Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021.
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report.........................
For the transition period from to
Commission file number: 001-36430
Tuniu Corporation
(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)
Tuniu Building No. 32
Suningdadao, Xuanwu District
Nanjing, Jiangsu Province 210042
The People’s Republic of China
(Address of principal executive offices)
Mr. Anqiang Chen, Financial Controller
Telephone: +(86) 25 86853969
Email: ir@tuniu.com
Tuniu Building No. 32
Suningdadao, Xuanwu District
Nanjing, Jiangsu Province 210042
The People’s Republic of China
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
American depositary shares (one
American depositary share
representing three Class A ordinary
shares, par value US$0.0001 per share)
Class A ordinary shares, par value
US$0.0001 per share*
Trading Symbol(s)
TOUR
Name of each exchange on which registered
The Nasdaq Stock Market LLC
(The Nasdaq Global Market)
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 be registered pursuant to Section 12(g) of the Act.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
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.
Table of Contents
371,958,043 Class A ordinary shares (including 18,266,523 Class A ordinary shares, represented by 6,088,841 ADSs, repurchased and reserved for the future exercise of options or the vesting of other awards
under the 2008 Plan and the 2014 Plan) and 17,373,500 Class B ordinary shares, par value US$0.0001 per share, as of December 31, 2021.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒ No
☐ Yes ☒ 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 1934 during 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 filing requirements for the past 90 days.
⌧ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
⌧ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated
filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☐
Accelerated filer
Emerging growth company
☒
☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ⌧
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
☒
International Financial Reporting Standards as issued by the International Accounting
Standards Board ☐
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.
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).
☒ Yes ☐ No
Other
☐
☐ Item 17 ☐ Item 18
☐ Yes ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
☐ Yes ☐ No
Table of Contents
TABLE OF CONTENTS
INTRODUCTION
FORWARD-LOOKING INFORMATION
PART I
Item 1.
Item 2.
Item 3.
Item 4.
Item 4A.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
PART II
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Unresolved Staff Comments
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other than Equity Securities
Item 13.
Item 14.
Item 15.
Item 16A.
Item 16B.
Item 16C.
Item 16D.
Item 16E.
Item 16F.
Item 16G.
Item 16H.
ITEM 16I.
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
Audit Committee Financial Expert
Code of Ethics
Principal Accountant Fees and Services
Exemptions from the Listing Standards for Audit Committees
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Change in Registrant’s Certifying Accountant
Corporate Governance
Mine Safety Disclosure
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 17.
Item 18.
Item 19.
SIGNATURES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements
Financial Statements
Exhibits
i
1
2
3
3
3
3
51
85
85
102
113
115
115
116
128
129
130
130
130
131
131
132
132
132
132
132
133
133
133
133
133
133
134
137
F-1
Table of Contents
In this annual report, except where the context otherwise requires and for purposes of this annual report only:
● “ADSs” refer to our American depositary shares, each ADS represents three Class A ordinary shares;
INTRODUCTION
● “China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan, Hong Kong and Macau;
● “consolidated affiliated entities” refers to the VIE and its subsidiaries;
● “gross bookings” refer to the total amount paid by our customers for the travel products that we have delivered and the travel services that we have rendered,
including the related taxes, fees and other charges borne by our customers;
● “shares” or “ordinary shares” refers to our ordinary shares, which include both Class A ordinary shares and Class B ordinary shares;
● “U.S. GAAP” refers to generally accepted accounting principles in the United States;
● “VIE” refers to variable interest entity, and “the VIE” refers to Nanjing Tuniu Technology Co., Ltd., or Nanjing Tuniu, and its subsidiaries.
● “we,” “us,” “our company,” “our,” or “Tuniu” refers to Tuniu Corporation, a Cayman Islands company, its subsidiaries, and, in the context of describing our
operations and consolidated financial information, also include the VIE;
● “RMB” or “Renminbi” refers to the legal currency of China;
● “$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States; and
● all discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.
Our business is primarily conducted in China and almost all of our revenues are denominated in Renminbi. However, periodic reports made to shareholders will
include current period amounts translated into U.S. dollars using the then current exchange rates, for the convenience of the readers. We make no representation that any
Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. The PRC
government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through
restrictions on foreign trade. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at
a rate of RMB6.3726 to US$1.00, the noon buying rate in effect as of December 30, 2021.
1
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FORWARD-LOOKING INFORMATION
This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. These statements are made
under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such
as “may,” “will,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “is/are likely to” or other similar expressions. We have based these forward-
looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results
of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to:
● our goals and strategies;
● the expected growth of the online leisure travel market in China;
● our expectations regarding demand for our products and services;
● our expectations regarding our relationships with customers and travel suppliers;
● our ability to offer competitive travel products and services;
● our future business development, results of operations and financial condition;
● competition in our industry in China;
● relevant government policies and regulations relating to our corporate structure, business and industry;
● the impact of the COVID-19 on our business operations, the travel industry and the economy of China and elsewhere generally;
● general economic and business condition in China and elsewhere; and
● assumptions underlying or related to any of the foregoing.
We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunction with 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 our business or the extent to which any
factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update
or revise the forward-looking statements, statements, whether as a result of new information, future events or otherwise, except as required under applicable law.
This annual report also contains statistical data and estimates that we obtained from industry publications and reports generated by government agencies and third-
party providers of market intelligence. These industry publications and reports generally indicate that the information contained therein was obtained from sources
believed to be reliable, but do not guarantee the accuracy and completeness of such information. Although we believe that the publications and reports are reliable, we
have not independently verified the data.
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
Our Holding Company Structure and Contractual Arrangements with the VIE
Tuniu Corporation is not an operating company in China but a Cayman Islands holding company with no equity ownership in the variable interest entity, or VIE. We
conduct our business in China through (i) our PRC subsidiaries and (ii) the consolidated affiliated entities with which we have maintained contractual arrangements. PRC
laws and regulations restrict and impose conditions on foreign investment in value-added telecommunication services and certain other businesses. Accordingly, we
operate these businesses in China through the VIE, and rely on contractual arrangements among our PRC subsidiaries, the VIE and its shareholders to control the
business operations of the VIE. Revenues contributed by the VIE accounted for 48.1%, 90.6% and 53.6% of our total revenues for the years of 2019, 2020 and 2021,
respectively. Holders of our ADSs hold equity interest in Tuniu Corporation, our Cayman Islands holding company, and do not have direct or indirect equity interest in
the VIE.
A series of contractual agreements, including powers of attorney, equity interest pledge agreements, cooperation agreements, purchase option agreements and
shareholders’ voting rights agreements, have been entered into by and among our wholly owned PRC subsidiary, Beijing Tuniu Technology Co., Ltd., or Beijing Tuniu,
the VIE and its shareholders. As a result of the contractual arrangements, we have effective control over and are considered the primary beneficiary of the VIE, and we
have consolidated the financial results of the VIE in our consolidated financial statements. For more details of these contractual arrangements, see “Item 4. Information
on the Company—C. Organizational Structure.”
However, the contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE and we may incur substantial costs to
enforce the terms of the arrangements. There are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and
rules regarding the status of our rights with respect to our contractual arrangements with the VIE and its shareholders. It is uncertain whether any new PRC laws or
regulations relating to VIE structures will be adopted or if adopted, what they would provide. If we or the VIE is found to be in violation of any existing or future PRC
laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC authorities would have broad discretion to take action in
dealing with such violations or failures. Our holding company, our PRC subsidiaries and VIE, and investors of our company face uncertainty about potential future
actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial
performance of the VIE and our company as a whole. In addition, these agreements have not been tested in China courts. For a detailed description of the risks associated
with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”
PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in,
China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide
regulations, including data security or anti-monopoly related regulations, in this nature may cause the value of such securities to significantly decline. For more details,
see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight over our business operation
could result in a material adverse change in our operations and the value of our ADSs.”
Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and
regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China— Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections
available to you and us.”
3
Table of Contents
Permissions Required from the PRC Authorities for Our Operations
We conduct our business in China through our subsidiaries and the consolidated affiliated entities in China. Our operations in China are governed by PRC laws and
regulations. As of the date of this annual report, our PRC subsidiaries and VIE have obtained the requisite licenses and permits from the PRC government authorities that
are material for the business operations of our PRC subsidiaries and the VIE in China, including, among others, a Value-Added Telecommunication Business Operating
License issued by the local bureau of the Ministry of Industry and Information Technology of the PRC, or the MIIT, a Short Messaging Service Access Code Certificate
issued by the MIIT, a Food Business License issued by Jizhou Branch of Tianjin Administration for Market Regulation, Filing Certificates for Operation of Prepacked
Food issued by Xuanwu Branch of Nanjing Administration for Market Regulation, Travel Agency Business Licenses issued by the local bureaus of and/or the then
Ministry of Tourism, or the Ministry of Culture and Tourism which has replaced the Ministry of Tourism, Approval Documents for Operation of Small-sum Loan
Business issued by the Guangzhou Municipal Bureau of Finance, an Insurance Brokerage Business License is issued by the CBIRC, a Securities and Futures Business
Operation License is issued by the CSRC, Insurance Agency Concurrent-business Licenses issued by the CBIRC, and a Hotel Hygiene License, which is issued by the
local bureau of the National Health Commission. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement
practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform
in the future. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected
by the complexity, uncertainties and changes in PRC regulations of internet and related business and companies.”
Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign
investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The
approval of or filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we
cannot predict whether or for how long we will be able to obtain such approval or complete such filing.”
The Holding Foreign Companies Accountable Act
The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have filed
audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (United States), or
the PCAOB, for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange. Since our
auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is not
currently inspected by the PCAOB, which may impact our ability to remain listed on a United States or other foreign exchange. The related risks and uncertainties could
cause the value of our ADSs to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The
PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct
inspections over our auditor deprives our investors with the benefits of such inspections” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing
Business in China—Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if
the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the
threat of their being delisted, may materially and adversely affect the value of your investment.”
Cash Flows through Our Organization
Tuniu Corporation is a holding company with no operations of its own. We conduct our business in China through our subsidiaries and the consolidated affiliated
entities in China. As a result, although other means are available for us to obtain financing at the holding company level, Tuniu Corporation’s ability to pay dividends to
the shareholders and to service any debt it may incur may depend upon dividends paid by our PRC subsidiaries and license and service fees paid by the VIE. If any of our
subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Tuniu Corporation. In addition, our
PRC subsidiaries are permitted to pay dividends to Tuniu Corporation only out of their retained earnings, if any, as determined in accordance with PRC accounting
standards and regulations. Further, our PRC subsidiaries and VIE are required to make appropriations to certain statutory reserve funds or may make appropriations to
certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5.
Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.”
4
Table of Contents
Under PRC laws and regulations, our PRC subsidiaries and VIE are subject to certain restrictions with respect to paying dividends or otherwise transferring any of
their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by State
Administration of Foreign Exchange, or the SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generates accumulated
profits and meets the requirements for statutory reserve funds. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—Risk Factors
—Risks Related to Doing Business in China—Our subsidiaries and the consolidated affiliated entities in China are subject to restrictions on paying dividends or making
other payments to our holding company, which may restrict our ability to satisfy our liquidity requirements.”
For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid within China, assuming that: (i) we have taxable
earnings, and (ii) we determine to pay dividends in the future.
Hypothetical pre-tax earnings
Tax on earnings at statutory rate of 25% (2)
Net earnings available for distribution
Withholding tax at standard rate of 10% (3)
Net distribution to Parent/Shareholders
Notes:
Tax calculation (1)
100
(25)
75
(7.5)
67.5
%
%
%
%
%
(1) For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount, not considering timing differences, is assumed
to equal taxable income in China.
(2) Certain of our subsidiaries qualifies for a 15% preferential income tax rate in China. For purposes of this hypothetical example, the table above reflects a maximum
tax scenario under which the full statutory rate would be effective.
(3) The PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding
company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’s immediate holding company is registered in Hong Kong or other
jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example,
the table above assumes a maximum tax scenario under which the full withholding tax would be applied.
Under PRC law, Tuniu Corporation may provide funding to our PRC subsidiaries only through capital contributions or loans, and to the VIE only through loans,
subject to satisfaction of applicable government registration and approval requirements. For the years ended December 31, 2019, 2020 and 2021, Tuniu Corporation did
not make any capital contribution to our intermediate holding companies and subsidiaries. For the years ended December 31, 2019, 2020 and 2021, our intermediate
holding companies and subsidiaries and the consolidated affiliated entities received no capital contribution or loan investment from Tuniu Corporation. VIE and its
subsidiaries obtained financing from external banks for their operations with the amount of RMB543.5 million for the year ended December 31, 2019, and repaid
RMB133.5 million and RMB284.1 million for the years ended December 31, 2020 and 2021, respectively.
Tuniu Corporation has not declared or paid any cash dividends, nor does it has any present plan to pay any cash dividends on our ordinary shares in the foreseeable
future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. We currently do not have any plan
to require our PRC subsidiaries to distribute their retained earnings and intend to retain them to operate and expand our business in the PRC. See “Item 8. Financial
Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an
investment in our ADSs, see “Item 10. Additional Information—E. Taxation.”
Financial Information Related to the VIE
The following table presents the condensed consolidating schedule of financial position for the VIE and other entities as of the dates presented.
5
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Selected Condensed Consolidated Balance Sheets Information
Tuniu
Other
Corporation Subsidiaries
As of December 31, 2020
Primary
Beneficiary of
VIE
VIE and
its
Subsidiaries
(in RMB thousands)
Eliminating
Adjustments
Consolidated
Totals
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net
Intercompany loan receivables (1)
Amounts due from Group companies (2)
Amounts due from related parties
Prepayments and other current assets
Total current assets
Non-current assets:
Long-term investments (3)
Property and equipment, net
Intangible assets, net
Land use right, net
Operating lease right-of-use assets, net
Goodwill
Other non-current assets
Total non-current assets
Total assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Short-term borrowings (1)
Accounts and notes payable
Amounts due to Group companies (2)
Amounts due to related parties
Salary and welfare payable
Taxes payable
Advances from customers
Operating lease liabilities, current
Accrued expenses and other current liabilities
Total current liabilities
Non-current liabilities:
Operating lease liabilities, non-current
Deferred tax liabilities
Long-term borrowings
Other non-current liabilities
Investment deficit in subsidiaries and Affiliated Entities (4)
Total non-current liabilities
Total liabilities
Redeemable noncontrolling interests
Equity
Total Tuniu Corporation shareholders’ equity
Noncontrolling interests (3)
Total equity
Total liabilities, redeemable noncontrolling interests and equity
1,398
—
103,000
—
—
20,169
—
1,975
126,542
—
671
4,698
—
—
—
2
5,371
131,913
—
—
13,934
—
2,183
2,536
—
—
366
19,019
—
—
—
—
4,616,473
4,616,473
4,635,492
—
(4,503,579)
—
(4,503,579)
131,913
115,737
49,068
685,773
153,844
—
504,780
23,856
214,164
1,747,222
232,068
46,346
61,682
—
37,182
185,004
83,328
645,610
2,392,832
251,685
604,766
5,293,093
2,198
38,397
3,384
192,965
9,527
630,330
7,026,345
30,108
12,019
—
—
—
42,127
7,068,472
—
(4,616,473)
(59,167)
(4,675,640)
2,392,832
—
—
—
—
(201,685)
(10,920,741)
—
—
(11,122,426)
(40,000)
—
—
—
—
—
—
(40,000)
(11,162,426)
(201,685)
—
(10,920,741)
—
—
—
—
—
—
(11,122,426)
—
—
—
—
(14,638,445)
(14,638,445)
(25,760,871)
—
14,638,445
(40,000)
14,598,445
(11,162,426)
213,538
50,566
1,353,670
264,134
—
—
23,913
378,704
2,284,525
266,866
111,697
71,362
96,713
42,293
232,007
91,180
912,118
3,196,643
60,679
705,838
—
21,034
47,487
6,004
208,762
18,264
676,501
1,744,569
34,367
14,861
22,577
3,054
—
74,859
1,819,428
27,200
1,384,679
(34,664)
1,350,015
3,196,643
95,805
1,498
564,897
110,290
201,685
3,486,097
57
162,337
4,622,666
74,798
64,680
4,982
96,713
5,111
47,003
7,850
301,137
4,923,803
10,679
101,072
5,613,714
18,836
6,907
84
15,797
8,737
38,356
5,814,182
4,259
2,842
22,577
3,054
4,503,579
4,536,311
10,350,493
27,200
(5,518,393)
64,503
(5,453,890)
4,923,803
598
—
—
—
—
6,909,695
—
228
6,910,521
—
—
—
—
—
—
—
—
6,910,521
—
—
—
—
—
—
—
—
7,449
7,449
—
—
—
—
5,518,393
5,518,393
5,525,842
—
1,384,679
—
1,384,679
6,910,521
6
Table of Contents
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net
Intercompany loan receivables (1)
Amounts due from Group companies (2)
Amounts due from related parties
Prepayments and other current assets
Total current assets
Non-current assets:
Long-term investments (3)
Property and equipment, net
Intangible assets, net
Land use right, net
Operating lease right-of-use assets, net
Goodwill
Other non-current assets
Total non-current assets
Total assets
LIABILITIES, REDEEMABLE NONCONTROLLING
INTERESTS AND EQUITY
Current liabilities:
Short-term borrowings (1)
Accounts and notes payable
Amounts due to Group companies (2)
Amounts due to related parties
Salary and welfare payable
Taxes payable
Advances from customers
Operating lease liabilities, current
Accrued expenses and other current liabilities
Total current liabilities
Non-current liabilities:
Operating lease liabilities, non-current
Deferred tax liabilities
Long-term borrowings
Investment deficit in subsidiaries and Affiliated Entities (4)
Total non-current liabilities
Total liabilities
Redeemable noncontrolling interests
Equity
Total Tuniu Corporation shareholders’ equity
Noncontrolling interests (3)
Total equity
Total liabilities, redeemable noncontrolling interests and
Tuniu
Corporation
Other
Subsidiaries
As of December 31, 2021
Primary
Beneficiary of
VIE
VIE and
its
Subsidiaries
(in RMB thousands)
Eliminating
Adjustments
Consolidated
Totals
4,712
—
—
—
—
6,855,545
—
130
6,860,387
—
—
—
—
—
—
—
—
6,860,387
—
—
—
—
—
—
—
—
8,038
8,038
—
—
—
5,583,205
5,583,205
5,591,243
—
1,269,144
—
1,269,144
254,173
26,111
298,201
—
184,546
3,173,186
164
288,526
4,224,907
66,000
56,421
2,186
94,652
20,274
47,388
5,343
292,264
4,517,171
9,981
57,910
5,284,262
2,481
6,603
448
16,152
12,099
43,454
5,433,390
14,897
2,138
14,344
4,546,165
4,577,544
10,010,934
27,200
761
—
11,600
—
—
116,142
—
1,922
130,425
—
676
1,265
—
—
—
2
1,943
132,368
—
—
13,934
—
2,469
3,443
—
—
414
20,260
—
—
—
4,658,273
4,658,273
4,678,533
—
89,431
20,410
306,100
111,941
—
424,829
14,805
46,455
1,013,971
175,947
41,062
51,925
—
27,841
184,619
86,766
568,160
1,582,131
184,546
325,716
5,271,506
2,198
24,689
4,113
123,625
4,457
330,723
6,271,573
23,935
10,341
—
—
34,276
6,305,849
—
—
—
—
—
(184,546)
(10,569,702)
—
—
(10,754,248)
(40,000)
—
—
—
—
—
—
(40,000)
(10,794,248)
(184,546)
—
(10,569,702)
—
—
—
—
—
—
(10,754,248)
—
—
—
(14,787,643)
(14,787,643)
(25,541,891)
—
349,077
46,521
615,901
111,941
—
—
14,969
337,033
1,475,442
201,947
98,159
55,376
94,652
48,115
232,007
92,111
822,367
2,297,809
9,981
383,626
—
4,679
33,761
8,004
139,777
16,556
382,629
979,013
38,832
12,479
14,344
—
65,655
1,044,668
27,200
(5,583,205)
62,242
(5,520,963)
(4,546,165)
—
(4,546,165)
(4,658,273)
(65,445)
(4,723,718)
14,787,643
(40,000)
14,747,643
1,269,144
(43,203)
1,225,941
equity
6,860,387
4,517,171
132,368
1,582,131
(10,794,248)
2,297,809
7
Table of Contents
Selected Condensed Consolidated Statements of Comprehensive Loss Information
Revenues:
Third-party revenues
Intra-Group revenues (5)
Total revenues
Total costs and expenses (5)
Loss from operations
Other income/(expenses) (5)
Investment in loss from subsidiaries and Affiliated Entities(4)
Loss before income tax expense
Income tax (expense)/benefit
Equity in income of unrelated affiliates
Net loss
Net loss attributable to noncontrolling interests
Net income attributable to redeemable noncontrolling interests
Net loss attributable to Tuniu Corporation
Tuniu
Corporation
Other
Subsidiaries
For the Year Ended December 31, 2019
Primary
Beneficiary of
VIE
VIE and
its
Subsidiaries
(in RMB thousands)
Eliminating
Adjustments
Consolidated
Totals
—
—
—
(3,903)
(3,903)
(1,410)
(689,252)
(694,565)
—
—
(694,565)
—
—
(694,565)
1,183,449
25,583
1,209,032
(1,517,942)
(308,910)
40,004
(412,948)
(681,854)
(3,210)
2,223
(682,841)
5,431
980
(689,252)
—
38,783
38,783
(117,315)
(78,532)
416
(334,832)
(412,948)
—
—
(412,948)
—
—
(412,948)
1,097,538
84,209
1,181,747
(1,658,170)
(476,423)
98,102
—
(378,321)
2,261
—
(376,060)
(41,228)
—
(334,832)
—
(148,575)
(148,575)
145,499
(3,076)
3,076
1,437,032
1,437,032
—
—
1,437,032
—
—
1,437,032
2,280,987
—
2,280,987
(3,151,831)
(870,844)
140,188
—
(730,656)
(949)
2,223
(729,382)
(35,797)
980
(694,565)
For the Year Ended December 31, 2020
Tuniu
Corporation
Other
Subsidiaries
Primary
Beneficiary of
VIE
(in RMB thousands)
VIE and
its
Subsidiaries
Eliminating
Adjustments
Consolidated
Totals
Revenues:
Third-party revenues
Intra-Group revenues (5)
Total revenues
Total costs and expenses (5)
Loss from operations
Other income/(expenses) (5)
Investment in loss from subsidiaries and Affiliated Entities (4)
Loss before income tax expense
Income tax (expense)/benefit
Equity in income of unrelated affiliates
Net loss
Net loss attributable to noncontrolling interests
Net loss attributable to Tuniu Corporation
—
—
—
(4,293)
(4,293)
(1,691)
(1,301,972)
(1,307,956)
—
—
(1,307,956)
—
(1,307,956)
42,122
22,093
64,215
(862,243)
(798,028)
24,927
(532,000)
(1,305,101)
(2,151)
797
(1,306,455)
(4,483)
(1,301,972)
—
15,355
15,355
(38,747)
(23,392)
798
(509,406)
(532,000)
—
—
(532,000)
—
(532,000)
408,137
77,565
485,702
(996,345)
(510,643)
(38,746)
—
(549,389)
8,792
—
(540,597)
(31,191)
(509,406)
—
(115,013)
(115,013)
110,574
(4,439)
4,439
2,343,378
2,343,378
—
—
2,343,378
—
2,343,378
450,259
—
450,259
(1,791,054)
(1,340,795)
(10,273)
—
(1,351,068)
6,641
797
(1,343,630)
(35,674)
(1,307,956)
8
Table of Contents
Revenues:
Third-party revenues
Intra-Group revenues (5)
Total revenues
Total costs and expenses (5)
Loss from operations
Other income (5)
Investment in loss from subsidiaries and Affiliated Entities (4)
Loss before income tax expense
Income tax (expense)/benefit
Equity in income of unrelated affiliates
Net loss
Net loss attributable to noncontrolling interests
Net loss attributable to Tuniu Corporation
Selected Condensed Consolidated Cash Flows Information
Net cash provided by transactions with intra-Group entities
Net cash (used in)/provided by transactions with external parties
Net cash (used in)/provided by operating activities
(Loans to)/receipts of repayment from Group companies, net
Other investing activities
Net cash provided by/(used in) investing activities
Borrowings under loan from Group companies, net
Other financing activities
Net cash (used in)/provided by financing activities
Net cash (used in)/provided by transactions with intra-Group entities
Net cash used in transactions with external parties
Net cash (used in)/provided by operating activities
Receipts of repayment from to Group companies, net
Other investing activities
Net cash provided by/(used in) investing activities
Repayment of loan from Group companies, net
Other financing activities
Net cash (used in)/provided by financing activities
Tuniu
Other
Corporation Subsidiaries
For the Year Ended December 31, 2021
Primary
Beneficiary of
VIE
VIE and
its
Subsidiaries
(in RMB thousands)
Eliminating
Adjustments
Consolidated
Totals
—
—
—
(3,688)
(3,688)
6,996
(124,832)
(121,524)
—
—
(121,524)
—
(121,524)
197,876
15,339
213,215
(307,287)
(94,072)
12,291
(43,643)
(125,424)
(1,799)
726
(126,497)
(1,665)
(124,832)
—
24,134
24,134
(25,841)
(1,707)
922
(42,858)
(43,643)
—
—
(43,643)
—
(43,643)
228,472
21,117
249,589
(325,803)
(76,214)
26,408
—
(49,806)
1,669
—
(48,137)
(5,279)
(42,858)
—
(60,590)
(60,590)
54,732
(5,858)
5,858
211,333
211,333
—
—
211,333
—
211,333
426,348
—
426,348
(607,887)
(181,539)
52,475
—
(129,064)
(130)
726
(128,468)
(6,944)
(121,524)
For the Year Ended December 31, 2019
Primary
Beneficiary of
VIE
VIE and
its
Subsidiaries
(in RMB thousands)
Eliminating
Adjustments
Consolidated
Totals
—
(28,665)
(28,665)
26,851
(10,000)
16,851
—
—
—
—
(505,492)
(505,492)
—
(246,340)
(246,340)
137,325
543,497
680,822
—
—
—
137,325
—
137,325
(137,325)
—
(137,325)
—
(120,461)
(120,461)
—
(578,134)
(578,134)
—
485,110
485,110
For the Year Ended December 31, 2020
Primary
Beneficiary of
VIE
VIE and
its
Subsidiaries
(in RMB thousands)
Eliminating
Adjustments
Consolidated
Totals
20,656
(30,072)
(9,416)
102,723
(93,000)
9,723
—
—
—
29,468
(879,077)
(849,609)
—
901,947
901,947
(133,455)
(199,000)
(332,455)
—
—
—
(133,455)
—
(133,455)
133,455
—
133,455
—
(1,313,115)
(1,313,115)
—
1,159,063
1,159,063
—
(209,546)
(209,546)
Tuniu
Other
Corporation Subsidiaries
—
(4,739)
(4,739)
—
18,268
18,268
—
(13,438)
(13,438)
—
418,435
418,435
(164,176)
(340,062)
(504,238)
—
(44,949)
(44,949)
Tuniu
Other
Corporation Subsidiaries
(50,124)
(399,187)
(449,311)
30,732
344,824
375,556
—
(10,296)
(10,296)
—
(4,779)
(4,779)
—
5,292
5,292
—
(250)
(250)
9
Table of Contents
Net cash (used in)/provided by transactions with intra-Group entities
Net cash used in transactions with external parties
Net cash used in operating activities
(Loans to)/receipts of repayment from Group companies, net
Other investing activities
Net cash provided by/(used in) investing activities
Borrowings under loan from Group companies, net
Other financing activities
Net cash provided by/(used in) financing activities
Tuniu
Other
Corporation Subsidiaries
For the Year Ended December 31, 2021
Primary
Beneficiary of
VIE
VIE and
its
Subsidiaries
(in RMB thousands)
Eliminating
Adjustments
Consolidated
Totals
—
(2,341)
(2,341)
—
6,020
6,020
—
373
373
(20,636)
(12,906)
(33,452)
83,908
194,939
278,847
—
(60,835)
(60,835)
—
(30)
(30)
(92,007)
91,400
(607)
—
—
—
20,636
(211,065)
(190,429)
—
411,467
411,467
8,099
(284,100)
(276,001)
—
—
—
8,099
—
8,099
(8,099)
—
(8,099)
—
(226,342)
(226,342)
—
703,826
703,826
—
(344,562)
(344,562)
(1) It represents the elimination of intercompany loan provided by other subsidiaries to VIE and its subsidiaries.
(2) It represents the elimination of the intercompany balances among Tuniu Corporation, other subsidiaries, primary beneficiary of VIE, and VIE and its subsidiaries.
(3) The VIE invested in a subsidiary of Other Subsidiaries and measured at cost and such investment is eliminated with noncontrolling interests of Other Subsidiaries.
(4) It represents the elimination of the investments among Tuniu Corporation, other subsidiaries, primary beneficiary of VIE, and VIE and its subsidiaries.
(5) It represents the elimination of the intercompany transactions at the consolidation level, as follows:
Charges to the VIE
(i) Technology consulting service fees and group management fees charged by other subsidiaries and the primary beneficiary of the VIE to the VIE and its
subsidiaries, in aggregate amouting to RMB30.4 million, RMB12.8 million and RMB16.3 million for the years ended 2019, 2020 and 2021, respectively. These
charges are recognized as operating expenses by the VIE and its subsidiaries.
(ii) Revenue was recognized by other subsidiaries for interest on loans to the VIE and its subsidiaries, in the amounts of RMB3.1 million, RMB4.4 million and
RMB5.9 million for the years ended 2019, 2020 and 2021, respectively. These charges are recognized as interest expense by the VIE and its subsidiaries.
Charges by the VIE
(i) Royalty fees charged by the VIE and its subsidiaries to other subsidiaries and the primary beneficiary of the VIE for the usage of software owned by VIE and its
Subsidiaries in the amounts of RMB84.9 million, RMB77.6 million and RMB21.1 million for the years ended 2019, 2020 and 2021, respectively. These
charges are recognized as operating expenses by the other subsidiaries and the primary beneficiary of the VIE.
Charges between other entities
(i) Group management fees charged by the primary beneficiary of the VIE to other subsidiaries in the Group.
10
Table of Contents
Transfers of Cash Within the Tuniu Group
Transfer of cash do not necessarily equal amounts charged, due to the timing of payments. The following is a summary of cash transfers that have occurred between our
subsidiaries and the VIE and its subsidiaries (in thousands):
Cash paid by our subsidiaries to the VIE and its subsidiaries for royalties
Cash paid by the VIE and its subsidiaries to our subsidiaries under service agreements
Cash paid by the VIE and its subsidiaries to our subsidiaries for intra-Group financing
Cash received by the VIE and its subsidiaries from our subsidiaries for intra-Group financing
2019
RMB
—
—
—
137,325
As of December 31,
2020
RMB
29,468
—
(133,455)
—
2021
RMB
22,000
(1,364)
—
8,099
A.[Reserved]
B.Capitalization and Indebtedness
Not applicable.
C.Reasons for the Offer and Use of Proceeds
Not applicable.
D.Risk Factors
Summary of Risk Factors
Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs.
Below is a summary of material risks we face, organized under relevant headings. These risks are discussed more fully in Item 3. Key Information—D. Risk Factors.
Risks Related to Our Business and Industry
● Our business operation, financial condition, results of operations and cash flows have been and are likely to continue to be materially and adversely affected
by the COVID-19 outbreak and spread;
● Declines or disruptions in the leisure travel industry may materially and adversely affect our business and results of operations;
● We face risks related to natural disasters and health epidemics;
● If we do not continue to provide competitive travel products and services, we may not be able to attract new customers or retain existing customers, and our
business, financial condition and results of operations could suffer;
● Failure to maintain the quality of customer services could harm our reputation and our ability to retain existing customers and attract new customers, which
may materially and adversely affect our business, financial condition and results of operations;
● We have incurred losses in the past and will likely incur losses in the future;
● We face intense competition and may not be able to compete successfully against existing and new competitors;
11
Table of Contents
● Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and
cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects;
● If we are unable to maintain existing relationships with travel suppliers, or develop relationships with new travel suppliers on favorable terms or terms
similar to those we currently have, our business and results of operations may suffer; and
● We may be subject to legal or administrative proceedings regarding our travel products and services, information provided on our online platform or other
aspects of our business operations, which may be time-consuming to defend and affect our reputation.
Risks Related to Our Corporate Structure
● We rely on contractual arrangements with Nanjing Tuniu and its shareholders for the operation of our business, which may not be as effective as direct
ownership. If Nanjing Tuniu or its shareholders fail to perform their obligations under these contractual arrangements, we may have to resort to litigation or
arbitration to enforce our rights, which may be time-consuming, unpredictable, expensive and damaging to our operations and reputation. If we are unable
to maintain effective control we would not be able to continue to consolidate the financial results of the consolidated affiliated entities with our financial
results;
● Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to restrictions on
foreign investment in value-added telecommunications and travel companies in China. If the PRC government finds that the structure we have adopted for
our business operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including shutting down of our online
platform; and
● Substantial uncertainties exist with respect to the interpretation and implementation of adopted PRC Foreign Investment Law and its implementation
rules and how they may impact the viability of our current corporate structure, corporate governance and business operations.
Risks Related to Doing Business in China
● The approval of or filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law,
and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing;
● The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB
to conduct inspections over our auditor deprives our investors with the benefits of such inspections.
● Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the
PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs,
or the threat of their being delisted, may materially and adversely affect the value of your investment;
● Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us;
● The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our
ADSs;
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● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations;
● A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect the leisure travel industry and our business, results
of operations and financial condition;
● The PRC government regulates travel and other related industries. If we fail to obtain or maintain all pertinent permits and approvals or if the PRC
government imposes more restrictions on these industries, our business may be adversely affected;
● Any failure or perceived failure by us to comply with the Platform Economy Anti-Monopoly Guidelines and other anti-monopoly and unfair competition
laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on
our business, financial condition and results of operations;
● PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or
distribute profits to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to liabilities and penalties under PRC laws; and
● Rising political tension, particularly between U.S. and China, may adversely impact our business, financial condition, and results of operations.
Risks Related to our ADSs and Class A Ordinary Shares
● Our ADSs may be delisted from the Nasdaq Global Market as a result of our failure of meeting the Nasdaq Global Market continued listing requirements;
● The trading prices of our ADSs have fluctuated and may continue to be volatile regardless of our operating performance;
● Our dual class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing
any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial; and
● The sale or availability for sale of substantial amounts of our Class A ordinary shares and/or ADSs could adversely affect their market price.
Risks Related to Our Business and Industry
Our business operation, financial condition, results of operations and cash flows have been and are likely to continue to be materially and adversely affected by the
COVID-19 outbreak and spread.
The outbreak of a novel strain of coronavirus, named as COVID-19, in early 2020 has severely impacted China and the rest of the world. During the first quarter of
2021, another wave of COVID-19 infections emerged in China. As a result, the Chinese government took a number of actions, which included quarantining individuals
infected with or suspected of having COVID-19, imposing travel restrictions in certain cities and towns and cancelling public activities, among others.
The current COVID-19 pandemic has already materially and adversely affected many aspects of our business. Normal economic life was sharply curtailed and the
travel industry was hit particularly hard. Government authorities in major countries across the world have implemented strict travel bans and adopted different control
measures to curb the spread of COVID-19. In connection with intensifying efforts to contain the spread of COVID-19, the Chinese government has taken a number of
actions, such as temporarily suspending the operation of organized tours in certain regions, quarantining individuals infected with or suspected of having COVID-19,
restricting residents from unnecessary travel, encouraging employees of enterprises to work remotely from home and cancelling public activities, limiting the number of
tourists allowed by tourism sites, among others. In addition, we have taken measures in response to COVID-19, including adoption of modified operating hours, remote
working arrangements and more stringent workplace sanitation
13
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measures, which have had a negative impact on our business operations. The spread or fear of spread of contagious diseases, such as COVID-19, has caused a significant
decline in the level of business and leisure travel both in certain regions and as a whole, and a significant decrease in the demand for our products and services, resulting
in customer cancellations, refund requests and reduced new orders relating to our services, which have materially and adversely affected our business, financial
condition, results of operations and cash flows.
Furthermore, the payment or repayment abilities or decisions of our business partners and borrowers have been negatively affected by the outbreak of COVID-19,
which has increased uncertainties relating to our collection of receivables, and has resulted in additional allowances for doubtful accounts. We have also recorded
impairment provisions against certain of our long-term and short-term assets, as the impacts of the COVID-19 pandemic on certain of our long-term and short-term assets
are considered to be other than temporary. In addition, our business partners and travel suppliers, including overseas suppliers, are also experiencing similar or more
serious disruptions to their business operations, which have negatively affected our business operations, financial condition, results of operations and cash flows. We have
been affirmatively facilitating our customers in their cancellations, rescheduling and refund requests and working with our travel suppliers to weather the difficult
situation, for which we have incurred and may continue to incur significant costs and expenses.
The extent of the impact of the COVID-19 pandemic on our business and financial results will depend largely on future developments, including the duration and
extent of the spread of COVID-19 around the world, and the prevalence of local, national and international travel restrictions which are highly uncertain and cannot be
predicted. While we have seen recovery in the Chinese travel market since the second half of 2020 due to the substantial containment of the COVID-19 pandemic in
China, we have seen a slower recovery of the international travel market, and in turn, a slower recovery of our overseas travel business. We cannot guarantee you that the
COVID-19 pandemic will not further escalate or have a material adverse effect on our results of operations, especially our financial condition, our cash flows or our
prospects. Recently, there has been an increasing number of COVID-19 cases, including the COVID-19 Delta and Omicron variant cases, in multiple cities in China. The
Chinese local authorities have reinstated certain measures to keep COVID-19 in check, including varying levels of travel restrictions and stay-at-home orders. In
March 2022, due to the spread of COVID-19 in China, Chinese government imposed lockdown in certain cities and districts, including Shanghai. These travel
restrictions reduce users’ demand for our products, and are expected to materially and adversely affect our results of operations in the first quarter of 2022 and potentially
beyond. We cannot assure you when these travel restrictions will be lifted. In addition, the highly-transmissible Delta and Omicron variants of COVID-19 have caused
authorities in various countries and regions to reimpose restrictions such as mask mandates, curfews and prohibitions on large gatherings. There remain significant
uncertainties surrounding COVID-19, including the existing and new variants of COVID-19, the duration and severity of COVID-19, the extent and severity of new
waves of outbreak in China and other countries, the development and progress of distribution of COVID-19 vaccine and other medical treatment and the effectiveness of
such vaccine and other medical treatment, and the actions taken by government authorities to contain the outbreak, all of which are beyond our control. The extent of any
possible business disruption and the related impact on our financial results and outlook cannot be reasonably estimated at this time. If the situation materially deteriorates
in China or globally, our business, results of operations and financial condition could be materially and adversely affected, including but not limited to the significant
continued adverse impact on revenue and significant operating cash outflow due to the incremental costs incurred in response to travelers’ cancellations and refund
requests.
Declines or disruptions in the leisure travel industry may materially and adversely affect our business and results of operations.
We are dependent on the leisure travel industry for substantially all of our revenues. The leisure travel industry is dependent on personal discretionary spending
levels, which may be materially and adversely affected by economic downturns and recessions. Although the leisure travel industry in China has experienced rapid
growth over the past decade, any severe or prolonged slowdown in the Chinese economy could reduce expenditures for leisure travel, which in turn may adversely affect
our financial condition and results of operations. See "—Risks Related to Doing Business in China— A severe or prolonged downturn in the Chinese or global economy
could materially and adversely affect the leisure travel industry and our business, results of operations and financial condition."
Our business may also be significantly affected by other factors that tend to reduce leisure travel, including increased prices in hotel, air-ticketing, fuel or other
travel-related sectors, work stoppages or labor unrest at airlines, increased occurrences of travel-related accidents, outbreaks of other contagious diseases, natural
disasters and extreme unexpected bad weather, terrorist attacks and political unrest. For example, the travel industry was negatively impacted by the outbreak of Ebola
hemorrhagic fever in West Africa beginning March 2014, the disappearance of a Malaysia Airlines flight in March 2014 as well as the crashes of Malaysia Airlines and
AirAsia flights in July and December 2014, respectively, the earthquake in Jiuzhaigou, China in August 2017, the volcanic eruption in Bali, Indonesia in November 2017,
the boat capsizing accident in Phuket island, Thailand in July 2018, as well as the outbreak and spread of
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the COVID-19 pandemic across the world since December 2019 till now, all of which had a negative impact on our target customers. See "— Our business operation,
financial condition, results of operations and cash flows have been and are likely to continue to be materially and adversely affected by the COVID-19 outbreak and
spread”. In addition, our overseas leisure travel business may be negatively affected by any adverse changes in the visa policies of foreign countries that makes it difficult
for Chinese nationals to obtain tourist visas. Terrorist attacks or threats of terrorist attacks, political unrest, wars, the imposition of taxes or surcharges by regulatory
authorities and regional hostilities may also reduce the demand for overseas tours. For example, the Nice terrorist attack in France, coup in Turkey, the deployment of
THAAD by South Korea in 2016, the political crisis in Maldives in 2018, and the protests in Hong Kong in 2019 and 2020, all negatively impacted short-term travel
demand for the tours to the affected regions. We have little or no control over the occurrence of such declines or disruptions, which could result in a decrease in demand
for our travel products and services. This decrease in demand, depending on the scope and duration, could materially and adversely affect our business and results of
operations over the short and long term.
We face risks related to natural disasters and health epidemics.
Other aspects of our business activities could be materially and adversely affected by natural disasters, health epidemics or other public safety concerns affecting the
PRC, and particularly Nanjing. Natural disasters may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures,
which could result in loss or corruption of data or software or hardware malfunctions, as well as adversely affect our ability to operate our platforms and provide services.
Our business could also be adversely affected if our employees are affected by health epidemics, including the effects of the COVID-19 outbreak and spread in China and
globally, Ebola virus disease, H1N1 flu, H7N9 flu, avian flu or Severe Acute Respiratory Syndrome, or SARS. In addition, our business operation, financial condition,
results of operations and cash flows could be adversely affected to the extent that any health epidemic harms the Chinese economy in general. Our headquarter is located
in Nanjing, where most of our directors and management and the majority of our employees currently reside. Most of our hardware systems and back-up systems are
hosted in facilities located in Nanjing. Consequently, if any natural disasters, health epidemics or other public safety concerns were to affect Nanjing, our operations may
experience material disruptions, which may materially and adversely affect our business, financial condition and results of operations.
If we do not continue to provide competitive travel products and services, we may not be able to attract new customers or retain existing customers, and our business,
financial condition and results of operations could suffer.
Our success depends on our ability to attract new customers and retain existing customers, which in turn requires our continual provision of a wide array of
competitive travel products and services. Participants in the online travel industry are continually developing new travel products and services in response to both the
increasing customer demand and the changing market environment. We strive to stay abreast of emerging and rapidly changing customer preferences and to continue to
anticipate trends that will appeal to existing and potential customers. We will also continue to invest in research and development in order to constantly improve the
speed, accuracy and comprehensiveness of our online platform. If we fail to keep improving our travel products and services and platform at a competitive pace, we may
lose customers to our competitors and be unable to attract new customers. In addition to packaged tours, we provide other travel-related services, such as sales of tourist
attraction tickets, visa application services, hotel booking services, air ticketing services, train ticketing services, bus ticketing services, car rental services, insurance
services and financial services. We intend to further broaden our product selection by extending our coverage of departing cities and travel destinations as well as offering
more departure time selections. If we fail to continue to source quality travel products and services tailored to accommodate our customers’ changing needs and
preferences, we may not be able to sell additional products and services to our current customers, retain our current customers or attract new customers, and our business,
financial condition and results of operations will be materially and adversely affected.
Failure to maintain the quality of customer services could harm our reputation and our ability to retain existing customers and attract new customers, which may
materially and adversely affect our business, financial condition and results of operations.
Our business is significantly affected by the overall size of our customer base, which in turn is determined by, among other factors, their experience with our
customer service. As such, the quality of customer service is critical to retaining our existing customers and attracting new customers. If we fail to provide quality
customer service, our customers may be less inclined to book travel products and services with us or recommend us to new customers, and may switch to our
competitors. Failure to maintain the quality of customer service could harm our reputation and our ability to retain existing customers and attract new customers, which
may materially and adversely affect our business, financial condition and results of operations.
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We may not be able to adequately control and ensure the quality of travel products and services sourced from travel suppliers. If there is any deterioration in the
quality of their performance, our customers may seek damages from us and not continue using our online platform.
Our ability to ensure satisfactory customer experiences largely depends on travel suppliers providing high-quality travel products and services. Our reputation and
brand will be negatively affected if travel suppliers fail to provide quality travel products and services.
The actions we take to monitor and enhance the performance of travel suppliers may be inadequate in the timely discovery of quality issues. There have been
customer complaints and litigation against us due to travel suppliers’ failure to provide satisfactory travel products or services. If our customers are dissatisfied with the
travel products and services provided, they may reduce their use of, or completely forgo, our online platform, and may even demand refunds of their payments to us or
claim compensation from us for the damages suffered as a result of travel suppliers’ performance or misconduct, which could materially and adversely affect our
business, financial condition and results of operations.
We have incurred losses in the past and will likely incur losses in the future.
We have incurred net losses historically and will likely continue to incur losses in the future as we grow our business. We had a net loss of RMB729.4 million,
RMB1,343.6 million and RMB128.5 million (US$20.2 million) in 2019, 2020 and 2021, respectively. Our historical net losses were partially attributable to our spending
associated with our rapidly expanding business operations, including expenses related to regional expansion, branding and advertising campaigns, mobile related
initiatives and personnel related expenses. Also, the outbreak and spread of COVID-19 in 2020 caused a temporary suspension of our businesses, which led to net losses
including a material amount of impairment charges. We recorded impairment provisions and allowances against our short-term assets of RMB17.8 million (US$2.8
million) in 2021, mainly expected credit loss for receivables, and the outbreak and spread of COVID-19 may result in additional allowances for doubtful accounts and
impairment provisions against our long-term assets and short-term as the impacts of COVID-19 pandemic on certain of our long-term and short-term assets are
considered to be other than temporary. In addition, we expect that we will continue to incur expenses to further grow our business, which will affect our profitability and
cash flow from operations in the future.
Our ability to achieve profitability is also affected by various factors that are beyond our control. For example, our revenues and profitability depend on the continual
development of the online leisure travel industry in China and consumers’ preference to make travel bookings online. We cannot assure you that making travel bookings
online will become more widely accepted in China or that consumers will increase their spending on online leisure travel booking. Factors negatively affecting travel
suppliers’ profitability will in turn adversely affect our financial condition and results of operations.
If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected and we will likely continue to incur
net losses in the near future.
We face intense competition and may not be able to compete successfully against existing and new competitors.
We operate in China’s highly competitive travel industry. We compete not only with other online travel companies, but also traditional travel service providers and
tour operators, airlines and hotels and large, established Internet companies. See “Item 4. Information on the Company—B. Business Overview—Competition.” Some of
our current and potential competitors may have greater financial, marketing and other resources than we do. In addition, some of our competitors may be acquired by,
receive investments from or enter into strategic relationships with larger, well-established and well-financed companies or investors. Furthermore, our business model
causes us to maintain a cooperative-competitive relationship with some of our competitors, especially tour operators, who also supply travel products to customers
directly or through our competitors’ platforms.
Many of our competitors have launched, and may continue to launch, aggressive advertising campaigns, special promotions and other marketing activities to
promote their brands, attract new customers or increase their market share. In response, we started to take and may continue to take similar measures and as a result will
incur significant expenses, which in turn could negatively affect our operating margin in the quarters or years when such promotional activities are carried out. We cannot
assure you that we will be able to successfully compete against existing or new competitors. If we are not able to compete successfully, we may lose our market share and
our business, financial condition and results of operations may be materially and adversely affected.
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If we fail to enhance our brand recognition, we may face difficulty in retaining existing customers and attracting new customers and travel suppliers, and our
business may be harmed.
Recognition and reputation of our “Tuniu” brand among our targeted customers and travel suppliers have contributed significantly to our growth. We have made
continual investments in enhancing awareness of our brand among customers and travel suppliers since our inception. Our brand recognition and reputation also depend
on our ability to provide high-quality customer services, address customer needs and handle customer complaints properly, maintain our relationships with travel
suppliers and provide a user-friendly online platform. See “—Risks Related to Our Business and Industry—Failure to maintain the quality of customer services could
harm our reputation and our ability to retain existing customers and attract new customers, which may materially and adversely affect our business, financial condition
and results of operations”, “—Risks Related to Our Business and Industry—If we are unable to maintain existing relationships with travel suppliers, or develop
relationships with new travel suppliers on favorable terms or terms similar to those we currently have, our business and results of operations may suffer” and “—Risks
Related to Our Business and Industry—The proper functioning of our online platform, including our web and mobile platforms, and management systems is essential to
our business. Any failure to maintain their satisfactory performance will materially and adversely affect our business, reputation, financial condition and results of
operations.” Failure to maintain the strength of our brand could reduce the number of customers and deteriorate our relationships with travel suppliers.
In addition, some of our competitors have well-established brands in the travel industry, and may have more financial and other resources to advertise and promote
their brands. Therefore, we expect to continue incurring advertising and marketing expenditures and use other resources to maintain and increase our brand recognition.
Our marketing costs may also increase as a result of inflation of media pricing in China, including costs for purchasing search engine keywords and placing online and
offline advertisements. If we fail to maintain and increase our brand recognition in a cost-effective manner, our financial condition and results of operations may be
materially and adversely affected.
We are exposed to proceedings or claims arising from travel-related accidents or customer misconduct during their travels, the occurrence of which may be beyond
our control.
Accidents are a leading cause of mortality and morbidity among tourists. We are exposed to risks of our customers’ claims arising from or relating to travel-related
accidents. As we enter into contracts with our customers directly, our customers typically take actions against us for the damages they suffer during their travels.
However, such accidents may result from the negligence or misconduct of travel suppliers or other service providers, over which we have no or limited control. See also
“—Risks Related to Our Business and Industry—We may not be able to adequately control and ensure the quality of travel products and services sourced from travel
suppliers. If there is any deterioration in the quality of their performance, our customers may seek damages from us and not continue using our online platform.” We
maintain insurance coverage for our liabilities as a travel company, and are indemnified by the insurance company/companies for the damages claimed by our customers.
However, there is no assurance that such insurance or indemnification will be sufficient to cover all of our losses. For example, losses incurred due to COVID-19 in most
cases are not reimbursable. In addition, some of the travel-related accidents result from adventure activities undertaken by our customers during their travels, such as
scuba diving, white water rafting, wind surfing and skiing. Furthermore, we may be affected by our customers’ misconduct during their travels, over which we have no or
limited control. Such accidents and incidents of misconduct, even if not resulting from our negligence or misconduct, or the travel suppliers’ negligence or misconduct,
could create a public perception that we are less reliable than our competitors, which would harm our reputation, and could adversely affect our business and results of
operations.
The proper functioning of our online platform, including our web and mobile platforms, and management systems is essential to our business. Any failure to
maintain their satisfactory performance will materially and adversely affect our business, reputation, financial condition and results of operations.
Availability, satisfactory performance and reliability of our online platform, including our web and mobile platforms, are critical to our ability to attract and retain
customers and provide quality travel products and services to our customers. Any unavailability or slowdown of our online platforms would reduce the number of our
customers and their travel bookings. Further, some telecommunications carriers have system constraints that can affect our customer experience. For example, if a large
number of customers use the same telecommunications carrier at the same time for services requiring a large amount of data transmission, the customers could
experience reduced speed or other technical issues due to the carrier’s capacity constraints, over which we have no control. Our servers may also be vulnerable to
computer viruses, physical or electronic break-ins or other potential disruptions, which could lead to interruptions, delays, loss of data or the inability to accept and
process customer queries or bookings. We may also experience interruptions caused by reasons beyond our control such as power outages. Unexpected interruptions
could damage our
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reputation and result in a material decrease of our revenues. In addition, our online platform may contain undetected errors or “bugs” that could adversely affect its
performance.
Our mobile platform forms an important and integral part of our customers’ research on travel-related information. It is difficult to predict the problems we may
encounter in developing mobile applications for newly released mobile devices and platforms, and we may need to devote significant resources to the development,
support and maintenance of such applications. We are dependent on the interoperability of providing our products and services on popular mobile operating systems that
we do not control, such as Android and iOS, and any changes in such systems that degrade the accessibility of our products and services or give preferential treatment to
competing products and services could adversely affect the usability of our products and services on mobile devices. In addition, we rely upon third-party mobile
application stores for users to download our mobile applications. As such, the promotion, distribution and operation of our mobile applications are subject to app stores’
standard terms and policies for app developers. As a result, we may fail to attract and retain a significant portion of the growing number of customers who search for and
book travel products and services through mobile devices. We may also experience difficulties monetizing customer traffic to our mobile platform.
In addition, we rely significantly on our proprietary N-Booking system and other management systems to facilitate and process transactions. We may in the future
experience system interruptions that prevent us from efficiently fulfilling bookings or providing services and support to our customers or travel suppliers. Any
interruptions, outages or delays in our systems, or deterioration in their performance, could impair our ability to process transactions and decrease the quality of our
services to our customers or travel suppliers. If we were to experience frequent or persistent system failures, our reputation and brand would be harmed.
If we are unable to maintain existing relationships with travel suppliers, or develop relationships with new travel suppliers on favorable terms or terms similar to
those we currently have, our business and results of operations may suffer.
Our business is dependent on our ability to maintain our relationships and arrangements with existing travel suppliers. For most of our suppliers, we do not prohibit
them from developing business relationships with our competitors or selling, through their direct sales, travel products that are the same as or similar to those they supply
to us. If we are unable to maintain satisfactory relationships with our existing travel suppliers, or if travel suppliers establish similar or more favorable relationships with
our competitors, or if travel suppliers increase their competition with us through their direct sales, we may not have the necessary supply to meet the needs of our
customers, or we may not obtain satisfactory rates. We do not enter into any long-term agreements with travel suppliers. We cannot assure you that travel suppliers will
renew their agreements with us in the future on favorable terms or terms similar to those we have currently agreed upon. Travel suppliers may increase the prices that
they charge us or the deposits that they require from us. As a result, the amount, pricing and breadth of travel products and services that we are able to offer may be
reduced, and our business and results of operations could be materially and adversely affected.
Furthermore, in order to grow our business, we will need to develop relationships with new travel suppliers of good quality. We cannot assure you that we will be
able to identify appropriate travel suppliers or enter into arrangements with those travel suppliers on favorable terms or at all. Any failure to do so could harm the growth
of our business and adversely affect our financial condition and results of operations.
We may suffer losses if we are unable to predict the amount of travel products we will need to purchase in advance.
For peak seasons and for certain tours and destinations, we have made commitments with certain travel suppliers to purchase hotel rooms before selling them to our
customers. We operate organized tours in which we take substantive inventory risk, and if this business increases, our inventory risk could also increase. If we are unable
to accurately predict demand for the packaged tours, hotel rooms and air tickets that we have committed to purchase and which are nonrefundable, we would be
responsible for bearing the cost of the travel products that we are unable to sell, and our financial condition and results of operations would be adversely affected.
Our quarterly results are likely to fluctuate because of seasonality in the leisure travel industry in China.
Our business experiences fluctuations, reflecting seasonal variations in demand for leisure travel services. Sales of leisure travel products and services will increase
in respect of holiday periods and decrease in respect of off-peak times, while prices of leisure travel products and services are subject to fluctuation between peak seasons
and low seasons. For example, the third quarter of each year generally contributes the highest percentage of our annual revenues, because many of our customers tend to
travel during summer holidays in July and August. Consequently, our results of operations may fluctuate from quarter to quarter.
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If we are unable to identify, attract, hire, train and retain key individuals and highly skilled employees, our business may be adversely affected
Our future performance depends on the continued service of our senior management, in particular, Mr. Dunde Yu, our founder, chairman and chief executive officer.
If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily, our future growth may be
constrained, our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. There is no assurance that we
can continue to retain their services and there can be no assurance that they will not compete against us.
If our business expands, we will need to hire additional employees, including supplier management personnel to maintain and expand our travel supplier network,
information technology and engineering personnel to maintain and expand our online platform and customer service personnel to serve an increasing number of
customers. If we are unable to identify, attract, hire, train and retain sufficient employees in these areas, our customers may not have satisfactory experiences with us and
may turn to our competitors, which may adversely affect our business and results of operations.
We may be subject to legal or administrative proceedings regarding our travel products and services, information provided on our online platform or other aspects of
our business operations, which may be time-consuming to defend and affect our reputation.
From time to time, we have become and may in the future become a party to various legal or administrative proceedings arising in the ordinary course of our
business, including breach of contract claims, anti-competition claims and other matters. Such proceedings are inherently uncertain and their results cannot be predicted
with certainty. Regardless of the outcome and merit of such proceedings, any such legal action could have an adverse impact on our business because of defense costs,
negative publicity, diversion of management’s attention and other factors. In addition, it is possible that an unfavorable resolution of one or more legal or administrative
proceedings, whether in the PRC or in another jurisdiction, could materially and adversely affect our financial position, results of operations or cash flows in a particular
period or damage our reputation. In addition, our online platform contains information about our travel products and services, vacation destinations and other travel-
related topics. It is possible that our customers would take action against us in the event that any content accessible on our online platform were to contain errors or false
or misleading information.
We may be subject to detrimental adverse publicity, malicious allegations or other conduct by individuals or entities, which could harm our reputation, adversely
affect our business and the trading price of our ADSs.
We have been, and in the future may be, the target of adverse publicity, malicious allegations or other detrimental conduct by individuals or entities. Such allegations,
directly or indirectly against us, may be posted in internet chat-rooms, on blogs, or on any website or mobile applications by anyone on an anonymous basis. We may be
required to spend significant time and incur substantial costs in response to such allegations or other detrimental conduct, and there is no assurance that we will be able to
conclusively refute each of them within a reasonable period of time, or at all. Our reputation may be harmed as a result of the public dissemination of malicious
allegations about our personnel, business, operations, accounting, prospects or business ethics, which in turn could adversely affect our business and the trading price of
our ADSs.
We have limited experience in operating a finance business. Increased exposure to credit risks or significant deterioration in the asset quality of our finance business
may have a material adverse effect on our business, results of operations and financial condition.
We started to offer financial services in China since 2015. We provide various financial services, including consumer financing, supply chain financing, cash lending
services and insurance products. Expansion in the finance sector involves new risks and challenges. For certain financial products, we have committed or will commit our
own capital. Our lack of familiarity with the finance sector may make it difficult for us to anticipate the demands and preferences in the market and develop financial
products that meet the requirements and preference. We may not be able to successfully identify new product and service opportunities or develop and introduce these
opportunities to our clients in a timely and cost-effective manner, or our clients may be disappointed in the returns from financial products that we offer.
The risk of nonpayment of loans is inherent in the finance business and we are subject to credit risk resulting from defaults in payment for loans by the suppliers and
customers. Credit risks are exacerbated in consumer financing because there is relatively limited information available about the credit histories of customers. There can
be no assurances that our monitoring of credit risk issues and our efforts to mitigate credit risks through our credit assessment and risk management policies are or will be
sufficient to result in lower
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delinquencies. Furthermore, our ability to manage the quality of our loan portfolio and the associated credit risks will have significant impact on the results of operations
of our finance business. Deterioration in the overall quality of our loan portfolio and increased exposure to credit risks may occur due to a variety of reasons, including
factors beyond our control, such as a slowdown in the growth of the PRC or global economies or a liquidity or credit crisis in the PRC or global finance sectors, which
may adversely affect the businesses, operations or liquidity of our suppliers and customers, or their ability to repay or roll over their debt. Any significant deterioration in
the asset quality of our finance business and significant increase in associated credit risks may have a material adverse effect on our business, results of operations and
financial condition.
In addition, the development of the finance business is capital intensive. We continue to provide management, administration and collection services on the
transferred financial assets and are obligated to absorb a portion of the losses incurred in the outstanding portfolio of the transferred financial assets in the event of
default. We may need additional cash resources due to further developments of our financial services or changed business conditions, which may cause us to seek credit
facilities or sell additional equity or debt securities. The incurrence of indebtedness would result in increased debt obligations and could result in operating and financial
covenants that would restrict our operations. Additionally, it is uncertain whether financing will be available in amounts or on terms acceptable, if at all.
The regulatory regime and practice with respect to online small credit companies are evolving and subject to uncertainty.
Government authorities have issued certain rules, laws and regulations to regulate the organization and business activities of online small credit companies.
However, due to the lack of detailed rules on interpretation and the implementation of such rules, laws and regulations, and the fact that these rules, laws and regulations
are expected to continue to evolve with respect to the online small credit companies, there are uncertainties as to how they will be interpreted and implemented. Further,
there may be new rules, laws or regulations issued which would set further requirements and restrictions on online small credit companies. In November 2020, the China
Banking Regulatory Commission, or the CBRC which is now merged into the China Banking and Insurance Regulatory Commission, or the CBIRC, and the People’s
Bank of China, or PBOC, published the draft Interim Measures for Online Small Credit Business, or the Draft Online Small Credit Measures, for public comment. See “
Item 4. Information on the Company—B.Business Overview—PRC Regulation—Regulations on Small Credit Companies.” The Draft Online Small Credit Measures, if
enacted substantially in the form published for public comment, will change regulatory requirements for online small credit business in various respects. We cannot
assure you that our existing practice of the online small credit companies will be deemed to be in full compliance with all rules, laws and regulations that are applicable,
or may become applicable to us in the future.
We have limited experience in operating our self-operated local tour operators, which may negatively affect our business, financial condition and results of
operations.
Starting in 2016, we further strengthened our presence in the travel supply chain by introducing a number of self-operated local tour operators in major destinations
such as Xiamen, Beijing and Changsha. We operate our domestic self-operated local tour operators primarily through Xiamen Suiwang International Travel Service
Co., Ltd., our wholly owned subsidiary established in January 2016. Our self-operated local tour operators directly provide destination-based services to our organized
tour customers, starting from their arrival at the destination all the way until they depart from the destination. Similar to our travel suppliers, our self-operated local tour
operators coordinate the tours based on pre-arranged itineraries and cover all components of the tours including transportation, accommodation, entertainment, meals and
tour guide services. The tour guides directly serving our customers are either directly employed by us or working for us on a contractual basis. Through the operation of
our self-operated local tour operators, we are able to exercise greater control over the quality of our trips and utilize years of data on travel preferences to design more
suitable products for consumers. As of February 28, 2022, we operate our own local tour operators in 32 domestic destinations and 6 international destinations.
We have limited experience in operating our self-operated local tour operators. The local leisure travel industry is highly fragmented, so our self-operated local tour
operators may encounter fierce competition from peers and we may not generate the expected profits. Furthermore, if any destinations where we have self-operated local
tour operators are negatively affected by external events such as earthquake or other natural disasters, pandemics or epidemics, such events may negatively affect the
business of our self-operated local tour operators as it will be difficult for them to change the pre-arranged itineraries of the customers. In addition, we may not be able to
adequately control and ensure the quality of service provided by the tour guides directly serving our customers, in particular the tour guides working for us on a
contractual basis. If our tour guides fail to provide high quality services in a timely manner to our customers or violate any applicable PRC laws and regulations, or in the
case of customer injury or death due to the negligence or misconduct of
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our tour guides, we may be liable for compensation, which may adversely affect our reputation, business, financial condition and results of operations.
If the fragmented travel industry in China becomes consolidated, our business, financial condition and results of operations may be adversely affected.
China’s enormous size and population, imbalanced economic development and differences in consumer behavior across the country have created a highly
fragmented and diverse travel industry. In recent years, customers have been shifting from highly fragmented traditional offline travel companies to travel websites for a
wider product selection and greater convenience. If, however, traditional tour operators form alliances, or merge or consolidate among themselves, or if one of the travel
suppliers is acquired by another company with which we do not have a relationship, we may not be able to maintain our strength in offering a wider selection of travel
products and services as compared to traditional travel companies, and our business, financial condition and results of operations may be adversely affected.
The Tourism Law and the Measures for Administration of the Overseas Tours of Chinese Citizens may reduce the demand of organized tours and materially and
adversely affect our business and results of operations.
On April 25, 2013, the Standing Committee of the National People’s Congress of the People’s Republic of China, or the NPC, promulgated the Tourism Law, which
became effective as of October 1, 2013 and was amended in 2016 and 2018, respectively. On May 27, 2002, the State Council promulgated the Measures for the
Administration of the Overseas Tours of Chinese Citizens which became effective as of July 1, 2002 and was amended in 2017. The Tourism Law and the Measures for
the Administration of the Overseas Tours of Chinese Citizens impose more stringent restrictions on tour operators. Pursuant to the Tourism Law and the Measures for the
Administration of the Overseas Tours of Chinese Citizens, tour operators are prohibited from arranging compulsory shopping or other activities which charge additional
fees on top of the contract prices that the tourist has already paid, unless it is agreed upon by both parties through consultation or requested by the tourist and does not
affect the itinerary of other tourists. See “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations on Travel Companies.” If travel
suppliers fail to comply with these restrictions, our reputation and brand may be negatively affected. In addition, as a result of the Tourism Law and the Measures for the
Administration of the Overseas Tours of Chinese Citizens, the commissions or rebates that tour operators receive from shopping establishments have declined and
organized tour prices have risen, which have reduced the demand for organized tours in the short term and may continue to reduce the demand for organized tours in the
future. If customers cannot adapt to the increased organized tour prices, our business and results of operations will be materially and adversely affected.
The E-Commerce Law may significantly increase our compliance cost.
In August 2018, the Standing Committee of the NPC promulgated the E-commerce Law, which became effective in January 2019. The E-commerce Law strengthens
the regulation of E-commerce operators relating to consumer protection, personal data protection and intellectual property rights protection. As an e-commerce operator,
we are required under the E-commerce Law, (1) to refrain from conducting false or misleading commercial promotion by fabricating transactions, making up user
comments or otherwise, to defraud or mislead consumers, (2) to allow consumer to opt out of search results targeting his or her personally characteristics such as hobbies
and shopping patterns and simultaneously show the consumers with options not targeting his or her personally characteristics, (3) to alert consumers of tie-in sale of
commodities or services, and shall not set the tied-in commodities or services as a default option, (4) to obtain and maintain business license and other applicable licenses
as required, and disclose information of such license at our front-page, (5) to clearly detail the refund procedure for the deposit we received from customers, and not set
any unreasonable conditions to refund, (6) to take the risks and responsibilities in the transportation of the products, unless the consumer chooses a courier logistics
service provider other than the default service provider, etc. Since the promulgation of the E-commerce Law, PRC government has promulgated implementation rules and
opinions governing the e-commerce industry, including measures governing the administration of payment institutions’ foreign exchange related services provided to e-
commerce operators and consumers, as well as guiding opinions on data interconnection and sharing between enterprises of express delivery and e-commerce industries,
and the Measures for the Supervision and Administration of Online Trading which impose a series of regulatory requirements on new forms of online trading, such as
online social networking e-commerce and online livestreaming e-commerce. Among other things, the Measures for the Supervision and Administration of Online Trading
specify typical examples of unreasonable restrictions or conditions imposed by e-commerce platform operators on transactions concluded on their platforms and require
e-commerce platform operators to verify and update each merchant’s profile on a regular basis and monitor registration status of their market participants. See also
“Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations on Online Transaction Platform Operators.”
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We have adopted the required measures to keep our current practice in line with the requirements under the E-Commerce Law and its implementation rules.
However, the competent PRC government may promulgate further implementation rules under the E-Commerce Law and may deem our current measures insufficient
under the E-Commerce Law and its implementation rules. If we are required to adopt additional measures to comply with the E-Commerce Law and its implementation
rules, our compliance cost would increase significantly, and our business and results of operations will be materially and adversely affected.
We may not be able to prevent others from using our intellectual property, which may harm our business and expose us to litigation.
