers and Party C hereby jointly and severally represent and warrant to the Pledgee that: 5.1 The Pledgers are the sole legal and beneficial owner of the Equity Interest. 5.2 Except for the Pledge, the Pledgers have not created any security interest or other encumbrance on the Equity Interest. 5.3 The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions of this Contract. 5.4 The Pledgers and Party C have obtained any and all approvals and consents from competent government authorities and third parties (if required) forexecution, delivery and performance of this Contract. 5.5 The execution, delivery and performance of this Contract will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of associationor other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it is a party or bywhich it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to anyParty; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or imposed with additional conditions. 6. Covenants and Further Agreement of the Pledgers and Party C 6.1 During the term of this Contract, the Pledgers and Party C hereby jointly and severally covenant to the Pledgee that the Pledgers and Party C: 6.1.1 shall not transfer the Equity Interest, create or permit the existence of any security interest or other encumbrance on the Equity Interest,without the prior written consent of the Pledgee, except for the purposes of the performance of the Transaction Documents; 6.1.2 shall promptly notify the Pledgee of any event or notice received by the Pledgers that may have an impact on the Equity Interest or anyportion thereof, as well as any event or notice received by the Pledgers that may have an impact on any guarantees and other obligations ofthe Pledgers hereunder. 6.2 The Pledgers agree that the rights acquired by the Pledgee in accordance with this Contract with respect to the Pledge shall not be interrupted orjeopardized by the Pledgers or any heirs or representatives of the Pledgers or any other persons through any legal proceedings. 4 6.3 To protect or perfect the security hereunder for the Contractual Obligations and Secured Indebtedness, the Pledgers hereby undertakes to execute ingood faith and to cause other parties who have an interest in the Pledge to execute all such certificates, contracts, deeds and/or covenants, and take allsuch actions as required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority hereunder, to enter into all relevantdocuments regarding ownership of Equity Interest with the Pledgee or assignee(s) of the Pledgee (natural persons/legal persons), and to provide thePledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that the Pledgee deems necessary. 6.4 The Pledgers hereby undertakes to comply with and perform all guarantees, promises, agreement, representations and conditions of and under thisContract. In the event of failure or partial performance of such guarantees, promises, agreements, representations and conditions, the Pledgers shallindemnify the Pledgee for all losses resulting therefrom. 7. Event of Breach 7.1 The following circumstances shall be deemed Event of Default: 7.1.1 The Pledgers and/or Party B breach any obligations under the Transaction Documents and/or this Contract; 7.1.2 The Pledgers have serious misstatement or mistake in any statement or warranty made in Section 5 of this Contract and/or the Pledgersviolate any warranty in Section 5 of this Contract; 7.1.3 The Pledgers and Party C fail to complete the registration of equity pledge with the registration authority in accordance with Section 3.1. 7.1.4 The Pledgers and Party C violate any provision of this Contract; 7.1.5 Except otherwise clearly stipulated in Section 6.1.1, the Pledgers transfer or intend to transfer or surrender the Equity Interest or assign theEquity Interest without the Pledgee’s written consent; 7.1.6 The Pledgers (i) are required to repay or perform in advance or (ii) fails to repay or perform upon maturity any debt obligations owed to anythird party such as loan, guarantee, indemnification and promise; 7.1.7 Any government approval, license, permit or authorization that renders this Contract enforceable, lawful and valid is withdrawn, terminated,invalid or substantially changed; 7.1.8 The enactment of governing laws renders this Contract unlawful or makes the Pledgers unable to continue performing its obligationshereunder; 7.1.9 The Pledgers’ assets experience negative change to the extent that affects the Pledgers’ ability to perform its obligations hereunder; 7.1.10 Party B’s heirs or custodians only partially perform or refuse to perform their payment obligations under the Transaction Documents; 7.1.11 Any other circumstance where the Pledgers cannot or possibly cannot exercise its rights over the Pledge. 7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1,the Pledgers shall immediately notify the Pledgee in writing accordingly. 5 7.3 Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to the Pledgee’s satisfaction, the Pledgee may issue a Notice ofDefault to the Pledgers upon the occurrence of the Event of Default or at any time thereafter, demanding the Pledgers and/or Party C to immediatelyperform their due obligations under the Transaction Documents and/or dispose of the Pledge in accordance with Section 8 of this Contract. 8. Exercise of Pledge 8.1 When the Pledgers and Party C are yet to fully perform their Contractual Obligations under the Transaction Documents, the Pledgers shall not transferthe Pledge or its Equity Interest in Party C without the Pledgee’s written consent. 8.2 The Pledgee may issue a written Notice of Default to the Pledgers when it exercises the Pledge. 8.3 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Defaultin accordance with Section 8.2. Once the Pledgee elects to exercise the right to dispose the Pledge, the Pledgers shall cease to be entitled to any rightsor interests associated with the Equity Interest. 8.4 The Pledgee shall the have right to be paid in priority with all or part of the Equity Interest from the proceeds from the transfer, auction or sale of theEquity Interest until the complete compensation of all outstanding payments due under the Transaction Documents and all other due payments to thePledgee. The Pledgee shall not be liable for any loss incurred by its due exercise of such rights and powers. 8.5 The Pledgee may exercise any remedy available simultaneously or in any order. The Pledgee may exercise the right to be paid in priority with theEquity Interest from the proceeds from auction or sale of the Equity Interest under this Contract, without recourse to any other remedy measure first. 8.6 When the Pledgee disposes of the Pledge in accordance with this Contract, the Pledgers and Party C shall provide necessary assistance to enable thePledgee to enforce the Pledge in accordance with this Contract. 9. Assignment 9.1 Without the Pledgee’s prior written consent, the Pledgers shall not assign or delegate their rights and obligations under this Contract. 9.2 This Contract shall be binding on the Pledgers and his/her successors and permitted assignees, and shall be valid with respect to the Pledgee and eachof his/her successors and assignees. 9.3 The Pledgee may at any time assign any and all of its rights and obligations under the Transaction Documents to its assignee(s) (natural persons/legalpersons), in which case the assignee shall enjoy and undertake the rights and obligations of the Pledgee under this Contract, as if it were the originalparty to this Contract. When the assignee transfers its rights and obligations under the Transaction Documents, the Pledgers shall execute relevantagreements or other documents related to such transfer as required by the Pledgee. 9.4 In the event of change of the Pledgee due to assignment, the Pledgers shall, at the request of the Pledgee, execute a new pledge contract with the newthe Pledgee on the same terms and conditions as this Contract. 6 9.5 The Pledgers shall strictly abide by the provisions of this Contract and other contracts jointly or separately executed by all or any of the Parties hereto,including the Exclusive Purchase Option Contract and the Power of Attorney Agreement, perform the obligations hereunder and thereunder, and refrainfrom any action/omission that may affect the effectiveness and enforceability hereof and thereof. Any residual rights of the Pledgers with respect to theEquity Pledged hereunder shall not be exercised by the Pledgers except in accordance with the written instructions of the Pledgee. 10. Termination Upon the sufficient and complete fulfillment of all Contractual Obligations and the full payment of all Secured Indebtedness by the Pledgers and PartyC, this Contract shall be terminated and the Pledgee shall terminate this Contract within reasonable and effective scope. Sections 10, 12 and 14 of this Contract shall survive the expiration or termination of this Contract. 11. Handling Fees and Other Expenses All fees and out of pocket expenses relating to this Contract, including but not limited to legal costs, costs of production, stamp tax and any other taxesand fees, shall be borne by Party C. If the Pledgee is required under applicable laws to bear certain taxes and fees, the Pledgers shall cause Party C toreimburse in full such taxes and fees paid by the Pledgee. 12. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) is orbecomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed byapplicable laws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels orfinancial advisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 13. Governing Law and Dispute Resolution 13.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the dispute resolution hereunder shall begoverned by the promulgated and publicly available laws of China. For matters not covered by the promulgated and publicly available laws of China,the principles and practices of international laws shall apply. 13.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission(CIETAC) for arbitration in accordance with its then effective Arbitration Rules. The arbitration shall be conducted in Beijing. The language ofarbitration shall be Chinese. The arbitration award shall be final and binding on all Parties. 7 13.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 14. Notices 14.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 14.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices. 14.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 14.2 The addresses of the Parties for receiving notices are as follows: Party A:Shenzhen Lexin Software Technology Co., Ltd.Address:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 Party B1:XIAO WenjieAddress:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenTel.:0755-******** Party B2:CHEN HuaAddress:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenTel.:*********** Party B3:ZHOU XiaotingAddress:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenTel.:*********** 8 Party B4:QIAO QianAddress:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenTel.:*********** Party B5:WEI JianweiAddress:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenTel.:*********** Party B6:XU ShanAddress:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenTel.:*********** Party C:Shenzhen Mengtian Technology Co., Ltd.Address:27/F CSE Tower, N0.3099 Keyuan South Road, Nanshan District, ShenzhenAttn:XIAO WenjieTel.:0755-36378888 14.3 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof. 15. Severability In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 16. Schedules The schedules hereto shall form an integral part of this Contract. 17. Effectiveness 17.1 This Contract shall come into force upon being signed by the Parties. Any amendment, change and supplement to this Contract shall be made inwritten form and become effective after being signed and stamped by the Parties and upon the completion of the registration with the government (ifapplicable). 17.2 This Contract is written in Chinese in four counterparts of equal legal force, with each Party holding one. 17.3 The Equity Pledge Contract signed by the Parties on August 27, 2018 will shall be terminated automatically from the date of signing of this Contract. [Signature page follows] 9 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Pledge Contract as of the date first above written. Party A:Shenzhen Lexin Software Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative Party B: By:/s/ XIAO WenjieName:XIAO Wenjie By:/s/ CHEN HuaName:CHEN Hua By:/s/ ZHOU XiaotingName:ZHOU Xiaoting By:/s/ QIAO QianName:QIAO Qian By:/s/ WEI JianweiName:WEI Jianwei By:/s/ XU ShanName:XU Shan Party C:Shenzhen Mengtian Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal Representative  Schedules 1. Capital Contribution Certificate 2. Shareholders’ Register of Shenzhen Mengtian Technology Co., Ltd.  Schedule 1 Capital Contribution Certificate This is to certify that XIAO Wenjie (ID No. ******************) has subscribed to the contribution of RMB450,000,000.00, thus holding 45% equityinterest of Shenzhen Mengtian Technology Co., Ltd. and that all of such 45% equity interest has been pledged to Shenzhen Lexin Software TechnologyCo., Ltd. Company:Shenzhen Mengtian Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:January 25, 2019  Schedule 1 Capital Contribution Certificate This is to certify that CHEN Hua (ID No. ******************) has subscribed to the contribution of RMB175,000,000.00, thus holding 17.5% equityinterest of Shenzhen Mengtian Technology Co., Ltd. and that all of such 17.5% equity interest has been pledged to Shenzhen Lexin Software TechnologyCo., Ltd. Company:Shenzhen Mengtian Technology Co., Ltd. By:/s/XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:January 25, 2019  Schedule 1 Capital Contribution Certificate This is to certify that ZHOU Xiaoting (ID No. ******************) has subscribed to the contribution of RMB175,000,000.00, thus holding 17.5% equityinterest of Shenzhen Mengtian Technology Co., Ltd. and that all of such 17.5% equity interest has been pledged to Shenzhen Lexin Software TechnologyCo., Ltd. Company:Shenzhen Mengtian Technology Co., Ltd. By:/s/XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:January 25, 2019  Schedule 1 Capital Contribution Certificate This is to certify that QIAO Qian (ID No. ******************) has subscribed to the contribution of RMB75,000,000.00, thus holding 7.5% equity interestof Shenzhen Mengtian Technology Co., Ltd. and that all of such 7.5% equity interest has been pledged to Shenzhen Lexin Software Technology Co., Ltd. Company:Shenzhen Mengtian Technology Co., Ltd. By:/s/XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:January 25, 2019  Schedule 1 Capital Contribution Certificate This is to certify that WEI Jianwei (ID No. ******************) has subscribed to the contribution of RMB75,000,000.00, thus holding 7.5% equityinterest of Shenzhen Mengtian Technology Co., Ltd. and that all of such 7.5% equity interest has been pledged to Shenzhen Lexin Software TechnologyCo., Ltd. Company:Shenzhen Mengtian Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:January 25, 2019  Schedule 1 Capital Contribution Certificate This is to certify that XU Shan (ID No. ******************) has subscribed to the contribution of RMB50,000,000.00, thus holding 5% equity interest ofShenzhen Mengtian Technology Co., Ltd. and that all of such 5% equity interest has been pledged to Shenzhen Lexin Software Technology Co., Ltd. Company:Shenzhen Mengtian Technology Co., Ltd. By:/s/ XIAO WenjieName:XIAO WenjieTitle:Legal RepresentativeDate:January 25, 2019  Schedule 2 Shareholders’ RegisterofShenzhen Mengtian Technology Co., Ltd. Shareholder’s nameID No. / Registration No.Amount of Subscription(RMB)Ratio ofContributionEquity PledgeXIAO Wenjie******************450,000,00045%XIAO Wenjie owns 45% equity interest ofShenzhen Mengtian Technology Co., Ltd. andall of such 45% equity interest has been pledgedto Shenzhen Lexin Software TechnologyCo., Ltd.CHEN Hua******************175,000,00017.5%CHEN Hua owns 17.5% equity interest ofShenzhen Mengtian Technology Co., Ltd. andall of such 17.5% equity interest has beenpledged to Shenzhen Lexin SoftwareTechnology Co., Ltd.ZHOU Xiaoting******************175,000,00017.5%ZHOU Xiaoting owns 17.5% equity interest ofShenzhen Mengtian Technology Co., Ltd. andall of such 17.5% equity interest has beenpledged to Shenzhen Lexin SoftwareTechnology Co., Ltd.QIAO Qian******************71,250,0007.5%QIAO Qian owns 7.5% equity interest ofShenzhen Mengtian Technology Co., Ltd. andall of such 7.5% equity interest has beenpledged to Shenzhen Lexin SoftwareTechnology Co., Ltd.WEI Jianwei******************71,250,0007.5%WEI Jianwei owns 7.5% equity interest ofShenzhen Mengtian Technology Co., Ltd. andall of such 7.5% equity interest has beenpledged to Shenzhen Lexin SoftwareTechnology Co., Ltd.XU Shan******************45,000,0005%XU Shan owns 5% equity interest of ShenzhenMengtian Technology Co., Ltd. and all of such5% equity interest has been pledged toShenzhen Lexin Software Technology Co., Ltd. Company: ShenzhenMengtianTechnology Co., Ltd.Shareholder: XIAO WenjieShareholder: ZHOU XiaotingShareholder: WEI JianweiSignature:/s/ XIAO WenjieSignature:/s/ ZHOU XiaotingSignature:/s/ WEI Jianwei By:/s/ XIAO WenjieShareholder: CHEN HuaShareholder: QIAO QianShareholder: XU Shan Name: XIAO WenjieSignature:/s/ CHEN HuaSignature:/s/ QIAO QianSignature:/s/ XU Shan Title: Legal Representative Dated: January 25, 2019 Exhibit 4.28 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Shenzhen, the People’s Republic of China(“China”) on January 25, 2019 byand between the following parties. Party A: Shenzhen Lexin Software Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose UnifiedSocial Credit Code is 91440300MA5ED2L92Q; and Party B: CHNE Hua, a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 17.5% of the equity interests (“Party B Equity”) in Shenzhen Mengtian Technology Co., Ltd. (“Mengtian Technology”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Mengtian Technology; (2) exercising all the powers and voting rights of PartyB as the shareholder in accordance to Chinese laws and the articles of association of Mengtian Technology, including but not limited to on the sale, transfer,pledge or disposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors,supervisors, chief executive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent.  