We regard our intellectual property as critical to our success. We rely primarily on a combination of copyright, software registration, trademark, trade secret and
unfair competition laws and contractual rights, such as confidentiality agreements with our employees and others, to protect our intellectual property rights. The
protection of intellectual property rights in China may not be as effective as that in the United States. Unauthorized use or other misappropriation of our technologies
would enable third parties to benefit from our technologies without paying us, or enable our competitors to offer travel products and services that are comparable to or
better than ours. From time to time, we may have to enforce our intellectual property rights through litigation. Such litigation may result in substantial costs and the
diversion of resources and management attention. If we are not successful in protecting our intellectual property, our business, financial condition and results of
operations may be materially and adversely affected.
Claims by third parties that we infringe on their intellectual property rights could lead to government administrative actions and result in significant costs and have a
material adverse effect on our business, financial condition and results of operations.
We cannot be certain that our operations or any aspects of our business do not or will not infringe upon copyrights or other intellectual property rights held by third
parties. We have been in the past, and may be from time to time in the future, subject to legal proceedings, claims or government administrative actions relating to alleged
infringement on copyrights or other intellectual property rights held by third parties in relation to the content on our online platform or intellectual property rights
otherwise used in our operation. For example, our website may be found to contain pictures that infringe on copyrights of third parties or hotel reviews that are third
parties’ proprietary information. In addition, some of the software that we are currently using in our business may infringe on third parties’ copyrights. If we are found to
have infringed on the intellectual property rights of others, we may be subject to liability for our infringement activities or prohibited from using such intellectual
property, and we may incur licensing fees. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially
disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question. Moreover, regardless of whether we successfully defend
against such claims, we could suffer negative publicity and our reputation could be severely damaged. Any of these events could have a material and adverse effect on
our business, financial condition and results of operations.
In addition, user-generated content on our online platform may contain or provide links to information that infringes on the copyrights or other intellectual property
rights of third parties or violates applicable rules or regulations in relation to censorship, or we may use the user-generated content in a way that infringes on the rights of
the users or third parties. Any claims, with or without merit, could be time-consuming to defend, result in litigation and divert management’s attention and resources.
The successful operation of our business depends upon the performance and reliability of the Internet infrastructure and telecommunications networks in China.
Our business depends on the performance and reliability of the Internet infrastructure and telecommunications networks in China. Almost all access to the Internet is
maintained through state-owned telecommunications operators under the administrative control and regulatory supervision of the MIIT. In addition, the national networks
in China are connected to the Internet through international gateways controlled by the PRC government. These international gateways are the only channels through
which domestic users can connect to the Internet. We rely on a limited number of telecommunications service providers, primarily China Telecom and China Unicom, to
provide us with data communications capacity. We, our customers or travel suppliers, may not have access to alternative networks in the event of disruptions, failures or
other problems with China’s Internet infrastructure. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with
the increasing traffic on our online platform. However, we have no control over the costs of the services provided by telecommunications service providers. If the prices
we pay for telecommunications and Internet services rise significantly, our results of operations may be materially and adversely affected. If Internet access fees or other
charges to Internet users increase, the number of Internet users may decline and our business may be harmed. Moreover, if we are not able to renew services agreements
with the telecommunications carriers when they expire and are not able to enter into agreements with alternative carriers on commercially reasonable terms or at all, the
quality and stability of our online platform may be adversely affected.
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We are subject to payment-related risks.
We enable our customers to make payments through our website by working with various third-party online payment processing service providers. As we rely on
third parties to provide payment processing services, including processing payments made with credit cards and debit cards, it could disrupt our business if these
companies become unwilling or unable to provide these services to us. We may be subject to human error, fraud and other illegal activities in connection with third-party
online payment services. If our data security systems are breached or compromised, we may lose our ability to accept credit and debit card payments from our customers,
and we may be subject to claims for damages from our customers and third parties, all of which could adversely and materially affect our reputation as well as our results
of operations.
If we fail to adopt new technologies or adapt our online platform and management systems to changing user requirements, increasing traffic or emerging industry
standards, our business may be materially and adversely affected.
The online travel industry is subject to rapid technological changes. To remain competitive, we must continue to enhance and improve the responsiveness,
functionality and features of our online platform. The online travel industry is also characterized by rapid technological evolution and changes in customer requirements
and preferences. Our success will depend, in part, on our ability to identify, develop, acquire or license leading technologies useful in our line of business and respond to
technological advances and emerging industry standards and practices in a cost-effective and timely manner. The development of our online platform and other
proprietary technology entails significant technical and business risks. In addition, the widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes could require substantial expenditures to modify or adapt our infrastructure. We may not be able to use new technologies
effectively or adapt our online platform, proprietary technologies and operating systems to the requirements of our customers and travel suppliers or emerging industry
standards. If we are unable to adapt in a cost-effective and timely manner to changing market conditions or user requirements, whether for technical, legal, financial, or
other reasons, our business may be materially and adversely affected.
Our business may be harmed if we are unable to upgrade our systems and infrastructure quickly enough to accommodate increasing traffic levels, or to avoid
obsolescence, or successfully integrate any newly developed or purchased technologies with our existing systems. Capacity constraints could cause unanticipated system
disruptions, slower response times, poor customer experience, impaired quality and speed of reservations and confirmations and delays in reporting accurate financial and
operating information. These factors could cause us to lose customers. Additionally, we will continue to upgrade and improve our technology infrastructure to support
our business growth. However, we cannot assure you that we will be successful in executing these system upgrades and improvement strategies. In particular, our
systems may experience interruptions during upgrades, and any new technologies or infrastructure may not be fully integrated with our existing systems on a timely
basis, or at all. If our existing or future technology infrastructure does not function properly, it could cause system disruptions and slow response times that affect data
transmission, which in turn could materially and adversely affect our business.
Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and
cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.
Our business generates and processes a large quantity of data. We face risks inherent in handling and protecting large volume of data. In particular, we face a number
of challenges relating to data from transactions and other activities on our platforms, including:
● protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our
employees;
● addressing concerns related to privacy and sharing, safety, security and other factors; and
● complying with applicable laws, rules and regulations relating to the collection, use, storage, transfer, disclosure and security of personal information, including
any requests from regulatory and government authorities relating to these data.
In general, we expect that data security and data protection compliance will receive greater attention and focus from regulators, both domestically and globally, as
well as attract continued or greater public scrutiny and attention going forward, which could increase our compliance costs and subject us to heightened risks and
challenges associated with data security and protection. If we are unable to
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manage these risks, we could become subject to penalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of
operations could be materially and adversely affected.
The PRC regulatory and enforcement regime with regard to data security and data protection is evolving and may be subject to different interpretations or significant
changes. Moreover, different PRC regulatory bodies, including the Standing Committee of the NPC, the MIIT, the Cyberspace Administration of China, or the CAC, the
Ministry of Public Security of the PRC, or the MPS, and the State Administration for Market Regulation, or the SAMR, have enforced data privacy and protections laws
and regulations with varying standards and applications. See “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations on
Information Security and Censorship”. The following are examples of certain recent PRC regulatory activities in this area:
Data Security
● In June 2021, the Standing Committee of the NPC promulgated the Data Security Law, which took effect in September 2021. The Data Security Law, among
other things, provides for security review procedure for data-related activities that may affect national security. In July 2021, the State Council promulgated the
Regulations on Protection of Critical Information Infrastructure, or the Regulations on Protection of CII, which became effective on September 1, 2021.
Pursuant to the Regulations on Protection of CII, critical information infrastructure means key network facilities or information systems of critical industries or
sectors, such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and
national defense science, the damage, malfunction or data leakage of which may endanger national security, people’s livelihoods and the public interest. In
December 2021, the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15,
2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet
products and services must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures
further stipulates that critical information infrastructure operators or network platform operators that hold personal information of over one million users shall
apply with the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange. As of the date of this annual
report, no detailed rules or implementation rules have been issued by any authority and we have not been informed that we are a critical information
infrastructure operator by any government authority. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory
regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. Therefore,
it is uncertain whether we would be deemed to be a critical information infrastructure operator under PRC law. If we are deemed to be a critical information
infrastructure operator under the PRC cybersecurity laws and regulations, we may be subject to obligations in addition to what we have fulfilled under the PRC
cybersecurity laws and regulations.
● In November 2021, the CAC released the Regulations on the Network Data Security (Draft for Comments), or the Draft Regulations. The Draft Regulations
provide that data processors refer to individuals or organizations that, during their data processing activities such as data collection, storage, utilization,
transmission, supply, publication and deletion, have autonomy over the purpose and the manner of data processing. In accordance with the Draft Regulations,
data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listing abroad of data processors that process
the personal information of more than one million users and (ii) any data processing activity that affects or may affect national security. However, there have
been no clarifications from the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that “affects
or may affect national security”. In addition, the Draft Regulations requires that data processors that process “important data” or are listed overseas must
conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment report of the
preceding year to the municipal cybersecurity department by the end of January each year. As of the date of this annual report, the Draft Regulations was
released for public comment only, and their respective provisions and anticipated adoption or effective date may be subject to change with substantial
uncertainty.
Personal Information and Privacy
● The Guidelines on Anti-monopoly Issues in Platform Economy, or the Platform Economy Anti-monopoly Guidelines, published by the Anti-monopoly
Committee of the State Council, effective on February 7, 2021, prohibits collection of unnecessary user information through coercive means by online platforms
operators.
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● In August 2021, the Standing Committee of the NPC promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to
personal information rights and privacy protection and took effect on November 1, 2021. We update our privacy policies from time to time to meet the latest
regulatory requirements of PRC government authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless,
the Personal Information Protection Law elevates the protection requirements for personal information processing, and many specific requirements of this law
remain to be clarified by the CAC, other regulatory authorities, and courts in practice. We may be required to make further adjustments to our business practices
to comply with the personal information protection laws and regulations.
Many of the data-related legislations are relatively new and certain concepts thereunder remain subject to interpretation by the regulators. If any data that we possess
belongs to data categories that are subject to heightened scrutiny, we may be required to adopt stricter measures for protection and management of such data. The
Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements will be applicable to companies that are already listed in
the United States, such as us. We cannot predict the impact of the Cybersecurity Review Measures and the Draft Regulations, if any, at this stage, and we will closely
monitor and assess any development in the rule-making process. If the Cybersecurity Review Measures and the enacted version of the Draft Regulations mandate
clearance of cybersecurity review and other specific actions to be taken by issuers like us, we face uncertainties as to whether these additional procedures can be
completed by us timely, or at all, which may subject us to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant
operations, or removal of our app from the relevant application stores, and materially and adversely affect our businesses and results of operations. As of the date of this
annual report, we have not been involved in any formal investigations on cybersecurity review made by the CAC on such basis.
In general, compliance with the existing PRC laws and regulations, as well as additional laws and regulations that PRC regulatory bodies may enact in the future,
related to data security and personal information protection, may be costly and result in additional expenses to us, and subject us to negative publicity, which could harm
our reputation and business operations. There are also uncertainties with respect to how such laws and regulations will be implemented and interpreted in practice.
In addition, regulatory authorities around the world have adopted or are considering a number of legislative and regulatory proposals concerning data protection.
These legislative and regulatory proposals, if adopted, and the uncertain interpretations and applications thereof could, in addition to the possibility of fines, result in an
order requiring that we change our data practices and policies, which could have an adverse effect on our businesses and results of operations. The European Union
General Data Protection Regulation (“GDPR”), which came into effect on May 25, 2018, includes operational requirements for companies that receive or process
personal data of residents of the European Economic Area. The GDPR establishes new requirements applicable to the processing of personal data, affords new data
protection rights to individuals and imposes penalties for serious data breaches. Individuals also have a right to compensation under the GDPR for financial or non-
financial losses. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our website
or our mobile platform and input protected information, we may become subject to provisions of the GDPR.
Our use of open source software could adversely affect our ability to offer our products and services and subject us to possible litigation.
We use open source software in connection with our development of technology infrastructure. From time to time, companies that use open source software have
faced claims challenging the use of open source software and/or compliance with open source license terms. We could be subject to suits by parties claiming ownership
of what we believe to be open source software, or claiming noncompliance with open source licensing terms. Some open source licenses require users who distribute
software containing open source to make available all or part of such software, which in some circumstances could include valuable proprietary code. While we monitor
the use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise
breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to
disclose our proprietary source code or pay damages for breach of contract could be harmful to our business, results of operations or financial condition, and could help
our competitors develop travel products and services that are similar to or better than ours.
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We may not be successful in pursuing strategic alliances and acquisitions, and future alliances and acquisitions may not bring us anticipated benefits.
Part of our growth strategy is the pursuit of strategic alliances and acquisitions. There can be no assurance that we will succeed in implementing this strategy as it is
subject to many factors which are beyond our control, including our ability to identify and successfully execute suitable acquisition opportunities and alliances. Any
future acquisitions, investments, and strategic alliances may expose us to new operational, regulatory and market risks, as well as risks associated with additional capital
requirements, including risks associated with unforeseen or hidden liabilities, diversion of management resources and costs of integrating acquired businesses, the
inability to generate sufficient revenue to offset the costs and expenses of acquisitions, and potentially significant loss of investments. Any acquisitions we pursue could
also create difficulties with integrating the technology of acquired businesses with our existing technology, and employees of acquired businesses into the various
departments and ranks in our company, and it could take substantial time and effort to integrate the business processes being used in the acquired businesses with our
existing business processes. Should we fail to integrate acquired companies efficiently, our earnings, revenues, gross margins, operating margins and business operations
could be negatively affected. Furthermore, acquired companies may not perform to our expectations for various reasons, including legislative or regulatory changes that
affect the products and services in which the acquired companies specialize, and the loss of key personnel and customer accounts. Any alliances we pursue could also
subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in
establishing new strategic alliances, any of which may materially and adversely affect our business. We may also have limited ability to monitor or control the actions of
these third parties and, to the extent any of these strategic third parties suffer negative publicity or harm to their reputation from events relating to their business, we may
also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.
We may not be able to identify suitable future acquisition or investment candidates or alliance partners. Moreover, there is no assurance that such alliances or
acquisitions will achieve our intended objectives or benefits. Even if we identify suitable candidates or partners, we may be unable to complete an acquisition, investment
or alliance on terms commercially acceptable to us. If we fail to identify appropriate candidates or partners, or complete desired acquisitions, investments or alliances, we
may not be able to implement our strategies effectively or efficiently, and our overall profitability and growth plans may be adversely affected.
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations or prevent fraud or fail
to meet our reporting obligations, and investor confidence and the market price of our ADSs may be materially and adversely affected.
We are subject to the Sarbanes-Oxley Act of 2002, or SOX. Section 404 of the SOX requires that we include a report from management on the effectiveness of our
internal control over financial reporting in our annual report on Form 20-F. In addition, our independent registered public accounting firm must report on the
effectiveness of our internal control over financial reporting.
Our management has concluded that our internal control over financial reporting was effective as of December 31, 2021. See “Item 15. Controls and Procedures.”
Our independent registered public accounting firm has issued an attestation report, which has concluded that our internal control over financial reporting was effective in
all material aspects as of December 31, 2021. However, if we fail to maintain the effectiveness of our internal control over financial reporting, we may not be able to
conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the SOX. Moreover, effective internal control over
financial reporting is necessary for us to produce reliable financial reports. As a result, any failure to maintain effective internal control over financial reporting could
result in the loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our ADSs. Furthermore,
we may need to incur additional costs and use additional management and other resources in an effort to comply with Section 404 of the SOX and other requirements
going forward.
We have limited business insurance coverage in China.
Insurance companies in China offer limited business insurance products. Business disruption insurance is available to a limited extent in China, but we have
determined that the risks of disruption, the cost of such insurance and the difficulties associated with acquiring such insurance make it commercially impractical for us to
have such insurance. We maintain insurance coverage for travel company liabilities, but we do not maintain insurance coverage for business disruptions and would have
to bear the costs and expenses associated with any such events out of our own resources.
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We may need additional capital, and financing may not be available on terms acceptable to us, or at all.
The outbreak of COVID-19 has had material adverse impacts on our cash flow for the fiscal years of 2020 and 2021 with potential continuing impacts on subsequent
periods. Together with the negative financial trends, the conditions and events casted substantial doubt on our ability to continue as a going concern. In response to the
COVID-19 pandemic, in 2021, we continue to take actions to improve our liquidity, including scaling down our business operations by reducing capital expenditures and
operational expenses that are discretionary in nature and obtaining funding from the maturity of certain short-term and long-term investments. Moving forward, we plan
to maintain adequate funds which may provide a sufficient flexibility in adjusting our operation scale to cope with the development of the COVID-19 pandemic, and we
will continue to manage our capital expenditures, operational expenses and investments based on our liquidity position and working capital needs. Based on our liquidity
assessment, which has considered our operations at the current business scale, the latest developments of COVID-19 and its continuous impact on our business operation,
the available funding that will be provided from the maturity of our short-term and long-term investments, and our available cash and cash equivalents, we will be able to
meet our working capital requirements and capital expenditures in the ordinary course of business for the next twelve months subsequent to the filing of this annual
report. As a result, we concluded that the substantial doubt on our ability to continue as a going concern has been alleviated. We may require additional cash resources
due to unanticipated business conditions or other future developments, including any marketing initiatives or investments we may decide to pursue. If these resources are
insufficient to satisfy our cash requirements, we may seek to obtain a credit facility or sell additional equity or debt securities. The sale of additional equity securities
could result in the dilution of our existing shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating
and financing covenants that would restrict our operations. It is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all.
We have granted share options and restricted shares, and may grant share options and other share-based awards in the future, which may materially increase our
net loss.
We adopted an incentive compensation plan in 2008, or the 2008 Plan, which permits the granting of options to purchase our ordinary shares and restricted shares.
We also adopted a separate incentive compensation plan in 2014, or the 2014 Plan, which permits the granting of options to purchase our ordinary shares, restricted
shares and restricted share units. In particular, our 2014 Plan contains an evergreen provision which allows us to automatically increase the maximum aggregate number
of ordinary shares reserved under the 2014 Plan to 5% of the then-issued and outstanding shares on an as-converted basis without shareholder approval, if and whenever
the shares reserved in the 2014 Plan account for less than 1% of the total then-issued and outstanding shares on an as-converted basis. For more details regarding the
2008 Plan and the 2014 Plan, see “Item 6. Directors, Senior Management and Employees—B. Compensation.” As of February 28, 2022, there were options to acquire
3,421,602 Class A ordinary shares outstanding under the 2008 Plan, and options to acquire 8,952,282 Class A ordinary shares and 13,170 restricted shares outstanding
under the 2014 Plan. In addition, we plan to grant employees share options and other share-based compensation in the future. Expenses associated with share-based
awards may materially impact our results of operations.
Risks Related to Our Corporate Structure
Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to restrictions on foreign
investment in value-added telecommunications and travel companies in China. If the PRC government finds that the structure we have adopted for our business
operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including shutting down of our online platform.
Foreign ownership of Internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates Internet
access, the distribution of online information and the conduct of online commerce through strict business licensing requirements and other government regulations. These
laws and regulations also include limitations on foreign ownership in PRC companies that provide Internet content distribution services. Specifically, unless otherwise
provided for by the state, foreign investors are prohibited from owning more than 50% of the equity interest in any PRC entity conducting value-added
telecommunications business, except for online data processing and transaction processing business (operational e-commerce), domestic multiparty communication,
storage-and-forward and call center businesses, in which foreign investors are allowed to hold up to 100% of the equity interest. The Circular on Strengthening the
Administration of Foreign Investment in and Operation of Value-added Telecommunications Business issued by the MIIT in July 2006, or the MIIT Circular, reiterated
the regulations on foreign investment in telecommunications business, which require foreign investors to set up foreign-invested telecom enterprises and obtain business
operating licenses for Internet content provision, or an ICP license to conduct any value-added telecommunications business in China. Under the MIIT Circular, a
domestic company that holds an ICP license is prohibited from leasing, transferring or selling the license to
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foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added
telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business
must be owned by the domestic ICP license holder or its shareholders. Due to a lack of interpretation from the MIIT, it is unclear what impact the MIIT Circular will
have on us or other PRC Internet companies that have adopted the same or similar corporate structures and contractual arrangements as ours. Nanjing Tuniu holds our
ICP licenses, and owns all the domain names used in our value-added telecommunications business. Nanjing Tuniu is also the owner of all the registered trademarks used
in our value-added telecommunications business and is the applicant of all the applications for trademark registration we have made.
We are a Cayman Islands company and our wholly owned PRC subsidiary, Beijing Tuniu, is considered a foreign invested enterprise. To comply with PRC laws and
regulations, we conduct our business in China through a series of contractual arrangements entered into among Beijing Tuniu, Nanjing Tuniu, and the shareholders of
Nanjing Tuniu. As a result of these contractual arrangements, we exert control over Nanjing Tuniu and its subsidiaries and consolidate their results of operations in our
financial statements under U.S. GAAP. For a detailed description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational
Structure.”
In the opinion of our PRC counsel, Fangda Partners, the ownership structure of Nanjing Tuniu, each of the shareholders’ voting rights agreement, powers of attorney,
equity interest pledge agreement and purchase option agreement entered into among Beijing Tuniu, Nanjing Tuniu and the shareholders of Nanjing Tuniu, and the
cooperation agreement between Beijing Tuniu and Nanjing Tuniu, which establish our contractual arrangement with Nanjing Tuniu and its shareholders, and these
agreements are valid, binding and enforceable in accordance with their terms. However, we are advised by our PRC counsel, Fangda Partners, that there are substantial
uncertainties regarding the interpretation and application of current 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 the opinion of our PRC counsel stated above.
If our ownership structure, contractual arrangements and business of our company, our PRC subsidiaries or the consolidated affiliated entities are found to be in
violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits or approvals, the relevant government authorities
would have broad discretion in dealing with such violations, including levying fines, confiscating our income or the income of our PRC subsidiaries or the consolidated
affiliated entities, revoking the business licenses or operating licenses of our PRC subsidiaries or the consolidated affiliated entities, shutting down our servers or
blocking our online platform, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring,
restricting or prohibiting our use of proceeds from our financing activities, such as our private placements, to finance our business and operations in China, and taking
other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our business operations and
severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If any of these
occurrences result in our inability to direct the activities of any of the consolidated affiliated entities that most significantly impact its economic performance, and/or our
failure to receive the economic benefits from any of the consolidated affiliated entities, we may not be able to consolidate the entity in our consolidated financial
statements in accordance with U.S. GAAP.
Substantial uncertainties exist with respect to the interpretation and implementation of adopted PRC Foreign Investment Law and its implementation rules and how
they may impact the viability of our current corporate structure, corporate governance and business operations.
The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in
industries that are currently subject to foreign investment restrictions in China. See “—Risks Related to Our Corporate Structure—Substantial uncertainties and
restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to restrictions on foreign investment in value-added
telecommunications and travel companies in China. If the PRC government finds that the structure we have adopted for our business operations does not comply with
PRC laws and regulations, we could be subject to severe penalties, including shutting down of our online platform” and “Item 4. Information on the Company—C.
Organizational Structure.” In March 2019, the NPC promulgated the Foreign Investment Law, or the PRC Foreign Investment Law. In December 2019, the State Council
promulgated the Implementing Rules of the Foreign Investment Law of the People’s Republic of China, or the Implementing Rules, to further clarify and elaborate the
relevant provisions of the PRC Foreign Investment Law. The PRC Foreign Investment Law and the Implementation Rules both became effective on January 1, 2020 and
replaced major existing laws and regulations governing foreign investment in the PRC. Pursuant to the PRC Foreign Investment Law, “foreign investments” refer to
investment activities conducted by foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or “indirectly” in the
PRC, which include any of the following circumstances: (i) foreign
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investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property
portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other
investors, and (iv) investment in other methods as specified in laws and administrative regulations, or as stipulated by the State Council. The PRC Foreign Investment
Law and the Implementation Rules do not use the concept of “control” in determining whether a company should be considered as a foreign-invested enterprise, nor do
they explicitly provide the VIE structure as a method of foreign investment. However, the PRC Foreign Investment Law has a catch-all provision that includes into the
definition of “foreign investments” made by foreign investors in China in other methods as specified in laws, administrative regulations, or as stipulated by the State
Council. Since the PRC Foreign Investment Law and the Implementation Rules are newly adopted, and relevant government authorities may promulgate future laws,
regulations or rules on the interpretation and implementation of the PRC Foreign Investment Law, the possibility cannot be ruled out that the concept of “control” as
stated in the 2015 draft PRC Foreign Investment Law may be reimposed, or the VIE structure adopted by us may be deemed a method of foreign investment by, any of
such future laws, regulations and rules, which cause significant uncertainties as to whether the VIE structures would be treated as a method of foreign investment. If the
VIE structure would be deemed as a method of foreign investment under any of such future laws, regulations and rules, and any of our businesses operations would fall
in the “negative list” for foreign investment that is subject to any foreign investment restrictions or prohibitions, we would be required to take further actions to comply
with such laws, regulations and rules, which may materially and adversely affect our current corporate structure, corporate governance, business, financial conditions and
results of operations. Furthermore, if future laws, administrative regulations or rules mandate further actions to be taken by companies with respect to existing contractual
arrangements, we may face substantial uncertainties as to whether we are able to complete such actions in a timely manner, or at all. Failure to take timely and
appropriate measures to respond to any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure,
business, financial condition and results of operations.
The PRC Foreign Investment Law requires foreign investors or applicable FIEs to report investment information to government authority. Pursuant to the
Information Reporting Measures for Foreign Investment jointly promulgated by the MOC and the SAMR, which took effect in January 2020, a foreign investment
information reporting system shall be established and foreign investors or FIEs shall report investment information to competent commerce departments of the
government through the enterprise registration system and the enterprise credit information publicity system, and the administration for market regulation shall forward
the above investment information to the competent commerce departments of the government. The foreign investors or FIEs shall report the investment information by
submitting initial reports, change reports, deregistration reports and annual reports, etc. The PRC government authorities may promulgate rules to further clarify the
detailed information reporting requirements on foreign investors and the applicable FIEs. In that case, our current corporate governance practices and business operations
may need to be adjusted to comply with the information reporting requirements, which would significantly increase our compliance costs, and have a material and
adverse effect on our current corporate structure, corporate governance, business, financial conditions and results of operations.
We rely on contractual arrangements with Nanjing Tuniu and its shareholders for the operation of our business, which may not be as effective as direct ownership.
If Nanjing Tuniu or its shareholders fail to perform their obligations under these contractual arrangements, we may have to resort to litigation or arbitration to
enforce our rights, which may be time-consuming, unpredictable, expensive and damaging to our operations and reputation. If we are unable to maintain effective
control we would not be able to continue to consolidate the financial results of the consolidated affiliated entities with our financial results.
Although we have been advised by our PRC counsel, Fangda Partners, that our contractual arrangements with Nanjing Tuniu and its shareholders did not and does
not result in any violation of current PRC laws and these agreements are valid, binding and enforceable, these contractual arrangements may not be as effective in
providing control as direct ownership. If Nanjing Tuniu or its shareholders fail to perform their obligations under the contractual arrangements, we may have to incur
substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under contract law, including seeking
specific performance or injunctive relief and claiming damages, which we cannot assure you will be effective. For example, if the shareholders of Nanjing Tuniu refuse
to transfer their equity interests in Nanjing Tuniu to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if they
otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. Furthermore, while the company
chops of Nanjing Tuniu are held by its legal and accounting departments, our ability to ensure its performance under the contractual agreements may be limited if we are
unable to secure control of the company chops in the event of a dispute with its management or shareholders, as many official documents require the affixation of
company chops to become fully effective. If we were the controlling shareholder of Nanjing Tuniu with direct ownership, we would be able to exercise our rights as
shareholders to effect changes to its board of directors, which in turn could implement changes at the management and operational level.
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All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in the PRC.
Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. There
remain significant uncertainties regarding how our contractual arrangements would be interpreted under PRC laws and the ultimate outcome of the resolution of disputes
in relation to such contractual arrangements, should arbitration become necessary. 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 PRC legal system could limit our ability to enforce these contractual arrangements. Under PRC laws, if the losing
parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through
arbitration award recognition proceedings, which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, we
may not be able to exert effective control over Nanjing Tuniu and its shareholders, and our ability to conduct our business may be negatively affected. If we are unable to
maintain effective control, we would not be able to continue to consolidate the financial results of the consolidated affiliated entities with our financial results.
The shareholders of Nanjing Tuniu may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
We have designated individuals who are PRC nationals to be the shareholders of Nanjing Tuniu. The equity interests of Nanjing Tuniu are held by Messrs. Dunde Yu
and Anqiang Chen. The interests of these individuals as the shareholders of Nanjing Tuniu may differ from the interests of our company as a whole. These shareholders
may breach, or cause Nanjing Tuniu to breach, the existing contractual arrangements we have with them and Nanjing Tuniu, which would have a material and adverse
effect on our ability to effectively control Nanjing Tuniu. 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 such conflicts 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 we could exercise our
purchase option under the purchase option agreement with these shareholders to request them to transfer all of their equity interests in Nanjing Tuniu to a PRC entity or
individual designated by us, to the extent permitted by PRC laws. We rely on Mr. Dunde Yu, who is our founder, director and beneficial owner, Mr. Anqiang Chen, who
is our Financial Controller to abide by the PRC law. If we cannot resolve any conflict of interest or dispute between us and the shareholders of Nanjing Tuniu, we would
have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal
proceedings.
Our contractual arrangements with Nanjing Tuniu and its shareholders may be subject to scrutiny by the PRC tax authorities, and a finding that we owe additional
taxes could substantially increase our consolidated net loss and reduce the value of your investment.
Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face
material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among Beijing Tuniu, Nanjing Tuniu and the shareholders
of Nanjing Tuniu do not represent an arm’s-length transaction and adjust Nanjing Tuniu’s income in the form of a transfer pricing adjustment. A transfer pricing
adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by Nanjing Tuniu, which could in turn increase its tax
liabilities without reducing our tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties to Nanjing Tuniu for under-paid
taxes. Our consolidated net loss may be increased if our tax liabilities increase or if we are found to be subject to late payment fees or other penalties.
If Nanjing Tuniu becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy its assets, which could materially and
adversely affect our business.
To comply with PRC laws and regulations relating to foreign ownership restrictions in the online value-added telecommunications business, we hold our ICP license
and operate our business through contractual arrangements with Nanjing Tuniu as well as its shareholders. As part of these arrangements, Nanjing Tuniu holds assets that
are important to the operation of our business.
We do not have priority pledges or liens against Nanjing Tuniu’s assets. As a contractual and property right matter, this lack of priority pledges and liens has remote
risks. If Nanjing Tuniu undergoes an involuntary liquidation proceeding, third-party creditors may claim rights to some or all of its assets and we may not have priority
against such third-party creditors on Nanjing Tuniu’s assets. If Nanjing Tuniu undergoes voluntary liquidation, we may take part in the liquidation procedures as a general
creditor under the PRC Enterprise Bankruptcy Law and recover any outstanding liabilities owed by Nanjing Tuniu to Beijing Tuniu under the cooperation
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agreement between them. To ameliorate the risks of an involuntary liquidation proceeding initiated by a third-party creditor, we closely monitor the operations and
finances of Nanjing Tuniu through carefully designed budgetary and internal controls to ensure that Nanjing Tuniu is well capitalized and thus highly unlikely to trigger
any third party monetary claims in excess of its assets and cash resources. Furthermore, Beijing Tuniu has the ability, if necessary, to provide financial support to Nanjing
Tuniu to avoid such involuntary liquidation.
If the shareholders of Nanjing Tuniu were to attempt to voluntarily liquidate Nanjing Tuniu without obtaining our prior consent, we could effectively prevent such
unauthorized voluntary liquidation by exercising our right to request Nanjing Tuniu’s shareholders to transfer all of their equity interests to a PRC entity or individual
designated by us in accordance with the purchase option agreement with the shareholders of Nanjing Tuniu, to the extent permitted by PRC laws. In the event that the
shareholders of Nanjing Tuniu initiate a voluntary liquidation proceeding without our authorization or attempt to distribute the retained earnings or assets of Nanjing
Tuniu without our prior consent, we may need to resort to legal proceedings to enforce the terms of the contractual agreements. Any such legal proceeding may be costly
and may divert our management’s time and attention away from the operation of our business, and the outcome of such legal proceeding would be uncertain.
Risks Related to Doing Business in China
The approval of or filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if
required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006
and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC
companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.
However, the interpretation and application of the M&A Rules remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC
approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be
rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would
subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or
limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and
results of operations.
On July 6, 2021, the relevant PRC government authorities issued the Opinions on Intensifying Crack Down on Illegal Securities Activities. These opinions
emphasized the need to strengthen regulation over illegal securities activities, and supervision on overseas listings by China-based companies and proposed to take
effective measures, such as promoting the development of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed
companies. There are still uncertainties regarding the interpretation and implementation of these opinions, and further explanations or detailed rules and regulations with
respect to these opinions may be issued in the future, which may impose additional requirements on us.
Furthermore, on December 24, 2021, the CSRC issued a draft of the Provisions of the State Council on the Administration of Overseas Securities Offering and
Listing by Domestic Companies, or the Draft Provisions, and the CSRC issued a draft of Administration Measures for the Filing of Overseas Securities Offering and
Listing by Domestic Companies, or the Draft Administration Measures, for public comments.
The Draft Provisions and the Draft Administration Measures, collectively, the Draft Overseas Listing Regulations, set out the new regulatory requirements and filing
procedures for Chinese companies seeking direct or indirect listing in overseas markets. The Draft Overseas Listing Regulations, among others, stipulate that (i) Chinese
companies that seek to offer and list securities in overseas markets directly or indirectly shall fulfill the filing procedures with and report relevant information to the
CSRC, and that an initial filing shall be submitted within three working days after the application for an initial public offering is submitted, and a second filing shall be
submitted after the listing is completed, and (ii) where Chinese companies that have directly or indirectly listed securities in overseas markets conduct follow-on offering
in overseas markets, they shall fulfill the filing procedures with and report relevant information to the CSRC, and such filing shall be submitted within three
working days after such follow-on offering is completed. Moreover, an overseas offering and listing is prohibited under circumstances if (i) it is prohibited by PRC laws,
(ii) it may constitute a threat to or endanger national security as reviewed and determined by competent PRC authorities, (iii) it has material ownership disputes over
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equity, major assets, and core technology, (iv) in recent three years, the Chinese operating entities, and their controlling shareholders and actual controllers have
committed relevant prescribed criminal offenses or are currently under investigations for suspicion of criminal offenses or major violations, (v) the directors, supervisors,
or senior executives have been subject to administrative punishment for severe violations, or are currently under investigations for suspicion of criminal offenses or major
violations, or (vi) it has other circumstances as prescribed by the State Council.
The Draft Overseas Listing Regulations, among others, stipulate that if the issuer meets the following conditions, its offering and listing shall be determined as an
“indirect overseas offering and listing by a Chinese company” and is therefore subject to the filing requirement: (i) the revenues, profits, total assets, or net assets of the
Chinese operating entities in the most recent financial year accounts for more than 50% of the corresponding data in the issuer’s audited consolidated financial statement
for the same period; and (ii) the majority of senior management in charge of business operations are Chinese citizens or domiciled in the PRC, and its principal place of
business is located in the PRC or main business activities are conducted in the PRC.
According to the Draft Overseas Listing Regulations, if we failed to complete the filing procedures with the CSRC for any of our follow-on offering or fell within
any of the circumstances where our offshore offerings are prohibited by the State Council, our offering application may be discontinued and we may be subject to
penalties, sanctions and fines imposed by the CSRC and relevant departments of the State Council. In severe circumstances, the business of our PRC subsidiaries may be
ordered to suspend and their business qualifications and licenses may be revoked. For more details of the Draft Provisions and the Draft Administration Measures, see
“Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations on Overseas Offering and Listing.”
As advised by our PRC legal counsel, the Draft Overseas Listing Regulations were released only for soliciting public comments at this stage and their provisions and
anticipated adoption or effective date are subject to changes and thus their interpretation and implementation remain substantially uncertain. Although according to the
current text of the Draft Overseas Listing Regulations, our offshore follow-on offerings may be subject to the newly-empowered regulatory scope of CSRC and the
newly-enacted report and filing procedures for constituting an “indirect overseas offering and/or listing by a Chinese company”, we cannot predict the impact of the Draft
Overseas Listing Regulations on our follow-on offshore offerings, if any, at this stage. We cannot guarantee that we will be able to satisfy the scrutinized and new
regulatory requirements in case they were adopted in the current form. Relatedly, on December 27, 2021, the NDRC and the Ministry of Commerce, or the MOC, jointly
issued the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Version), or the 2021 Negative List, which became effective on
January 1, 2022. Pursuant to the 2021 Negative List, if a domestic company engaging in the prohibited business stipulated in the 2021 Negative List seeks an overseas
offering and listing, it shall obtain the approval from the competent government authorities. Besides, the foreign investors of the company shall not be involved in the
company’s operation and management, and their shareholding percentage shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities
investments by foreign investors. As the 2021 Negative List is relatively new, there remain substantial uncertainties as to the interpretation and implementation of these
new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements. If we are required to comply with
these requirements and fail to do so on a timely basis, if at all, our business operations, financial conditions and business prospects may be adversely and materially
affected.
In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the
future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the enacted version of the
Draft Regulations, are required for our offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approvals or complete such filing
procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approvals or completing such filing procedures
for our offshore offerings, or a rescission of any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities.
These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges
in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our
businesses, financial conditions, results of operations, and prospects, as well as the trading price of our ADSs. The CSRC or other PRC regulatory authorities also may
take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors
engage in market trading or other activities in anticipation of and prior to the settlement and delivery, they do so at the risk that the settlement and delivery may not occur.
In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required
filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such requirements, if and when procedures are established to
obtain such a waiver. Any uncertainties or negative publicity regarding such requirement could materially and adversely affect our business, prospect, financial condition,
reputation, and the trading price of our ADSs. See “Item 4. Information on the
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Company—B. Business Overview—PRC Regulation—Regulations on Information Security and Censorship” for more detailed discussion.
Since the Draft Overseas Listing Regulations and the Draft Regulations were released only for soliciting public comment at this stage and their provisions and
anticipated adoption or effective date are subject to changes, our PRC counsel has advised us based on their understanding of the current PRC laws, rules and regulations
that no permission is required from any Chinese authorities (including the CSRC and the CAC) for our offshore offerings. There can be no assurance that the relevant
PRC government agencies, including the CSRC, would reach the same conclusion as our PRC counsel.
The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to
conduct inspections over our auditor deprives our investors with the benefits of such inspections.
Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that
are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular
inspections to assess its compliance with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to
conduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB. As a result, we and investors in our ADSs are
deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the
effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are
subject to the PCAOB inspections, which could cause investors and potential investors in our ADSs to lose confidence in our audit procedures and reported financial
information and the quality of our financial statements.
Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is
unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of
their being delisted, may materially and adversely affect the value of your investment.
The Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law on December 18, 2020. The HFCAA states if the SEC determines that we
have filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in
2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On
December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCAA, pursuant to which the SEC will identify
an issuer as a “Commission Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the
PCAOB has determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-
Identified Issuer for three consecutive years. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to
inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the
registered public accounting firms that the PCAOB is unable to inspect or investigate completely. Therefore, we expect to be identified as a “Commission Identified
Issuer” shortly after the filing of this annual report on Form 20-F.
Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on Form 20-F for the year ending
December 31, 2023 which is due by April 30, 2024, or at all, is subject to substantial uncertainty and depends on a number of factors out of our, and our auditor’s,
control. If our shares and ADSs are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market
for our shares will develop outside of the United States. Such a prohibition would substantially impair your ability to sell or purchase our ADSs when you wish to do so,
and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our
ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.
On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under
the HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among other things, an identical provision.
If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA is reduced from
three years to two, then our shares and ADSs could be prohibited from trading in the United States in 2023.
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Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.
The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late
1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of
legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China. Our PRC
subsidiaries and the consolidated affiliated entities are subject to various PRC laws and regulations generally applicable to companies in China. However, since these
laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always
uniform and enforcement of these laws, regulations and rules involve uncertainties.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court
authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative
and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal 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 have retroactive 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, and any failure to respond to changes in the regulatory environment in China could materially and
adversely affect our business and impede our ability to continue our operations.
We may be adversely affected by the complexity, uncertainties and changes in PRC regulations of internet and related business and companies.
The PRC government regulates the internet and related industry extensively, including foreign ownership of, and the licensing and permit requirements pertaining to,
companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve
significant uncertainty. As a result, under certain circumstances it may be difficult to determine what actions or omissions may be deemed to be violations of applicable
laws and regulations. Issues, risks and uncertainties relating to PRC government regulation of the internet industry include, but are not limited to, the following:
● We only have contractual control over our websites. We do not own the websites due to the restriction of foreign investment in businesses providing value-
added telecommunications services in China, including online information services.
● The licensing requirements relating to the internet business in China are uncertain and evolving. This means that permits, licenses or operations at some of our
PRC subsidiaries and the consolidated affiliated entities may be subject to challenges, or we may not be able to obtain or renew certain permits or licenses,
including, without limitation, a Value-Added Telecommunication Business Operating License, which is issued by the local bureau of the MIIT, a Short
Messaging Service Access Code Certificate, which is issued by the MIIT, a Food Business License, which is issued by Jizhou Branch of Tianjin Administration
for Market Regulation, Filing Certificates for Operation of Prepacked Food, which are issued by Xuanwu Branch of Nanjing Administration for Market
Regulation, Travel Agency Business Licenses, which are issued by the local bureau of and/or the then Ministry of Tourism, or the Ministry of Culture and
Tourism which has replaced the Ministry of Tourism, Approval Documents for Operation of Small-sum Loan Business, which are issued by the Guangzhou
Municipal Bureau of Finance, an Insurance Brokerage Business License, which is issued by the CBIRC, a Securities and Futures Business Operation License,
which is issued by the CSRC, Insurance Agency Concurrent-business Licenses, which are issued by the CBIRC. Violation of relevant laws and regulations
governing these licenses, approvals, filings or qualifications may result in penalties and even suspension or revocation of the licenses, approvals, filings or
qualifications. Failure to obtain, maintain or renew these permits and licenses may significantly disrupt our business, or subject us to sanctions, requirements to
increase capital or other conditions or enforcement, or compromise enforceability of related contractual arrangements, or have other harmful effects on us. For
example, we have not obtained the internet audio-visual program transmission license, or Audio-Visual License, for providing the internet audio-visual program
services and content on our platform in China, for which we are not qualified to apply, because the current applicable laws and regulations require an applicant
to be a wholly state-owned or state-controlled entity. In addition, we have not completed filing for distributing publications and providing live streaming
services on our platform.
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● New laws and regulations may be promulgated to regulate internet activities, including online advertising and internet cultural activities. Other aspects of our
online operations may be further regulated in the future. If these new laws and regulations are promulgated, additional licenses may be required for our online
operations. If our operations do not comply with these new regulations at the time they become effective, or if we fail to obtain any licenses required under
these new laws and regulations, we could be subject to penalties.
The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have
created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China,
including our business.
The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our ADSs.
We conduct our business in China. Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight over the
conduct of our business, and may intervene or influence our operations as the government deems appropriate to advance regulatory and societal goals and policy
positions. The PRC government has recently published new policies that significantly affected certain industries and we cannot rule out the possibility that it will in the
future release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to continue our operations, which could
result in a material adverse change in our operation and/or the value of our ADSs.
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.
Our business operations are based in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant
degree by economic, political and social conditions or government policies in China generally and by continued economic growth in China as a whole.
China’s 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 PRC government has implemented measures emphasizing the utilization of market
forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a
substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating
industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through allocating
resources, controlling payment of foreign currency-denominated obligations, setting monetary 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 among various sectors of
the economy. Some of the government measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition
and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. The growth rate of the Chinese
economy has gradually slowed since 2010, and the COVID-19 pandemic has brought uncertainties to the growth rate of the Chinese economy. Any prolonged slowdown
in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations. However, any
stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our financial condition and results of
operations. For example, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation.
A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect the leisure travel industry and our business, results of
operations and financial condition.
COVID-19 has had a severe and negative impact on both the Chinese and global economy since early 2020. Whether this will lead to a prolonged economic
downturn is still unknown, especially considering the multiple recent outbreaks in various countries and regions as well as the uncertainties brought by the vaccination
programs. Even before the outbreak of COVID-19, the global macroeconomic environment had been facing numerous challenges. The growth of the Chinese economy
has gradually slowed down in recent years and the trend may continue. There is considerable uncertainty over the long-term effects of the expansionary monetary and
fiscal policies which had been adopted by the central banks and financial authorities of some of the world’s leading economies, including the United
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States and China, even before 2021. The conflict in Ukraine and the imposition of broad economic sanctions on Russia could raise energy prices and disrupt global
markets. Unrest terrorist threats and the potential for war in the Middle East and elsewhere may increase market volatility across the globe. There have also been
concerns on the relationship between China and other countries, including surrounding Asian countries, which may potentially lead to foreign investors closing down
their businesses or withdrawing their investments in China and, thus, exiting the China market, and other economic effects. In particular, there is significant uncertainty
about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs. It is unclear whether these
challenges and uncertainties will be contained or resolved and what effects they may have on the global political and economic conditions in the long term. Economic
conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall
economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect the leisure travel industry and
our business, results of operations and financial condition, and continued turbulence in the international markets may adversely affect our ability to access the capital
markets to meet liquidity needs. Our users and business partners may reduce or delay spending with us, while we may have difficulty expanding our user base fast
enough, or at all, to offset the impact of decreased spending by our existing users.
The PRC government regulates travel and other related industries. If we fail to obtain or maintain all pertinent permits and approvals or if the PRC government
imposes more restrictions on these industries, our business may be adversely affected.
We are required to obtain applicable permits or approvals from regulatory authorities to conduct our business activities. See “Item 4. Information on the Company—
B. Business Overview—PRC Regulation.” If we fail to obtain or maintain any of the required permits or approvals in the future, we may be subject to various penalties,
such as fines or suspension of operations in these regulated businesses, which could severely disrupt our business operations. As a result, our financial condition and
results of operations may be adversely affected.
Under the PRC Enterprise Income Tax Law, we may be classified as a PRC resident enterprise for PRC enterprise income tax purposes. Such classification would
likely result in unfavorable tax consequences to us and our non-PRC shareholders and would have a material adverse effect on our results of operations and the
value of your investment.
Under the PRC Enterprise Income Tax Law, or the EIT Law and its Implementation Rules, that became effective on January 1, 2008 and was amended in
February 2017, December 2018 and April 2019, respectively, an enterprise established outside the PRC with a “de facto management body” within the PRC is considered
a PRC resident enterprise for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under
the implementation rules to the EIT Law, or the Implementation Rules, a “de facto management body” is defined as a body that has material and overall management and
control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, STA Circular 82, which
was issued in April 2009 and was amended in December 2017 by the State Taxation Administration, or the STA, specifies that certain offshore incorporated enterprises
controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if all of the following conditions are met: (a) senior management
personnel and core management departments in charge of the daily operations of the enterprises have their presence mainly in the PRC; (b) their financial and human
resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) major assets, accounting books and company seals of the enterprises,
and minutes and files of their board’s and shareholders’ meetings are located or kept in the PRC; and (d) half or more of the enterprises’ directors or senior management
personnel with voting rights habitually reside in the PRC. Further to STA Circular 82, the STA issued STA Bulletin 45, which took effect on September 1, 2011, to
provide more guidance on the implementation of STA Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore-incorporated
resident enterprises.” STA Bulletin 45 provides procedures and administrative details for the determination of PRC resident enterprise status and administration on post-
determination matters. Although both STA Circular 82 and STA Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups,
not those controlled by PRC individuals or foreign individuals like us, the determining criteria set forth in STA Circular 82 and STA Bulletin 45 may reflect the STA’s
general position on how the “de facto management body” test should be applied in determining the PRC resident enterprise status of offshore enterprises, regardless of
whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.
We do not believe that Tuniu Corporation meets all of the conditions above and thus we do not believe that it is a PRC resident enterprise for PRC enterprise income
tax purposes, despite the fact that all of the members of our management team as well as the management team of Tuniu (HK) Limited are located in China. However, if
the PRC tax authorities determine that it is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could
follow. First, we will be subject to the uniform 25% enterprise income tax on our worldwide income, which could materially reduce our net income. In addition,
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we will also be subject to PRC enterprise income tax reporting obligations. Second, although dividends paid by one PRC tax resident to another PRC tax resident should
qualify as “tax-exempt income” under the EIT Law, we cannot assure you that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange
control authorities, which enforce the withholding tax on dividends, and the PRC tax authorities have not yet issued guidance with respect to the processing of outbound
remittances to entities that are not controlled by any PRC enterprise or PRC enterprise group and treated as PRC resident enterprises for PRC enterprise income tax
purposes.
Under the EIT Law and its Implementation Rules, subject to any applicable tax treaty or similar arrangement between the PRC and our shareholders’ jurisdiction of
residence that provides for a different income tax arrangement, PRC withholding tax at the rate of 10% is normally applicable to dividends from PRC sources payable to
investors that are non-PRC resident enterprises, which do not have an establishment or place of business in the PRC, or which have such establishment or place of
business if the relevant income is not effectively connected with the establishment or place of business. Any gain realized on the transfer of ADSs or shares by such non-
PRC resident enterprise investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC unless a tax treaty or
similar arrangement otherwise provides. Under the PRC Individual Income Tax Law and its implementation rules, dividends from sources within the PRC paid to foreign
individual investors who are not PRC residents are generally subject to a PRC withholding tax at a rate of 20%, and gains from PRC sources realized by such investors
on the transfer of ADSs or shares are generally subject to 20% PRC income tax, in each case, subject to any reduction or exemption set forth in applicable tax treaties and
PRC laws. It is also unclear whether dividends we pay with respect to our ordinary shares or ADSs, or the gain realized from the transfer of our ordinary shares or ADSs,
would be treated as income derived from sources within the PRC and as a result be subject to PRC income tax if we were considered a PRC resident enterprise, as
described above. If PRC income tax were imposed on gains realized through the transfer of our ADSs or ordinary shares or on dividends paid to our non-PRC resident
shareholders, the value of the investment in our ADSs or ordinary shares may be materially and adversely affected. Furthermore, our ADS holders whose jurisdictions of
residence have tax treaties or arrangements with China may not qualify for benefits under such tax treaties or arrangements.
We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of our operating company’s equity interests.
Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
According to the Announcement of the STA on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises
(“Bulletin 7”) promulgated by the STA in February 2015, which has been further amended by Bulletin 37 issued by the STA in October 2017 and amended in June 2018,
if a non-resident enterprise transfers the equity interests of 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 a PRC resident enterprise in public stock market) without a reasonable commercial purpose, the PRC tax authorities have the
discretion to reassess the nature of the transaction and the indirect equity transfer will be treated as a direct transfer. As a result, gains derived from such a transfer, which
means the equity transfer price minus the cost of equity, will be subject to PRC withholding tax at a rate of up to 10%. Under the terms of Bulletin 7, as amended, the
transfer that meets all of the following conditions shall be directly deemed as having no reasonable commercial purposes: (i) more than 75% of the value of the equity
interests of the offshore holding company are directly or indirectly derived from PRC taxable properties; (ii) at any time during the year before the indirect transfer, over
90% 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 the offshore
holding company’s revenue is directly or indirectly derived from PRC territory; (iii) the function performed and risks assumed by the offshore holding company are
insufficient to substantiate its corporate existence; or (iv) the foreign income tax imposed on the indirect transfer is lower than the PRC tax imposed on the direct transfer
of the PRC taxable properties.
There is uncertainty as to the interpretation and application of Bulletin 7, as amended. If an Indirect Transfer occurs for us, we and our non-PRC resident
shareholders may be at risk of being taxed under Bulletin 7, as amended, and we may be required to expend valuable resources to comply with Bulletin 7, as amended or
to establish that we should not be taxed under Bulletin 7, as amended.
Any failure or perceived failure by us to comply with the Platform Economy Anti-Monopoly Guidelines and other anti-monopoly and unfair competition laws and
regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business,
financial condition and results of operations.
The PRC anti-monopoly enforcement agencies have in recent years strengthened enforcement under the PRC Anti-monopoly Law. In March 2018, the SAMR was
formed as a new governmental agency to take over, among other things, the anti-monopoly enforcement functions from the relevant departments under the Ministry of
Commerce, the NDRC and the SAMR, respectively. Since its inception, the SAMR has continued to strengthen anti-monopoly enforcement. In December 2018, the
SAMR issued the Notice on Anti-monopoly
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Enforcement Authorization, which grants authorities to its province-level branches to conduct anti-monopoly enforcement within their respective jurisdictions. In
October 2021, the Standing Committee of the NPC officially released the second draft amendments to the PRC Anti-monopoly Law for public comment, which not only
proposes to increase legal liability for certain violations by introducing greater penalties and criminal liabilities, but also proposes to further regulate the monopolistic
behaviors in the Internet sector. In November 2021, the National Anti-monopoly Bureau was inaugurated by the State Council, which aims to further implement the fair
competition policies, and strengthen anti-monopoly supervision in the PRC, especially to strengthen oversight and law enforcement in areas involving platform economy,
innovation, science and technology, information security and people’s livelihood.
Moreover, the PRC Anti-Monopoly Law requires that SAMR shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In
February 2021, the SAMR published the Platform Economy Anti-monopoly Guidelines. The Platform Economy Anti-monopoly Guidelines set out detailed standards and
rules in respect of definition of “relevant markets”, typical types of “cartel activity” and “abusive behavior by companies with market dominance”, which provide further
guidelines for enforcement of anti-monopoly laws regarding online platform operators. The Platform Economy Anti-monopoly Guidelines prohibits certain monopolistic
acts of internet platforms so as to protect market competition and safeguard interests of users and undertakings participating in internet platform economy, including
without limitation, prohibiting companies with dominant position from abusing their market dominance (such as discriminating customers in terms of pricing and other
transactional conditions using big data and analytics, coercing counterparties into exclusivity arrangements, using technologies to block competitors’ interface, favorable
positioning in search results of goods displays, using bundle services to sell services or products, compulsory collection of unnecessary user data). Due to the expansive
scope of business activities the anti-monopoly law and regulations target to regulate, many of our businesses and practices, including our pricing practices, promotional
activities and cooperation with business partners, may be subject to regulatory scrutiny and significant penalties. Certain long-standing practices may be subject to
challenges by regulators, consumers, merchants and other parties. Furthermore, in July 2021, the SAMR released the revised draft Provisions on the Administrative
Penalties on Price-related Violation for public comment, which proposed significant penalties, including fines of up to 10% of revenue during the violation period,
suspension of business or revocation of required licenses, for a number of price-related violations, such as below-cost pricing to squeeze out competitors, price
discrimination, manipulation of market prices and fraudulent pricing. In particular, improper pricing by e-commerce platform operators, including the use of big data
analysis, algorithms or other technologies to conduct differentiated pricing and price subsidies, may be subject to significant penalties, including fines of up to 5% of
prior year’s revenue, suspension of business and revocation of required licenses. As a result, we may need to devote significant resources or change our business
practices to comply with current laws and regulations as well as new laws and regulations that may be enacted in the future. We may also be subject to regulatory
investigations, fines and other penalties, which would materially and adversely affect our business and reputation.
In addition, the Platform Economy Anti-monopoly Guidelines also reinforces anti-monopoly merger review for internet platform related transactions to safeguard
market competition. As the Platform Economy Anti-monopoly Guidelines were newly promulgated, we are unable to estimate their specific impact on our businesses,
financial conditions, results of operations and prospects.
The Anti-unfair Competition Law prohibits business operator from engaging in anti-competitive activities, such as undue influence transactions, confusion
marketing, commercial bribery, trade secret infringement and commercial libel. On March 16, 2022, the Supreme People’s Court in China issued the Interpretations on
Several Issues concerning the Application of the Anti-unfair Competition Law, which further clarify that the business operators shall not (i) use, without authorization,
the main part of a domain name, the name of a website or a web page of another party that has certain influence, resulting in the mistaken belief that a product of the
business operator is another party’s product or has a specific connection with another party; or (ii) maliciously interfere with or destroy the network products or services
provided by other business operators pursuant to the law by misleading, deceiving or forcing users into modifying, shutting off or uninstalling such products or services
without explicit prior notice and without consent of the users. In August 2021, the SAMR issued the Provisions on Preventing Unfair Online Competition (Drafts for
Public Comments), or the Draft Provisions on Preventing Unfair Online Competition, which detailed the implementation of the PRC Anti-Unfair Competition Law, under
which business operators must not use technical means such as data or algorithms to implement traffic hijacking or interference, cause malicious incompatibility or
conduct any activity impeding or disrupting the normal operation of network products or services legally provided by other business operators. Furthermore, business
operators are not allowed to (i) fabricate or spread misleading information to damage the reputation of competitors, or (ii) employ marketing practices such as fake
reviews or use coupons or “red envelopes” to entice positive ratings.
In practice, the PRC government authorities also strengthen the supervision of monopoly and other unfair competition acts, and request to establish a new order of
the platform economy. In April 2021, the SAMR, together with certain other PRC government authorities convened an administrative guidance meeting, focusing on
unfair competition acts in community group buying, self-inspection and rectification by major internet companies of possible violations of anti-monopoly, anti-unfair
competition, tax and other
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related laws and regulations, and requesting such companies to comply with relevant laws and regulations strictly and be subject to public supervision. In addition, many
internet companies, including the over 30 companies which attended such administrative guidance meeting, were required to conduct a comprehensive self-inspection
and make necessary rectification accordingly. We cannot assure you that our business operations comply with anti-monopoly and unfair competition laws and regulations
and authorities’ requirements in all respects. If any non-compliance is raised by relevant authorities and determined against us, we may be subject to fines and other
penalties.
We may expand our business in part by acquiring complementary businesses. Due to the uncertainties associated with the new and evolving legislative activities and
varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, complying with the requirements of the M&A Rules, merger
control review rules, security review rules and other PRC regulations to complete such transactions could be time-consuming, and any required approval processes,
including obtaining approval from the SAMR, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or
maintain our market share. If we are found to have violated the PRC Anti-Monopoly Law for failing to file the notification of concentration and request for review, we
could be subject to a fine of up to RMB500,000, and the parts of the transaction causing the prohibited concentration could be ordered to unwind. Such unwinding could
affect our business and financial results, and harm our reputation.
PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue
growth through acquisitions in China.
The M&A Rules establish procedures and requirements that could make some acquisitions of PRC companies by foreign investors more time-consuming and
complex, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of
a PRC domestic enterprise.
In addition, national security review rules issued by the PRC government authorities in 2011 require acquisitions by foreign investors of domestic companies
engaged in military-related or certain other industries that are crucial to national security to be subject to prior security review. According to the Measures for the Security
Review of Foreign Investment, or the Security Review Measures, promulgated by the NDRC and the MOC on December 19, 2020 and effective as of January 18, 2021,
investments in military, national defense-related areas or in locations in proximity to military facilities, or investments that would result in acquiring the actual control of
assets in certain key sectors, such as critical agricultural products, energy and resources, equipment manufacturing, infrastructure, transport, cultural products and
services, information technology, Internet products and services, financial services and technology sectors, are required to obtain approval from designated government
authorities in advance. See also “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Foreign Investment in Value-Added
Telecommunications Services.”
Furthermore, according to the Draft Overseas Listing Regulations, if a Chinese overseas listed company issues overseas listed securities to acquire assets, such
issuance would be subject to filing requirements, pursuant to which the filing shall be submitted within three working days after such follow-on offering is completed if
the acquired assets are offshore assets, or shall be submitted within three working days after the date of first announcement of such transaction if the acquired assets are
PRC onshore assets. Our ability to carry out our investment and acquisition strategy may be materially and adversely affected due to significant regulatory uncertainty as
to the timing of receipt of relevant approvals or completion of relevant filings and whether we will be able to complete such investments and acquisitions in the future in
a timely manner or at all.
PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute
profits to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to liabilities and penalties under PRC laws.
The SAFE, promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and
Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as “SAFE Circular
75” promulgated by SAFE in October, 2005. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct
establishment or indirect control of an offshore entity for the purpose of overseas investment and financing, with assets or equity interests of onshore companies or
offshore assets or interests held by the PRC residents, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to
the registration in the event of any significant changes with respect to the special purpose vehicle, such as increases or decreases in capital contributed by PRC residents,
transfers or exchanges of shares, mergers, divisions, or other material changes. The term “control” under SAFE Circular 37 is broadly defined as the operation rights,
beneficiary rights or decision-making
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rights acquired by PRC residents in special purpose vehicles or PRC companies by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or
other arrangements.
If our shareholders or beneficial owners who are PRC citizens or residents do not complete their registration with the local SAFE branches, our PRC subsidiaries
may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to
contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with the various SAFE registration requirements described above could result in
liabilities for our PRC subsidiaries under PRC laws for evasion of applicable foreign exchange restrictions, including (1) the requirement by SAFE to return the foreign
exchange remitted overseas within a period specified by SAFE, with a fine of up to 30% of the total amount of foreign exchange remitted overseas and deemed to have
been evasive and (2) in circumstances involving serious violations, a fine of no less than 30% of and up to the total amount of remitted foreign exchange deemed evasive.
Furthermore, the persons-in-charge and other persons at our PRC subsidiaries who are held directly liable for the violations may be subject to criminal sanctions.
SAFE Circular 37 provides that PRC residents include both PRC citizens, meaning any individual who holds a PRC passport or resident identification card, and
individuals who are non-PRC citizens but primarily reside in the PRC due to their economic ties to the PRC. We have requested all of our known current shareholders
and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fall within the ambit of SAFE Circular 37 and other related rules, and urged
relevant shareholders and beneficial owners, upon learning they are PRC residents, to make the necessary applications, filings and amendments as required under SAFE
Circular 37 and other related rules. However, we cannot assure you that they successfully amended their foreign exchange registrations with the local SAFE branch in
compliance with applicable laws after our initial public offering. In addition, we may not be informed of the identities of all the PRC residents holding direct or indirect
interests in our company, and we cannot compel our beneficial owners to comply with the requirements of SAFE Circular 37. As a result, we cannot assure you that all of
our shareholders or beneficial owners who are PRC residents have complied with and will in the future comply with our requests to make or obtain any applicable
registrations or comply with other requirements required by SAFE Circular 37 or other related rules. A failure by any of our current or future shareholders or beneficial
owners who are PRC residents to comply with the SAFE regulations may subject us to fines or other legal sanctions, restrict our cross-border investment activities, limit
our PRC subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.
Furthermore, since it is unclear how SAFE Circular 37 and any future regulation concerning offshore or cross-border transactions will be interpreted, amended and
implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. For example, we may
be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-
denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company,
either we or the owners of such company, as the case may be, may not be able to obtain the necessary approvals or complete the necessary filings and registrations
required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
Failure to comply with PRC regulations regarding the registration requirements for share option plans may subject the PRC plan participants or us to fines and
other legal or administrative sanctions.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock
Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules. Under the Stock Option Rules and other relevant rules and regulations, PRC residents
who participate in stock incentive plans in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other
procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly-
listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive
plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options,
the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the
stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. See “Item 4.
Information on the Company—B. Business Overview—PRC Regulation—Regulations on Employee Stock Option Plans.”
We and our PRC employees who have been granted share options are subject to these regulations and Beijing Tuniu as an agent has registered with the Beijing
Branch of SAFE in connection with the 2008 Plan and the 2014 Plan. We have advised our employees and directors participating in our share incentive plans to handle
foreign exchange matters in accordance with the Stock Option Rules.
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However, we cannot assure you that the share option holders can successfully register with SAFE in full compliance with the Stock Option Rules for material changes of
the granted share options. Failure of our PRC share option holders or restricted shareholders to complete their SAFE registrations may subject these PRC residents to
fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute
dividends to us, or otherwise materially adversely affect our business.
PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control of currency conversion may delay or limit us
from using the proceeds of our financing activities, or making additional capital contributions or loans to our PRC subsidiaries and the consolidated affiliated
entities.
Any capital contributions or loans that we, as an offshore entity, make to our PRC subsidiaries and the consolidated affiliated entities, including from the proceeds of
our financing activities, such as our private placements, are subject to PRC laws and regulations. Under PRC laws and regulations, we are permitted to utilize such
proceeds to fund our existing PRC subsidiaries and the consolidated affiliated entities only through loans or capital contributions or to establish new PRC subsidiaries or
new PRC consolidated affiliated entities, subject to applicable government registration and approval requirements. Currently, there is no statutory limit to the amount of
funding that we can provide to our PRC subsidiaries through capital contributions. However, the maximum amount we can loan to our PRC subsidiaries and the
consolidated affiliated entities is subject to statutory limits. According to current PRC laws and regulations, we can provide funding to our PRC subsidiaries through
loans of up to either (i) the amount of the difference between the respective registered total investment amount and registered capital of each of our PRC subsidiaries, or
the Total Investment and Registered Capital Balance, or (ii) two times, or the then applicable statutory multiple, the amount of their respective net assets, calculated in
accordance with PRC GAAP, or the Net Assets Limit, at our election. We may also fund the consolidated affiliated entities through cross-border loans and the maximum
amount would be their respective Net Assets Limit. Increasing the Total Investment and Registered Capital Balance of our PRC subsidiaries is subject to governmental
procedures and may require a PRC subsidiary to increase its registered capital at the same time. If we choose to make a loan to a PRC subsidiary or PRC consolidated
affiliated entity based on its Net Assets Limit, the maximum amount we would be able to loan to the relevant PRC subsidiary or PRC consolidated affiliated entity would
depend on the relevant PRC entity’s net assets and the applicable statutory multiple at the time of calculation. PRC laws and regulations may also impose more stringent
limitations to cross-border loans, which will also have negative impacts on our ability to fund our PRC entities.
In August 2008, SAFE promulgated a SAFE Circular 142 regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into
Renminbi by restricting how the converted Renminbi may be used. SAFE Circular 142 provides that the Renminbi capital converted from foreign currency registered
capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and unless otherwise
provided by law, such Renminbi capital may not be used for equity investments in the PRC. Although on July 4, 2014, the SAFE issued the Circular of the SAFE on
Relevant Issues Concerning the Pilot Reform in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested
Enterprises, or SAFE Circular 36, which launched a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises in
certain designated areas from August 4, 2014 and some of the restrictions under SAFE Circular 142 will not apply to the settlement of the foreign exchange capitals of
the foreign-invested enterprises established within the designated areas and such enterprises are allowed to use its Renminbi capital converted from foreign exchange
capitals to make equity investments, our PRC subsidiary is not established within the designated areas. On March 30, 2015, SAFE promulgated Circular 19, to expand
the reform nationwide. Circular 19 came into force and replaced both Circular 142 and Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises to
make equity investments by using Renminbi funds converted from foreign exchange capital. However, Circular 19 continues to prohibit foreign-invested enterprises
from, among other things, using Renminbi funds converted from its foreign exchange capital for expenditure beyond its business scope, providing entrusted loans or
repaying loans between non-financial enterprises. In June 2016, SAFE promulgated Notice on Reforming and Standardizing the Administrative Provisions on Capital
Account Foreign Exchange Settlement which further stipulates that foreign-invested enterprises shall not use Renminbi funds converted from foreign exchange capital
for providing loans to non-affiliated enterprises, except as otherwise expressly permitted under its business scope. In addition, SAFE strengthened its oversight of the
flow and use of the Renminbi capital converted from foreign currency registered capital of a foreign-invested company. The business scopes of Beijing Tuniu and Tuniu
(Nanjing) Information Technology Co., Ltd., or Tuniu Nanjing Information Technology, include research and development of computer software, network information
technology products, computer application systems, e-commerce systems, network security systems and computer system integration; technology services, consulting
and transfers; sales of self-developed products; investment consulting; business information consulting; and conference services and public relations advice. Beijing
Tuniu and Tuniu Nanjing Information Technology may only use Renminbi converted from foreign exchange capital contribution for activities within their respective
approved business scope. In addition, the use of such Renminbi capital may not be altered without SAFE approval, and such Renminbi capital may not in
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any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of these Circulars could result in severe monetary or other
penalties. If we convert the net proceeds we receive from our financing activities, such as our private placement into Renminbi pursuant to these Circulars, our use of
Renminbi funds for general corporate purposes must be within the business scopes of our PRC subsidiaries.
Our subsidiaries and the consolidated affiliated entities in China are subject to restrictions on paying dividends or making other payments to our holding company,
which may restrict our ability to satisfy our liquidity requirements.
We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from our PRC subsidiaries to satisfy our
liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, as determined in
accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits
each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a
portion of its after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash
dividends. Furthermore, if our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends
or make other payments to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements among Beijing Tuniu,
Nanjing Tuniu and the shareholders of Nanjing Tuniu in a manner that would materially and adversely affect Beijing Tuniu’s ability to pay dividends and other
distributions to us. Any limitation on the ability of our subsidiaries to distribute dividends to us or on the ability of Nanjing Tuniu to make payments to us may restrict
our ability to satisfy our liquidity requirements.
We may not be able to obtain certain treaty benefits on dividends paid to us by our PRC subsidiaries through our Hong Kong subsidiary.
Under the EIT Law, dividends generated from retained earnings after January 1, 2008 from a PRC company and distributed to a foreign parent company are subject
to a withholding tax rate of 10% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding
arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and
Prevention of Fiscal Evasion with respect to Taxes on Income, or the Hong Kong Tax Treaty, which became effective on December 8, 2006, a company incorporated in
Hong Kong, such as Tuniu (HK) Limited, will be subject to withholding income tax at a rate of 5% on dividends it receives from its PRC subsidiaries, if it holds a 25%
or more interest in that particular PRC subsidiary, or 10% if it holds less than a 25% interest in that subsidiary. However, the STA promulgated STA Circular 9 on
February 3, 2018, which became effective from April 2018 and replaced Circular 601 issued by STA on October 27, 2009 and the Announcement of the STA regarding
Recognition of “Beneficial Owner” under Tax Treaties, or Announcement 30 issued on June 29, 2012. Circular 9 stipulates that in determining whether a non-resident
enterprise has the status as a beneficial owner, comprehensive analysis shall be conducted based on the factors provided in Circular 9 and the actual circumstances of the
specific case shall be taken into consideration. Specifically, Circular 9 expressly excludes an agent or a designated payee from being considered as a “beneficial owner.”
As a result, although our PRC subsidiaries, Beijing Tuniu and Tuniu Nanjing Information Technology, are currently wholly owned by our Hong Kong subsidiary, Tuniu
(HK) Limited, we cannot assure you that we would be entitled to the tax treaty benefits and enjoy the favorable 5% rate applicable under the Hong Kong Tax Treaty. If
Tuniu (HK) Limited is not recognized as the beneficial owner of the dividends paid to it by Beijing Tuniu or Tuniu Nanjing Information Technology, such dividends will
be subject to a normal withholding tax of 10% as provided by the EIT Law.
Discontinuation or revocation of any of the preferential tax treatments and government subsidies or imposition of any additional taxes or surcharges could adversely
affect our financial condition and results of operations.
Our PRC subsidiaries are incorporated in the PRC and governed by applicable PRC tax laws and regulations. The EIT Law and its Implementation Rules have
adopted a uniform statutory enterprise income tax rate of 25% to all enterprises in China, including foreign-invested enterprises. The EIT Law and its Implementation
Rules also permit qualified “high and new technology enterprises,” or HNTEs, to enjoy a preferential enterprise income tax rate of 15% upon filing with the relevant tax
authorities. The qualification as a HNTE is generally effective for a term of three years and the renewal of such qualification is subject to review by the relevant
authorities in China. Nanjing Tuniu originally obtained its HNTE certificate in 2010 with a valid period of three years and successfully obtained its third renewal of such
a certificate in December 2019 for another three years. Tuniu Nanjing Information Technology obtained its HNTE certificate in 2017 with a valid period of three years
and successfully obtained its first renewal of such a certificate in December 2020 for another three years. Therefore, Nanjing Tuniu and Tuniu Nanjing Information
Technology were eligible to enjoy a preferential tax rate of 15% in 2020 to the extent that they have taxable income under the EIT Law, as long as they maintain the
HNTE qualifications
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and duly conduct relevant EIT filing procedures with the relevant tax authorities. If Nanjing Tuniu and Tuniu Nanjing Information Technology fail to maintain or renew
their HNTE qualifications when their current terms expire, they will lose the current preferential tax treatments and their applicable enterprise income tax rates may
increase to 25%, which could have an adverse effect on our financial condition and results of operations. Besides, Beijing Tuniu obtained the HNTE certificate as well in
2018 and expired in 2020. As a result, the applicable enterprise tax rate for Beijing Tuniu has been restored to 25% since 2021. However, since Beijing Tuniu has large
amount of accumulated loss in previous years, the increased EIT rate would not result in an immediate adverse effect on our financial condition.
In addition, our PRC subsidiaries have received various financial subsidies from PRC local government authorities. Preferential tax treatments and financial
subsidies are subject to review and may be adjusted or revoked at any time in the future. The discontinuation of any preferential tax treatments or financial subsidies or
imposition of any additional taxes or surcharges could adversely affect our financial condition and results of operations.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against
the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and
economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that 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 Renminbi
and the U.S. dollar in the future.
Any significant appreciation or depreciation of Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any
dividends payable on, our ADSs in U.S. dollars. For example, a significant depreciation of Renminbi against the U.S. dollar may significantly reduce the U.S. dollar
equivalent of our earnings, which in turn could adversely affect the price of our ADSs.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any material hedging
transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability
and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be
magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a
material adverse effect on your investment.
There are uncertainties regarding the interpretation and enforcement of certain PRC laws, rules and regulations regarding overseas listed companies.
The M&A Rules, among other things, require offshore special purpose vehicles controlled by PRC companies or individuals formed for the purpose of an overseas
listing of such PRC companies’ or individuals’ interests in PRC domestic companies to obtain the CSRC’s approval prior to listing their securities on an overseas stock
exchange. The application of this regulation remains unclear. Our PRC counsel, Fangda Partners, has advised us that, based on its understanding of the current PRC laws,
rules and regulations, we are not required to submit an application to the CSRC for its approval of the initial public offering and listing of our ADSs on the Nasdaq
Global Market, because:
● the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like our initial public offering are subject to CSRC’s
approval under the M&A Rules;
● our wholly owned PRC subsidiaries were established by means of foreign direct investment, rather than through a merger or acquisition of domestic companies,
as defined under the M&A Rules; and
● there is no provision in the M&A Rules that explicitly classifies contractual arrangements as a type of transaction subject to the M&A Rules.
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There is uncertainty as to how this regulation will be interpreted or implemented. If it is determined that the CSRC approval was required for our initial public
offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek the CSRC’s approval for our initial public offering. These sanctions
may include fines and penalties on our operations in the PRC, delays or restrictions on the repatriation of the proceeds from our initial public offering into the PRC,
restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiaries, or other actions that could have a material adverse effect on our
business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs.
The PRC government has recently announced its plans to enhance its regulatory oversight of Chinese companies listing overseas. The Opinions on Intensifying
Crack Down on Illegal Securities Activities issued on July 6, 2021 called for:
● tightening oversight of data security, cross-border data flow and administration of classified information, as well as amendments to relevant regulation to
specify responsibilities of overseas listed Chinese companies with respect to data security and information security;
● enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies; and
● extraterritorial application of China’s securities laws.
Furthermore, on December 24, 2021, the CSRC published the Draft Overseas Listing Regulations. The Draft Overseas Listing Regulations, among others, stipulate
that where Chinese companies that have directly or indirectly listed securities in overseas markets conduct follow-on offering in overseas markets, they shall fulfill the
filing procedures with and report relevant information to the CSRC, and such filing shall be submitted within three working days after such follow-on offering is
completed. Moreover, an overseas offering is prohibited under certain circumstances. See also “Item 4. Information on the Company—B. Business Overview—PRC
Regulation—Regulations on Overseas Offering and Listing.”
According to the Draft Overseas Listing Regulations, if we fail to complete the filing procedures with the CSRC for any of our follow-on offerings or fall within any
of the circumstances where our follow-on offering is prohibited by the State Council, our offering application may be discontinued and we may be subject to penalties,
sanctions and fines imposed by the CSRC and relevant departments of the State Council. In severe circumstances, the business of our PRC subsidiaries may be ordered to
suspend and their business qualifications and licenses may be revoked. The Draft Overseas Listing Regulations were released only to solicit public comments at this
stage and their provisions and anticipated adoption or effective date are subject to changes and thus their interpretation and implementation remain substantially
uncertain. Although we intend to fully comply with the then effective relevant laws and regulations applicable to all our follow-on offerings, including but not limited to
fulfill our obligations under such laws and regulations to complete any required reporting and filing procedures, we cannot guarantee that we will be able to satisfy the
scrutinized and new regulatory requirements in case they were adopted in the current form.
Online payment systems in China are at the stage of development and may restrict our ability to expand our online business.
Online payment systems in China are at a stage of development. Although major Chinese banks are instituting online payment systems, these systems are not as
widely acceptable to consumers in China as in the United States and other developed countries. The lack of wide acceptance of online payment systems and concerns
regarding the adequacy of system security may limit the number of online commercial transactions that we can conduct. If online payment services and their security
capabilities are not significantly enhanced, our ability to grow our online business may be limited.
Regulation and censorship of information distribution over the Internet in China may adversely affect our business, and we may be liable for information displayed
on, retrieved from or linked to our website.
The PRC government has adopted regulations governing Internet access and the distribution of information over the Internet. Under these regulations, Internet
content providers and Internet publishers are prohibited from posting or displaying over the Internet content that, among other things, violates PRC laws and regulations,
impairs the national dignity of China or the public interest, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these regulations
may result in confiscation of income, fines, suspension of business, revocation of licenses to provide Internet content and other licenses, the closure of the concerned
websites, which could materially and adversely affect our business, financial conditions and results of operations. A website operator may also be held liable for such
censored information displayed on or linked to its website. For a detailed discussion, see “Item 4. Information on
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the Company—B. Business Overview—PRC Regulation—Regulations on Information Security and Censorship.” We have a team dedicated to screening and monitoring
content published on our online platform and removing prohibited content. However, we may have difficulty identifying and removing all illegal content displayed on or
linked to our website, which could expose us to the penalties described above.
Increases in labor costs in the PRC may adversely affect our business and results of operations.
The economy of China has been experiencing increases in inflation and labor costs in recent years. As a result, the average wage in the PRC is expected to continue
to grow. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pensions, housing funds, medical insurance,
work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. The relevant
government agencies may examine whether an employer has made adequate payments of the requisite statutory employee benefits, and those employers who fail to make
adequate payments may be subject to late payment fees, fines and/or other penalties. If the relevant PRC authorities determine that we shall make supplemental social
insurance and housing fund contributions and that we are subject to fines and legal sanctions, our business, financial condition and results of operations may be adversely
affected. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to
our customers by increasing the prices of our products and services, our financial condition and results of operations may be materially and adversely affected.
We face certain risks relating to the real properties that we lease.
We lease real properties from third parties primarily for our office use in the PRC. Our leasehold interests in a number of these leased properties may be defective as
a result of the lessors’ lack of proper title or right to lease. As a result, we cannot assure you that our leasehold interests will not be challenged. In addition, we have not
registered the vast majority of our lease agreements with the relevant PRC government authorities as required by PRC law, and although failure to do so does not in itself
invalidate the leases, we may not be able to defend these leases against bona fide third parties. As of the date of this annual report, we are not subject to any material
actions, claims or investigations pending or threatened in writing by government authorities or third parties with respect to defects in our leased properties. However, if
third parties who purport to be property owners or beneficiaries of the mortgaged properties challenge our right to lease these properties, we may not be able to protect
our leasehold interests and may be ordered to vacate the affected premises, which could materially and adversely affect our business and results of operations.
Rising political tension, particularly between U.S. and China, may adversely impact our business, financial condition, and results of operations.
Political tensions between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak and spread, sanctions
imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the
executive orders issued by U.S. President Donald J. Trump in August 2020 that prohibit certain transactions with certain Chinese companies and their applications.
Rising political tensions could reduce levels of trade, investments, technological exchanges and other economic activities between the two major economies, which
would have a material adverse effect on global economic conditions and the stability of the global financial markets. Any of these factors could have a material adverse
effect on our business, prospects, financial condition and results of operations.
Risks Related to Our ADSs and Class A Ordinary Shares
Our ADSs may be delisted from the Nasdaq Global Market as a result of our failure of meeting the Nasdaq Global Market continued listing requirements.
Our ADSs are currently listed on the Nasdaq Global Market under the symbol “TOUR.” We must continue to meet the requirements set forth in Nasdaq Listing
Rule 5550 to remain listing on the Nasdaq Global Market. The listing standards of the Nasdaq Global Market provide that a company, in order to qualify for continued
listing, must maintain a minimum ADS price of US$1.00 and various additional requirements. On April 13, 2022, we received a letter from the Listing Qualifications
Department of Nasdaq, notifying us that because the closing bid price of our ADSs for the last 30 consecutive business days was below US$1.00 per share, we no longer
meet the Nasdaq minimum bid price requirement, set forth in Nasdaq Listing Rule 5450(a)(1). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain
compliance is 180 days. We have until October 10, 2022 to regain compliance with Nasdaq’s minimum bid price requirement. If we fail to satisfy Nasdaq’s continued
listing requirements and fail to regain compliance on a timely basis, our ADSs could be delisted from Nasdaq Global Market.
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The trading prices of our ADSs have fluctuated and may continue to be volatile regardless of our operating performance.
Since our ADSs became listed on the Nasdaq Global Market on May 9, 2014, the trading price of our ADSs has fluctuated significantly. The trading prices of our
ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the
performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United
States. The widespread negative publicity of alleged fraudulent accounting practices and poor corporate governance of certain U.S. public companies with operations in
China in recent years were believed to have negatively affected investors’ perception and sentiment towards companies with connection with China, which significantly
and negatively affected the trading prices of some companies’ securities listed in the U.S. Any similar negative publicity or sentiment may affect the performances of our
ADSs. The trading prices of our ADSs may also be affected by changes in the U.S. stock markets in general. Furthermore, securities markets may from time to time
experience significant price and volume fluctuations that are not related to our operating performance, 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, which may have a material adverse effect on the market price of our ADSs. The securities of
some PRC companies that have listed their securities on U.S. stock markets have experienced significant volatility. The trading performances of these PRC companies’
securities after their initial public offerings may affect the attitudes of investors toward PRC companies listed in the United States in general and consequently may
impact the trading performance of our ADSs, regardless of our actual operating performance.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the
following:
● the financial projections that we may choose to provide to the public, any changes in those projections or our failure for any reason to meet those projections;
● variations in our revenues, net income and cash flow;
● announcements of new investments, acquisitions, strategic partnerships, or joint ventures;
● announcements of new products, services and expansions by us or our competitors;
● changes in financial estimates by securities analysts;
● additions or departures of key personnel;
● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;
● potential litigation or regulatory investigations; and
● fluctuations in market prices for our products or services.
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs trade.
If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the
market price for our ADSs and trading volume could decline.
The trading market for our ADSs will be influenced by research or reports that securities or industry analysts publish about our business. If one or more analysts who
cover us downgrade our ADSs, or publish unfavorable research about us, the market price for our ADSs would likely decline. Failure to meet expectations driven by
analyst research or reports, even by aggressive research or reports, may cause the market price of our ADSs to decline. If one or more of these analysts cease to cover us
or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to
decline.
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Our dual class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any
change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
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 vote per share, while
holders of Class B ordinary shares are entitled to ten votes per share, with Class A and Class B ordinary shares voting together as one class on all matters subject to a
shareholders’ vote. Due to the disparate voting powers attached to these two classes of ordinary shares, holders of our Class B ordinary shares collectively beneficially
owned approximately 4.68% of our outstanding ordinary shares as of February 28, 2022, representing 32.94% of our total voting power. As of February 28, 2022, our
directors and officers beneficially own an aggregate of 63.3% of our outstanding shares representing 62.3% of our total voting power.
As a result of the dual class share structure and the concentration of ownership, holders of our Class B ordinary shares have substantial influence over our business,
including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions.
They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent 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 of our company and may reduce
the price of our ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger,
takeover or other change of control transactions that holders of Class A ordinary shares and/or ADSs may view as beneficial. For more information regarding our
principal shareholders and their affiliated entities, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”
The sale or availability for sale of substantial amounts of our Class A ordinary shares and/or ADSs could adversely affect their market price.
Sales of substantial amounts of our Class A ordinary shares and/or ADSs in the public market, or the perception that these sales could occur, could adversely affect
the market price of our Class A ordinary shares and/or ADSs and could materially impair our ability to raise capital through equity offerings in the future. As of
February 28, 2022, we had 371,082,366 ordinary shares outstanding, comprising of (i) 353,708,866 Class A ordinary shares (excluding the 18,249,177 Class A ordinary
shares, represented by 6,083,059 ADSs, repurchased and reserved for the future exercise of options or the vesting of other awards under the 2008 Plan and the 2014
Plan), and (ii) 17,373,500 Class B ordinary shares. Among these shares, 125,034,591 Class A ordinary shares are in the form of ADSs, which are freely transferable by
persons other than our affiliates without restriction or additional registration under the Securities Act. The remaining Class A ordinary shares outstanding will be
available for sale, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. We cannot predict what effect, if any, market
sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our
Class A ordinary shares and/or ADSs. In addition, certain holders of our Class B ordinary shares are entitled to certain registration rights in the event that specified
conditions are met, including demand registration rights, piggyback registration rights, and Form F-3 registration rights. Registration of these shares under the Securities
Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of
these registered shares in the public market, or the perception that such sales could occur, could cause the price of our Class A ordinary shares and/or ADSs to decline.
We believe that we were a passive foreign investment company, or PFIC, for United States federal income tax purposes for the taxable year ended December 31,
2021, which could result in adverse United States federal income tax consequences to United States holders of the ADSs or ordinary shares.
Under United States federal income tax law, we will be classified as a “passive foreign investment company,” or PFIC, for any taxable year, if either (a) 75% or more
of our gross income for such year consists of certain types of “passive” income or (b) 50% or more of the value of our assets (generally determined on the basis of a
quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”). Although the law in this regard
is unclear, we treat the consolidated affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control
over their operations, but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our
consolidated financial statements.
Based on the market price of our ADSs and the composition of our assets (in particular the substantial amount of cash, deposits and investments), we believe that we
were a PFIC for United States federal income tax purposes for the taxable year ended December 31, 2021, and we will likely be a PFIC for our current taxable year
ending December 31, 2022 unless the market price of our ADSs increases
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and/or we invest a substantial amount of the cash and other passive assets we hold in assets that produce or are held for the production of active income.
If we are classified as a PFIC in any taxable year, a U.S. Holder (as defined in “Item 10.E. Additional Information—Taxation—United States Federal Income Tax
Considerations”) may incur significantly increased United States federal income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares
and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States
federal income tax rules, and such U.S. Holders may be subject to burdensome reporting requirements. Further, if we are classified as a PFIC for any year during which a
U.S. Holder holds our ADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our
ADSs or ordinary shares. We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result
in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs. For more information, see “Item 10. Additional Information—E.
Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under
Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of
association, the Companies Act of the Cayman Islands (Revised) and the common law of the Cayman Islands. The rights of shareholders to take actions against the
directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the
common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as
well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of
our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands have a less developed body of securities laws than the United States. Some U.S.
states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies
may not have standing to initiate a shareholder derivative action in a federal court of the United States.
The Cayman Islands courts are also unlikely:
● to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and
● to impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal
in nature.
There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain
circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the
board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant
differences between the provisions of the Companies Act of the Cayman Islands (Revised) and the laws applicable to companies incorporated in the United States and
their shareholders, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Differences in Corporate Law.”
Judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands company and all of our assets are located outside of the United States. Our current operations are based in China. In addition, the majority
of our current directors and executive officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are
located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the
event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action
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of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.
It may be difficult for overseas regulators to conduct investigation or collect evidence within China.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For
example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside of China.
Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement
cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of a
mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020,
no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory of the PRC. On April 2, 2022, the CSRC,
together with the Ministry of Finance, the National Secrecy Bureau and the National Archives Administration, issued a draft of the Provisions on Strengthening
Confidentiality and File Management Relating to Overseas Issuance and Listing of Securities by Domestic Enterprises, or the Draft Provisions on Confidentiality and
File Management, which further emphasize that if overseas securities regulatory authorities and relevant overseas competent authorities propose to investigate and collect
evidence or carry out inspection against the domestic company limited by shares that is directly issued and listed overseas or the onshore operating entity of a company
listed on overseas stock exchanges indirectly, or the Domestic Enterprise, such investigation shall be conducted through the cross-border supervision and administration
cooperation mechanism. The Domestic Enterprise which provides or publicly discloses any documents or materials involving state secrets or work secrets of government
authorities to relevant securities firms, securities service providers, overseas regulatory institutions and other entities, shall file application with competent authorities for
approval and complete filing with secrecy administrative department. Furthermore, before cooperating with overseas regulatory authorities or relevant overseas
competent authorities in an investigation or inspection or in the provision of documents and materials, the Domestic Enterprise shall report to the CSRC or the relevant
competent authority. While detailed interpretation or implementation of rules under Article 177 have yet to be promulgated and the Draft Provisions on Confidentiality
and File Management have not been formally adopted, the inability for an overseas securities regulator to directly conduct investigations or evidence collection activities
within China may further increase difficulties you face in protecting your interests. See also “—Risks Related to Our ADSs and Class A Ordinary Shares—You may face
difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands
law” for risks associated with investing in us as a Cayman Islands company.
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 vote your Class A ordinary
shares.
Holders of our ADSs are only able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of the
deposit agreement. Under the deposit agreement, holders of our ADSs must vote by giving voting instructions to the depositary. Upon receipt of those voting instructions,
the depositary will vote the underlying Class A ordinary shares in accordance with those instructions. Holders of our ADSs are not able to directly exercise their right to
vote with respect to the underlying shares unless they withdraw the shares. Under our amended and restated memorandum and articles of association, the minimum
notice period required for convening a general meeting is 14 calendar days. When a general meeting is convened, holders of our ADSs may not receive sufficient
advance notice to withdraw the shares underlying their ADSs to allow them to vote with respect to any specific matter. If we ask for instructions from the holders of our
ADSs, the depositary will notify the holders of our ADSs of the upcoming vote and will arrange to deliver our voting materials to them. We cannot assure holders of our
ADSs that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their shares. In addition, the depositary and its agents are
not responsible for failing to carry out voting instructions or for their manner of carrying out voting instructions. This means that holders of our ADSs may not be able to
exercise their right to vote and may have no legal remedy if the shares underlying their ADSs are not voted as requested.
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 United
States 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 regulations in the United
States that are applicable to U.S. domestic issuers, including:
● the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
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● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;
● the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who 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 publish our results on a quarterly basis as
press releases, distributed pursuant to the rules and regulations of the Nasdaq Global Market. Press releases relating to financial results and material events are also
furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC is less extensive and less timely as compared to that
required to be filed with the SEC by United States domestic issuers. As a Cayman Islands company listed on the Nasdaq Global Market, we are subject to the Nasdaq
Global Market corporate governance listing standards. However, Nasdaq Global Market rules permit a foreign private issuer like us to follow the corporate governance
practices of its home country. Certain corporate governance practices in the Cayman Islands, our home country, may differ significantly from the Nasdaq Global Market
corporate governance listing standards. As we have chosen, and may from time to time choose, to follow home country practice exemptions with respect to certain
corporate matters, such as the requirement of shareholders’ approval for issuing additional securities exceeding 20% of our outstanding ordinary shares and the
requirement to hold an annual meeting of shareholders, our shareholders may be afforded less protection under Cayman Islands law than they would under the Nasdaq
corporate government requirements applicable to U.S. domestic issuers. See “Item 16G. Corporate Governance.” As a result, you may not be afforded the same
protections or information, which would be made available to you, were you investing in a United States domestic issuer.
Because we do not expect to pay dividends in the foreseeable future, ADS holders must rely on price appreciation of our ADSs for return on their investment.
We do not anticipate that we will pay any cash dividends on our ordinary shares, or indirectly on our ADSs, for the foreseeable future. Any determination to pay
dividends in the future will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, contractual restrictions
relating to indebtedness we may incur, restrictions imposed by applicable law and other factors our board of directors deem relevant. Accordingly, for holders of our
ADSs, realization of a gain on their investment will depend on the appreciation of the price of our ADSs, which may never occur. Investors seeking cash dividends in the
foreseeable future should not purchase our ADSs.
Holders of our ADSs may not receive dividends or other distributions on our Class A ordinary shares and may not receive any value for them, if it is illegal or
impractical to make them available.
The depositary of our ADSs has agreed to pay to holders of our ADSs the cash dividends or other distributions it or the custodian receives on Class A ordinary shares
or other deposited securities underlying our ADSs, after deducting its fees and expenses. Holders of our ADSs will receive these distributions in proportion to the number
of Class A ordinary shares their ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available
to 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 under the
Securities Act, but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it 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. In these cases, the depositary
may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received
through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of
ADSs. This means that holders of our ADSs may not receive distributions we make on our Class A ordinary shares or any value for them if it is illegal or impractical for
us to make them available. These restrictions may cause a material decline in the value of our ADSs.
Holders of our ADSs may not be able to participate in rights offerings and may experience dilution of your holdings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute
rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities
Act with respect to all holders of ADSs, or are registered under the
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provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We
may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these
rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights
offerings and may experience dilution of their holdings as a result.
Holders of our ADSs may be subject to limitations on transfer of our ADSs.
Our ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in
connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate
events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary
may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally
when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or
of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
We incur increased costs as a result of being a public company.
As a public company, we incur significant accounting, legal and other expenses that we did not incur as a private company. The SOX, as well as rules subsequently
implemented by the SEC and Nasdaq, have detailed requirements concerning corporate governance practices of public companies, including Section 404 of the SOX
relating to internal controls over financial reporting. We expect these rules and regulations applicable to public companies to increase our accounting, legal and financial
compliance costs and to make certain corporate activities more time-consuming and costly. Our management will be required to devote substantial time and attention to
our public company reporting obligations and other compliance matters. We are currently evaluating and monitoring developments with respect to these rules and
regulations, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. Our reporting and other compliance obligations as
a public company may place a strain on our management, operational and financial resources and systems for the foreseeable future.
In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market 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 and other 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 is successfully made against us, we may be required
to pay significant damages, which could have a material and adverse effect on our financial condition and results of operations.
Item 4.Information on the Company
A. History and Development of the Company
We began our operation in China through Nanjing Tuniu, a PRC company formed in December 2006. Nanjing Tuniu acquired 100% of the equity interests in
Shanghai Tuniu International Travel Service Co., Ltd., Nanjing Tuniu International Travel Service Co., Ltd. and Beijing Tuniu International Travel Service Co., Ltd. in
August 2008, December 2008 and November 2009, respectively. Nanjing Tuniu established Nanjing Tuzhilv Tickets Sales Co., Ltd. in April 2011.
In June 2008, we incorporated Tuniu Corporation under the laws of the Cayman Islands as our offshore holding company in order to facilitate international
financing. In May 2011, we established our wholly owned Hong Kong subsidiary, Tuniu (HK) Limited.
We completed our initial public offering and listed our ADSs on the Nasdaq under the symbol “TOUR” in May 2014. At the time of our initial public offering, we
also entered into a concurrent private placement with three investors.
In December 2014, we entered into a share subscription agreement with Unicorn Riches Limited, a special purpose vehicle of Hony Capital, JD.com E-commerce
(Investment) Hong Kong Corporation Limited, a special purpose vehicle of JD.com, Inc. (Nasdaq: JD), Ctrip Investment Holding Ltd., a subsidiary of Ctrip.com
International, Ltd. (which later changed its name to Trip.com Group Limited)
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(Nasdaq: TCOM) and the respective personal holding companies of Tuniu’s chief executive officer and chief operating officer, pursuant to which we sold a total of
36,812,868 newly issued Class A ordinary shares for US$148 million.
In May 2015, we entered into a share subscription agreement with each of the following, Fabulous Jade Global Limited, a subsidiary of JD.com, Inc., Unicorn
Riches Limited, a special purpose vehicle of Hony Capital, DCM Ventures China Turbo Fund, L.P. and DCM Ventures China Turbo Affiliates Fund, L.P., both affiliates
of DCM V, L.P., Ctrip Investment Holding Ltd., a subsidiary of Ctrip.com International, Ltd . (which later changed its name to Trip.com Group Limited), Esta
Investments Pte Ltd, an affiliate of Temasek Holdings and Sequoia Capital 2010 CV Holdco, Ltd, an affiliate of Sequoia Capital, pursuant to which we sold a total of
93,750,000 newly issued Class A ordinary shares for US$500 million.
In November 2020, JD.com E-commerce (Investment) Hong Kong Corporation Limited transferred all its Class A ordinary shares to Hopeful Turism Limited, a
subsidiary of Caissa Sega Tourism Culture Development Group Co., Ltd., or Caissa Group, and JD.com Investment Limitedm transferred all its shares in Fabulous Jade
Global Limited to Hopeful Turism Limited. As a result of the share transfer, Caissa Group beneficially owned 78,061,780 Class A ordinary shares.
In November 2015, we entered into a share subscription agreement with HNA Tourism Group, or HNA Tourism, pursuant to which an affiliate of HNA Tourism
purchased 90,909,091 newly issued Class A ordinary shares from us for US$500 million in January 2016.
During the year ended December 31, 2016, we acquired 100% controlling equity interest of one offline travel agency, to further expand our overseas tourism market
and promote our destination service. The total purchase price was RMB28.1 million (US$4.0 million), which included cash consideration of RMB16.5 million (US$2.4
million) and RMB11.6 million (US$1.6 million), the fair value of contingent cash consideration to be made based on the achievement of certain revenue and profit targets
over the next four years.
During the year ended December 31, 2018, we acquired 80% controlling equity interest of one offline travel agency, to further expand our overseas tourism market
and promote our destination local tour operator service. The total purchase price was RMB20.2 million (US$2.9 million), which included cash consideration of RMB9.8
million (US$1.4 million) and RMB10.4 million (US$1.5 million), the fair value of contingent cash consideration, as at the acquisition date, to be made based on the
achievement of net profit targets over the next four years.
During the year ended December 31, 2019, we acquired 51% controlling equity interest in an offline travel agency, and 63.51% controlling equity interest in an
online travel agency, to further expand our overseas tourism market and promote our destination local tour operator service. The total purchase price was RMB60.0
million (US$8.6 million), which included cash consideration of RMB52.6 million (US$7.6 million) and RMB7.3 million (US$1.1 million), being the fair value of
contingent cash consideration, as at the acquisition date, based on the achievement of certain profit target, to be paid by us over the next four years.
Tuniu Corporation established a wholly owned PRC subsidiary, Beijing Tuniu, in September 2008. Tuniu (HK) Limited established another wholly owned PRC
subsidiary, Tuniu (Nanjing) Information Technology Co., Ltd., in August 2011, and acquired 100% of the equity interests in Beijing Tuniu in September 2011. Through
Beijing Tuniu, we obtained control over Nanjing Tuniu by entering into a series of contractual arrangements, including purchase option agreement, equity interest pledge
agreement, shareholders’ voting rights agreement, powers of attorney and cooperation agreement, with Nanjing Tuniu and its shareholders. Nanjing Tuniu holds our ICP
licenses as an Internet content provider and operates our website. Beijing Tuniu International Travel Service Co., Ltd. and Nanjing Tuniu International Travel Service
Co. Ltd., both of which are Nanjing Tuniu’s subsidiaries, hold our operation permits for overseas travel business.
These contractual arrangements allow us to:
● exercise effective control over Nanjing Tuniu;
● receive substantially all of the economic benefits of Nanjing Tuniu; and
● have an option to purchase all or part of the equity interests in Nanjing Tuniu when and to the extent permitted by PRC law.
As a result of these contractual arrangements, we are the primary beneficiary of Nanjing Tuniu, and we treat it and its subsidiaries as consolidated affiliated entities
under U.S. GAAP. We have consolidated the financial results of Nanjing Tuniu and its subsidiaries in our consolidated financial statements in accordance with U.S.
GAAP.
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Our principal executive offices are located at Tuniu Building No. 32 Suningdadao, Xuanwu District, Nanjing, Jiangsu Province 210042, the People’s Republic of
China. Our telephone number at this address is +86 (25) 8685-3969. Our registered office in the Cayman Islands is located at International Corporation Services Ltd.,
P.O. Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman Islands. Our agent for service of process and
authorized representative in the United States in connection with each of the registration statement on Form S-8 (File No. 333-198111 and File No. 333-251283) and
registration statement on Form F-6 (File No. 333-195515) is Cogency Global, Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.
The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding us that filed electronically with the
SEC, which can be accessed at http://www.sec.gov. Our annual reports, quarterly results, press release and other SEC filings can also be accessed via our investor
relationship website at https://ir.tuniu.com/.
See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources” for a discussion of our capital expenditures.
B. Business Overview
We offer a large selection of packaged tours, including organized tours and self-guided tours, as well as travel-related services for leisure travellers. Our online
platform, which comprises our tuniu.com website and mobile platform, provides comprehensive product and travel information through user-friendly interfaces to enable
leisure travellers to plan their travels and search for itineraries that best suit their needs. Our online platform contains travel guides featuring photos, information and
recommendations for all destinations we cover, as well as user-generated content that serves as valuable references for other travellers.
Our recognized brand in leisure travel and growing customer base enable us to source a broad range of products from high-quality travel suppliers at competitive
prices. We rigorously select travel suppliers to ensure quality and reliability. We have developed our proprietary supply chain management system—N-Booking system—
to streamline our interactions with travel suppliers, allowing them to receive booking information real-time, through the web or mobile devices to manage travel products
more efficiently and understand customer preferences better. In 2016, we upgraded our supplier management system and data analytics system in order to better facilitate
the cooperation between the suppliers and us. In addition, to broaden the range of our products further and serve our customers better, we enter into strategic agreements
with various industry partners from time to time. For example, in December 2014, we entered into a strategic cooperation agreement with Ctrip.com International, Ltd .
(which later changed its name to Trip.com Group Limited), a leading travel service provider in China, in order to expand our collaboration on shared travel resources. In
November 2015, we formed a strategic partnership with HNA Tourism, under which HNA Tourism undertook to provide us with its premium airline and hotel resources
at a preferential rate, under fair competition market rules.
Our Products and Services
We offer a wide array of packaged tours and other travel-related services to meet the diverse travel needs and preferences of leisure travellers in China.
Packaged Tours
Packaged tours offered on our platform consist of organized tours and self-guided tours.
Organized Tours: Organized tours offer the benefits of pre-arranged itineraries, transportation, accommodation, entertainment, meals and tour guide services. By
booking an organized tour on our platform, our customers can achieve cost savings compared to booking each component separately and enjoy a pleasant and hassle-free
travel experience.
Organized tours offered on our platform encompass nearly all of the popular tourist destinations both within China and overseas among Chinese travellers.
Organized tour product portfolios offered on our platform also include local tours, which mainly consist of weekend getaways and themed tours, such as water resort
tours, historical town tours, ski tours and hot spring tours, mainly targeting customers who want to spend one to three days away from their departing cities. Typically,
local tours have lower average gross bookings per trip as compared to other types of organized tours.
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In addition, to address the needs of group travellers who cannot be satisfied with off-the-shelf standard packaged travel products, such as companies planning travel
retreats and families planning group trips, we provide customized tours to cater to specific travel needs. Our group travel tour advisors work closely with travel suppliers
and our customers to design travel products and itineraries that meet such customers’ unique needs.
Self-guided Tours: Self-guided tours offered on our platform consist of combinations of flights and hotel bookings and other optional add-ons, such as airport pick-
ups that travellers can choose of their own volition. These products are offered at attractive prices compared to booking each travel product separately. The self-guided
tours target leisure travellers who prefer greater flexibility during their vacations and do not need tour guide services. Due to the breadth of travel suppliers that are
available on our platform, we are able to provide a wide selection of self-guided tours, covering a large number of hotels and airlines, and have developed the most
comprehensive product offerings for selected popular destinations.
Other Travel-Related Services
Our other travel-related services comprise mainly of sales of tourist attraction tickets, visa application services, hotel booking services, air ticketing services, train
ticketing services, bus ticketing services, car rental services, insurance services and financial services. We earn a commission or service fee for these services. In addition,
we provide advertising services to domestic and foreign tourism boards and bureaus on our online platform.
Our Online Platform and Offline Service Network
We reach and serve customers through multiple online and offline channels, including our tuniu.com website, mobile platform, a primary call center in Nanjing and
our offline retail stores across China.
Our online platform provides our customers with the tools and information they need to conveniently plan, book and purchase travel products and services. In
addition, our online platform presents comprehensive product information and travel requirements through user-friendly interfaces for leisure travellers to easily search
for, compare and place orders for product offerings that best suit their needs. We have well-trained tour advisors and customer service representatives located at our
centralized call center to supplement our online transaction infrastructure by providing our customers with professional advice and guidance throughout their travel
planning and bookings process as well as timely support before and during their travels. The inclusion of a customer-focused, service network is particularly important to
customers of our travel products with high selling prices as these customers usually demand more assistance and attention in their travel planning.
Our Website
Our website, tuniu.com, provides a one-stop travel platform for our customers to do everything from researching travel destinations to booking travel products. In
addition to our product information such as tour duration, departure time and destination descriptions, our website features comprehensive travel advice ranging from
basic information to professional, and user recommendations and travellers’ reviews for the destinations we cover. Users can post questions regarding specific products
and receive timely responses online from our well-trained tour advisors and customer service representatives, which facilitates their travel planning, product selection,
reservations and payments. Our user-friendly interface enables users to quickly and easily evaluate and compare a wide array of travel products. Customers can also raise
complaints about our travel products and services through the online-messaging function on our website.
We encourage our customers to share photos, stories and other travel-related information on our website. We have built a large and fast-growing collection of
customer reviews and travel stories which we believe are attractive and useful to our current and prospective customers. The Travelogue forum on our website, which is
organized based on destinations, provides our customers with an easy and intuitive way to access various topics of interest. Registered members can share their travel
experiences and interact with other members by posting questions and receiving answers from fellow forum members. We have a comprehensive collection of
descriptions and photos of different destinations. Our website also provides other useful travel-related information, such as weather forecasts, exchange rates, train
schedules and subway maps to further enhance user experience.
A transaction on our website generally involves the following steps:
Browse. A customer typically enters one of our over 420 city webpages by selecting his or her location or departing city. The customer can easily browse our product
selection by travel destination. In order to allow customers to locate the products they are
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interested in, our website also arranges our travel product offerings into different categories, such as organized tours, self-guided tours, customized tours, cruises, tourist
attractions tickets, self-drive tours, accommodation reservation, and transportation tickets. The customer can also choose to browse through our best-sellers for each of
the following categories: local tours, domestic tours, overseas tours, self-guided tours, themed tours, hotels, destination activities and tourist attractions tickets.
Search and Select. A customer conducts a search for a particular product on our website by defining desired parameters, such as destinations, departing cities,
departure time, product types, tour duration, number of travellers, prices and itineraries. We provide the customer with information regarding each travel product in detail
together with photographs of the destinations and hotels as well as customer reviews and ratings. Our website displays various possible selections and provides additional
information about the products. The customer can sort, refine or rank search results by further defining certain search parameters such as price range, customer ratings,
popularity and keywords. Our online Q&A feature enables the customer to raise inquiries and receive timely responses to facilitate their research. In addition, the
comparison tool on our website displays details of different travel products side-by-side, enabling the customer to evaluate different travel products easily.
Order Placement. After a customer has selected a particular option, our website will provide the customer with an opportunity to review details of the travel products
and services being purchased and the terms and conditions of such purchases. The customer can also request assistance and professional advice from our tour advisors
who will promptly follow up and interact with the customer online or by phone.
Contract Confirmation. At this stage, a customer is required to confirm that he or she agrees to the terms and conditions of his or her purchase. The customer can
submit his or her confirmation online or sign the contract related to his or her purchase in one of our offline retail stores or send us the signed contract. Contracts are
entered between us and the customer directly.
Payment. After confirming the terms of a contract, a customer will be directed to the payment webpage. We offer our customers the flexibility to choose a number of
payment options, which include bank transfers, credit cards, debit cards and online payment through third-party online payment platforms. In addition, the customer can
pay at one of our offline retail stores. If available, the customer can also discount the purchase price of our travel products by using our coupons and travel vouchers.
Electronic confirmations are sent to the customer’s e-mail address or mobile phone and the customer can use the itinerary management function on our website or APP to
check his or her booking details as well as amend or cancel bookings.
Review. After completing his or her trips, a customer is provided with incentives such as coupons to return to our website to write reviews and travel stories and
share his or her experience on our Travelogue forum. This increases transparency regarding our travel product quality and increases customer stickiness. We regard
customer reviews and travel stories, which provide valuable information to potential customers, as important criteria in assessing the quality and performance of travel
suppliers and travel products.
We offer customized services via a sophisticated account management system accessible on our online platform. After logging on with a unique identification, a
customer can track the order status, manage itineraries and check membership points, coupons and travel vouchers.
Our Mobile Platform
Our Android and Apple iOS-based mobile applications, such as Tuniu Travel, and the mobile version of our website, m.tuniu.com, allow customers to search for
travel products and services and place orders on mobile devices. Our mobile platform also enables customers to track their order status and provides other location-based
services to allow users to quickly locate a variety of nearby scenic spots.
Through Tuniu Travel, our customers can search for travel products and services and complete a booking within minutes. Tuniu Travel also serves as an important
and integral part of customers’ research on travel-related information. Customers often use our in-house developed and user-generated travel guides and other user
generated content, such as customer reviews, travel stories, tips and recommendations, on our Tuniu Travel to plan their travels. In addition, we offer discounted travel
products that are exclusive to users of Tuniu Travel for limited periods to enhance our mobile user engagement and increase monetization. We have upgraded our mobile
applications on a regular basis, adding new functions into it.
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Our Customer Services
When selecting a travel company or platform, leisure travellers often look beyond factors such as price and selection and focus on enjoyable experiences, in which
our customer service play a crucial part. We believe that the quality customer service provided by our well-trained tour advisors and customer service representatives
attract our customers towards our online platform.
Offline nationwide service network. Our primary call center is located in our headquarter in Nanjing. Our call centers provide 24-hour-a-day, seven-day-a-week
customer service before, during and after travels, from answering customers’ initial inquiries on their travel-related needs to assisting them in making and amending their
travel bookings. For inquiries on detailed product information and itinerary management, our customer service representatives allocate them via destination to our in-
house tour advisors, who follow up with our customers within half an hour to address their concerns and needs. We have implemented comprehensive performance
measures to monitor our calls to ensure our customers receive quality services. In October 2013 and 2015, we obtained the Best Call Center Award in the CCM Awards
that was jointly organized by Customer Care Management (CCM) World Group and CC-CMM Organization, and we were rewarded the Golden Tone Award from
51CallCenter in the years of 2014, 2015, 2016 and 2018, for offering outstanding call center and customer service experiences. We were awarded the Best Call Center by
CCCS for three consecutive years in 2017, 2018 and 2019.
Tour Advisors. Tour advisors are well-trained through in-house training workshops as well as training sessions provided by the travel suppliers to closely assist our
customers throughout their travel planning and booking process, from pre-sale consultation to final order confirmation. Our tour advisors are equipped with product
expertise to guide customers through the details of available packaged tours on our online platform and provide insightful advice on customers’ desired travel
destinations. Our tour advisors provide professional guidance on product selection, price, travel requirements and payment to ensure an efficient and informed shopping
experience.
To create a better travel experience for our customers, we are committed to sharing part of their losses due to certain unexpected events. For example, if our
customers cannot travel due to death, pregnancy, serious injury, hospitalization or rejection of visa applications after entering into contracts with us, we will provide them
with travel vouchers equivalent to a portion of the amounts paid which are redeemable towards the purchase of our travel products at a later time.
Supply Chain Management
Our travel suppliers primarily include tour operators, travel services providers and wholesalers of travel products and services in China. We believe that our ability to
enable these travel suppliers to extend their reach to potentially millions of Internet users in China and fulfill their needs for inventory management, attracts new, quality
travel suppliers and builds stronger ties with our existing travel suppliers. We have a product procurement team dedicated to developing and enhancing our relationships
with existing and prospective travel suppliers.
We source a broad range of products from travel suppliers who have significant advantages in the destinations we cover and who offer travel products at competitive
prices, which enhances our ability to attract more customers to our online platform. Our growing customer base in turn attracts more travel suppliers, creating a virtuous
cycle that strengthens our leading market position.
We generally enter into contracts with travel suppliers based on our standard form. Travel suppliers often pay us rebates based on our business volume. In addition,
some of the travel suppliers require prepayments for reserving tour availabilities. Typically, we settle payment with travel suppliers on a monthly basis, although travel
suppliers can also request for an early settlement on a discounted basis. To date, substantially all of the travel suppliers have sought to pursue continuing cooperation
opportunities with us.
We conduct a rigorous process in qualifying travel suppliers and in selecting their travel products and services to be offered on our platform. In qualifying a potential
travel supplier, we focus on its reputation, product quality, track record, credibility and price competitiveness.
In addition, travel suppliers can participate in biddings for priority listings, prominent placements for biddings and advertising displays on our website for the travel
products they supply.
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Product Selection
We adopt an open-source procurement strategy to source quality travel products in the destinations we cover. Our product procurement team works closely with
travel suppliers to ensure that customers are provided with high-quality travel products. In addition, we conduct regular price comparisons for travel products to assess
the competitiveness of the pricing of travel products offered on our platform.
Supply Management
We hosted a major conference event for our travel suppliers and presented to our travel suppliers our projected travel demand trends each year before the outbreak of
COVID-19 in 2020. This has been temporarily suspended. However, we regularly communicate with travel suppliers, mainly through our product procurement team and
our proprietary N-Booking system, to keep them informed of any changes to the supply outlook so that they can respond to customer demand in a timely manner. This
helps us and the travel suppliers make timely adjustments to procurement plans.
Supplier Quality Control
We have developed product and service provision protocols for travel suppliers to follow. We have offline retail stores throughout China that help us closely track the
performance of travel suppliers in each region. We have a dedicated team in charge of monitoring travel suppliers based on customer feedback; which also provides
recommendations for travel suppliers to improve their service quality and the products they supply. We impose penalties on travel suppliers or cease listing their travel
products on our platform if their products fail to meet our quality standards or if we receive valid complaints from our customers. We also prepare regular assessment
reports on travel suppliers based on the popularity, quality and price competitiveness of their travel products. To monitor and further improve the quality of travel
suppliers and the products and services we offer, we proactively collect feedback from our customers after their travels.
B2B distribution
We launched our B2B distribution business in September 2015 and rebranded it to Difeng Cloud in October 2018. Based on Tuniu’s direct procurement and
integration with the supply chain, Difeng Cloud was able to rapidly scale by offering Tuniu’s products and resources to other distributors within the leisure travel
industry. Difeng Cloud currently offers travel products including both packaged tours and other travel-related products such as air ticketing, hotel reservations, attraction
tickets, visa applications and insurance products.
N-Booking System
We have developed a proprietary N-Booking system, accessible via web and mobile, that offers travel suppliers the following features:
Product Management. Travel suppliers can submit details of their travel products via an easy-to-navigate online interface. After our review and approval, we will
post the details provided by the travel suppliers and the prices determined by us on our online platform. In addition, our N-Booking system provides travel suppliers with
an option to use descriptions and photos of destinations and tourist attractions in our database.
Just-In-Time Management. Our N-Booking system provides travel suppliers with access to real-time inventory data and gives them a wide range of inventory
management tools. Our N-Booking system also notifies travel suppliers of any changes in the inventory level of the travel products we source from them, which enables
them to adjust their procurement and sales plans in a timely manner. As such, we are able to deliver real-time information on product availability and provide our
customers with prompt booking and order confirmations.
Account Management. Travel suppliers can review transaction history details on our N-Booking system. They can also submit requests for early settlement of their
account balance with us on a discounted basis.
Data Analysis. Supported by our big data platform, travel suppliers can analyze and understand user behavior based on their browsing history. Travel suppliers can
keep track of traffic brought to the travel products supplied by them on our online platform and
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are able to evaluate the competitiveness of different travel products. We believe the user information gathered from our online platform reflects current leisure travel
market trends in China and provides excellent market insights to travel suppliers for their procurement planning and product design. By leveraging our data mining and
analytics capabilities, travel suppliers are able to develop a more in-depth understanding of customers’ behaviors and preferences, potentially unlocking significant value.
Financial Services
We currently offer a range of financial services, which complement our core leisure travel business, mainly to both travellers and travel suppliers. Our financial
services are designed to systematically support the overall development of the leisure travel market in China by funding customers’ travels and supporting suppliers’
growth. For travellers, we provide travel financing products enabling travellers to travel with an initial down payment, which has been particularly popular among the
young generation of travellers who are more price-sensitive. In addition, we also offer insurance products to our customers. For travel suppliers, we provide various types
of loans that optimize working capital for the selected suppliers, allowing them to provide high-quality travel products on a larger scale. We also provided cash lending
services to customers.
Technology
We have built our technology infrastructure with high levels of performance, reliability, scalability and security to ensure superior customer and supplier experiences.
We rely on internally developed proprietary technologies and licensed technologies to manage and improve our website, mobile platform and management systems. We
have a team of engineers dedicated to research and development in the areas of website operations, mobile platform, search engine, data analytics and supply chain
management system.
We believe that an advanced technology platform is vital to our growth and success. We obtained ISO 9001:2015 certification for our quality management system
indicating our compliance with internationally recognized standards for quality control in 2018, with such certification being renewed in 2019 and is expected to expire in
2022.
Product Search
We strive to present relevant and useful search results in a timely fashion to ensure the accuracy, efficiency and synchronism of our search results. Despite the
difficulties in analyzing leisure travel products data, we have developed search technologies that allow us to retrieve, index, filter and rank real-time product information.
We are able to prioritize the search results and display information most suited to our customers’ requirements in a simple and intuitive interface in real-time. Our core
search technologies include the following:
Real-time Indexing. Our search infrastructure enables changes in product data to be indexed, processed and reflected in search results on a real-time basis.
Smart Caching. We maintain a database with massive product information on packaged tours, hotels, flights and other travel-related services. We have designed an
auto-prioritizing method to update the database by ranking popular products based on different criteria, such as popular cities, most-visited attractions, top-rated products
and most-viewed products. Different refreshing frequencies are applied to different products.
Accuracy Checking. Our accuracy checking software complements our smart caching system and is implemented to display the latest product information such as
prices and product descriptions. When a user clicks on the interested search result, an accuracy checker is triggered to retrieve the updated product information and
present it to the user.
Fuzzy Query Processing. We maintain a dictionary for travel-related keywords in Chinese, where keywords are classified and linked to each other based on their
meanings. We have also developed a query search algorithm based on user inputs to enhance our ability to dissect natural language queries. Such technologies help us
better understand the meanings of queries and produce the most relevant and useful search results. We also provide additional search features such as query spelling
correction, query suggestion and search by Chinese phonetics (Pinyin).
Big Data Analysis
We gather and analyze customer behavior and data for our procurement, inventory management and marketing purposes. We also provide selected data to travel
suppliers, enabling them to optimize their product designs and marketing strategies.
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Big Data Platform. We have developed our big data platform based on a distributed computing system. Such data analytics capabilities help us gain a deeper
understanding of existing and prospective customers and market trends, make customized recommendations to customers and improve our applications and products
accordingly.
Streaming Data Analysis. We have also built a streaming data processing pipeline based on our big data platform to view the browsing history of the users of our
online platform and to allow travel suppliers to review their performance data near real-time.
Web Content Mining. Our web content processing system links user generated content which includes customer reviews, travel stories and tips as well as destination
guides such as locations, hotels and tourist attractions. This allows users of our online platform to obtain information of different destinations and travel products and
services in a user-friendly manner.
N-Booking System
Our N-Booking system streamlines the interactions between us and travel suppliers. Our N-Booking system also allows travel suppliers to receive booking
information real-time through the web or mobile devices to manage travel products more efficiently and understand customer preferences better. See “—Supply Chain
Management—N-Booking System.”
CRM System
Through a customer relationship management system, or CRM system, we gather, analyze and make use of internally-generated customer behavior and transaction
data based on customers’ historical purchase and browsing records. We regularly use this information in budgeting and procurement planning as well as in planning our
marketing initiatives and promotional campaigns.
Data Security
Our system servers are currently housed in Nanjing, and have secure and dedicated communication links among them. All data are backed up on an hourly basis. Our
system servers utilize digital certificates to help us conduct secure communications and transactions. The performance of our system servers is monitored and maintained
by an internal team that operates 24 hours a day, seven days a week. Customer sensitive information, such as password and payment information, is stored with
encryption, and our data servers are secured with firewalls.
Dynamic Packaging System
Backed by our robust data analytics capabilities, we have established a dynamic packaging system that enables our users to customize their own travel packages
tailored to individual travellers’ needs. This system is able to combine trip components from different suppliers to provide truly customized trips, automating and placing
in the hands of our customers a function that was previously performed manually. It uses algorithms and past customer data to filter out unnatural choices and provide
customers with relevant choices based on their ascertainable behavior. We believe this is one of the first systems of its kind in China.
Seasonality
Our business experiences fluctuations, reflecting seasonal variations in the demand for leisure travel services. Sales of leisure travel products and services will
increase in respect of holiday periods and decrease in respect of off-peak times, while prices of leisure travel products and services are subject to fluctuation between
peak seasons and low seasons. For example, the third quarter of each year generally contributes the highest percentage of our annual revenues, because many of our
customers tend to travel during summer holidays in July and August.
Marketing and Brand Building
We continue to build and maintain a strong Tuniu brand through both traditional offline marketing media and online marketing channels. We organize targeted
campaigns, make promotional and seasonal offers and cooperate with domestic and foreign tourism boards and bureaus in holding promotional events and marketing
campaigns.
While our offline advertising plays an important role in promoting our brand image, we complement our branding campaigns through mobile and online channels.
We promote our mobile app through advertisements in the mobile app store and various display
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advertisements. We have also entered into agreements with a number of search engines, pursuant to which we have purchased travel-related keywords or directory links
that direct users to our website. In addition, we have a strong presence in online social media such as Tencent’s WeChat and Sina’s Weibo. We believe that our presence
in online social media helps us maintain engagement with our targeted customers.
As part of our cross-marketing effort, we have agreements with financial institutions to recommend our products and services to their debit or credit card holders,
and we allow these cardholders to settle their payments for travel products purchased from us using these cards with discounts. For instance, we cooperated with several
major banks in China and launched co-branded credit cards, through which cardholders may book with us and are entitled to discounts, bonus points and certain other
privileges.
Furthermore, our customer loyalty program allows our customers to accumulate membership points and coupons as they purchase travel products and services. Our
membership points have a fixed validity term and, before expiry, customers may redeem these points for future purchases. Our customer loyalty program is designed to
encourage repeat purchases. Currently, our membership has seven levels. For customers who meet certain spending thresholds, we upgrade their membership status to the
next level, entitling them to further discounts and more points for their spending. For all customers who have joined our loyalty program, we provide them with
designated customer service representatives to handle their travel needs.
In April 2020, we launched our live streaming shows to promote our own products. This novel format of online marketing is getting popularity for both product sales
and content offerings, such as the introduction of destinations. We have developed our live streaming shows via both our official platforms such as Tuniu.com and third-
party platforms. Our live streaming shows are mainly conducted and hosted by our employees.
Competition
We compete primarily with all other types of online travel companies. In addition, we compete with traditional travel service providers and tour operators. In the
self-guided tour business, as we sell packaged tours which include flights and hotels, we also compete with airlines and hotels, which in recent years have made efforts to
improve their direct sales. Large, established Internet companies have also launched applications offering travel products in various destinations around the world.
Factors affecting our competitiveness include, among other things, price, availability and breadth of choice of travel products and services, brand recognition, customer
services, ease of use, accessibility, security and reliability of our transaction and service infrastructure.
Some of our current and potential competitors may have greater financial, marketing and other resources than we do. In addition, some of our competitors may be
acquired by, receive investment from or enter into strategic relationships with larger, well-established and well-financed companies or investors. They may be able to
devote greater resources to marketing and promotional campaigns and devote substantially more resources to website and system development than us. See “Item 3. Key
Information—D. Risk Factors—Risks Related to Our Business and Industry—We face intense competition and may not be able to compete successfully against existing
and new competitors.”
Intellectual Property
Our success and ability to compete depend, in part, upon our ability to establish and adequately protect our intellectual property rights. In this regard, we rely
primarily on a combination of copyright, software registration, trademark, trade secret and unfair competition laws and contractual rights, such as confidentiality
agreements with our employees and others. As of December 31, 2021, we had 116 registered computer software copyrights, 27 registered patent and 26 registered
artwork copyrights in China, and were in the process of applying for 3 patents in China. In addition, as of December 31, 2021, we had 93 registered domain names that
were material to our business, including tuniu.com, and 493 registered trademarks, including 途牛 (the Chinese characters of Tuniu),
and
,
and
in China.
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Insurance
We maintain various insurance policies to safeguard against risks and unexpected events. We have purchased travel companies’ liability insurance covering expenses
related to accidents caused by us. We have also maintained property insurance policies for our fixed assets covering losses due to fire, explosion, lightning, storm,
landslide, subsidence and aircraft damage.
PRC Regulation
This section sets forth a summary of the significant regulations or requirements that affect our business activities in China or our shareholders’ rights to receive
dividends and other distributions from us.
Regulations on Value-Added Telecommunication Services
The PRC government extensively regulates the telecommunications industry, including the Internet sector. The PRC State Council, the MIIT, the MOC, the SAMR
(formerly the State Administration for Industry and Commerce, or the SAIC), the National of Radio and Television, Administration and the National Press and
Publication Administration, both of which were split from State Administration of Press, Publication, Radio, Film and Television (formerly the General Administration of
Press and Publication) and other relevant government authorities have promulgated an extensive regulatory scheme governing telecommunications, Internet-related
services and e-commerce. However, since China’s telecommunications industry and Internet-related industry are at an early stage of development, new laws and
regulations may be adopted from time to time that will require us to obtain additional licenses and permits in addition to those that we currently have, and will require us
to address new issues that arise from time to time. As a result, substantial uncertainties exist regarding the interpretation and implementation of current and any future
Chinese laws and regulations applicable to the telecommunications, Internet-related services and e-commerce. See “Item 3. Key Information—D. Risk Factors—Risks
Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you
and us.”
Licenses for Value-Added Telecommunication Services
The Telecommunications Regulations issued by the PRC State Council in September 2000 and amended in February 2016 are the primary regulations governing
telecommunication services. The Telecommunications Regulations set out the general framework for the provision of telecommunication services by PRC companies.
Under the Telecommunications Regulations, it is a requirement that telecommunications service providers procure operating licenses prior to commencement of their
operations. The Telecommunications Regulations draw a distinction between “basic telecommunications services” and “value-added telecommunications services.”
Internet content provision services, or ICP services, is a subcategory of value-added telecommunications services.
In March 2009, the MIIT promulgated the Administrative Measures for Telecommunications Business Operating Permit which was repealed in September 2017 by
the 2017 Revision of the Administrative Measures for Telecommunications Business Operating Permit. Pursuant to the 2017 Revision of the Administrative Measures for
Telecommunications Business Operating Permit, there are two types of telecommunication operating license for operators in China, namely, licenses for basic
telecommunications services and licenses for value-added telecommunications services. The operation scope of the license will specify the permitted activities of the
enterprise to which it is granted. An approved telecommunication services operator must conduct its business in accordance with such specifications.
Pursuant to the Administrative Measures on Internet Information Services, promulgated by the PRC State Council in September 2000, as most recently amended in
May 2021, commercial Internet information services operators must obtain an ICP license, from the relevant government authorities before engaging in any commercial
Internet information services operations within the PRC. Nanjing Tuniu, our consolidated affiliated entity, obtained ICP licenses issued by the Jiangsu Administration of
Telecommunication which will expire in October 2022.
The Internet Electronic Bulletin Service Administrative Measures promulgated by the MIIT in November 2000 require Internet information services operators to
obtain specific approvals before providing BBS services, which include electronic bulletin boards, electronic forums, message boards and chat rooms. In
September 2014, the Internet Electronic Bulletin Service Administrative Measures was repealed by Repealing and Revising Certain Rules of MIIT. However, in practice,
the relevant authorities still require obtaining such approval for the operation of BBS services. We have applied to the Jiangsu Administration of Telecommunication for
and have obtained an approval for the operation of BBS services on our website.
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In addition to the Telecommunications Regulations and the other regulations as disclosed above, the provision of commercial internet information services on mobile
internet applications is regulated by the Administrative Provisions on Mobile Internet Applications Information Services, which was promulgated by the CAC in
June 2016. Under the Administrative Provisions on Mobile Internet Applications Information Services, the providers of mobile internet applications need to, among other
things, acquire the relevant qualifications and comply with other requirements provided by laws and regulations and being responsible for information security. On
January 5, 2022, the CAC issued the revised draft Administrative Provisions on Mobile Internet Applications Information Services for public comments, which further
emphasize that mobile internet app providers shall comply with relevant provisions on the scope of necessary personal information when engaging in personal
information processing activities. According to the revised draft Administrative Provisions on Mobile Internet Applications Information Services, mobile internet apps
providers shall not compel users to agree to non-essential personal information collection, and are not allowed to ban users from their basic functional services due to the
users’ refusal of providing non-essential personal information.
Since 2021, the PRC government has taken steps to strengthen the supervision on the utilization of algorithm in the field of Internet information service. On
September 17, 2021, the CAC and eight other authorities jointly promulgated the Notice on Promulgation of the Guiding Opinions on Strengthening the Comprehensive
Governance of Algorithm-Related Internet Information Services, which provides that, among others, enterprises shall establish an algorithmic security responsibility
system and a technology ethics vetting system, improve the algorithmic security management organization, strengthen risk prevention and control, and improve the
capacity to respond to algorithmic security emergencies. On December 31, 2021, the CAC, the MIIT, the MPS and the Ministry of State Security jointly promulgated the
Administrative Provisions on Internet Information Service Algorithm Recommendation, or the Algorithm Recommendation Provisions, which took effect on March 1,
2022. The Algorithm Recommendation Provisions implements classification and hierarchical management for algorithm recommendation service providers based on
various criteria, and stipulate that algorithm recommendation service providers shall inform users of their provision of algorithm recommendation services in a
conspicuous manner, and publicize the basic principles, purpose intentions, and main operating mechanisms of algorithm recommendation services in an appropriate
manner, and that algorithm recommendation service providers selling goods or providing services to consumers shall protect consumers’ rights of fair trade, and are
prohibited from carrying out illegal conducts such as unreasonable differentiated treatment on transaction conditions based on consumers’ preferences, purchasing habits,
and other such characteristics.
Foreign Investment in Value-Added Telecommunications Services
On March 15, 2019, the NPC promulgated the PRC Foreign Investment Law, which became effective on January 1, 2020 and replaced the major existing laws and
regulations governing foreign investment in the PRC. Pursuant to the PRC Foreign Investment Law, “foreign investments” refer to investment activities conducted by
foreign investors directly or “indirectly” in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the
PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises
within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment of other methods as specified in
laws, administrative regulations, or as stipulated by the State Council. Although VIE structure is not explicitly defined as a method of foreign investment, it remains to be
further clarified and detailed on whether VIE Structure will be interpreted to fall under the scope of the “investment in other methods as specified in laws and
administrative regulations, or as stipulated by the State Council”. Please also refer to “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate
Structure—Substantial uncertainties exist with respect to the interpretation and implementation of the newly adopted PRC Foreign Investment Law and its
implementation rules and how they may impact the viability of our current corporate structure, corporate governance and business operations.”
According to PRC Foreign Investment Law and the Implementation Rules, China adopts a system of pre-entry national treatment plus negative list with respect to
foreign investment administration, where “pre-entry national treatment” means that the treatment given to foreign investors and their investments at market access stage
is no less favorable than that given to domestic investors and their investments, and “negative list” means the special entry management measures for foreign
investment’s access to specific fields or industries, which will be proposed by the competent investment department of the State Council in conjunction with the
competent commerce department of the State Council and other relevant departments, and be reported to the State Council for promulgation, or be promulgated by the
competent investment department or competent commerce department of the State Council after being reported to the State Council for approval. Foreign investment
beyond the negative list will be granted national treatment. Foreign investors shall not invest in the prohibited fields as specified in the negative list, and foreign investors
who invest in the restricted fields must comply with the special requirements on the shareholding, senior management personnel, etc. The current industry entry clearance
requirements governing investment activities in the PRC by foreign investors are set out in two categories, namely the 2021 Negative List, and the
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Encouraged Industry Catalog for Foreign Investment (2020 version), or the 2020 Encouraged Industry Catalog, both were promulgated by the National Development and
Reform Commission (the “NDRC”) and the MOC and took effect in January 2022 and January 2021, respectively. Industries not listed in these two categories are
generally deemed “permitted” for foreign investment unless specifically restricted by other PRC laws. Industries such as value-added telecommunication business, which
we are engaged in, are generally regarded as restricted fields to foreign investment pursuant to the 2021 Negative List, and we conduct business operations in restricted
fields through the VIE.
On December 19, 2020, the NDRC and the MOC promulgated the Security Review Measures, which took effect on January 18, 2021. According to the Security
Review Measures, the foreign investment security review work mechanism shall be established to conduct the security review and the general office responsible for the
security review will be set in the NDRC and be jointly led by the NDRC and the MOC. Foreign investments in military, national defense-related areas or in locations in
proximity to military facilities, or foreign investments that would result in acquiring the actual control of assets in certain key sectors, such as critical agricultural
products, energy and resources, equipment manufacturing, infrastructure, transport, cultural products and services, information technology, Internet products and
services, financial services and technology sectors, are subject to the foreign investment security review by such foreign investment security review work mechanism.
Acquiring actual control includes any investment in which foreign investors obtain more than 50% of equity interest in the invested enterprise or, in the event that the
equity interest is less than 50%, the voting rights owned by such foreign investors have significant impact on the shareholders meeting and board of directors of the
invested enterprise or where there is any other circumstance that enables foreign investors to exert a significant impact on the business decision-making, personnel,
finance, technology, etc. of the invested enterprise.
Pursuant to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises, promulgated by the PRC State Council in December 2001 and
amended most recently in April 2022, unless otherwise provided for by the state, the ultimate foreign equity ownership in a value-added telecommunications services
provider may not exceed 50%. For example, the 2021 Negative List allows foreign investors to hold more than 50% equity interests in a value-added telecommunications
service provider engaging in e-commerce, domestic multiparty communication, storage-and-forward and call center businesses. Pursuant to the Notice regarding the
Strengthening of Ongoing and Post Supervision of Foreign Invested Telecommunication Enterprises issued by MIIT in October 2020, foreign investors are no longer
subject to the MIIT pre-approval requirements, but foreign invested telecommunications enterprises are still required to submit relevant foreign investor qualification
materials to MIIT when applying for new telecommunication operating permits or amended permits. Since the 2021 Negative List and the Provisions on Administration
of Foreign-Invested Telecommunications Enterprises were recently amended and further implementing rules with respect to the new policies on foreign investment in
value-add telecommunications services have yet to been promulgated, there exist significant uncertainties with respect to their interpretation and implementation by
authorities.
Pursuant to the MIIT Circular, a domestic company that holds an ICP license is prohibited from leasing, transferring or selling the license to foreign investors in any
form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business
illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the domestic
ICP license holder or its shareholders. The MIIT Circular further requires each ICP license holder to have the necessary facilities for its approved business operations and
to maintain such facilities in the regions covered by its license. In addition, all value-added telecommunications service providers are required to maintain network and
information security in accordance with the standards set forth under relevant PRC regulations.
In light of the aforesaid restrictions, we rely on Nanjing Tuniu, our consolidated affiliated entity, to hold and maintain the licenses necessary to provide online
marketing services and other value-added telecommunications services in China. For a detailed discussion of our contractual arrangements, please refer to “—C.