All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Mengtian Technology, this Agreement and the authorization hereunder shall be irrevocable and remain in fullforce as from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on August 27, 2018 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 2 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Shenzhen Lexin Software Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ CHEN Hua Name:CHEN Hua 3 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Shenzhen, the People’s Republic of China(“China”) on January 25, 2019 byand between the following parties. Party A: Shenzhen Lexin Software Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose UnifiedSocial Credit Code is 91440300MA5ED2L92Q; and Party B: QIAO Qian, a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 7.5% of the equity interests (“Party B Equity”) in Shenzhen Mengtian Technology Co., Ltd. (“Mengtian Technology”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Mengtian Technology; (2) exercising all the powers and voting rights of PartyB as the shareholder in accordance to Chinese laws and the articles of association of Mengtian Technology, including but not limited to on the sale, transfer,pledge or disposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors,supervisors, chief executive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. 4 All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Mengtian Technology, this Agreement and the authorization hereunder shall be irrevocable and remain in fullforce as from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on August 27, 2018 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 5 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Shenzhen Lexin Software Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ QIAO Qian Name:QIAO Qian 6 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Shenzhen, the People’s Republic of China(“China”) on January 25, 2019 byand between the following parties. Party A: Shenzhen Lexin Software Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose UnifiedSocial Credit Code is 91440300MA5ED2L92Q; and Party B: ZHOU Xiaoting, a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 17.5% of the equity interests (“Party B Equity”) in Shenzhen Mengtian Technology Co., Ltd. (“Mengtian Technology”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Mengtian Technology; (2) exercising all the powers and voting rights of PartyB as the shareholder in accordance to Chinese laws and the articles of association of Mengtian Technology, including but not limited to on the sale, transfer,pledge or disposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors,supervisors, chief executive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. 7 All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Mengtian Technology, this Agreement and the authorization hereunder shall be irrevocable and remain in fullforce as from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on August 27, 2018 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 8 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Shenzhen Lexin Software Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ ZHOU Xiaoting Name:ZHOU Xiaoting 9 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Shenzhen, the People’s Republic of China(“China”) on January 25, 2019 byand between the following parties. Party A: Shenzhen Lexin Software Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose UnifiedSocial Credit Code is 91440300MA5ED2L92Q; and Party B: XU Shan, a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 5% of the equity interests (“Party B Equity”) in Shenzhen Mengtian Technology Co., Ltd. (“Mengtian Technology”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Mengtian Technology; (2) exercising all the powers and voting rights of PartyB as the shareholder in accordance to Chinese laws and the articles of association of Mengtian Technology, including but not limited to on the sale, transfer,pledge or disposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors,supervisors, chief executive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. 10 All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Mengtian Technology, this Agreement and the authorization hereunder shall be irrevocable and remain in fullforce as from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on August 27, 2018 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 11 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Shenzhen Lexin Software Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ XU Shan Name:XU Shan 12 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Shenzhen, the People’s Republic of China(“China”) on January 25, 2019 byand between the following parties. Party A: Shenzhen Lexin Software Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose UnifiedSocial Credit Code is 91440300MA5ED2L92Q; and Party B: XIAO Wenjie a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 45% of the equity interests (“Party B Equity”) in Shenzhen Mengtian Technology Co., Ltd. (“Mengtian Technology”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Mengtian Technology; (2) exercising all the powers and voting rights of PartyB as the shareholder in accordance to Chinese laws and the articles of association of Mengtian Technology, including but not limited to on the sale, transfer,pledge or disposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors,supervisors, chief executive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. 13 All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Mengtian Technology, this Agreement and the authorization hereunder shall be irrevocable and remain in fullforce as from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on August 27, 2018 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 14 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Shenzhen Lexin Software Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ XIAO Wenjie Name:XIAO Wenjie 15 Power of Attorney Agreement This Power of Attorney Agreement (hereinafter this “Agreement”) is made in Shenzhen, the People’s Republic of China(“China”) on January 25, 2019 byand between the following parties. Party A: Shenzhen Lexin Software Technology Co., Ltd., a limited company duly incorporated and existing under the laws of China, whose UnifiedSocial Credit Code is 91440300MA5ED2L92Q; and Party B: WEI Jianwei, a Chinese citizen whose identification number is ******************. Party A and Party B shall be hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS Party B holds 7.5% of the equity interests (“Party B Equity”) in Shenzhen Mengtian Technology Co., Ltd. (“Mengtian Technology”). Now Therefore, the Parties hereby agree as follows through mutual negotiations: Party B hereby irrevocably authorizes Party A to exercise the following rights with respect to Party B Equity during the term of this Agreement. Party A is hereby authorized as the sole and exclusive agent and attorney to act generally on behalf of Party B with respect to all matters relating to Party BEquity, including but not limited to (1) attending the Shareholders Meeting of Mengtian Technology; (2) exercising all the powers and voting rights of PartyB as the shareholder in accordance to Chinese laws and the articles of association of Mengtian Technology, including but not limited to on the sale, transfer,pledge or disposal of partial or entire Party B Equity; and (3) designating and appointing the legal representative, chairman of the Board, directors,supervisors, chief executive officers and other senior management members on behalf of Party B. Without prejudice to the generality of the powers conferred upon by this Agreement, Party A shall be entitled as authorized by this Agreement, to act onbehalf of Party B to sign the Transfer Contracts as specified in the Exclusive Purchase Option Agreement (to which Party B shall be a party) and execute theEquity Pledge Agreement and the Exclusive Purchase Option Agreement signed on the same day with this Agreement and to which it is a party. Theconclusion of the contracts aforementioned and the forms of the contractual rights therein shall not affect the authorization hereunder to any extent. 