Organizational Structure.” To comply with these PRC regulations, we operate our website and value-added telecommunications services through Nanjing Tuniu. Nanjing
Tuniu holds our ICP licenses and owns all the domain names used in our value-added telecommunications businesses. Nanjing Tuniu is also the owner of all the
registered trademarks used in our value-added telecommunications businesses and is the applicant of all the registered trademark applications we are currently making.
Regulations on Information Security and Censorship
The PRC government regulates and restricts Internet content in China to protect state security and ensure the legality of the Internet content. The NPC, China’s
national legislative body, enacted a Decision on the Safeguarding of Internet Security in December 2000, as subsequently amended in August 2009, among other things,
makes it unlawful to: (1) gain improper entry into a computer or system of
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strategic importance; (2) disseminate politically disruptive information; (3) leak state secrets; (4) spread false commercial information; or (5) infringe intellectual
property rights. Pursuant to the Administrative Measures on Internet Information Services and other applicable laws, Internet content providers and Internet publishers
are prohibited from posting or displaying over the Internet content which violates PRC laws and regulations, impairs the national dignity of China, or is reactionary,
obscene, superstitious, fraudulent or defamatory. Internet service providers are required to monitor their websites, including electronic bulletin boards. They may not post
or disseminate any content that falls within these prohibited categories and must remove any such content from their websites. The PRC government may shut down the
websites of ICP license holders that violate any of the above-mentioned content restrictions and revoke their ICP licenses. In addition, the MIIT has published regulations
that subject ICP operators to potential liability for content displayed on their websites and the actions of users and others using their systems, including liability for
violations of PRC laws and regulations prohibiting the dissemination of content deemed to be socially destabilizing. The MPS has the authority to order any local Internet
service provider to block any Internet website at its sole discretion. From time to time, the MPS has stopped the dissemination over the Internet of information which it
believes to be socially destabilizing. On September 15, 2021, the CAC promulgated the Opinions of the CAC on Further Enforcing the Subject Responsibilities of
Website Platforms for Information and Content Management, which took effect on the same day. These opinions further require the website platforms to play the role of
the first responsible persons for management of the information and content and effectively improve the level of network management and governance.
The MPS has promulgated the Administrative Measures for the Security Protection of International Connections to Computer Information Network in
December 1997, as amended in January 2011, that prohibits the use of the Internet in ways which, among other things, result in a leakage of state secrets or the
distribution of socially destabilizing content. Socially destabilizing content includes any content that incites defiance or violations of PRC laws or regulations or
subversion of the PRC government or its political system, spreads socially disruptive rumors or involves cult activities, superstition, obscenities, pornography, gambling
or violence. Under PRC laws, state secrets are defined broadly to include information concerning PRC national defense, state affairs and other matters as determined by
the PRC authorities.
In December 2005, the MPS promulgated Provisions on Technological Measures for Internet Security Protection. These measures and the Administrative Measures
on Internet Information Services require all ICP operators to keep records of certain information about their users (including user registration information, log-in and log-
out time, IP address, content and time of listings by users) for at least 60 days and submit the above information as required by laws and regulations. The ICP operators
must regularly update information security and censorship systems for their websites with local public security authorities, and must also report any public dissemination
of prohibited content. If an ICP operator violates these measures, the PRC government may revoke its ICP license and shut down its websites. In December 2012, the
Standing Committee of the NPC promulgated the Decision on Strengthening Network Information Protection, or the Network Information Protection Decision, to
enhance the legal protection of information security and privacy on the internet. The Network Information Protection Decision also requires internet operators to take
measures to ensure confidentiality of information of users. In July 2013, the MIIT promulgated the Provisions on Protection of Personal Information of
Telecommunication and Internet Users to regulate the collection and use of users’ personal information in the provision of telecommunication service and internet
information service in China. In August 2015, the Standing Committee of the NPC promulgated the Ninth Amendment to the Criminal Law, which became effective in
November 2015 and amended the standards of crime of infringing citizens’ personal information and reinforced the criminal culpability of unlawful collection,
transaction, and provision of personal information. It further provides that any network service provider that fails to fulfill the obligations related to internet information
security administration as required by applicable laws and refuses to rectify upon orders will be subject to criminal liability. In November 2016, the Standing Committee
of the NPC promulgated the PRC Cyber Security Law, which requires, among others, that network operators take security measures to protect the network from
interference, damage and unauthorized access and prevent data from being divulged, stolen or tampered with. Network operators are also required to collect and use
personal information in compliance with the principles of legitimacy, properness and necessity, and strictly within the scope of authorization by the subject of personal
information unless otherwise prescribed by laws or regulations. The Civil Code promulgated in 2020 also provides specific provisions regarding the protection of
personal information.
On December 15, 2019, the CAC promulgated Provisions on Ecological Governance of Network Information Content, or the Network Ecological Governance
Provisions, which took effect on March 1, 2020. The Network Ecological Governance Provisions provide the requirements for the content producers of the network
information, the service platforms for the network information and the users of the network information. Among others, the Network Ecological Governance Provisions
classify the network information into the “encouraged category”, the “prohibited category” and the “prevented and resisted category”. The content producers of network
information are encouraged to produce, copy and publish network information in the encouraged category, prohibited from producing, copying or publishing network
information in the prohibited category, and shall take measures to prevent and resist the production, reproduction and publication of undesirable information in the
prevented and resisted category. In addition, the service platforms for the
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network information shall strengthen the management of information content, and upon discovery of any prohibited information or prevented and resisted information,
shall immediately take measures in accordance with the laws, keep the relevant records, and report the same to the competent government authorities. A service platform
for network information shall compile an annual report on the ecological governance of network information, which contains information such as the ecological
governance of network information, the performance of the person in charge of ecological governance of network information and social evaluation.
On July 6, 2021, certain PRC regulatory authorities issued the Opinions on Intensifying Crack Down on Illegal Securities Activities, which, among others, provide
for improving relevant laws and regulations on data security, cross-border data transmission, and confidential information management. The Opinions provide that efforts
will be made to revise the regulations on strengthening the confidentiality and file management relating to the offering and listing of securities overseas, to implement the
responsibility on information security of overseas listed companies, and to strengthen the standardized management of cross-border information provision mechanisms
and procedures.
On December 28, 2021, the CAC, together with other competent government authorities, jointly promulgated the Cybersecurity Review Measures, which took effect
on February 15, 2022 and replaces the predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure
internet products and services, or network platform operators that process data must be subject to the cybersecurity review if their activities affect or may affect national
security. The Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users shall apply with
the Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange. The relevant competent government authorities may
also initiate a cybersecurity review against the relevant operators if the authorities believe that the network products or services or data processing activities of such
operators affect or may affect national security. Article 10 of the Cybersecurity Review Measures also set out certain general factors which would be the focus in
assessing the national security risk during a cybersecurity review, including (i) risks of critical information infrastructure being illegally controlled or subject to
interference or destruction; (ii) the harm caused by the disruption of the supply of the product or service to the business continuity of critical information infrastructure;
(iii) the security, openness, transparency and diversity of sources of the product or service, the reliability of supply channels, and risks of supply disruption due to
political, diplomatic, trade and other factors; (iv) compliance with PRC laws, administrative regulations and departmental rules by the provider of the product or service;
(v) the risk of core data, important data or a large amount of personal information being stolen, leaked, damaged, illegally used, or illegally transmitted overseas; (vi) the
risk that critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, and maliciously used by
foreign governments for a listing, as well as network information security risks; and (viii) other factors that may endanger the security of critical information
infrastructure, cybersecurity and data security. However, there are still uncertainties as to the exact scope of network product or service or data processing activities that
will or may affect national security, and the PRC government authorities may have discretion in the interpretation and enforcement of these measures.
On November 14, 2021, the CAC promulgated the Draft Regulations, for public comments, pursuant to which, data processors conducting the following activities
shall apply for cybersecurity review: (i) merger, reorganization or division of internet platform operators that have acquired a large number of data resources related to
national security, economic development or public interests affect or may affect national security; (ii) the listing abroad of data processors that process the personal
information of more than one million users; (iii) listing in Hong Kong which affects or may affect national security; or (iv) any data processing activity that affects or
may affect national security. The Draft Regulations also provide that operators of large internet platforms that set up headquarters, operation centers or R&D centers
overseas shall report to the national cyberspace administration and competent authorities. The Draft Regulations also require that data processors that process “important
data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment
report of the preceding year to the municipal cybersecurity department by the end of January each year. Further, the Draft Regulations require internet platform operators
to establish platform rules, privacy policies and algorithm strategies related to data, and solicit public comments on their official websites and personal information
protection related sections for no less than 30 working days when they formulate platform rules or privacy policies or make any amendments that may have a significant
impact on users’ rights and interests. In addition, platform rules and privacy policies formulated by operators of large internet platforms with more than 100 million daily
active users, or amendments to such rules or policies by operators of large internet platforms with more than 100 million daily active users that may have significant
impacts on users’ rights and interests shall be evaluated by a third-party organization designated by the CAC and reported to local branch of the CAC for approval. As of
the date of this annual report, the Draft Regulations was released for public comment only, and their respective provisions and anticipated adoption or effective date may
be subject to change with substantial uncertainty
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On June 10, 2021, the Standing Committee of the NPC promulgated the Data Security Law, which took effect in September 2021. The Data Security Law, among
other things, provides for security review procedure for data processing activities that may affect national security. The Data Security Law also introduces a data
classification and hierarchical protection system based on the importance of data in economic and social development, as well as the degree of harm it will cause to
national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally
acquired or used. The appropriate level of protection measures is required to be taken for each respective category of data. For example, a processor of important data
shall designate the personnel and the management body responsible for data security, carry out risk assessments for its data processing activities and file the risk
assessment reports with the competent authorities. In addition, the Data Security Law provides a national security review procedure for those data activities which may
affect national security and imposes export restrictions on certain data and information. As the Data Security Law was recently promulgated, we may be required to make
further adjustments to our business practices to comply with this law.
On July 12, 2021, the MIIT and two other authorities jointly issued the Provisions on the Administration of Security Vulnerabilities of Network Products, or the
Provisions. The Provisions state that, no organization or individual may abuse the security vulnerabilities of network products to engage in activities that endanger
network security, or to illegally collect, sell, or publish the information on such security vulnerabilities. Anyone who is aware of the aforesaid offences shall not provide
technical support, advertising, payment settlement and other assistance to the relevant offenders. According to the Provisions, network product providers, network
operators, and platforms collecting network product security vulnerabilities shall establish and improve channels for receiving network product security vulnerability
information and keep such channels available, and retain network product security vulnerability information reception logs for at least six months. The Provisions also
bans provision of undisclosed vulnerabilities to overseas organizations or individuals other than to the product providers.
On July 30, 2021, the State Council issued the Regulations on Protection of CII, which became effective on September 1, 2021. Pursuant to the Regulations on
Protection of CII, critical information infrastructure means key network facilities or information systems of critical industries or sectors, such as public communication
and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, the damage, malfunction
or data leakage of which may endanger national security, people’s livelihoods and the public interest. The competent government authorities and supervision and
management authorities of the aforementioned important industries will be responsible for (i) organizing the identification of critical information infrastructures in their
respective industries in accordance with certain identification rules, and (ii) promptly notifying the identified operators and the public security department of the State
Council of the identification results. However, the exact scope of “critical information infrastructure operators” under the current regulatory regime still remains unclear,
and the PRC government authorities may have discretion in the interpretation and enforcement of these laws, rules and regulations.
On October 29, 2021, the CAC issued the Measures for Security Assessment of Cross-border Data Transfer (Draft for Comment). According to these draft measures,
in addition to the self-risk assessment requirement for provision of any data outside China, a data processor shall apply to the competent cyberspace department for data
security assessment and clearance of outbound data transfer in any of the following events: (i) outbound transfer of personal information and important data collected and
generated by an operator of critical information infrastructure; (ii) outbound transfer of important data; (iii) outbound transfer of personal data by a data processor which
has processed more than one million users’ personal data; (iv) outbound transfer of more than one hundred thousand users’ personal information or more than ten
thousand users’ sensitive personal information cumulatively; or (v) such other circumstances where ex-ante security assessment and evaluation of cross-border data
transfer is required by the CAC.
In addition, the State Secrecy Bureau has issued provisions authorizing the blocking access to any website it deems to be leaking state secrets or failing to comply
with the relevant legislation regarding the protection of state secrets. As Nanjing Tuniu is an ICP operator, it is subject to the laws and regulations relating to information
security. To comply with these laws and regulations, it has completed the mandatory security filing procedures with the local public security authorities, regularly updates
its information security and content-filtering systems with newly issued content restrictions, and maintains records of users’ information as required by the relevant laws
and regulations. Nanjing Tuniu has also taken measures to delete or remove links to content that to its knowledge contains information violating PRC laws and
regulations. The majority of the content posted on our online platform is first screened by our filtering systems. Content containing prohibited words or images is then
manually screened by employees who are dedicated to screening and monitoring content published on our platform and removing prohibited content. We believe that
with these measures in place, no material violations have arisen out of the public dissemination of prohibited content through our online platform under PRC information
security laws and regulations in the past. However, there is a significant amount of content posted on our online platform by our users on a daily basis. If any prohibited
content is publicly disseminated in the future and we become aware of it, we will report it to the
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relevant government authority. We believe these measures taken by us are generally in compliance with the relevant laws and regulations.
If, despite the precautions, we fail to identify and prevent illegal or inappropriate content from being displayed on or through our online platform, we may be subject
to liability. In addition, these laws and regulations are subject to interpretation by the relevant authorities, and it may not be possible for us to determine in all cases the
types of content that could result in liability. To the extent that PRC regulatory authorities find any content displayed on or through our online platform objectionable,
they may require us to limit or eliminate the dissemination or availability of such content or impose penalties, including the revocation of our operating licenses or the
suspension or shutdown of our online operations. In addition, the costs of compliance with these regulations may increase as the volume of content and the number of
users on our online platform increases.
Furthermore, on April 2, 2022, the CSRC, together with certain other PRC government authorities, issued the Draft Provisions on Confidentiality and File
Management, aiming to revise the currently effective Provisions on Strengthening Confidentiality and File Management Relating to Overseas Issuance and Listing of
Securities. According to the Draft Provisions on Confidentiality and File Management, where the Domestic Enterprise, directly or through its overseas listed entity,
provides relevant securities firms, securities service providers and overseas regulatory authorities or other entities, or public discloses documents and materials involving
state secrets and work secrets of government authorities, such Domestic Enterprise shall file application with competent authorities for approval and complete filing with
secrecy administrative department; in the event that the Domestic Enterprise provides or publicly discloses other documents and materials which, if disclosed, would
have adverse impact on national security or public interests, such Domestic Enterprise shall strictly go through corresponding procedures in accordance with relevant
regulations. The Domestic Enterprise shall also provide written records with respect to performance of the abovementioned procedures, and enter into confidentiality
agreement(s) with relevant securities firms, securities service providers or other entities with respect to the circumstances above. The Draft Provisions on Confidentiality
and File Management were released only for soliciting public comments at this stage and their interpretation and implementation remain substantially uncertain.
Regulations on Internet Privacy
The PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these rights. In recent years,
PRC government authorities have promulgated laws and regulations on Internet use to protect personal information from any unauthorized disclosure. The Decisions on
Strengthening Network Information Protection and the Regulation on Protection of Personal Information of Telecommunication and Internet Users provide that
information that identifies a citizen, the time or location for his use of telecommunication and Internet services, or involves privacy of any citizen such as his birth date,
ID card number, and address is protected by law and must not be unlawfully collected or provided to others. ICP operators collecting or using personal electronic
information of citizens must specify the purposes, manners and scopes of information collection and uses, obtain consent of the relevant citizens, and keep the collected
personal information confidential. ICP operators are prohibited from disclosing, tampering with, damaging, selling or illegally providing others with, collected personal
information. ICP operators are also prohibited from collection and use of personal information after a user has stopped using the services. ICP operators are required to
take technical and other measures to prevent the collected personal information from any unauthorized disclosure, damage or loss as well as conducting a self-
examination of their protection of personal information at least once a year. The Administrative Measures on Internet Information Services prohibit an ICP operator from
insulting or slandering a third party or infringing upon the lawful rights and interests of a third party. The relevant telecommunications authorities are further authorized
to order ICP operators to rectify unauthorized disclosure. ICP operators are subject to legal liability, including warnings, fines, confiscation of illegal gains, revocation of
licenses or filings, closing of the relevant websites, administrative punishment, criminal liabilities, or civil liabilities, if they violate relevant provisions on Internet
privacy. Such requirements are reiterated by the Regulations on Protection of Personal Information of Telecommunications and Internet Users. If an ICP operator
appoints an agent to undertake any marketing and technical services that involve the collection or use of personal information, the ICP operator is required to supervise
and manage the protection of such information. Any violation may subject the ICP operators to warnings, fines, disclosure to the public and, in the most severe cases,
criminal liability. The PRC government, however, has the power and authority to order ICP operators to turn over personal information if an Internet user posts any
prohibited content or engages in illegal activities on the Internet.
Pursuant to the Cyber Security Law, personal information refers to all kinds of information recorded by electronic or otherwise that can be used to independently
identify or be combined with other information to identify a specific natural persons. Such information includes but not limited to a natural person’s name, date of birth,
ID number, biologically identified personal information, address and telephone numbers, etc. The Cyber Security Law also provides that: (i) to collect and use personal
information, network operators shall follow the principles of legitimacy, rightfulness and necessity, disclose their rules of data collection and use, clearly express the
purposes,
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means and scope of collecting and using the information, and obtain the consent of the persons whose data is gathered; (ii) network operators shall neither gather personal
information unrelated to the services they provide, nor gather or use personal information in violation of the provisions of laws and administrative regulations or the
scopes of consent given by the persons whose data is gathered; and shall dispose of personal information they have saved in accordance with the provisions of laws and
administrative regulations and agreements reached with the persons whose data is collected; and (iii) network operators shall not divulge, tamper with or damage the
personal information they have collected, and shall not provide the personal information to others without the consent of the persons whose data is collected. However,
exceptions may apply if the information has been processed and cannot be recovered and thus it is impossible to match such information with any specific persons.
In August 2019, the CAC promulgated Provisions on Online Protection of Children’s Personal Information, or the Children Personal Information Provisions, which
came into effect in October 2019. The Children Personal Information Provisions provides that network operators’ collection, storage, transfer, and disclosure of children’s
personal information must follow the principles of legitimacy and necessity, awareness and consent, clear purpose, protection of security and legal use. Network
operators shall clearly inform children’s guardian and obtain his consent when collecting, storing, using, transferring and disclosing children’s personal information.
According to the Children Personal Information Provisions, network operators must adopt personal information protection rules and user agreements specifically for
children’s personal information and appoint persons dedicated to be responsible for the protection of children’s personal information. In addition, network operators must
strictly limit the access authorization to children’s personal information within their staff members to the minimum. Furthermore, the access to children’s personal
information by network operators’ staff must be subject to approval by the children personal information protection officer or the administrative personnel delegated by
him, the access must be recorded, and technical measures must be adopted to prevent unauthorized duplication or download of children’s personal information. In April,
2021, the MIIT issued the Interim Administrative Provisions on Personal Information Protection in Internet Mobile Applications (Draft for Comment). The draft of the
Interim Administrative Provisions on Personal Information Protection in Internet Mobile Applications sets forth two principles of collection and utilization of personal
information, namely “informed and consent” and “minimum necessity.”
In November 2019, the CAC, together with the General Office of the MIIT, the General Office of the MPS and the General Office of the SAMR, published the
Guidelines for Identifying Illegal Collection and Use of Personal Information via Apps, which describes six categories of prohibited behaviors on illegal collection or use
of user’s personal information via Apps, and further broken down into 31 specific types, including (i) failure to publicly disclose rules of collecting and using personal
information, (ii) failure to clearly express the purposes, means and scope of collecting and using personal information, (iii) collecting or using personal information
without users’ consent, (iv) violating the principle of necessity and collecting personal information unrelated to services they provide, (v) providing personal information
to others without the consent of the persons whose data is collected, and (vi) failure to provide functions of deleting or rectifying personal information as required by
laws or failure to publicly disclose contact information for complaint or reporting. On March 12, 2021, the CAC, the MIIT, the MPS and the SAMR jointly promulgated
the Provisions on the Scope of Necessary Personal Information Required for Common Types of Mobile Internet Applications, which became effective on May 1, 2021,
clarifying the scope of necessary information required for certain common mobile apps and stating that mobile apps operators may not deny users’ access to basic
functions and services when the users opt out of the collection of unnecessary personal information.
In August 2021, the Standing Committee of the NPC promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to
personal information rights and privacy protection and took effect on November 1, 2021. The Personal Information Protection Law requires, among others, that (i) the
processing of personal information should have a clear and reasonable purpose which should be directly related to the processing purpose, in a method that has the least
impact on personal rights and interests, and (ii) the collection of personal information should be limited to the minimum scope necessary to achieve the processing
purpose to avoid the excessive collection of personal information. Different types of personal information and personal information processing will be subject to various
rules on consent, transfer, and security. Entities handling personal information shall bear responsibilities for their personal information handling activities, and adopt
necessary measures to safeguard the security of the personal information they handle. Otherwise, the entities handling personal information could be ordered to correct,
or suspend or terminate the provision of services, and face confiscation of illegal income, fines or other penalties. As the Personal Information Protection Law was
recently promulgated and many specific requirements of this law remain to be clarified by the CAC, other regulatory authorities, and courts in practice, we may be
required to make further adjustments to our business practices to comply with the requirements thereunder.
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Regulations Relating to Online Transmission of Audio-Visual Programs
On April 13, 2005, the State Council promulgated the Certain Decisions on the Entry of the Non-State-owned Capital into the Cultural Industry. On July 6, 2005,
five PRC regulatory agencies, namely, the Ministry of Culture (which is the predecessor of the Ministry of Culture and Tourism, the MCT), the State Administration of
Radio, Film and Television, or the SARFT (which is the predecessor of the National Radio and Television Administration, the NRTA), the General Administration of
Press and Publication, or the GAPP, the NDRC and MOFCOM, jointly promulgated the Several Opinions on Introduction of Foreign Investment into the Cultural Sector.
According to these regulations, non-state-owned capital and foreign investors are prohibited from conducting the business of transmitting audio-visual programs through
information network.
According to the Administrative Provisions on Internet Audio-visual Program Service, or the Audio-visual Program Provisions, jointly promulgated by the SARFT
and the Ministry of Information Industry, or the MII (which is the predecessor of MIIT), on December 20, 2007 and amended by the State Administration of Press,
Publication, Radio, Film and Television, or the SAPPRFT, on August 28, 2015, internet audio-visual program service refers to activities of making, editing and
integrating audio-visual programs, providing them to the general public via internet, and providing audio-visual programs uploading and transmission services and
providers of internet audio-visual program services are required to obtain a Audio-visual License issued by the competent department of radio, film and television or
complete certain registration procedures. Providers of internet audio-visual program services are generally required to be either state-owned or state-controlled by the
PRC government, and the business to be carried out by such providers must satisfy the overall planning and guidance catalog for internet audio-visual program service
determined by the competent department of radio, film and television.
In 2008, the SARFT issued the Notice on Relevant Issues Concerning Application and Approval of License for Online Transmission of Audio-visual Programs,
amended on August 28, 2015, which further sets forth detailed provisions concerning the application and approval process regarding the Audio-visual License. The
notice also provides that the internet audio-visual program services providers who had engaged in such services, complies with relevant laws and regulations of the state
on the administration of internet websites, prior to the promulgation of the Audio-visual Program Provisions shall also be eligible to apply for the license so long as they
has no violation of laws and regulations, or their violation of the laws and regulations is minor and can be rectified in a timely manner and they have no records of
violation during the latest three months.
Further, on March 31, 2009, the SARFT promulgated the Notice on Strengthening the Administration of the Content of Internet Audio-visual Programs, which
reiterates the requirements for the internet audio-visual programs to be published to the public through information networks, including those on mobile network (if
applicable), where applicable, and prohibits certain types of internet audio-visual programs containing violence, pornography, gambling, terrorism, superstitions or other
prohibited elements.
On March 17, 2010, the SARFT issued the Internet Audio-visual Program Services Categories (Provisional), or the Provisional Categories, amended on March 10,
2017, which classified internet audio-visual program services into four categories. In addition, the Notice concerning Strengthening the Administration of the Streaming
Service of Online Audio-Visual Programs promulgated by the SAPPRFT on September 2, 2016, or the Online Live Streaming Notice, emphasizes that, unless a specific
Audio-visual License is granted, an audio-visual programs service provider is forbidden from engaging in live streaming on major political, military, economic, social,
cultural and sports events. According to the Online Live Streaming Notice, online audio-visual live streaming service providers shall censor and tape such programs and
retain them for at least 60 days for future check by the administrative departments; and they shall have an emergency plan in place to replace programs in violation of
laws and regulations. Bullet-screen comments shall be forbidden in the live streaming of important political, military, economic, social, sports and cultural events. Special
censor shall be appointed for bulletscreen comments in the live streaming of general cultural events of social communities and sports events. Hosts, guests and targets
hired or invited by online audio-visual live streaming programs shall meet the following requirements: (i) patriotic and law-abiding; (ii) good public reputation and social
image, no scandals and misdeeds; and (iii) dress, hairstyle, language and actions are consistent with public order and good morals, and not drawing topics with vulgar
content or content inappropriate to discuss in public.
As of the date of this annual report, we have not obtained an Audio-visual License. For detailed analysis, see “Item 3. Key Information—D. Risk Factors—Risks
Relating to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC regulations of internet and related business
and companies.”
On November 4, 2016, the CAC promulgated the Administrative Provisions on Internet Live-Streaming Services, or Internet Live-Streaming Services Provisions.
According to the Internet Live-Streaming Services Provisions, an internet live-streaming service
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provider shall take various measures during operation of live streaming services, including, but not limited to: (i) establish a live-streaming content review platform,
conducting classification and grading management according to the online live streaming content categories, user scale and others, add tags to graphics, video, audio or
broadcast tag information for platforms; (ii) conduct verification on online live streaming users with valid identification information (e.g., authentic mobile phone
numbers) and authentication registration of internet live-streaming issuers based on their identification documents (such as their identity certificates, business licenses
and organization code certificates); (iii) examine and verify the authenticity of the identification information of online live streaming service publishers, classify and file
such identification information records with the Internet information offices at the provincial level where they are located and provide such information to relevant law
enforcement departments upon legal request; and (iv) enter into a service agreement with internet live-streaming services user to specify both parties’ rights and
obligations and require them to comply with the laws, regulations and platform conventions; and (v) establish a credit-rating system and a blacklist system, to provide
management and services according to such credit rating, prohibit re-registration of accounts by online live streaming service users on the black list and promptly report
such users to relevant Internet information offices.
According to the Guidelines on Strengthening Supervision of Online Live Streaming Marketing Activities promulgated by the SAMR on November 5, 2020, any
network platform shall assume the responsibility and obligation as an e-commerce platform operator according to the E-Commerce Law; provided that this platform
provides operators, who sell goods or provide services via internet live streaming, with services such as internet operation place, transaction matchmaking and
information publication in order for the transaction parties to independently complete their transaction activities.
According to the Notice on Strengthening the Management of Online Show Live Broadcasting and E-commerce Live Broadcasting promulgated by the NRTA on
November 12, 2020, platforms providing online show live streaming or e-commerce live streaming services shall register their information and business operations by
November 30, 2020 on the National Internet Audio-visual Platforms Information Management System. Live broadcasting platforms for online shows and e-commerce
live broadcasting are requested to strengthen positive value guidance and prevent the spread of the trends of wealth flaunting, money worshiping and vulgarity. In
addition, the number of content reviewers of a platform is required to keep must in principle be no less than 1:50 of the number of live broadcasting rooms and the
platform shall report the number of its live streaming rooms, streamers and content reviewers to the provincial branch of the NRTA on a quarterly basis. Live
broadcasting platforms for online shows need to manage the hosts and “reward” users based on the real-name registration system, and users who have not registered with
real names or who are minors are prohibited from making rewards. The live broadcasting platforms are required to implement real-name registration system by real-name
verification, face recognition, manual review and other measures to prevent who have not registered with real names or minors from making rewards. The platform shall
limit the maximum amount of rewards each user may give per time, day and month. Live streaming platforms for e-commerce shall not illegally produce and broadcast,
beyond their business scope of e-commerce, any commentary programs unrelated to sales of goods.
According to the Law of the PRC on the Protection of Minors (2020 Revision), which will take effect on June 1, 2021, among others, live broadcasting service
providers are not allowed to provide minors under age 16 with online live broadcasting publisher account registration service, and must obtain the consent from parents
or guardians and verify the identity of the minors before allowing minors aged 16 or above to register live broadcasting publisher accounts.
According to the Notice on Strengthening the Administration of the Internet Live Streaming Service jointly promulgated by the MIIT, the MPS and other
government agencies on August 1, 2018, internet live streaming service providers shall go through the procedures of filing with the competent department of
telecommunications. The internet live streaming service providers engaged in telecommunications business and internet news information, network performances and
internet live streaming of audio-visual programs shall apply to the relevant departments for licenses to operate such telecommunication business and shall perform the
procedures of record-filing with the local public security department within 30 days after the live streaming service being operated.
Furthermore, pursuant to the Administrative Provisions on Online Audio and Video Information Services jointly promulgated by the CAC, MCT and NRTA on
November 18, 2019 and effective on January 1, 2020, online audio and video information services providers shall obtain the relevant legally required qualifications and
certificates. Online audio-visual information service providers shall authenticate user’s real identity information based on organization code, identity card number, mobile
phone number, etc. Online audio-visual information service providers shall not serve users who fail to provide their real identity information. They shall also fulfill their
responsibilities as information content management entities, such as having in place professional staff commensurate with their service scale, and establishing the
systems of user registration, information release review, information security management, intellectual property rights protection and minority protections and other
mechanisms. Moreover, when the online audio and video information services provider produce, publish or spread untrue audio-visual information by way of utilizing
new technologies such as deep learning
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or virtual reality, the disseminated information shall be identified in a noticeable way. If any user is found to produce, post or disseminate content prohibited by laws or
regulations, the transmission of such information shall be ceased, and disposal measures such as deletion shall be taken to prevent the information from spreading, and
such service providers shall save relevant records, and report to the CAC, the MCT, the NRTA, etc.
In order to further strengthen the standardized management of the online live streaming industry, the CAC, the MIIT, the MPS, the MCT, the SAMR, the NRTA and
other government agencies jointly issued the Circular on the Guiding Opinions on Strengthening Standardized Management of Online Live Streaming on February 9,
2021, which further states that live streaming platforms which provide online audio-visual program services must obtain the Audio-Visual Licenses (or complete the
registration on the National Internet Audio-visual Platforms Information Management System) and complete the ICP filing procedure. As of the date of this annual
report, we have not completed registration for distributing publications and providing live streaming services on our platform, however, we also provide online live
streaming services on third parties’ platforms which have completed such registration.
On April 12, 2022, the NRTA and the Publicity Department of the China Communist Party Central Committee promulgated the Notice on Strengthening the
Administration of Live Games on Online Audio and Video Program Platforms, specifying that online live streaming platforms shall discretely select the hosts and guests
with political standpoint, moral character, artistic standard and social evaluation as the selection criteria, and resolutely refuse hosts and guests who are politically
incorrect, or have committed any violations of laws, regulations, public order or good morals. The notice further specifies that online live streaming platforms shall
establish and implement a mechanism for the protection of minors, implement the real-name registration system, prohibit minors from tipping, and establish a special
channel for returning the tips of minors.
Regulations on Overseas Offering and Listing
The M&A Rules, which were amended on June 22, 2009, with such amendments becoming effective as of the same date, require offshore SPVs formed for overseas
listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly
listing their securities on an overseas stock exchange. While the application of this regulation remains unclear, we believe, based on the advice of our PRC counsel,
Fangda Partners, that CSRC approval was not required in the context of our initial public offering because (1) CSRC currently has not issued any definitive rule or
interpretation concerning whether offerings like our initial public offerings are subject to this regulation and (2) we established our PRC subsidiaries by means of direct
investment other than by merger or acquisition of PRC domestic companies, and no explicit provision in the M&A Rules classifies the contractual arrangements between
Beijing Tuniu, our PRC subsidiary, Nanjing Tuniu, our consolidated affiliated entity, and its shareholders as a type of acquisition transaction falling under the M&A
Rules.
On July 6, 2021, the relevant PRC government authorities issued the Opinions on Intensifying Crack Down on Illegal Securities Activities. These opinions
emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to
take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed
companies.
On December 27, 2021, the NDRC and the MOC jointly issued the 2021 Negative List, which came into effect on January 1, 2022. Pursuant to the 2021 Negative
List, if a domestic company engaging in the prohibited business stipulated in the 2021 Negative List seeks an overseas offering and listing, it shall obtain the approval
from the competent government authorities. Besides, the foreign investors of the company shall not be involved in the company’s operation and management, and their
shareholding percentage shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors.
On December 24, 2021, the CSRC issued the Draft Overseas Listing Regulations. The Draft Overseas Listing Regulations, among others, stipulate that where
Chinese companies that have directly or indirectly listed securities in overseas markets conduct follow-on offering in overseas markets, they shall fulfill the filing
procedures with and report relevant information to the CSRC, and such filing shall be submitted within three working days after such follow-on offering is completed.
Moreover, an overseas offering is prohibited under certain circumstances if (i) it is prohibited by PRC laws, (ii) it may constitute a threat to or endanger national security
as reviewed and determined by competent PRC authorities, (iii) it has material ownership disputes over equity, major assets, and core technology, (iv) in recent
three years, the Chinese operating entities, and their controlling shareholders and actual controllers have committed relevant prescribed criminal offenses or are currently
under investigations for suspicion of criminal offenses or major violations, (v) the directors, supervisors, or senior executives have been subject to administrative
punishment for severe violations, or are currently under investigations for suspicion of criminal offenses or major violations, or (vi) it has other circumstances as
prescribed by the State Council.
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According to the Draft Overseas Listing Regulations, if we failed to complete the filing procedures with the CSRC for any of our follow-on offerings or fell within
any of the circumstances where our follow-on offering is prohibited by the State Council, our offering application may be discontinued and non-compliance with the
Draft Overseas Listing Regulations or an overseas listing completed in breach of Draft Overseas Listing Regulations may result in a warning on the relevant domestic
companies or a fine of 1-10 million RMB on them. If the circumstances are serious, they may be ordered to suspend their business or suspend their business pending
rectification, or their permits or businesses licenses may be revoked. Furthermore, the controlling shareholders, actual controllers, directors, supervisors, and other legally
appointed persons of the domestic enterprises may be warned, or fined between 500,000 - 5 million RMB either individually or collectively. The Draft Overseas Listing
Regulations were released only for soliciting public comments at this stage and their provisions and anticipated adoption or effective date are subject to changes and thus
their interpretation and implementation remain substantially uncertain.
Regulations on Air-ticketing
The air-ticketing business is subject to the supervision of the China Aviation Transportation Association, or CATA, and its regional branches. Currently the principal
regulation governing air-ticketing agencies in China is the Rules on Certification of Qualification for Civil Aviation Transport Sales Agencies, or the Air Ticketing Rules,
issued by the CATA, which became effective on March 31, 2006. Under the Air Ticketing Rules and relevant foreign investment regulations, any company acting as an
air-ticketing sale agency must obtain approval from the CATA, and a foreign investor cannot currently own 100% of an air-ticketing agency in China, except for qualified
Hong Kong and Macau aviation marketing agencies. In addition, foreign-invested air-ticketing agencies are not permitted to sell passenger airline tickets for domestic
flights in China, except for Hong Kong and Macau aviation marketing agencies. In addition, CATA issued the Supplementary Rules Regarding Sales via the Internet in
2008. These Supplementary Rules provide that, effective as of June 1, 2008, if an air-ticketing sales agency would like to engage in sales via the Internet, it must obtain
an ICP license from the local counterpart of the MIIT and must complete a commercial website registration with the local counterpart of the SAMR. Although we request
that travel suppliers provide their licenses or permits to us before entering into agreements with them, we cannot ensure that all of travel suppliers engaged in the air
ticketing sales agency service obtained, and maintained, all necessary permits. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and
Industry—We may not be able to adequately control and ensure the quality of travel products and services sourced from travel suppliers. If there is any deterioration in
the quality of their performance, our customers may seek damages from us and not continue using our online platform.”
On March 3, 2021, the Ministry of Transport of the People’s Republic of China issued Administrative Provisions on Passenger Services for Public Air Transport,
which took effect on September 1, 2021, requiring that operators of the aviation sales network platforms shall preserve the ticket-related information and ensure the
completeness, confidentiality and availability of such information.
Regulations on Hotel Operation
In November 1987, the MPS issued the Measures for the Control of Security in the Hotel Industry, which has been most recently amended in April 2022. In
June 2004, the PRC State Council promulgated the Decision of the PRC State Council on Establishing Administrative License for the Administrative Examination and
Approval Items Really Necessary To Be Retained, which has been amended in 2016, 2019, 2020 and 2021, respectively. Under these two regulations, anyone who
applies to operate a hotel is subject to examination and approval by the local public security authority and must obtain a special industry license. The Measures for the
Control of Security in the Hotel Industry impose certain security control obligations on the operators. For example, the hotel must examine the identification card of any
guest to whom accommodation is provided and make an accurate registration. The hotel must also report to the local public security authority if it discovers anyone
violating the law or behaving suspiciously, or an offender wanted by the public security authority.
In April 1987, the PRC State Council promulgated the Public Area Hygiene Administration Regulation, which has been most recently amended in May 2021,
requiring hotels to obtain a public area hygiene license before opening for business. In March 2011, the Ministry of Health promulgated the Implementation Rules of the
Public Area Hygiene Administration Regulation, which has been amended in January 2016 and December 2017, respectively, requiring, starting from May 1, 2011, hotel
operators to establish hygiene administration systems and keep records of hygiene administration. In February 2009, the Standing Committee of the NPC enacted the
Food Safety Law, which has been amended in April 2015, December 2018 and April 2021, respectively, requiring any hotel that provides food to obtain a food service
license.
The Fire Prevention Law, as most recently been amended by the Standing Committee of the NPC in April 2021, and the Provisions on Supervision and Inspection on
Fire Prevention and Control, as amended by the MPS in July 2012, require that public gathering places
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such as hotels submit a fire prevention design plan in order to apply for completion acceptance of fire prevention facilities for their construction projects and to pass a fire
prevention safety inspection by the local public security fire department, which is a prerequisite for opening business.
In January 2006, the PRC State Council promulgated the Regulations for Administration of Entertainment Places which has been most recently amended in
November 2020. Under the regulations, hotels that provide entertainment facilities, such as discos or ballrooms, are required to obtain a license for entertainment
business operations.
We cannot ensure that all of the hotels that we offer to our customers have obtained, and maintained, all necessary permits and licenses. See “Item 3. Key
Information—D. Risk Factors—Risks Related to Our Business and Industry—We may not be able to adequately control and ensure the quality of travel products and
services sourced from travel suppliers. If there is any deterioration in the quality of their performance, our customers may seek damages from us and not continue using
our online platform.”
Regulations on Travel Companies
The travel industry is subject to the supervision of the MCT, formerly known as China National Tourism Administration, or the CNTA, and local culture and tourism
administrations. The principal regulations governing travel companies in China include: (i) the Regulations on Travel Companies, or the Travel Company Regulations,
issued by the PRC State Council in February 2009, and most recently amended in October 2021, which replaced the Administration of Travel Companies Regulations
(1996), (ii) the Implementation Rules for the Regulation on Travel Companies (the “Travel Company Implementation Rules”), promulgated by the CNTA, the
predecessor of MCT, in April 2009 and amended in December 2016, (iii) the Tourism Law issued by the Standing Committee of the NPC on April 25, 2013, and
amended in November 2016 and October 2018, respectively, and (iv) Measures for the Administration of the Overseas Tours of Chinese Citizens, issued by the PRC
State Council in May 2002, became effective as of July 2002 and was amended in March 2017. Under these regulations, a travel company must obtain a license from the
MCT to conduct cross-border travel business and a license from the provincial-level culture and tourism administration to conduct domestic travel company business.
The Travel Company Regulations permit foreign investors to establish wholly foreign-owned travel companies, as well as joint ventures and cooperative travel
companies. Foreign-owned travel companies are allowed to open branches nationwide, but are restricted from engaging in overseas travel business in China, unless
otherwise determined by the PRC State Council, or provided under a bilateral free trade agreement between the country and China, or the closer economic partnership
agreements between China, Hong Kong and Macau. However, according to regulations recently promulgated by the State Council and/or other authorities, qualified
foreign-invested travel companies registered in certain areas of China are allowed to engage in overseas travel business, except in Taiwan area, for example, (i) on July 1,
2016, the PRC State Council issued the Decision of the State Council on Temporally Adjusting Relevant Provisions of Administrative Regulations, Documents of the
State Council and Departmental Rules approved by the State Council in the Pilot Free Trade Zones, or Decision 41, pursuant to which qualified foreign-invested travel
companies, registered in the Pilot Free Trade Zones of Shanghai, Guangdong, Tianjin and Fujian, may engage in overseas travel business, except in Taiwan area, (ii) the
State Council Circular 16 promulgated in January 2019 allows foreign-invested travel companies, including Sino-foreign joint ventures and wholly foreign owned travel
companies, registered in Beijing to engage in overseas travel business, except in Taiwan area, (iii) in August 2019, the PRC State Council issued Notice of the State
Council on the Overall Plans for Six Newly Established Pilot Free Trade Zones, pursuant to which qualified foreign-invested travel companies, registered in the Pilot
Free Trade Zones of Shandong and Heilongjiang provinces may engage in overseas travel business, except in Taiwan area, (iv) in August 2019, Shanghai Municipal
People’s Government promulgated Several Measures of Shanghai Municipality for a New Round of Expanding the Opening up of the Service Sector, pursuant to which
foreign-invested travel companies registered in Shanghai may engage in overseas travel business, except in Taiwan area, (v) in November 2019, MOC together with 17
other government authorities promulgated the Notice on Trial Implementation in China (Hainan) Pilot Free Trade Zone of the Policies Implemented in Other Pilot Free
Trade Zones, pursuant to which qualified foreign-invested travel companies, registered in the Hainan Pilot Free Trade Zones may engage in overseas travel business,
except in Taiwan area.
The Travel Company Implementation Rules define certain terms used in the Travel Company Regulations, for example, the definition of “domestic tourism
business,” “inbound travel business” and “overseas travel business”, and set out detailed application requirements to establish a travel company. The Travel Company
Implementation Rules also clarify certain aspects of legal liability for travel companies as prescribed in the Travel Company Regulations.
Pursuant to the Tourism Law, travel companies are prohibited from arranging for compulsory shopping or other activities which charge additional fees on top of the
contract prices that tourists have already paid, unless it is agreed upon by both parties through
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consultation or requested by the tourists and does not affect the itinerary of other tourists. Travel companies are required to pay quality deposits for compensation for
damage to tourists’ rights and advance payment of expenses for emergency assistance when the tourists’ personal safety is in danger. Travel companies are required to
engage tour guides, who are required to strictly follow the itineraries and are prohibited from altering arrangements without the consent of customers, suspending the
provision of services, requesting tips from tourists, and arranging for compulsory shopping or other activities which charge additional fees on top of the contract prices
that tourists have already paid by way of induction, deception, coercion or in other illegal forms. The information that travel companies release to attract or organize
tourists is required to be authentic and accurate, and no false publicity can be made to mislead tourists. In addition, travel companies conducting business via the Internet
are required to present information of their travel company licenses on their websites, and ensure the truthfulness and accuracy of the travel-related information they
release on their websites. Generally, travel companies soliciting tourists are required to take primary liabilities for any breach of travel contracts, including personal
injury or property loss suffered by the tourists attributable to travel service providers and tour operators at destinations and their suppliers.
In 2010, CNTA released the Measures for Dealing with Tourism Complaints, which took effect as of July 1, 2010. Under these Measures, authorities which are
responsible for dealing with tourist complaints are required to render a decision on the complaints within 60 days after the date of receipt thereof.
Although we take measures, such as requesting travel suppliers to provide their relevant permits and/or licenses, we cannot make sure that all of the travel suppliers
maintained all necessary permits. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may not be able to adequately
control and ensure the quality of travel products and services sourced from travel suppliers. If there is any deterioration in the quality of their performance, our customers
may seek damages from us and not continue using our online platform.”
In November 2010, CNTA and China Insurance Regulatory Commission jointly promulgated the Measures for the Administration of the Liability Insurance of
Travel Companies, or the Liability Insurance Measures, which became effective as of February 1, 2011. Travel companies are required to procure travel company liability
insurance pursuant to the Liability Insurance Measures. The insurance companies are required to, subject to the liability limits provided under the insurance agreement,
reimburse the travel companies for the compensation made by the travel companies for the personal injury or death and the loss of properties of tourists and the relevant
tour guides or tour leaders. Pursuant to the Liability Insurance Measures, the liability limit for the personal injury or death of each person cannot be less than
RMB200,000. Each of the relevant consolidated affiliated entities engaged in travel agent business has procured and is covered by valid travel company liability
insurance.
On August 20, 2020, the MCT issued the Interim Measures on the Administration of Online Tourism Business Services, or the Measures on Online Tourism
Business Services, which took effect on October 1, 2020. The Measures on Online Tourism Business Services provides that operators of online tourism business services
shall, among other things, (i) formulate tourist security protection mechanisms, (ii) refrain from transmission of information prohibited by laws and regulations, keep
relevant records and report to competent authorities, (iii) implement the classified protection system for cyber security and take management and technical measures for
the protection of cyber security, (iv) provide true and accurate tourism service information and establish transparent and accessible reservation channels for
transportation, accommodation and sightseeing for tourists; (v) protect the safety of tourists’ personal information and privacy, and (vi) maintain travel agency liability
insurance if they conduct travel agency business.
Regulations on Online Transaction Platform Operators
In May 2014, the SAIC issued the Guidelines for the Performance of Social Responsibilities by Online Transaction Platform Operators, or the Online Transaction
Platform Operators Guidelines. The Online Transaction Platform Operators Guidelines stipulate the qualification requirements for operators of online transaction
platforms, and certain other obligations, such as examination and registration of any business operator using online transaction platforms, online transaction operators’
contracts with suppliers and customers, and data protection for consumers, among others. Pursuant to the Online Transaction Platform Operators Guidelines, online
transaction platform operators must (i) establish a consumer protection and consumer dispute settlement system, and (ii) ensure that their complaint and customer support
channels are smooth.
In addition, online transaction platform operators must also preserve all relevant online transaction data for at least two years from the date of the transaction.
Operators of online transaction platform must comply with the Consumer Protection Law, the Product Quality Law, the Anti-unfair Competition Law and other relevant
laws and regulations. Furthermore, as required by Jiangsu Administration of Telecommunication, Nanjing Tuniu, our consolidated affiliated entity, has obtained a license
of online data processing and transaction
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which will expire in October 2022. Subject to any clarifications or interpretations that may be issued in future as to the Online Transaction Platform Operators
Guidelines, we might need to adjust our operational or contracting practices.
In August 2018, the Standing Committee of the NPC promulgated the PRC E-commerce Law, which became effective in January 2019. The E-commerce Law
strengthens the regulation on E-commerce operators relating to consumer protection, personal data protection and intellectual property rights protection. As an e-
commerce operator, we are required under the E-commerce Law, (1) to refrain from conducting false or misleading commercial promotion by fabricating transactions,
making up user comments or otherwise, to defraud or mislead consumers, (2) to allow consumers to opt out of search results targeting his or her personal characteristics
such as hobbies and shopping patterns and simultaneously show the consumers with options not targeting his or her personally characteristics, (3) to alert consumers of
tie-in sales of commodities or services, and shall not set the tied-in commodities or services as a default option, (4) to obtain and maintain a business license and other
applicable licenses as required, and disclose information of such licenses at our front-page, (5) to clearly detail the refund procedure for the deposit we received from
customers, and not set any unreasonable conditions to refund, (6) to take the risks and responsibilities in the transportation of the products, unless the consumer chooses a
courier logistics service provider other than the default service provider, etc.
On March 15, 2021, the SAMR promulgated the Measures for the Supervision and Administration of Online Trading, or the Online Trading Measures, which took
effect and replace the Administrative Measures for Online Trading on May 1, 2021. The Online Trading Measures further strengthen the administration and supervision
of online trading activities, and impose a series of regulatory requirements on new forms of online trading, such as online social networking e-commerce and online
livestreaming e-commerce. The Online Trading Measures specify typical examples of unreasonable restrictions or conditions imposed by e-commerce platform operators
on transactions concluded on their platforms, including prohibiting or restricting the merchants to operate on other e-commerce platforms by means of unfair practices,
such as reducing their search exposure, removing their products or services, blocking their stores etc., or prohibiting or restricting the merchants from freely choosing
supporting service providers for transactions, such as logistics services providers.
On March 1, 2022, the Supreme People’s Court in China issued the Provisions on Issues Concerning the Application of Law for the Trial of Cases on Online
Consumption Disputes, which came into effect as of March 15, 2022 and further clarify the responsibilities of online consumption platforms and improve the seven-day
no-reason return rules. According to these judicial interpretations, standard terms provided by e-commerce operators that are unfair and unreasonable to consumers may
be deemed invalid, and contracts signed between e-commerce operators and others for false publicity by means of fictitious deals, hits or user comments should also be
null and void. Moreover, an operator on e-commerce platform shall bear the liability as a product seller or service provider: (1) where the e-commerce platform operator
on an e-commerce platform guides the consumer to make a payment through a method other than that provided by the transaction platform (2) where prizes or gifts
provided by the e-commerce operator during a promotion, or commodities bought by consumers for redemption, harm the consumers; (3) when the promised
compensation standards are higher than the legal standards. In particular, even if the e-commerce platform does not carry out any self-operated business, but the marks
made thereon are sufficient to mislead consumers, the e-commerce platform shall be liable as the product seller or service provider. Furthermore, operators of
livestreaming platforms are responsible for verifying the qualification and license of livestreamers who sell food products.
Regulations on Consumer Rights Protection
According to the PRC Consumer Protection Law, as amended on October 25, 2013 and became effective as of March 15, 2014, the rights and interests of consumers
that purchase or use commodities or receive services for consumption purposes in daily life are required to be protected, which includes the right to personal safety and
the safety of property, the right to be informed about goods and services offered for sale, the right to free choice when selecting goods or services and the right to enjoy
fair dealings, respect for their personal dignity and ethnic customs, and compensation for damages suffered.
Correspondingly, a business operator providing a commodity or service to a consumer is subject to a number of requirements, which includes to ensure that
commodities and services meet with certain safety requirements, to disclose serious defects of a commodity or a service and to adopt preventive measures against damage
occurring, to provide consumers with accurate information and to refrain from conducting false advertising, and not to set unreasonable or unfair terms for consumers or
alleviate or release itself from civil liability for harming the lawful rights and interests of consumers by means of standard contracts, circulars, announcements, shop
notices or other means. A business operator may be subject to civil liabilities for failing to fulfill the obligations discussed above. These liabilities include restoring the
consumer’s reputation, eliminating the adverse effects suffered by the consumer, offering an apology and compensating for any losses incurred. The following penalties
may also be imposed upon business operators for any infraction: issuance of a warning,
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confiscation of any illegal income, imposition of a fine, an order to cease business operations, revocation of its business license or imposition of criminal liabilities under
circumstances that are specified in laws and statutory regulations.
The amended Consumer Protection Law further strengthens the protection of consumers and imposes more stringent requirements and obligations on business
operators, especially on the business operators through the internet. The consumers whose interests are harmed due to their purchase of goods or acceptance of services
on online marketplace platforms may claim damages from sellers or service providers. As to legal liabilities of the online marketplace platform provider, the Consumer
Protection Law set forth that, where a consumer purchases products or accepts services via an online trading platform and his or her interests are prejudiced, if the online
trading platform provider fails to provide the name, address and valid contact information of the seller, the manufacturer or the service provider, the consumer is entitled
to demand compensation from the online trading platform provider. If the online trading platform provider gives an undertaking that is more favorable to consumers, it
shall perform such undertaking. Once the online trading platform provider has paid compensation, it shall have a right of recourse against the seller, the manufacturer or
the service provider. If an online trading platform provider is aware or ought to have been aware that a seller, manufacturer or service provider is using the online
platform to infringe upon the lawful rights and interests of consumers and it fails to take necessary measures, it shall bear joint and several liabilities with the seller, the
manufacturer or service provider for such infringement. The Civil Code of the PRC, which was enacted by the NPC on May 28, 2020 and took effect on January 1, 2021,
also provides that if an online service provider is aware that an online user is committing infringing activities, such as selling counterfeit products, through its internet
services and fails to take necessary measures, it shall be jointly and severally liable with said online user for such infringement. If the online service provider receives 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 and severally liable with the relevant online user for the extended damages.
The Interim Measures for No Reason Return of Online Purchased Commodities within Seven Days, which came into effect in March 2017 and was amended in
October 2020, further clarifies the scope of consumers’ rights to make returns without a reason, including the detailed rules on exceptions, return procedures and online
marketplace platform providers’ responsibility to formulate seven-day no-reason return rules, sets up the related consumer protection systems and supervision on
merchants for compliance with the relevant rules.
In October 2010, the Supreme People’s Court of China issued the Provisions on Issues Concerning the Application of Law for the Trial of Cases on Tourism-related
Disputes, as amended in December 2020, which establish liabilities for tour operators and tourism support service providers in the event of contract disputes, personal
injury and property damage involving tourists.
On March 1, 2022, the Supreme People’s Court in China issued the Provisions on Issues Concerning the Application of Law for the Trial of Cases on Online
Consumption Disputes, which took effect as of March 15, 2022 and further clarify the responsibilities of online consumption platforms. According to these judicial
interpretations, the e-commerce platform shall be liable as the product seller or service provider if the marks made thereon mislead consumers to believe they are
provided by the e-commerce platform, even if it does not actually carry out any self-operated business. Furthermore, according to these judicial interpretations, operators
of livestreaming platforms are responsible for verifying the qualification and license of livestreamers who sell food products.
Therefore, although we take certain measures to monitor the qualities of the travel products and services provided by travel suppliers and handle customer
complaints, we cannot ensure that these measures are sufficient to protect consumer rights, or that customer disputes can be handled and resolved in a timely fashion. See
“Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may not be able to adequately control and ensure the quality of travel
products and services sourced from travel suppliers. If there is any deterioration in the quality of their performance, our customers may seek damages from us and not
continue using our online platform.”
Regulations on Advertising Business
The SAMR is the primary government authority regulating advertising activities, including online advertising, in China. Regulations that apply to advertising
business primarily include:
● Advertisement Law of the People’s Republic of China, promulgated by the Standing Committee of the NPC as most recently amended on April 29, 2021 and
effective as of the same date;
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● Administrative Regulations for Advertising, promulgated by the PRC State Council on October 26, 1987 and effective since December 1, 1987.
● Regulations on Internet Information Search Services, promulgated by the CAC on June 25, 2016 and effective on August 1, 2016 ; and
● Interim Measures for Administration of Internet Advertising, promulgated by the SAIC on July 4, 2016 and effective on September 1, 2016.
According to the above regulations, companies that engage in advertising activities must each obtain, from the SAMR or its local branches, a business license which
specifically includes operating an advertising business in its business scope. An enterprise engaging in advertising business within the specifications in its business scope
does not need to apply for the registration for advertisement publication, provided that such enterprise is not a radio station, television station, newspaper and periodical
publishers.
Under the Rules for Administration of Foreign Invested Advertising Enterprises, which were jointly promulgated by the SAIC and the MOC on March 2, 2004 and
amended on August 22, 2008, certain foreign investors are permitted to hold direct equity interests in PRC advertising companies. A foreign investor in a Chinese
advertising company is required to have prior direct advertising operations as its main business outside China for two years if the Chinese advertising company is a joint
venture, or three years if the Chinese advertising company is a wholly foreign-owned enterprise. Since we have not been involved in the advertising industry outside of
China for the required number of years, we are not permitted to hold direct equity interests in PRC companies engaging in the advertising business. Therefore, we
conduct our advertising business through Nanjing Tuniu, which holds a business license that covers advertising in its business scope. The Rules for Administration of
Foreign Invested Advertising Enterprises has been abolished on June 29, 2015. PRC advertising laws and regulations set certain content requirements for advertisements
in China, including, among other things, prohibitions on false or misleading content, superlative wording, socially destabilizing content or content involving obscenities,
superstition, violence, discrimination or infringement of the public interest. Advertisers, advertising agencies, and advertising distributors are required to ensure that the
content of the advertisements they prepare or distribute is true and in full compliance with applicable laws. In providing advertising services, advertising operators and
advertising distributors must review the supporting documents provided by advertisers for advertisements and verify that the content of the advertisements complies with
applicable PRC laws and regulations. Prior to distributing advertisements that are subject to government censorship and approval, advertising distributors are obligated to
verify that such censorship has been performed and approval has been obtained. Violation of these regulations may result in penalties, including fines, confiscation of
advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. Where serious
violations occur, the SAMR or its local branches may revoke such offenders’ licenses or permits for their advertising business operations.
Regulations on Small Credit Companies
Under the Guiding Opinions on the Pilot Operation of Small Credit Companies which was promulgated by the CBIRC and the PBOC on May 4, 2008, or the
Guiding Opinions on Small Credit Companies, a small credit company is a company which is specialized in operating a small credit business, established with
investments from natural persons, legal-person enterprises or other social organizations, and does not accept any public deposits. Currently there is no regulatory
authority at the national level with respect to the administration and supervision of small credit companies in the PRC. Pursuant to the Guiding Opinions on Small Credit
Companies, if a provincial government determines a competent department (office of finance or relevant organizations) to be responsible for the supervision and
administration of small credit companies and the regulation of risks associated with small credit companies, such provincial government may carry out the pilot operation
of small credit companies within such province. The applicant is required to file an application with the competent department of the provincial government to apply for
setting up a small credit company. Based on the Guiding Opinions on Small Credit Companies, many provincial governments, including that of Guangdong Province,
where our small credit company is incorporated, promulgated local implementing rules on the administration of small credit companies. Our small credit company has
obtained the approval issued by the competent authority to conduct small credit businesses through the internet.
In November 2020, the CBIRC and the PBOC published the Draft Online Small Credit Measures, for public comment. The Draft Online Small Credit Measures
provide, among others, that:
● an online small credit company must obtain the CBIRC’s approval before carrying out online small credit business across two or more provinces;
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● an online micro-lending company shall provide at least 30% funding for any single co-lending loan and keep its overall debt financing amount within five times
of its net assets; and
● the amount of the balance of the loan that an online small credit company may provide to an individual or entity shall not exceed, in the case of an individual,
the lower of RMB300,000 or one-third of the individual’s average annual income for the past three years, and, in the case of a legal person or organization,
RMB1 million.
Under the Draft Online Small Credit Measures, existing online small credit companies with businesses across provinces will have a three-year transition period to
obtain the required approval and adjust their businesses as necessary to be in compliance with these measures. The Draft Online Small Credit Measures, if enacted in
substantially the form published for public comment, will change regulatory requirements for online small credit business in various respects.
Regulations on Insurance Brokerage
According to the Measures for the Regulations of the Internet Insurance Business issued by CBIRC on December 7, 2020 and effective on February 1, 2021,
“Internet insurance business” means the insurance operations in which insurance institutions conclude insurance contracts and provide insurance services through the
Internet, “insurance institutions” include insurance companies and insurance intermediary institutions such as insurance brokers. Internet insurance business shall only be
carried out by legally established insurance institutions. No insurance institution may carry out the Internet insurance business beyond the permitted business scope. An
insurance institution, including insurance broker, shall sell internet insurance products or provide insurance brokerage services via its self-operated network platform or
the self-operated network platform of any other insurance institution, and the insurance application page shall belong to its self-operated network platform, except where
any government department requires policyholders to complete the entry of insurance application information on the network platform prescribed by the government in
the public interest. “Self-operated network platform” refers to any network platform being independently operated with complete data permission, which is legally
established by an insurance institution for the purpose of internet insurance business operation; network platforms established by branches of insurance institutions and
non-insurance institutions related to insurance institutions in terms of equity or personnel shall not be deemed as self-operated network platforms. An insurance
institution shall continue to raise the level of risk prevention and control of internet insurance business, improve the risk monitoring, early warning and early intervention
mechanism, and ensure the independent operation of its self-operated network platform.
According to the Provisions on the Supervision of Insurance Brokers, or the POSIB, promulgated by the China Insurance Regulatory Commission, which was
merged into the CBIRC, on February 1, 2018 and effective on May 1, 2018, the Implementation Measures for Insurance Intermediary Business Administrative Licensing
and Record-filing promulgated by CBIRC on October 28, 2021 and effective on February 1, 2022, the insurance brokerage company must obtain an insurance brokerage
license from CBIRC before engaging in insurance brokerage business. One of the consolidated affiliated entities has obtained the insurance brokerage license to operate
the following insurance brokerage businesses: (i) draft insurance plans for insurance applicants, select insurance companies and handle insurance application formalities
nationwide; (ii) assist the insured parties or beneficiaries in making claims; (iii) reinsurance brokerage, (iv) provide disaster prevention, loss prevention, risk evaluation or
risk management advisory services to entrusting parties; (v) other businesses approved by the CBIRC.
According to the Notice of the General Office of the CBIRC on Relevant Matters of Further Regulating the Internet Personal Insurance Businesses of Insurance
Institutions promulgated on October 12, 2020, the insurance intermediary institution carrying out the Internet personal insurance business shall be a national institution
and shall have corresponding technical capacity, operating capacity and service capacity, the customer service personnel of an insurance intermediary institution are not
allowed to conduct proactive marketing and their salaries shall not be linked to the sales assessment indicators of the Internet personal insurance.
Regulations on Fund Distribution
According to the Administration Measures of Publicly Offered Securities Investment Funds Distribution Institutions, or the Fund Distribution Administrative
Measures, promulgated by CSRC on August 28, 2020 and effective on October 1, 2020, fund distribution institutions include fund managers and other institutions shall
be registered with the CSRC or its branches. Commercial banks, securities companies, futures companies, insurance institutions, securities investment consulting
institutions and independent institutions are required to register with local CSRC branch and obtain the relevant fund distribution license before engaging in fund
distribution service. Distribution services regulated under the Fund Distribution Administrative Measures refer to marketing and promotion, sales and
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distribution, and in particular, subscription and redemption services of mutual funds. One of the consolidated affiliated entities obtained the fund distribution license from
the CSRC.
Regulations on Intellectual Property Rights
The PRC has adopted legislation governing intellectual property rights, including trademarks, domain names and copyrights.
Trademark
The PRC Trademark Law and its implementation rules protect registered trademarks. The State Intellectual Property Office, formerly the PRC Trademark Office of
the SAIC is responsible for the registration and administration of trademarks throughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect
to trademark registration. As of December 31, 2021, we had 493 registered trademarks in different applicable trademark categories and were in the process of applying to
register 7 trademarks in China.
In addition, pursuant to the PRC Trademark Law, counterfeit or unauthorized production of the label of another person’s registered trademark, or sale of any label
that is counterfeited or produced without authorization will be deemed as an infringement to the exclusive right to use a registered trademark. The infringing party will be
ordered to stop the infringement immediately, a fine may be imposed and the counterfeit goods will be confiscated. The infringing party may also be held liable for the
right holder’s damages, which will be equal to the gains obtained by the infringing party or the losses suffered by the right holder as a result of the infringement,
including reasonable expenses incurred by the right holder for stopping the infringement. If the gains or losses, or royalties are difficult to determine, the court may
render a judgment awarding damages of up to RMB5,000,000.
Domain Name
Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT in August 2017 and effective on
November 2017. The MIIT is the major regulatory body responsible for the administration of the PRC Internet domain names, under supervision of which the China
Internet Network Information Center, or CNNIC, is responsible for the daily administration of .cn domain names and Chinese domain names. The MIIT issued
Administrative Measures on Internet Domain Name on August 14, 2017 and then CNNIC issued Rules for the Implementations of the Registration of State Top-Level
Domain Name on June 18, 2019, which set forth basic rules for registration of domain names. CNNIC adopts the “first to file” principle with respect to the registration of
domain names. In November 2017, MIIT promulgated the Notice of the Ministry of Industry and Information Technology on Regulating the Use of Domain Names in
Internet Information Services to further regulate the use of domain names in internet information services. As of December 31, 2021, we had 93 registered domain
names, including www.tuniu.com.
Copyright
Works are protected under the PRC Copyright Law adopted by the NPC in 1990, as amended in 2001, 2010 and 2020, as well as its implementation rules adopted by
the State Council in 1991, as amended in 2002, 2011 and 2013. Whether such protected works are published or not, copyrights duly obtained and enjoyed by the author
or other copyright owner remain unaffected. Copyright owners, however, could register such protected works on a voluntary basis with National Copyright
Administration or its local counterparts. We have registered 26 artwork copyrights in China.
Pursuant to the PRC Copyright Law and its implementation rules, creators of protected works enjoy personal and property rights, including, among others, the right
of disseminating the works through information network. Pursuant to the relevant PRC regulations, rules and interpretations, Internet service providers will be jointly
liable with the infringer if they (i) participate in, assist in or abet infringing activities committed by any other person through the Internet, (ii) are or should be aware of
the infringing activities committed by their website users through the Internet, or (iii) fail to remove infringing content or take other action to eliminate infringing
consequences after receiving a warning with evidence of such infringing activities from the copyright holder. In addition, where an ICP service operator is clearly aware
of the infringement of certain content against another’s copyright through the Internet, or fails to take measures to remove relevant contents upon receipt of the copyright
owner’s notice, and as a result, it damages the public interest, the ICP service operator could be ordered to stop the tortious act and be subject to other administrative
penalties such as confiscation of illegal income and fines. To comply with these laws and regulations, we have implemented internal procedures to monitor and review
the content we have licensed from content providers before they are released on our website and remove any infringing content promptly after we receive notice of
infringement from the legitimate rights holder.
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Software Copyrights
Computer Software Protection Regulations promulgated by the PRC State Council in December 2001, amended in 2011 and 2013, provide that the rights and
interests of computer software copyright owners are protected. A Chinese citizen, legal person, or other organization shall be entitled to the copyright in software
developed thereby regardless of whether the software has been published or not. A foreigner’s or stateless person’s software shall enjoy copyright if it is first distributed
in China.
In order to further implement the Computer Software Protection Regulations, the State Copyright Bureau issued the Computer Software Copyright Registration
Procedures in February 2002, amended in 2004, which apply to software copyright registration, license contract registration and transfer contract registration. As of
December 31, 2021, we had 116 registered computer software copyrights in China.
Patents
Patents are protected under the PRC Patent Law adopted by the NPC in 1984, as amended in 1992, 2000, 2008 and 2020, as well as its implementation rules adopted
by the State Council in 1985, as amended in 1992, 2001, 2002 and 2010. The Patent Office under the State Intellectual Property Office is responsible for receiving,
examining and approving patent application. A patent is valid for a term of 20 years in the case of an invention and a term of 10 years in the case of utility models and
designs. A third-party user must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use constitutes an infringement of patent
rights. As of December 31, 2021, we had 27 registered patents, and were in the process of applying to register 3 patents in China.
Civil Code of the PRC
In accordance with the Civil Code of the PRC promulgated by the NPC on May 28, 2020, which became effective as of January 1, 2021, Internet users and Internet
service providers bear tortious liabilities in the event they infringe other persons’ rights and interests through the Internet. Where an Internet user conducts tortious acts
through Internet services, the infringed person has the right to request the Internet service provider to take necessary actions such as deleting contents, screening and
delinking. The Internet service provider, failing to take necessary actions after being informed, will be subject to joint and several liabilities with the Internet user with
regard to the additional damages incurred. If an Internet service provider knows an Internet user is infringing other persons’ rights and interests through its Internet
service but fails to take necessary action, it shall be jointly and severally liable with the Internet user. We have internal policies designed to reduce the likelihood that user
content may be used without proper licenses or third-party consents. When we are approached and requested to remove content uploaded by users on the grounds of
infringement, we investigate the claims and remove any uploads that appear to infringe the rights of a third party after our reasonable investigation and determination.