16 All actions taken by Party A in relation to Party B Equity shall be deemed as Party B’s own actions and all the documents signed by Party A shall be deemedas signed by Party B. Party B hereby acknowledges and approves the actions taken by and/or documents signed by Party A. Party A shall be entitled at its discretion to delegate or transfer to any other person or entity the rights in relation to the aforementioned issues without priornotification to or consent of Party B. During the term of Party B as a shareholder of Mengtian Technology, this Agreement and the authorization hereunder shall be irrevocable and remain in fullforce as from the execution date hereof. During the term of this Agreement, Party B hereby waives all the rights conferred upon Party A hereunder with respect to Party B Equity and shall notexercise such rights on its own. In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendlynegotiations. In the event that the Parties fail to reach an agreement within 30 days after either Party requests to the other Party for resolution of the disputethrough negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration inaccordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on bothParties. The Power of Attorney executed by the Parties on August 27, 2018 shall be automatically terminated as at the execution date hereof. This Agreement shall be written in Chinese in duplicates of equal legal force, with each party holding one. [Signature page follows] 17 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Power of Attorney Agreement as of the date first abovewritten. Party A:Shenzhen Lexin Software Technology Co., Ltd By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Party B: Signature:/s/ WEI Jianwei Name:WEI Jianwei 18Exhibit 4.29 LOAN CONTRACT This Loan Contract (this “Contract”) is executed on August 27, 2018 in Shenzhen, the People’s Republic of China (the “PRC”) by and between: Party A:Shenzhen Lexin Software Technology Co., Ltd. (the “Lender”) Unified Social Credit Code:91440300MA5ED2L92Q Address:24/F CES Tower, No. 3099 Keyuan South Road, Yuehai Sub-district, Nanshan District, Shenzhen Party B: XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; CHEN Hua (“Party B2”), a Chinese citizen whose ID number is ******************; ZHOU Xiaoting (“Party B2”), a Chinese citizen whose ID number is ******************; QIAO Qian (“Party B2”), a Chinese citizen whose ID number is ******************; WEI Jianwei (“Party B2”), a Chinese citizen whose ID number is ******************; XU Shan (“Party B2”), a Chinese citizen whose ID number is ******************; Party B1, Party B2, Party B3, Party B4, Party B5 and Party B6, collectively the “Borrowers”. The Lender and the Borrowers are hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS: The Borrowers hold in aggregate 100% equity interests (the “Borrower Interests”) in Shenzhen Mengtian Technology Co., Ltd. (the “BorrowerCompany”), a limited liability company incorporated in Shenzhen, the PRC with a registered capital of RMB750,000,000.00. The Lender intends to extend a loan to the Borrowers for the purposes set out in this Contract. The Parties hereby agree as follows through friendlyconsultations: 1. Loan 1.1 In accordance with the terms and conditions of this Contract, the Lender agrees to extend a loan totaling RMB750,000,000.00 (the “Loan”) to theBorrowers. The term of the Loan shall be ten (10) years as from the execution date of this Contract. Unless otherwise agreed by the Parties in writing,the term of the Loan shall be renewed automatically upon each of its expirations for another ten (10) years. 1.2 During the original or renewed term of the Loan, the Borrowers must make prepayment immediately upon occurrence of any of the followingcircumstances:  1.1.1 where the 30-day period expires after the Borrowers receive the written notice demanding repayment from the Lender; 1.1.2 where the Borrower, in the case of an individual, dies, losses or becomes limited in terms of civil capacity, or in the case of a limited liabilitycompany, is dissolved or liquidated; 1.1.3 where the Borrowers are no longer employed by the Lender, the Borrower Company or their affiliates for whatever reason; 1.1.4 where the Borrowers are engaged or involved in criminal activities; 1.1.5 where any third party make claims against the Borrowers with an amount of RMB100,000 or more; or 1.1.6 where in accordance with the applicable PRC laws, the Lender may directly hold the equity interests in the Borrower Company, the BorrowerCompany may lawfully continue with its business, and the Lender decides to exercise its exclusive purchase option under the exclusivepurchase option contract (the “Exclusive Purchase Option Contract”) referred to herein. 1.2 Subject to satisfaction of all conditions precedent set out in Section 2, the Lender agrees to remit the Loan to the bank account designated by theBorrowers within twenty (20) days of the receipt of the written notice indicating the Borrowers’ demand for the Loan. The Borrowers shall issue anacknowledgement of receipt to the Lender on the same day when they receive such amount. The Loan extended by the Lender under this Contractshall be utilized by the Borrowers only, and shall not be used by the successors or assignees of the Borrowers. 1.3 The Borrowers agree to accept the above Loan extended by the Lender, and hereby agree and undertake to use the Loan for funding businessdevelopment of the Borrower Company. Without prior written consent of the Lender, the Borrowers shall not use such amount for any other purpose. 1.4 Both the Lender and the Borrowers agree and acknowledge that the Borrowers may make repayment only in following manner determined by theLender: the Borrowers shall transfer all the Borrower Interests they hold to the Lender or the legal or natural person designated by the Lender upon theLender’s exercise of its option to buy the Borrower Interests under the Exclusive Purchase Option Contract. 1.5 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted, any proceeds obtained by the Borrowers from transfer of theBorrower Interests shall be used for repaying for the Loan in accordance with this Contract in such manner as designated by the Lender. 1.6 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted by applicable laws, the Lender shall have the right but noobligation to buy, or designated other legal or natural persons to buy, in whole or in part the Borrower Interests at any time at the purchase priceagreed under the Exclusive Purchase Option Contract. 1.7 Both the Lender and the Borrowers agree and acknowledge that the Borrowers agree to create a pledge over all the equity interests they hold in theBorrower Company in favor of the Lender to secure the debt repayment hereunder. For the avoidance of doubt, the Parties acknowledge that, inaddition to the debt under this Contract, the principal debt secured by the equity pledge under this section also includes all the debts owed by theBorrowers and the Borrower Company to the Lender under the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contractand the Power of Attorney Agreement (as defined below). 2 1.8 Each of the Borrowers has executed an irrevocable Power of Attorney Agreement (the “Power of Attorney Agreement”), under which they authorizethe Lender or any legal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company. 1.9 When the Borrowers transfer their Borrower Interests to the Lender or the person designated by the Lender, if the transfer price is equal to or lower thanthe principal of the Loan under this Contract, the Loan under this Contract shall be deemed to be interest free loan; if the transfer price is higher thanthe principal of the Loan under this Contract, the portion of the transfer price in excess of the principal shall be deemed to be the interests on theprincipal of the Loan and shall be repaid by the Borrowers to the Lender. 2. Conditions Precedent for Loan Extending The Lender will not be obligated to extend the Loan to the Borrowers in accordance with Section 1.1 unless and until all the conditions below aresatisfied or waived by the Lender in writing. 2.1 The Lender receives on time the drawdown notice duly signed by the Borrowers in accordance with Section 1.2. The Borrower Company and theLender or the legal or natural person designated by the Lender has duly entered into a definite exclusive business cooperation agreement (the“Exclusive Business Cooperation Agreement”), under which the Lender or the person designated by the Lender will, to the extent permitted by thePRC laws, provide the Borrower Company with technical services and business consultancy services in the capacity of an exclusive service provider. 2.2 The Borrower, the Borrower Company and the Lender or the legal or natural person designated by the Lender have duly entered into a definite equitypledge contract (the “Equity Pledge Contract”), under which the Borrowers agree to create a pledge over all the Borrower Interests in favor of theLender or the person designated by the Lender. 2.3 The Borrower, the Lender and the Borrower Company have duly entered into a definite Exclusive Purchase Option Contract, under which theBorrowers will, to the extent permitted by the PRC laws, irrevocably grant the Lender an exclusive Purchase Option to buy all Borrower Interests. 