However, such policy may not be effective in preventing the unauthorized listing of copyrighted materials or materials infringing other rights of third parties. See
“Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Claims by third parties that we infringe on their intellectual property rights
could lead to government administrative actions and result in significant costs and have a material adverse effect on our business, financial condition and results of
operations.”
Regulations on Foreign Currency Exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations. Under PRC foreign exchange
regulations, payments of current account items, such as profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in
foreign currencies without prior approval from the SAFE, by complying with certain procedural requirements. By contrast, approval from or registration with competent
government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct
investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China.
In 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or Circular
59, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to Circular 59, the opening of various special purpose foreign exchange
accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign
investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval
or verification of SAFE, and multiple capital accounts for the same entity are allowed to be opened in different provinces, which was previously prohibited. In 2013,
SAFE specified that the administration by SAFE or its local branches over direct investment
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by foreign investors in the PRC must be conducted by way of registration and banks must process foreign exchange business relating to the direct investment in the PRC
based on the registration information provided by SAFE and its branches. In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the
Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, which became effective in June 2015 and was most recently amended in
December 2019. Under SAFE Circular 13, foreign exchange registrations of direct investment will be handled by the banks designated by the foreign exchange authority
instead of SAFE and its branches. We generally follow the regulations and apply to obtain the approval of or registration with SAFE and other relevant PRC government
authorities or designated banks. However, we may not be able to obtain these registrations or approvals on a timely basis, if at all. If we fail to receive such registrations
or approvals, our ability to provide loans or capital contributions to our PRC subsidiaries and the consolidated affiliated entities may be negatively affected, which could
adversely affect our liquidity and our ability to fund and expand our business.
In March 2015, SAFE promulgated the Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-
invested Enterprise, or Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises
nationwide. Circular 19 replaced both the Circular of the SAFE on Issues Relating to the Improvement of Business Operations with Respect to the Administration of
Foreign Exchange Capital Payment and Settlement of Foreign Invested Enterprises, or Circular 142, and the Circular of the SAFE on Issues concerning the Pilot Reform
of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-invested Enterprises in Certain Areas, or Circular 36. Circular 19
allows all foreign-invested enterprises established in the PRC to settle their foreign exchange capital on a discretionary basis according to the actual needs of their
business operation, provides the procedures for foreign invested companies to use Renminbi converted from foreign currency-denominated capital for equity investments
and removes certain other restrictions that had been provided in Circular 142. However, under Circular 19, foreign-invested enterprises are continued to be prohibited
from, among other things, using RMB funds converted from their foreign exchange capital for expenditure beyond their business scope and providing entrusted loans or
repaying loans between non-financial enterprises. SAFE further promulgated the Notice of the State Administration of Foreign Exchange on Reforming and
Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or Circular 16, effective June 2016, which reiterates some of the rules set forth
in Circular 19. Circular 16 provides that discretionary settlement of foreign exchange applies to foreign exchange capital, foreign debt offering proceeds and remitted
foreign listing proceeds, and the corresponding RMB capital converted from foreign exchange may be used to extend loans to related parties or repay intercompany loans
(including advances by third parties). However, there are substantial uncertainties with respect to the interpretation and implementation of Circular 16 in practice.
Circular 19 or Circular 16 may delay or limit us from using the proceeds of offshore financing activities to make additional capital contributions to our PRC subsidiaries,
and any violations of these circulars could result in severe monetary or other penalties.
In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance
Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profits from domestic entities to offshore entities,
including (i) banks must check whether the transaction is genuine by reviewing board resolutions regarding profit distribution, original copies of tax filing records and
audited financial statements, and (ii) domestic entities must retain income to account for previous years’ losses before remitting any profits. Moreover, pursuant to
Circular 3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts and other proof as a
part of the registration procedure for outbound investment.
On October 23, 2019, SAFE issued Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and
Investment, or the Circular 28, which took effect on the same day. Circular 28 allows foreign-invested enterprises of non-investment nature to use their capital funds to
make equity investments in China, provided that such investments do not violate the effective special entry management measures for foreign investment (negative list)
and the target investment projects are genuine and in compliance with laws. According to the Circular on Optimizing Administration of Foreign Exchange to Support the
Development of Foreign-related Business issued by SAFE on April 10, 2020, eligible enterprises are allowed to make domestic payments with their income under capital
accounts such as capital funds, foreign debts and proceeds from overseas listing without submitting evidence of genuineness to the banks in advance, provided the use of
such funds is genuine and in compliance with administrative regulations on the use of income under capital accounts.
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Regulations on Dividend Distribution
The principal regulations governing distribution of dividends of wholly foreign-owned enterprises include the PRC Company Law, which applies to both PRC
domestic companies and foreign-invested companies, and the PRC Foreign Investment Law and its Implementation Rules, which apply to foreign-invested companies.
Under these laws, regulations and rules, both domestic companies and foreign-invested companies in the PRC are required to set aside as general reserves at least 10% of
their after-tax profit, until the cumulative amount of their reserves reaches 50% of their registered capital. PRC companies are not permitted to distribute any profits until
any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current
fiscal year.
Regulations on Offshore Financing
Pursuant to a SAFE Circular 37 issued by SAFE on July 4, 2014, which replaced the former circular commonly known as “Safe Circular 75” issued by SAFE in
October 2005, prior registration with the local SAFE branch is required for PRC residents in connection with their direct establish or indirect control of an offshore entity,
for the purposes of overseas investment and financing, with assets or equity interests of onshore companies or offshore assets or interests held by such PRC residents,
referred to in SAFE Circular 37 as a “special purpose vehicle.” The PRC residents are also required to amend the registration or filing with the local SAFE branch in the
event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC residents, share transfer or
exchange, merger, division or other material event.
Failure to comply with the registration procedures set forth in the SAFE Circular 37 may result in restrictions being imposed on the foreign exchange activities of the
relevant onshore company, including the increase of its registered capital, the payment of dividends and other distributions to its offshore parent or affiliate and the
capital inflow from the offshore entities, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations. PRC residents
who control our company from time to time are required to register with SAFE in connection with their investments in us. We requested PRC residents holding direct or
indirect interests in our company to our knowledge to make the necessary applications, filings and amendments as required under SAFE Circular 75 and other related
rules prior to our initial public offering. However, we might not be fully informed of the identities of all of our beneficial owners who are PRC citizens or residents, and
we cannot compel our beneficial owners to comply with the requirements of SAFE Circular 37. As a result, we cannot assure you that all of our shareholders or
beneficial owners who are PRC citizens or residents have complied with and will in the future make or obtain any applicable registrations or approvals required by SAFE
Circular 37 or other related regulations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—PRC regulations relating to
offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, limit our ability to
inject capital into our PRC subsidiaries, or otherwise expose us to liability and penalties under PRC laws.”
Regulations on Employee Stock Option Plans
In February 2012, SAFE promulgated the Stock Option Rules, replacing the previous rules issued by SAFE in March 2007. Under the Stock Option Rules and other
relevant rules and regulations, PRC residents who participate in stock incentive plans in an overseas publicly-listed company, which includes employee stock ownership
plans, stock option plans and other incentive plans permitted by relevant laws and regulations, are required to register with SAFE or its local branches and complete
certain other procedures. Participants of a stock incentive plan in an overseas publicly listed company who are PRC residents must retain a qualified PRC agent, which
could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and
other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters
in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to
amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted
institution or other material changes. The PRC agents must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or
its local branches for an annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign
exchange proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed
companies must be remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents.
We adopted the 2008 Plan, pursuant to which we may issue options or restricted shares to our qualified employees and consultants on a regular basis. We also
adopted the 2014 Plan, which permits the granting of options to purchase our ordinary shares, restricted
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shares and restricted share units. The failure of the share options holders to complete their registration pursuant to the Stock Option Rules and other foreign exchange
requirements may subject these PRC individuals to fines and legal sanctions, and may also limit our ability to contribute additional capital to our PRC subsidiaries, limit
our PRC subsidiaries’ ability to distribute dividends to us or otherwise materially adversely affect our business. See “Item 3. Key Information—D. Risk Factors—Risks
Related to Doing Business in China—Failure to comply with PRC regulations regarding the registration requirements for share option plans may subject the PRC plan
participants or us to fines and other legal or administrative sanctions.”
In addition, the State Administration for Taxation has issued circulars concerning employee share options, under which our employees working in the PRC who
exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options with
relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or if we fail to withhold
their income taxes as required by relevant laws and regulations, we may face sanctions imposed by the PRC tax authorities or other PRC government authorities.
Regulations on Employment
The PRC Labor Law, the PRC Labor Contract Law and its implementation rules provide requirements concerning employment contracts between an employer and
its employees. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is
established, the employer would be deemed to have entered into a labor contract without a fixed term with such employee. In addition, the employer must rectify the
situation by entering into a written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following the
lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment contract. The Labor
Contract Law and its implementation rules also require compensation to be paid upon certain terminations. In addition, if an employer intends to enforce a non-compete
provision with an employee in an employment contract or non-competition agreement, it has to compensate the employee on a monthly basis during the term of the
restriction period after the termination or ending of the labor contract. Employers in most cases are also required to provide a severance payment to their employees after
their employment relationships are terminated.
Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension
plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan, and a housing provident fund, and
contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local
government from time to time at locations where they operate their businesses or where they are located.
Regulations on Taxation
For a discussion of applicable PRC tax regulations, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Taxation.”
C.Organizational Structure
We restructured the ownership structure of Nanjing Tuniu, the VIE, in February, 2021, during which the shareholders of Nanjing Tuniu other than Messrs Dunde Yu
transferred all of their equity interest in Nanjing Tuniu to Messrs Dunde Yu and Anqiang Chen. On February 19, 2021, Beijing Tuniu, Nanjing Tuniu and the then
existing shareholders of Nanjing Tuniu, namely Dunde Yu, Haifeng Yan, Tong Wang, Jiping Wang, Xin Wen, Yongquan Tan and Haifeng Wang entered into a
termination agreement to terminate the existing contractual arrangements and, on the same day, Beijing Tuniu, Nanjing Tuniu and the new shareholders of Nanjing Tuniu,
namely Dunde Yu and Anqiang Chen, entered into new contractual arrangements which are substantially similar to the contractual arrangements we have historically
adopted. See “Agreements that Provide us with Effective Control over Nanjing Tuniu” below.
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The following diagram illustrates our corporate structure, including our principal subsidiaries, consolidated affiliated entity and its principal subsidiaries, as of the
date of this annual report on Form 20-F:
(1) Messrs. Dunde Yu and Anqiang Chen hold 80.89% and 19.11% equity interests in Nanjing Tuniu, respectively. Among the shareholders of Nanjing Tuniu,
Mr. Dunde Yu is our founder, director and an ultimate shareholder of Tuniu Corporation. Mr. Anqiang Chen is our Financial Controller.
Agreements that Provide us with Effective Control over Nanjing Tuniu
Purchase Option Agreement. Pursuant to the purchase option agreement entered into on February 19, 2021, each of the shareholders of Nanjing Tuniu irrevocably
and exclusively grants Beijing Tuniu an option to purchase, or have its designated person or persons to purchase, at its discretion, to the extent permitted under PRC law,
all or part of such shareholder’s equity interests in Nanjing Tuniu. The aggregate purchase price is RMB2.43 million. The shareholders of Nanjing Tuniu agree, without
the prior written consent of Beijing Tuniu, not to transfer or otherwise dispose of their equity interests in Nanjing Tuniu, pledge their equity interests or create any
encumbrance on their equity interests. The agreement remains effective until all equity interests held in Nanjing Tuniu by the shareholders of Nanjing Tuniu are
transferred or assigned to Beijing Tuniu or its designated person or persons. The purchase price has been prepaid by Beijing Tuniu to the shareholders of Nanjing Tuniu.
Equity Interest Pledge Agreement. Pursuant to the equity interest pledge agreements entered into by and between Beijing Tuniu, Nanjin Tuniu and each shareholder
of Nanjing Tuniu on February 19, 2021, each of the shareholders of Nanjing Tuniu pledge all of such shareholder’s equity interests in Nanjing Tuniu to guarantee the
performance of the obligations under the purchase option agreement. If the shareholders of Nanjing Tuniu breach their contractual obligations under the purchase option
agreement and shareholders’ voting rights agreement, Beijing Tuniu, as the pledgee, will have the right to either conclude an agreement with the pledger to obtain the
pledged equity or seek payments from the proceeds of the auction or sell-off the pledged equity to any person pursuant to the PRC law. The shareholders of Nanjing
Tuniu agree that, during the term of the equity interest pledge agreement, they will not dispose of the pledged equity interests or create or allow any encumbrance on the
pledged equity interests. During the equity pledge period, Beijing Tuniu is entitled to all dividends and other distributions made by Nanjing Tuniu. The equity interest
pledge became effective on the date when the equity interest pledge was registered with the relevant local administration for market regulation, and remains effective
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until the shareholders of Nanjing Tuniu discharge all their obligations under the purchase option agreement, or Beijing Tuniu enforces the equity interest pledge,
whichever is earlier. We have completed the registration of the equity interest pledge with Xuanwu Branch of Nanjing Administration for Market Regulation.
Shareholders’ Voting Rights Agreement. Pursuant to the shareholders’ voting rights agreement entered into on February 19, 2021, the shareholders of Nanjing
Tuniu appointed Beijing Tuniu or its designated person as their attorney-in-fact to exercise all of their voting and related rights with respect to their equity interests in
Nanjing Tuniu, including attending shareholders’ meetings, voting on all matters of Nanjing Tuniu requiring shareholder approval, nominating and appointing directors,
convening extraordinary shareholders’ meetings, and other voting rights pursuant to the then-effective articles of association of Nanjing Tuniu. The shareholders’ voting
rights agreement will remain in force until all the parties to the agreement mutually agree to terminate the agreement in writing or cease to be shareholders of Nanjing
Tuniu.
Irrevocable Powers of Attorney. Pursuant to the powers of attorney dated February 19, 2021, the shareholders of Nanjing Tuniu each irrevocably appointed Beijing
Tuniu as the attorney-in-fact to exercise all of such shareholder’s voting and related rights with respect to such shareholder’s equity interests in Nanjing Tuniu, including
but not limited to attending shareholders’ meetings, voting on all matters of Nanjing Tuniu requiring shareholder approval, nominating and appointing directors,
convening extraordinary shareholders’ meetings, and other voting rights pursuant to the then-effective articles of association of Nanjing Tuniu. Each power of attorney
will remain in force until the shareholders’ voting rights agreement expires or is terminated.
Agreement that Allows us to Receive Economic Benefits from Nanjing Tuniu
Cooperation Agreement. Under the cooperation agreement entered into on February 19, 2021, Beijing Tuniu has the exclusive and irrevocable right to provide to
Nanjing Tuniu business consulting, technical consulting and technical services related to the businesses of Nanjing Tuniu and its subsidiaries. Beijing Tuniu owns the
exclusive intellectual property rights created by Nanjing Tuniu or its employees as a result of the performance of this agreement. Beijing Tuniu has the right to receive, or
designate a person or persons to receive, a quarterly service fee, which equals the profits of each of Nanjing Tuniu and its subsidiaries, to which it provides such business
consulting, technical consulting and technical services, provided that such amount of service fees can be adjusted by Beijing Tuniu at its sole discretion. This agreement
shall be effective retroactive to 24 January 2014 and will remain effective until expiration of Beijing Tuniu’s business term, unless Beijing Tuniu exercises its unilateral
right to terminate the agreement, one of the parties is declared bankrupt or Beijing Tuniu is not able to provide consulting and services as agreed for more than three
consecutive years because of force majeure. Nanjing Tuniu is not permitted to terminate the agreement in any other event.
In 2019, 2020 and 2021, we received service fees of RMB30.4 million, RMB12.8 million and RMB36.2 million (US$5.7 million), respectively, from the
consolidated affiliated entities, which were eliminated on consolidated financial statements.
D.Property, Plant and Equipment
Our principal executive offices, consisting of our administrative center, sales and marketing division, technical services department, and call center, are located on
leased premises in Jiangsu. We lease these premises under lease agreements from unrelated third parties, and we plan to renew these leases from time to time as needed.
Item 4A.Unresolved Staff Comments
Not applicable.
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 audited consolidated
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. Key Information—D. Risk Factors” in this
annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.
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A.Operating Results
Overview
We are a leading online leisure travel company in China. We offer a large selection of packaged tours, including organized tours and self-guided tours, as well as
travel-related services for leisure travellers on our platform. Our platform offers product portfolio consisting of organized tours, self-guided tours, and tickets for all
popular domestic and overseas tourist attractions.
We generated net revenues of RMB2,281.0 million, RMB450.3 million and RMB426.3 million (US$66.9 million) in 2019, 2020 and 2021, respectively. We
recognized revenues from most of the organized tours on a net basis as a result of changes in our role in the organized tour arrangements since the beginning of 2017
(except for certain business arrangements under which we take substantive inventory risks and the self-operated local tour operators in which we act as a principal, for
which revenues are recognized on gross basis). We had a net loss of RMB729.4 million, RMB1,343.6 million and RMB169.4 million (US$26.6 million) in 2019, 2020
and 2021, respectively. We generally collect payments from our customers upon contract confirmation before we pay travel suppliers. Our net cash used in operating
activities was RMB120.5 million, RMB1,313.1 million and RMB226.3 million (US$35.5 million) in 2019, 2020 and 2021, respectively.
Our ability to achieve and maintain profitability depends on our ability to effectively reduce our costs and expenses as a percentage of our net revenues. Our cost of
revenues were RMB1,200.0 million, RMB237.1 million and RMB254.8 million (US$40.0 million) in 2019, 2020 and 2021, respectively, representing 52%, 56% and
59% of our revenues, respectively. Our operating expenses were RMB1,951.8 million, RMB1,554.0 million and RMB353.1 million (US$55.4 million) in 2019, 2020 and
2021, respectively, representing 86%, 345% and 83% of our revenues, respectively. The costs and expenses were affected by the level of spending associated with our
business operations, including expenses related to regional expansion, branding and advertising campaigns, mobile related initiatives and expenses related to technology,
product development and administrative personnel such as share-based compensation. The percentage of our costs and expenses compared to our revenues were greatly
impacted by the sharp reduction in revenues caused by COVID-19 related travel restrictions in China – see “Impact of COVID-19 on Our Operations”. Our past results
of operations should not be taken as indicative of our future performance. Our sales and marketing expenses were RMB923.3 million, RMB372.0 million and RMB150.5
million (US$23.6 million) in 2019, 2020 and 2021, respectively. Upon resuming normalized operations, we aim to maintain these expenses as a percentage of net
revenues at a stable or lower level over time by focusing on operational scalability and efficiency improvements. If we fail to effectively reduce our costs and expenses as
a percentage of our net revenues, we may not be able to achieve and maintain profitability.
Impact of COVID-19 on Our Operations
Our results of operations for the years ended December 31, 2020 and 2021 have been significantly and negatively affected by the COVID-19 pandemic. The
pandemic drove a significant decline in travel demand resulting in reservation cancellations, requests for refunds and reduced new orders. In addition, allowances for
doubtful accounts and impairment provisions against our long-term assets both increased. In response to the COVID-19 pandemic, we have quickly adopted cost control
measures to mitigate a significant slowdown in customer demand. As the COVID-19 pandemic is still evolving, we will continue to monitor and evaluate the financial
impacts to our financial condition, results of operations, and cash flows and make adjustments accordingly.
For the year ended December 31, 2021, our financial performance was materially and adversely affected as a result of the domestic and international travel
restrictions and significant incremental costs and expenses incurred to facilitate our customers’ cancellations and refund requests. While we have seen recovery in the
China travel market since the second half of 2020 due to the substantial containment of the COVID-19 pandemic in China, we have seen a slower recovery of the
international travel market, and in turn, a slower recovery of our overseas travel business. In addition, we made provisions for the expected difficulty in collection of
receivables, which resulted in additional allowances for doubtful accounts. We also recorded impairment provisions against our long-term and short-term assets, as the
impact of the COVID-19 pandemic on certain of our long-term and short-term assets are considered to be other than temporary. In 2021, we recognized allowance for
credit losses of RMB17.8 million (US$2.8 million), compared to RMB829.7 million in the same period in 2020, respectively. Our net revenues for the year ended
December 31, 2021 decreased by 5.3% from 2020.
The global spread of the COVID-19 pandemic in a significant number of countries around the world has resulted in, and may intensify, global economic distress, and
the extent to which it may affect our financial condition, results of operations, and cash flows will depend on future developments, which are highly uncertain and cannot
be reasonably predicted. Recently, there has been an increasing number of COVID-19 cases, including the COVID-19 Delta and Omicron variant cases, in multiple cities
in China. The
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Chinese local authorities have reinstated certain measures to keep COVID-19 in check, including varying levels of travel restrictions and stay-at-home orders. These
travel restrictions reduced users’ demand for our products, and are expected to materially and adversely affect our results of operations in the first quarter of 2021 and
potentially beyond. See “Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business and Industry — Our business operation, financial condition,
results of operations and cash flows have been and are likely to continue to be materially and adversely affected by the COVID-19 outbreak and spread.”
Any future outbreak of contagious diseases or similar adverse public health developments, extreme unexpected bad weather, or severe natural disasters would affect
our business and operating results. Ongoing concerns regarding contagious disease or natural disasters, particularly its effect on travel, could adversely affect our users’
desire to travel. If there is a recurrence of an outbreak of certain contagious diseases or natural disasters, travel to and from affected regions could be curtailed. Public
policy regarding, or governmental restrictions on, travel to and from these and other regions on account of an outbreak of any contagious disease or occurrence of natural
disasters could materially and adversely affect our business and operating results.
Selected Income Statement Items
Revenues
We generate revenues primarily from sales of packaged tours, which consist of organized tours and self-guided tours. The following table sets forth the components
of our revenues in absolute amounts and as percentages of our net revenues for the periods presented.
Revenues:
Packaged tours
Others
Net revenues
For the Years Ended December 31,
2019
2020
RMB
%
RMB
%
RMB
(in thousands, except percentages)
2021
US$
%
1,886,822
394,165
82.7
17.3
302,359
147,900
67.2
32.8
305,333
121,015
47,913
18,990
71.6
28.4
2,280,987
100.0
450,259
100.0
426,348
66,903
100.0
Packaged tours. Packaged tours consist of organized tours and self-guided tours. In 2019, 2020 and 2021, revenues from sales of packaged-tours were RMB1,886.8
million, RMB302.4 million and RMB305.3 million (US$47.9 million), respectively. Since the beginning of 2017, we have implemented certain changes in our
arrangements with the tour operators. Under the organized tour arrangements with the tour operators, our role is an agent that provides tour booking services to the tour
operators and travellers. Among the organized tours, revenues under arrangements for which we undertake substantive inventory risk were RMB166.2 million, RMB1.6
million and nil, respectively, and revenues for the self-operated local tour operator business were RMB724.2 million, RMB122.7 million and RMB169.4 million
(US$26.6 million) for the years ended December 31, 2019, 2020 and 2021, respectively. Revenues from packaged tours were recognized when the tours depart, except
for revenues from the self-operated local tour operator business in which we act as principal, which were recognized over time during the period of packaged tours. Our
revenues from packaged tours decreased by 84.0% from RMB1,886.8 million in 2019 to RMB302.4 million in 2020, and increased by 1.0% to RMB305.3 million
(US$47.9 million) in 2021.
Others. Other revenues were RMB394.2 million, RMB147.9 million and RMB121.0 million (US$19.0 million) in 2019, 2020 and 2021, respectively. Our other
revenues are primarily generated from (i) service fees received from insurance companies, (ii) commission fees from other travel-related products and services, such as
tourist attraction tickets, visa application services, accommodation reservation and transportation ticketing, (iii) fees for advertising services that we provide primarily to
domestic and foreign tourism boards and bureaus, and (iv) service fees for financial services.
Cost of Revenues
Our cost of revenues accounted for 52.6%, 52.7% and 59.8% as percentages of our net revenues in 2019, 2020 and 2021, respectively.
Revenues from packaged tours are mainly recognized on net basis (except for certain business arrangements under which we take substantive inventory risks, and
except for the self-operated local tour operator business in which we act as a principal, for which
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revenues are recognized on gross basis). Accordingly, the amounts we pay to travel suppliers for packaged tours are mainly recorded as a reduction to revenues, rather
than cost of revenues.
Our cost of revenues mainly consists of salaries and other compensation-related expenses related to our tour advisors, customer services representatives, and other
personnel related to tour transactions, and other expenses directly attributable to our principal operations, primarily including payment processing fees,
telecommunication expenses, rental expenses, depreciation expenses, and other service fees for financial service. For the arrangements where we secure availabilities of
tours and bear substantive inventory risks, and for the self-operated local tour operator business, from which revenues are recognized on a gross basis, cost of revenues
also includes the amount paid to tour operators or suppliers.
Operating Expenses
Our operating expenses were RMB1,951.8 million, RMB1,554.0 million and RMB353.1 million (US$55.4 million) in 2019, 2020 and 2021, respectively. The
following table sets forth the components of our operating expenses in absolute amounts and as percentages of our net revenues for the periods presented:
Operating expenses:
Research and product development
Sales and marketing
General and administrative
Other operating income
2019
RMB
%
For the Year Ended December 31,
2020
RMB
(in thousands, except percentages)
%
RMB
2021
US$
%
(303,561)
(923,273)
(749,404)
24,419
(13.3)
(40.5)
(32.9)
1.1
(100,514)
(371,984)
(1,109,340)
27,849
(22.3)
(82.6)
(246.4)
6.2
(54,622)
(150,493)
(174,021)
26,064
(8,571)
(23,616)
(27,308)
4,090
(12.8)
(35.3)
(40.8)
6.1
Total operating expenses
(1,951,819)
(85.6)
(1,553,989)
(345.1)
(353,072)
(55,405)
(82.8)
Research and product development expenses. Research and product development expenses primarily comprise of salaries and other compensation expenses for our
research and product development personnel as well as office rental, depreciation and other expenses related to our research and product development function. Research
and product development expenses also include expenses that are incurred in connection with the planning and implementation phases of development and costs that are
associated with the maintenance of our online platform or software for internal use. Research and product development expenses were RMB303.6 million, RMB100.5
million and RMB54.6 million (US$8.6 million) in 2019, 2020 and 2021, respectively.
Sales and marketing expenses. Sales and marketing expenses primarily comprise of marketing and promotional expenses, salaries and other compensation expenses
for our sales and marketing personnel and office rental, depreciation and other expenses related to our sales and marketing function. Our sales and marketing expenses
were RMB923.3 million, RMB372.0 million and RMB150.5 million (US$23.6 million) in 2019, 2020 and 2021, respectively.
General and administrative expenses. General and administrative expenses primarily comprise of salaries and other compensation expenses for our administrative
personnel, professional service fees, office rental, depreciation, bad debt and other expenses related to our administrative function. General and administrative expenses
were RMB749.4 million, RMB1,109.3 million and RMB174.0 million (US$27.3 million) in 2019, 2020 and 2021, respectively.
Other operating income. Other operating income relates primarily to government subsidies and tax refunds that we receive from provincial and local governments.
Government subsidies are granted from time to time at the discretion of the relevant government authorities. These subsidies are granted for general corporate purposes
and to support our ongoing operations in the region. Other operating income accounted for 1.1%, 6.2% and 6.1% of our net revenues in 2019, 2020 and 2021,
respectively.
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Taxation
Cayman Islands
We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to income or capital gains tax. In addition, dividend
payments are not subject to withholding tax in the Cayman Islands.
Hong Kong
Companies registered in Hong Kong are subject to Hong Kong Profits Tax on the taxable income as reported in their respective statutory financial statements
adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. Under the Hong Kong tax law, our Hong Kong subsidiaries
are exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
PRC
Our PRC subsidiaries and the consolidated affiliated entities are subject to PRC enterprise income tax, or EIT, on the taxable income in accordance with the relevant
PRC income tax laws.
Under the EIT Law, an enterprise established outside the PRC with a “de facto management body” within the PRC is considered a PRC resident enterprise for PRC
enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the Implementation Rules, a “de
facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and
human resources, finances and properties of an enterprise. In addition, STA Circular 82, which was issued in April 2009 by the STA and amended in 2013 and in
December 2017, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident
enterprises if all of the following conditions are met: (a) senior management personnel and core management departments in charge of the daily operations of the
enterprises have their presence mainly in the PRC; (b) their financial and human resources decisions are subject to determination or approval by persons or bodies in the
PRC; (c) major assets, accounting books and company seals of the enterprises, and minutes and files of their board’s and shareholders’ meetings are located or kept in the
PRC; and (d) half or more of the enterprises’ directors or senior management personnel with voting rights habitually reside in the PRC. Further to STA Circular 82, the
STA issued STA Bulletin 45, which took effect on September 1, 2011 and was amended in 2015 and 2016, to provide more guidance on the implementation of STA
Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore-incorporated resident enterprises.” STA Bulletin 45 provides procedures
and administrative details for the determination of PRC resident enterprise status and administration on post-determination matters. Although both STA Circular 82 and
STA Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign
individuals like us, the determining criteria set forth in STA Circular 82 and STA Bulletin 45 may reflect the STA’s general position on how the “de facto management
body” test should be applied in determining the PRC resident enterprise status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC
enterprise groups or by PRC or foreign individuals.
Nanjing Tuniu qualified for an HNTE since 2010 and was able to renew its HNTE certificate upon expiration of the 3-year period. In 2019, Nanjing Tuniu obtained a
new HNTE certificate, which expired in 2021. Therefore, Nanjing Tuniu was eligible to enjoy a preferential tax rate of 15% from 2019 to 2021 to the extent it has taxable
income under the EIT Law, as long as it maintains the HNTE qualification and duly conducts relevant EIT filing procedures with the relevant tax authority. Tuniu
Nanjing Information Technology qualified for an HNTE since 2017 and was able to renew its HNTE certificate upon expiration of the 3-year period. In 2020, Tuniu
Nanjing Information Technology obtained a new HNTE certificate, which will expire in 2022. Therefore, Tuniu Nanjing Information Technology was eligible to enjoy a
preferential tax rate of 15% from 2020 to 2022 to the extent it has taxable income under the EIT Law, as long as it maintains the HNTE qualification and duly conducts
relevant EIT filing procedures with the relevant tax authority. Beijing Tuniu obtained the HNTE certificate as well in 2018 and expired in 2020. As a result, the
applicable enterprise tax rate for Beijing Tuniu has been restored to 25% since 2021. However, since Beijing Tuniu has a large amount of accumulated loss in
previous years, the increased EIT rate would not result in an immediate adverse effect on our financial condition.
Under the EIT Law and its Implementation Rules, subject to any applicable tax treaty or similar arrangement between the PRC and our shareholders’ jurisdiction of
residence that provides for a different income tax arrangement, PRC withholding tax at the rate of 10% is normally applicable to dividends from PRC sources payable to
investors that are non-PRC resident enterprises, which do not have an
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establishment or place of business in the PRC, or which have such establishment or place of business if the relevant income is not effectively connected with the
establishment or place of business. Any gain realized on the transfer of American depositary shares or shares by such non-PRC resident enterprise investors is also
subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC unless a tax treaty or similar arrangement provides otherwise.
Under the PRC Individual Income Tax Law and its implementation rules, dividends from sources within the PRC paid to foreign individual investors who are not PRC
residents are generally subject to a PRC withholding tax at a rate of 20% and gains from PRC sources realized by such investors on the transfer of American depositary
shares or shares are generally subject to 20% PRC income tax, in each case, subject to any reduction or exemption set forth in applicable tax treaties and PRC laws.
Although substantially all of our business operations are based in China, it is unclear whether dividends we pay with respect to our ordinary shares or ADSs, or the gain
realized from the transfer of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC and as a result be subject to PRC income tax
if we were considered a PRC resident enterprise, as described above. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—
Under the PRC Enterprise Income Tax Law, we may be classified as a PRC resident enterprise for PRC enterprise income tax purposes. Such classification would likely
result in unfavorable tax consequences to us and our non-PRC shareholders and would have a material adverse effect on our results of operations and the value of your
investment.”
Pursuant to the applicable PRC tax regulations, any entity or individual conducting business in the service industry is generally required to pay value-added tax, or
VAT at the rate of 6% on the revenues generated from providing such services. Entities engaging in the travel business can deduct certain approved costs from their
revenues in calculating VAT. However, if the services provided are related to technology development and transfer, such entities may be exempted from VAT and related
taxes arising from such services subject to approval by the relevant tax authorities. In our consolidated financial statements included elsewhere in this annual report, VAT
is deducted from gross revenues to arrive at net revenues.
On March 23, 2016, the PRC Ministry of Finance and the STA jointly issued the Circular on the Nationwide Implementation of Pilot Program for the Collection of
Value Added-Tax Instead of Business Tax, or Circular 36, pursuant to which the VAT reforms will be implemented comprehensively across the country and extended to
the construction, real estate, financial and consumer services industries. Circular 36 became effective on May 1, 2016 and was amended as of January 1, 2018 and
March 20, 2019. As a result, the majority of our business will be subject to VAT at a rate of 6%, which is higher than the business tax rate previously applied to us. We
would be permitted to offset input VAT by providing valid VAT invoices received from vendors against our output VAT liability. Alternatively, the taxable income of
tourism business could be calculated on net basis by deducting relevant expenses (including expenses for accommodation, catering, transportation, visa, ticket and
tourism fee paid to other entities/ individuals) if valid invoices could be obtained.
On May 6, 2016, the STA issued the Administrative Measures for Value Added Tax Exemption on Cross-border Taxable Activities under the Program for the
Collection of Value Added-Tax Instead of Business Tax, which was most recently amended on June 15, 2018, or Circular 29, pursuant to which the tourism services
provided overseas are exempted from VAT.
On March 20, 2019. The PRC Ministry of Finance, STA and GAC (General Administration of Customs) jointly issued the Circular on Measures to Further
Implement the VAT reform, pursuant to which entities in the producer service sector (including technology consulting service) and consumer service sector can
additionally deduct 10% of the creditable input VAT against their output VAT liability from April 2019 to December 2021. On September 30, 2019, The PRC Ministry of
Finance and STA increased the input super deduction portion from 10% to 15% for consumer service sector, effective from September 30, 2019.
In addition, on February 6, 2020, the Ministry of Finance and the STA jointly issued Announcement on Relevant Tax Policies in Support of Prevention and Control
of COVID-19, or Circular 8, pursuant to which the income obtained from public transportation services, daily life services including tourism services and express
delivery services shall be exempt from VAT. And on May 15, 2020, the Ministry of Finance and the STA issued Circular [2020] 28, which provided the preferential tax
treatments according to Circular 8 would be expired on December 31, 2020. And on March 17, 2021, the Ministry of Finance and the STA further issued Announcement
[2021] 7. According to the Announcement, the expiration date for the above mentioned VAT exemption treatments was extended to March 31, 2021.
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Results of Operations
The following table sets forth a summary of our consolidated results of operations in absolute amounts and as percentages of our net revenues for the periods
indicated. The period-to-period comparisons of results of operations should not be relied upon as indicative of future performance.
Revenues:
Packaged tours
Others
Net revenues
Cost of revenues
Gross profit
Operating expenses:
Research and product development
Sales and marketing
General and administrative
Other operating income
Loss from operations
Other income/(expenses):
Interest and investment income
Interest expense
Foreign exchange (losses)/gains, net
Other (loss)/income, net
Loss before income tax expense
Income tax expense
Equity in income of affiliates
2019
RMB
%
For the Years Ended December 31,
2020
RMB
(in thousands, except percentages)
%
RMB
2021
US$
%
1,886,822
394,165
82.7
17.3
302,359
147,900
67.2
32.8
305,333
121,015
47,913
18,990
71.6
28.4
2,280,987
100.0
450,259
100.0
426,348
66,903
100.0
(1,200,012)
(52.6)
(237,065)
(52.7)
(254,815)
(39,986)
(59.8)
1,080,975
47.4
213,194
47.3
171,533
26,917
40.2
(303,561)
(923,273)
(749,404)
24,419
(13.3)
(40.5)
(32.9)
1.1
(100,514)
(371,984)
(1,109,340)
27,849
(22.3)
(82.6)
(246.4)
6.2
(54,622)
(150,493)
(174,021)
26,064
(8,571)
(23,616)
(27,308)
4,090
(12.8)
(35.3)
(40.8)
6.1
(870,844)
(38.2)
(1,340,795)
(297.8)
(181,539)
(28,488)
(42.6)
156,862
(34,052)
(1,131)
18,509
(730,656)
(949)
2,223
6.9
(1.5)
(0.0)
0.8
(32.0)
(0.0)
0.1
3,526
(32,266)
18,720
(253)
0.8
(7.2)
4.2
(0.1)
50,041
(7,491)
7,030
2,895
7,853
(1,176)
1,103
454
(1,351,068)
6,641
797
(300.1)
1.5
0.2
(129,064)
(130)
726
(20,254)
(20)
114
11.7
(1.8)
1.6
0.7
(30.3)
0.0
0.2
Net loss
(729,382)
(32.0)
(1,343,630)
(298.4)
(128,468)
(20,160)
(30.1)
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Net Revenues. Net revenues were RMB450.3 million and RMB426.3 million (US$66.9 million) in 2020 and 2021, respectively.
● Revenues from packaged tours. Revenues from packaged tours increased by 1.0% from RMB302.4 million in 2020 to RMB305.3 million (US$47.9 million) in
2021 primarily due to the growth in revenues from self-operated products.
● Other revenues. Other revenues decreased by 18.2% from RMB147.9 million in 2020 to 121.0 million (US$19.0 million) in 2021, primarily due to the decline
in revenues generated from financial services.
Cost of Revenues. Our cost of revenues increased by 7.5% from RMB237.1 million in 2020 to RMB254.8 million (US$40.0 million) in 2021. As a percentage of net
revenues, cost of revenues was 59.8% in 2021 compared to 52.7% in 2020.
Operating Expenses. Operating expenses decreased by 77.3% from RMB1.6 billion in 2020 to RMB353.1 million (US$55.4 million) in 2021, primarily due to the
decrease in allowance for doubtful accounts.
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● Research and product development. Research and product development expenses decreased by 45.7% from RMB100.5 million in 2020 to 54.6 million (US$8.6
million) in 2021, primarily due to the decrease in research and product development personnel related expenses.
● Sales and marketing. Sales and marketing expenses decreased by 59.5% from RMB372.0 million in 2020 to RMB150.5 million (US$23.6 million) in 2021. The
decrease was primarily due to the decreases in sales and marketing personnel related expenses and amortization of acquired intangible assets.
● General and administrative. General and administrative expenses decreased by 84.3% from RMB1,109.3 million in 2020 to RMB174.0 million (US$27.3
million) in 2021. The decrease was primarily due to the decreases in general and administrative personnel related expenses and allowance for doubtful accounts.
● Other operating income. Other operating income decreased from RMB27.8 million in 2020 to RMB26.1 million (US$4.1 million) in 2021.
Net Loss. As a result of the foregoing, net loss decreased from RMB1,343.6 million in 2020 to RMB128.5 million (US$20.2 million) in 2021.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Net Revenues. Net revenues were RMB2,281.0 million and RMB450.3 million in 2019 and 2020, respectively.
● Revenues from packaged tours. Revenues from packaged tours decreased by 84.0% from RMB1,886.8 million in 2019 to RMB302.4 million 2020 primarily due
to the suspension of sale of packaged tours impacted by the outbreak and spread of COVID-19.
● Other revenues. Other revenues decreased by 62.5% from RMB394.2 million in 2019 to 147.9 million in 2020, primarily due to the decline in commissions
received from other travel-related products and service fees received from insurance companies impacted by the outbreak and spread of COVID-19, as well as
revenues generated from financial services.
Cost of Revenues. Our cost of revenues decreased by 80.2% from RMB1,200.0 million in 2019 to RMB237.1 million in 2020. As a percentage of net revenues, cost
of revenues was 52.7% in 2020 compared to 52.6% in 2019.
Operating Expenses. Operating expenses decreased by 20.4% from RMB2.0 billion in 2019 to RMB1.6 billion in 2020, primarily due to the decreases in research
and product development expenses and sales and marketing expenses.
● Research and product development. Research and product development expenses decreased by 66.9% from RMB303.6 million in 2019 to 100.5 million in 2020,
primarily due to the decrease in research and product development personnel related expenses.
● Sales and marketing. Sales and marketing expenses decreased by 59.7% from RMB923.3 million in 2019 to RMB372.0 million in 2020. The decrease was
primarily due to the decrease in sales and marketing personnel related expenses and promotion expenses.
● General and administrative. General and administrative expenses increased by 48.0% from RMB749.4 million in 2019 to RMB1,109.3 million in 2020. The
increase was primarily due to current expected credit losses for receivables from related parties and other third parties in the amount of RMB829.7 million. The
ongoing impact of COVID-19 and recent available information received from these parties indicated there was no assurance of future collection of these
receivables.
● Other operating income. Other operating income increased from RMB24.4 million in 2019 to RMB27.8 million in 2020.
Net Loss. As a result of the foregoing, net loss increased from RMB729.4 million in 2019 to RMB1,343.6 million in 2020.
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Inflation
To date, 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 2019, 2020 and 2021 were increases of 4.5%, 0.2% and 1.5%, respectively. Although we have not been materially
affected by inflation in the past, we can provide no assurance that we will not be affected by higher rates of inflation in China in the future. For example, certain
operating costs and expenses, such as employee compensation and office operating expenses may increase as a result of higher inflation. Additionally, because a
substantial portion of our assets consist of cash and cash equivalents and short-term investments, high inflation could significantly reduce the value and purchasing power
of these assets. We are not able to hedge our exposure to higher inflation in China.
Foreign Currency
The average exchange rate between U.S. dollar and Renminbi has declined from RMB8.2264 per U.S. dollar in July 2005 to RMB6.3726 per U.S. dollar as of
December 31, 2021. For the year ended December 31, 2021, we recorded RMB3.2 million (US$0.5 million) of net foreign currency translation loss in accumulated other
comprehensive income as a component of shareholders’ equity. To date, we have not entered into any material hedging transactions in an effort to reduce our exposure to
foreign currency exchange risk. See also “Item 3. Key Information—D. Risk Factors— Risks Related to Doing Business in China—Fluctuations in exchange rates could
have a material adverse effect on our results of operations and the value of your investment” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk—
Foreign Exchange Risk.”
Recent Accounting Pronouncements
See Note 2(ag) to our consolidated financial statements included elsewhere in this annual report for discussion on recent issued accounting pronouncements.
B.Liquidity and Capital Resources
Our primary sources of liquidity have been proceeds from operating activities, borrowings from banks, private issuances of ordinary and preferred shares, and our
initial public offering.
Prior to the completion of our initial public offering in May 2014, we financed our operations primarily through cash generated from our operating activities, private
issuances and sales of preferred shares. In May 2014, we completed our initial public offering in which we issued and sold 8,580,000 ADSs representing 25,740,000
Class A ordinary shares. Concurrently with our initial public offering, we issued and sold 5,000,000, 5,000,000 and 1,666,666 Class A ordinary shares to each of DCM
Hybrid RMB Fund, L.P., Ctrip Investment Holding Ltd. and Qihoo 360 Technology Co. Ltd., respectively. As a result of our initial public offering and such concurrent
private placements, we raised an aggregate of approximately US$106.3 million (RMB659.5 million) in proceeds, net of underwriting commissions.
In December 2014, we raised an aggregate of approximately US$148.0 million in proceeds through issuance of 36,812,868 Class A ordinary shares to certain
investors. In May 2015, we raised an aggregate of approximately US$400.0 million in proceeds through issuance of 93,750,000 Class A ordinary shares to certain
investors.
Generally, our customers pay us upon contract confirmation, which is usually more than one month before the departure dates, and we pay the travel suppliers at a
later date, such as at the end of each month. The timing difference between when the cash is collected from our customers and when payments are made to travel
suppliers increases our operating cash inflow and provides us with a source of liquidity to fund our settlement of outstanding accounts payable to travel suppliers and our
prepayment to travel suppliers to secure packaged tours during peak seasons.
Our advances from customers decreased from RMB1,113.9 million as of December 31, 2019 to RMB208.8 million as of December 31, 2020 and further decreased to
RMB139.8 million (US$21.9 million) as of December 31, 2021. Accounts and notes payable decreased from RMB1,312.0 million as of December 31, 2019 to
RMB705.8 million as of December 31, 2020 and further decreased to RMB383.6 million (US$60.2 million) as of December 31, 2021. Furthermore, prepayments and
other current assets decreased from RMB1,300.3 million as of December 31, 2019 to RMB378.7 million as of December 31, 2020 and further decreased to RMB337.0
million (US$52.9 million) as of December 31, 2021. The decreases in the balance of advances from customer, accounts and notes payable and prepayments and other
current assets as of December 31, 2021 compared to the same as of December 31, 2020 and
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as of December 31, 2020 compared to the same as of December 31, 2019 were primarily due to the decline in the sales of our travel products and services impacted by
COVID-19. Moreover, our sales and marketing expenses decreased from RMB923.3 million in 2019 to RMB372.0 million in 2020 which was primarily due to the
decreases in sales and marketing personnel related expenses and promotion expenses impacted by COVID-19, and decreased to RMB150.5 million (US$23.6 million) in
2021 which was primarily due to the decreases in promotion expenses and amortization of acquired intangible assets. As a result, our net cash used in operating activities
was RMB120.5 million, RMB1,313.1 million and RMB226.3 million (US$35.5 million) in 2019, 2020 and 2021.
Our principal uses of cash for the years ended December 31, 2019, 2020 and 2021 were for operating activities, primarily refunds paid to customers (including as a
result of COVID-19 related cancellations), marketing and brand promotion expenses, salaries and other compensation expenses as well as office rental and professional
service fees. Our cash and cash equivalents consist of cash on hand and cash in bank, including demand bank deposits. Our short-term investments comprise financial
products issued by banks or other financial institutions. As of December 31, 2020 and 2021, we had RMB1,617.8 million and RMB1,011.5 million (US$158.7 million) in
cash and cash equivalents, restricted cash and short-term investments, respectively. We had credit from several Chinese commercial banks. As of December 31, 2020 and
2021, our outstanding short-term borrowings (including outstanding discounted bank acceptance notes) were RMB60.7 million and RMB10.0 million (US$1.6 million)
and our outstanding long-term borrowings were RMB22.6 million and RMB14.3 million (US$2.3 million), respectively.
As of December 31, 2020 and 2021, we had short-term borrowings from banks which were repayable within one year, with interests charged at rates ranging from
0.2% to 5.8% and 0.2% to 5.0% per annum, as of RMB60.7 million and RMB10.0 million (US$1.6 million), respectively. As of December 31, 2020 and 2021, we had
long-term borrowings from banks which were repayable over one year, with interests charged at rates ranging from 0.2% to 6.0% and 0.2% to 4.3% per annum, as of
RMB22.6 million and RMB14.3 million (US$2.3 million), respectively, among which RMB2.3 million (US$0.4 million) were guaranteed by one of our subsidiaries and
subject to a pledge of our land use right as of December 31, 2020, which was repayed in 2021. In addition, as of December 31, 2020 and 2021, we obtained received cash
from from banks by discounting of bank acceptance notes with the amount of RMB482 million and RMB197.9 million (US$30.9 million), respectively, which are
repayable within one year with interest ranging from 2.55% to 3.1%. The issuance of notes payable is pledged by the Group’s bank deposits of RMB482,000 and
RMB197,900 as of December 31, 2020 and 2021, which were recorded in restricted cash and short-term investments.
We had net losses attributable to Tuniu Corporation of approximately RMB694.6 million, RMB1,308.0 million and RMB121.5 million (US$19.1 million), for the
years ended December 31, 2019, 2020 and 2021, respectively. Our net cash used in operating activities was RMB120.5 million, RMB1,313.1 million and RMB226.3
million (US$35.5 million) in 2019, 2020 and 2021, respectively. As of December 31, 2021, our accumulated deficit was RMB7,834.9 million (US$1,229.5 million) and
we had cash and cash equivalents and short-term investments of RMB965.0 million (US$151.4 million). The COVID-19 pandemic has had a negative impact on our
business operations for the year ended December 31, 2021, and will continue to impact our results of operations and cash flows for subsequent periods. Such conditions
and events casted substantial doubt on our ability to continue as a going concern. In responses to the COVID-19 pandemic, in 2021, we continued to take actions to
improve our liquidity, including scaling down our business operations by reducing capital expenditures and operational expenses that are discretionary in nature and
obtaining funding from the maturity of certain short-term and long-term investments. Management has developed a plan to mitigate these adverse conditions and events,
including a business plan with forecasted cash flows covering the next twelve months from the date of issuance of the consolidated financial statements. Moving forward,
we plan to maintain a liquidity position to provide adequate funds to provide a sufficient flexibility in adjusting the Group’s operation scale to cope with the development
of the COVID-19 pandemic, and management will continue to manage the Group’s capital expenditures, operational expenses and investments based on the Group’s
liquidity position and working capital needs. Based on our liquidity assessment, which has considered our operations at the current business scale, the latest development
of COVID-19 and its continuous impact on our business operations, the available funding from maturity of our short-term and long-term investments, and the available
cash and cash equivalents, we will be able to meet our working capital requirements and capital expenditures in the ordinary course of business for the next twelve
months subsequent to the filing of this annual report. As a result, we concluded that the substantial doubt on our ability to continue as a going concern will be alleviated
through the effective implementation of the business plan. We may require additional cash resources due to unanticipated business conditions or other future
developments. If our existing cash is insufficient to meet our requirements, we may seek to obtain a credit facility or sell additional equity or debt securities. See also
“Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We may need additional capital, and financing, may not be available on
terms acceptable to us, or at all.”
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The following table sets forth a summary of our cash flows for the periods presented:
Net cash used in operating activities
Net cash (used in)/provided by investing activities
Net cash provided/(used in) by financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net (decrease)/increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of year
Cash, cash equivalents and restricted cash at the end of year
Operating Activities
2019
RMB
(120,461)
(578,134)
485,110
4,974
(208,511)
831,026
622,515
For the Years Ended December 31,
2020
RMB
2021
RMB
US$
(in thousands, except percentages)
(1,313,115)
1,159,063
(209,546)
5,187
(358,411)
622,515
264,104
(226,342)
703,826
(344,562)
(1,428)
131,494
264,104
395,598
(35,519)
110,447
(54,069)
(226)
20,634
41,444
62,078
Our net cash used in operating activities was RMB226.3 million (US$35.5 million) in 2021, primarily attributable to cash inflows from sales of our travel products
and services of RMB2,539.0 million (US$398.4 million) and cash inflows from other operating activities such as deposits, interest income and government subsidies of
RMB70.0 million (US$11.0 million), that were offset by cash outflows due to payments to travel suppliers of RMB2,386.6 million (US$374.5 million), payments
relating to other operating activities, which include payments to employees and for employees’ benefits of RMB247.4 million (US$38.8 million), payments for
marketing and promotional activities, office rental and utilities and professional services of RMB186.4 million (US$29.3 million), and payments of taxes and levies of
RMB14.9 million (US$2.3 million).
Our net cash used in operating activities was RMB1,313.1 million in 2020, primarily attributable to cash inflows from sales of our travel products and services of
RMB2,896.3 million and cash inflows from other operating activities such as deposits, interest income and government subsidies of RMB219.3 million, that were offset
by cash outflows due to payments to travel suppliers of RMB3,514.2 million, payments relating to other operating activities, which include payments to employees and
for employees’ benefits of RMB428.9 million, payments for marketing and promotional activities, office rental and utilities and professional services of RMB472.2
million, and payments of taxes and levies of RMB13.4 million.
Our net cash used in operating activities was RMB120.5 million in 2019, primarily attributable to cash inflows from sales of our travel products and services of
RMB20,840.5 million and cash inflows from other operating activities such as deposits, interest income and government subsidies of RMB255.5 million, that were offset
by cash outflows due to payments to travel suppliers of RMB19,302.6 million, payments relating to other operating activities, which include payments to employees and
for employees’ benefits of RMB959.8 million, payments for marketing and promotional activities, office rental and utilities and professional services of RMB858.0
million, and payments of taxes and levies of RMB96.1 million.
Investing Activities
Our net cash provided by investing activities was RMB703.8 million (US$110.4 million) in 2021, primarily attributable to the proceeds from maturity of short-term
investments of RMB1,096.5 million (US$172.1 million), the proceeds from maturity of long-term investments of RMB86.8 million (US$13.6 million) and cash received
from dividend of equity investment of RMB6.0 million (US$0.9 million), which were offset by the increase in loan receivable of RMB134.3 million (US$21.1 million),
the purchase of short-term investments of RMB336.5 million (US$52.8 million), and the purchase of property and equipment and intangible assets of RMB14.7 million
(US$2.3 million).
Our net cash provided by investing activities was RMB1,159.1 million in 2020, primarily attributable to the proceeds from maturity of short-term investments of
RMB1,445.4 million, the decrease in loan receivable of RMB241.0 million, the proceeds from maturity of long-term investments of RMB904.8 million and cash received
from disposal of equity investment of RMB56.6 million, which were offset by the purchase of short-term investments of RMB1,460.1 million, the purchase of property
and equipment and intangible assets of RMB28.3 million and cash paid for acquisition (net of cash received) of RMB0.3 million.
Our net cash used in investing activities was RMB578.1 million in 2019, primarily attributable to the purchase of short-term investments of RMB2,041.3 million, the
cash paid for long-term investment of RMB547.2 million, the purchase of property and
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equipment and intangible assets of RMB122.5 million, the increase in loan receivable of RMB16.6 million, and cash paid for acquisition (net of cash received) of
RMB33.2 million, which were offset by the proceeds from the maturity of short-term investments of RMB1,614.1million and the proceeds from maturity of long-term
investments of RMB568.5 million.
Financing Activities
Our net cash used in financing activities in 2021 was RMB344.6 million (US$54.1 million), primarily attributable to RMB621.0 million (US$97.5 million) for
repayments of short-term and long-term borrowings and RMB1.9 million (US$0.3 million) for acquisition of noncontrolling interests of subsidiaries, which were
partially offset by RMB0.4 million (US$0.1 million) of proceeds from employees exercising stock options and RMB277.9 million (US$43.6 million) of proceeds from
short-term and long-term borrowings.
Our net cash used in financing activities in 2020 was RMB209.5 million, primarily attributable to RMB918.5 million for repayments of short-term and long-term
borrowings, RMB0.3 million for share repurchase, RMB14.0 million for deferred and contingent consideration of business acquisitions made in previous years and
RMB10.0 million we paid to redeem non-controlling interests, which were offset by RMB733.3 million of proceeds from short-term and long-term borrowings,
RMB57,731.0 of proceeds from employees exercising stock options.
Our net cash provided by financing activities in 2019 was RMB485.1 million, primarily attributable to RMB833.5 million of proceeds from short-term and long-term
borrowings, RMB1.5 million of cash contribution from noncontrolling interests and RMB0.1 million of proceeds from employees exercising stock options, which were
offset by RMB281.4 million we paid as repayment of short-term and long-term borrowings, RMB37.7 million we paid to redeem non-controlling interests, RMB13.5
million we paid for share repurchase, RMB13.9 million we paid for deferred and contingent consideration of business acquisitions made in previous years, RMB3.4
million we paid for acquisition of noncontrolling interest of a subsidiary.
Material Cash requirements
Our material cash requirements as of December 31, 2021 mainly include debt obligations, operating lease obligations and capital expenditure commitments, as
below:.
Operating Lease Obligations
Bank Borrowings
Capital Commitments
Payment Due by Period
Less Than
1 Year
1-3 Years
(In RMB thousands)
3-5 Years
18,853
9,981
1,050
21,897
7,795
—
5,896
4,400
—
More Than
5 Years
20,404
2,149
—
Total
67,050
24,325
1,050
Our operating lease obligations represent our obligations for the leased premises of our headquarter and offline retail stores.
Our capital commitments are commitments in relation to the purchase of property and equipment including leasehold improvements.
Our short-term and long-term bank borrowings represent borrowings from banks with maturity from six months to six years.
We intend to fund our existing and future material cash requirements for at least the next twelve months after the issuance of this report using our existing cash
balance, and these commitments have been considered in our assessment that we will be able to meet our obligations as they become due over that period. We will
continue to make cash commitments, including capital expenditures, to support the growth of our business.
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any off-
balance sheet derivative instruments. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development services with us.
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Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2021. As of
December 31, 2021, for the purpose of indebtedness, save as disclosed in our consolidated financial statements included elsewhere in this annual report, we did not have
significant contingent liabilities.
Holding Company Structure
We are a holding company with no material operations of our own. We conduct our operations primarily through our wholly owned subsidiaries and the consolidated
affiliated entities in China. As a result, our ability to pay dividends to our shareholders depends upon dividends paid by our PRC subsidiaries. If our PRC subsidiaries or
any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In
addition, our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards
and regulations. Under PRC law, each of our subsidiaries and the consolidated affiliated entities in China is required to set aside at least 10% of its after-tax profits
each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, our wholly foreign-owned subsidiaries in
China may allocate a portion of their after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at their
discretion, and our consolidated affiliated entity may allocate a portion of its after-tax profits based on PRC accounting standards to a surplus fund at its discretion. The
statutory reserve funds and the discretionary funds are not distributable as cash dividends. As our PRC subsidiaries and consolidated affiliated entity have incurred losses,
they have not started to contribute to the statutory reserve funds and discretionary funds. Remittance of dividends by a wholly foreign-owned company out of China is
subject to examination by the banks designated by SAFE. Our PRC subsidiaries have never paid dividends and will not be able to pay dividends until they generate
accumulated profits and meet the requirements for statutory reserve funds.
C.Research and Development
We have built our technology infrastructure with high levels of performance, reliability, scalability and security. We rely on internally developed proprietary
technologies and licensed technologies to manage and improve our website, mobile platform and management systems. We have a team of engineers dedicated to
research and development in the areas of website operations, mobile platform, search engine, data analytics and supply chain management system.
Research and product development expenses primarily comprise salaries and other compensation expenses for our research and product development personnel as
well as office rental, depreciation and other expenses related to our research and product development function. Research and product development expenses also include
expenses that are incurred in connection with the planning and implementation phases of development and costs that are associated with the maintenance of our online
platform or software for internal use. Our research and product development expenses decreased from RMB303.6 million in 2019 to RMB100.5 million in 2020 and
further decreased to RMB54.6 (US$8.6) million in 2021, which was primarily due to the decrease in research and product development personnel related expenses
impacted by COVID-19.
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 year ended
December 31, 2021 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would
cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
E.Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires our management to make estimates that affect the reported amounts
of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the
reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be
affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and
expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time
the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur
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from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or
results of operations. There are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates
used in these and other items could have a material impact on our financial statements. For a detailed discussion of our significant accounting policies and related
judgments, see “Notes to Consolidated Financial Statements – Note 2 Significant Accounting Policies”.
Long-term investments
Long-term investments include equity investments and other long-term investments, which involve significant accounting estimates.
Equity investments
We adopted the ASU 2016-01 at January 1, 2018. Upon adoption of the ASU 2016-01, we elect a measurement alternative for equity investments that do not have
readily determinable fair values and where we do not have the ability to exercise significant influence over operating and financial policies of the entity. Under the
measurement alternative, we measured these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly
transactions for an identical or similar investment of the same issuer. An impairment loss is recognized in the consolidated statements of comprehensive loss equal to the
excess of the investment’s cost over its fair value when the impairment is deemed other-than-temporary.
Other long-term investments
Other long-term investments include financial products with maturities over one year, which are carried at their fair value at each balance sheet date and changes in
fair value are reflected in the consolidated statements of operations and comprehensive income.
When our assumptions related to the estimates of the fair value of the investments decreased/increased by 5% while holding all other estimates constant, there would
be no significant impact to our consolidated results of operations.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable assets and liabilities acquired in business combinations. Goodwill is not
amortized, but tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired.
We adopted ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which removes
the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. We first assess qualitative factors
to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, so as to perform the quantitative
goodwill impairment test. If determined to be necessary, the quantitative impairment test is used to identify goodwill impairment by comparing the fair value of a
reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss
recognized should not exceed the total amount of goodwill allocated to that reporting unit.
There is only one reporting unit as Chief Operating Decision Maker ("CODM") only reviews the operating results on the consolidation level, and our business
substance and economic characteristics of entities and components are similar. Therefore, the goodwill assessment was performed on consolidated level as one reporting
unit.
As of December 31, 2021, we performed an annual impairment assessment and believed it was more likely than not an impairment was indicated based on
qualitative assessment including the volatility of our share price during the year and negative financial trend impacted by the outbreak of COVID-19. Quantitative
goodwill impairment test were performed and discounted cash flow analysis was used to estimate the fair value of the reporting unit with certain key assumptions
including revenue growth rate, gross margin, operating expenses, working capital requirements and discount rate. Based on the result of the impairment test, the fair
value of the reporting unit was higher than its carrying value as at December 31, 2021. Therefore, no impairment loss was recognized for the year ended December 31,
2021.
No impairment loss was recognized for the year ended December 31, 2021 based on our goodwill impairment test performed.
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When one of our assumptions relating to these factors decreased/increased by 5% while holding all other assumptions constant, the result of the goodwill impairment
assessment would not be impacted and the fair value of the reporting unit would still be above its carrying value.
Impairment of non-financial assets
We evaluate our non-financial assets including property and equipment, intangible assets, land use rights and operating lease rights-of-use assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The asset group is the unit of account for a non-
financial asset or assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups
of assets and liabilities. When these events occur, we measure impairment by comparing the carrying amount of the asset group to future undiscounted net cash flows
expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the
assets, we recognize an impairment loss equal to the difference between the carrying amount and fair value of these assets.
As at December 31, 2021, the continuous loss making situation, net operating cash outflow and the uncertainty as to the future impact of COVID-19 pandemic
indicated that the book value of our non-financial assets are subject to potential impairment risk. All of our non-financial assets are considered one asset group which
represents the lowest level to independently generate identifiable cash flows. We performed an impairment test of non-financial assets using the key assumptions
including revenue growth rate, gross margin, operating expenses and working capital requirements. Based on our assessment, no additional impairment of non-financial
assets was recognized during the years ended December 31, 2019, 2020 and 2021, except for provision for certain intangible assets.
When one of our assumptions relating to these factors decreased/increased by 5% while holding all other assumptions constant, the result of the non-financial assets
impairment assessment would not be impacted and the fair value of the asset group would still be above its carrying value.
Current expected credit losses
In 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC
Topic 326”), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment model that is based on expected
losses rather than incurred losses. On January 1, 2020, we adopted this ASC Topic 326 and several associated ASUs on the measurement of credit losses, which requires
us to estimate lifetime expected credit losses upon recognition of the financial assets. We adopted the accounting standards update using a modified retrospective
approach. Upon adoption of the new standard on January 1, 2020, we recorded a net decrease to its retained earnings of RMB19.4 million.
Our accounts receivable, held-to-maturity investments, prepayments and other current assets, amounts due from related parties and long-term amounts due from
related parties are within the scope of ASC Topic 326. We have identified the relevant risk characteristics of its customers and the related receivables and prepayments,
which include nature, size and types of the services we provide, or a combination of these characteristics. Receivables with similar risk characteristics have been grouped
into pools. For each pool, we consider the historical credit loss experience, current economic conditions, supportable forecasts of future economic conditions, expected
impact of COVID-19 and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence the expected credit loss analysis include
customer demographics, payment terms offered in the normal course of business to customers, and industry-specific factors that could impact our receivables.
Additionally, external data and macroeconomic factors are also considered. This is assessed at each quarter based on our specific facts and circumstances.
When our assumptions related to the estimates of loss severity and recoveries and macroeconomic factors decreased/increased by 5% while holding all other
estimates constant, there would be no significant impact to our consolidated results of operations.
Revenue Recognition
We generate revenues primarily from sales of packaged tours and other service fees.
We offer travellers coupons, travel vouchers, membership points or cash rewards from time to time. For customer incentives offered where prior purchase is not
required, we account for them as a reduction of revenue when the coupons and vouchers are utilized to
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purchase travelling products or as selling and marketing expenses when membership points are redeemed for merchandises. For customer incentives offered from prior
purchase, we estimate the amount associated with the future obligation to the customers, and record them as a reduction of revenue when the prior purchase revenue is
initially recognized. Unredeemed incentives are recorded in other current liabilities in the consolidated balance sheets. We estimate liabilities under the customer loyalty
program based on accumulated customer incentives, and the estimate of probability of redemption in accordance with the historical redemption pattern. The actual
expenditure may differ from the estimated liability recorded.
Income Taxes
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or
deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are provided using the liability method.
Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years
to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount
attributed to that asset or liability for tax purposes. The effect on deferred taxes of a change in tax rates is recognized in the statement of comprehensive loss in the period
of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred
tax assets will not be realized.
U.S. GAAP prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. Guidance also provides for derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for
interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in
evaluating our uncertain tax positions and determining our provision for income taxes. As of December 31, 2020 and 2021, we did not have any significant unrecognized
uncertain tax positions or any interest or penalties associated with 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 and financial
statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available 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% likely to be realized upon settlement.
Share-based Compensation
We account for share options and restricted shares granted to employees in accordance with ASC 718, “Stock Compensation”. The 2014 Share Incentive Plan, or the
2014 Plan, allows the plan administrator to grant options, restricted shares and restricted share units. The 2008 Plan allows the plan administrator to grant options and
restricted shares to our employees, directors, and consultants. The plan administrator under both plans is our board of directors or a committee appointed and determined
by the board. The board may also authorize one or more of our officers to grant awards under the plan. In accordance with the guidance, we determine whether a stock-
based award should be classified and accounted for as a liability award or equity award. Under the 2008 Plan and the 2014 Plan, we only granted options to employees
and directors, and such stock-based compensation is considered to be equity classified awards, and is recognized in the financial statements based on their grant date fair
values which are calculated using the binomial option pricing model. Share-based compensation expense is recorded net of an estimated forfeiture rate at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Share-based compensation expense is recorded net of estimated
forfeitures such that expenses are recorded only for those share-based awards that are expected to ultimately vest.
Under the 2008 Plan and the 2014 Plan, options granted to employees vest upon satisfaction of a service condition, which is generally satisfied over four years.
Accordingly, we recognized a significant share-based compensation expense of RMB61.7 million, RMB20.5 million and RMB9.1 million (US$1.4 million) in 2019,
2020 and 2021, respectively. The estimates we used to determine the fair value of these options in computing our share-based compensation expense are determined on
the respective grant dates, and will not change when the underlying shares begin trading because our options are equity classified awards.
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The following table sets forth the options granted under the 2008 Plan and the 2014 Plan in 2019 and no options were granted in 2020 and 2021:
Fair Value
of Option
as of the
Grant Date
Fair Value of
the Underlying
Ordinary
Shares as of the
Grant Date
Intrinsic Value
as of the Grant
Date
Exercise Price
US$
RMB(2)
US$ RMB(2) US$
Number
of
Options
Granted
Jan 30, 2019(1)
Jan 30, 2019(1)
169,461
4,175,853
0.0033
0.0033
0.0230
0.0230
1.50
1.50
10.44
10.44
RMB(2) US$ RMB(2)
1.50
1.50
10.44
10.44
10.42 Contemporaneous
10.42 Contemporaneous
Type of Valuation
1.50
1.50
(1) Options granted to officers and non-officer employees result in different fair value on the same grant date.
(2) The translations from U.S. dollars to Renminbi were made at a rate of RMB6.5063 to US$1.00, the exchange rate in effect as of December 29, 2017 for the
options granted before December 31, 2017, and at a rate of RMB6.8755 to US$1.00, the exchange rate in effect as of December 31, 2018 for the options granted
after January 1, 2018, and at a rate of RMB6.9618 to US$1.00, the exchange rate in effect as of December 31, 2019 for the options granted after January 1, 2019
(including January 1, 2019) solely for the convenience of the readers.
We estimated the fair value of awards on their respective grant dates by considering below:
● Expected volatility. We determine if there is sufficient history for us to calculate volatility using trading prices of our own ADSs. Additionally, we may update
the list of comparable companies from time to time.
● Risk-free interest rate (per annum). We update this estimate each time a new stock award is granted.