2.4 The Borrowers and the Lender have entered into an irrevocable Power of Attorney Agreement, under which the Borrowers authorize the Lender or anylegal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company 2.5 The above Equity Pledge Contract, Power of Attorney Agreement, Exclusive Purchase Option Contract and Exclusive Business CooperationAgreement are executed on or prior to the execution date of this Contract, and entered into full legal force. There have been no event that breaches orprejudices any of such contracts or agreements, and all the relevant filings, approvals, authorizations, registrations and government procedures havebeen secured or completed in accordance with such contracts or agreements, if required. 2.6 The representations and warranties made by the Borrowers under Section 3.2 are truthful, complete and accurate, and contain no misleading content. 3 2.7 The Borrowers have not breached any of the undertakings they make under Section 4 of this Contract, and there is no actual or threatened event thatmay affect the performance of their obligations under this Contract. 3. Representations and Warranties 3.1 From the execution date to the termination of this Contract, the Lender represents and warrants to the Borrowers as follows: 3.1.1 The Lender is a company duly incorporated and existing under the PRC laws; 3.1.2 The Lender has the authority to execute and perform this Contract. Its execution and performance of this Contract are in line with its scope ofbusiness and the provisions in its articles of association and other constitutional documents. The Lender has obtained all necessary andappropriate approvals and authorizations required for the execution and performance of this Contract; and 3.1.3 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Lender. 3.2 From the execution date to the termination of this Contract, the Borrowers represent and warrant as follows: 3.2.1 The Borrowers have the authority to execute and perform this Contract, and have obtained all necessary and appropriate approvals andauthorizations required for the execution and performance of this Contract; 3.2.2 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Borrowers; and 3.2.3 There is no actual or potential dispute, action, arbitration, administrative procedures or other legal proceedings involving the Borrowers. 4. Undertakings of the Borrowers 4.1 The Borrowers irrevocably undertake in the capacity of the shareholders of the Borrower Company that they will, during the term of this Contract,procure the Borrower Company: 4.1.1 to strictly comply with the provisions of the Exclusive Purchase Option Contract and the Exclusive Business Cooperation Agreement, andnot to engage in any action or omission that is sufficient to affect the validity and enforceability of the Exclusive Purchase Option Contractand the Exclusive Business Cooperation Agreement; 4.1.2 to enter into contracts/agreements on business cooperation with the Lender or the person designated by the Lender or the person designatedby the Lender at any time as requested by the Lender, and ensure the strict performance of such contracts/agreements; 4.1.3 to provide the Lender with all its operating and financial information at the request of the Lender; 4.1.4 to inform the Lender promptly of any existing or potential litigation, arbitration or administrative procedures in connection with its assets,business and revenue; and 4 4.1.5 to appoint any person designated by the Lender as director of the Borrower Company at the request of the Lender. 4.2 The Borrowers undertake that during the term of this Contract: 4.2.1 they shall exert their best efforts to cause the Borrower Company to continue with its existing business; 4.2.2 they shall strictly comply with the provisions of this Contract, the Power of Attorney Agreement, the Equity Pledge Contract and theExclusive Purchase Option Contract, and shall not engage in any action or omission that is sufficient to affect the validity and enforceabilityof this Contract, the Power of Attorney Agreement, the Equity Pledge Contract and the Exclusive Purchase Option Contract; 4.2.3 unless otherwise provided under the Equity Pledge Contract, they shall not sell, transfer, charge or otherwise dispose of the legal or beneficialinterests in the Borrower Interests, or permit any other security interests to be created over the same; 4.2.4 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove any sale, transfer, charge orother disposal of the legal or beneficial interests in the Borrower Interests, or permission of any other security interests to be created over thesame, in each case without prior written consent of the Lender, unless in favor of the Lender or the person designated by the Lender; 4.2.5 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove the merger or consolidation ofthe Borrower Company with any person or acquisition of or investment in any person by the Borrower Company, in each case without priorwritten consent of the Lender; 4.2.6 they shall inform the Lender promptly of any actual or threatened litigation, arbitration or administrative procedures in connection with theBorrower Interests; 4.2.7 they shall execute all such documents, take all such actions, make all such allegations, or present such defense against all claims as arenecessary and appropriate for maintaining their ownership over the Borrower Interests; 4.2.8 without prior written consent of the Lender, they shall not take any action or omission that may cause a material adverse effect on the assets,business and liabilities of the Borrower Company; 4.2.9 they shall, at the request of the Lender, appoint any person designated by the Lender as director of the Borrower Company; 4.2.10 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, unconditionally transfer the BorrowerInterests to the Lender or the person designated by the Lender, and cause other shareholders of the Borrower Company to waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.11 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, cause other shareholders of theBorrower Company to unconditionally transfer all the equity interests they hold in the Borrower Company to the Lender or the representativedesignated by the Lender, in which case, the Borrowers shall waive their pre-emptive rights to the equity interests transfer under thisparagraph; 5 4.2.12 the Borrowers shall use the purchase price for repaying for the Loan first if the Lender purchases the Borrower Interests from them inaccordance with the Exclusive Purchase Option Contract; and 4.2.13 without prior written consent of the Lender, they shall not supplement, change or amend their articles of association in any manner, increaseor decrease the registered capital, or change the capital structure in any form. 5. Liabilities for Breach of Contract 5.1 Either Party that breaches this Contract and thus causes it impossible to perform this Contract in whole or in part shall bear the liability for breach ofcontract, and indemnify the other Party against the losses (including litigation fees and attorney fees) thus caused. Where both Parties are in breach ofthis Contract, they shall bear their respective liabilities according to the actual circumstances. 5.2 Where the Borrowers fail to perform their obligations to make repayment within the period set out in this Contract, they shall pay the default interestsat a rate of 0.1% of the overdue amount on a daily basis, until all the principal, default interests and other amount are paid up. 6. Notice 6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 6.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices; or 6.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 6.2 The addresses of the Parties for receiving notices are as follows: Lender: Shenzhen Lexin Software Technology Co., Ltd. Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-3368 8788 6 Borrowers: XIAO Wenjie Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:0755-******** CHEN Hua Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** ZHOU Xiaoting Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** QIAO Qian Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** WEI Jianwei Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** XU Shan Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** 6.3 Any Party may send a notice to the other Party as provided in this Section to change its address used to receive notice. 7. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) isor becomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed byapplicable laws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels orfinancial advisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. 7 Disclosure of any confidential information by the employees of or agencies engaged by any Party shall be deemed disclosure by such Party itself andsuch Party shall be held liable for breach of this Contract. This Section shall survive the termination of this Agreement for any reason. 8. Governing Law and Dispute Resolution 8.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the resolution of disputes hereunder shall begoverned by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws ofChina shall be governed by international legal principles and practices. 8.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission forarbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the language shall be Chinese.The arbitration award shall be final and binding on all Parties. 8.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 9. Miscellaneous 9.1 This Contract shall take effect on the day when it is executed by the Parties and expire on the day when the Parties have completed the performance oftheir obligations under this Contract. 9.2 This Contract is made in Chinese in four counterparts of equal legal force with each of the Lender and the Borrower holding one. 9.3 The Parties may amend and supplement this Contract by written agreement. The amendment agreement and/or supplementary agreement among theParties in connection with this Contract shall be integral part of and have the equal legal effect with this Contract. 9.4 In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 9.5 The schedules, if any, to this Contract shall be integral part of and have equal legal effect with this Contract. [Signature page follows] 8 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute sign this Loan Contract as of the date first above written. Lender: Shenzhen Lexin Software Technology Co., Ltd. (Seal) By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Borrowers: By:/s/ XIAO Wenjie Name:XIAO Wenjie By:/s/ CHEN Hua Name:CHEN Hua By:/s/ ZHOU Xiaoting Name:ZHOU Xiaoting By:/s/ QIAO Qian Name:QIAO Qian By:/s/ Wei Jianwei Name:WEI Jianwei By:/s/ XU Shan Name:XU Shan  Appendix 1 Loan Amount BorrowerLoan Amount (RMB)XIAO Wenjie262,500,000CHEN Hua150,000,000ZHOU Xiaoting150,000,000QIAO Qian71,250,000WEI Jianwei71,250,000XU SHAN45,000,000Total750,000,000  LOAN CONTRACT This Loan Contract (this “Contract”) is executed on January 25, 2019 in Shenzhen, the People’s Republic of China (the “PRC”) by and between: Party A:Shenzhen Lexin Software Technology Co., Ltd. (the “Lender”) Unified Social Credit Code:91440300MA5ED2L92Q Party B: XIAO Wenjie (“Party B1”), a Chinese citizen whose ID number is ******************; CHEN Hua (“Party B2”), a Chinese citizen whose ID number is ******************; ZHOU Xiaoting (“Party B2”), a Chinese citizen whose ID number is ******************; QIAO Qian (“Party B2”), a Chinese citizen whose ID number is ******************; WEI Jianwei (“Party B2”), a Chinese citizen whose ID number is ******************; XU Shan (“Party B2”), a Chinese citizen whose ID number is ******************; Party B1, Party B2, Party B3, Party B4, Party B5 and Party B6, collectively the “Borrowers”. The Lender and the Borrowers are hereinafter referred to as a “Party” individually and the “Parties” collectively. WHEREAS: The Borrowers hold in aggregate 100% equity interests (the “Borrower Interests”) in Shenzhen Mengtian Technology Co., Ltd. (the “BorrowerCompany”), a limited liability company incorporated in Shenzhen, the PRC with a registered capital of RMB1,000,000,000.00. The Lender intends to extend a loan to the Borrowers for the purposes set out in this Contract. The Parties hereby agree as follows through friendlyconsultations: 1. Loan 1.1 In accordance with the terms and conditions of this Contract, the Lender agrees to extend a loan totaling RMB250,000,000.00 (the “Loan”) to theBorrowers. The term of the Loan shall be ten (10) years as from the execution date of this Contract. Unless otherwise agreed by the Parties in writing,the term of the Loan shall be renewed automatically upon each of its expirations for another ten (10) years. 1.2 During the original or renewed term of the Loan, the Borrowers must make prepayment immediately upon occurrence of any of the followingcircumstances: 1.1.1 where the 30-day period expires after the Borrowers receive the written notice demanding repayment from the Lender; 11 1.1.2 where the Borrower, in the case of an individual, dies, losses or becomes limited in terms of civil capacity, or in the case of a limited liabilitycompany, is dissolved or liquidated; 1.1.3 where the Borrowers are no longer employed by the Lender, the Borrower Company or their affiliates for whatever reason; 1.1.4 where the Borrowers are engaged or involved in criminal activities; 1.1.5 where any third party make claims against the Borrowers with an amount of RMB100,000 or more; or 1.1.6 where in accordance with the applicable PRC laws, the Lender may directly hold the equity interests in the Borrower Company, theBorrower Company may lawfully continue with its business, and the Lender decides to exercise its exclusive purchase option under theexclusive purchase option contract (the “Exclusive Purchase Option Contract”) referred to herein. 1.2 Subject to satisfaction of all conditions precedent set out in Section 2, the Lender agrees to remit the Loan to the bank account designated by theBorrowers within twenty (20) days of the receipt of the written notice indicating the Borrowers’ demand for the Loan. The Borrowers shall issue anacknowledgement of receipt to the Lender on the same day when they receive such amount. The Loan extended by the Lender under this Contract shallbe utilized by the Borrowers only, and shall not be used by the successors or assignees of the Borrowers. 1.3 The Borrowers agree to accept the above Loan extended by the Lender, and hereby agree and undertake to use the Loan for funding businessdevelopment of the Borrower Company. Without prior written consent of the Lender, the Borrowers shall not use such amount for any other purpose. 1.4 Both the Lender and the Borrowers agree and acknowledge that the Borrowers may make repayment only in following manner determined by theLender: the Borrowers shall transfer all the Borrower Interests they hold to the Lender or the legal or natural person designated by the Lender upon theLender’s exercise of its option to buy the Borrower Interests under the Exclusive Purchase Option Contract. 1.5 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted, any proceeds obtained by the Borrowers from transfer of theBorrower Interests shall be used for repaying for the Loan in accordance with this Contract in such manner as designated by the Lender. 1.6 Both the Lender and the Borrowers agree and acknowledge that, to the extent permitted by applicable laws, the Lender shall have the right but noobligation to buy, or designated other legal or natural persons to buy, in whole or in part the Borrower Interests at any time at the purchase price agreedunder the Exclusive Purchase Option Contract. 1.7 Both the Lender and the Borrowers agree and acknowledge that the Borrowers agree to create a pledge over all the equity interests they hold in theBorrower Company in favor of the Lender to secure the debt repayment hereunder. For the avoidance of doubt, the Parties acknowledge that, inaddition to the debt under this Contract, the principal debt secured by the equity pledge under this section also includes all the debts owed by theBorrowers and the Borrower Company to the Lender under the Exclusive Business Cooperation Agreement, the Exclusive Purchase Option Contractand the Power of Attorney Agreement (as defined below). 12 1.8 Each of the Borrowers has executed an irrevocable Power of Attorney Agreement (the “Power of Attorney Agreement”), under which they authorizethe Lender or any legal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company. 1.9 When the Borrowers transfer their Borrower Interests to the Lender or the person designated by the Lender, if the transfer price is equal to or lower thanthe principal of the Loan under this Contract, the Loan under this Contract shall be deemed to be interest free loan; if the transfer price is higher thanthe principal of the Loan under this Contract, the portion of the transfer price in excess of the principal shall be deemed to be the interests on theprincipal of the Loan and shall be repaid by the Borrowers to the Lender. 2. Conditions Precedent for Loan Extending The Lender will not be obligated to extend the Loan to the Borrowers in accordance with Section 1.1 unless and until all the conditions below aresatisfied or waived by the Lender in writing. 2.1 The Lender receives on time the drawdown notice duly signed by the Borrowers in accordance with Section 1.2. The Borrower Company and theLender or the legal or natural person designated by the Lender has duly entered into a definite exclusive business cooperation agreement (the“Exclusive Business Cooperation Agreement”), under which the Lender or the person designated by the Lender will, to the extent permitted by thePRC laws, provide the Borrower Company with technical services and business consultancy services in the capacity of an exclusive service provider. 2.2 The Borrower, the Borrower Company and the Lender or the legal or natural person designated by the Lender have duly entered into a definite equitypledge contract (the “Equity Pledge Contract”), under which the Borrowers agree to create a pledge over all the Borrower Interests in favor of theLender or the person designated by the Lender. 2.3 The Borrower, the Lender and the Borrower Company have duly entered into a definite Exclusive Purchase Option Contract, under which theBorrowers will, to the extent permitted by the PRC laws, irrevocably grant the Lender an exclusive Purchase Option to buy all Borrower Interests. 