● Exercise multiple. The exercise multiple is estimated based on a consideration of empirical studies on the actual exercise behavior of employees of comparable
companies as we currently do not have a sufficiently long history of employee exercise patterns. Based on our employees’ exercise behavior and pattern, we
continue to update this estimate when stock awards are granted.
● Expected dividend yield. This estimate remained unchanged since our initial public offering and is unlikely to change in the foreseeable future, as we do not
anticipate any dividend payments on our ordinary shares in the foreseeable future.
● Expected term (in years). This estimate did not change upon completion of our initial public offering.
● Expected forfeiture rate (post-vesting). We update this estimate each time a new stock award is granted based on the turnover rate of our employees.
● Fair value of our ordinary shares. The fair value of our ordinary shares on the grant date is determined based on the trading price of our ADSs on such date, as
opposed to applying the income approach valuation method.
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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
Dunde Yu
Kun Li
Jie Zhu
Haifeng Yan
Frank Lin
Shiwei Zhou
Onward Choi
Jack Xu
Jiangtao Liu
Haijin Cheng
Anqiang Chen
Wei Zhang
Age
Position/Title
41 Founder, Chairman and Chief Executive Officer
34 Director
41 Director
Independent Director
40
Independent Director
57
Independent Director
46
Independent Director
51
Independent Director
54
Independent Director
44
51
Independent Director
46 Financial Controller
56 Executive Vice President
Mr. Dunde Yu is our founder and has served as chairman of our board of directors and chief executive officer since our inception. Prior to founding our company,
Mr. Yu was the chief technology officer of ci123.com in 2006, where he helped ci123.com become a leading Chinese childcare website. From 2004 to 2006, Mr. Yu
served as the technical director of Bokee.com. Mr. Yu received a bachelor’s degree in mathematics from Southeast University in China in 2003.
Mr. Kun Li has served as Tuniu’s director since April 21, 2020. Mr. Kun Li currently serves as the vice general manager of asset management in HNA Tourism &
Hospitality Business Unit. Mr. Li joined HNA Group in July 2013 and has previously served as president of HNA Tourism Innovation Ventures, deputy director of the
investment committee in HNA’s Travel Innovation Platform and general manager of strategic coordination in HNA Hotels and Resorts. Mr. Li has extensive experience
in the fields of tourism and investment. Mr. Li received a master’s degree in financial modeling from University of Glasgow in November 2012.
Mr. Jie Zhu has served as our director since February 2016. Currently, Mr. Zhu serves as Vice President of Wangfujing Group CO., Ltd. After joining HNA Tourism
Group in 2011, Mr. Zhu headed the investment and securities business divisions of HNA Tourism Group and its subsidiary Beijing Tourism Investment Fund. Mr. Zhu
Joined Wangfujing Group CO., Ltd in 2021. Mr. Zhu holds an MBA from Glendon-York University.
Mr. Haifeng Yan has served as our director since our inception and is now our independent director. Mr. Yan is the founder and Chief Executive Officer of Black Fish
Group Limited. Mr. Yan co-founded Tuniu in 2006 and previously served as our Chief Operating Officer and President until November 2017. Prior to founding Tuniu,
Mr. Yan was one of the founding members and Chief Operating Officer of ci123.com, a leading childcare website in China, from 2005 to 2006. Prior to that, Mr. Yan
served as an analyst of iTech Holdings Limited in 2004.
Mr. Frank Lin has served as our independent director since December 2009. Mr. Lin is a general partner of DCM, a technology venture capital firm. Prior to joining
DCM in 2006, Mr. Lin was chief operating officer of Sina Corporation, a Nasdaq-listed company. He co-founded SINA’s predecessor, SinaNet, in 1995 and later guided
SINA through its listing on Nasdaq. Mr. Lin had also held various marketing, engineering and managerial positions at Octel Communication Inc. and NYNEX. Mr. Lin
currently serves on the board of directors of various DCM portfolio companies, including Vipshop Holdings Limited, China Online Education Group (51 Talk.com),
which are NYSE listed companies, Kuaishou Technology, a Hong Kong Exchange listed company. Mr. Lin received an MBA degree from Stanford University and a
bachelor’s degree in engineering from Dartmouth College.
Mr. Shiwei Zhou has served as Tuniu’s independent director since February 2021. Mr. Zhou currently serves as Vice President of Corporate Strategy & Investment at
Trip.com Group (NASDAQ: TCOM), leading the Company’s strategic M&A activity and investments. Mr. Zhou joined Trip.com Group in November 2015 as the head
of its investor relations department. Before joining Trip.com Group, Mr. Zhou worked in equity research on the both the buy side and the sell side in the US, covering the
technology, real estate, and hospitality sectors. Prior to that, he worked in a private investment fund, investing in US real estate assets. Mr. Zhou is a
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Certified Financial Analyst (CFA) and received an MBA degree from the University of Southern California, a Master of Science degree from Columbia University, and a
Bachelor of Engineering degree from Tongji University.
Mr. Onward Choi has served as our independent director since May 2014. Mr. Choi was the acting chief financial officer of NetEase Inc., a Nasdaq-listed company,
from July 2007 to June 2017. Mr. Choi currently serves as the independent director and the chairman of the audit committee of Smart Share Global Limited and
Ucloudlink Group Inc., both are Nasdaq-listed companies. Mr. Choi also serves as an independent non-executive director and the chairman of the audit committee of
Beijing Jingkelong Company Limited (HKEX: 0814) and Tongdao Liepin Group (HKEX: 6100), both of which are listed on the Hong Kong Stock Exchange. Mr. Choi is
a fellow member of the Association of Chartered Certified Accountants, CPA Australia, and the Hong Kong Institute of Certified Public Accountants. Mr. Choi received
a bachelor’s degree in accountancy with honors from the Hong Kong Polytechnic University.
Mr. Jack Xu has served as our independent director since May 2014. Mr. Xu is the managing partner at Seven Seas Venture Partners. Mr. Xu served as Co-President
and Chief Technology Officer of Sina Corporation, a Nasdaq-listed company, from January 2013 to February 2015. Prior to joining Sina Corporation, Mr. Xu worked at
Cisco as the Corporate Vice President of the Communications and Collaboration business unit. Previously, Mr. Xu served as Vice President of Engineering and Research
at eBay from October 2002 to April 2008 and Chief Technology Officer at NetEase from May 2000 to July 2002. He led Excite’s search engine development in 1996,
while pursuing a Ph.D. at the University of California at Berkeley. Mr. Xu received a bachelor’s degree and a master’s degree in information management from Sun Yat-
Sen University in China.
Mr.Jiangtao Liu has served as Tuniu’s independent director since February 2021. Mr. Jiangtao Liu joined Caissa Group in 2019 and currently serves as Chief
Executive Officer of Caissa Group. Prior to joining Caissa Group, Mr. Liu served as Vice Chairman of Secoo Group, Executive Director and Senior Vice President of
Elion Resources Group and Vice Chairman of HNA Tourism Group Co. Mr. Liu received a bachelor’s degree in engineering from Nanjing University of Aeronautics and
Astronautics and is currently pursuing an EMBA degree in the PBC School of Finance at Tsinghua University.
Mr. Haijin Cheng has served as Tuniu’s independent director since March 2021. Mr. Cheng has extensive experience in internal auditing, financial management and
strategic M&A with companies in a range of industries and countries. Mr. Cheng is the founder and president of Shanghai Huan Pu Management Consulting Co., which
provides management advisory services to domestic and foreign companies. Prior to founding Huan Pu, Mr. Cheng served as the leader of the business development
department in General Electric (China) Ltd, director of the business development department in Honeywell (China) Ltd., senior officer of the audit department in Bank of
China (Hong Kong) and corporate accountant in C. P. Group of Thailand. Mr. Cheng currently serves as an independent director of Centre Testing International Group
Co., Ltd. (300012.SZ), an A-share company listed on the Shenzhen Stock Exchange. Mr. Cheng is a Certified Public Accountant USA and received an MBA degree from
Cornell University.
Mr. Anqiang Chen has served as our financial controller since May 2020. Mr. Chen joined Tuniu in March 2010. Prior to the financial controller appointment,
Mr. Chen previously served as associate vice president in charge of budgeting and working capital management at Tuniu. Mr. Chen has over 25 years of experience in
finance and management across various industries. Mr. Chen holds an MBA from Xi’an University of Technology.
Mr. Wei Zhang has served as our executive vice president since May 2017. Mr. Zhang joined us in May 2015 as a senior vice president. Prior to joining us,
Mr. Zhang worked in Jiangsu Hiteker High-tech Co., Ltd. from 2000 to 2015 in various roles such as vice president and executive president. Mr. Zhang received a
master’s degree of business administration from a joint program between Renmin University of China and University of Wales in 2013.
B.Compensation
For the fiscal year ended December 31, 2021, we paid an aggregate of approximately RMB2.0 million (US$0.3 million) in cash to our executive officers and
RMB1.0 million (US$0.2 million) to our non-executive directors and officers. For share incentive grants to our directors and executive officers and the vesting conditions
of such share incentive grants, see “—Share Incentive Plans.”
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Share Incentive Plans
2008 Incentive Compensation Plan
We adopted an incentive compensation plan, or the 2008 Plan, in 2008. The purposes of the 2008 Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to employees and consultants, and to promote the success of our business by offering these
individuals an opportunity to acquire a proprietary interest in our company. In 2012, we increased the maximum aggregate number of shares which may be issued under
the 2008 Plan from 11,500,000 to 18,375,140. As of February 28, 2022, options to purchase 3,421,602 Class A ordinary shares were outstanding under the 2008 Plan.
The 2008 Plan terminated automatically in 2018.
The following paragraphs summarize the terms of the 2008 Plan.
Types of Awards. The 2008 Plan permits the awards of options and restricted shares.
Plan Administration. Our board of directors or a committee appointed by our board will administer the 2008 Plan. The committee or the full board of directors, as
applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award
grant, among other things. Our board of directors may authorize one or more officers of us to grant awards under the 2008 Plan, subject to parameters specified by the
board of directors.
Award Agreement. Awards granted under the 2008 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which
may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally or
bilaterally amend, modify, suspend, cancel or rescind the award, among other things. Pursuant to the form award agreement under the 2008 Plan, 1/4 of the ordinary
shares underlying the option shall vest on the first anniversary of the date of grant, and 1/48 of the remaining ordinary shares underlying the option shall vest on
a monthly basis in the following three years. However, the option may be exercised, to the extent vested, only (a) in connection with or after certain triggering events if
the option is assumed by a company whose shares are listed on a securities exchange, or (b) unless otherwise allowed by the plan administrator in its sole discretion, if
the option holder obtains all the necessary governmental approvals and consents required for the issuance of such shares.
Eligibility. We may grant awards to our employees and consultants of our company. However, we may grant options that are intended to qualify as incentive options
only to our employees.
Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will
expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is the tenth anniversary after
the date of a grant.
Transfer Restrictions. Options may not be transferred in any manner by the recipient other than by will or by the laws of descent or distribution, except as otherwise
provided by the plan administrator.
Termination of the 2008 Plan. The 2008 Plan terminated automatically in 2018.
2014 Share Incentive Plan
We adopted the 2014 Share Incentive Plan, or the 2014 Plan, in 2014. The maximum aggregate number of shares which may be issued pursuant to all awards under
the 2014 Plan was initially 5,500,000 ordinary shares as of the date of its approval. The number of shares reserved for future issuances under the 2014 Plan will be
increased automatically if and whenever the ordinary shares reserved under the 2014 Plan account for less than 1% of the total then-issued and outstanding ordinary
shares on an as-converted basis, as a result of which increase, the ordinary shares reserved under the 2014 Plan immediately after each such increase shall equal to 5% of
the then-issued and outstanding ordinary shares on an as-converted basis (the "Evergreen Provision"). Pursuant to the Evergreen Provision, the maximum aggregate
number of shares which may be issued under the 2014 Plan increased automatically by an aggregate of 36,464,263 Class A ordinary shares in December 2014,
August 2015 and December 2016, respectively, reaching to a total of 41,964,263
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Class A ordinary shares. As of February 28, 2022, options to purchase 8,952,282 Class A ordinary shares and 13,170 restricted shares were outstanding under the 2014
Plan.
The following paragraphs summarize the terms of the 2014 Plan.
Types of Awards. The 2014 Plan permits the awards of options, restricted shares and restricted share units.
Plan Administration. Our board of directors or a committee designated by our board administers the 2014 Plan. The committee or the full board of directors, as
applicable, determines the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award
grant.
Award Agreement. Awards granted under the 2014 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which
may include the term of the award, the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally
amend, modify, suspend, cancel or rescind the award.
Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to qualify as
incentive share options only to our employees and employees of our parent companies and subsidiaries.
Acceleration of Awards upon Change in Control. If a change in control of our company occurs, the plan administrator may, in its sole discretion, 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 portion of 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 attained upon 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-in-control transaction plus reasonable interest.
Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will
expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is the tenth anniversary after
the date of a grant.
Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise
provided by the plan administrator.
Termination of the 2014 Plan. Unless terminated earlier, the 2014 Plan will terminate automatically in 2024. Our board of directors has the authority to amend or
terminate the plan subject to shareholder approval or home country practice.
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The following table summarizes, as of February 28, 2022, the outstanding options and restricted shares granted to our directors and executive officers under the 2008
Plan and 2014 Plan.
Name
Dunde Yu
Wei Zhang
Jack Xu
Onward Choi
Directors and officers as a group
Ordinary
Shares
Underlying
Options
Awarded/
Restricted
Shares
630,814
1,100,000
1,269,995
900,000
760,000
1,981,000
1,420,000
17,256
3
12,564
*
*
*
*
*
*
*
8,801,148
Exercise Price
(US$/
Share)
0.100
0.226
0.0001
3.000
3.090
3.090
2.683
0.0001
1.670
0.0033
3.090
0.0001
2.683
1.670
0.0033
N/A
N/A
—
(RMB/
Share)(3)
0.637
1.44
0.001
19.118
19.691
19.691
17.098
0.001
10.642
0.021
19.691
0.001
17.098
10.642
0.021
—
Date of Grant
November 5, 2009
March 11, 2011
August 1, 2013
June 13, 2014
March 6, 2015
August 20, 2015
December 2, 2016
January 1, 2017
May 8, 2018
January 30, 2019
August 20, 2015
August 20, 2015
December 2, 2016
May 8, 2018
January 30, 2019
May 9, 2018
May 9, 2018
—
Vesting
Schedule
4 years(1)
4 years(1)
4 years(1)
4 years(1)
4 years(1)
4 years(1)
4 years(1)
1 years(2)
4 years(1)
1 years(2)
4 years(1)
4 years(1)
4 years(1)
4 years(1)
1 years(2)
4 years(1)
4 years(1)
—
Date of Expiration
November 4, 2029
March 10, 2031
July 31, 2029
June 12, 2024
March 5, 2025
August 19, 2025
December 1, 2026
December 31, 2026
May 7, 2028
January 29, 2029
August 19, 2025
August 19, 2025
December 1, 2026
May 7, 2028
January 29, 2029
May 8, 2028
May 8, 2028
—
*
Shares underlying vested options less than 1% of our total outstanding shares.
† Denotes restricted share award; all other awards in this table are option awards.
(1) Pursuant to the relevant award agreement, 1/4 of the ordinary shares underlying the option or restricted shares shall vest on the first anniversary of the date of
grant, and 1/48 of the remaining ordinary shares underlying the option or restricted shares shall vest on a monthly basis in the following three years. However,
the option or restricted shares may be exercised, to the extent vested, only (a) in connection with or after certain triggering events if the option is assumed by a
company whose shares are listed on a securities exchange, or (b) unless otherwise allowed by the plan administrator in its sole discretion, if the option holder or
holder of restricted shares obtains all the necessary governmental approvals and consents required for the issuance of such shares.
(2) Pursuant to the relevant award agreement, 1/12 of the ordinary shares underlying the option shall vest on a monthly basis. However, the option may be
exercised, to the extent vested, only (a) in connection with or after certain triggering events if the option is assumed by a company whose shares are listed on a
securities exchange, or (b) unless otherwise allowed by the plan administrator in its sole discretion, if the option holder obtains all the necessary governmental
approvals and consents required for the issuance of such shares.
(3) The prices in Renminbi were translated using the rate of US$1.00 = RMB6.3726, the exchange rate in effect as of December 31, 2021, solely for the
convenience of the readers.
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C.Board Practices
Board of Directors
Our board of directors currently consists of ten directors. A director is not required to hold any shares in our company. A director may vote with respect to any
contract, proposed contract, or arrangement in which he or she is interested provided (a) such director has declared the nature of his or her interest, whether material or
not, at the earliest meeting of the board at which it is practicable to do so, either specifically or by way of a general notice, (b) such director has not been disqualified by
the chairman of the relevant board meeting, and (c) if such contract or arrangement is a transaction with a related party, such transaction has been approved by the audit
committee in accordance with the Nasdaq rules. The directors may exercise all the powers of the company to borrow money, mortgage its business, property and uncalled
capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party.
Committees of the Board of Directors
We have three committees of the board of directors: the audit committee, the compensation committee and the nominating and corporate governance committee
under the board of directors. 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. Onward Choi, Mr. Jack Xu and Mr. Haijin Cheng and is chaired by Mr. Choi. Each of Mr. Choi, Mr. Xu and
Mr. Cheng satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules and meet the independence standards under Rule 10A-3
under the Securities Exchange Act of 1934, as amended. Our board of directors has determined that each of Mr. Choi and Mr. Xu qualifies as an “audit committee
financial expert” within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended. The audit committee oversees our accounting and
financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:
● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the
independent registered public accounting firm;
● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;
● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;
● discussing the annual audited financial statements with management and the independent registered public accounting firm;
● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant or material control deficiencies;
● reviewing and reassessing annually the adequacy of our audit committee charter;
● meeting separately and periodically with management and the independent registered public accounting firm; and
● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper
compliance.
Compensation Committee. Our compensation committee consists of Mr. Onward Choi, Mr. Jiangtao Liu and Mr. Jack Xu, and is chaired by Mr. Choi. Each of
Mr. Choi, Mr. Liu and Mr. Xu, satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The compensation committee assists the
board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive
officer may not be present at any
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committee meeting during which his compensation is deliberated upon. 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 executive officers;
● 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’s independence from
management.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Mr. Jack Xu, Mr. Onward Choi and Mr. Frank
Lin, and is chaired by Mr. Xu. Each of Mr. Xu, Mr. Choi and Mr. Lin satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules.
The nominating and corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of
the board and its committees. The nominating and corporate governance committee is responsible for, among other things:
● recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board;
● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, age, skills, experience and
availability of service to us;
● selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the
nominating and corporate governance committee itself;
● developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law
and practice of corporate governance and our compliance with such laws and practices; and
● evaluating the performance and effectiveness of the board as a whole.
Terms of Directors and Executive Officers
All directors hold office until they are removed by ordinary resolution of the shareholders or become disqualified from being a director in accordance with the terms
of our articles of association. In addition, the service agreements between us, our subsidiaries, if applicable, and the directors do not provide benefits upon termination of
their service. Director nominations by the board of directors are subject to the approval of our corporate governance and nominating committee. Our shareholders may
remove any director by ordinary resolution and may in like manner appoint another person in his stead. A valid ordinary resolution requires (i) a majority of the votes
cast at a shareholder meeting (in person or by proxy) that is duly constituted and meets the quorum requirement; or (ii) approval by unanimous written shareholder
resolutions. Officers are elected by and serve at the discretion of the board of directors.
Duties of Directors
Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty to
exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty
of care to us, our directors must ensure compliance with our memorandum and articles of association. A shareholder may have the right to seek damages in our name if a
duty owed by our directors is breached. You should refer to “Item 10. Additional Information—B. Memorandum and Articles of Association—Differences in Corporate
Law—Directors’ Fiduciary Duties.”
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Board Diversity Matrix
Country of Principal Executive Offices
Foreign Private Issuer
Disclosure Prohibited Under Home Country Law
Total Number of Directors
Part I: Gender Identity
Directors
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction
LGBTQ+
Did Not Disclose Demographic Background
D.Employees
Board Diversity Matrix (As of February 28, 2022)
Female
0
Male
10
PRC
Yes
No
10
0
0
5
Non-Binary
Did Not
Disclose
Gender
0
0
We had a total of 6,188, 2,113 and 1,916 employees as of December 31, 2019, 2020 and 2021, respectively. The following table sets forth the numbers of our
employees, categorized by function, as of December 31, 2021:
Function
Management and administration
Customer service center
Sales and marketing
Research and product development
Total
Number of
Employees
242
1,071
267
336
1,916
We enter into standard employment agreements with all our employees. We also enter into confidentiality agreements with certain directors and executive officers
that impose confidentiality obligations until the relevant information becomes public or is no longer considered confidential by us. In addition to salaries and benefits, we
provide stock-based compensation and performance-based bonuses for our employees and commission-based compensation for our sales personnel.
As required by regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including
pension insurance, medical insurance, unemployment insurance, maternity insurance, job-related injury insurance and a housing provident fund. We are required by PRC
laws to make contributions to employee social security plans at specified percentages of the salaries, bonuses and certain allowances of our employees.
Our success depends on our ability to attract, retain and motivate qualified personnel. We believe that we maintain a good working relationship with our employees,
and we have not experienced any significant labor disputes.
E.Share Ownership
The following table sets forth information with respect to the beneficial ownership of our shares as of February 28, 2022 by:
● each of our current directors and executive officers; and
● each person known to us to own beneficially more than 5% of our shares.
See “—B. Compensation—Share Incentive Plans” for more details on options and restricted shares granted to our directors and executive officers.
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The calculations in the table below are based on 371,082,366 ordinary shares outstanding as of February 28, 2022, including 17,373,500 Class B ordinary shares
outstanding and 353,708,866 Class A ordinary shares outstanding (excluding 18,249,177 Class A ordinary shares, represented by 6,083,059 American depositary shares,
repurchased and reserved for the future exercise of options or the vesting of other awards under the 2008 Plan and the 2014 Plan).
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by 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 through the 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 the percentage ownership of any other
person.
Directors and Executive Officers:*
Dunde Yu(1)
Kun Li(2)
Jie Zhu(3)
Jiangtao Liu(4)
Haijin Cheng(5)
Frank Lin(6)
Shiwei Zhou(7)
Haifeng Yan(8)
Onward Choi
Jack Xu(9)
Anqiang Chen
Wei Zhang
All directors and executive officers as a group
Principal Shareholders:
Affiliates of HNA Tourism(10)
Affiliates of Caissa Group(11)
DCM V, L.P. and Affiliates(12)
Dragon Rabbit Capital Limited(13)
Fullshare Holdings Limited(14)
Total
Ordinary
Shares
Voting
%†
Power††
Class A
Ordinary
Shares
11,821,727
100,379,869
100,379,869
78,061,780
—
25,829,512
12,467,252
—
**
**
**
**
230,003,071
Class B
Ordinary
Shares
10,423,503
—
—
—
—
—
—
—
—
—
—
—
10,423,503
22,245,230
100,379,869
100,379,869
78,061,780
—
25,829,512
12,467,252
—
**
**
**
**
240,426,574
100,379,869
78,061,780
25,829,512
3,704,135
4,104,137
—
—
—
10,423,503
6,949,997
100,379,869
78,061,780
25,829,512
14,127,638
11,054,134
5.9
27.1
27.1
21.0
—
7.0
3.4
—
**
**
**
**
63.3
27.1
21.0
7.0
3.8
3.0
21.7
19.0
19.0
14.8
—
4.9
2.4
—
**
**
**
**
62.3
19.0
14.8
4.9
20.5
14.0
*
Except for Kun Li, Jie Zhu, Jiangtao Liu, Haijin Cheng, Frank Lin, Shiwei Zhou, Haifeng Yan and Jack Xu, the business address of our directors and executive
officers is Tuniu Building, No. 32, Suningdadao, Xuanwu District, Nanjing, Jiangsu Province 210042, PRC.
** Shares underlying vested options of less than 1% of our total outstanding shares on an as-converted basis.
†
For each person and group included in this column, percentage ownership is calculated by dividing the number of ordinary shares beneficially owned by such
person or group by the sum of the total number of ordinary shares outstanding as of February 28, 2022, which is 371,082,366 ordinary shares outstanding,
including 17,373,500 Class B ordinary shares outstanding and 353,708,866 Class A ordinary shares outstanding (excluding the 18,249,177 Class A ordinary
shares, represented by 6,083,059 ADSs, repurchased and reserved for the future exercise of options or the vesting of other awards under the 2008 Plan and the
2014 Plan), plus the number of ordinary shares such person or group has the right to acquire, including upon exercise of options and vesting of restricted shares
and restricted share units, within 60 days after February 28, 2022.
†† For each person and group included in this column, percentage ownership percentage of total voting power represents voting power based on both Class A and
Class B ordinary shares held by such person or group, and the ordinary shares such person or group has the right to acquire upon exercise of the stock options or
warrants within 60 days after February 28, 2022, with respect to the total voting power based on all the outstanding shares of our Class A and Class B ordinary
shares as a single class. Each holder of Class A ordinary shares is entitled to one vote per Class A ordinary share. Each holder of our Class B
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ordinary shares is entitled to ten votes per Class B ordinary share. Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary
shares on a share-for-share basis.
(1) Represents (i) 8,091,621 Class A ordinary shares underlying the options that have become fully vested as of February 28, 2022 or will become fully vested
within 60 days after February 28, 2022, (ii) 25,971 Class A ordinary shares represented by 8,657 American Depository Shares held by Mr.Yu, and
(iii) 3,704,135 Class A ordinary shares and 10,423,503 Class B ordinary shares held by Dragon Rabbit Capital Limited, a British Virgin Islands company.
Dragon Rabbit Capital Limited is wholly owned by Longtu Holdings Limited, a British Virgin Islands company which is wholly owned by a trust, of which
Mr. Yu’s family is the beneficiary. The 3,704,135 Class A ordinary shares and 10,423,503 Class B ordinary shares owned by Dragon Rabbit Capital Limited are
currently pledged to Fuqun Limited, as lender under a loan agreement dated August 21, 2017, to secure the obligations of Dragon Rabbit Capital Limited under
the loan agreement.
(2) Represents (i) 90,909,091 Class A ordinary shares held by BHR Winwood Investment Management Limited and (ii) 9,470,778 Class A ordinary shares
represented by 3,156,926 American Depository Shares held by Hong Kong Praise Tourism Investment Limited. The business address of Mr. Li is 10/F Hainan
Airlines Plaza, Xiao Yun Road, Chaoyang District, Beijing, PRC.
(3) Represents (i) 90,909,091 Class A ordinary shares held by BHR Winwood Investment Management Limited and (ii) 9,470,778 Class A ordinary shares
represented by 3,156,926 American Depository Shares held by Hong Kong Praise Tourism Investment Limited. The business address of Mr. Zhu is No. 253
Wangfujing Street, Dongcheng District, Beijing, PRC.
(4) Represents (i) 65,625,000 Class A ordinary shares held by Fabulous Jade Global Limited and (ii) 12,436,780 Class A ordinary shares held by Hopeful Tourism
Limited. The business address of Mr. Liu is Floor 4th, Hopson One office building, No.22 West Dawang Road. Chaoyang District, Beijing, PRC.
(5) The business address of Mr. Cheng is No.4-2-502 Dong Hua Shi Nan Li Yi Qu, Dongcheng District, Beijing, PRC.
(6) Represents (i) 14,653,569 Class A ordinary shares and 1,766,328 Class A ordinary shares represented by 588,776 American Depository Shares held by DCM
V, L.P., (ii) 357,564 Class A ordinary shares and 43,104 Class A ordinary shares represented by 14,368 American Depository Shares held by DCM Affiliates
Fund V, L.P., (iii) 6,022,522 Class A ordinary shares and 539,187 Class A ordinary shares represented by 179,729 American Depository Shares held by DCM
Hybrid RMB Fund, L.P., (iv) 1,696,088 Class A ordinary shares and 615,195 Class A ordinary shares represented by 205,065 American Depository Shares held
by DCM Ventures China Turbo Fund, L.P., and (v) 99,769 Class A ordinary shares and 36,186 Class A ordinary shares represented by 12,062 American
Depository Shares held by DCM Ventures China Turbo Affiliates Fund, L.P. The business address of Mr. Lin is Unit 1, Level 10, Tower W2, Oriental Plaza,
Dong Cheng District, Beijing, PRC.
(7) Represents 12,467,252 Class A ordinary shares held by Ctrip Investment Holding Ltd. The business address of Mr. Zhou is 10F, Building 16, 968 Jinzhong
Road, Shanghai, PRC.
(8) The business address of Mr. Yan is Floor 2-5,Building C6, Zidong International Creative Park, Nanjing, Jiangsu, PRC.
(9) The business address of Mr. Xu is 12011 Magnolia Court, Saratoga, CA 95070, USA.
(10) Represents (i) 90,909,091 class A ordinary shares held by BHR Winwood Investment Management Limited and (ii) 9, 470,778 class A ordinary shares
represented by 3,156,926 American Depository Shares held by Hong Kong Praise Tourism Investment Limited (HK Praise Tourism). BHR Winwood
Investment Management Limited is a company incorporated in Hong Kong and wholly owned by an affiliated fund of HNA Tourism. The business address of
BHR Winwood Investment Management Limited is Unit 3101, 31/F, tower 2, China Central Place, 79 Jianguo Road, Chaoyang District, Beijing 100025, PRC.
HK Praise Tourism is a company organized under the laws of Hong Kong, and is a nominee of Beijing Capital Airlines Co. Limited, a controlled subsidiary of
HNA Tourism. The business address of HK Praise Tourism is Unit 417, 4/F, Lippo
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Centre Tower Two No. 89 Queensway, Admiralty, Hong Kong. We refer to BHR Winwood Investment Management Limited and HK Praise Tourism as
“Affiliates of HNA Tourism.”
(11) Represents (i) 65,625,000 Class A ordinary shares held by Fabulous Jade Global Limited, and (ii) 12,436,780 Class A ordinary shares held by Hopeful Tourism
Limited. The business address of Fabulous Jade Global Limited is c/o P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
. Fabulous Jade is a wholly-owned subsidiary of Hopeful Tourism Limited. The business address of Hopeful Tourism Limited is Flat/Rm A, 12/F Kiu Fu
Commercial Building, 300 Lockhart Road, Wan Chai, Hong Kong. Hopeful Tourism Limited is a wholly-owned subsidiary of Caissa Sega Tourism Culture
Investment Limited, which in turn is a wholly-owned subsidiary of Caissa Sega Tourism Culture Development Group Co., Ltd. We refer to Fabulous Jade
Global Limited and Hopeful Tourism Limited as “Affiliates of Caissa Group”.
(12) Represents (i) 14,653,569 Class A ordinary shares and 1,766,328 Class A ordinary shares represented by 588,776 American Depository Shares held by DCM
V, L.P., (ii) 357,564 Class A ordinary shares and 43,104 Class A ordinary shares represented by 14,368 American Depository Shares held by DCM Affiliates
Fund V, L.P., (iii) 6,022,522 Class A ordinary shares and 539,187 Class A ordinary shares represented by 179,729 American Depository Shares held by DCM
Hybrid RMB Fund, L.P., (iv) 1,696,088 Class A ordinary shares and 615,195 Class A ordinary shares represented by 205,065 American Depository Shares held
by DCM Ventures China Turbo Fund, L.P., and (v) 99,769 Class A ordinary shares and 36,186 Class A ordinary shares represented by 12,062 American
Depository Shares held by DCM Ventures China Turbo Affiliates Fund, L.P. The general partner of DCM V, L.P. and DCM Affiliates Fund V, L.P. is DCM
Investment Management V, L.P., whose general partner is DCM International V, Ltd. DCM International V, Ltd., through DCM Investment Management V, L.P.,
has the sole voting and investment power over these shares, and such voting and investment power is exercised by F. Hurst Lin and Matthew C. Bonner, the
directors of DCM International V, Ltd. The general partner of DCM Hybrid RMB Fund, L.P. is DCM Hybrid RMB Fund Investment Management, L.P., whose
general partner is DCM Hybrid RMB Fund International Ltd. DCM Hybrid RMB Fund International Ltd., through DCM Hybrid RMB Fund Investment
Management, L.P., has the sole voting and investment power over these shares, and such voting and investment power is exercised by F. Hurst Lin and Matthew
C. Bonner, the directors of DCM Hybrid RMB Fund International Ltd. The general partner of DCM Ventures China Turbo Fund, L.P. and DCM Ventures China
Turbo Affiliates Fund, L.P. is DCM Turbo Fund Investment Management, L.P., whose general partner is DCM Turbo Fund International, Ltd. DCM Turbo Fund
International, Ltd., through DCM Turbo Fund Investment Management, L.P., has the sole voting and investment power over these shares, and such voting and
investment power is exercised by F. Hurst Lin and Matthew C. Bonner, the directors of DCM Turbo Fund International, Ltd. The business address of DCM
V, L.P., DCM Affiliates Fund V, L.P., DCM Hybrid RMB Fund, L.P., DCM Ventures China Turbo Fund, L.P. and DCM Ventures China Turbo Affiliates
Fund, L.P. is 2420 Sand Hill Road, Suite 200, Menlo Park, CA 94025, the United States.
(13) Dragon Rabbit Capital Limited is wholly owned by Longtu Holdings Limited is a British Virgin Islands company which is wholly owned by a trust, of which
Mr. Yu’s family is the beneficiary. The business address of Dragon Rabbit Capital Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town,
Tortola, VG1110, British Virgin Islands. The 3,704,135 Class A ordinary shares and 10,423,503 Class B ordinary shares owned by Dragon Rabbit Capital
Limited are currently pledged to Fuqun Limited, as lender under a loan agreement dated August 21, 2017, to secure the obligations of Dragon Rabbit Capital
Limited under the loan agreement.
(14) Represents (i) 4,104,137 Class A ordinary shares and (ii) 6,949,997 Class B ordinary shares held by Verne Capital Limited. Verne Capital Limited is a wholly
owned subsidiary of Five Seasons XV Limited. Five Seasons XV Limited is a wholly owned subsidiary of Fullshare Value Fund II L.P. Fullshare Investment
Management III Limited is the general partner of Fullshare Value Fund II L.P., and is wholly owned by Five Seasons XII Limited, which is a wholly owned
subsidiary of Five Seasons XVIII (A) Limited. Five Seasons XVIII (A) Limited is a wholly owned subsidiary of Five Seasons XVIII Limited, which is a wholly
owned subsidiary of Fullshare Holdings Limited. Accordingly, Fullshare Holdings Limited and its affiliates may be deemed to beneficially own the securities
directly held by Verne Capital Limited. The business address of Fullshare Holdings Limited is Unit 2805, Level 28 Admiralty Centre Tower One 18 Harcourt
Road, Admiralty Hong Kong.
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To our knowledge, as of February 28, 2022, 144,302,394 of our outstanding ordinary shares are held by five record holders in the United States. The total number of
shares held by the five record holders in the United States represents 38.9% of our total outstanding shares. This includes 125,034,591 ordinary shares (excluding
18,249,177 Class A ordinary shares, represented by 6,083,059 American depositary shares, repurchased and reserved for the future exercise of options or the vesting of
other awards under the 2008 Plan and the 2014 Plan) held of record by JPMorgan Chase Bank, N.A., the depositary of our ADS program. The number of beneficial
owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States. 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.E Directors, Senior Management and Employees—Share Ownership.”
B.Related Party Transactions
Contractual Arrangements
For a description of the contractual arrangements among Beijing Tuniu, Nanjing Tuniu and the shareholders of Nanjing Tuniu, see “Item 4. Information on the
Company—C. Organizational Structure.” See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”
Private Placements, Repurchase and Redesignation
See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”
Relationship with Trip.com
Trip.com purchased 5,000,000 Class A ordinary shares in a private placement concurrent with our initial public offering, an additional 3,731,034 Class A ordinary
shares for a total of US$15,000,000 through a private placement transaction in December 2014 as well as an additional 3,750,000 Class A ordinary shares for a total of
US$20,000,000 through a private placement transaction in May 2015. We conduct transactions in the ordinary course of business with Trip.com on the terms of arm-
length transactions. We sell our packaged tours through Trip.com’s online platform and the commission fees to Trip.com were insignificant. We purchased travelling
products from Trip.com’s online platform, which were insignificant. Revenues from Trip.com consist of commission fees for the booking of hotel rooms and air tickets
through our online platform, amounting to RMB65.7 million, RMB16.9 million and RMB145.5 (US$22.8)for the years ended December 31, 2019, 2020 and 2021,
respectively. As of December 31, 2020 and 2021, amounts due from Trip.com amounted to RMB14.0 million and RMB13.0 million (US$2.0 million), respectively, and
amounts due to Trip.com amounted to RMB18.2 million and RMB3.9 million (US$0.6 million), respectively.
Relationship with Caissa Group
On November 20, 2020, pursuant to a share purchase agreement and certain amendments, Caissa completed the purchase of all Class A ordinary shares held by
JD.com, Inc.
We sold packaged tours through Caissa’s platform and the commission fees to Caissa were insignificant. As of December 31, 2020 and 2021, amounts due from
Caissa amounted to RMB 8.3 million and RMB1.9 million (US$0.3 million), respectively, and amounts due to Caissa amounted to RMB1.9 million and RMB0.8 million
(US$0.1 million).
Relationship with HNA Tourism Group
In November 2015, we entered into a strategic partnership with HNA Tourism through a share subscription agreement, pursuant to which (i) HNA Tourism invested
US$500 million in our company in January 2016 through the acquisition of 90,909,091 newly issued Class A ordinary shares of our company by one of its affiliates, and
(ii) HNA Tourism agreed to provide us with access to its premium airlines and hotels resources at a preferential rate, in compliance with applicable fair competition
market rules, and we undertook to acquire no less than US$100 million products and services sourced from HNA Tourism until June 30, 2018. The transaction
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contemplated by the share subscription agreement was completed on in January 2016. In connection with the strategic partnership with HNA Tourism, we entered into an
investor rights agreement with HNA Tourism in November 2015, which was subsequently amended in December 2015 and February 2016, to govern certain rights and
obligations of us and HNA Tourism. We have purchased RMB443.1 million, RMB164.4 million and RMB112.8 million (US$17.7 million) air tickets from HNA Tourism
for the years ended December 31, 2019, 2020 and 2021, respectively. We sold travelling products through an affiliate of HNA Tourism’s distribution channels and the
revenues were insignificant.
In December 2017, we provided financing to an affiliate of HNA Tourism (the "HNA Affiliate") amounting to RMB40.0 million (US$6.3 million) by purchasing
private placement notes issued by the HNA Affiliate (the “Notes Financing”), with the interest rate of 8.5%, which was repayable in one year and was further requested
by this debtor to extend to December 2020. The Notes Financing was guaranteed by HNA Group Co., Limited (“HNA Group”), HNA Tourism’s ultimate holding
company, and was further pledged by certain equity investment held by HNA Affiliate. In May 2018, we provided financing in the form of accounts receivable factoring
arrangement (the “Loan Financings”) to another affiliate of HNA Tourism amounting to RMB500.0 million (US$78.5 million) with the average interest rate of 14% per
annum and service fee rate of 6%, which were repayable in one year and was further requested by this creditor to extend to May 2021. The Loan Financings were
guaranteed by another affiliate of HNA Tourism, a subsidiary of HNA Group.
As of December 31, 2019, we reviewed the recoverability of above Notes Financing and Loan Financings and recorded an allowance provision of RMB1.9 million
and RMB21.3 million against the carrying value, respectively, to reflect the credit risk associated with the respective outstanding balances. In addition, the remaining
balance of the Notes Financing and the Loan Financings of RMB44.8 million (US$7.0 million) and RMB512.8 million (US$80.5 million) were presented in non-current
assets, based on management’s estimates of time for collection.
By the ended of 2020, we did not receive the repayment of RMB40.0 million (US$6.3 million) from the affiliate of HNA Tourism according to the extended
schedule and no settlement plans were reached for the outstanding balance. In addition, HNA Group, HNA Tourism’s ultimate holding company, received a formal
bankruptcy and restructuring notice from the Hainan Province High People’s Court (the “Court”) following creditors’ action against HNA Group due to its failure to pay
overdue debts. Based on the assessment of all then available information of HNA Group’s restructuring plan, we believed it was unlikely to collect the outstanding
receivables as of December 31, 2020. Accordingly, we provided full allowance for current expected credit losses (“CECL”) on the remaining balance at the amount of
RMB44.8 million (US$7.0 million) and RMB512.8 million (US$80.5 million) for the Notes Financing and the Loan Financings, respectively. Moreover, we provided a
full allowance of RMB30.8 million (US$4.8 million) for the current amounts due from HNA Tourism affiliates. As of December 31, 2020, the carrying value of the
Notes Financing, Loan Financing and amounts due from other HNA Tourism affiliates (collectively referred to as “HNA debts”) was RMB nil.
In October 2021, debt restructuring plans of HNA Group and its affiliates were approved by the creditors and the Court, pursuant to which HNA Group and its
affiliates would settle their debts owed to the creditors by various means, including cash, shares of Hainan Airlines Holding Co., Ltd., (“HNA Airlines”), a company
listed in Chinese A share market, and units in a trust comprising assets/liabilities of HNA Group and certain of its affiliates, etc. In December 2021, we received cash of
RMB0.3 million (US$0.05 million) and 531,591 shares of HNA Airlines with value of RMB1 million (US$0.16 million) as part of the settlement of the HNA debts, of
which CECL allowance was fully provided in the prior years. Accordingly, a reversal of CECL allowance at the amount of RMB1.3 million (US$0.2 million) was
credited to the consolidated statements of comprehensive loss in 2021.
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees—B. Compensation.”
Share Incentive Plans
See “Item 6. Directors, Senior Management and Employees—B. Compensation.”
C.Interests of Experts and Counsel
Not applicable.
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Item 8.Financial Information
A.Consolidated Statements and Other Financial Information
See “Item 18. Financial Statements.”
Legal Proceedings
From time to time, we may be involved in legal proceedings in the ordinary course of our business. We are not currently a party to any material legal or
administrative proceedings.
Dividend Policy
Our board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Even if our board of directors decides to pay dividends, 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. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary
shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Item 12. Description of Securities Other than Equity
Securities—D. American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
We have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our shares or ADSs. We currently
intend to retain most, if not 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 rely principally on dividends from our PRC subsidiaries 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—PRC Regulation—Regulations on Dividend Distribution” and “Item 12. Description of Securities Other than Equity Securities—D.
American Depositary Shares.” Cash dividends on our common 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 consolidated financial statements
included in this annual report.
Item 9.The Offer and Listing
A.Offering and Listing Details
See “—C. Markets.”
B.Plan of Distribution
Not applicable.
C.Markets
Our ADSs, each representing three Class A ordinary shares of ours, have been listed on Nasdaq since May 9, 2014 under the symbol “TOUR.”
D.Selling Shareholders
Not applicable.
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E.Dilution
Not applicable.
F.Expenses of the Issue
Not applicable.
Item 10.Additional Information
A.Share Capital
Not applicable.
B.Memorandum and Articles of Association
We are a Cayman Islands company and our affairs are governed by our memorandum and articles of association and the Companies Act (Revised) of the Cayman
Islands, which we refer to as the Companies Act below. The following are summaries of material provisions of our fifth amended and restated memorandum and articles
of association that became effective immediately prior to the completion of our initial public offering in May 2014, 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 International Corporation Services Ltd., P.O. Box 472, 2nd Floor, Harbour Place, 103 South Church Street,
George Town, Grand Cayman KY1-1106, Cayman Islands, or at such other place as our board of directors may from time to time decide. The objects for which our
company is established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Act, as amended from time to time,
or any other law of the Cayman Islands.
Board of Directors
See “Item 6. Directors, Senior Management and Employees—C. Board Practices.”
Ordinary Shares
General. Our authorized share capital is US$100,000 divided into 1,000,000,000 shares, with a par value of US$0.0001 each, which will be divided into 780,000,000
Class A ordinary shares with a par value of US$0.0001 each, 120,000,000 Class B ordinary shares with a par value of US$0.0001 each, and 100,000,000 shares of a par
value of US$0.0001 each of such class or classes (however designated) as our board of directors may determine. Holders of Class A ordinary shares and Class B ordinary
shares have the same rights except for voting and conversion rights. All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the
ordinary shares are issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and transfer their ordinary shares.
Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our current articles of association provide
that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our board of directors determine is no
longer needed. Dividends may also be declared and paid out of share premium account or any other fund or account which can be authorized for this purpose in
accordance with the Companies Act. Holders of Class A ordinary shares and Class B ordinary shares are entitled to the same amount of dividends, if declared.
Voting Rights. In respect of all matters subject to a shareholders’ vote, each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled
to ten votes, voting together as one class. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman
of such meeting or any shareholder present in person or by proxy. Each holder of our ordinary shares are entitled to vote such ordinary shares as are registered in his or
her name on our register of members.
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A quorum required for a meeting of shareholders consists of at least two shareholders who hold at least one third in nominal value of our share capital in issue at the
meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings may be held
annually. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting. Extraordinary general meetings may be called by a
majority of our board of directors or our chairman or upon a requisition of shareholders holding at the date of deposit of the requisition not less than one-third of the
aggregate voting power of our company. Advance notice of at least 14 calendar days is required for the convening of our annual general meeting and other general
meetings. All holders of ordinary shares are permitted to attend general and extraordinary meetings.
An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares
cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the outstanding ordinary shares at a
meeting. A special resolution is required for important matters such as a change of name or making changes to our current memorandum and articles of association.
Conversion. Each Class B ordinary share can be convertible into one Class A ordinary share at any time by the holder. Class A ordinary shares are not convertible
into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder to any person or entity which is not an affiliate of such
holder, such Class B ordinary shares will be automatically and immediately converted into the equivalent number of Class A ordinary shares.
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 by an instrument
of transfer 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 we have 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 as our board of
directors may reasonably require to show the right of the transferor to make the transfer;
● the instrument of transfer is in respect of only one class of ordinary shares;
● the instrument of transfer is properly stamped, if required;
● in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four;
● the shares transferred are free of any lien in favor of the Company; and
● a fee of such maximum sum as the Nasdaq Global Market may determine to be payable or such lesser sum as our directors may from time to time require is paid
to us in respect thereof.
If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, 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 at such times and for
such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed
for more than 30 calendar days in a year.
Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for
distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution
are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately. Any distribution of assets
or capital to a holder of a Class A ordinary share and a holder of a Class B ordinary share will be the same in any liquidation event.
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Calls on Ordinary Shares and Forfeiture of Ordinary Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid
on their ordinary shares in a notice served to such shareholders at least 14 calendar days prior to the specified time of payment. The ordinary shares that have been called
upon and remain unpaid are subject to forfeiture.
Redemption of Ordinary Shares. The Companies Act and our current articles of association permit us to purchase our own shares. In accordance with our current
articles of association and provided the necessary shareholders or board approval have been obtained, we may issue shares on terms that are subject to redemption, at our
option or at the option of the holders of these shares, on such terms and in such manner, including out of capital, as may be determined by our board of directors.
Alteration of Share Capital. We may from time to time by ordinary resolution increase the share capital by such sum, to be divided into shares of such classes and
amount, as the resolution shall prescribe. We may by ordinary resolution: (a) consolidate and divide all or any of our share capital into shares of a larger amount than its
existing shares; (b) convert all or any of our paid up shares into stock and reconvert that stock into paid up shares of any denomination; (c) subdivide our existing shares,
or any of them into shares of a smaller amount provided that in the subdivision the proportion between the amount 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 reduced share is derived; and (d) cancel any shares that, at the date of the passing of the resolution,
have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled. We may by special
resolution reduce our share capital and any capital redemption reserve in any manner authorised by law.
Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Act, be materially
adversely varied with the written consent of the holders of three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a general
meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by
the terms of issue of the shares of that class, be deemed to be materially adversely varied by the creation or issue of further shares ranking pari passu with such existing
class of shares, or by the creation or issue of shares with preferred or other rights including, without limitation, the creation of shares with enhanced or weighted voting
rights.
Inspection of Books and Records. Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of our list of
shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “—H. Documents on Display.”
Issuance of Additional Shares. Our current memorandum of association authorizes our board of directors to issue additional ordinary shares from time to time as
our board of directors shall determine, to the extent of available authorized but unissued shares.
Our current memorandum of association also authorizes our board of directors to establish from time to time one or more 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 action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilute the
voting power of holders of ordinary shares.
Anti-Takeover Provisions. Some provisions of our current memorandum and articles of association may discourage, delay or prevent a change 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 and restrictions of such preferred shares without any further vote or action by our shareholders.
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Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident
companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be
registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary 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 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 first instance);
● may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
● may register as a limited duration company; and
● may register as a segregated portfolio company.
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
Register of Members. Under the Companies Act, we must keep a register of members and there should be entered therein:
● the names and addresses of our members, a statement of the shares held by each member, and of the amount paid or agreed to be considered as 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.
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 members will raise a
presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members is deemed as a matter of Cayman Islands law to
have legal title to the shares as set against its 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 entering on 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 our company 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 such application or it may, if satisfied of the justice of
the case, make an order for the rectification of the register.
Differences in Corporate Law
The Companies Act is modeled after that of English law but does not follow many recent English law statutory enactments. In addition, the Companies Act differs
from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the
Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware.
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Mergers and Similar Arrangements. A merger of two or more constituent companies under Cayman Islands law requires a plan of merger or consolidation to be
approved by the directors of each constituent company and authorization by (a) a special resolution of the shareholders and (b) such other authorization, if any, as may be
specified in such constituent company’s articles of association.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that
Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that member agrees otherwise. For this
purpose a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.
The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman
Islands.
Save in certain circumstances, a dissentient shareholder of a Cayman constituent company is entitled to payment of the fair value of his shares upon dissenting to a
merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the grounds that the merger or
consolidation is void or unlawful.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority
in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such
class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The
convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right
to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
● the statutory provisions as to the required majority vote have been met;
● the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to
promote interests adverse to those of the class;
● the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
● the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.
When a takeover offer is made and accepted by holders of 90.0% of the shares within four months, the offeror may, within a two-month period commencing on the
expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand
Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise
ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Shareholders’ Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder.
However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, there are exceptions to the foregoing principle,
including when:
● a company acts or proposes to act illegally or ultra vires;
● the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and
● those who control the company are perpetrating a “fraud on the minority.”
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Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company’s memorandum
and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to
be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our current memorandum and articles of
association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages
arise from dishonesty, willful default, or fraud of such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General
Corporation Law for a Delaware corporation. In addition, we have entered into indemnification agreements with our directors and executive officers that provide such
persons with additional indemnification beyond that provided in our current memorandum and articles of association.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing
provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable.
Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This
duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent
person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably
available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the
corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the
corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally.
In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests
of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a
transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is
considered that he or she owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his
or her position as director (unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of the company
conflict with his or her personal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care.
It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a
person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill
and care and these authorities are likely to be followed in the Cayman Islands.
Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written
consent by amendment to its certificate of incorporation. Cayman Islands law and our current articles of association provide that shareholders may approve corporate
matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting
without a meeting being held.
Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders,
provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to
do so in the governing documents, but shareholders may be precluded from calling special meetings.
Cayman Islands law does not provide shareholders any right to put proposals before a meeting or requisition a general meeting. However, these rights may be
provided in articles of association. Our current articles of association allow our shareholders holding not less than one-third of all voting power of our share capital in
issue to requisition a shareholder’s meeting. Other than this right to requisition a shareholders’ meeting, our current articles of association do not provide our
shareholders other right to put proposal before a meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general
meetings.
Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of
incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the
minority shareholder to cast all the votes to which
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the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation
to cumulative voting under the laws of the Cayman Islands but our current articles of association do not provide for cumulative voting. As a result, our shareholders are
not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our current articles of association,
directors may be removed with or without cause, by an ordinary resolution of our shareholders.
Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations
whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging
in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested
shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the
effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not
apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business
combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to
negotiate the terms of any acquisition transaction with the target’s board of directors.
Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination
statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions
must be entered into bona fide in the best interests of the company and not with the effect of constituting a fraud on the minority shareholders.
Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be
approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a
simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting
requirement in connection with dissolutions initiated by the board. Under Cayman Islands law, a company may be wound up by either an order of the courts of the
Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court
has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the
Companies Act and our current articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.
Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority
of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our current articles of association, if our
share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of the holders of three-fourths of the
issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.
Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a
majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands law, our current
memorandum and articles of association may only be amended with a special resolution of our shareholders.
Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our post-offering amended and restated memorandum and articles of
association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our current
memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
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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. Information on 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—PRC Regulation—Regulations on Foreign Currency Exchange, Regulations on Dividend
Distribution, Regulations on Offshore Financing, Regulations on Employee Stock Option Plans.”
E.Taxation
Cayman Islands Taxation
Travers Thorp Alberga, our Cayman Islands counsel, has advised us that the Cayman Islands currently levies no taxes on individuals or corporations based upon
profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes levied by the Government of the
Cayman Islands that are likely to be material to holders of ADSs or ordinary shares. The Cayman Islands is not party to any double tax treaties. There are no exchange
control regulations or currency restrictions in the Cayman Islands.
People’s Republic of China Taxation
Under the EIT Law, an enterprise established outside the PRC with a “de facto management body” within the PRC is considered a PRC resident enterprise for PRC
enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income as well as tax reporting obligations. Under
the Implementation Rules, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business
operations, personnel and human resources, finances and properties of an enterprise. In addition, STA Circular 82 issued in April 2009 and amended in 2013 and 2017,
specifies that certain offshore-incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if all of the
following conditions are met: (a) senior management personnel and core management departments in charge of the daily operations of the enterprises have their presence
mainly in the PRC; (b) their financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) major assets,
accounting books and company seals of the enterprises, and minutes and files of their board’s and shareholders’ meetings are located or kept in the PRC; and (d) half or
more of the enterprises’ directors or senior management personnel with voting rights habitually reside in the PRC. Further to STA Circular 82, the STA issued STA
Bulletin 45, which took effect in September 2011 and was amended in 2015 and 2016, respectively, to provide more guidance on the implementation of STA Circular 82.
STA Bulletin 45 provides for procedures and administration details of determination on PRC resident enterprise status and administration on post-determination matters.
If the PRC tax authorities determine that Tuniu Corporation is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax
consequences could follow. For example, Tuniu Corporation may be subject to enterprise income tax at a rate of 25% with respect to its worldwide taxable income. Also,
a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise
shareholders from transferring our shares or ADSs and potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual
shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares or ADSs.
It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim the benefit of income tax treaties or
agreements entered into between China and other countries or areas. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Under
the PRC Enterprise Income Tax Law, we may be classified as a PRC resident enterprise for PRC enterprise income tax purposes. Such classification would likely result
in unfavorable tax consequences to us and our non-PRC shareholders and would have a material adverse effect on our results of operations and the value of your
investment.”
The STA released its Bulletin on Several Issues Concerning Enterprise Income Taxation on Income Arising from the Indirect Transfer of Property by Non-resident
Enterprises (“Bulletin 7”) which became effective on February 3, 2015. Bulletin 7 sets forth detailed rules for the tax treatment of Indirect Transfers of equity interests in
PRC resident enterprises and other assets situated in China. Applying a “substance over form” principle, when a non-resident enterprise structures an Indirect Transfer of
an equity interest in a PRC resident enterprise or other assets situated in China to avoid taxation under the EIT through arrangements lacking reasonable commercial
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purposes, the Indirect Transfer will be re-characterized as a direct transfer. As a result, any gains derived from the Indirect Transfer may be subject to PRC withholding
tax at a rate of up to 10%. Bulletin 7 provides de facto safe harbor treatment for situations in which a non-resident enterprise buys and then sells shares, in the public
securities markets, of a foreign listed company that holds an equity interest in a PRC resident enterprise, and thereby realizes a capital gain. However, in order for the safe
harbor treatment to apply, both the purchase and sale must be conducted on the public securities markets so as to preclude market manipulation, and the equity interests
purchased and sold must be those in the same enterprise. When shares sold in the public securities markets were obtained before such shares were listed on a public
securities market or were not purchased through a public securities market, or when shares were purchased on a public market but are to be sold through non-public
markets, the safe harbor treatment would not be applicable. In 2017, the STA released its Bulletin on Matters concerning Withholding of Income Tax of Non-resident
Enterprises at Source (“Bulletin 37”) which became effective on December 1, 2017. Bulletin 37 updated the calculation method for the taxable income for the share
transfer as well as stipulated the withholding obligation of the withholding agent. There is uncertainty as to the interpretation and application of Bulletin 7 and Bulletin
37. We and our non-PRC resident shareholders may be at risk of being taxed under Bulletin 7 and Bulletin 37 and we may be required to expend valuable resources to
comply with Bulletin 7 and Bulletin 37 or to establish that we should not be taxed under Bulletin 7 and Bulletin 37. See “Item 3. Key Information—D. Risk Factors—
Risks Related to Doing Business in China—We face uncertainty regarding the PRC tax reporting obligations and consequences for certain indirect transfers of our
operating company’s equity interests. Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we
may pursue in the future.”
United States Federal Income Tax Considerations
The following discussion is a summary of United States federal income tax considerations relating to the ownership and disposition of our ADSs or ordinary shares
by a U.S. Holder, as defined below, that 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 is based upon existing United States federal income tax law, which is subject to differing
interpretations or change, possibly with retroactive effect. There can be no assurance that the Internal Revenue Service (the “IRS”) or a court will not take a contrary
position. This discussion does not address all aspects of United States federal income taxation that may be important to particular investors in light of their individual
circumstances, including investors subject to special tax rules that differ significantly from those summarized below (such as, for example, certain financial institutions,
insurance companies, regulated investment companies, real estate investment trusts, broker-dealers, traders in securities that elect mark-to-market treatment, partnerships
and their partners, tax-exempt organizations (including private foundations), investors who are not U.S. Holders, investors that own (directly, indirectly, or
constructively) 10% or more of our stock (by vote or value), investors that hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale
or other integrated transaction) or investors that have a functional currency other than the U.S. dollar). In addition, this discussion does not address United States federal
estate, gift, Medicare, and alternative minimum tax considerations, or state, local, and non-United States tax considerations. Each U.S. Holder is urged to consult its tax
advisor regarding the United States federal, state, local, and non-United States 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 tax purposes, (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 federal income 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 of which is includible in gross
income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision 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 the Code.
If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ADSs or ordinary shares, the tax
treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding
our ADSs or ordinary shares are urged to consult their tax advisors regarding an investment in our ADSs or ordinary shares.
It is generally expected that a U.S. Holder of ADSs will be treated as the beneficial owner, for United States federal income tax purposes, of the underlying shares
represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated in this manner. Accordingly, deposits or withdrawals
of our ordinary shares for our ADSs will not be subject to United States federal income tax.
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Passive Foreign Investment Company Considerations
A non-United States corporation, such as our company, will be classified as a “passive foreign investment company,” or PFIC, for United States federal income tax
purposes, if, in the case of 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 value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the
production of passive income. For this purpose, cash is categorized as a passive asset and the company’s goodwill and unbooked intangibles associated with active
business 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 our proportionate share of the assets and earning our proportionate share of the income of any other
corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.
Although the law in this regard is unclear, we treat the consolidated affiliated entities as being owned by us for United States federal income tax purposes, not only
because we exercise 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 operating results in our consolidated financial statements.
Based on the market price of our ADSs and the composition of our assets (in particular the substantial amount of cash, deposits and investments), we believe that we
were a PFIC for United States federal income tax purposes for the taxable year ended December 31, 2021, and we will likely be a PFIC for our current taxable year
ending December 31, 2022 unless the market price of our ADSs increases and/or we invest a substantial amount of the cash and other passive assets we hold in assets that
produce or are held for the production of active income.
If we were classified as a PFIC for any year during which a U.S. Holder held our ADSs or ordinary shares, we generally would continue to be treated as a PFIC for
all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares.
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 classified as a PFIC
for United States federal income tax purposes. The United States federal income tax rules that apply if we are classified as a PFIC for the current taxable year or any
subsequent taxable year are discussed below under “Passive Foreign Investment Company Rules.”
Dividends
Subject to the PFIC rules described below, any cash distributions (including the amount of any PRC tax withheld) paid on our ADSs or ordinary shares out of our
current or accumulated earnings and profits, as determined under United States federal income tax principles, will generally be includible in the gross 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 the depositary bank, 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, a U.S. Holder should expect that any
distribution paid on our ADSs or ordinary shares will be treated as a “dividend” for United States federal income tax purposes. A non-corporate recipient of dividend
income will generally be subject to tax on dividend income from a “qualified foreign corporation” at a lower applicable capital gains rate rather than the marginal tax
rates generally applicable to ordinary income provided that certain holding period and other requirements are met.
A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year)
will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of
Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (b) with respect to any
dividend it pays on stock (or ADSs in respect of such stock) which is readily tradable on an established securities market in the United States. Our ADSs (but not our
ordinary shares) are listed on the Nasdaq Global Market and is considered readily tradable on an established securities market in the United States. There can be no
assurance that our ADSs will continue to be considered readily tradable on an established securities market in later years. Since we do not expect that our ordinary shares
will be listed on established securities markets, we do not believe that dividends 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 the event we are deemed to be a PRC resident enterprise under the EIT Law (see “People’s Republic of China
Taxation”), we may be eligible for the benefits of the United States-PRC income tax treaty (which the Secretary of the Treasury of the United States has determined is
satisfactory for this purpose) and be treated as a qualified foreign corporation with respect to dividends
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paid on our ADSs or ordinary shares. Furthermore, as mentioned above, we believe that we were a PFIC for United States federal income tax purposes for the
taxable year ended December 31, 2021, and we will likely be a PFIC for our current taxable year ending December 31, 2022. U.S. Holders are urged to consult their tax
advisors regarding the availability of the reduced tax rate on dividends with respect to our ADSs or ordinary shares in their particular circumstances. Dividends received
on our ADSs or ordinary shares will not be eligible for the dividends-received deduction allowed to corporations.
For United States foreign tax credit purposes, dividends paid on our ADSs or ordinary shares will be treated as income from foreign sources and will generally
constitute passive category income. In the event that we are deemed to be a PRC resident enterprise under the EIT Law, a U.S. Holder may be subject to PRC
withholding taxes on dividends paid, if any, on our ADSs or ordinary shares. A U.S. Holder may be eligible, subject to a number of complex limitations, to claim a
foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on our ADSs or ordinary shares. A U.S. Holder who does not elect to claim
a foreign tax credit for foreign tax withheld may instead claim a deduction for United States federal income tax purposes in respect of such withholding, 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 urged to
consult their tax 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 will generally recognize capital gain or loss, if any, upon the sale or other disposition of ADSs or ordinary
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 ADSs or ordinary shares.
Any capital gain or loss will be long-term gain or loss if the ADSs or ordinary shares have been held for more than one year and will generally be United States-source
gain or loss for United States foreign tax credit purposes. In the event that we are treated as a PRC resident enterprise under the EIT Law, and gain from the disposition of
the ADSs or ordinary shares is subject to tax in the PRC, a U.S. Holder that is eligible for the benefits of the Treaty may elect to treat the gain as PRC source income.
Pursuant to recently issued United States Treasury Regulations, however, if a U.S. Holder is not eligible for the benefits of the Treaty or does not elect to apply the
Treaty, then such holder may not be able to claim a foreign tax credit arising from any PRC tax imposed on the disposition of ADSs or ordinary shares. The
rules regarding foreign tax credits and deduction of foreign taxes are complex. U.S. Holders should consult their tax advisors regarding the availability of a foreign tax
credit or deduction in light of their particular circumstances, including their eligibility for benefits under the Treaty and the potential impact of the recently issued United
States Treasury Regulations.
Passive Foreign Investment Company Rules
If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares, unless the U.S. Holder makes a mark-to-market
election (as described below) with respect to the ADSs, the U.S. Holder will, except as discussed below, be subject to special tax rules that have a penalizing effect,
regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a
taxable year to a U.S. Holder that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s
holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or
ordinary shares. Under the PFIC rules:
● the excess distribution and/or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares;
● the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are
classified as a PFIC (each, a pre-PFIC year) will be taxable as ordinary income;
● the amount allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, will be subject to tax at the highest tax rate in effect
applicable to the individuals or corporations, as appropriate, for that year; and
● will be increased by an additional tax equal to interest on the resulting tax deemed deferred with respect to each prior taxable year, other than a pre-PFIC year.
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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 is also 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 the application of these rules. Each
U.S. Holder is advised to consult its 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
such stock is regularly traded on a qualified exchange or other market, as defined in the applicable United States Treasury Regulations. For those purposes, our ADSs, but
not our ordinary shares, are listed on the Nasdaq Global Market, which is a qualified exchange. We anticipate that our ADSs should qualify as being regularly traded, but
no assurances may be given in this regard. If a mark-to-market election is made, the U.S. Holder will generally (i) include as ordinary income for each taxable year that
we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (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 the taxable 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 tax basis in the ADSs would be adjusted to reflect
any income or loss resulting from the mark-to-market election. If a U.S. Holder makes an effective mark-to-market election, in each year that we are a PFIC, any gain
recognized 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 of the 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 in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S.
Holder will not be required to take into account the mark-to-market gain or loss described above during any period that such corporation is not classified as a PFIC.
Because a mark-to-market election cannot technically be made for any lower-tier PFICs that we may own, a U.S. Holder who makes a mark-to-market election with
respect to our ADSs may continue to be subject to the general PFIC rules with respect to such U.S. Holder’s indirect interest in any of our non-United States subsidiaries
that is classified as a PFIC.
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment
different from 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 that applies to qualified
dividend income if we are classified as 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 U.S. Holder must file an annual report with the IRS, subject to certain limited exceptions. Each
U.S. Holder is urged to consult its tax advisor concerning the United States federal income tax consequences of owning and disposing our ADSs or ordinary shares if we
are or become a PFIC, including the possibility of making a mark-to-market election and the unavailability of the qualified electing fund election.
Each U.S. Holder is advised to consult with its tax advisor regarding the application of the United States information 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 are required 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 months after 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 at www.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 request copies of documents, upon payment of a duplicating fee,
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by writing to the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and
proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of
the Exchange Act.
We will furnish JPMorgan Chase Bank, N.A., the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited
consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that are made
generally available to our shareholders. The depositary will make such notices, reports and communications available to holders 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 by the 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.tuniu.com. In addition, we will
provide hardcopies of our annual report free of charge to shareholders and ADS holders upon request.
I.Subsidiary Information
Not applicable.
Item 11.Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. We have
not used derivative financial instruments in our investment portfolio to hedge our exposure to the interest rate risk. Interest earning instruments carry a degree of interest
rate risk. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in market interest rates. However, our future interest income
may fall short of expectations due to changes in market interest rates.
Foreign Exchange Risk
Substantially all of our revenues and expenses are denominated in RMB. We do not believe that we currently have any significant direct foreign exchange risk To
date, we have not entered into any material hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. Although our exposure to foreign
exchange risks should be limited in general, the value of your investment in our ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because
the value of our business is effectively denominated in RMB, while our ADSs will be traded in U.S. dollars.
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against
the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate
between Renminbi and the U.S. dollar in the future.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse
effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for
dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S.
dollar amounts available to us.
As of December 31, 2021, we had Renminbi-denominated cash and cash equivalents, restricted cash and short-term investments of RMB1,011.5 million, and U.S.
dollar-denominated cash, cash equivalents and short-term investments of US$158.7 million. Assuming we had converted RMB1.0 million into U.S. dollars at the
exchange rate of RMB6.3726 for US$1.00 as of December 31, 2021, our U.S. dollar cash balance would have been US$156,922. If the Renminbi had depreciated by
10% against the U.S. dollar, our U.S. dollar cash balance would have been US$142,656 instead. Assuming we had converted US$1.0 million into Renminbi at the
exchange rate of RMB6.3726 for US$1.00 as of December 31, 2021, our Renminbi cash balance would have been RMB6.4 million. If the Renminbi had depreciated by
10% against the U.S. dollar, our Renminbi cash balance would have been RMB7.0 million instead.
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Inflation
To date, 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 2019, 2020 and 2021 were increases of 4.5%, 0.2% and 1.5% respectively. Although we have not been materially
affected by inflation in the past, we can provide no assurance that we will not be affected by higher rates of inflation in China in the future.