2.4 The Borrowers and the Lender have entered into an irrevocable Power of Attorney Agreement, under which the Borrowers authorize the Lender or anylegal or natural person designated by the Lender to exercise all their rights as the shareholders of the Borrower Company 2.5 The above Equity Pledge Contract, Power of Attorney Agreement, Exclusive Purchase Option Contract and Exclusive Business CooperationAgreement are executed on or prior to the execution date of this Contract, and entered into full legal force. There have been no event that breaches orprejudices any of such contracts or agreements, and all the relevant filings, approvals, authorizations, registrations and government procedures havebeen secured or completed in accordance with such contracts or agreements, if required. 2.6 The representations and warranties made by the Borrowers under Section 3.2 are truthful, complete and accurate, and contain no misleading content. 2.7 The Borrowers have not breached any of the undertakings they make under Section 4 of this Contract, and there is no actual or threatened event thatmay affect the performance of their obligations under this Contract. 13 3. Representations and Warranties 3.1 From the execution date to the termination of this Contract, the Lender represents and warrants to the Borrowers as follows: 3.1.1 The Lender is a company duly incorporated and existing under the PRC laws; 3.1.2 The Lender has the authority to execute and perform this Contract. Its execution and performance of this Contract are in line with its scopeof business and the provisions in its articles of association and other constitutional documents. The Lender has obtained all necessary andappropriate approvals and authorizations required for the execution and performance of this Contract; and 3.1.3 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Lender. 3.2 From the execution date to the termination of this Contract, the Borrowers represent and warrant as follows: 3.2.1 The Borrowers have the authority to execute and perform this Contract, and have obtained all necessary and appropriate approvals andauthorizations required for the execution and performance of this Contract; 3.2.2 Upon execution, this Contract shall constitute lawful, valid and enforceable obligations for the Borrowers; and 3.2.3 There is no actual or potential dispute, action, arbitration, administrative procedures or other legal proceedings involving the Borrowers. 4. Undertakings of the Borrowers 4.1 The Borrowers irrevocably undertake in the capacity of the shareholders of the Borrower Company that they will, during the term of this Contract,procure the Borrower Company: 4.1.1 to strictly comply with the provisions of the Exclusive Purchase Option Contract and the Exclusive Business Cooperation Agreement, andnot to engage in any action or omission that is sufficient to affect the validity and enforceability of the Exclusive Purchase Option Contractand the Exclusive Business Cooperation Agreement; 4.1.2 to enter into contracts/agreements on business cooperation with the Lender or the person designated by the Lender or the person designatedby the Lender at any time as requested by the Lender, and ensure the strict performance of such contracts/agreements; 4.1.3 to provide the Lender with all its operating and financial information at the request of the Lender; 4.1.4 to inform the Lender promptly of any existing or potential litigation, arbitration or administrative procedures in connection with its assets,business and revenue; and 4.1.5 to appoint any person designated by the Lender as director of the Borrower Company at the request of the Lender. 14 4.2 The Borrowers undertake that during the term of this Contract: 4.2.1 they shall exert their best efforts to cause the Borrower Company to continue with its existing business; 4.2.2 they shall strictly comply with the provisions of this Contract, the Power of Attorney Agreement, the Equity Pledge Contract and theExclusive Purchase Option Contract, and shall not engage in any action or omission that is sufficient to affect the validity and enforceabilityof this Contract, the Power of Attorney Agreement, the Equity Pledge Contract and the Exclusive Purchase Option Contract; 4.2.3 unless otherwise provided under the Equity Pledge Contract, they shall not sell, transfer, charge or otherwise dispose of the legal orbeneficial interests in the Borrower Interests, or permit any other security interests to be created over the same; 4.2.4 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove any sale, transfer, charge orother disposal of the legal or beneficial interests in the Borrower Interests, or permission of any other security interests to be created over thesame, in each case without prior written consent of the Lender, unless in favor of the Lender or the person designated by the Lender; 4.2.5 they shall procure the shareholders meeting and/or board of directors of the Borrower Company to disapprove the merger or consolidation ofthe Borrower Company with any person or acquisition of or investment in any person by the Borrower Company, in each case without priorwritten consent of the Lender; 4.2.6 they shall inform the Lender promptly of any actual or threatened litigation, arbitration or administrative procedures in connection with theBorrower Interests; 4.2.7 they shall execute all such documents, take all such actions, make all such allegations, or present such defense against all claims as arenecessary and appropriate for maintaining their ownership over the Borrower Interests; 4.2.8 without prior written consent of the Lender, they shall not take any action or omission that may cause a material adverse effect on the assets,business and liabilities of the Borrower Company; 4.2.9 they shall, at the request of the Lender, appoint any person designated by the Lender as director of the Borrower Company; 4.2.10 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, unconditionally transfer the BorrowerInterests to the Lender or the person designated by the Lender, and cause other shareholders of the Borrower Company to waive their pre-emptive rights to the equity interests transfer under this paragraph; 4.2.11 to the extent permitted by the PRC laws, they shall, upon the request of the Lender from time to time, cause other shareholders of theBorrower Company to unconditionally transfer all the equity interests they hold in the Borrower Company to the Lender or therepresentative designated by the Lender, in which case, the Borrowers shall waive their pre-emptive rights to the equity interests transferunder this paragraph; 4.2.12 the Borrowers shall use the purchase price for repaying for the Loan first if the Lender purchases the Borrower Interests from them inaccordance with the Exclusive Purchase Option Contract; and 15 4.2.13 without prior written consent of the Lender, they shall not supplement, change or amend their articles of association in any manner, increaseor decrease the registered capital, or change the capital structure in any form. 5. Liabilities for Breach of Contract 5.1 Either Party that breaches this Contract and thus causes it impossible to perform this Contract in whole or in part shall bear the liability for breach ofcontract, and indemnify the other Party against the losses (including litigation fees and attorney fees) thus caused. Where both Parties are in breach ofthis Contract, they shall bear their respective liabilities according to the actual circumstances. 5.2 Where the Borrowers fail to perform their obligations to make repayment within the period set out in this Contract, they shall pay the default interestsat a rate of 0.1% of the overdue amount on a daily basis, until all the principal, default interests and other amount are paid up. 6. Notice 6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registeredmail with postage prepaid, commercial courier service or facsimile transmission to the address of such Party set forth below. Each notice shall befollowed by a confirmation copy sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined asfollows: 6.1.1 Notices given by personal delivery, courier service, registered mail with postage prepaid shall be deemed effectively given on the date ofreceipt or rejection at the address specified for notices; or 6.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 6.2 The addresses of the Parties for receiving notices are as follows: Lender: Shenzhen Lexin Software Technology Co., Ltd. Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Attn:XIAO Wenjie Tel.:0755-3368 8788 Borrowers: XIAO Wenjie Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:0755-******** 16 CHEN Hua Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** ZHOU Xiaoting Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** QIAO Qian Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** WEI Jianwei Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** XU Shan Address:27/F, CES Tower, No. 3099 Keyuan South Road, Nanshan District, Shenzhen Tel.:*********** 6.3 Any Party may send a notice to the other Party as provided in this Section to change its address used to receive notice. 