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.
D.American Depositary Shares
Fees and Charges Our ADS holders May Have to Pay
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share
distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities
or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADRs
are cancelled or reduced for any other reason, US$5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may
be. The depositary may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other distribution prior to
such deposit to pay such charge.
The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADSs or to
whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADSs or
the deposited securities or a distribution of ADSs), whichever is applicable:
● a fee of US$1.50 per ADR for transfers of certificated or direct registration ADRs;
● a fee of up to US$0.05 per ADS for any cash distribution made pursuant to the deposit agreement;
● a fee of up to US$0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be
charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary
during each calendar year and shall be payable in the manner described in the next succeeding provision);
● a fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents (including, without limitation, the
custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating
to foreign investment) in connection with the servicing of the shares or other deposited securities, the sale of securities (including, without limitation, deposited
securities), the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or
regulation (which fees and charges shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be
payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions);
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● a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the US$0.05 per ADS
issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if
they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled thereto;
● stock transfer or other taxes and other governmental charges;
● cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares;
● transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of
deposited securities;
● the fees, expenses and other charges charged by JPMorgan Chase Bank, N.A. and/or its agent (which maybe a division, branch or affiliate) in connection with
the conversion of foreign currency into U.S. dollars; and
● fees of any division, branch or affiliate of the depositary utilized by the depositary to direct, manage and/or execute any public and/or private sale of securities
under the deposit agreement.
JPMorgan Chase Bank, N.A. and/or its agent may act as principal for such conversion of foreign currency. We will pay all other charges and expenses of the
depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The charges described above
may be amended from time to time by agreement between us and the depositary.
Fees and Other Payments Made by the Depositary to Us
The depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program upon such terms and
conditions as we and the depositary may agree from time to time. The depositary may make available to us a set amount or a portion of the depositary fees charged in
respect of the ADR program or otherwise upon such terms and conditions as we and the depositary may agree from time to time. The depositary collects its fees for
issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.
The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to
pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, or by directly billing investors, or by charging the
book-entry system accounts of participants acting for them. The depositary will generally set off the amounts owing from distributions made to holders of ADSs. If,
however, no distribution exists and payment owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have
not paid those fees and expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit
agreement are due in advance and/or when declared owing by the depositary. For the fiscal year 2021, we received a reimbursement of approximately US$0.63 million
from the depositary net of US$0.19 million United States withholding tax.
The fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of any increase
in any such fees and charges.
PART II
Item 13.Defaults, Dividend Arrearages and Delinquencies
None.
Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
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Item 15.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with participation of our chief executive officer and financial controller, has performed an evaluation of the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2021, the end of the period covered by this
annual report, as required by Rule 13a-15(b) under the Exchange Act.
Based upon that evaluation, our management has concluded that, as of December 31, 2021, our disclosure controls and procedures were effective in ensuring 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 reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our chief executive officer and financial controller, 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 Rules 13a-15(f) and 15d-15(f) under
the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles
(GAAP) in the United States of America and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of consolidated financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with
authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or
disposition of our company’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our company’s internal control over financial reporting as of December 31, 2021 based on the
framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this
evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2021.
PricewaterhouseCoopers Zhong Tian LLP, our independent registered public accounting firm, audited the effectiveness of our company’s internal control over
financial reporting as of December 31, 2021, as stated in its report, which appears on pages F-2 and F-3 of this annual report on Form 20-F.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have
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. Onward Choi and Mr. Jack Xu, each an independent director (under the standards set forth in Nasdaq Stock Market
Rule 5605(a)(2) and Rule 10A-3 under the Exchange Act) and a member of our audit committee, are audit committee financial experts.
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Item 16B.Code of Ethics
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees, including certain provisions that
specifically apply to our chief executive officers, financial controller, senior finance officer and any other persons who perform similar functions for us. We filed our code
of business conduct and ethics as Exhibit 99.1 to our registration statement on Form F-1, as amended, which was originally filed with the SEC on April 4, 2014. We have
posted a copy of our code of business conduct and ethics on our website at http://ir.tuniu.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 by PricewaterhouseCoopers
Zhong Tian LLP, our principal external auditors, for the periods indicated.
Audit fees(1)
Audit-related fees(2)
All other fees(3)
US$
US$
US$
2020
1,535,879
—
—
2021
1,170,680
—
—
(1) “Audit fees” means the aggregate fees billed for professional services rendered by our principal external auditors for the audits of our annual financial
statements and effectiveness of internal control over financial reporting, as well as the quarterly reviews of condensed consolidated financial information.
(2) “Audit-related fees” means the aggregate fees billed for professional services rendered by our principal external auditors associated with certain financial due
diligence projects.
(3) “All other fees” means the aggregate fees billed for professional services rendered by our principal external auditors associated with other advisory services.
The policy of our audit committee is to pre-approve all audit and non-audit services provided by PricewaterhouseCoopers Zhong Tian LLP, including audit services,
audit-related services and all other services as described above, other than those for de minimis services which are approved by the audit committee prior to the
completion of the audit.
Item 16D.Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On September 30, 2020, our board of directors authorized a share repurchase program, under which we may repurchase up to US$10 million worth of our ordinary
shares or American depositary shares representing ordinary shares over the next 12 months. The share repurchase program permitted us to purchase shares from time to
time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on
market conditions and in accordance with applicable rules and regulations. The repurchased shares were presented as “treasury stock” in shareholder’s equity on our
consolidated balance sheets. Treasury stock is accounted for under the cost method. No repurchase was made in 2021.
On December 27, 2021, we announced a senior management share purchase plan, under which, certain senior management members of us, among others,
Mr. Donald Dunde Yu, Mr. Wei Zhang and Mr. Anqiang Chen, were authorized to purchase up to US$2.0 million of our ADSs over the following six months through
June 27, 2022. Approximately US$68,251.7 of ADSs under the senior management share purchase plan were repurchased as of December 31, 2021. All shares were
purchased in the open market pursuant to the senior management share purchase plan.
Item 16F.Change in Registrant’s Certifying Accountant
Not applicable.
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Item 16G.Corporate Governance
As a Cayman Islands company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign
private issuer like us to follow the corporate governance practices of its home country. Travers Thorp Alberga, our Cayman Islands counsel, has advised us that certain
corporate governance practices in the Cayman Islands, our home country, may differ significantly from the Nasdaq corporate governance listing standards. We followed
home country practice for our private placements in December 2014, May 2015 and November 2015, which would have required shareholder approval under the Nasdaq
Rules but for which there was no such requirement under Cayman Islands law. In addition, we have elected to follow home country practice in lieu of the requirement to
hold an annual meeting of shareholders under Nasdaq Rule 5620(a).
We currently do not plan to rely on the home country exemption for any other corporate governance matters. However, if we choose to follow home country practice
in other matters in the future, our shareholders may be afforded less protection than they otherwise would under the Nasdaq corporate governance listing standards
applicable to U.S. domestic issuers. See “Item 3. Key Information —D. Risk Factors — Risks Related to Our ADSs and Class A Ordinary Shares—We are a foreign
private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public
companies.”
Item 16H.Mine Safety Disclosure
Not applicable.
ITEM 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 17.Financial Statements
PART III
We have elected to provide financial statements pursuant to Item 18.
Item 18.Financial Statements
The consolidated financial statements of Tuniu Corporation, its subsidiaries and the consolidated affiliated entities are included at the end of this annual report.
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Item 19.Exhibits
Exhibit
Number
Description of Document
1.1
Fifth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 to the Registration
Statement on Form F-1 (file no. 333-195075), as amended, initially filed with the Securities and Exchange Commission on April 4, 2014).
2.1 Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3).
2.2 Registrant’s Specimen Certificate for Class A ordinary shares (incorporated herein by reference to Exhibit 4.2 to the registration statement on Form F-1
(File No. 333-195075), as amended, initially filed with the Security and Exchange Commission on April 4, 2014).
2.3
Form of Amended and Restated Deposit Agreement among the Registrant, the depositary and holders of the American Depositary Receipts (incorporated
herein by reference to Exhibit 99.(A) to the Post-Effective Amendment No. 1 to the F-6 Registration Statement (File No. 333-195515), filed with the
Security and Exchange Commission on December 1, 2020).
2.4 Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934 (incorporated herein by reference to
Exhibit 2.4 to the annual report on Form 20-F filed on April 29, 2021 (File No. 001-36430)).
4.1
4.2
4.3
2008 Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1 (File No. 333-195075), as
amended, initially filed with the Security and Exchange Commission on April 4, 2014).
2014 Share Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1 (File No. 333-195075), as
amended, initially filed with the Security and Exchange Commission on April 4, 2014).
Form of Indemnification Agreement with the Registrant’s directors (incorporated herein by reference to Exhibit 10.3 to the registration statement on
Form F-1 (File No. 333-195075), as amended, initially filed with the Security and Exchange Commission on April 4, 2014).
4.4 English Translation of Form of Employment Agreement between the Registrant and an Executive Officer of the Registrant (incorporated herein by
reference to Exhibit 10.4 to the registration statement on Form F-1 (File No. 333-195075), as amended, initially filed with the Security and Exchange
Commission on April 4, 2014).
4.5 English Translation of Cooperation Agreement dated February 19, 2021 between Beijing Tuniu and Nanjing Tuniu (incorporated herein by reference to
Exhibit 4.5 to the annual report on Form 20-F filed on April 29, 2021 (File No. 001-36430)).
4.6 English Translation of Shareholders’ Voting Rights Agreement dated February 19, 2021 among Beijing Tuniu, Nanjing Tuniu and the shareholders of
Nanjing Tuniu (incorporated herein by reference to Exhibit 4.6 to the annual report on Form 20-F filed on April 29, 2021 (File No. 001-36430)).
4.7 English Translation of Powers of Attorney dated February 19, 2021 among Beijing Tuniu, Nanjing Tuniu and the shareholders of Nanjing Tuniu
(incorporated herein by reference to Exhibit 4.7 to the annual report on Form 20-F filed on April 29, 2021 (File No. 001-36430)).
4.8 English Translation of Equity Interest Pledge Agreement dated February 19, 2021 among Beijing Tuniu, Nanjing Tuniu and Anqiang Chen (incorporated
herein by reference to Exhibit 4.8 to the annual report on Form 20-F filed on April 29, 2021 (File No. 001-36430)).
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4.9 English Translation of Equity Interest Pledge Agreement dated February 19, 2021 among Beijing Tuniu, Nanjing Tuniu and Dunde Yu (incorporated
herein by reference to Exhibit 4.9 to the annual report on Form 20-F filed on April 29, 2021 (File No. 001-36430)).
4.10 English Translation of Purchase Option Agreement dated February 19, 2021 among Beijing Tuniu, Nanjing Tuniu and the shareholders of Nanjing Tuniu
(incorporated herein by reference to Exhibit 4.10 to the annual report on Form 20-F filed on April 29, 2021 (File No. 001-36430)).
4.11 Business Cooperation Agreement dated May 8, 2015 between Tuniu Corporation and JD.com, Inc. (incorporated herein by reference to Exhibit 99.6 to
amendment no. 1 to Schedule 13D filed by JD.com, Inc. and its affiliates with the Securities and Exchange Commission on May 29, 2015).
4.12
Investor Rights Agreement dated May 22, 2015 between Tuniu Corporation and Fabulous Jade Global Limited (incorporated herein by reference to
Exhibit 99.7 to amendment no. 1 to Schedule 13D filed by JD.com, Inc. and its affiliates with the Securities and Exchange Commission on May 29,
2015).
4.13 Registration Rights Agreement dated as of May 22, 2015 between Tuniu Corporation and Unicorn Riches Limited (incorporated herein by reference to
Exhibit 7.08 to amendment no. 1 to Schedule 13D filed by Unicorn Riches Limited with the Securities and Exchange Commission on May 26, 2015).
4.14
Investor Rights Agreement dated as of November 20, 2015 between Tuniu Corporation and HNA Tourism Holding (Group) Co., Ltd. (incorporated
herein by reference to Exhibit 7.3 to Schedule 13D filed by BHR Winwood Investment Management Limited and its affiliates with the Securities and
Exchange Commission on February 1, 2016).
4.15 Amendment No. 1 to Investor Rights Agreement dated as of December 31, 2015 between Tuniu Corporation and HNA Tourism Holding (Group)
Co., Ltd. (incorporated herein by reference to Exhibit 7.4 to Schedule 13D filed by BHR Winwood Investment Management Limited and its affiliates
with the Securities and Exchange Commission on February 1, 2016).
4.16 Amendment No. 2 to Investor Rights Agreement dated February 19, 2016 between Tuniu Corporation and BHR Winwood Investment Management
Limited (incorporated herein by reference to Exhibit A to amendment no. 1 to Schedule 13D filed by BHR Winwood Investment Management Limited
and its affiliates with the Securities and Exchange Commission on February 29, 2016).
8.1* List of Principal Subsidiaries, Consolidated Affiliated Entity and its Principal Subsidiaries
11.1 Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the registration statement on Form F-1 (File
No. 333-195075), as amended, initially filed with the Security and Exchange Commission on April 4, 2014).
12.1* Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2* Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1** Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2** Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1* Consent of PricewaterhouseCoopers Zhong Tian LLP.
15.2* Consent of Travers Thorp Alberga.
15.3* Consent of Fangda Partners.
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101.INS*
Inline XBRL Instance Document – this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document.
101.SCH*
Inline XBRL Taxonomy Extension Scheme Document.
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
*Filed herewith
**Furnished herewith
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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 and authorized the
undersigned to sign this annual report on its behalf.
SIGNATURES
Tuniu Corporation
By:
Name:
Title:
/s/ Dunde Yu
Dunde Yu
Chairman and Chief Executive Officer
Date: April 29, 2022
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1424)
Consolidated Balance Sheets as of December 31, 2020 and 2021
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019, 2020 and 2021
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2019, 2020 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2020 and 2021
Notes to the Consolidated Financial Statements
Financial Statement Schedule I - Condensed Financial Information of the Parent Company as of December 31, 2020 and 2021 and for each of the three years in
the period ended December 31, 2021
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Tuniu Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Tuniu Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the
related consolidated statements of comprehensive loss, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended December 31,
2021, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in 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 of December 31,
2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses on certain financial instruments
in 2020.
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 over Financial Reporting
appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities 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 reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control 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 financial statements,
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 used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
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 reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding
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prevention or timely 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 of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or
required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Going concern assessment
As described in Note 2(a) to the consolidated financial statements, the Company’s consolidated financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and liquidation of liabilities during the normal course of operations. The Company has a history of net losses, net cash used in
operating activities, and accumulated deficits. In particular, the outbreak and spread of the COVID-19 pandemic has had material adverse impacts on the Company’s
operating results and cash flows for the years ended December 31, 2020 and 2021 with potential continuing impacts on subsequent periods. Such adverse conditions and
events, before consideration of management’s plan, raised substantial doubt about the Company’s ability to continue as a going concern. Management has developed its
plan to mitigate these adverse conditions and events, including a business plan with forecasted cash flows covering the next twelve months from the date of issuance of
the Company’s consolidated financial statements. Based on the management’s assessment, management concluded that the business plan, when implemented effectively,
will alleviate the substantial doubt on the Company’s ability to continue as a going concern. Such conclusion required management to make assumptions and judgements
relating to future revenues, capital expenditures, operational expenses and investments when developing the business plan with forecasted cash flows.
The principal considerations for our determination that performing procedures relating to going concern assessment is a critical audit matter are the significant judgment
by management when developing its business plan with forecasted cash flows included in the going concern assessment and when evaluating the mitigation effect of the
business plan. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to
management’s business plan with forecasted cash flows.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of internal controls relating to management’s going concern assessment, including the Company’s
controls over the preparation of the business plan with forecasted cash flows. These procedures also included, among others, (i) testing management’s process for
developing the business plan with forecasted cash flows included in the going concern assessment; (ii) testing the completeness, accuracy, and relevance of underlying
data used in developing the business plan with forecasted cash flows; and (iii) evaluating the reasonableness of the assumptions and judgements made by management in
evaluating whether the business plan will be effectively implemented and in forecasting future revenues, capital expenditures, operational expenses, investments and
hence future cash flows arising from the implementation of the business plan by considering the Company’s historical performance, relevant industry forecasts and
market developments.
Goodwill impairment assessment
As described in Note 2(q) and Note 11 to the consolidated financial statements, the Company had goodwill of RMB 232.0 million as of December 31, 2021. Management
performs its goodwill impairment assessment annually or more frequently if events or changes in circumstances indicate that it might be impaired. Where the qualitative
assessment indicated that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, a quantitative goodwill
impairment test is performed. Goodwill impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. Fair value
of the reporting unit is estimated by management based on the income approach, using a discounted cash flow model. The use of
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discounted cash flow model requires management to make judgments and assumptions relating to revenue growth, gross margin, operating expenses, working capital
requirements, and discount rate.
The principal considerations for our determination that performing procedures relating to goodwill impairment assessment is a critical audit matter are the significant
judgment by management when developing the fair value measurement of the reporting unit. This in turn led to a high degree of auditor judgment, subjectivity, and effort
in performing our procedures and in evaluating management’s cash flow projections and significant assumptions, including revenue growth, gross margin, operating
expenses, working capital requirements and discount rate. The audit effort also included the involvement of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of internal controls relating to management’s goodwill impairment assessment process, including internal
controls over the valuation of the Company’s reporting unit. These procedures also included, among others, (i) testing management’s identification of the reporting unit
and the process to estimate the reporting unit’s fair value, (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness, accuracy
and relevance of underlying data used in the model; and (iv) evaluating management’s cash flow projections and significant assumptions including revenue growth, gross
margin, operation expenses, working capital requirements and discount rate by considering the historical performance of the reporting unit, relevant industry forecasts
and market developments. Professionals with specialized skill and knowledge were also used to assist in the evaluation of the Company’s discounted cash flow model
and certain significant assumptions, including the discount rate.
Non-financial assets impairment assessment
As described in Note 2(r), Note 8, Note 9, Note 10 and Note 14 to the consolidated financial statements, the Company had property and equipment of RMB 98.2 million,
finite-lived intangible assets of RMB 55.4 million, land use right of RMB 94.7 million and operating lease right-of-use assets of RMB 48.1 million as of December 31,
2021. Management performs its non-financial assets impairment assessment whenever events or changes in circumstances indicate that the carrying value of the asset
group may not be recoverable. Recoverability of asset group to be held and used is measured by comparing the carrying amount of the asset group to future undiscounted
cash flows expected to result from the use of the asset group and their eventual disposition. Management’s impairment test involved significant judgement and
assumptions, including revenue growth, gross margin, operation expenses and working capital requirements of the asset group. If the asset group is determined to be not
recoverable, an impairment loss is recognized at the amount equal to the difference between the carrying amount and fair value of the asset group.
The principal considerations for our determination that performing procedures relating to non-financial assets impairment assessment is a critical audit matter are the
significant judgment by management when determining the estimated future undiscounted cash flows expected to be generated by the asset group. This in turn led to a
high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions,
including revenue growth, gross margin, operation expenses and working capital requirements.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of internal controls relating to management’s non-financial assets impairment assessment process,
including the Company’s internal controls over the development of assumptions used to estimate the future undiscounted cash flows expected to be generated by the asset
group. These procedures also included, among others, (i) testing the identification of the asset group, (ii) testing management’s process for developing the future
undiscounted cash flows estimates; (iii) testing the completeness, accuracy, and relevance of underlying data used in the estimate of future undiscounted cash flows; and
(iv) evaluating the reasonableness of management’s significant assumptions used, including revenue growth, gross margin, operation expenses and working capital
requirements by considering the historical performance of the asset group, relevant industry forecasts and market developments.
/s/ PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
April 29, 2022
We have served as the Company’s auditor since 2010, which includes periods before the Company became subject to SEC reporting requirements.
F-4
TUNIU CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31, 2020 and 2021
(All amounts in thousands, except for share and per share data, or otherwise noted)
Table of Contents
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net
Amounts due from related parties
Prepayments and other current assets
Total current assets
Non-current assets
Long-term investments
Property and equipment, net
Intangible assets, net
Land use right, net
Operating lease right-of-use assets, net
Goodwill
Other non-current assets
Total non-current assets
Total assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities (including current liabilities of the Affiliated Entities without recourse to the Company amounting to RMB1,733,252 and RMB1,000,067, as of
December 31, 2020 and 2021, respectively)
Short-term borrowings
Accounts and notes payable
Amounts due to related parties
Salary and welfare payable
Taxes payable
Advances from customers
Operating lease liabilities, current
Accrued expenses and other current liabilities
Total current liabilities
Non-current liabilities
Operating lease liabilities, non-current
Deferred tax liabilities
Long-term borrowings
Other non-current liabilities
Total non-current liabilities
Total liabilities
Commitments and contingencies (Note 22)
Redeemable noncontrolling interests
Equity
Ordinary shares (US$0.0001 par value; 1,000,000,000 shares (including 780,000,000 Class A shares, 120,000,000 Class B shares and 100,000,000 shares to be
designated by the Board of Directors) authorized as of December 31, 2020 and 2021; 389,331,544 shares (including 371,958,044 Class A and 17,373,500 Class
B shares) and 389,331,543 shares (including 371,958,043 Class A shares and 17,373,500 Class B shares) issued and outstanding as of December 31, 2020 and
2021, respectively)
Less: Treasury stock (18,842,688 shares and 18,266,523 shares as of December 31, 2020 and 2021, respectively)
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total Tuniu Corporation shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities, redeemable noncontrolling interests and equity
The accompanying notes are an integral part of these consolidated financial statements.
F-5
2020
RMB
As of December 31,
2021
RMB
US$(Note 2(d))
213,538
50,566
1,353,670
264,134
23,913
378,704
2,284,525
266,866
111,697
71,362
96,713
42,293
232,007
91,180
912,118
3,196,643
60,679
705,838
21,034
47,487
6,004
208,762
18,264
676,501
1,744,569
34,367
14,861
22,577
3,054
74,859
1,819,428
349,077
46,521
615,901
111,941
14,969
337,033
1,475,442
201,947
98,159
55,376
94,652
48,115
232,007
92,111
822,367
2,297,809
9,981
383,626
4,679
33,761
8,004
139,777
16,556
382,629
979,013
38,832
12,479
14,344
—
65,655
1,044,668
54,778
7,300
96,648
17,566
2,349
52,888
231,529
31,690
15,403
8,690
14,853
7,550
36,407
14,454
129,047
360,576
1,566
60,199
734
5,298
1,256
21,934
2,598
60,043
153,628
6,094
1,958
2,251
—
10,303
163,931
27,200
27,200
4,268
249
(302,916)
9,125,689
275,012
(7,713,355)
1,384,679
(34,664)
1,350,015
3,196,643
249
(293,795)
9,125,748
271,821
(7,834,879)
1,269,144
(43,203)
1,225,941
2,297,809
39
(46,103)
1,432,029
42,655
(1,229,464)
199,156
(6,779)
192,377
360,576
TUNIU CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Years Ended December 31, 2018, 2019 and 2020
(All amounts in thousands, except for share and per share data, or otherwise noted)
Table of Contents
Revenues
Packaged tours
Others
Net revenues
Cost of revenues
Gross profit
Operating expenses
Research and product development
Sales and marketing
General and administrative
Other operating income
Total operating expenses
Loss from operations
Other income/(expenses)
Interest and investment income, net
Interest expense
Foreign exchange (losses)/gains, net
Other income/(loss), net
Loss before income tax expense
Income tax (expense)/benefit
Equity in income of affiliates
Net loss
Net loss attributable to noncontrolling interests
Net income attributable to redeemable noncontrolling interests
Net loss attributable to Tuniu Corporation
Accretion on redeemable noncontrolling interests
Net loss attributable to ordinary shareholders
Net loss
Other comprehensive income/(loss):
Foreign currency translation adjustment, net of nil tax
Comprehensive loss
Comprehensive loss attributable to noncontrolling interests
Comprehensive income attributable to redeemable noncontrolling interests
Comprehensive loss attributable to Tuniu Corporation
For the Years Ended December 31,
2020
RMB
RMB
2021
US$(Note 2(d))
2019
RMB
1,886,822
394,165
2,280,987
(1,200,012)
1,080,975
(303,561)
(923,273)
(749,404)
24,419
(1,951,819)
(870,844)
156,862
(34,052)
(1,131)
18,509
(730,656)
(949)
2,223
(729,382)
(35,797)
980
(694,565)
(4,634)
(699,199)
302,359
147,900
450,259
(237,065)
213,194
(100,514)
(371,984)
(1,109,340)
27,849
(1,553,989)
(1,340,795)
3,526
(32,266)
18,720
(253)
(1,351,068)
6,641
797
(1,343,630)
(35,674)
—
(1,307,956)
—
(1,307,956)
305,333
121,015
426,348
(254,815)
171,533
(54,622)
(150,493)
(174,021)
26,064
(353,072)
(181,539)
50,041
(7,491)
7,030
2,895
(129,064)
(130)
726
(128,468)
(6,944)
—
(121,524)
—
(121,524)
(729,382)
(1,343,630)
(128,468)
9,705
(719,677)
(35,797)
980
(684,860)
(18,772)
(1,362,402)
(35,674)
—
(1,326,728)
(3,191)
(131,659)
(6,944)
—
(124,715)
47,913
18,990
66,903
(39,986)
26,917
(8,571)
(23,616)
(27,308)
4,090
(55,405)
(28,488)
7,853
(1,176)
1,103
454
(20,254)
(20)
114
(20,160)
(1,090)
—
(19,070)
—
(19,070)
(20,160)
(501)
(20,661)
(1,090)
—
(19,571)
Loss per share
Basic and diluted
Weighted average number of ordinary shares used in computing basic and diluted loss per share
(1.89)
369,472,880
(3.53)
370,240,040
(0.33)
370,874,312
(0.05)
370,874,312
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
TUNIU CORPORATION
As of December 31, 2021, the aggregate
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Years Ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, or otherwise noted)
Balance as of January 1, 2019
Repurchase of ordinary shares
Issuance of ordinary shares pursuant to share incentive plan
Share-based compensation expenses
Capital contribution to subsidiaries with noncontrolling interests
Acquisition of additional shares in subsidiaries
Disposal of shares in subsidiaries
Acquisition of subsidiaries
Foreign currency translation adjustments
Accretion on redeemable noncontrolling interest
Net loss
Balance as of December 31, 2019
Balance as of January 1, 2020
Cumulative effect of adoption of new accounting standard (Note 2(i))
Repurchase of ordinary shares
Issuance of ordinary shares pursuant to share incentive plan
Share-based compensation expenses
Foreign currency translation adjustments
Net loss
Balance as of December 31, 2020
Balance as of January 1, 2021
Acquisition of additional shares in subsidiaries
Issuance of ordinary shares pursuant to share incentive plan
Share-based compensation expenses
Foreign currency translation adjustments
Cancellation of shares
Net loss
Balance as of December 31, 2021
Balance as of December 31, 2021(US$ (Note 2(d)))
Ordinary shares
Treasury Stock
Shares
389,331,544
—
—
—
—
—
—
—
—
—
—
389,331,544
389,331,544
—
—
—
—
—
—
389,331,544
389,331,544
—
—
—
—
(1)
—
389,331,543
389,331,543
Amount
RMB
249
—
—
—
—
—
—
—
—
—
—
249
249
—
—
—
—
—
—
249
249
—
—
—
—
—
—
249
39
Shares
(19,323,900)
(947,529)
964,128
—
—
—
—
—
—
—
—
(19,307,301)
(19,307,301)
—
(160,554)
625,167
—
—
—
(18,842,688)
(18,842,688)
—
576,165
—
—
—
—
(18,266,523)
(18,266,523)
Amount
RMB
(304,535)
(11,147)
4,740
—
—
—
—
—
—
—
—
(310,942)
(310,942)
—
(308)
8,334
—
—
—
(302,916)
(302,916)
—
9,121
—
—
—
—
(293,795)
(46,103)
Additional
paid-in
capital
RMB
9,061,979
Accumulated
other
comprehensive
income/(loss)
RMB
284,079
—
(4,600)
61,736
—
(1,134)
165
—
—
(4,634)
—
9,113,512
9,113,512
—
—
(8,287)
20,464
—
—
9,125,689
9,125,689
(308)
(8,765)
9,132
—
—
—
9,125,748
1,432,029
—
—
—
—
—
—
—
9,705
—
—
293,784
293,784
—
—
—
—
(18,772)
—
275,012
275,012
—
—
—
(3,191)
—
—
271,821
42,655
Accumulated
deficit
RMB
(5,691,409)
—
—
—
—
—
—
—
—
—
(694,565)
(6,385,974)
(6,385,974)
(19,425)
—
—
—
—
(1,307,956)
(7,713,355)
(7,713,355)
—
—
—
—
—
(121,524)
(7,834,879)
(1,229,464)
Total Tuniu
Corporation
Shareholders’
equity
RMB
Noncontrolling
interests
RMB
3,350,363
(11,147)
140
61,736
—
(1,134)
165
—
9,705
(4,634)
(694,565)
2,710,629
2,710,629
(19,425)
(308)
47
20,464
(18,772)
(1,307,956)
1,384,679
1,384,679
(308)
356
9,132
(3,191)
—
(121,524)
1,269,144
199,156
(5,830)
—
—
—
1,500
(2,281)
(380)
43,798
—
—
(35,797)
1,010
1,010
—
—
—
—
—
(35,674)
(34,664)
(34,664)
(1,595)
—
—
—
—
(6,944)
(43,203)
(6,779)
Total Equity
RMB
3,344,533
(11,147)
140
61,736
1,500
(3,415)
(215)
43,798
9,705
(4,634)
(730,362)
2,711,639
2,711,639
(19,425)
(308)
47
20,464
(18,772)
(1,343,630)
1,350,015
1,350,015
(1,903)
356
9,132
(3,191)
—
(128,468)
1,225,941
192,377
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
TUNIU CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, or otherwise noted)
2019
RMB
For the Years Ended December 31,
2020
RMB
RMB
2021
US$ (Note 2(d))
Cash flows from operating activities:
Net loss
Depreciation of property and equipment
Amortization of intangible assets and land use right
Amortization of right-of-use assets
Allowance for credit losses
Change in fair value of contingent consideration
Foreign exchange (losses)/gains
Loss from long-term investments
Loss from disposal of property and equipment and intangible assets
Gain from dividend of equity investments
Loss from impairment of intangible assets
Share-based compensation expenses
Change in deferred tax liabilities
Remeasurement of equity investments
Change in fair value of investments
Gain from disposal of equity investment
Share of results of equity investees
Changes in operating assets and liabilities:
Accounts receivable
Short-term and long-term amounts due from related parties
Prepayments and other current assets
Other non-current assets
Operating lease liabilities, current and non-current
Accounts and notes payable
Amounts due to related parties
Salary and welfare payable
Taxes payable
Advances from customers
Accrued expenses and other liabilities
Non-current liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchase of short-term investments
Proceeds from maturity of short-term investments
Cash paid for loan receivable
Cash received from loan repayment
Purchase of property and equipment and intangible assets
Cash paid for long-term investments
Proceeds from maturity of long-term investments
Cash received from dividend of equity investment
Cash received from disposal of equity investment
Cash paid for acquisition, net of cash received
Net cash provided by/(used in) investing activities
Cash flows from financing activities:
Cash paid for repurchase of ordinary shares
Proceeds from issuance of ordinary shares upon exercise of options
Contingent consideration paid for business acquisitions
Repurchase of redeemable noncontrolling interests
Acquisition of noncontrolling interests of subsidiaries
Cash contribution from noncontrolling interests
Repayment of borrowings and discounted notes
Proceeds from borrowings and discounted notes
Net cash (used in)/provided by financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase/(decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of year
Cash, cash equivalents and restricted cash at the end of year
Supplemental disclosure of cash flow information
Income tax paid
Interest paid
Supplemental disclosure of non-cash investing and financing activities
Accrual related to purchase of property and equipment
Receivables related to exercise of stock options
Accrual related to purchase business acquisitions
(729,382)
87,887
155,002
79,683
185,130
344
(82)
—
1,501
—
32,014
61,736
(2,727)
(18,356)
(17,977)
(24)
(2,223)
(55,043)
49,815
160,205
103
(73,315)
(36,253)
(47,404)
5,860
(11,383)
44,498
15,234
(5,304)
(120,461)
(2,041,280)
1,614,098
(1,321,271)
1,304,687
(122,479)
(547,205)
568,532
—
—
(33,216)
(578,134)
(13,547)
109
(13,921)
(37,733)
(3,415)
1,500
(281,354)
833,471
485,110
4,974
(208,511)
831,026
622,515
2,286
20,983
12,473
(55)
30,530
(1,343,630)
127,836
66,597
28,952
829,652
(5,451)
(15,682)
49,502
3,790
—
31,876
20,464
(8,797)
9,021
(60,630)
—
(797)
208,175
9,553
447,332
(45,233)
(24,983)
(492,659)
(8,721)
(64,936)
(6,203)
(905,118)
(163,025)
—
(1,313,115)
(1,460,051)
1,445,422
(314,411)
555,414
(28,330)
—
904,755
—
56,574
(310)
1,159,063
(308)
58
(14,019)
(10,000)
—
—
(918,532)
733,255
(209,546)
5,187
(358,411)
622,515
264,104
3,515
24,597
5,632
(45)
10,750
(128,468)
24,755
18,609
20,443
17,829
(3,597)
1,168
—
1,762
(5,982)
—
9,132
(2,382)
(11,443)
(32,687)
—
(726)
39,834
8,282
175,139
(6,058)
(23,507)
(222,380)
(16,354)
(13,716)
2,000
(68,984)
(9,011)
—
(226,342)
(336,548)
1,096,550
(858,538)
724,277
(14,742)
—
86,845
5,982
—
—
703,826
—
373
—
—
(1,903)
—
(620,932)
277,900
(344,562)
(1,428)
131,494
264,104
395,598
3,007
7,110
4,429
(28)
7,176
(20,160)
3,884
2,920
3,208
2,798
(564)
183
—
276
(939)
—
1,433
(374)
(1,796)
(5,129)
—
(114)
6,251
1,300
27,483
(951)
(3,689)
(34,896)
(2,566)
(2,152)
314
(10,825)
(1,414)
—
(35,519)
(52,812)
172,073
(134,723)
113,655
(2,313)
—
13,628
939
—
—
110,447
—
59
—
—
(299)
—
(97,438)
43,609
(54,069)
(226)
20,634
41,444
62,078
472
1,116
695
(4)
1,126
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
1. Organization and Principal Activities
Tuniu Corporation (the “Company”) is an exempted company with limited liability incorporated in the Cayman Islands. The Company, its subsidiaries and the
consolidated variable interest entity (“VIE”) and the VIE’s subsidiaries (collectively referred to as the “Affiliated Entities”) are collectively referred to as the “Group”.
The Group’s principal activity is the provision of travel-related services in the People’s Republic of China (“PRC”).
As of December 31, 2021, the Company’s significant consolidated subsidiaries and the consolidated Affiliated Entities are as follows:
Name of subsidiaries and Affiliated entities
Subsidiaries of the Company:
Tuniu (HK) Limited
Tuniu (Nanjing) Information Technology Co., Ltd.
Beijing Tuniu Technology Co., Ltd. (“Beijing Tuniu”)
Jiangsu Kaihui Commercial Factoring Co., Ltd
Xiamen Suiwang International Travel Service Co., Ltd.
Tianjin Tuniu International Travel Service Co., Ltd.
Guangzhou Kaihui Internet Microcredit Co., Ltd.
Nanjing Kaihui Internet Microcredit Co., Ltd.
Variable Interest Entity (“VIE”)
Nanjing Tuniu Technology Co., Ltd. (“Nanjing Tuniu”)
Subsidiaries of VIE
Shanghai Tuniu International Travel Service Co., Ltd.
Nanjing Tuniu International Travel Service Co., Ltd.
Beijing Tuniu International Travel Service Co., Ltd.
Nanjing Tuzhilv Tickets Sales Co., Ltd.
Tuniu Insurance Brokers Co., Ltd.
Date of establishment/acquisition
Place of
incorporation
Established on May 20, 2011
Established on August 24, 2011
Established on September 8, 2008
Established on September 22, 2015
Established on January 26, 2016
Established on March 23, 2016
Established on June 13, 2016
Established on December 28, 2016
Hong Kong
PRC
PRC
PRC
PRC
PRC
PRC
PRC
Established on December 18, 2006
PRC
Acquired on August 22, 2008
Acquired on December 22, 2008
Acquired on November 18, 2009
Established on April 19, 2011
Acquired on August 11, 2015
PRC
PRC
PRC
PRC
PRC
F-9
Percentage of
direct or indirect
economic
ownership
100 %
100 %
100 %
100 %
100 %
100 %
100 %
90 %
100 %
100 %
100 %
100 %
100 %
100 %
Table of Contents
2. Principal Accounting Policies
(a) Basis of Presentation
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of
America (“U.S. GAAP”).
Liquidity
The Group’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities
during the normal course of operations. The Group incurred net losses of RMB729,382, RMB1,343,630 and RMB128,468 for the years ended December 31, 2019, 2020
and 2021, respectively. Net cash used in operating activities was RMB120,461, RMB1,313,115 and RMB226,342 for the years ended December 31, 2019, 2020 and
2021, respectively. As of December 31, 2021, the Group’s accumulated deficit was RMB7,834,879 and the Group had cash and cash equivalents and short-term
investments of RMB964,978. The COVID-19 pandemic has negatively impacted the Group’s business operations for the past two years, and will continue to impact the
Group’s results of operations and cash flows for subsequent periods. Such conditions and events casted substantial doubt on the Group’s ability to continue as a going
concern. In response to the COVID-19 pandemic, in 2021, the Group continued to take actions to improve its liquidity, including scaling down its business operations by
reducing capital expenditures and operational expenses that were discretionary in nature and obtaining funding from the maturity of certain short-term and long-term
investments. Management has developed a plan to mitigate these adverse conditions and events, including a business plan with forecasted cash flows covering the next
twelve months from the date of issuance of the consolidated financial statements. Moving forward, management plans to maintain adequate funds to provide a sufficient
flexibility in adjusting the Group’s operation scale to cope with the development of the COVID-19 pandemic, and management will continue to manage the Group’s
capital expenditures, operational expenses and investments based on the Group’s liquidity position and working capital needs. Based on management’s liquidity
assessment, which has considered the Group’s operations at the current business scale, the latest development of COVID-19 and its continuous impact on the Group’s
business operations, the available funding from maturity of the Group’s short-term and long-term investments, and the available cash and cash equivalents, the Group
will be able to meet its working capital requirements and capital expenditures in the ordinary course of business for the next twelve months from the issuance of these
consolidated financial statements. As a result, management concluded that the substantial doubt on the Group’s ability to continue as a going concern will be alleviated
through the effective implementation of the business plan. Accordingly, the consolidated financial statements have been prepared on going concern basis.
(b) Principles of Consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries, the Affiliated Entities for which 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, has the power to appoint or
remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of board of directors, or has the power to govern the financial
and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, has controlling interest and therefore the Company or its subsidiary is
the primary beneficiary of the entity. In determining whether the Company or its subsidiary has controlling interests in a VIE, the Company considers whether the
Company or its subsidiary has the power to direct activities that most significantly impact the VIE’s economic performance, and the right to receive benefits from the
VIE or the obligation right to absorb losses of the VIE that could be potentially significant to the VIE.
All significant transactions and balances among the Company, its subsidiaries and the Affiliated Entities have been eliminated upon consolidation.
F-10
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(b) Principles of Consolidation – continued
To comply with PRC laws and regulations that restrict foreign equity ownership of companies that operate internet content, travel agency and air-ticketing services,
the Company operates its website and engaged in such restricted services through Nanjing Tuniu and its subsidiaries. Nanjing Tuniu’s equity interests are held by Dunde
Yu, the Company’s Chief Executive Officer, and Anqiang Chen, the Company’s financial controller, with equity interests of 80.89% and 19.11%, respectively. On
September 17, 2008 and subsequently amended on January 24, 2014 and February 19, 2021, Beijing Tuniu, one of the Company’s wholly owned subsidiaries, entered
into a series of agreements with Nanjing Tuniu and its shareholders. Pursuant to these agreements, Beijing Tuniu has the ability to direct substantially all the activities of
Nanjing Tuniu, and absorb substantially all of the risks and rewards of the Affiliated Entities. As a result, Beijing Tuniu is the primary beneficiary of Nanjing Tuniu, and
has consolidated the Affiliated Entities.
Contractual arrangements
On September 17, 2008 and subsequently amended on January 24, 2014 and February 19, 2021, Beijing Tuniu entered into a series of contractual agreements with
Nanjing Tuniu and its shareholders. The following is a summary of the agreements which allow the Company to exercise effective control over Nanjing Tuniu:
(1) Purchase Option Agreement.
Under the purchase option agreement entered between Beijing Tuniu and the shareholders of Nanjing Tuniu, Beijing Tuniu has the irrevocable exclusive right to
purchase, or have its designated person or persons to purchase all or part of the shareholders’ equity interests in Nanjing Tuniu at RMB2,430. The option term
remains valid until all equity interests held in Nanjing Tuniu are transferred or assigned to Beijing Tuniu or its designated person or persons. The purchase
consideration was paid by Beijing Tuniu to the shareholders of Nanjing Tuniu shortly after the purchase option agreement was entered.
(2) Equity Interest Pledge Agreements.
Under the equity interest pledge agreements entered between Beijing Tuniu and the shareholders of Nanjing Tuniu, the shareholders pledged all of their equity
interests in Nanjing Tuniu to guarantee their performance of their obligations under the purchase option agreement and the shareholders’ voting rights
agreement. If the shareholders of Nanjing Tuniu breach their contractual obligations under the purchase option agreement, Beijing Tuniu, as the pledgee, will
have the right to either conclude an agreement with the pledger to obtain the pledged equity or seek payments from the proceeds of the auction or sell-off of the
pledged equity to any person pursuant to the PRC law. The shareholders of Nanjing Tuniu agreed that they will not dispose of the pledged equity interests or
create or allow any encumbrance on the pledged equity interests. During the equity pledge period, Beijing Tuniu is entitled to all dividends and other
distributions made by Nanjing Tuniu. The equity interest pledge agreement remains effective until the shareholders of Nanjing Tuniu discharge all their
obligations under the purchase option agreement, or Beijing Tuniu enforces the equity interest pledge, whichever is earlier.
(3) Shareholders’ Voting Rights Agreement.
Under the shareholders’ voting rights agreement entered between Beijing Tuniu and the shareholders of Nanjing Tuniu, each of the shareholders of Nanjing
Tuniu appointed Beijing Tuniu’s designated person as their attorney-in-fact to exercise all of their voting and related rights with respect to their equity interests
in Nanjing Tuniu, including attending shareholders’ meetings, voting on all matters of Nanjing Tuniu, nominating and appointing directors, convene
extraordinary shareholders’ meetings, and other voting rights pursuant to the then effective articles of association. The shareholders’ voting rights agreement
will remain in force for an unlimited term, unless all the parties to the agreement mutually agree to terminate the agreement in writing or cease to be
shareholders of Nanjing Tuniu.
F-11
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(b) Principles of Consolidation – continued
(4) Irrevocable Powers of Attorney.
Under the powers of attorney issued by the shareholders of Nanjing Tuniu, the shareholders of Nanjing Tuniu each irrevocably appointed Beijing Tuniu as the
attorney-in-fact to exercise all of their voting and related rights with respect to their equity interests in Nanjing Tuniu. Each power of attorney will remain in
force until the shareholders’ voting rights agreement expires or is terminated.
(5) Cooperation Agreement.
Under the cooperation agreement entered between Beijing Tuniu and Nanjing Tuniu, Beijing Tuniu has the exclusive right to provide Nanjing Tuniu technology
consulting and services related to Nanjing Tuniu’s operations, which require certain licenses. Beijing Tuniu owns the exclusive intellectual property rights
created as a result of the performance of this agreement. Nanjing Tuniu agrees to pay Beijing Tuniu a quarterly service fee which equals the profits of each of
Nanjing Tuniu and its subsidiaries, and that Beijing Tuniu can adjust the service fee at its own discretion. This agreement remains effective for an unlimited
term, unless the parties mutually agree to terminate the agreement, one of the parties is declared bankrupt or Beijing Tuniu is not able to provide consulting and
services as agreed for more than three consecutive years because of force majeure. In addition, Beijing Tuniu has the unilateral right to terminate the agreement.
In the years ended December 31, 2019, 2020 and 2021, the Company and its subsidiaries charged technology consulting service fees and group management fees of
RMB30,420, RMB12,813 and RMB16,308, respectively, from its consolidated Affiliated Entities, which were eliminated in the consolidated financial statements.
Risks in relation to the VIE structure
The Group believes that each of the agreements and the powers of attorney under the contractual arrangements among Beijing Tuniu, Nanjing Tuniu and its
shareholders is valid, binding and enforceable, and does not and will not result in any violation of PRC laws or regulations currently in effect. The legal opinion of
Fangda Partners, the Company’s PRC legal counsel, also supports this conclusion. The shareholders of Nanjing Tuniu are also shareholders, nominees of shareholders, or
designated representatives of shareholders of the Company and therefore have no current interest in seeking to act contrary to the contractual arrangements. However,
uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements and if the shareholders of Nanjing Tuniu were to
reduce their interest in the Company, their interests may diverge from that of the Company and that may potentially increase the risk that they would seek to act contrary
to the contractual terms.
The Company’s ability to control Nanjing Tuniu also depends on the power of attorney Beijing Tuniu has to vote on all matters requiring shareholder approval in
Nanjing Tuniu. As noted above, the Company believes this power of attorney is legally enforceable but it may not be as effective as direct equity ownership.
In addition, if the legal structure and contractual arrangements were found to be in violation of any existing PRC laws and regulations, the PRC government could:
● levying fines or confiscate the Group’s income;
● revoke the Group’s business or operating licenses;
● require the Group to discontinue, restrict or restructure its operations;
F-12
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(b) Principles of Consolidation – continued
● shut down the Group’s servers or block the Group’s websites and mobile platform;
● restrict or prohibit the use of the Group’s financing proceeds to finance its business and operations in China; or
● take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business
Currently, the Company believes the possibility that it will no longer be able to control and consolidate Nanjing Tuniu and its subsidiaries as a result of the
aforementioned risks and uncertaintities is remote.
Summary financial information of the Affiliated Entities in the consolidated financial statements
As of December 31, 2021, the aggregate accumulated deficit of the Affiliated Entities was RMB4,660 million prior to the elimination of transactions between the
Affiliated Entities and the Company or the Company’s subsidiaries.
F-13
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(b) Principles of Consolidation – continued
The following assets, liabilities, revenues and loss of the Affiliated Entities were included in the consolidated financial statements as of December 31, 2020 and 2021
and for the years ended December 31, 2019, 2020 and 2021:
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net
Intercompany receivables
Amounts due from related parties
Prepayments and other current assets
Total current assets
Non-current assets
Long-term investments
Property and equipment, net
Intangible assets, net
Operating lease right-of-use assets, net
Goodwill
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Short-term borrowings
Accounts and notes payable
Intercompany payable
Salary and welfare payable
Taxes payable
Advances from customers
Operating lease liabilities, current
Amounts due to related parties
Accrued expenses and other current liabilities
Total current liabilities
Non-current liabilities
Operating lease liabilities, non-current
Deferred tax liabilities
Total non-current liabilities
Total liabilities
2020
RMB
115,737
49,068
685,773
153,844
504,780
23,856
214,164
1,747,222
232,068
46,346
61,682
37,182
185,004
83,328
645,610
2,392,832
251,685
604,766
5,293,093
38,397
3,384
192,965
9,527
2,198
630,330
7,026,345
30,108
12,019
42,127
7,068,472
As of December 31,
2021
RMB
US$(Note 2(d))
89,431
20,410
306,100
111,941
424,829
14,805
46,455
1,013,971
175,947
41,062
51,925
27,841
184,619
86,766
568,160
1,582,131
184,546
325,716
5,271,506
24,689
4,113
123,625
4,457
2,198
330,723
6,271,573
23,935
10,341
34,276
6,305,849
14,034
3,203
48,034
17,566
66,665
2,323
7,290
159,115
27,610
6,444
8,148
4,369
28,971
13,615
89,157
248,272
28,959
51,112
827,215
3,874
645
19,399
699
345
51,898
984,146
3,756
1,623
5,379
989,525
F-14
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(b) Principles of Consolidation – continued
Net revenues (1)
Net loss attributable to Tuniu Corporation (2)
Net cash used in operating activities
Net cash (used in)/provided by investing activities
Net cash provided by/(used in) financing activities
For the Years Ended December 31,
2019
RMB
1,181,747
(334,832)
(505,492)
(246,340)
680,822
2020
RMB
485,702
(509,406)
(849,609)
901,947
(332,455)
RMB
249,589
(42,858)
(190,429)
411,467
(276,001)
2021
US$ (Note 2(d))
39,166
(6,726)
(29,882)
64,568
(43,311)
Additional disclosures relating to operating results of the Affiliated Entities:
(1) Net revenues reflect amounts charged to other entities within the consolidated Group for royalty fee for the usage of software owned by VIE in the amount of
RMB84,209, RMB77,565 and RMB21,117, for the years ended December 31, 2019, 2020 and 2021, respectively, all of which have been eliminated in the
presentation of consolidated statement of comprehensive loss.
(2) Net loss includes costs occured to other entities within the consolidated Group for technology consulting service fees and group management fees in the amount
of RMB30,420, RMB12,813 and RMB16,308, for the years ended December 31, 2019, 2020 and 2021, respectively, all of which have been eliminated in the
presentation of consolidated statement of comprehensive loss.
Additional disclosures relating to investing activities of the Affiliated Entities:
Investing activities of the Affiliated Entities primarily represent the investment of, or redemption of, short-term investments during the periods indicated.
Additional disclosures relating to financing activities of the Affiliated Entities:
Financing activities include borrowing and repayment of loans from other entities within the consolidated Group, including borrowings of RMB137,325, repayments
of RMB133,455 and borrowings of RMB8,099, for the years ended December 31, 2019, 2020 and 2021, respectively, all of which have been eliminated in the
presentation of consolidated statement of cash flows.
In addition, the Affiliated Entities obtained financing from banks by discounting bank acceptance notes (Note 15) for their operations with the amount of
RMB543,497 for the year ended December 31, 2019 and repaid RMB133,455 and RMB284,100 for the years ended December 31, 2020 and 2021, respectively.
Currently there is no contractual arrangement that could require the Company to provide additional financial support to the Affiliated Entities. As the Company is
conducting its business mainly through the Affiliated Entities, the Company may provide such support on a discretionary basis in the future, which could expose the
Company to a loss.
Under the contractual arrangements with Nanjing Tuniu and through its equity interest in its subsidiaries, the Group has the power to direct the activities of the
Affiliated Entities and direct the transfer of assets out of the Affiliated Entities. As the consolidated Affiliated Entities are each incorporated as a limited liability
company under the PRC Company Law, the creditors do not have recourse to the general credit of the Company for all of the liabilities of the consolidated Affiliated
Entities.
F-15
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(c) Use of Estimates
The preparation of the Group’s consolidated financial statements in conformity with the U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates.
Significant accounting estimates reflected in the Group’s consolidated financial statements mainly include fair value of short-term and long-term investments, current
expected credit losses for financial assets measured at amortized cost, estimated useful lives of property and equipment and intangible assets, impairment for goodwill
and non-financial assets, fair value of contingent considerations with respect to business combinations, fair value of share-based payment arrangements, subsequent
measurement of equity investments using measurement alternative, valuation allowance for deferred tax assets and the determination of uncertain tax positions.
(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 outside of PRC is the United
States dollar (“US$”), while the functional currency of the PRC entities in the Group is RMB as determined based on ASC 830, Foreign Currency Matters.
Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the
transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. The resulting exchange
differences are included in the consolidated statements of comprehensive loss as foreign exchange gains / losses.
When preparing the consolidated financial statements presented in RMB, assets and liabilities of the Company and its subsidiaries incorporated outside of PRC are
translated into RMB at fiscal year-end exchange rates, and equity accounts are translated into RMB at historical exchange rates. Income and expense items are translated
at average exchange rates prevailing during the respective fiscal years. Translation adjustments arising from these are reported as foreign currency translation adjustments
and are shown as a component of accumulated other comprehensive income or loss in the consolidated statement of changes in shareholders’ equity.
F-16
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(d) Functional Currency and Foreign Currency Translation – continued
The unaudited United States dollar amounts disclosed in the accompanying financial statements are presented solely for the convenience of the readers. Translations
of amounts from RMB into US$ for the convenience of the reader were calculated at the rate of US$1.00 = RMB6.3726 on December 31, 2021, as set forth in H.10
statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on
December 31, 2021, or at any other rate.
(e) Fair Value Measurement
The Group defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the
principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The
three levels of inputs may be used to measure fair value include:
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 the asset or liability such as
quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or
corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.
The Group’s financial instruments include cash and cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable, amounts due
from and due to related parties, long-term investments in financial products, borrowings, operating lease liabilities, contingent consideration for business combinations
and certain accrued liabilities and other current liabilities. The carrying values of these financial instruments approximated their fair values due to the short-term maturity
of these instruments except for certain investments which are carried at fair value and contingent consideration for business combinations at each balance sheet date. The
Group’s equity security with readily determinable fair value is carried at fair value using quoted market prices that currently available on a securities exchange and
classified within Level 1. Certain short-term and long-term investments in financial products and funds classified within Level 2 are valued using directly or indirectly
observable inputs in the market place. Certain investments in financial products and contingent consideration for business combinations classified within Level 3 are
valued based on a model utilizing unobservable inputs which require significant management judgment and estimation.
F-17
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TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(e) Fair Value Measurement – continued
The Group’s assets and liabilities measured at fair value on a recurring basis are summarized below:
Long-term investments
Short-term investments
Long-term investments
Short-term investments
Long-term investments
Contingent consideration for business combinations - short term
Contingent consideration for business combinations - long term
The roll forward of major Level 3 investments are as following:
Fair value of Level 3 investment at the beginning of the year
Addition
Decrease
Change in fair value of the investments
Fair value of Level 3 investment at the end of the year
Fair Value Measurement Using Significant Other
Markets for Identical Assets (Level 1)
As of December 31,
2020
RMB
2021
RMB
US$(Note 2(d))
—
988
155
Fair Value Measurement Using Significant Other
Observable Inputs (Level 2)
As of December 31,
2020
RMB
1,223,547
6,819
RMB
580,855
—
2021
US$ (Note 2(d))
91,149
—
Fair Value Measurement Using
Unobservable Inputs (Level 3)
As of December 31,
2020
RMB
—
71,506
7,696
3,054
2020
RMB
825,970
—
(754,013)
(451)
71,506
RMB
30,006
—
7,153
—
2021
US$ (Note 2(d))
4,709
—
1,122
—
As of December 31,
2021
RMB
71,506
30,000
(71,241)
(259)
30,006
US$ (Note 2(d))
11,221
4,708
(11,179)
(41)
4,709
The Company determined the fair value of its investments by using income approach with significant unobservable inputs of future cash flows and discount rates
ranging from 2.0% to 10.0%.
F-18
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(e) Fair Value Measurement – continued
The roll forward of contingent consideration for acquisitions is as below:
Balance at the beginning of the year
Addition
Net change in fair value
Payment
Balance at the end of the year
2020
RMB
30,220
—
(5,451)
(14,019)
10,750
As of December 31,
2021
RMB
10,750
—
(3,597)
—
7,153
US$ (Note 2(d))
1,687
—
(565)
—
1,122
Contingent consideration is valued using an expected cash flow method with unobservable inputs including the probability to achieve the operating and financial
targets, which is assessed by the Group, in connection with the contingent consideration arrangements.
F-19
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TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(f) Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand and demand deposits placed with banks and third party payment processors, which are unrestricted as to
withdrawal or use.
(g) Restricted Cash
Restricted cash represents cash that cannot be withdrawn without the permission of third parties. The Group’s restricted cash mainly represents (i) cash deposits
required by tourism administration departments as a pledge to secure travellers’ rights and interests, (ii) cash deposits required by China Insurance Regulatory
Commission for engaging in insurance agency or brokering activities. (iii) the deposits held in designated bank accounts for issuance of bank acceptance notes and letter
of guarantee, and required by the Group’s business partners.
Cash, cash equivalents and restricted cash as reported in the consolidated statement of cash flows are presented separately on consolidated balance sheet as follows:
Cash and cash equivalents
Restricted cash
Total
(h) Short-term Investments
As of December 31,
2019
RMB
295,463
327,052
622,515
2020
RMB
213,538
50,566
264,104
2021
RMB
349,077
46,521
395,598
US$ (Note 2(d))
54,778
7,300
62,078
Short-term investments are comprised of (i) held-to-maturity investments such as time deposits, which are due between three months and one year and stated at
amortized cost; and (ii) investments in financial products issued by banks or other financial institutions, which contain a fixed or variable interest rate and with original
maturities between three months and one year. Such investments are generally not permitted to be redeemed early or are subject to penalties for redemption prior to
maturity. These investments are stated at fair value. Changes in the fair value are reflected in the consolidated statements of comprehensive loss. There was no other-than-
temporary impairment of short-term investments measured at amortized cost for the years ended December 31, 2019, 2020 and 2021.
(i) Current expected credit losses
In 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC
Topic 326”), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment model that is based on expected
losses rather than incurred losses. On January 1, 2020, the Group adopted this ASC Topic 326 and several associated ASUs on the measurement of credit losses, which
requires the Group to estimate lifetime expected credit losses upon recognition of the financial assets. The Group adopted the accounting standards update using a
modified retrospective approach. Upon adoption of the new standard on January 1, 2020, the Group recorded a net decrease to its retained earnings of RMB19,425.
F-20
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TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(i) Current expected credit losses - continued
The Group’s accounts receivable, held-to-maturity investments, prepayments and other current assets, amounts due from related parties and long-term amounts due
from related parties are within the scope of ASC Topic 326. The Group has identified the relevant risk characteristics of its customers and the related receivables and
prepayments, which include nature, size and types of the services the Group provides, or a combination of these characteristics. Receivables with similar risk
characteristics have been grouped into pools. For each pool, the Group considers the historical credit loss experience, current economic conditions, supportable forecasts
of future economic conditions, expected imapct of COVID-19 and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence the
expected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers, and industry-specific factors that
could impact the Group’s receivables. Additionally, external data and macroeconomic factors are also considered. This is assessed at each quarter based on the Group’s
specific facts and circumstances.
(j) Accounts Receivable, net
The Group’s accounts receivable mainly consist of amounts due from the customers, travel agents, insurance companies and travel boards or bureaus, which are
carried at the original invoice amount less provision for current expected credit losses. The Group recognized allowance for doubtful accounts of RMB28,443,
RMB55,910 and RMB 13,216 for the years ended December 31, 2019, 2020 and 2021, respectively.
The following table summarized the details of the Group’s allowance for credit losses related to accounts receivables:
Balance at the beginning of year
Cumulative effect of adoption of new accounting standard
Provision for doubtful accounts
Reversal
Write-offs
Balance at the end of year
(k) Long-term investments
For the Years Ended December 31,
2019
RMB
20,204
—
30,023
(1,580)
—
48,647
2020
RMB
48,647
1,833
56,747
(837)
(14,968)
91,422
2021
RMB
91,422
—
13,216
—
(10,205)
94,433
US$ (Note 2(d))
14,346
—
2,073
—
(1,601)
14,818
Long-term investments include equity investments, held-to-maturity investments and other long-term investments.
Equity investments
The Group accounts for the investments in entities with significant influence under equity-method accounting. Under this method, the Group’s pro rata share of
income (loss) from an investment is recognized in the consolidated statements of comprehensive loss. Dividends received reduce the carrying amount of the investment.
Equity-method investment is reviewed for impairment by assessing if the decline in fair value of the investment below the carrying value is other-than-temporary. In
making this determination, factors are evaluated in determining whether a loss in value should be recognized. These include consideration of the intent and ability of the
Group to hold investment and the ability of the investee to sustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are
recognized when a decline in value is deemed to be other-than-temporary.
F-21
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(k) Long-term investments - continued
The Group adopted the ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial
Liabilities”, effective from January 1, 2018. The Group elects a measurement alternative for equity investments that do not have readily determinable fair values and
where the Group does not have the ability to exercise significant influence over operating and financial policies of the entity. Under the measurement alternative, the
Group measures these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or
similar investment of the same issuer. An impairment loss is recognized in the consolidated statements of comprehensive loss equal to the excess of the investment’s cost
over its fair value when the impairment is deemed other-than-temporary.
Equity securities with readily determinable fair value and over which the Group has neither significant influence nor control through investments in common stock
or in-substance common stock are measured at fair value, with changes recorded in the consolidated statements of comprehensive loss.
Held-to-maturity investments
The investments that the Group intends and is able to hold to maturity are classified as held-to-maturity investments and are stated at amortized cost, and interest
income is recorded in the consolidated statements of comprehensive income. The Group monitors these investments for other-than-temporary impairment by considering
factors including, but not limited to, current economic and market conditions, the operating performance of the companies including current earnings trends and other
company-specific information.
Other long-term investments
Other long-term investments include financial products with maturities over one year, which are carried at their fair value at each balance sheet date and changes in
fair value are reflected in the consolidated statements of operations and comprehensive loss.
Refer to Note 7 for details.
(l) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and impairment if applicable. Property and equipment are depreciated over the estimated
useful lives on a straight-line basis. The estimated useful lives are as follows:
Category
Computers and equipment
Buildings
Furniture and fixtures
Vehicles
Software
Leasehold improvements
Estimated useful life
3 - 5 years
16 - 20 years
3 - 5 years
3 - 5 years
5 years
Over the shorter of the lease term or the estimated useful life of the asset ranging
from 1 – 9 years
Construction in progress represents leasehold improvements and office buildings under construction or being installed and is stated at cost. Cost comprises original
cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and buildings and
depreciation commences when the asset is ready for its intended use.
Gain or loss on the disposal of property and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is
recognized in the consolidated statements of comprehensive loss.
F-22
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(m) Land use right, net
Land use right represents the payments for usage of land for office buildings, which is recorded at cost less accumulated amortization. Amortization is provided on a
straight-line basis over their respective lease period which is 49.
(n) Capitalized Software Development Cost
The Group has capitalized certain direct development costs associated with internal-used software in accordance with ASC 350-40, “Internal-use software”, which
requires the capitalization of costs relating to certain activities of developing internal-use software that occur during the application development stage. Costs capitalized
mainly include payroll and payroll-related costs for employees who devoted time to the internal-use software projects during the application development stage.
Capitalized internal-use software costs are stated at cost less accumulated amortization and the amount is included in “property and equipment, net” on the consolidated
balance sheets, with an estimated useful life of five years. Software development cost capitalized amounted to RMB56,927, RMB756 and RMB4,972 for the years ended
December 31, 2019, 2020 and 2021, respectively. The amortization expense for capitalized software costs amounted to RMB36,983, RMB90,684 and RMB8,001 for
the years ended December 31, 2019, 2020 and 2021, respectively. The unamortized amount of capitalized internal use software development costs was RMB18,671 as of
December 31, 2021.
(o) Business combination
U.S. GAAP requires that all business combinations not involving entities or businesses under common control be accounted for under the purchase method. The
Group has adopted ASC 805 “Business Combinations”, and the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets
given, liabilities incurred and equity instruments issued. The transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets,
liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any
noncontrolling interests. The excess of the (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously
held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair
value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of operations and comprehensive income.
The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation
methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates, the number of years on which to base
the cash flow projections, as well as the assumptions and estimates used to forecast the future cash inflows and outflows. Management determines discount rates to be
used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of products and
forecasted life cycle and forecasted cash flows over that period. Although management believes that the assumptions applied in the determination are reasonable based on
information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material. The Group recognized
adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.
A noncontrolling interest is recognized to reflect the portion of a subsidiary’s equity which is not attributable, directly or indirectly, to the Group. Consolidated net
loss on the consolidated statements of comprehensive loss includes the net loss attributable to noncontrolling interests when applicable. The cumulative results of
operations attributable to noncontrolling interests are also recorded as noncontrolling interests in the Group’s consolidated balance sheets. Cash flows related to
transactions with noncontrolling interests are presented under financing activities in the consolidated statements of cash flows when applicable.
Subsequent to the initial measurement of acquisition, adjustments to the amount of contingent consideration are recognized as a gain or loss during the period of
adjustments, and are reflected in other operating income.
F-23
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(p) Intangible Assets
Intangible assets purchased are recognized and measured at cost upon acquisition and intangible assets arising from acquisitions of subsidiaries are recognized and
measured at fair value upon acquisition. The Company’s purchased intangible assets include computer software, which are amortized on a straight-line basis over their
estimated useful lives 1 to 5 years. Separable intangible assets arising from acquisitions consist of trade names, customer relationship, software, technology, non-compete
agreements, travel licenses, insurance agency license and business cooperation agreement with JD.com Inc., which are amortized on a straight-line basis over their
estimated useful lives of 1 to 20 years. The estimated life of intangible assets subject to amortization is reassessed if circumstances occur that indicate the life has
changed. The Group provided impairment for certain intangible assets of RMB32,014, RMB31,876 and nil or the years ended December 31, 2019, 2020 and 2021,
respectively. Refer to Note 9 for details.
(q) Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable assets and liabilities acquired in business combinations. Goodwill is not
amortized, but tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired.
The Group adopted ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”), which
removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. The Group first
assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, so as
to perform the quantitative goodwill impairment test. If determined to be necessary, the quantitative impairment test is used to identify goodwill impairment by
comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the
reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.
There is only one reporting unit in the Group as Chief Operating Decision Maker (“CODM”) only reviews the operating results on the consolidation level, and
business substance and economic characteristics of entities and components within the Group are similar. Therefore, the goodwill assessment was performed for the
Group on consolidated level as one reporting unit.
As of December 31, 2021, management performed an annual impairment assessment and believed it was more likely than not an impairment was indicated based on
qualitative assessment including the volatility of the Company’s share price during the year and negative financial trend impacted by the outbreak of COVID-19.
Quantitative goodwill impairment test were performed and discounted cash flow analysis was used to estimate the fair value of the reporting unit with certain key
assumptions including revenue growth rate, gross margin, operating expenses, working capital requirements and discount rate. Based on the result of the impairment test,
the fair value of the reporting unit was higher than its carrying value as at December 31, 2021. Therefore, no impairment loss was recognized for the year ended
December 31, 2021.
No impairment loss was recognized for the year ended December 31, 2020 based on management’s goodwill impairment test.
F-24
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(r) Impairment of non-financial assets
The Group evaluates its non-financial assets including property and equipment, intangible assets, land use rights and operating lease rights-of-use assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The asset group is the unit of account for
a non-financial asset or assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other
groups of assets and liabilities. When these events occur, the Group measures impairment by comparing the carrying amount of the asset group to future undiscounted net
cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount
of the assets, the Group recognizes an impairment loss equal to the difference between the carrying amount and fair value of these assets.
As at December 31, 2021, the continuous loss making situation, net operating cash outflow and the uncertainty as to the future impact of COVID-19 pandemic
indicated that the book value of the Group’s non-financial assets are subject to potential impairment risk. All of the Group’s non-financial assets are considered one asset
group which represents the lowest level to independently generate identifiable cash flows. The Group performed an impairment test of non-financial assets using the key
assumptions including revenue growth rate, gross margin, operating expenses and working capital requirements. Based on management’s assessment, no additional
impairment of non-financial assets was recognized during the years ended December 31, 2019, 2020 and 2021, except for provision for certain intangible assets (Note
2(p) and Note 9).
(s) Advances from Customers
Advances from customers represent the amounts travellers pay in advance to purchase packaged tours or other travelling products. Among the cash proceeds from
travellers, the amounts payable to tour operators are recorded as accounts payable and the remaining are recognized as revenues when revenue recognition criteria are
met.
(t) Revenue Recognition
The Group’s revenue is primarily derived from sales of packaged tours and other service fees.
According to ASC 606, “Revenue from Contracts with Customers” revenue is recognized when control of the promised services is transferred to our customers, in an
amount that reflects the consideration the Group expects to be entitled to in exchange for those services. The Group early adopted this new revenue standard effective
from January 1, 2017 by applying the full retrospective method. There are no significant estimates in the Group’s revenue arrangements.
Packaged tours: Packaged tours include organized tours which offer pre-arranged itineraries, transportations, accommodations, entertainments, meals and tour guide
services; and self-guided tours which consist of combinations of air tickets and hotel bookings and other optional add-ons, such as airport pick-ups that the travellers
choose at their discretion.
Under the organized tour arrangements with the tour operators, the Group’s role is an agent that provides tour booking services to the tour operators and travellers.
The tour operators are primarily responsible for all aspects of providing services relating to the tour and responsible for the resolution of customer disputes and any
associated costs. Revenues from organized tours (except for those under which the Group takes substantive inventory risks and the self-operated local tour operator
business in which the Group acts as a principal, as discussed below) are generally reported on net basis, representing the difference between what the Group receives
from the travellers and the amounts due to the tour operators.
F-25
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(t) Revenue Recognition - continued
Revenues from self-guided tours are recognized on a net basis, as the Group has no involvement in determining the service, and provides no additional services to
travellers other than the booking services. Suppliers are responsible for all aspects of providing the air transportation and hotel accommodation, and other travel-related
services. As such, the Group is an agent for the travel service providers in these transactions and revenues are reported on a net basis.
Under certain circumstances, the Group may enter into contractual commitments with suppliers to reserve tours, and is required to pay a deposit to ensure tour
availabilities. Some of these contractual commitments are non-cancellable, and to the extent the reserved tours are not sold to customers, the Group would be liable to
pay suppliers a pre-defined or negotiated penalty, thereby assuming inventory risks. For packaged tour arrangements that the Group undertakes inventory risk which is
considered to be substantive, revenues are recognized on gross basis. Revenues for such arrangements that the Group undertakes substantive inventory risk were
RMB166,186, RMB1,599 and nil for the years ended December 31, 2019, 2020 and 2021, which were recorded in revenues from packaged tours.
The Group also operates its self-operated local tour operator business in various destinations by directly providing destination-based services to the organized tour
customers, starting from their arrival at the destination and all the way until they depart from the destination. As a self-operated local tour operator, the Group integrates
the underlying resources such as transportations, accommodations, entertainments, meals and tour guide services from selected suppliers, directs the selected vendors to
provide services on the Group’s behalf, and hence sets up the price for the tour.The Group is also primarily responsible for fulfilling the promise of the whole packaged
tours service, which is a single performance obligation. Accordingly, the Group is a principal for the self-operated local tour operator business and recognizes revenue on
a gross basis in accordance with ASC 606. Revenues from the self-operated tour operator business are recognized over time during the period of the tours when control
over the tour services is transferred to the customers. Revenues for the self-operated local tour operator business were RMB724,239, RMB122,699 and RMB169,376 for
the years ended December 31, 2019, 2020 and 2021, which were recorded in revenues from packaged tours.
Under the arrangements for the organized tours (except for the self-operated local tour operator business in which the Group acts as a principal, as discussed above)
and self-guided tours, for which the Group’s role is an agent, revenues are recognized when the tours depart, as control over the tour booking services is transferred to the
customers when the tour booking is completed and successful.
Other revenues: Other revenues primarily comprise revenues generated from (i) service fees received from insurance companies, (ii) commission fees from other
travel-related products and services, such as tourist attraction tickets, visa application services, accommodation reservation and transportation ticketing, with revenue
recognized of RMB88,042, RMB35,284 and RMB38,406 for the years ended December 31, 2019, 2020 and 2021, respectively, (iii) fees for advertising services that the
Group provides primarily to domestic and foreign tourism boards and bureaus, with revenue recognized of RMB74,859, RMB26,204 and RMB20,971 for the years
ended December 31, 2019, 2020 and 2021, respectively,and (iv) service fees for financial services. The Group provided account receivables factoring service and cash
lending service to customers and fees charged in connection with these financial services were recorded as other revenue over the period of the service rendered. The
amount of such service revenue for the years ended December 31, 2019, 2020 and 2021 were RMB97,016, RMB43,149 and RMB20,307, respectively.
Revenue is recognized when relevant services are rendered or when the tickets are issued.
F-26
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(t) Revenue Recognition - continued
Customer incentives
From time to time, travelers are offered coupons, travel vouchers, membership points, or cash rewards as customer incentives. For customer incentives offered where
prior purchase is not required, the Group accounts for them as a reduction of revenue when the coupons and vouchers are utilized to purchase travelling products or as
selling and marketing expenses when membership points are redeemed for merchandises. For customer incentives offered from prior purchase, the Group estimates the
amount associated with the future obligation to customers, and records as a reduction of revenue when the prior purchase revenue is initially recognized. Unredeemed
incentives are recorded in other current liabilities in the consolidated balance sheets. The Group estimates liabilities under the customer loyalty program based on
accumulated customer incentives, and the estimate of probability of redemption in accordance with the historical redemption pattern. The actual expenditure may differ
from the estimated liability recorded. As of December 31, 2020 and 2021, liabilities recorded related to membership points and cash rewards were RMB10,369 and
RMB3,951, respectively.
Value-added tax and surcharges
The Group’s business is subject to value-added tax (“VAT”), and the Group is permitted to offset input VAT (VAT that is paid in the acquisition of goods or services,
and which is supported by valid VAT invoices received from vendors) against their VAT liability. VAT on the taxable revenue collected by the Group on behalf of tax
authorities in respect of services provided, net of VAT paid for purchases, is recorded as a liability until it is paid to the tax authorities. The Group is also subject to
certain government surcharges on VAT payable in the PRC and these surcharges are recorded in cost of revenues.
(u) Cost of Revenues
Cost of revenues mainly consists of salaries and other compensation expenses related to the Group’s tour advisors, customer services representatives, and other
personnel related to tour transactions, and other expenses directly attributable to the Group’s principal operations, primarily including payment processing fees,
telecommunication expenses, rental expenses, depreciation expenses and other service fee for financial service. For the arrangements where the Group secures
availabilities of tours and bears substantive inventory risks and for the self-operated local tour operator business, from which revenues are recognized on a gross basis,
cost of revenues also includes the amount paid to tour operators or suppliers.
(v) Advertising Expenses
Advertising expenses, which primarily consist of online marketing expenses and brand marketing expenses through various forms of media, are recorded in sales and
marketing expenses as incurred. Advertising expenses were RMB223,522, RMB50,662 and RMB40,661 for the years ended December 31, 2019, 2020 and 2021,
respectively.
F-27
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(w) Research and Product Development Expenses
Research and product development expenses include salaries and other compensation-related expenses for the Group’s research and product development personnel,
as well as office rental, depreciation and related expenses and travel-related expenses for the Group’s research and product development team. The Group recognizes
software development costs in accordance with ASC 350-40 “Software—internal use software”. The Group expenses all costs that are incurred in connection with the
planning and implementation phases of development, and costs that are associated with maintenance of the existing websites or software for internal use. Certain costs
associated with developing internal-use software are capitalized when such costs are incurred within the application development stage of software development
(Note 2(n)).
(x) Leases
The Company applied ASC 842, Leases, on January 1, 2019 by using the optional transition method at the adoption date without recasting comparative periods. The
Company determines if an arrangement is a lease at inception. Operating leases are primarily for office and operation space and are included in operating lease right-of-
use (“ROU”) assets, net, operating lease liabilities, current and operating lease liabilities, non-current on its consolidated balance sheets. ROU assets represent the
Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. The operating
lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at lease commencement date in determining
the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms
may include options to extend or terminate the lease. Renewal options are considered within the ROU assets and lease liability when it is reasonably certain that the
Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
For operating leases with a term of one year or less, the Company has elected to not recognize a lease liability or ROU asset on its consolidated balance sheet.
Instead, it recognizes the lease payments as expense on a straight-line basis over the lease term. Short-term lease costs are immaterial to its consolidated statements of
operations and cash flows.
(y) Share-based Compensation
The Company applies ASC 718, “Compensation — Stock Compensation” to account for its share-based compensation program including share options and
restricted shares. In accordance with the guidance, the Company determines whether a share-based award should be classified and accounted for as a liability award or
equity award. All grants of share-based awards to employees classified as equity awards are recognized in the financial statements based on their grant date fair values.
For options, the fair values are calculated using the binominal option pricing model. Share-based compensation expenses are recorded net of an estimated forfeiture rate
over the required service period using the straight-line method. The modifications of the terms or conditions of the shared-based award are treated as an exchange of the
original award for a new award. The incremental compensation expense is equal to the excess of the fair value of the modified award immediately after the modification
over the fair value of the original award immediately before the modification. For options already vested as of the modification date, the Company immediately
recognized the incremental value as compensation expenses. For options still unvested as of the modification date, the incremental compensation expenses are recognized
over the remaining service period of these options.
F-28
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(z) Income Taxes
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or
deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are provided using the liability method.
Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years
to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount
attributed to that asset or liability for tax purposes. The effect on deferred taxes of a change in tax rates is recognized in the interim condensed consolidated statements of
comprehensive loss in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that
some portion of, or all of the deferred tax assets will not be realized.
Uncertain tax positions
U.S. GAAP prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. The guidance also provides for the derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities,
accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is
required in evaluating the Group’s uncertain tax positions and determining its provision for income taxes. As of December 31, 2020 and 2021, the Group did not have
any significant unrecognized uncertain tax positions or any interest or penalties associated with tax positions.
In order to assess uncertain tax positions, the Group applies a more likely than not threshold and a two-step approach for the tax position measurement and financial
statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available 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% likely of being realized upon settlement.
(aa) Employee Benefits
Full-time employees of the Group in the PRC are entitled to welfare benefits including pension, work-related injury benefits, maternity insurance, medical insurance,
unemployment benefit 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 employees’ salaries, up to a maximum amount specified by the local government. The
Group has no legal obligation for the benefits beyond the contributions. The Group recorded employee benefit expenses of RMB217,199 , RMB56,396 and RMB22,326
for the years ended December 31, 2019, 2020 and 2021, respectively.
(ab) Government Subsidies
Government subsidies are cash subsidies received by the Group’s entities in the PRC from provincial and local government authorities. The government subsidies
are granted from time to time at the discretion of the relevant government authorities. These subsidies are granted for general corporate purposes and to support the
Group’s ongoing operations in the region. Cash subsidies are recorded in other operating income on the consolidated statements of comprehensive loss when received
and when all conditions for their receipt have been satisfied. The Group recognized government subsidies of RMB24,608, RMB22,398 and RMB22,468 for the years
ended December 31, 2019, 2020 and 2021, respectively.
F-29
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(ac) Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period. Accretion of the redeemable noncontrolling interests is deducted from the net income (loss) to arrive at net income (loss) attributable to the
Company’s ordinary shareholders. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to ordinary shareholders by the weighted
average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of unvested restricted shares and
shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted loss per
share calculation when inclusion of such shares would be anti-dilutive. Except for voting rights, Class A and Class B shares have all the same rights and therefore the
Group has elected not to use the two-class method.
(ad) Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of the Group during a period arising from transactions and other events and circumstances excluding
transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive income or loss is reported in the consolidated statements of
comprehensive loss. Accumulated other comprehensive income (loss), as presented on the accompanying consolidated balance sheets, consists of accumulated foreign
currency translation adjustments.
(ae) Treasury stock
On September 30, 2020, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to US$10 million
worth of the Company’s ordinary shares or American depositary shares representing ordinary shares over the next 12 months. The share repurchase programs permitted
the Company to purchase shares from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through
other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations. The repurchased shares were accounted for
under the cost method and presented as “treasury stock” in equity on the Group’s consolidated balance sheets. For the year ended December 31, 2020 and 2021, the
Group reissued 625,167 and 576,165 shares to employees upon their exercise of share options or vesting of restricted share units under the Group’s share compensation
plans, respectively. The Company recognizes the difference between the reissuance price and the average cost the Company paid for repurchase in additional paid-in
capital when reissuing the shares.
(af) Segment Reporting
In accordance with ASC 280, Segment Reporting, the Group’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results when
making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group has only one reportable segment.
The Group does not distinguish between markets or segments for the purpose of internal reporting. The Group’s long-lived assets are substantially all located in the
PRC and substantially all the Group’s revenues are derived from within the PRC, therefore, no geographical segments are presented.
F-30
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
2. Principal Accounting Policies – continued
(ag) Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”,
which provides optional expedients and exceptions for applying U.S. GAAP on contract modifications and hedge accounting to contracts, hedging relationships, and
other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. These optional
expedients and exceptions provided in ASU 2020-04 are effective for the Company as of March 12, 2020 through December 31, 2022. The Company will evaluate
transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. The ASU
is currently not expected to have a material impact on the Group’s consolidated financial statements.
In July 2021, the FASB issued ASU 2021-05, Lessors—Certain Leases with Variable Lease (“ASU 2021-05”). It requires lessors to classify leases as operating
leases if they have variable lease payments that do not depend on an index or rate and would have selling losses if they were classified as sales-type or direct financing
leases. The Group will adopt this standard in 2022, and do not expect the adoption of this standard will have a material impact on the Group’s consolidated financial
statements.
F-31
Table of Contents
3. Risks and Concentration
(a) Credit and Concentration Risks
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
The Group’s credit risk arises from cash and cash equivalents, restricted cash, short-term investments, prepayments and other current assets, accounts receivables
balances amounts, due from related parties and long-term investments. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance
sheet dates.
The Group expects that there is no significant credit risk associated with the cash and cash equivalents, restricted cash and time deposits, which are held by reputable
financial institutions in the jurisdictions where the Company, its subsidiaries and the Affiliated Entities are located. The Group believes that it is not exposed to unusual
risks as these financial institutions have high credit quality.
The Group has no significant concentrations of credit risk with respect to its customers, as customers usually prepay for travel services. Accounts receivable are
typically unsecured and are primarily derived from revenue earned from individual customers, corporate customers, travel agents, insurance companies and travel boards
or bureaus. The risk with respect to accounts receivable is mitigated by credit evaluations performed on those customers and ongoing monitoring processes on
outstanding balances. No individual customer accounted for more than 10% of net revenues for the years ended December 31, 2019, 2020 and 2021.
The Group has purchased financial products issued by banks, companies and other financial institutions. The Group also provided account receivables factoring
service and cash lending service to customers. The Group has set up a risk evaluation system on the issuers of credit quality, ultimate borrowers of asset management
schemes, and conducts collectability assessment of the financial assets and loan receivables on timely basis.
The Group’s collectability assessment considers duration of credit periods, the credit standing of the borrowers and parties that have guaranteed the repayment of the
debts, the quality of assets pledged, the borrowers’ repayment plans, forward looking information and an evaluation of default risk by reference to relevant information
that is publicly available.
(b) Foreign Currency Risk
The Group’s operating transactions and its assets and liabilities are mainly denominated in RMB. RMB is not freely convertible into foreign currencies. The value of
RMB is subject to changes influenced by central government policies, and international economic and political developments. In the PRC, certain foreign exchange
transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (the “PBOC”). Remittances
in currencies other than RMB by the Group in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain
supporting documentation in order to affect the remittance.
F-32
Table of Contents
4. Business acquisition
Travel agencies
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
During the year ended December 31, 2019, the Group acquired 51% and 63.51% of controlling equity interests in an offline travel agency and an online travel
agency, respectively. The Group expanded its tours market and improved its capability of direct procurement of travel related products by means of these acquisitions.
The total purchase price of RMB59,981 including cash consideration of RMB52,640 and an accrual in the amount of RMB7,341 representing the fair value of contingent
consideration to be made based on the achievement of profit target over the next four years. The fair value of the contingent cash consideration was estimated using a
probability-weighted scenario analysis method. Key assumptions included probabilities assigned to each scenario and the discount rate. During the year ended December
31, 2019, the Group made an upward adjustment of the fair value of the contingent consideration by RMB2,265 based on the reassessment of achievement of profit
target. The contingent consideration is due in installments annually over the next four years. During the year ended December 31, 2020, the Group paid RMB1,776 of the
contingent consideration, and made a downward adjustment of the fair value of the contingent consideration by RMB3,715 based on the reassessment of achievement of
profit target. During the year ended December 31, 2021, the Group made a downward adjustment of the fair value of the contingent consideration by RMB2,255 based on
the reassessment of achievement of profit target. As of December 31, 2021, the carrying value of total unpaid contingent consideration was RMB1,860, which is expected
to be in 2022.
The business acquisition was accounted for using purchase accounting. The following is the summary of the fair values of the assets acquired and liabilities assumed
:
Net assets (including cash acquired of RMB18.9 million)
Including:
Customer Relationship
Technology
Goodwill
Deferred tax liability
Noncontrolling interests
Total consideration
Amount
Estimated useful lives
5.75-11.2 years
5.5 years
37,712
16,889
9,230
72,598
(6,530)
(43,799)
59,981
During the year ended December 31, 2018, the Group acquired 80% of controlling equity interests of an online travel agency to expand Tuniu’s overseas business
network and further enhance the Company’s competitive position. The total purchase price of RMB20,234 including cash consideration of RMB9,852 and an accrual in
the amount of RMB10,382 representing the fair value of contingent consideration to be made based on the achievement of profit target over the next four years. The fair
value of the contingent consideration was estimated using a probability-weighted scenario analysis method. Key assumptions included probabilities assigned to each
scenario and the discount rate. The Group recognized a goodwill of RMB10,565 for this transactions. During the year ended December 31, 2019, the Group paid
RMB3,800 of the contingent consideration, and made an downward adjustment of the fair value of the contingent consideration by RMB2,311 based on the reassessment
of achievement of profit target. During the year ended December 31, 2020, the Group made another downward adjustment of the fair value of the contingent
consideration by RMB1,736 based on the reassessment of achievement of profit target. During the year ended December 31, 2021, the Group made another downward
adjustment of the fair value of the contingent consideration by RMB1,342 based on the reassessment of achievement of profit target. As of December 31, 2021, the
carrying value of total unpaid contingent consideration was RMB1,193, which is expected to be paid in 2022.
Before 2018, the Group made several acquisitions in offline travel agencies and recognized goodwill of RMB147,639 accordingly. As of December 31, 2021, the
Group has unpaid contingent consideration of RMB4,100 resulting from these acquisitions, which amount is expected to be paid in 2022.
Pro forma results of operations for the acquisitions described above have not been presented because they are not material to the Group’s consolidated income
statements, either individually or in aggregate.
F-33
Table of Contents
5. Transaction with JD.com, Inc.
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
On May 8, 2015, the Company entered into a share subscription agreement with Fabulous Jade Global Limited, an affiliate of JD.com, Inc., and a Business
Cooperation Agreement (“BCA”) with JD. Com, Inc. (“JD”) for a period of five years. Pursuant to these agreements, the Company issued 65,625,000 Class A ordinary
shares for a cash consideration of RMB1,528.2 million (US$250 million) and the business resource contributed by JD. According to BCA, the business resource includes
the exclusive rights to operate the leisure travel channel for both JD’s website and mobile application and JD’s preferred partnership for hotel and air ticket reservation
service, the internet traffic support and marketing support for the leisure travel channel for a period of five years started from August 2015.
The acquisition of BCA is considered as assets acquisition and the intangible assets acquired include the exclusive operation right of leisure travel channel, preferred
partnership of hotel and air ticket reservation service, traffic and marketing supports. The Group assessed the economic benefits to generated from these intangible assets
using the excess earning method with certain key assumptions including revenue, EBIT margin and discount rate. Due to the downturn in business actitivites in 2020,
which impacted the underlying key assumptions, the Group wrote down RMB9,554 for these intangible assets for the year ended December 31, 2020. As of December
31, 2020, the five-year agreement had expired, and the carrying value of above intangible assets was nil, so the Group wrote off these intangible assets.
6. Prepayments and other current assets
The following is a summary of prepayments and other current assets:
Prepayments to suppliers
Interest income receivable
Prepayment for advertising expenses
Loan receivables
Value-added tax receivables
Receivables from employees
Others
Total
2020
RMB
232,906
278
1,514
22,934
78,218
19,337
23,517
378,704
As of December 31,
2021
RMB
74,328
814
1,714
151,089
76,285
15,180
17,623
337,033
US$ (Note 2(d))
11,664
129
269
23,709
11,971
2,382
2,764
52,888
Receivable in relation to factoring business and loan receivable are recorded in connection with the Group’s account receivable factoring service and cash lending
service.
The Group recognized a net provision for prepayments and other current assets of RMB124,581, RMB170,639 and RMB2,858 for the years ended December 31,
2019, 2020 and 2021, respectively.
For the year ended December 31, 2020, the Group provided a full provision for receivable in relation to factoring business from a third party with the amount of
RMB101,641, as this third party did not made repayment according to the extended schedule and no settlement plans was reached for the outstanding balance. Based on
the assessment of all currently available information, the Group considered there were no assurance as to whether the collection of the outstanding receivables are
probable as of December 31, 2020.
F-34
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
6. Prepayments and other current assets - continued
The following table summarized the details of the Group’s provision for prepayments and other current assets:
Balance at the beginning of year
Cumulative effect of adoption of new accounting standard for
expected credit losses
Addition
Reversal
Write-offs
Balance at the end of year
F-35
For the Years Ended December 31,
2019
RMB
29,901
—
132,825
(8,244)
—
154,482
2020
RMB
154,482
17,262
182,829
(12,190)
—
342,383
2021
RMB
342,383
US$ (Note 2(d))
53,727
—
22,408
(19,550)
(27,207)
318,034
—
3,516
(3,068)
(4,269)
49,906
Table of Contents
7. Long-term investments
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
The Group’s long-term investments consist of equity investments, held-to-maturity investments and other long-term investments.
Equity investments – equity method
Equity investments – measurement alternative
Equity investments - securities (Note 23(a))
Held-to-maturity investments
Other long-term investments
Total
Equity investments
2020
RMB
43,689
142,199
—
2,653
78,325
266,866
As of December 31,
2021
RMB
44,415
153,643
988
2,901
—
201,947
US$ (Note 2(d))
6,970
24,110
155
455
—
31,690
In February 2019, the Group invested RMB54,616 for 21.33% of equity interest in Nanjing Tengbang Jinhong Tourism Industry Investment Fund Partnership
(“Tengbang”). The investment was accounted for as an equity-method investment because the Group has significant influence over the operating and financial policies of
Tengbang as the Group has one of the five board seats of Tengbang. In December 2020, the Group withdrew this investment and recognized a gain of RMB799 for the
year ended December 31, 2020 from this investment.
In December 2016, Nanjing Zhongshan Financial Leasing Co., Ltd. (“Zhongshan”) was established and the Group invested RMB42,500 for 25% of equity interest in
Zhongshan. This investment was accounted for as an equity-method investment because the Group has significant influence over the operating and financial policies of
Zhongshan as the Group has one of the five board seats of Zhongshan. The Group recognized a gain of RMB1,191, a loss of RMB2 and a gain of RMB726 for the years
ended December 31, 2019, 2020 and 2021 from this investment, respectively. As of December 31, 2021, the carrying value of its equity investment was RMB44,415.
Financial information of the investees described above have not been presented because they are not material to the Group’s consolidated income statements, either
individually or in aggregate.
With the adoption of ASU 2016-01 effective from January 1, 2018, the Group elected a measurement alternative for equity investments that do not have readily
determinable fair values and where the Group does not have the ability to exercise significant influence over operating and financial policies of the entity. During
the years ended December 31, 2019, 2020 and 2021, the Group remeasured certain equity investments based on the information obtained from observable transactions
and recognized a gain of RMB18,356, a loss of RMB9,021 and a gain of RMB11,443, respectively.
During the year ended December 31, 2020, the Group recognized impairment losses of RMB49,502 on certain equity investments based on the Group’s assessment
of current economic conditions with the considerations of COVID-19 impacts, as well as the operating performance of the investees. The impairment was recorded in
other income/(loss). No impairment loss was recognized for long-term investments for the years ended December 31, 2021 and 2019.
Held-to-maturity investments
During 2019, the Group made investments in time deposits that the Group has intention and ability to hold until maturity. The Group classified these investments as
held-to-maturity investments. As of December 31, 2020 and 2021, the carrying value of RMB2,653 and RMB 2,901, respectively.
F-36
Table of Contents
7. Long-term investments – continued
Other long-term investments
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
The Group also made several investments in financial products with maturities over one year. The Group measured these other long-term investments at their fair
value and the carrying value was RMB78,325 and nil as of December 31, 2020 and 2021, respectively.
8. Property and equipment, net
The following is a summary of property and equipment, net:
Computers and equipment
Leasehold improvements
Buildings
Furniture and fixtures
Vehicles
Software
Others
Subtotal
Less: Accumulated depreciation
Property and equipment subject to depreciation
Construction in progress
Total
2020
RMB
142,277
131,923
4,308
16,860
19,925
185,118
2,102
502,513
(435,393)
67,120
44,577
111,697
As of December 31,
2021
RMB
136,993
139,087
4,109
16,541
19,419
190,100
2,102
508,351
(452,759)
55,592
42,567
98,159
US$ (Note 2(d))
21,497
21,825
645
2,596
3,047
29,831
330
79,770
(71,047)
8,723
6,680
15,403
Depreciation expense for the years ended December 31, 2019, 2020 and 2021 was RMB84,273, RMB127,836 and RMB24,755, respectively.
F-37
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
9. Intangible assets, net
Intangible assets, net, consist of the following:
Travel license
Insurance agency license
Software
Technology
Trade names
Supplier relationship
Customer relationship
Non-compete agreements
Subtotal
Less: Accumulated amortization
Less: Impairment
Total
2020
RMB
31,056
11,711
73,721
4,300
41,634
8,560
21,787
6,399
199,168
(105,484)
(22,322)
71,362
As of December 31,
2021
RMB
31,056
11,711
73,056
4,300
41,634
8,560
21,787
6,399
198,503
(120,805)
(22,322)
55,376
US$ (Note 2(d))
4,874
1,838
11,464
675
6,533
1,343
3,419
1,004
31,150
(18,957)
(3,503)
8,690
Amortization expenses for intangible assets were RMB152,941, RMB64,536 and RMB16,547 for the years ended December 31, 2019, 2020 and 2021, respectively.
Impairment charges for Business Cooperation Agreements were RMB9,554 for the year ended December 31, 2020. As of December 31, 2020, the five-year
agreement had expired and the carrying value of above intangible assets were nil, so the Group wrote off these intangible assets (Note 5).
The Group provided impairment charges for trade names and customer relationship of RMB15,482 and RMB6,840, respectively, for the year ended December 31,
2020, as the Group believes the future economic benefit generated from these intangible assets were limited. No impairment was made in 2021.
The annual estimated amortization expense for the above intangible assets for the following years is as follows:
Years Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
Amortization for Intangible Assets
RMB
US$ (Note 2(d))
10,347
8,550
7,788
4,412
3,343
20,936
55,376
1,624
1,342
1,222
692
525
3,285
8,690
F-38
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
10. Land use right, net
Land use right, net, consist of the following:
Land use right
Less: Accumulated amortization
Net book value
2020
RMB
101,007
(4,294)
96,713
As of December 31,
RMB
101,007
(6,355)
94,652
2021
US$ (Note 2(d))
15,850
(997)
14,853
In December 2018, the Group obtained the certificate for a land use right, which had been fully paid, and started to amortize over the remaining period of the right to
use the land. Amortization expenses for land use right were RMB2,062, RMB2,061 and RMB2,062 for the years ended December 31, 2019, 2020 and 2021, respectively.
11. Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2020 and 2021 were as follows:
Balance at the beginning of year
Increase in goodwill related to acquisitions during the year
Accumulated impairment loss
Balance at the end of year
12. Other non-current assets
Other non-current assets consist of the following:
Deposits
Loans receivables
Long-term prepayments to a supplier (a)
Others
Total
2020
RMB
232,007
—
—
232,007
As of December 31,
2021
RMB
232,007
—
—
232,007
US$ (Note 2(d))
36,407
—
—
36,407
2020
RMB
As of December 31,
2021
RMB
16,395
17,586
55,348
1,851
91,180
7,094
13,551
71,353
113
92,111
US$ (Note 2(d))
1,113
2,126
11,197
18
14,454
(a) This represents the prepayment of hotel resources the Group prepaid to a third party supplier which are expected to be utilized over one year.
F-39
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
12. Other non-current assets - continued
The Group recognized a net provision for other loans receivable carried in non-current assets of RMB8,377 and RMB1,092 for the year ended December 31, 2020
and 2021. The following table summarized the details of the Group’s provision:
Balance at the beginning of year
Cumulative effect of adoption of new accounting standard relating
to credit losses
Addition
Reversal
Balance at the end of year
13. Short-term and long-term borrowings
The following is a summary of short-term and long-term borrowings:
Short-term borrowings
Long-term borrowings
For the Years Ended December 31,
2019
RMB
2020
RMB
—
—
1,181
—
1,181
1,181
294
8,805
(428)
9,852
2021
RMB
9,852
US$(Note 2 (d))
1,546
—
1,633
(541)
10,944
—
256
(85)
1,717
As of December 31,
2020
RMB
60,679
22,577
RMB
9,981
14,344
2021
US$ (Note 2(d))
1,566
2,251
As of December 31, 2020 and 2021, the Group had short-term borrowings from banks which were repayable within one year, with interests charged at rates ranging
from 0.2% to 5.8% and 0.2% to 5.0% per annum, respectively.
As of December 31, 2020 and 2021, the Group had long-term borrowings from banks which were repayable over one year, with interests charged at rates ranging
from 0.2% to 6.0% and 0.2% to 4.3% per annum, respectively. The repayment terms of Group’s long-term borrowings from banks ranged from three years to ten years
and the principals and interests are repaid on monthly or quarterly basis or upon maturity.
The above borrowings contain certain standard covenants including, among others, limitation on liens, liquidation and dissolution of the Group, significant change of
the Group’s capital structure and external investments. The Group was in compliance with all of the loan covenants as of December 31, 2020 and 2021. Borrowings of
RMB2.3 million were guaranteed by one of our subsidiaries and subject to a pledge of our land use right as of December 31, 2020, which was repayed in 2021.
F-40
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
13. Short-term and long-term borrowings – continued
The following table summarizes the aggregate required repayments of the principal amounts of the Group’s long-term borrowing:
2022
2023
2024
2025
2026 and thereafter
Total
14. Leases
As of December 31,
2021
RMB
—
3,989
3,806
2,992
3,557
14,344
The Group has operating leases primarily for office and operation space. The Group’s operating lease arrangements have remaining lease terms of one month to
eighteen years.
Total lease costs were RMB110,993, RMB39,327 and RMB26,469 for the year ended December 31, 2019, 2020 and 2021, including short-term lease costs within 12
months of RMB21,726, RMB6,653 and RMB2,540, respectively.
Consolidated balance sheet information related to leases is presented as follows:
ASSETS
Operating lease right-of-use assets, net
LIABILITIES
Operating lease liabilities, current
Operating lease liabilities, non-current
Total
Supplemental cash flow information related to leases is as follows:
Cash paid for amounts included in the measurement of lease liabilities
Right-of-use assets obtained in exchange for operating lease liabilities
F-41
2020
RMB
As of December 31,
2021
RMB
US$ (Note 2(d))
42,293
18,264
34,367
52,631
48,115
16,556
38,832
55,388
7,550
2,598
6,094
8,692
As of December 31,
2020
RMB
38,399
28,444
2021
RMB
26,000
43,855
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
14. Leases – continued
Other information related to lease is as follows:
Weighted average remaining lease term(years)
Weighted average discount rate
As of December 31,
2020
2021
6.97
5 %
6.81
5 %
As of December 31, 2021, maturities of lease liabilities (excluding lease payments of RMB1,015 for the leases with lease terms less than one year) are as follows:
2022
2023
2024
2025
2026 and thereafter
Total minimum lease payments
Less: interest
Present value of lease obligations
15. Accrued expenses and other current liabilities
The following is a summary of accrued expenses and other current liabilities:
Deposits from packaged-tour users (a)
Payable for business combination
Accrued liabilities related to customers incentive program
Accrued professional service fees
Accrued advertising expenses
Deposits received from suppliers
Accrued operating expenses
Advanced payment from banks (b)
Discounted bank acceptance notes (c)
Others
Total
As of December 31,
2021
RMB
18,853
16,417
5,480
2,948
23,352
67,050
(11,662)
55,388
2020
RMB
As of December 31,
2021
RMB
18,195
8,138
10,369
11,513
18,804
82,054
10,032
10,812
482,000
24,584
676,501
12,428
7,153
3,951
11,861
18,806
86,212
8,067
13,925
197,900
22,326
382,629
US$ (Note 2(d))
1,950
1,123
620
1,861
2,951
13,529
1,266
2,185
31,055
3,503
60,043
(a) Deposits from packaged-tour users represent cash paid to the Group as a deposit for overseas tours, and such amount is refundable upon completion of the tours.
F-42
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
15. Accrued expenses and other current liabilities – continued
(b) Advanced payment from banks represent cash received by the Group for promotional and marketing campaigns. Banks participating in these campaigns would
reimburse the Group for tours sold to their credit card holders at a specified discount. Such advanced payment is recognized as revenues when revenues from the related
tour are recognized.
(c) Discounted bank acceptance notes represent cash received from financial institutions by discounting of bank acceptance notes issued between the Company’s
subsidiaries, which are repayable within one year with interest ranging from 2.55% to 3.1%. The issuance of notes payable is collatetralized by the Group’s bank deposits
of RMB482,000 and RMB197,900 as of December 31, 2020 and 2021, which were recorded in restricted cash and short-term investments.
16. Income Taxes
The Company is registered in the Cayman Islands. The Company generates substantially all of its income (loss) from its PRC operations for the years ended
December 31, 2019, 2020 and 2021.
Cayman Islands (“Cayman”)
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to
shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% since January 1, 2010. The operations in Hong Kong have incurred net
accumulated operating losses for income tax purposes.
PRC
On March 16, 2007, the NPC enacted an Enterprise Income Tax Law (“EIT Law”), under which Foreign Investment Enterprises (“FIEs”) and domestic companies
are subject to EIT at a uniform rate of 25%. The EIT law became effective on January 1, 2008.
The EIT Law also imposes a withholding income tax of 10% on dividends distributed by a FIE to its immediate holding company outside of China, if such
immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection
with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty
with China that provides for a different withholding arrangement. The Cayman Islands, where the Company incorporated, does not have such tax treaty with China.
According to the arrangement between Mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal
Evasion in August 2006, dividends paid by a FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than
5% if the immediate holding company in Hong Kong owns directly at least 25% of the shares of the FIE and could be recognized as a Beneficial Owner of the dividend
from PRC tax perspective.
F-43
Table of Contents
16. Income Taxes – continued
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
Nanjing Tuniu originally obtained its HNTE certificate in 2010 with a valid period of three years and successfully obtained the third renewal of such certificate in
December 2019 for another three years. Tuniu Nanjing Information Technology obtained its HNTE certificate in 2017 with a valid period of three years and successfully
obtained the first renewal of such certificate in December 2020 for another three years. Therefore, Nanjing Tuniu and Tuniu Nanjing Information Technology are eligible
to enjoy a preferential tax rate of 15% in 2021 to the extent they have taxable income under the EIT Law, as long as they maintain the HNTE qualifications and duly
conduct relevant EIT filing procedures with the relevant tax authorities. If Nanjing Tuniu and Tuniu Nanjing Information Technology fail to maintain their HNTE
qualifications or renew their qualifications when their current terms expire, their applicable enterprise income tax rates may increase to 25%, which could have an
adverse effect on our financial condition and results of operations. Besides, Beijing Tuniu obtained the HNTE certificate as well in 2018 and expired in 2020. As a
consequence, the applicable enterprise tax rate for Beijing Tuniu has been restored to 25% since 2021. However, since Beijing Tuniu has large amount of accumulated
loss in previous years, the increased EIT rate would not result in an immediate adverse effect on our financial condition.
A reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows:
PRC Statutory income tax rates
Change in valuation allowance
R&D expenses super-deduction
Non-deductible expenses and non-taxable income incurred
Difference in EIT rates of certain subsidiaries
Effect of preferential income tax rates
Total
The aggregate amount and per share effect of the preferential income tax rates are as follows:
For the Years Ended December 31,
2020
%
2021
%
2019
%
25.0
(15.8)
(3.8)
(2.1)
(0.3)
(3.1)
(0.1)
25.0
(20.9)
(0.7)
(2.2)
0.1
(0.8)
0.5
25.0
(16.0)
(4.3)
(1.1)
(0.3)
(3.4)
(0.1)
For the Years Ended December 31,
Aggregate amount
Basic net loss per share effect
Diluted net loss per share effect
2019
RMB
22,274
—
—
2020
RMB
11,239
—
—
F-44
RMB
2021
US$ (Note 2(d))
692
—
—
4,411
—
—
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
16. Income Taxes – continued
The following table sets forth the significant components of deferred tax assets and liabilities:
Non-current deferred tax assets:
Accruals and others
Net operating loss carry forwards
Carryforwards of deductible advertising expenses
Allowance for doubtful accounts
Subtotal
Less: valuation allowance
Total non-current deferred tax assets, net
Non-current deferred tax liabilities:
Recognition of intangible assets arising from business combination
Total non-current deferred tax liabilities, net
2020
RMB
7,596
1,044,010
11,500
269,615
1,332,721
(1,332,721)
—
As of December 31,
2021
RMB
US$ (Note 2(d))
18,124
657,571
11,321
252,605
939,621
(947,640)
—
2,843
103,187
1,777
39,639
147,447
(147,447)
—
(14,861)
(14,861)
(2,382)
(2,382)
(374)
(374)
As of December 31, 2021, the Group had net operating loss carryforwards of RMB2,758,293 which can be carried forward to offset taxable income. The
carryforwards period for net operating losses under the EIT Law is five years. The net operating loss carry forward of the Group will start to expire in 2022 for the
amount of RMB874,960 if not utilized. The remaining net operating loss carryforwards will expire in varying amounts between 2023 and 2026. Other than the
expiration, there are no other limitations or restrictions upon the Group’s ability to use these operating loss carryforwards. There is no expiration for the advertising
expenses carryforwards.
F-45
Table of Contents
16. Income Taxes – continued
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
A valuation allowance is provided against deferred tax assets when the Group determines that it is more likely than not that the deferred tax assets will not be utilized
in the future. In making such determination, the Group evaluates a variety of factors including the Group’s operating history, accumulated deficit, existence of taxable
temporary differences and reversal periods.
As of December 31, 2020 and 2021, valuation allowances of RMB1,332,721 and RMB939,621 were provided because it was more likely than not that the Group
will not be able to utilize certain tax losses carry forwards and other deferred tax assets generated by its subsidiaries and Affiliated Entities. If events occur in the future
that allow the Group to realize more of its deferred tax assets than the presently recorded amount, an adjustment to the valuation allowances will increase income when
those events occur.
Movement of valuation allowance
Balance at the beginning of the year
Additions
Written-off for expiration of net operating losses
Utilization of previously unrecognized tax losses and deductible advertising expenses
Balance at the end of the year
17. Redeemable noncontrolling interests
For the Years Ended December 31,
2019
RMB
1,207,426
143,227
(98,818)
(5,539)
1,246,296
2020
RMB
1,246,296
396,582
(304,939)
(5,218)
1,332,721
RMB
1,332,721
29,089
(414,409)
(7,780)
939,621
2021
US$ (Note 2(d))
209,133
4,565
(65,030)
(1,221)
147,447
In December 2016, the Group entered into an investment agreement with certain investors (“noncontrolling shareholders”) to establish a subsidiary. The
noncontrolling shareholders contributed RMB90,000 and held 30% equity interest. Pursuant to the investment agreement, the noncontrolling shareholders have the option
to request the Group to redeem their equity interests at an agreed price after three years of the investment. In April 2018, the Group agreed with one of the noncontrolling
shareholders to purchase its 10% equity interest of the subsidiary at the cost of RMB30,000. In December 2019, the Group agreed with one of the noncontrolling
shareholders to purchase its 10% equity interest of the subsidiary at the cost of RMB37,733. In September 2020, this subsidiary decreased its share capital and the Group
made payment to the noncontrolling shareholder of RMB10,000.
The Group recorded the noncontrolling interests as redeemable noncontrolling interests, outside of permanent equity in the Group’s consolidated balance sheets in
accordance with ASC 480. The Group uses the effective interest method for the changes of redemption value over the period from the date of issuance to the earliest
redemption date of the noncontrolling interests. The accretion, which increases the carrying value of the redeemable noncontrolling interests, is recorded against
additional paid-in capital.
The change in the carrying amount of redeemable noncontrolling interests for the years ended December 31, 2019, 2020 and 2021 is as follows:
Balance as of January 1
Repurchase of redeemable noncontrolling interests
Net income attributable to redeemable noncontrolling interests
Accretion on redeemable noncontrolling interests
Balance as of December 31
For the Years Ended December 31,
2019
RMB
69,319
(37,733)
980
4,634
37,200
2020
RMB
37,200
(10,000)
—
—
27,200
2021
RMB
27,200
—
—
—
27,200
US$ (Note 2(d))
4,268
—
—
—
4,268
F-46
Table of Contents
18. Ordinary Shares
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
Upon inception of the Company, each ordinary share was issued at a par value of US$0.0001 per share. Various numbers of ordinary shares were issued to share-
based compensation award recipients. As of December 31, 2020 and 2021, the authorized share capital of the Company is US$100,000 divided into 1,000,000,000
shares, comprising of 780,000,000 Class A Ordinary Shares and 120,000,000 Class B Ordinary Shares, each at a par value of US$0.0001 per share, and 100,000,000
shares of a par value of US$0.0001 each of such class or classes as the board of directors may determine.
As of December 31, 2021, 1,000,000,000 ordinary shares were authorized. 389,331,543 were issued and outstanding, comprising of 371,958,043 Class A shares and
17,373,500 Class B shares as of December 31, 2021.
19. Share-based Compensation Expenses
The Company’s 2008 Incentive Compensation Plan (the “2008 Plan”) allows the plan administrator to grant share options and restricted shares to the Company’s
employees, directors, and consultants, up to a maximum of 18,375,140 ordinary shares. In April 2014 the Company adopted the 2014 Share Incentive Plan (the “2014
Plan”). The maximum aggregate number of shares will be increased automatically if and whenever the ordinary shares reserved under the 2014 Plan account for less than
1% of the total then-issued and outstanding ordinary shares on an as-converted basis, as a result of which increase the ordinary shares reserved under the 2014 Plan
immediately after each such increase shall equal 5% of the then-issued and outstanding ordinary shares on an as-converted basis, reaching a total of 41,964,263 Class A
ordinary shares.
The share options and restricted shares granted under the 2008 plan initially have a contractual term of six years, and grants under the 2014 plan have a contractual
term of ten years. The incentive awards under both 2008 plan and 2014 plan generally vest over a period of four years of continuous service, one fourth (1/4) of which
vest upon the first anniversary of the stated vesting commencement date and the remaining vest ratably over the following 36 months. As of December 31, 2021,
13,976,607 options and 21,918 restricted shares were outstanding under the 2008 and 2014 plan.
The Group recognized share-based compensation expense of RMB61,736, RMB20,464 and RMB9,132 for the years ended December 31, 2019, 2020 and 2021,
respectively, which was classified as follows:
Cost of revenue
Research and product development
Sales and marketing
General and administrative
Total
For the Years Ended December 31,
2019
RMB
2020
RMB
4,006
12,057
3,321
42,352
61,736
1,044
4,349
1,099
13,972
20,464
RMB
390
724
644
7,374
9,132
2021
US$ (Note 2(d))
61
114
101
1,157
1,433
F-47
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
19. Share-based Compensation Expenses - continued
Share options
The following table summarizes the Company’s option activities:
Outstanding at January 1, 2021
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Vested and expected to vest at December 31, 2021
Exercisable at December 31, 2021
Number of
share options
19,299,717
—
(523,677)
(4,799,433)
13,976,607
13,905,090
13,547,013
Weighted
Average
Exercise
Price
US$
Weighted
Average
Remaining
Contractual Life
In Years
Aggregate
Intrinsic
Value
US$’000
1.80
—
0.10
1.93
1.81
1.81
1.82
4.92
—
—
—
3.74
3.72
3.65
2,339
—
1.63
1.44
825
825
825
In June 2019, the Company completed a one-time modification of share options, pursuant to which certain eligible employees were offered to replace certain
unvested share options granted to them with cash awards. The price of cash awards were the same as the fair value of share options on grant date and still requires the
same employees’ continuous employments with the Company for the remaining period and will be paid in installment. As a result, 2,342,913 options were replaced. The
incremental compensation cost of this modification was immaterial. As of December 31, 2020, all of these cash awards were paid.
The total intrinsic value of options exercised for the years ended December 31, 2019, 2020 and 2021 was RMB6,857, RMB2,290 and RMB3,563 (US$559),
respectively.
The weighted-average grant date fair value for options granted during the years ended December 31, 2019 was US$1.50, computed using the binomial option pricing
model. No share options were granted for the years ended December 31, 2022 and 2021.
The total fair value of share options vested during the years ended December 31, 2019, 2020, and 2021 was RMB25,461, RMB25,038 and RMB11,000 (US$1,726),
respectively.
F-48
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
19. Share-based Compensation Expenses - continued
The Company estimated the expected volatility at the date of grant date and each option valuation date based on the annualized standard deviation of the daily return
embedded in historical share prices of comparable companies. Risk free interest rate was estimated based on the yield to maturity of US treasury bonds denominated in
US$ at the option valuation date. The exercise multiple is estimated as the ratio of fair value of underlying shares over the exercise price as at the time the option is
exercised, based on a consideration of research study regarding exercise pattern based on empirical studies on the actual exercise behavior of employees. The Company
has never declared or paid any cash dividends on its capital stock, and the Company does not anticipate any dividend payments on its ordinary shares in the foreseeable
future. Time to maturity is the contract life of the option, and estimated forfeiture rates are determined based on historical employee turnover rate.
The Company uses the binominal option pricing model to estimate the fair value of stock options. There was no option granted for the years ended December 31,
2020 and 2021. The assumptions used to value the Company’s option grants for the year ended December 31, 2019 were as follows:
Expected volatility
Risk-free interest rate
Exercise multiple
Expected dividend yield
Time to maturity (in years)
Expected forfeiture rate (post-vesting)
Fair value of the common share on the date of option grant
2019
48.05 %
2.72 %
2.2-2.8
0 %
10
0%-20 %
US$1.5 (RMB10.42)
As of December 31, 2021, there was RMB5,218 in total unrecognized compensation expense related to share options, which is expected to be recognized over a
weighted-average period of 1.38 years.
Restricted shares
The total intrinsic value of restricted shares vested for the years ended December 31, 2019, 2020 and 2021 were RMB610, RMB161 and RMB247 (US$39),
respectively.
The fair value of restricted shares with service conditions is based on the fair market value of the underlying ordinary shares on the date of grant.
The following table summarizes the Company’s restricted shares activity under the plans:
Restricted shares as of January 1, 2021
Granted
Vested
Forfeited
Restricted shares as of December 31, 2021
Vested and expected to vest at December 31, 2021
Numbers of
restricted shares
Weighted average
grant date fair value
74,406
—
(52,488)
—
21,918
21,918
2.23
—
2.23
—
2.23
2.23
As of December 31, 2021, there was RMB261 in total unrecognized compensation expense related to restricted shares, which is expected to be recognized over a
weighted-average period of 0.35 years.
F-49
Table of Contents
20. Loss Per Share
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
The following table sets forth the computation of basic and diluted loss per share for the periods indicated:
Numerator:
Net loss attributable to Tuniu Corporation
Accretion on redeemable noncontrolling interests
Numerator for basic and diluted net loss per share
Denominator:
Weighted average number of ordinary shares outstanding-basic and diluted
Loss per share-basic and diluted
For the Years Ended December 31,
2019
RMB
2020
RMB
2021
RMB
US$ (Note 2(d))
(694,565)
(4,634)
(699,199)
(1,307,956)
—
(1,307,956)
(121,524)
—
(121,524)
(19,070)
—
(19,070)
369,472,880
(1.89)
370,240,040
(3.53)
370,874,312
(0.33)
370,874,312
(0.05)
The Company had securities which could potentially dilute basic loss per share in the future, which were excluded from the computation of diluted loss per share as
their effects would have been anti-dilutive. Such outstanding securities consist of the share options and unvested restricted shares with the number of 8,776,330,
3,027,586 and 2,891,152 for the years ended December 31, 2019, 2020 and 2021, respectively.
21. Restricted Net Assets
Pursuant to laws applicable to entities incorporated in the PRC, the Group’s subsidiaries and Affiliated Entities in the PRC must make appropriations from after-tax
profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff
bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires an annual appropriation of 10% of after tax profit (as determined under
accounting principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% of a company’s registered capital;
the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes of enterprise expansion and staff bonus and
welfare and are not distributable as cash dividends. In addition, due to restrictions on the distribution of share capital from the Group’s PRC subsidiaries and Affiliated
Entities and also as a result of these entities’ unreserved accumulated losses, total restrictions placed on the distribution of the Group’s PRC subsidiaries and Affiliated
Entities’ net assets was RMB925 million, or 73.8% of the Group’s total consolidated net assets as of December 31, 2021.
22. Commitments and Contingencies
(a) Capital Commitments
As of December 31, 2021, capital commitments relating to leasehold improvement were approximately RMB1,050.
(b) Contingencies
From time to time, the Group is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information,
management does not believe that the ultimate outcome of these unresolved matters, individually and in the aggregate, is likely to have a material adverse effect on the
Group’s financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties and the Group’s view of these matters may change
in the future. If an unfavorable outcome were to occur, there exists the possibility of a material adverse impact on the Group’s financial position and results of operations
for the periods in which the unfavorable outcome occurs.
F-50
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
22. Commitments and Contingencies - continued
(c) Other commitments
Deposits or guarantees are required by the Group’s business partners for air ticketing and tourist attraction tickets. Letters of guarantee are issued by banks to the
Group’s business partners with total amount of RMB84 million and RMB30 million as of December 31, 2020 and 2021, respectively.
23. Related party transactions and balances
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in
making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related
parties may be individuals or corporate entities.
The following entities are considered to be related parties to the Group:
Name of related parties
Ctrip Investment Holding Co., Ltd. (“Trip.com”)
Hopeful Tourism Limited (“Caissa”, a wholly-owned subsidiary of Caissa
Sega Tourism Culture Investment Limited)
one board director of the Company
one board director of the Company
Relationship with the Group
HNA Tourism Holdings Group Co., Ltd. (“HNA Tourism”)
two board directors of the Company
a) Transactions with related parties:
Trip.com
Trip.com purchased 5,000,000 Class A ordinary shares in a private placement concurrent with the Company’s initial public offering, an additional 3,731,034 Class A
ordinary shares for a total of US$15 million through a private placement transaction in December 2014 as well as an additional 3,750,000 Class A ordinary shares for a
total of US$20 million through a private placement transaction in May 2015.
The Group sells packaged tours through Trip.com’s online platform and the commission fees to Trip.com were insignificant. The Group purchased travelling
products from Trip.com’s online platform, which were insignificant. Revenues from Trip.com consist of commission fees for the booking of hotel rooms and air tickets
through the Group’s online platform, amounted of RMB65.7 million, RMB16.9 million and RMB145.5 (US$22.8) for the years ended December 31, 2019, 2020 and
2021, respectively.
JD
On May 8, 2015, the Company issued 65,625,000 Class A ordinary shares to Fabulous Jade Global Limited, a subsidiary of JD, for cash consideration of
RMB1,528.2 million (US$250 million) and RMB660.2 million representing the fair value of business resource contributed by JD.
F-51
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
23. Related party transactions and balances - continued
The Group also purchased travelling products from JD's channels at the amount of RMB49,399 and RMB25 for the years ended December 31, 2019 and 2020,
respectively. On November 20, 2020, JD completed transfer of all its equity interest in the Group to Caissa. Subsequently on February 9, 2021, Caissa assigned a director
to the Group’s board of directors to replace the director previsouly assigned by JD and since then, JD was no longer a related party of the Group. No transactions were
made with JD from January 1, 2021 to February 9, 2021.
Caissa
On November 20, 2020, pursuant to a share purchase agreement and certain amendements, Caissa completed the purchase of all
Class A ordinary shares of the Company from JD and became the related party of the Group. Subsequently on February 9, 2021, Caissa assigned a director to the
Group's board of directors to replace the director previsouly assigned by JD.
The Group sold packaged tours through Caissa’s platform and the commission fees to Caissa were insignificant.
HNA Tourism
On January 21, 2016, the Company issued 90,909,091 Class A ordinary shares to HNA Tourism for total consideration of RMB3,279 million (US$500 million).
HNA Tourism agreed to provide the Group with access to its premium airlines and hotels resources at a preferential rate, under fair competition market rules, and the
Group undertook to acquire no less than US$100 million products and services sourced from HNA Tourism over the next two years. The Group purchased RMB443.1
million, RMB164.4 million and RMB112.8 million (US$17.7 million)air tickets from HNA Tourism for the year ended December 31, 2019, 2020 and 2021, respectively.
The Group sold travelling products through an affiliate of HNA Tourism’s distribution channels and the revenues were insignificant.
In December 2017, the Group provided financing to an affiliate of HNA Tourism (the “HNA Affiliate”) amounting to RMB40.0 million (US$6.1 million) by
purchasing private placement notes issued by the HNA Affiliate (the "Notes Financing"), with the interest rate of 8.5%, which was repayable in one year and was further
requested by this debtor to extend to December 2020. The Notes Financing was guaranteed by HNA Group Co., Limited (“HNA Group”), HNA Tourism’s ultimate
holding company, and was further pledged by certain equity investment held by the HNA Affiliate. In May 2018, the Group provided financing in the form of accounts
receivable factoring arrangement (the "Loan Financing") to another affiliate of HNA Tourism amounting to RMB500 million (US$76.6 million) with the average interest
rate of 14% per annum and service fee rate of 6%, which were repayable in one year. and was further requested by this creditor to extend to May 2021. The Loan
Financings were guaranteed by another affiliate of HNA Tourism, a subsidiary of HNA Group.
As of December 31, 2019, the Group reviewed the recoverability of above Notes Financing and Loan Financing and recorded an allowance provision of RMB1.9
million and RMB21.3 million against the carrying value, respectively, to reflect the credit risk associated with the respective outstanding balances. In addition, the
remaining balance of the Notes Financing and the Loan Financing of RMB44.8 million and RMB512.8 million were presented in non-current assets, based on
management’s estimates of time for collection.
F-52
Table of Contents
TUNIU CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, or otherwise noted)
23. Related party transactions and balances - continued
By the ended of 2020, the Group did not receive the repayment of RMB40.0 million from the affiliate of HNA Tourism according to the extended schedule and no
settlement plans were reached for the outstanding balance. In addition, HNA Group received a formal bankruptcy and restructuring notice from the Hainan Province High
People’s Court (the “Court”) following creditors’ action against HNA Group due to its failure to pay overdue debts. Based on the assessment of all then available
information of HNA Group’s restructuring plan, the Group considered it was unlikely to collect the outstanding receivables as of December 31, 2020. Accordingly, the
Group provided a full allowance for current expected credit losses (“CECL”) on the remaining balance at the amount of RMB44.8 million and RMB512.8 million for the
Notes Financing and the Loan Financings, respectively. Moreover, the Group provided a full allowance of RMB30.8 million for the current amounts due from other HNA
Tourism affiliates. As of December 31, 2020, the carrying value of the Notes Financing, Loan Financing and amounts due from other HNA Tourism affiliates
(collectively referred to as “HNA debts”) was RMB nil.
In October 2021, debt restructuring plans of HNA Group and its affiliates were approved by the creditors and the Court, pursuant to which HNA Group and its
affiliates would settle their debts owed to the creditors by various means, including cash, shares of Hainan Airlines Holding Co., Ltd., (“HNA Airlines”), a company
listed in Chinese A share market, and units in a trust comprising assets/liabilities of HNA Group and certain of its affiliates, etc. In December 2021, the Company
received cash of RMB0.3 million (US$0.05 million) and 531,591 shares of HNA Airlines with value of RMB1 million (US$0.16 million) as part of the settlement of the
HNA debts, of which CECL allowance was fully provided in the prior years. Accordingly, a reversal of CECL allowance at the amount of RMB1.3 million (US$0.2
million) was credited to the consolidated statements of comprehensive loss in 2021.
b) Balances with related parties:
Current:
Amounts due from Trip.com
Amounts due from JD
Amounts due from Caissa
Total
Current:
Amounts due to Trip.com
Amounts due to JD
Amounts due to HNA Tourism
Amounts due to Caissa
Total
24. Subsequent events
The Group has evaluated the subsequent events through the date of issuance of the financial statements.
F-53
2020
RMB
As of December 31,
2021
RMB
US$ (Note 2(d))
13,977
1,644
8,292
23,913
18,240
112
746
1,936
21,034
13,044
—
1,925
14,969
3,860
—
—
819
4,679
2,047
—
302
2,349
605
—
—
129
734
Table of Contents
FINANCIAL STATEMENT SCHEDULE I
TUNIU CORPORATION
CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
CONDENSED BALANCE SHEETS
(All amounts in thousands, except for share and per share data, or otherwise noted)
ASSETS
Current assets
Cash and cash equivalents
Amounts due from subsidiaries and Affiliated Entities
Prepayments and other current assets
Total current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accrued expenses and other current liabilities
Total current liabilities
Non-current liabilities
Investment deficit in subsidiaries and Affiliated Entities
Total non-current liabilities
Total liabilities
Equity
Ordinary shares (US$0.0001 par value; 1,000,000,000 shares (including 780,000,000 Class A shares,
120,000,000 Class B shares and 100,000,000 shares to be designated by the Board of Directors) authorized
as of December 31, 2020 and 2021; 389,331,544 shares (including 371,958,044 Class A shares and
17,373,500 Class B shares) and 389,331,543 shares (including 371,958,043 Class A shares and 17,373,500
Class B shares) issued and outstanding as of December 31, 2020 and 2021)
Less: Treasury stock (18,842,688 shares and 18,266,523 shares as of December 31, 2020 and 2021,
respectively)
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total Tuniu Corporation shareholders’ equity
Total liabilities and equity
F-54
As of December 31,
2020
RMB
RMB
2021
US$ (Note 2(d))
598
6,909,695
228
6,910,521
4,712
6,855,545
130
6,860,387
739
1,075,785
20
1,076,544
6,910,521
6,860,387
1,076,544
7,449
7,449
5,518,393
5,518,393
5,525,842
8,038
8,038
5,583,205
5,583,205
5,591,243
1,261
1,261
876,127
876,127
877,388
249
249
39
(302,916)
9,125,689
275,012
(7,713,355)
1,384,679
6,910,521
(293,795)
9,125,748
271,821
(7,834,879)
1,269,144
6,860,387
(46,103)
1,432,029
42,655
(1,229,464)
199,156
1,076,544
Table of Contents
FINANCIAL STATEMENT SCHEDULE I
TUNIU CORPORATION
CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(All amounts in thousands, except for share and per share data, or otherwise noted)
Operating expenses
General and administrative
Total operating expenses
Loss from operations
Share of loss of subsidiaries and affiliated entities
Other income/(expenses)
Foreign exchange (losses)/gains, net
Other income, net
Loss before income tax expense
Net loss
Accretion on redeemable noncontrolling interests
Net loss attributable to ordinary shareholders
Net loss
Other comprehensive income/(loss)
Foreign currency translation adjustment, net of nil tax
Comprehensive loss
For the Years Ended December 31,
2019
RMB
2020
RMB
2021
RMB
US$ (Note 2(d))
(3,903)
(3,903)
(3,903)
(689,252)
(2,457)
1,047
(694,565)
(694,565)
(4,634)
(699,199)
(4,293)
(4,293)
(4,293)
(1,301,972)
(2,922)
1,231
(1,307,956)
(1,307,956)
—
(1,307,956)
(3,688)
(3,688)
(3,688)
(124,832)
4,669
2,327
(121,524)
(121,524)
—
(121,524)
(579)
(579)
(579)
(19,589)
733
365
(19,070)
(19,070)
—
(19,070)
(694,565)
(1,307,956)
(121,524)
(19,070)
9,705
(684,860)
(18,772)
(1,326,728)
(3,191)
(124,715)
(501)
(19,571)
F-55
Table of Contents
FINANCIAL STATEMENT SCHEDULE I
TUNIU CORPORATION
CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(All amounts in thousands, except for share and per share data, or otherwise noted)
Cash used in operating activities
Cash provided by investing activities
Cash (used in)/provided by financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of year
Cash, cash equivalents and restricted cash at the end of year
Supplemental disclosure of non-cash investing and financing activities
Receivables related to exercise of stock option
F-56
For the Years Ended December 31,
2019
RMB
(4,739)
18,268
(13,438)
2020
RMB
(4,779)
5,292
(250)
(5)
86
250
336
(55)
(1)
262
336
598
(45)
2021
RMB
US$ (Note 2(d))
(2,341)
6,020
373
62
4,114
598
4,712
(28)
(369)
945
59
10
645
94
739
(4)
Table of Contents
FINANCIAL STATEMENT SCHEDULE I
TUNIU CORPORATION
CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
Note to Financial Statement Schedule I
Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04-(c) of Regulation S-X, which require condensed financial information as to the
financial position, change in financial position and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated
financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most
recently completed fiscal year.
The condensed financial information has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except
that the equity method has been used to account for investments in its subsidiaries and Affiliated Entities. Such investments in subsidiaries and Affiliated Entities are
presented as investment deficit in subsidiaries and Affiliated Entities and the loss of the subsidiaries and Affiliated Entities is presented as share of loss of subsidiaries
and Affiliated Entities.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. The footnote disclosures to the consolidated financial statements contain information relating to the operations
of the parent company and, as such, this schedule should be read in conjunction with the notes to the accompanying consolidated financial statements.
As of December 31, 2021, the parent company had no significant capital and other commitments, long-term obligations, or guarantee, except for those which have
separately disclosed in the consolidated financial statements.
F-57
List of Principal Subsidiaries, Consolidated Affiliated Entity and its Principal Subsidiaries
Exhibit 8.1
Subsidiaries
Tuniu (HK) Limited
Tuniu (Nanjing) Information Technology Co., Ltd.
Beijing Tuniu Technology Co., Ltd.
Jiangsu Kaihui Commercial Factoring Co., Ltd.
Xiamen Suiwang International Travel Service Co., Ltd.
Tianjin Tuniu International Travel Service Co., Ltd.
Guangzhou Kaihui Internet Microcredit Co., Ltd.
Nanjing Kaihui Internet Microcredit Co., Ltd.
Consolidated Affiliated Entity and its Subsidiaries
Nanjing Tuniu Technology Co., Ltd.
Beijing Tuniu International Travel Service Co., Ltd.
Nanjing Tuniu International Travel Service Co., Ltd.
Shanghai Tuniu International Travel Service Co., Ltd.
Nanjing Tuzhilv Tickets Sales Co., Ltd.
Tuniu Insurance Brokers Co., Ltd.
Place of Incorporation
Hong Kong
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
Place of Incorporation
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 12.1
I, Dunde Yu, certify that:
1.
I have reviewed this annual report on Form 20-F of Tuniu Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a mate rial fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly pres ent in all material respects the financial
condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 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)) for the 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 subsid iaries, 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 re porting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness 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 by the annual report
that has materially affected, or is reasonably likely to materially affect, the com pany’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 con trol over financial reporting, 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 re porting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)
financial reporting.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over
Date: April 29, 2022
/s/ Dunde Yu
Signature
Chief Executive Officer
Title
Exhibit 12.2
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Anqiang Chen, certify that:
1.
I have reviewed this annual report on Form 20-F of Tuniu Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a mate rial fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly pres ent in all material respects the financial
condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in 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)) for the 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 subsid iaries, 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 re porting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness 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 by the annual report
that has materially affected, or is reasonably likely to materially affect, the com pany’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 con trol over financial reporting, 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 re porting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
(b)
financial reporting.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over
Date: April 29, 2022
/s/ Anqiang Chen
Signature
Financial Controller
Title
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.1
In connection with the Annual Report of Tuniu Corporation (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Dunde Yu, 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 the Company.
Date:
April 29, 2022
/s/ Dunde Yu
Signature
Chief Executive Officer
Title
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.2
In connection with the Annual Report of Tuniu Corporation (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Anqiang Chen, Financial Controller of Finance 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 the Company.
Date: April 29, 2022
/s/Anqiang Chen
Signature
Financial Controller
Title
Consent of Independent Registered Public Accounting Firm
Exhibit 15.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-198111 and No. 333-251283) of Tuniu Corporation of our
report dated April 29, 2022 relating to the consolidated financial statements, financial statement schedule I, and the effectiveness of internal control over financial
reporting, which appears in this Form 20-F.
/s/ PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
April 29, 2022
Office:
Mobile:
Email:
+852 2801 6066
+852 9718 8740
rthorp@tta.lawyer
Tuniu Building No. 32
Suningdadao, Xuanwu District
Nanjing, Jiangsu Province 210042
The People’s Republic of China
Dear Sirs
Re: Tuniu Corporation
Exhibit 15.2
29 April 2022
We have acted as legal advisers as to the laws of the Cayman Islands to Tuniu Corporation, an exempted limited liability company incorporated in the Cayman Islands
(the "Company"), in connection with the filing by the Company with the United States Securities and Exchange Commission (the "SEC") of an annual report on Form
20-F for the year ended 31 December 2021 ("Form 20-F").
We hereby consent to the reference of our name under the headings, "Item 10. Additional Information—E. Taxation—Cayman Islands Taxation" and "Item 16G.
Corporate Governance" in the Form 20-F, and further consent to the incorporation by reference of the summaries of our opinions under these captions into Tuniu
Corporation’s registration statement on Form S-8 (File No. 333-198111) that was filed on August 13, 2014, Tuniu Corporation's Post-Effective Amendments No. 1 to
Form S-8 (File No. 333-198111) that was filed on December 11, 2020 and Tuniu Corporation's registration statement on Form S-8 (File No. 333-251283) that was filed
on December 11, 2020.
Yours faithfully
/s/ TRAVERS THORP ALBERGA
TRAVERS THORP ALBERGA
FANGDA PARTNERS
上海 Shanghai (cid:0)(cid:0)北京 Beijing (cid:0)(cid:0)深圳 Shenzhen (cid:0)(cid:0)广州 Guangzhou香港 Hong Kong
http://www.fangdalaw.com
EXHIBIT 15.3
电子邮件 Email: email@fangdalaw.com
Tel.: 861057695600
电 话
Fax: 861057695788
传 真
Ref.: 20GC0010
文 号
Consent of Fangda Partners
April 29, 2022
中国北京市朝阳区光华路1号
嘉里中心北楼27层
邮政编码: 100020
27/F, North Tower, Kerry Center
No. 1, Guanghua Road, Chaoyang District
Beijing 100020, PRC
Tuniu Corporation
Tuniu Building No. 32
Suningdadao, Xuanwu District
Nanjing, Jiangsu Province 210042
The People’s Republic of China
Dear Sirs:
We hereby consent to the reference of our name under the heading “Item 3. Key Information—D. Risk Factors”, “Item 4. Information on the Company—B. Business
Overview—PRC Regulation”, “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Contractual Arrangements” and “Item 18.
Financial Statements—Notes to the Consolidated Financial Statements” in Tuniu Corporation’s Annual Report on Form 20-F for the year ended December 31, 2021 (the
“Annual Report”), which is filed with the Securities and Exchange Commission (the “SEC”) on April 29, 2022. We also consent to the filing of this consent letter with
the SEC as an exhibit to the Annual Report and further consent to the incorporation by reference of the summaries of our opinions under these captions into Tuniu
Corporation’s registration statement on Form S-8 (File No. 333-198111) that was filed on August 13, 2014, Tuniu Corporation’s Post-Effective Amendment No. 1 to
Form S-8 (File No. 333-198111) that was filed on December 11, 2020 and Tuniu Corporation’s registration statement on Form S-8 (File No. 333-251283) that was filed
on December 11, 2020.
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 the Securities Act of 1933, or
under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Very truly yours,
/s/ Fangda Partners
Fangda Partners