7. Confidentiality The Parties acknowledge that any oral or written information exchanged between the Parties in connection with the preparation and performance thisContract constitute confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining thewritten consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (i) is orbecomes available to the general public (other than through the receiving Party’s unauthorized disclosure); (ii) is required to be disclosed byapplicable laws or regulations or rules or regulations of any stock exchange; or (iii) is necessary to be disclosed by any Party to its legal counsels orfinancial advisors regarding the transaction contemplated hereunder, provided that such legal counsels or financial advisors shall be bound by theconfidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the employees of or agenciesengaged by any Party shall be deemed disclosure by such Party itself and such Party shall be held liable for breach of this Contract. This Section shallsurvive the termination of this Agreement for any reason. 17 8. Governing Law and Dispute Resolution 8.1 The execution, effectiveness, construction, performance, amendment and termination of this Contract and the resolution of disputes hereunder shall begoverned by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws ofChina shall be governed by international legal principles and practices. 8.2 In the event of any dispute with respect to the construction and performance of this Contract, the Parties shall first resolve the dispute through friendlynegotiations. In the event the Parties fail to reach an agreement within 30 days after either Party requests to the other Parties for resolution of thedispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission forarbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and the language shall be Chinese. Thearbitration award shall be final and binding on all Parties. 8.3 Upon occurrence of any disputes arising from the construction and performance of this Agreement or pending arbitration of any dispute, except for thematters under dispute, the Parties shall continue to exercise their respective rights and perform their respective obligations hereunder. 9. Miscellaneous 9.1 This Contract shall take effect on the day when it is executed by the Parties and expire on the day when the Parties have completed the performance oftheir obligations under this Contract. 9.2 This Contract is made in Chinese in four counterparts of equal legal force with each of the Lender and the Borrower holding one. 9.3 The Parties may amend and supplement this Contract by written agreement. The amendment agreement and/or supplementary agreement among theParties in connection with this Contract shall be integral part of and have the equal legal effect with this Contract. 9.4 In the event that one or several provisions hereof are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws orregulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect.The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to thegreatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to theeconomic effect of those invalid, illegal or unenforceable provisions. 9.5 The schedules, if any, to this Contract shall be integral part of and have equal legal effect with this Contract. [Signature page follows] 18 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute sign this Loan Contract as of the date first above written. Lender: Shenzhen Lexin Software Technology Co., Ltd. (Seal) By:/s/ XIAO Wenjie Name:XIAO Wenjie Title:Legal Representative Borrowers: By:/s/ XIAO Wenjie Name:XIAO Wenjie By:/s/ CHEN Hua Name:CHEN Hua By:/s/ ZHOU Xiaoting Name:ZHOU Xiaoting By:/s/ QIAO Qian Name:QIAO Qian By:/s/ WEI Jianwei Name:WEI Jianwei By:/s/ XU Shan Name:XU Shan  Appendix 1 Loan Amount BorrowerLoan Amount (RMB)XIAO Wenjie18,7500,000CHEN Hua25,000,000ZHOU Xiaoting25,000,000QIAO Qian3,750,000WEI Jianwei3,750,000XU SHAN5,000,000Total250,000,000 Exhibit 8.1 Principal Subsidiaries, Consolidated Affiliated Entities and Subsidiaries of Consolidated Affiliated Entities A. Principal Subsidiaries: Installment (HK) Investment Limited, a Hong Kong company Beijing Shijitong Technology Co., Ltd., a PRC company Shenzhen Lexin Software Technology Co., Ltd., a PRC company B. Consolidated Affiliated Entities: Shenzhen Xinjie Investment Co., Ltd., a PRC company Beijing Lejiaxin Network Technology Co., Ltd., a PRC company Shenzhen Qianhai Dingsheng Asset Management Co., Ltd., a PRC company Shenzhen Mengtian Technology Co., Ltd., a PRC company C. Subsidiaries of Consolidated Affiliated Entities: Shenzhen Fenqile Network Technology Co., Ltd., a PRC company Ji’an Fenqile Network Microcredit Co., Ltd., a PRC company Shenzhen Fenqile Trading Co., Ltd., a PRC company Shenzhen Lexin Financing Guarantee Co., Ltd., a PRC company Shenzhen Qianhai Juzi Information Technology Co., Ltd., a PRC company Shenzhen Tiqianle Network Technology Co., Ltd., a PRC company Shenzhen Dingsheng Computer Technology Co., Ltd., a PRC company Exhibit 12.1 Certification by the Principal Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Jay Wenjie Xiao, certify that: 1. I have reviewed this annual report on Form 20-F of LexinFintech Holdings Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) forthe company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others 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 reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered bythe annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably 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 the company’s internalcontrol over financial reporting. Date:April 30, 2019 By:/s/ Jay Wenjie XiaoName:Jay Wenjie XiaoTitle:Chief Executive Officer Exhibit 12.2 Certification by the Principal Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Craig Yan Zeng, certify that: 1. I have reviewed this annual report on Form 20-F of LexinFintech Holdings Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) forthe company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others 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 reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered bythe annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably 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 the company’s internalcontrol over financial reporting. Date:April 30, 2019 By:/s/ Craig Yan ZengName:Craig Yan ZengTitle:Chief Financial Officer Exhibit 13.1 Certification by the Principal Executive OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of LexinFintech Holdings Ltd. (the “Company”) on Form 20-F for the year ended December 31, 2018 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay Wenjie Xiao, 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; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date:April 30, 2019 By:/s/ Jay Wenjie XiaoName:Jay Wenjie XiaoTitle:Chief Executive Officer Exhibit 13.2 Certification by the Principal Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of LexinFintech Holdings Ltd. (the “Company”) on Form 20-F for the year ended December 31, 2018 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig Yan Zeng, 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; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date:April 30, 2019 By:/s/ Craig Yan ZengName:Craig Yan ZengTitle:Chief Financial Officer Exhibit 15.1 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-225322) of LexinFintech Holdings Ltd. of ourreport dated April 30, 2019 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in thisForm 20-F. /s/ PricewaterhouseCoopers Zhong Tian LLP Beijing, the People’s Republic of ChinaApril 30, 2019 Exhibit 15.2 April 30, 2019 To: LexinFintech Holdings Ltd. (乐信控股有限公司) (the “Company”) 27/F, CES Tower, No. 3099 Keyuan South Road, Yuehai Street Nanshan District, Shenzhen 518052 The People’s Republic of China Ladies and Gentlemen: We hereby consent to the reference of our name under the headings “Item 3.D. Key Information—Risk Factors—Risks Related to Our CorporateStructure” and “Item 4.C. Information on the Company—Organizational Structure” in the Company’s annual report on Form 20-F for the year endedDecember 31, 2018 (the “Annual Report”), which will be filed with the Securities and Exchange Commission (the “SEC”) on the date hereof, and furtherconsent to the incorporation by reference into the Registration Statement on Form S-8 (File No. 333-225322) of the summary of our opinion under theheadings “Item 3.D. Key Information—Risk Factors—Risks Related to Our Corporate Structure” and “Item 4.C. Information on the Company—Organizational Structure” in the Annual Report. We also consent to the filing of this consent letter with the SEC as an exhibit to the Annual Report. 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 faithfully, /s/ SHIHUI PARTNERS 

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